Brent Nyitray
Fairlington Blade
Let the mutherfuker burn!
jnc4p
Kevin S. Willis
Michigoose
lmsinca
markinaustin
Arcanaut
novahockey
quarterback
ScottC
yellojktVital Statistics:
| Last | Change | Percent | |
| S&P Futures | 1365.7 | -3.1 | -0.23% |
| Eurostoxx Index | 2536.7 | -9.5 | -0.37% |
| Oil (WTI) | 106.62 | -0.1 | -0.07% |
| LIBOR | 0.4746 | -0.001 | -0.25% |
| US Dollar Index (DXY) | 79.32 | -0.083 | -0.10% |
| 10 Year Govt Bond Yield | 1.99% | 0.02% |
Markets are weaker this morning after China lowered its economic growth target from 8% to 7.5%, which was basically an acknowledgement of the economic weakness in Europe. Surprisingly, bonds and mortgages are off a few ticks as well. At 10:00 we have ISM and Factory Orders reports.
Private creditors will either accept or reject the Greek restructuring this week. The Greek government has set a minimum participation level of 75% in order to proceed with the transaction. If that number comes in less, the government could compel bondholders to go along, which would undoubtedly trigger a credit event which means all the credit default swaps linked to Greek debt will pay out.
HUD has released its February Housing Scorecard.There is nothing really earth-shattering in the document. The document claims it would take 6.1 months to turn over the supply of existing homes on the market, which obviously ignores the looming shadow inventory. It discusses HAMP, but doesn’t discuss REO-to-Rentals, which is surprising.
Filed under: Uncategorized |
All Things in Moderation 
Interesting speech/rant by Krugman regarding the state of the economics profession.
http://krugman.blogs.nytimes.com/2012/03/05/economics-in-the-crisis/
Short version: “Everyone but me was wrong about the slump and they should all shut up and stop distracting the politicians and policy makers from listening to me.”
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Pearlstein as the antidote to the grand poobahness of Krugman:
http://www.washingtonpost.com/steven-pearlstein-signs-the-economy-has-shifted-in-the-right-direction/2012/02/27/gIQAl8abpR_story.html?wpisrc=nl_wonk
I know: Pearlstein never won a Nobel Prize in Economics. And Pearlstein favored a bigger and better targeted stimulus when ARRA was being debated, so he is not the anti-Krugman. What Pearlstein sees is an economy gradually self righting even against headwinds, one that does not need more stimulus, but now needs some serious attention to long term deficit control.
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I’m out till Friday. I get to experience the hotel meeting rooms of the Orlando Omni.
Avenge me!!
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Pearstein’s close:
“Th e choice we are presented between more stimulus and more budget-cutting is a false one. At this point in the recovery, the right policy is to cut and invest, while having the patience and humility to allow the economy to continue putting itself back into balance.”
He noted some potential investments for long term growth, but neglected to specify any cuts. If he means to cut the long term debt, there’s a good discussion to be had about how to best address the projected shortfalls of SS & Medicare. There’s a good discussion to be had about the size of the DOD vs GDP. The rest is small potatoes.
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I’ve always been a big Pearlstein fan and I’d take him any day over Krugman for balanced and nuanced analysis. I’d put his Pulitzer up against Krugman’s Nobel.
Also, if I had followed his stock market advice in 2008 (i.e. it’s a bubble, sell), I’d have been better off today.
Edit:
My point on Pearlstein’s Pulitzer needs to be made more forcefully:
Go back and reread his 2007 articles here:
http://www.pulitzer.org/works/2008-Commentary
and contrast them with Krugman’s admission:
“What you can criticize economists for – and indeed, what I sometimes berate myself for – is failing even to see that something like this crisis was a fairly likely event. In retrospect, it shouldn’t have been hard to notice the rise of shadow banking, banking that is carried out by non-depository institutions such as investment banks financing themselves through repo. And it shouldn’t have been hard to realize that an institution using overnight borrowing to invest in longer-term and somewhat illiquid assets was inherently vulnerable to something functionally equivalent to a classic bank run – and, furthermore, that the institutions doing this were neither backed by deposit insurance nor effectively regulated. Economists, of all people, should have been on guard for the fallacy of misplaced concreteness, should have realized that not everything that functions like a bank and creates bank-type systemic risks looks like a traditional bank, a big marble building with rows of tellers.
And I plead guilty to falling into that fallacy. I was vaguely aware of the existence of a growing sector of financial institutions that didn’t look like conventional banks, and weren’t regulated like conventional banks, but engaged in bank-like activities. Yet I gave no thought to the systemic risks.”
http://krugman.blogs.nytimes.com/2012/03/05/economics-in-the-crisis/
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I agree with you about Pearlstein. I have also observed that Krugman is more persuasive in his academic writing than in his columns, which seem to take positions that are far more politically motivated than his scholarly works.
