The United States is
facing both a structural and demand problem - it is not the cyclical
recessionary business cycle or the fallout of a credit supply crisis
which the Washington spin would have you believe.
It is my opinion that
the Washington political machine is being forced to take this position,
because it simply does not know what to do about the real dilemma
associated with the implications of the massive structural debt and
deficits facing the US. This is a politically dangerous predicament
because the reality is we are on the cusp of an imminent and
significant
collapse in the standard of living for most Americans.
The politicos’ proven
tool of stimulus spending, which has been the silver bullet solution for
decades to everything that has even hinted of being a problem, is
clearly no longer working. Monetary and Fiscal policy are presently no
match for the collapse of the Shadow Banking System. A $2.1 Trillion YTD
drop in Shadow Banking Liabilities has become an insurmountable problem
for the Federal Reserve without a further and dramatic increase in
Quantitative Easing. The fallout from this action will be an intractable
problem which we will face for the next five to eight years, resulting
in the “Jaws of Death” for the American public.
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The
economic news has turned decidedly negative globally and a sense of
‘quiet before the storm’ permeates the financial headlines. Arcane
subjects such as a Hindenburg Omen now make mainline news. The retail
investor continues to flee the equity markets and in concert with the
institutional players relentlessly pile into the perceived safety of
yield instruments, though they are outrageously expensive by any
proven measure. Like trying to buy a pump during a storm flood, people
are apparently willing to pay any price. As a sailor it feels
like the ominous period where the crew is fastening down the hatches
and preparing for the squall that is clearly on the horizon. Few crew
mates are talking as everyone is checking preparations for any
eventuality. Are you prepared?
What if this is not a squall but a tropical storm, or even a hurricane?
Unlike sailors the financial markets do not have the forecasting
technology to protect it from such a possibility. Good sailors before
today’s technology advancements avoided this possibility through the use
of almanacs, shrewd observation of the climate and common sense. It
appears to this old salt that all three are missing in today’s financial
community.
Looking through the misty haze though, I can see the following clearly
looming on the horizon.
Since President Nixon took the US off the Gold standard in 1971 the
increase in global fiat currency has been nothing short of breath taking.
It has grown unchecked and inevitably became unhinged from world
industrial production and the historical creators of real tangible wealth.
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positioning COMMENTARY
POSTS: WEDNESDAY 10-06-10
Last Update:
10/07/2021 05:18 AM
SCHEDULE: 1st Pass: 5:30AM EST, 2nd Pass: 8:00 AM, 3rd Pass 10:30
AM. Last Pass 5:30 PM
Trying to Make Sense of the Mortgage Foreclosure Fiasco Lawler via
Calculated Risk
Since the GMAC “robo-signer” issue first “broke” last month,
the “issue” has catapulted from what some (but not all) industry
folks characterized as a “technical” issue in judicial foreclosure
states to what the media (who predictably jumped on this story
like a ... well, I can’t print that!) now characterizes as a
“gigantic mess.” Not too long after the GMAC story came out, both
Chase and Bank of America announced that they too were suspending
foreclosures in the 23 “judicial” foreclosure states, and while
some other big servicers (Wells and Citi) weren’t planning to
suspend foreclosures, news reports surfaced suggesting that both
companies had some “robo-signers” as well. The media, of course,
then searched for individual cases of “foreclosures gone wild,”
and found a number of instances where there were some real
mistakes made by lenders/servicers that went well beyond
“robo-signing.”
Predictably, of course, politicians in
many states jumped on this issue, calling for an across the board
moratoria on foreclosures “until homeowners can be assured they
are treated fairly.” Even California, a non-judicial state, jumped
on this bandwagon, with Attorney General Brown arguing that GMAC
and Chase should “stop foreclosing” on homes until they can
“prove” that they are complying with a state law requiring lenders
to “contact” borrowers facing foreclosure to assess their
“situation” and discuss “options" before foreclosing on a home.
The OCC ordered other large servicers to “review” their
foreclosure processes and procedures, and Fannie and Freddie told
its servicers to
undertake a review of their processes and procedures on
foreclosures, and reminded them of their basic duties and
responsibilities (including the consequences of “non-compliance”).
