patrick.net

Japan is raising rates to .25% it seems. What is the possibility that the Fed will drop rates to 0% post bubble crash?

Good question… I have wondered this myself. I wish I had a better grip on the fundamentals. Would the Fed be willing to discard its remaining credibility as an inflation fighter and usher in a dollar crash in order to save the FBs and the FLs? Or are they tough enough to handle the outcry as ARMs reset, unemployment takes off and FBs drown?

Glen, no supreme grasp of the fundamentals here is needed --just a casual understanding of the nature of self-interested, myopic bureaucrats who can see no further than the next election cycle for their political benefactors. BB, like his unfathomably overrated predecessor, will drop rates as soon as enough FBs & voters scream "Uncle!" to their Congressmen. Sadly, there hasn't been any real Fed credibility on inflation-fighting since Paul Volcker.

I hope I'm 100% wrong on this, but unless BB turns out to be more than an eager-to-please cheap political hack who talks tough, but won't hold firm (likely), he will start cutting rates again either late this year or early 2007. The only question is, will this be enough to re-stimulate the housing bubble and/or broad-based inflation? The latest stats on stagnant wages and tepid job growth tells me "probably not".

Don't know about his going all the way down to zero, though. If you haven't already seen it, I'd check out Randy's ZIRP, Global Imbalances, and Home Prices thread on this very topic.

0% would certainly be a lifeline to the FBs. Especially if they were out shooting the FR's(realtors). I guess it goes back to the trillion dollar question, is Ben an inflation fighter? The price of gold tells me a lot of people think Ben will not really fight inflation.

HARM,

The Fed (and NAR) would like nothing more than lower rates. The Fed for political reasons, NAR to "stabilize" the RE market. However the "50 bps. in August" crowd is gaining membership. The yankee dollar has already given up enough ground and lower rates (however welcome) would create a stampede to bail out of MBS. They need to coddle the debt paper already trading without regard to issuing more of it. It's truly a damage control situation now.

The crying "uncle" will likely be met with some sort of re-nogotiated loan program vice an outright lowering of rates. That way pols can appear generous and the Fed can save face at the same time. IMHO.

Oh and for those even following the ongoing saga of the incredible falling apart 2 year old shitbox;

The owner, property manager, HOA atty. (also resident) and two small dogs were out to look at our collapsed gutter. The owner was clearly miffed and was already threatening to get the builder on the phone ASAP! The property manager asked the HOA atty. if they should be considering legal action. Regular meeting of the minds I tell you.

Turns out that the flashing was held in (near as they could figure) by gravity and the gutter (while screwed) was not "screwed" into anything! Sure there were screws but they terminated into well........ thin air! The hell w/craftsmanship and attention to detail! How's about making sure the gutters stay where they're put? Can't wait to see them "re-hang" the gutters for the whole complex. How well does a stud finder work through a sheet of galvanized steel? Yeah, uh huh, they're coming down.

the gutter (while screwed) was not “screwed” into anything!

Screwed gutter, meet screwed owner. :-)

Can we use this thread to christen a new acronym? FR! Fucked realator!! Are the workers at taco bell going to have competition for jobs from the FR crowd? I guess, "Would you like some hot sauce with your tacos sir? is better than, "Call 911 I've been shot"!

Most realtors are good people. Some may be misguided. But we should be nice to them.

SQT,

Actually the "fellow" that committed those atrocities HAD murdered before! The way he got the day trading money was by killing his "ex" making it look like an accident and collecting on the insurance money. The PD was aware that something was fishy but couldn't quite pin it on him so it went "cold case". What a jitbag.

Places where someone has met their end kind of weird me out. It had to be kind of creepy going in their everyday? I mean this wasn't "shoot out at the O.K Corral", this was a helpless person being gunned down. That weirds me out. I think Peter P would say "bad karma"?

"meet screwed owner" LOL!

The owner clearly did not appreciate my sense of "humor" as all I said was that "only God can make something perfect, and we're just men".

He huffed at that and basically demanded to get the builder on the phone!

HARM, you're absolutely right. We'd all do well to steer clear of bubble homes, not only for their "blue sky" pricing but for the hasty manner in which they were constructed.

Peter P,

Are you a fan of Vernon Howard? It just seems like you're in this place where NOTHING messes with you. Wish I could be like that.

Mr Vincent,

A couple of months ago I highlighted a complete POS (IMO) house for sale. The price has just been reduced from 538K to 466K and still no activity. That’s a 72 gurrr reduction. There are other homes that have been reduced with no activity after reduction.

