regarding the printing press comments from last thread, i've been mulling this over. we have global deflation and no real decoupling. i don't think it is impossible to have global hyperinflation, very unlikely though.
but there are only two things that BB (or any central bank) can do, raise rates (which supposedly caused huge damage in the last depression) or try to inflate out of deflation by printing. the latter would destroy the currency and bond rating (going to happen anyway).
Yes, I proclaim all better. At least for the next hour or 2. Although I reserve the right to change my mind. I may push the Dow over 8k today so look out.
It's great to be near the beginning of a thread, too bad I don't have much to say here. I won't let that stop me, though. In one of CR's great charts, he had laid out for us future resets and recasts (?). That chart alone makes me think that we can not possibly hit 'bottom' until those resets, etc, are in the rear view mirror.
I had an interest-only 5/1 ARM in California. 40% of all home buyers did when we bought in 2004, and many of them refinanced since then. Boy, are they ever screwed up the ying yang with secured debt. I have heard of many stories of single working Moms making 75k securing 500k+ loans, with 1.9% teaser rate, interest-only.
people still think housing is going to "bounce back" over the next few years. i hear that crap all the time...
we have been in credit expansionary mode for so long that nobody has any experience with anything else and most cannot even see beyond this recent experience.
reversion to the mean for most mean reverting back to 10+ percentage annual gains in housing and equities.
I had an interest-only 5/1 ARM in California. 40% of all home buyers did when we bought in 2004, and many of them refinanced since then. Boy, are they ever screwed up the ying yang with secured debt. I have heard of many stories of single working Moms making 75k securing 500k+ loans, with 1.9% teaser rate, interest-only.
But the single mom is planning to sell the house for $600k and use the gain to buy Christmas gifts for her kids. She'll be fine.
"You can stay in your $700,000 3/2, but you can't sell it for more than $400,000."
On the other hand, research shows that people are solidly in denial about the value of their own homes. This could lead some to try to keep up payments since their home/neighborhood is different.
Boy oh boy do I remember those... ummm... "discussions."
IMO the real problem with resets is not so much "higher v. lower" as it is about "stable v. volatile." Following first reset subsequent resets could be annually, quarterly, even monthly. Even a temporary blip in any of the indicies could tip borrowers into default. Just what we need more volatility.
people still think housing is going to "bounce back" over the next few years. i hear that crap all the time...
Housing and equities both. Too many people think that these things are 50% off right now and will bounce back. Iguess people are gradually coming to grips with reality but it seems to be taking a long time.
So you are saying I have plenty of time before I need to invest in Wells, even if I like them for a long-term (30 year horizon)???
I'm starting to get the picture. Not only is housing going to be L-shaped, but so is our entire economy.
labrador writes:
Mr. T. writes:
people still think housing is going to "bounce back" over the next few years. i hear that crap all the time...
Housing and equities both. Too many people think that these things are 50% off right now and will bounce back. Iguess people are gradually coming to grips with reality but it seems to be taking a long time.
labrador | 11.21.08 - 12:56 pm | #
Housing and equities both. Too many people think that these things are 50% off right now and will bounce back. Iguess people are gradually coming to grips with reality but it seems to be taking a long time.
labrador | 11.21.08 - 12:56 pm | #
I begged my MIL (about 65 yo) to get out of market and she finally got out about a month ago around 8500. Asked her last night wasn't she so happy that she got out and she told me she got back in!!!
They are late because he's a carpenter and now doing badly, not 'cause of the reset.
And therein lies the crux. While homeowners may end up getting help because of their rate changes, the unemployed/underemployed are flat out of luck. And those ranks are growing.
RhodesianGreenbackinAZ writes:
So you are saying I have plenty of time before I need to invest in Wells, even if I like them for a long-term (30 year horizon)???
I'm starting to get the picture. Not only is housing going to be L-shaped, but so is our entire economy.
I don't see much in the near future to fuel a V-shaped recovery. If one believes that a short-term, fixable problem is causing current asset pricing to be depressed from true values then maybe a V-shaped recovery is possible. I don't think most people see that, though.
