patrick.net

For those of us that remember when "getting qualified" meant at least a 3 month long ordeal where NOTHING else in your life was a priority, having a "kick-back" feature sounds silly.

I blame the "re-fi craze" when the process was whittled down to the time it takes to get thru the drive-up window at Taco Bell.

About who is buying the mortgage securities.

We have wondered for a long time about who exactly are the bag-holders. It turned out to be everyone. In every country, you can find an idiot who provided some sort of crack to the US house junkies. The US cities themselves have seen their parked funds somehow got pulled into this mess.

I have always said that I do NOT get the bond market. I have no idea why people are loaning money to US govt, companies and for mortgages at these ridiculously low interest rate. Why is anyone buying US 10yr treasury note at 3.75% ?

Are bond buyers STILL out of their mind ? Or is this a rational decision that I don't get ? Mish argues for deflation and hence justifies rally in US treasury. I know the Fed buys US treasuries as standard practice to manage reserves. Is the Fed propping up US treasury prices and holding the yields down ?

Whatever. If someone knows a good book on understanding the bond market, please let me know. I can understand string theory - at least I think I understand the idea - but bond markets, that is so beyond me.

I like Rick S. on CNBC last night-

"The Fed should cut rates to zero with a tightening bias and get it over with!"

I just returned from voting: straight Ron Paul ticket (included all the delegates).

Solar eclipse (in Asia) tomorrow. What gives? Will there be a major market event?

Paul,

Santelli is one of the only straight shooters they have! LOL! And yes I suppose the "tightening bias" would... be a given? :)

StuckInBA,

Everything I "thought" I knew about the bond market has been decimated in the last year or so. Maybe John Devaney formerly of U.S Capital Markets can explain all this stuff to us?

http://www.treas.gov/tic/mfh.txt

OK, the trend from Nov 2006 till Nov 07 (in $B)

Japan - reduced from 615 to 580
China - reduced from 393 to 386
UK - increased from 76 to 315 (looks like the biggest idiot, but why???)
Oil exporters - increased from 106 to 127 (understandably, too fast of a gush of USD to diversify)
Brazil - increased from 51 to 120 (why???)

DinOr,

Yes, I agree, Rick does a fantastic job. I've been lucky enough to have met him as we both live and work in Chicago.

Paul

Is UK trying to repay our debt for bailing them out of WWII? Why did they suddenly increase their purchase of USD Treasury by 4x in 12 months? Another oddity is Brazil, why did they increase their holding by more than 2x within 12 months?

Paul,

I'd have a beer w/ Rick any day! Oh and go White Sox (spring trng. starting up down in Tucson!)

UK includes Channel Islands and Isle of Man.

I don't know about Isle of Man, I know Channel Islands are a tax-haven destination where buyer's identity can be properly concealed. Since the Fed doesn't provide a breakdown between UK and Channel Islands, it is hard to say if there is something fishy with some sort of operations through C.I.

I just found it hard to swallow, that UK, which doesn't need to export to us (unlike Brazil and Oil Exporters), doesn't rely on us financially, and doesn't have a big US Treasury portfolio to begin with, would suddenly increase its holding of US Treasury by 4x. Their holding is now coming close to scale of that of China, a country that cannot help being sprinkled with USD every day.

Something is very fishy with the UK holdings. I searched high and low on the internet and couldn't find an explanation of why UK would want to hold more US Treasury, by 4x more within a year.

I see Arnold has been drinking the REIC kool-aide:
www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2008/02/04/EDF7UQMJL.DTL

"The limit for these loans is $417,000. Now, while that limit works well in most of the country, where the median housing price is $217,000, it doesn't work as well in many parts of California where, as we all know, homes are far more expensive. This means that Californians generally need larger home loans, even for starter homes."

This means that Californians generally need larger home loans, even for starter homes.

True, but people do not need to live in California!

Any GSE "limit" above 0.00 is highly problematic.

http://www.imf.org/external/np/sta/ir/gbr/eng/curgbr.pdf

Above is the official international reserve statement of UK government up to 2007 Dec.

