Housing: Still A Broken Market

Aside from everything else -- including a still-massive overhang of properties for sale -- the fact that ultra-cheap financing is not enough to induce a suffcient number of buyers to step up and take the plunge makes it apparent that we are nowhere near a bottom in the housing market.

And yet, Wall Street keeps piling into homebuilding stocks (I guess fundamentals don't matter when you're the "smart money" -- right?).

Comments

[kwark]

On the annecdotal side, I have office mates who can't ignore the "now's a great time to buy" drumbeat but can't qualify for a loan (despite, the low interest rates). The debate around the coffee machine centers on . . . is the difficulty due to homes prices that are still pretty damn high (in my opinion, even if this is S. California), they don't have lots of time on-the-job, or have only one income to bring to the table? Well, and there is the 20% down hurdle too since these guys don't have $80k just sitting in a passbook account. I keep telling them they're better off without a mortgage but they're drinking the coolaid . . .

[Which market isn't broken?]

Was The SEC "Explanation" Of The Flash Crash Maliciously Fabricated Or Completely Flawed Due To Plain Incompetence?

It is no secret that one of the main reasons why the retail investor has since declared a boycott of capital markets, which lasts to this day, and manifests itself in hundreds of billions pulled out of equities and deposited into bonds and hard assets, has been precisely the SEC's unwillingness to probe into this still open issue, and not only come up with a reasonable and accurate explanation for what truly happened, but hold anyone responsible for the biggest market crash in history in absolute terms. Instead, the SEC, naively has been pushing forth a ridiculous story that the entire market crash was the doing of one small mutual fund: Waddell and Reed, and its 75,000 E-mini trade, which initially was opposed to being scapegoated, but subsequently went oddly radio silent. Well, if they didn't mind shouldering the blame, the SEC was likely right, most would say. However, as virtually always happens, most would be wrong. Over the past few days, Nanex has one again, without any assistance from the regulators or any third parties, managed to unravel a critical component of the entire 104 page SEC "findings" which as is now known, indemnified all forms of high frequency trading (even as subsequently it was found, again by Nanex, that it was precisely HFT quote churning that was the primary, if not sole, reason for the catastrophic chain of events) with a finding so profound which in turn discredits the entire analytical framework of the SEC report, and makes it null and void.

Nanex' approach is simple and elegant: they unravel the fundamental argument at the core of the entire paper, and thus the SEC's conclusion, with definitive factual proof and material evidence. And in doing so they make all the primary and tangential conclusions of the SEC invalid.

http://www.zerohedge.com/news/was-sec-explanation-flash-crash-maliciously-fabricated-or-completely-flawed-due-plain-incompete?

[payday loans uk]

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[Life is a masquerade]

JPM Earnings Beat Courtesy Of $0.28 Benefit From Loan Loss Reserves Despite First Increase In Nonperforming Loans In Years

As for the EPS beat, as usual the one-time items swamped everything else, of which the primary one, reduction in loan loss reserves which is the traditional way for the bank to pump up the bottom line, accounting for $1.8 billion or $0.28/share. We are curious how Jamie Dimon will justify this accelerating release even as the firm's Nonperforming loans increased for the first time in years from $10 billion to $10.6 billion: just the TBTF put or something else?

But the key chart is the following, which shows that no matter what happens, Jamie Dimon is happy to boost earnings by reducing his loan loss reserve, which over the past 2 years alone has generated $12.3 billion in non-earnings earnings! Naturally, loan loss reserves were down $3.9 billion from a year ago: easy money.

Finally, JPM's presentation of its Net Interest Margin: down to 2.61% and sliding. You better hope we get some steepness in that curve soon.

http://www.zerohedge.com/news/jpm-earnings-beat-courtesy-028-benefit-loan-loss-reserves-despite-first-increase-nonperforming-?

Expect Another $17 Trillion of QE

“The $17 trillion that came into the system, in total, has gone into the hands of the winners on the derivatives. The flushing of Lehman made that a necessity. Those people with the money are not lenders. I would say that sitting in front of Goldman Sachs with a tin cup would not get you too far.

They don’t have a mindset for building. They have a mindset to reward destruction. So what you are seeing is the effect of simply putting money into a system, to fill a dark hole, out of which the money doesn’t come.

It doesn’t fund the ability to lend. And truth be known, because of FASB allowing the financial organizations, in the US, to value their over the counter derivatives at any value they choose to use, the balance sheets of the lending institutions are cartoons.

http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2012/4/13_Jim_Sinclair_-_Expect_Another_$17_Trillion_of_QE_%26_War_in_Gold.html

[This doesn't sound smart, either!]