" lawyerliz writes:
Oh, they'll bounce back. Never is a long time. 10 years maybe..
lawyerliz | 11.21.08 - 1:00 pm | # "
For most people, that might as well be in their next reincarnation.
The story goes that most Americans move more often than that. So they'll either sell at a loss or hang in there and stay tied to a particular geographical area by necessity, perhaps against their best interest in other ways (employment, familial, etc.). Neither is good.
Housing and equities both. Too many people think that these things are 50% off right now and will bounce back.
I think what some people don't quite get is that that "appreciation" factor of the two asset classes will be gone for some time. Even when equities return to normalcy, they'll be priced at much more normal multiples.
We also have to understand the mind of the aggressive ARM borrower. I don't think a measurable fraction ever anticipated actually getting to a reset. Most were "climbing the property ladder" or serial refinanciers or grasshoppers in an ant world.
I didn't know what to say.
PSgirl | 11.21.08 - 1:02 pm | #
After the 1929-32 drop of 89% shown in CR's chart, wasn't there another huge drop in 1937? That implies that people learned little and overpriced equities again within 5 years,and this during a depression when you'd expect money to be in short supply.
With housing, a lack of financing might stop that from happening any time soon. On the ther hand, banks have incentive to keep house prices as high as possible.
"But we have to remember a higher interest rate is only one problem."
Why would these people want a house if it is not appreciating 20% a year? That is why they bought them. Now it is depreciating 20% a year. When the ARM Option resets and their rent increases from $500 a month to $5000 a month, those people will leave. And become bandos in a 8000 sq. ft. home next door.
the option ARMs will reset to a seemingly tolerable rate
people will stay in their house, and continue to pay down their mortgage even though their house is becoming worthless
then, after enough money has been siphoned off from the homeowner, kaboom, interest rates skyrocket, housing values plummet (we haven't seen anything yet - try 10-15% mortgages - million dollar houses will be an anachronism), but by then J6P has already pissed away a ton more money
yup - looks like the banksters are still smarter than us...
We also have to understand the mind of the aggressive ARM borrower.
That's become the predominant mindset in the US. I guess if enough people get corrected harshly enough and often enough, that could change. The PTB are doing their best to reduce the harshness and frequency of the corrections, though.
The rate is irrelevant if your unemployed and have problems with cash flow. Many of the problems with foreclosures are related to the fact that people can't refinance ahead of resets because they don't have the cash! As far as an ARM like a HELOC, if a person a rate reset as a function of a floating rate that drops, that would be good for them to offset cash burn, right.
Future cash flow is decaying along with home values and deflation is a factor to keep in mind.
In the early '60s I asked by father why he didn't buy the vacant lot next door. He said after going thru the GD he would never own RE. It was over 20 years later. Posted this about a year ago on CR and was told it would not be the same this time, recovery would be much faster. Don't think will get as much disagreement now.
I was so happy I got my Mom out 2 months ago. Saved her at least $50k in retirement money.
"I begged my MIL (about 65 yo) to get out of market and she finally got out about a month ago around 8500. Asked her last night wasn't she so happy that she got out and she told me she got back in!!!"
I didn't know what to say.
PSgirl | 11.21.08 - 1:02 pm | #
Adjustable mortgages were never the big problem for any of the bad mortgage categories. Subprimes crashed because they switched from teaser rate to usury at the reset; the effect would have been the same if they were otherwise fixed. Alt-A mortgages are defaulting because they're mostly fraudulent - if not outright cash-out fraud, they're no-doc or at least unaffordable DTI. Option-ARM will crash not because of being ARMs but because they become unaffordable when they recast to fully amortizing.
However, although the adjustable mortgages aren't a bomb, they are a trap. If the economy recovers some, interest rates increase, foreclosures soar again, and the economy gets dragged back down.
bearly writes:
Why do you CR-folk think Hank held off on blowing the remaining TARP funds? This weekend C wind-down, perhaps ?