Note the total foreign reserve in US $B (both central government and monetary authorities) is only $40 + $57 = $97B. How UK central government and monetary authorities combined hold $315B US Treasury??

If I am not mistaken in interpreting the UK government statements, then I can deduce that most of the $315B US Treasury is in fact held by Channel Islands and Isle of Man.

So, who is buying from Channel Islands and Isle of Man?

What site should I go to for posting the data above for expert verification? I am not an expert in reading international government settlement statements, so I want to check with those who understand how to read these things to see what they think.

UK, Japan and China are always the big buyers and Brazil seems to think it adds credibility I guess.

they all just print currency and exchange it with one anthter - how does that help anyone?

Here's a thought - try going to a bank and getting 100k out in cash. I bet they freak (because they don't have it or are not expecting you to show up). Here's another thought, go to your gold (coin dealer) with that 100k and see if he/she has inventory to fill your order for 110 gold eagles or whatever. It is very interesting to see reactions when you do what are in the big scheme of things very small actions.

I know for fact that physical gold is hard to come by, at least in the retail level.

I went 50% physical several months ago. At the same time, I exchanged some info with gold bugs in Hong Kong and China on the physical situation. It is very hard to come by physical gold in retail market. If you just want a small coin, or a small bar, sure. But if you want to drop $50K (not to mention $100K or above) and exchange for bullion, you can walk through Hong Kong island whole day without coming up with enough inventory.

There are quite a few pieces of news of physical gold inventory going dry in major cities in China for the next six months. Some first-movers went to smaller cities and hoard all the physical gold they can get their hands on.

I really think the machine of writing bad bad loans is actually continuing but GSE is buying them - included bad and shitty refi's being dumped on GSE. Just wait one year and another 10% plunge in housing it will cause defaults at fanny/freddie/fha to need a bailout.

The only shocking thing is the head of OFHEO (Mr Stockton) is actually speaking AGAINST rasing limit to 729k. This looks like typical CYA behavior - now he can say I told you so when fnma cracks. The REAL question is what will lending look like AFTER the government bails out GSE? No doubt more 'stricter guidelines' followed by another crash bailout every few years.

Dont the airlines/railways operate on periodic bankruptcy/bailout as a business model? Looks like mortgages will be the same going forward.

Without 20% down payment as the norm you are going to have widespread massive default everytime there is a hiccup in the housing market or a small recession/job loss locally so only the us taxpaper would be dumb enough to insure/buy those loans on an ongoing basis right? government controlled mortgage market is here to stay. May as well move to France.

OO,

You can ask Mish. I think yours is an interesting observation. There might be a simple explanation, which still would be educational. Update us with whatever you have learned.

Paul,

Japan and China EARNED their US Treasury. Goods changed hand as USD flows in their way. We print something, but we get something.

My main suspicion is, the UK purchase of US Treasury is completely out of thin air, no goods changed hand. We print something out of Channel Islands, we get nothing.

Channel Island and Isle of Man have always been notorious for rich people hiding money in the banks there - think tax havens.

I just got a reply from CR, he thinks the Channel Island purchases could be explained by Oil exporters because there have been some buying from the Middle East coming from tax havens before.

He referred me to consult with Brad Setser, who seems to be the expert in this field.

HK,

Excellent point of the airline/railroad model of perpetual insolvency. I don't know about 20% down but you're right, without at least some cushion the slightest ripple will look like a tidal wave. I'm coming around to your way of thinking.

Asia and Europe markets head south, emergency rate cut coming. Prediction: Markets likely yawn, no up move on news. Or maybe Ben recognizes the potential yawn, which itself might be damaging creating perception of impotent fed. Probably they let it slide deep this time before any action.

Everybody recognizes it's not working.

I heard some analysts saying that if the Fed eases to 1.75% that this will essentially rescue and bottom housing. I think NOT.

