Homebuilder confidence fell again to 20 from 22. Robert Toll of Toll Brothers says the turndown in housing since early August has been the worst since 1980-1982 and between 1987-1991.
Foreclosure filings rose 36% in August from July and 115% from a year ago led by California, Nevada and Florida. The number of filings in August, default notices, auction sales notices and bank repossessions were 243,947, the highest since it began its monthly report in January 2005.
Bankrupt American Home Mortgage is attempting to seize as much as $27 million that employees had set aside for retirement. If they are successful, the employees will never see the money again. Let’s hear it for the crooks of corporate America.
Impac Mortgage Holdings will quit most lending and cancel its dividend. Accredited Home Lenders Holding posted a quarterly loss and said its survival remains in doubt. Impac said it fired 144 workers and will stop making ALT-A loans.
Jimmy Rogers says, “If Bernanke starts running those printing presses even faster than he is doing already, yes we are going to have a serious recession.” The dollar is going to collapse, and the bond market is going to collapse. There is going to be a lot of problems in the US.
Producer prices supposedly fell 1.4% in October versus a 0.6% increase in July. We suggest the doctored figures were manufactured to prove there would not be inflation to deal with in order to justify cutting interest rates. In other words inflation is under control, which it is not.
Iran has massively cut down its dependence on the dollar in the face of US pressure over its nuclear program and now 70% of its foreign assets are in euros, other currencies or gold. Several European nations have drastically cut business with Iran as a result of pressure from the US, something they will live to regret. 60% of oil exports are in euros.
Alan Greenspan tells us the euro will replace the dollar. That is because the Greenspan era of lower inflation is over.
Lord Oxburgh, former Chairman of Shell, has issued a stark warning that the price of oil could hit $150 a barrel, with oil production peaking over the next 20 years.
For every two homes sold in August, one went into foreclosure in central California. Amador, El Dorado, Nevada, Placer, Sacramento, Sutter, Yolo and Yuba counties have this distinction. The numbers just get bigger and bigger. Prices in Sacramento and Placer counties are off 20% from their highs with 20% more to go.
As the dollar falls, consumption will fall and so will the US economy. That means stagnation and inflation, stagflation. As this transpires American’s dominance in all world affairs will wane. As we said long ago, the USDX dollar index will fall to 40 to 55 from its current index number of just over 79. This means higher interest rates, more inflation and a very bad recession if not depression.
That is why the life of the dollar as the world’s reserve currency is now limited. The break in the dollar has doomed the US economy and perhaps the world economy as well. We do not have June figures, but we guess that dollar foreign exchange holdings of foreign central banks has probably fallen to close to 60% from 64.75% at the end of 2006. As capital leaves dollar denominated investments, interest rates will rise and inflation will increase, as the Fed has to purchase more and more Treasury paper. That will bring higher unemployment and recession. The recent lowering of the prime rate and discount rate is only a stopgap. While this proceeds we are seeing higher inflation.
Consumer prices fell 0.1% in August as energy prices fell 3.2% and food prices rose 0.4%. We are expected to believe that CPI is up only 2% yoy, try 11.1%.
Energy prices declined 6.6% in August according to the BLS. Gasoline fell 13.8%, natural gas 8.5%, food 0.2%, and computers 3.2%. That is hedonics, so you can see the statistics are what they want them to be.
Foreclosures climbed 36% in Phoenix in August; some 1,093 people lost their homes. It is the first time they exceeded 1,000 in ten years. Homeowners at least 30-days behind in payments rose 29% to 3,203. Arizona is 4th in foreclosures.
The Fed and the bureaucrats have decided along with other central bankers that they will risk an inflationary explosion instead of allowing the system to purge itself of 15 years of more excesses. Though the cost of credit has been reduced, only a few will benefit, Wall Street and the bankers. This is just the latest attempt to allow the elites and The Street to unload crappy paper on the gullible and the goofy. There will be no resumption of “liar loans” or undocumented mortgages and real estate will be allowed to collapse. People with FOIC’s under 700 won’t get loans.
General Electric only lost $1.4 billion in the third quarter to exit from its Japanese personal loan business and US subprime unit.
California August home foreclosures soared and there is no end in sight.
Chiquita Brands will pay a $25 million fine for paying protection payments to Colombian military groups who are professional murderers funded by the Colombians, which is funded by our government. Just more fines and nobody goes to jail.
Another Zogby poll showed only 29% of Americans gave President Bush a positive grade for his performance. That is below the former low of 30 in March.
Only 11% rated Congress positively, beating the previous low of 14% in July.
The index of the mood of the country dropped from 100 to 98.8 due to fears of recession.
The public mood is not dark; it’s darker than dark. The mood is getting very ugly said Zogby.
Twenty-seven percent believe the country is headed in the right direction and 62% believe the country is on the wrong track; 63% believe the value of their homes will stay the same or drop next year; 33% expect a recession amid a housing slump and credit crunch; 68% rated economic policy fair to poor and 73% said foreign policy was fair to poor. We are seeing an anti-institution mood. People do not have any faith that anybody is solving their problems.
Housing construction fell to a 12 year low as starts fell by 2.6%. Housing is experiencing its steepest downturn in 16 years with analysts finally forecasting weak prices and further declines in sales for months to come, given rising mortgage defaults which are dumping even more homes on an already glutted market.