I actually give Paulson credit here. Perhaps it is wishful thinking but I chose to believe he stopped at ~$320b because it wasn't working. Wow. What a concept. Most of us here knew it wasn't going to work. He just needed to try something but to his credit has stopped once he knew what CR readers have always known.
Why do you CR-folk think Hank held off on blowing the remaining TARP funds? This weekend C wind-down, perhaps ?
Yes. Rescuing Citi will take quite a big bazooka. Even with the money, I honestly don't see how they can do it. FDIC hasn't got the manpower; no other bank can bear the weight; what's to do? And then there's the problem of Citi's massive international reach.
Loan broker Narbik Karamian of Arvest Financial in Campbell said most of the borrowers he meets with have no idea what index their adjustable loan is tied to. "All they know is they have a five-year fixed," he said. Sometimes he discovers that a client who's set on refinancing has a loan tied to a Treasury index that is likely to remain low, given the economic climate.
"I say, 'How would you like to not do anything and have your rate drop for another year?' " he said. Sometimes the borrower sticks with the ARM. But many homeowners these days are eager for the certainty of a 30-year fixed-rate loan, he said.
Yep...and that is not the only trap. IF we somehow magically did return to trendline growth (worldwide) we would be staring straight into the teeth of real energy issues as demand for oil would continue to march upwards and bump against the capacity to supply it IMO.
That is why there is no recovery that I can see. If we contract we enter Depression....if we grow we hit limits in other ways which lead us right back into contraction.
I am underwater on my mortgage, and I really don't think an interest rate reduction will help me much. My payment was $1100/mnth, for 2 years, but has now reset to $4800/mnth.
A better plan would be if the government could just send me the cash for my mortgage payment each month. Then I could remain living in the house.
Why do you CR-folk think Hank held off on blowing the remaining TARP funds?
Unwinding C would technically be the FDIC's job, and they don't need access to TARP funds to do it. IIRC, the Congress had already approved the increase in the FDIC's line of credit with the Treasury earlier this year.
The US stock markets have finally found Nirvana. They are accepting the bad news.
But during the collapse and confusion, money interests ran for the dollar and US treasuries. They ignored the leftist leanings of the US government, yes; even Bush was left of center, though few would recognize the fact.
Now the US is going full left, congress and the administration, at a time when the US is more broke than ever before.
The next markets to watch are the dollar and treasuries.
And gold. While many see gold as a recent disappointment, the fact is it is doing better than the dollar, oil and stocks.
As the leftist (one can not separate politics from economics and is a fool to try) US government spends and further destroys its currency and treasuries, gold will soar.
The stock markets have officially handed the baton to gold.
It's not so much the rate of interest charged as the increased payments (80% chose minimum payment option) on an even higher principal amount. These are folks who could not afford their house purchase any other way and haven't even mentioned THEY ARE SEVERELY UNDER WATER. (sorry for yelling)
"Could it be true? That maybe a large part of our current housing woes are at least somewhat attributable to this borderline pathological need so many of us have to go into massive debt for the majority of our adult lives, just so you can have your own little box to destroy or rearrange or paint any color you want, so long as it's beige or gray or creamy eggshell white? Could be, could be."
So I'm supposed to buy Citi based on the rumors being false. Or sell based on 667 $Billion in VIE's that may or may not contain a chicken. I chose the latter.
Comrade Misean is Dope writes:
...
Anywho, I always thought the recast thingy was the bomb. Because aren't like 80% of option ARMS I/O or neg ams, chosing lowest monthly payment?
Thats the big problem. 80% of those with optionARMs are neg-amming. And 80% of alt-a loans in CA are ARMs (though this includes IOs and hybrids).
I'd love to see the loan types broken out from the 'ARM' category.
I just got done pulling some listings in the area of your mom. South Sarasota County. 5 acre lots/homes. Jesus,I thought Charlotte County had a run up...