Since we both live in Alhambra, I don't know why one of us hasn't bought that house. I expected to be in a bidding war with you!

Sure, it's only got 2 bedrooms, there's no back yard, and the house is small -- probably @800 square feet -- but think of the upside potential! The ad says "needs a little TLC." From that, I assume that there are no granite countertops in the kitchen. I smell a flip!

In fact, what am I waiting for...I'm going to make a bid on that place right now. Can you give me the number of your friend the mortgage broker?

I just read the listing again. The house has 696 square feet! A little smaller than I had envisioned, but I can still make this work. Maybe the cinder block garage can be turned into a third bedroom, or a study!

"Most realtors are good people. Some may be misguided. But we should be nice to them."

Govt. issued flack jackets? How about just keeping the interest rates low and ignoring inflation altogether. Would this be nice enough?

Are you a fan of Vernon Howard? It just seems like you’re in this place where NOTHING messes with you. Wish I could be like that.

Well, they may be messing with us, intentionally or not. However, they will be in depression for years very soon. I may or may not be sympathetic but I am going to be nice to them. :)

Joe Schmoe,

696 sq. ft? Maybe that would be O.K for a cabin by the lake but 24/7 365? I haven't seen it but it might be better to tear it down?

Oh, no slight intended toward legit attys. It's just in my industry there are times when more ROIC can be attained through litigation than actual investment. They have "career plaintiffs" and they cost everyone. Kind of like a professional victim?

Call 1-800-Stock-Losses for your free case evaluation today!

There’s going to be a lot of pi$$ed off homedebtors who are going to be looking for someone else to blame. It may the be realtors® and mortgage brokers who become the literal targets.

Let's hope that they do not blame their neighbors for reducing prices..

There’s going to be a lot of pi$$ed off homedebtors who are going to be looking for someone else to blame. It may the be realtors® and mortgage brokers who become the literal targets.

This worries me as well. Let me repeat once more for any readers not paying attention: The "news" story opening this thread is a SPOOF/SATIRE meant for ENTERTAINMENT purposes only. Do not misinterpret this in any way as a "signal" that it's ok to start shooting or assaulting Realtors. There are lots of nice, honest realtors out there just as disgusted with this mess as we are --George being one of them-- nor did realtors "start the fire". We can thank the Fed, Congress and the GSEs for that honor.

I am in no way responsible for anyone else's irresponsible and/or illegal actions.

"nor did realtors "start the fire"

Now THAT is absolutely true. While they did benefit from the bull run they were hardly the architects.

Just curious, when was the last time anyone saw a RE listing on C/L where it actually looked lived in? I've seen a lot of blatantly unoccupied homes, staged homes, about to be repo'd homes and that unmistakable "flipper look" homes, just can't recall seeing any that looked lived in. Just wondering.

Illegal shootings are wrong. There is no question about that.

I just have trouble with people who refuse to take responsibility of their past actions. If their investments went poof, they should blame no one but themselves.

I just have trouble with people who refuse to take responsibility of their past actions. If their investments went poof, they should blame no one but themselves.

I generally agree with the caveat emptor principle; however, would add that there's a lot of deliberate, malicious disinformation floating around out there. For every greedy specuvestor going in with eyes wide open, there is also a naive young couple looking to buy their first home being partly suckered into overpaying and taking on crushing debt, thanks to industry-standard FUD and bait-and switch tactics.

Plus we had our glorious former Fed chief shilling for option-ARMs at the worst possible moment (when rates were still at 1%), when he damned well knew that HE was about to raise them. Almost everyone involved in the Realtor-Mortgage-Industrial Complex had a hand in creating this mess, from the Bubble-blowing Fed, to the risk-shifting GSEs, to the sacred-cow deduction protecting NAR lobbyists, to chicken-shit politicians.

No one is completely innocent in this game, no one is completely blame-free. However, some are a lot more deserving of blame (and pain) than others.

BTW, recent geopolitical disturbances may trigger a flight-to-quality into US bonds again, causing interest rates to be lowered. On the other hand, people who are anxious about their future may attempt to seek security in homeownership.

Perhaps planets are just not aligned for the housing bubble to bust.

There really is no sense to making light of this. It's real and it is upon us. There will be animosity in abundance and we're already seeing the "blame game" being played out in markets from coast to coast. Since 70% + Americans "own" their own home there's bound to be a few nut jobs in the bunch. In Portland alone there were 4 stockbroker suicides following the dot.bomb era. Much of this is reported simply as a suicide but those in the industry now exactly why this individual was "distraught".