House general counsel has directed 13 members of Congress who have been subpoenaed for documents and testimony by the lawyer for Brent Wilkes who has been accused of bribing jailed former Congressman Rep. Duke Cunningham, not to comply. Duke is doing an 8-year stretch. Those summoned were Ike Skelton (D-MO), Silvestre Reyes (D-TX), Duncan Hunter (R-CA), John Murtha (D-PA) and Jerry Lewis (R-CA), all for testimony and documents. Those requested for testimony were Roy Blunt (R-MO), Dennis Hastert (R-IL), Joe Knollenberg (R-MI), Peter Hoekstra (R-MI), Darrell Issa (R-CA), Jim Doolittle (R-CA), Jerry Weller R-IL) and Norm Decks (D-WA). It’s like a rogues gallery.
On Wednesday the Fed added $9.75 billion in reserves.
Countrywide Financial is out of the subprime business. They follow HSBC and New Century out of that type of business. Those with better credit must have documented proof of their income and assets. Starting next month, 80% of its mortgages will meet the standards of Fannie Mae and Freddie Mac. That is up from 60% almost nine months ago.
The regulator for Fannie Mae and Freddie Mac reversed policy and will allow the government chartered companies to buy more home loans – an increase of 2% beyond the existing cap of about $1.5 trillion. Each guarantee 40% of US home loans and can buy $20 billion each of subprime home loans. This will have little impact on the problem. The reason President Bush wants to limit Fannie and Freddie is that he knows they are on the edge of bankruptcy after having jointly lost $11.3 billion. Senator Charles Schumer (D-NY) as we reported earlier this month, wants to permit the companies to buy $145 billion more in home loans. We expect any such legislation would be vetoed by Mr. Bush. Schumer’s move is a political one because he knows the problems at Fannie and Freddie and the stand of the president. Freddie Mac CEO Richard Syron says the housing slump may last another 18 months. Try 24 to 48 months.
Absolute Capital Management Holdings, whose co-founder Florian Homm, quit abruptly, stopped investors from withdrawing money from eight hedge funds that manage $2.1 billion. Clients tried to withdraw more than $100 million after Homm quit in a dispute over pay from the firm’s fund managers. Shares of the company fell 84%. Their main offices are in Majorca, Spain. The funds are holding illiquid OTC shares.
MBA purchase applications rose 9% in the 9/14 week versus 5.2% the prior week. The refi index was up 4.6% versus +6% in the prior week. The 30-year fixed rate mortgage rose 3 bps to 6.29%.
Yale University economist Robert Shiller, who has long predicted this decade’s housing market bubble would deflate, said the residential real estate turndown could spiral into the most severe since the great depression and could lead to recession.
Due to a continuing software glitch, the first high-tech “virtual fence” at the nation’s borders remains unused, three months after its scheduled debut. It doesn’t work.
Any US military intervention in Iran would be a “political error” that would have catastrophic consequences said Russian Deputy Foreign Minister Alexander Losyukov in an interview. He said we are convinced that there is no military solution to the Iranian problem. It is impossible. It is now as well quite clear that there is no military solution to Iraq either.
As Ben Bernanke, via his helicopter, brings us credit from above to bail out the banks and Wall Street, he smells repos in the morning. No matter what they do they will have a very hard time dumping all their crappy paper. The whole world knows what they have to sell and they will have a hard time selling it. That means financial liquidity won’t become a reality for a long time unless the Fed buys their toxic waste and they monetize it. Knowing the lenders, since they’ll be able to issue cheaper rates for loans, we are afraid they’ll just relax standards by re-popularizing ARMs, especially if more rate cuts follow.
Saudi Arabia has $800 billion in their future generation fund and the entire region has $3.5 trillion. Saudi has refused to cut interest rates in lockstep with the Fed for the first time, signaling the kingdom is preparing to break the dollar currency peg in a move that risks setting off a stampede out of the dollar across the Middle East. The Saudi central bank said they would take “appropriate measures” to halt the huge capital inflows into the country, but analysts say this policy is unsustainable and will inevitably lead to the collapse of the dollar peg. The dollar and the US bond markets are now in serious trouble. This week’s Fed figures showed a collapse in US bond purchases by foreign central banks. A fall from $97 billion to $19 billion in July. America will be stripped of foreign capital flows needed to cover the current account deficit. Wall Street went too far this time screwing bankers worldwide. Now that flight from the dollar has begun it will accelerate until we hit the bottom and the US dollar is no longer the world’s reserve currency. If foreigners stop buying Treasury and Agency paper, the Fed will be forced to buy it and that is monetization and that immediately means higher inflation. The current account deficit is expected to reach $850 billion this year or $3.4 billion a day and foreign central banks won’t be there to fund that debt. These banks have been funding 30% of the debt. Thus, the Wall Street-banker bailout, via two deep interest cuts – dooms the dollar and puts the problem of confidence and trust front and center. The short term palliative will push up long-term interest rates, which will drive up mortgage rates and drive the property market into deeper crisis. The money and credit creation will increase, bringing on hyperinflation, creating a major recession if not depression. The dollar is collapsing and next bonds will collapse sending yields rocketing.