C won't go under - it can't won't happen - gov't won;t let it
now, the equity will get wiped out - there is no question now of that
the only question left is will the bondholders take a haircut
my strong suspicion is no, bondboys are made whole - only move the govt has now is to do so - basically throw money into the pile, much like AIG, until the giant stinking hole is filled with 400 billion+ that it will need to fill the hole completely
Building materials supplier USG Corp. said Friday it plans to raise $400 million by selling convertible notes, most of which will be bought by Warren Buffett's Berkshire Hathaway Inc.
RhodesianGreenbackinAZ writes:
I was so happy I got my Mom out 2 months ago. Saved her at least $50k in retirement money.
That is great.
I have no idea where my parents are with everything. They will not discuss it with me. They have always been very private with their money. I send them emails every once in a while with info that I get here. When I try to talk to my mom about it, she says she has no idea and she does not like to think about it because it scares her:(
That is one of the things that pisses me off so much about this. All of these irresponsible people's actions have made my mom (and other older people) feel like this.
In the world of quantitative easing, the theory now goes that the Fed should be promising long term Fed Funds rates. In theory this would serve to depress LIBOR which would mean ARMs are the best kinda financing going forward.
But, IMHO LIBOR is a risky way to cast a loan as LIBOR is only down becasue Great Britain is backstopping their banks. Since Britain is correctly seen as a big Iceland I think anything tied to LIBOR is a whopper of a risk.
For tied-to-treasurry ARMS your risk is if/when the rates explode associateed with either failing auctions and/or the day the Fed has to jack up rates to soak up liquidity.
So, what we have is a pretty short window where ARMS are okay, but the asset is massively deflating and then the rate will spike which sould cause even more asset deflation.
No, I think ARMS are bombs. The fuse is just slightly longer.
Bottom Callers, Capitualtion a writes:
Rob - you nailed it!
Ca unemployment @8.2% (I said 8.5%)
Wow, I thought people only kept track of my predictions so as to rub my nose in the bad calls. Thanks.
Cobradriver writes:
Rob,
I just got done pulling some listings in the area of your mom. South Sarasota County. 5 acre lots/homes. Jesus,I thought Charlotte County had a run up...
Can I hide under my desk till this ends???
No, you cannot hide. Sh¡tstorms are not hurricanes or earthquakes or floods. You are experiencing pyroclastic flow. You concern is appreciated but she owns, really owns and self insures and has a nice pension from a New England state. Bulletproof positioning. Not a coincidence either that she was born the day the banks closed.
I was going to cover the background over why Dollar Libor would have spiked, but I want to keep this concise so here is something else fun Banking liabilities to emerging markets
FWIW, I agree with the main page post in that high rates will not be to blame for anything beyond corporate bonds right now
The next person to mention PPT will be struck by a bolt of lightening to rid the world of idiocy.
Give it a rest. The market is down 50+%, most of that in the past 45 days....
The Dawg wrote:
and has a nice pension from a New England state
Both my parents just retied from the state (CT). Both early 60's. So far its been good. But I'm worried about pensions making it thru the next 20+ years.
Some commonly used indices include the 1
Year Constant Maturity Treasury Rate (CMT), the 6-Month London Interbank Offered Rate (LIBOR), the 11th District Cost of Funds (COFI), and the Moving Treasury Average (MTA), a 12-month moving average of the monthly average yields of U.S. Treasury securities adjusted to a
constant maturity of one year. The margin is the number of percentage points a lender adds to the index value to calculate the ARM interest rate at each adjustment period.
In different interest rate scenarios, the fully indexed rate for an ARM loan based on a lagging index (e.g., MTA rate) may be significantly different from the rate on a
comparable 30-year fixed-rate product. In these cases, a credible market rate should be used to qualify the borrower and determine repayment capacity.
A friend of mine said markets go up and down and it's a good thing he's not retiring soon. He's riding it out.
There are many people who still think this is just another down cycle, so they're riding it out. 401k money still pumping into the market, and the market just swallows it whole.