Yes, Virginia, this is Obama’s JOBS Act

But this bill accomplishes those things at the cost of slashing investor protections to a degree that isn’t just unnecessary, but stone-cold crazy. It includes ideas that just ten or fifteen years ago were conclusively proven to result in wide-scale fraud.

For instance, if this bill is supposedly about increasing access to capital for small businesses, why do we also need to repeal the conflict-of-interest ban on bank analysts talking up startup firms in an attempt to gain their investment banking business? Wasn’t it just ten minutes ago that Eliot Spitzer had to drag the entire financial services industry into court for pumping up worthless stocks in order to get their business?

Read more: http://www.rollingstone.com/politics/blogs/taibblog/yes-virginia-this-is-obama-s-jobs-act-20120412#ixzz1rvOn34M4

[What has really been accomplished by the fed's policies?]

Steinhardt On The Fed's Failure And The End Of Wall Street As We Know It

The low interest rate 'logic' is not working and "the economy can't gain any zest, can't gain any vigor" is how Michael Steinhardt describes the crushing of 'widows and orphans' that the Fed has embarked upon. In a Bloomberg TV interview, the WisdomTree chairman notes the broad 'pall' over the equity markets (conjuring images of a funereal procession down Trinity Street) pointing out that there is no reason to be wildly bullish here. Citing Wall Street's lack of 'spirit', he questions the entire raison d'etre of efficient capital transfer as becoming secondary as he rather poignantly asks who has benefited from Fed's policies "Certainly the banks. But ordinarily you'd say, well, low interest rates benefit housing. It certainly hasn't benefited housing." Reflecting on his performance as a hedge fund manager he concludes that extraordinary performance is sadly not necessary anymore as the money flowing into hedge funds means people do exceptionally well for themselves despite diminished performance. While finding equities broadly unappealing, and suggesting talk of QE3 should cease, he notes there are pockets he would invest in but ends by noting that "Bonds are no place to be".

http://www.zerohedge.com/news/steinhardt-feds-failure-and-end-wall-street-we-know-it?

[Oh! what a tangled web we weave, When first we practice to deceive!]

JP Morgan To World: Heads We Win, Tails You Lose

It turns out Blythe Masters, JPM's head of commodities trading, lied her ass off on CNBC last week when she explained on CNBC that JPM's trading business is client-driven (most of knew she was full of shit). But I thought everyone on Wall Street told the truth when they were on TV (wink wink). Here's the report that explains how JPM has simply moved its proprietary (the in-house hedge fund aka "prop trading") functions into the office of the CIO. This maneuver was done in order to move the risk-based capital trading out of the securities unit and into the bank holding unit. Why? Twofold: 1) it removes the proprietary trading away from the eyeballs of the securities regulators and the Volker Rule AND 2) it shifts this risky trading into a business unit that would be covered by the FDIC. It's what Bank of America did when moved something like $52 trillion in gross derivative positions from its Merrill Lynch securities unit to its holding company.

http://truthingold.blogspot.com/2012/04/jp-morgan-to-world-heads-i-win-tails.html

[Broke(n)]

Americans Can't Wait For Their Tax Refunds... To Immediately File For Bankruptcy

In yet another sad reflection on the state of the Schrodinger-economy, USA Today notes that over 200,000 households will use their tax rebate this year to pay for (drum roll please) a bankruptcy filing and associated legal fees.

http://www.zerohedge.com/news/americans-cant-wait-their-tax-refunds-immediately-file-bankruptcy?

[Weak foundations will continue to hurt housing]

U.S. Pension Crisis: States Choose Bondholders Over Public Employees

Measured on a market value basis, these unfunded liabilities (combined with those for retirees' health care) exceed $4 trillion, which is more than the total amount of bond debt outstanding from states and localities. And because of the way pension accounting works, most states and local governments can expect to see continued sharp rises in required payments into pension funds at least through 2014. While most parts of states' fiscal pictures are improving, this one continues to deteriorate.

Last year, when the small city of Central Falls, Rhode Island entered receivership, the state passed a law to move bondholders to the front of the priority list for payment, making it essentially impossible for municipalities to default on bond debt. Meanwhile, the state enacted an aggressive pension reform that both cut benefits that workers can earn in the future and froze cost of living adjustments-- effectively reducing the benefits that current workers and even retirees had earned in the past. It didn't matter that Rhode Island is a state with politically powerful unions; a loss of access to the bond markets was far scarier to state lawmakers than anything the unions could do.

http://finance.yahoo.com/blogs/daily-ticker/u-pension-crisis-states-choose-bondholders-over-public-155744670.html

[last rites]

Charting the Housing Market

It saddens me to have to report that, even with mortgage rates at historic lows, the American housing market is dead.

http://www.oftwominds.com/blogapril12/charting-housing4-12.html