HARM said:
Plus we had our glorious former Fed chief shilling for option-ARMs at the worst possible moment (when rates were still at 1%), when he damned well knew that HE was about to raise them.

I have often wondered what AG was up to when he made this recommendation. I have my own theory about it. There is a good documentary which is occasionally re-run on PBS called "Commanding Heights." The documentary includes a discussion of the back-room Fed-engineered bailout of LTCM. Before the crisis hit the headlines there were a lot of back room machinations to figure out how to keep the thing afloat so as to minimize a systemic meltdown.

So my theory about AG's ARM endorsement is that similar machinations were taking place regarding a hidden bailout FNM and the rest of the mortgage industry. Low rates hammered big institutional mortgage lenders like FNM because they were carrying on their books a ton of mortgages which could be (and were) refinanced at substantially lower rates. Yet FNM did not have the same ability to refinance its cost of funds, since Fannie and Ginnie Mae bonds carry a fixed rate of interest.

So.... the Fed decided to try to offload some of the interest rate risk on to consumers going forward (from 2001) in order to give FNM a chance to get its books in order. Of course, we are still waiting for the restated FNM financials. Should be interesting when these finally make into the public domain.

PS: HARM, thanks for the link to Randy's earlier post on ZIRP--interesting reading.

Glen,

Some time back HARM said that GSE's basically were designed to:

Privatize Profits and

Socialize Risk!

I'm not exactly foaming at the mouth to hear the "re-stated numbers" b/c we all know it will be fluff and hot air. I guess the only thing that remains to be seen is just how blatant this is going to be!

I do not think GSEs are necessarily. I do not like moral hazards.

Please unlock my comment. I have no idea what blasphemous words I happened to use.

socialist, I believe.

reposting with some grammatical fixes.

The democrats have ruined this country by pandering to the poor with all kinds of zozialist programs.

Peter, regarding US interest rates (long bonds), I think you have a good point. However, with JCB raising their interest rates, the YEN carry trade will have to unwind. That’ll result in selling US bonds and paying back the borrowed YEN. Therefore, there’ll be downward pressure on US bonds (upward pressure on long-term interest rates). Correct me if I’m wrong.

SQT,

I wasn't sure how to up/down load the pictures of my rented sh@tbox so I e-mailed them to you. Can you create a link so all may witness the care and quality that goes into today's homes?

Many thanks,

DinOR

Thanks for the link, SQT. It's fairly critcal of the GSEs overall, but I take exception to this part:

"By eliminating this temptation [of holding large portfolios of MBSs] and increasing oversight, the housing GSEs can be the shining institutions that they claim that they are - and that we aspire for them to be," he said.

I see absolutely no reason why the GSEs even need to exist, or at least exist as quasi-government entities --with the gargantuan moral hazards & implicit taxpayer bailout "guarantees". What public "benefit" have they provided exactly? Have they lowered housing prices? Just the opposite, in fact. Have they lowered overall mortgage interest rates? Nope --Alan Greenspan himself debunked that myth a while ago. The private MBS market, if freed from GSE & Fed manipulation --and, *gasp* actually regulated in a way to benefit CONSUMERS-- could handle mortgage liquidity and risk just fine, thank you.

But, overall this was about as critical as comments coming from Congress can be, I suppose.

Today's yield curve (from http://www.treas.gov/offices/domestic-finance/debt-management/interest-rate/yield.shtml)

1 m 3 m 6 m 1 y 2 y 3 y 5 y 7 y 10 y 20y 30y
4.88 5.05 5.27 5.22 5.12 5.07 5.04 5.05 5.08 5.23 5.12

Very clear inversion.

Regarding posting images:

Try ImageShack. You can post a link to your shack-hosted images. It's free.

GC, Sorry but I could not find the blocked comment in my moderation queue. It's generally best to spell 'socialist' as 'soc-ialist' and post your links one at a time.

HARM, I believe someone went ahead and unlocked it. Thanks.

@DinOR & SQT,

I have a solution for the image file uploading/hosting issue. I don't have time to go into it right now, but we can speak offline after business hours.

HARM,

That's a roger.

seamus,

Uh for them to be considered "sales people" would tend to imply that they had at least a working knowledge of the product? Most are "tools". They just mimic what their broker told them to say. There is little independent thought and certainly NO consideration as to what would be best for the "client" long term.

How can anyone resist granite countertop? Must over-bid 100K to get it! :)