It won't be capitulation until people feel that the stock market is a money hole.
Sarah-Jane Tasker | November 22, 2008
Article from: The Australian
FEARS of the unknown long-term effects from the global financial crisis have sparked a new gold rush.
With retail and wholesale clients around the world stocking up on the precious metal, the Perth Mint has been forced to suspend orders.
As the World Gold Council reported that the dollar demand for gold reached a quarterly record of $US32 billion ($50.73 billion) in the third quarter, industry insiders said the race to secure physical gold had reached an intensity that had never been witnessed before.
The protests were sparked by local residents' worries about a government resettlement plan after the May 12 earthquake killed more than 80,000 people, and in Gansu alone made 1.8 million people homeless.
Estimates of the number who joined in the Gansu violence on the streets of Wudu range from an official total of 2,000 to as high as 20,000 cited by local residents.
Taxi drivers in Shantou, a rich city in southern Guangdong province, went on strike on Thursday in protest at the growing number of unlicensed cabs, Chinanews news agency reported.
Who thinks we will see a Washington Mututal like dismantling of C? Or will we see a direct loan like AIG to keep the crap floating in the toilet for a few weeks longer?
Comrade Misean is Dope writes:
Anywho, I always thought the recast thingy was the bomb. Because aren't like 80% of option ARMS I/O or neg ams, chosing lowest monthly payment?
Yeah, Mr. Mortgage has done a number of posts on this. While the rate may reset lower, the pick-a-pay goes to full amortization at a certain point as values drop. He had #'s on the percentage of borrowers that were paying the BARE minimum. Staggering given the fact that many are already defaulting.
Will try to find links
God writes:
The next person to mention PPT will be struck by a bolt of lightening to rid the world of idiocy.
Give it a rest. The market is down 50+%, most of that in the past 45 days....
And on the 46th day you rested? Far be it from me to tell God His business but wouldn't it be far better to drop a "Frasier" cliché on them? Lightning bolts have to be expensive even for You.
12-month moving Treasury average (MTA)
An index determined by the monthly average of one-year Treasury bills. Commonly used as a benchmark for adjustable-rate mortgages.
conversation I just overheard at my parts counter.
2 drivers waiting for diesel parts.
Driver 1: Citbanks in trouble.
Driver 2: I dont want to hear about it.
Driver 1: I think we are going into a depression.
Driver 2: I dont want to hear about it.
Driver 1: My 401k has lost over 40%.
Driver 2: I dont want to hear about it.
Driver 2 gets his parts, as he walks out the door.... "ads running in the newspaper for $15 dollars an hour to drive trucks, thats embarrassing. I swear this country is going downhill and fast."
Video interview with William Black:
"But even though the FBI warned of an "epidemic" of mortgage fraud in 2004, they subsequently made a "strategic alliance" with the Mortgage Bankers Association, which serves the major industry players."
his Treasury Financial Manual (TFM) bulletin publishes the CVFR percentage based on the current value of funds to the Department of the Treasury (Treasury).
Background
The CVFR percentage is based on the investment rates for the Treasury Tax and Loan accounts set for purposes of Public Law 95-147, 91 Stat. 1227 (October 28, 1977).
Annually, Treasury computes the CVFR percentage by averaging investment rates for the 12-month period ending on September 30, rounded to the nearest whole percentage. Quarterly, if the annual average (on a 12-month moving average basis) changes by 2 percent, Treasury revises the rate. Treasury's Financial Management Service (FMS) publishes the presiding rate in the Federal Register and in a TFM bulletin.
Rate for Charges on Outstanding Debts Owed to the Government, Comparison Point for Cash Discounts, and Determination of Payment Due Dates for Purchase Card Invoices
The CVFR percentage during the period January 1, 2009, through December 31, 2009, is 3 percent. This rate reflects the average investment rates for the 12-month period ending September 30, 2008.