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” , if I had followed his stock market advice in 2008 (i.e. it’s a bubble, sell), I’d have been better off today.”
When did he switch back to “buy”?
I’m pretty happy with where I am following Bogle’s “ride it out” advice. Continuing to buy during the dip has proved to be good advice.
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“bsimon, on March 5, 2012 at 10:30 am said:
” , if I had followed his stock market advice in 2008 (i.e. it’s a bubble, sell), I’d have been better off today.”
When did he switch back to “buy”?
I’m pretty happy with where I am following Bogle’s “ride it out” advice. Continuing to buy during the dip has proved to be good advice.”
He stopped giving advice after that, but his point was that people didn’t believe there was a bubble in 2007 and therefore you couldn’t “time the market’ were delusional.
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OT: Bailout outrage fatigue has set in:
A bailout for real estate speculators
Posted by Suzy Khimm at 11:18 AM ET, 03/05/2012
Expanding its push to fill vacant homes, the Obama administration is giving mortgage aid to real-estate investors who bought multiple homes during the housing bubble.
Having recently expanded its TARP-funded Home Affordable Modification Program, the administration will now extend the program to landlords for the first time.
“Landlords can qualify for up to four federally-subsidized loan workouts starting around May, as long as they rent out each house or have plans to fill them,” Bloomberg reports. “The program pays banks to reduce monthly payments by cutting interest rates, stretching terms, and forgiving principal.”
Until now, the White House had only extended mortgage modification to owner-occupied homes, rather than real-estate investors and landlords—a group that includes the kind of buy-and-flip speculators that fueled the bubble in the first place. ”
http://www.washingtonpost.com/blogs/ezra-klein/post/a-bailout-for-real-estate-speculators/2012/03/05/gIQAs9ZjsR_blog.html#excerpt
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Re: jnc4p’s post. My rental is an 5/1 ARM based on the 1-year LIBOR that originated in 2005. It’s reset 3 times now, and each time the rate has been lower than the original rate. this past reset was 2 weeks ago and the rate went from 3 to 3.3.
But I guess if they’re going to let me convert it to fixed rate, kick it back up to a 30 year fixed, why not?
I was shopping around and was told I needed at least 20% equity.
[update: It was our primary residence and we converted it. I’m not underwater because i paid down the loan like a sucker.]
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” I’m not underwater because i paid down the loan like a sucker”
I feel your pain. We bought with a 50% downpayment, then put another 30% into an addition.
We couldn’t get out what we have into it; but most of what we have into it came from the guy that bought my duplex…
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From the first of those Pulitzer winning columns:
Five years later and nothing has yet been done to change the situation.
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“novahockey, on March 5, 2012 at 12:33 pm said:
I’m not underwater because i paid down the loan like a sucker.”
Should you lose your job you won’t feel like a sucker. It will feel like prudent risk management.
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Hello, in the last of the Pulitzer articles, he describes how banks “convinced themselves and ratings agencies” that tranching & retranching CDOs could turn moderate risk mortgages into AAA rated instruments. Its like spinning straw into gold!
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“bsimon, on March 5, 2012 at 1:55 pm said:
Hello, in the last of the Pulitzer articles, he describes how banks “convinced themselves and ratings agencies” that tranching & retranching CDOs could turn moderate risk mortgages into AAA rated instruments. Its like spinning straw into gold!”
Like I said, I’ll put that series of articles up against anything that Krugman wrote during the same time period. Speaking of which, I’m going to channel bannedagain/John and provide today’s relevant John Carney link:
“Paul Krugman: Bond Vigilante?
Published: Wednesday, 29 Feb 2012 | 5:27 PM ET
Text Size
By: John Carney”
http://www.cnbc.com/id/46578590
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Speaking of bonded debt, the Jefferson County, AL bankruptcy has survived a creditor challenge that the debts were “warrants” and not approved by the voters. This is significant because the Harrisburg PA bankruptcy was dismissed, I think on the same grounds.
The Supremes don’t usually hear bkcy cases, but these might get there.
BTW, the Supremes are not bankruptcy lawyers and as with tax cases they can be sometimes off the wall.
Jefferson County is home to Birmingham.
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I hated buying during the boom. It felt like I was the designated driver for a bachelor’s party (15 year fixed rate, 10% down). We’ve managed to pay down quite a bit and so would walk away from the table with quite a hefty bit of money. My guess is we’d lose everything we put into the place (~$50k) along with paying commissions. Still, NRL has been a relatively safe port in one hell of a storm, so I don’t feel too bad about my situation.
There was an interesting analysis of the current Supreme Court. For the first time in a long time (ever?), there isn’t a single politician on the court. Well, one that held elective office. It’s already known that there’s not a single Protestant on the court nor anyone between the coasts. I’d love for a question at the presidential debate to be give me several examples of people you would consider nominating for the next vacancy.
BB
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