I once had relations with a Manx (isle of man) trollop in Galway Ireland, many moons ago. Amazing legs and interesting view of the world. I don't think she is buying any treasuries. I think she may have given me crabs.

this show called 'buy me' is on HGTV, people trying to sell crapshacks.

this lady refused to sell her home for 185k, wanted 200k so she declines offer and pulls it off to 'wait fer spring'. ive seen this so much, whats the word for this pulleroffNwaitferspring? Ive noticed the majority of listings (2 out of 3) have been expired/pulled off not sold.....gotta be a few years of pent up sellers.....and they are all going to relist _right_ about _ now_.

HK,

There are so many townsfolk out there that are waiting for the turnaround that is not coming. All these people that get their primary information from MSM sources alone, and that now understand it's bad but "we'll sell 'er when she turns around, it's always does". Yes, but not this spring, not next, and not the one after that, or even probably the one after that. And by the way, your cost of living will have skyrocketed 70% by that time.

It's so easy to forget that even now the masses have no idea what's going on, or what's coming.

And agreed, it will be amazing to see the spring both the spring inventory increase and the REIC's attempt to cover and spin it.

I'd like to be the first to congratulate President McCain.

I have a very racist friend back in CA....

I called him up and told him that the reddest-state in the union went 75% to 25% for Obama.

He then told me he just got back from the polls and he voted for Obama. Racist guys have voted in great majority for a NIGG..er rather than HillBilly.

I’d like to be the first to congratulate President McCain.

The McCain-Huckabee combination will be unstoppable.

So between McCain and Mrs. Bill Clinton who would bankrupt the country fastest with further deficit spending?

McCain with the disastrous 100 year Iraqcupation boondoggle or Mrs Bill Clinton with healthcare free for all plus nationalization of all mortgages. If Billary didnt want to bail out the mortgage industry I would have more respect for her.

Take this, Bay Area:

http://infotech.indiatimes.com/articleshow/2759230.cms

Cisco to up India headcount to 360,000

[ TUESDAY, FEBRUARY 05, 2008 06:15:20 PM]

MUMBAI: To increase its talent pool in India, IT networking major Cisco System India Pvt Ltd has decided to increase its headcount six fold to nearly 360,000 in the next five years.

The IT giant has announced a series of initiatives to nurture networking professionals, which would translate to an addition of nearly 360,000 engineers within the next five years.

....

>> Cisco to up India headcount to 360,000

Yes, take this shitty bay area ...

McCain with the disastrous 100 year Iraqcupation boondoggle or Mrs Bill Clinton with healthcare free for all plus nationalization of all mortgages.

I am all for ending the Iraq war reasonably but it is arguable that welfare is more evil than warfare.

I am a fan of India but the South Asia sub-continent does not look very stable.

I am not a fan of India, smelly dirty place.

Lets see, our choices are

Boomer big ass white woman,
Boomer Brother
Boomer Cult member
Boomer big eye'd freak
or War hero.

Me, I'll take the war hero.

Perhaps some McCain slogans

"I was getting beaten by Charlie when she was gettin high and sucking dick"

"I was voting in the Senate when her husband was gettin high and gettin his dick sucked"

Surfer, what about the non-Boomer medical doctor?

But anyway, congrats to President McCain!

Peter P, King of Sashimi, non-Boomer M.D.? Hmmm.

I must say that Fred Thompson did a really good job as the D.A. in Law and Order, certainly he would make a gdod President, especially if he had that hot blonde assitant D.A. as Veep.

but then again there's always Gopher from the love boat.

I’ll take the war hero.
Thus far, [the Silent Generation] are the only generation from which no president of the United States was ever selected.

X-man, have you seen the PBS show Boomer Century? I am still having nightmares. Let's see if I can sum up the finances section: one third well off, one third destitute, one third "What, me worry?". The narrator ends by saying Boomers could continue to have a world changing impact as they age... or, just maybe, they could turn inward and totally screw the generations following them. Oh, its different this time all right... I fear we could be entering the neverending selloff (not to finish until 2046, the end of the Boomer Century).