The Current Value of Funds Rate (CVFR) is used to calculate interest on overdue Federal Government receivables and to determine the effectiveness of taking cash discounts on Government payments. Interest charged is simple interest at the rate in effect at the time the debt becomes overdue. The rate of interest remains fixed for the duration of the indebtedness ...??
ppt is protecting the plunge now, not protecting from it. it's that legacy thing for W now, his administration will look good next to the smoking crater that he leaves behind
irreverent writes:
ppt is protecting the plunge now, not protecting from it. it's that legacy thing for W now, his administration will look good next to the smoking crater that he leaves behind
irreverent | 11.21.08 - 1:45 pm | #
Yeah, and if W's leave behind a smoking crater, O's leaving behind a paradise? Please.
mykillk writes:
yagij, completely out of touch with what?
mykillk | 11.21.08 - 1:38 pm
Gold coins & bullion has been flying off of the shelves of mints and dealers for months. There is a reason that the US Mint could only honor orders placed before April 1, 2008 for some kinds of coins, and if the Perth Mint has found themselves "shocked" or "surprised", it is because they are lying or out of touch with the true market demand.
The physical PM v. paper PM markets have been out of whack for just as long, and the gold/silver/bugs knew it. Hoarders knew it. It is the reason that my only local dealer charges 18 USD for Silver American Eagles when the price of paper silver is almost half that amount.
Ticker Tape of Doom writes:
Who is going to buy all this gold when it hits another peak?
If you are holding or buying gold right now - how does one plan to sell it if you need cash or food?
Ticker Tape of Doom | 11.21.08 - 1:41 pm
I think you made a jump there.
You may not go into Wal-Mart to have your gold and silver honored, but if you find yourself bartering, I think people would prefer hard assets for food over a USD if it is quickly devalued. Depends on how you want to bet.
Yeah, and if W's leave behind a smoking crater, O's leaving behind a paradise? Please.
Duarte | 11.21.08 - 1:48 pm | #
I think he's making an observation about actual recent economic events/current conditions, not a prediction about the economy after an Obama administration.
"Yeah, and if W's leave behind a smoking crater, O's leaving behind a paradise? Please.
Duarte | 11.21.08 - 1:48 pm | #"
Are you better off now, or 8 years ago..
What are the deltas for income, cost of living and consumer confidence from beginning to end of either administration or the republican or democrat controlled congress?
A single world currency makes no sense. Even if you're paranoid that there is an upper echelon which wishes to enslave the entire world, it makes no sense for them to bring in a single currency.
As of June 3, 2008, the interpolated yield was dropped as a yield curve input and the on-the-run 52-week bill was added as an input knot point in the quasi-cubic hermite spline algorithm and resulting yield curve.
Treasury does not provide the computer formulation of our quasi-cubic hermite spline yield curve derivation program. However, we have found that most researchers have been able to reasonably match our results using alternative cubic spline formulas.
You may not go into Wal-Mart to have your gold and silver honored, but if you find yourself bartering, I think people would prefer hard assets for food over a USD if it is quickly devalued. Depends on how you want to bet.
yagij | 11.21.08 - 1:50 pm | #
This is sort of how I believe this scenario will play out as well. I am just wondering how valuable gold will be if we get to this point.
fwiw-
I have some silver set aside for this scenario.
As much as I despise Bush, I have to laugh when I see this. Who cares? As if these scum are any better than him. They were rubbing shoulders with him for 4-8 years....and now they're going to shun him when it no longer matters? Also, as if they're without sin and need to be throwing stones?
Finally, some have posted yesterday that this is not what it seems. Bush met with all of them and shook their hands prior to this, so no need to shake again.
I am just wondering how valuable gold will be if we get to this point. - Ticker Tape of Doom
Same as last time. The nice Treasury Agent will help you open your safe deposit box. Not to worry. Submit your claim and after careful review if you can prove ownership and have tax witholding then you can can get a check for your precious metals at the government determined price.
Oh wow, is that ever bad on the late vintages. 16% of all 2006 Alt-As are delinquent, and if the trend continues unstopped it'll be more like 24% in another year. And that's before the big wave of Alt-A resets.