Meanwhile, Old Republic National Title stopped writing title
insurance on foreclosure sales by GMAC and Chase until
“objectionable issues had been resolved,” creating concerns in
some camps about the ability of firms to sell foreclosed
properties.
The current mess, of course, suggests that (1) either loans
should be priced differently based on a state’s foreclosure law;
or (2) the government should push states to accept a national
foreclosure law, with crystal clear rules and adequate borrower
and lender safeguards. It also suggests that the “timeline” to
reduce the government’s role in the US mortgage market has now
been extended even further into the future!
Rule of Law Versus Bank Profits- Mortgage Fraud Edition
Naked Capitalism
This development reveals how this battle is likely to play
out. Now that judges in some states are starting to take these
dubious, potentially fraudulent measures seriously, the next line
of attack is to get the more bought and paid for Federal
government to intercede on behalf of the banks. As the e-mail by
the Ohio Secretary shows, this is a state versus Federal rights
issue. And the problem is that these solutions will be depicted as
“efficient,” just as securitizations and other “innovations” were.
The result is that we institutionalize kleptocracy while
keeping largely gutted forms of due process as theater. The powers
that be hope that the broad public will remain unaware of what is
really at work.
Congressmen are not aiming at the narrow
issue that gave this story prominence, the robo signers, but the
broader patterns of abuses. Let’s hope they have the resolve to
make an investigation a serious undertaking, rather than a mere
photo op.
Foreclosure Paperwork Scandal 'Same Process' That Fed The Housing
Bubble HP Dr. HB
Sorry kids, we just report the news... as ugly as they may be.
After last week saw an
insider selling to buying ratio of 1,411 to 1, this week the
ratio has nearly doubled, hitting a ridiculous
2,341 to 1.
And while Wall Street's liars and CNBC's clowns will have you
throw all your money into "leading" techs like Oracle and Google,
insiders in these names sold a combined $200 million in stock in
the last week alone (following Oracle insider sales of $223
million in the prior week). Insiders can. not. wait. to.
get. out. fast. enough. This Fed-induced rally is nothing
short of a godsend for each and every corporate executive. But
yes, there may be value: there was insider buying in 2
(two) companies last week: General Dynamics and Best Buy,
for a whopping total of $177,064. At the same time sales were a
total of $414 million: so is anyone wondering why
JPMorgan is reopening its gold vault... Anyone left holding the
bag on this market when the FRBNY props are taken away, will be
left with the same return as all those investors who entrusted
their money with Madoff. Guaranteed.
Has the time for a
currency war with China arrived? The answer looks increasingly
to be yes. The politics and economics of an assault on Chinese
exchange rate policy are increasingly convincing. The idea is, of
course, deeply disturbing. But I no longer believe there is an
alternative.
The menu of possible options for the Chinese
authorities could include a cap on the intervention, an end to
sterilisation of the monetary consequences and targets for real
domestic demand, household consumption and the current account.
Meanwhile, China should demand complementary actions elsewhere,
notably in the US
“Within a single week 25 nations have
deliberately slashed the values of their currencies. Nothing
quite comparable with this has ever happened before in the history
of the world.”
Ben Davies, CEO of Hinde Capital
Gordon T Long is not a registered advisor and
does not give investment advice. His comments are an expression of opinion
only and should not be construed in any manner whatsoever as
recommendations to buy or sell a stock, option, future, bond, commodity or
any other financial instrument at any time. While he believes his
statements to be true, they always depend on the reliability of his own
credible sources. Of course, he recommends that you consult with a
qualified investment advisor, one licensed by appropriate regulatory
agencies in your legal jurisdiction, before making any investment
decisions, and barring that, we encourage you confirm the facts on your
own before making important investment commitments.ont>
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Gordon T Long
is not a registered advisor and does not give investment advice. His comments
are an expression of opinion only and should not be construed in any manner
whatsoever as recommendations to buy or sell a stock, option, future, bond,
commodity or any other financial instrument at any time. While he believes his
statements to be true, they always depend on the reliability of his own
credible sources. Of course, we recommend that you consult with a qualified
investment advisor, one licensed by appropriate regulatory agencies in your
legal jurisdiction, before making any investment decisions, and barring that,
we encourage you confirm the facts on your own before making important
investment commitments.
