We certainly do not buy a soft landing for the economy and the housing market. Although the fall can be prolonged by dropping interest rates ¾% this year, but the flip side is higher inflation and gold and silver prices and a much lower dollar. That is a test of $1.3666 euros and 78.33 to 80 on the dollar index. The intermediate to long-term direction is set no matter what the elitists do.
Housing sales continue to fall as inventory builds and that eventually means lower prices for residential real estate. Once speculators and others finally realize they are beating a dead horse they will give up and finally take what they can get for their properties. Energy cost reduction will help the consumer but not enough to change things radically. The boom in housing has been totally artificial. The product of ridiculously low interest rates and criminally loose lending standards. The impact of lower housing prices affects 69% of the population, not 45% as a fall in equities would. Housing will fall from its own weight.
You see the inverted yield curve that we’ve so often talked about, it is now 8 months old and this situation whenever it has occurred since 1950 has been followed by recession. There were two minor exceptions, but the chance for recession is already with us. It began last February. Any recession will be accompanied by a correction in the stock market, probably to 7,286 or the 2002 low and perhaps even lower. Those who believe the rest of the world will avoid recession are mistaken. We go, they all go, and that includes China, which has a capital investment bubble and a banking system with over $1 trillion in bad debt. A recession in China would be a fall to 5% growth.
Due to massive world liquidity interest rates and mortgage rates have been artificially subdued and that makes it difficult for the Fed to lower interest rates from 4.75% on the Ten-year Treasury note. Once the real estate correction takes place then interest rates, set by the Fed, will fall from 5-1/4% to 3%. That cannot happen until real estate falls 30% more and the recession is very obviously underway. The dollar has to correct as well and it cannot bottom until the recession bottoms. In this context base metal commodities have corrected some 30%. We could see a further correction, but not until the foregoing takes place.
In the coming year most forecasters will again be wrong. We hope we are fortunate enough to be on the correct side again.
India is willing to pay a higher price for extra quantities of liquefied natural gas from Iran if the latter honors an existing contract for five million tons. That will surely send Washington’s neocons and Israeli’s fascists into fits. This while the US, UK and the Saudi’s are pushing down oil prices to put economic pressure on Iran, Venezuela and Russia.
The Treasury Department has reported to Congress that a data-collection program to spy on Americans so counterterrorism analysts can routinely access as many as 500 million cross-border financial transactions a year, can not be implement until 2010. Treasury says the program is technologically feasible and has value, but said it needs to determine whether the counterterrorism benefit outweighs banks’ costs of compliance and to address privacy considerations.
If you can believe it bankers oppose the program, they say it is burdensome and invasive.
Unlike another Treasury program, which uses administrative powers that bypass traditional banking privacy protections to tap into the most global database of transactions maintained by Swift Bank, the cross-border plan is the result of legislation sought by the Treasury and would require congressional oversight.
Banks and money services are required by law to keep records of all wire transfers of $3,000 or more. The proposed program would mandate that each of those transactions, if they cross the US border, be reported to the Treasury Department’s Financial Crimes Enforcement Network (FINCEN).
The type of data captured would include the names and addresses of senders, amount and dates of transfers, and the names and addresses of beneficiaries and their financial institutions.
Bankers say this would be very expensive and burdensome. This is a total violation of privacy and a giant fishing expedition. This has no security benefit. It is set up to snoop on American and foreign individuals and businesses. They cannot possibly filter 500 million cross-border transactions a year for terrorists. Foreign countries are up in arms, due to violations of their privacy laws.
FINCEN has proposed a $1.1 million cost analysis. Implementation would cost $32.6 million and take 3-1/2 years. Our corporatist fascist police state marches on.
Colorado had the highest rate of residential foreclosures in December, that is 9-months in first place last year. Nevada won in November. Colorado had one new foreclosure filing for each 376 households. It is very concerning because the state hasn’t had the price appreciation of the 30 hot markets. People are in trouble because of Mickey Mouse tactics by real estate agents, appraisers and lenders.
There were 109,652 houses nationally at some stage of foreclosure in December, off 9% from November. The national foreclosure rate is one for every 1,055 US households.