Why 8 years? Let's make it 16 years, or 20, or, hell, why not 28? What's occurred has been a bipartisan consensus, and the blame should get pinned on both sides of the same coin.
StewPDX,
To be precise, it's "(60+ day delinquencies, in percent of original balance) " so is you assume the smaller mortgages, because their credit was so bad they couldn't borrow much, are more likely to become delinquent then the % of mortgage delinquent would be even greater.
Why 8 years? Let's make it 16 years, or 20, or, hell, why not 28? What's occurred has been a bipartisan consensus, and the blame should get pinned on both sides of the same coin.
Morocco Bama | 11.21.08 - 2:04 pm | #
True. Our system is not a two party one. I don't see how anyone can really believe that it is.
As of today bullion can freely travel outside US Borders with no requirement for claim to US Customs.
\t
Monetary instruments that must be reported by travelers or persons sending or receiving them (other then by electronic means by a banking concern) are:
Coin or currency from the U.S. and/or other countries, including gold coins;
Travelers Checks;
Checks, promissary notes or money orders that can be cashed by the bearer. This includes checks or money orders made out to someone other than the bearer that are endorsed without restriction(i.e. for deposit only.), and incomplete checks, money orders, promissary notes that are signed but on which the name of the payee has been omitted (the "To" line is left blank);
Securities or stocks in bearer form.
Monetary instruments that are made payable to a named person but are not endorsed or which bear restrictive endorsements are not subject to reporting requirements, nor are credit cards with credit lines of over $10,000.
Gold Bullion is not a monetary instrument for purposes of this requirement. You can obtain the currency reporting form FinCEN 105 for more information.
You may not go into Wal-Mart to have your gold and silver honored, but if you find yourself bartering, I think people would prefer hard assets for food over a USD if it is quickly devalued. Depends on how you want to bet.
In the ME and Subcontinent women wear their families' savings as jewelry. On any given day, you can walk into a gold souk and buy and sell gold in any form based on price per gram.
Same as last time. The nice Treasury Agent will help you open your safe deposit box. Not to worry. Submit your claim and after careful review if you can prove ownership and have tax witholding then you can can get a check for your precious metals at the government determined price.
Any scenario where you need gold to trade would be a "black market" transaction anyway, so keeping your gold "in the system" (safety deposit box) seems pretty silly to me.
labrador,
Diamonds are good for cross border unreported financial transactions. They are not a good store of wealth as diamond pricing is entirely dependent on hoarding. Even with DeBeers you could go to a market in India, near where most of the world's diamonds are polished, and get them for a fraction of the price you would in North America
a knot is a point that divides two such sectionsof the data. Between knot points, a smooth curve is fit to the data, and conditionsare met so that the curves in each section of the data connect at each knot point.Generally, derivative conditions must be met at the knot points to ensure smoothnessin the spline. The result is a smooth curve that fits the data according to a criteriondefined by the spline method itself.
The Hull-White model also improved upon the Ho-Lee modelby incorporating mean-reversion, which the Ho-Lee model lacks. Both of these modelstake the initial zero curve as an input, but neither model requires that the zero curvebe differentiable. Some no-arbitrage models can be implemented in a discrete-timesense through the use of trees. Section 1.3.1 details the construction of a trinomial treein the case of the Hull-White model.
Hull (2003) notes that one negative aspect of the HJM model framework is thedifficulty of calibrating the model to the prices of actively traded instruments. Yan(2001) also points out that since HJM models use continuous compounding of theinstantaneous forward rate curve, specifying a lognormal process in the HJM frameworkis no longer possible.
This result implies that there exists a convenience premium for Treasury instru-ments due to their liquidity (among other factors). The implication for the currentresearch is that the interest rate being used in the Hull-White trinomial tree to dis-count future payments might not be as close to the true riskless rate as one woulddesire. An extension to this work could involve an adjustment to the discount rates inthe tree so that they are closer to the riskless rate....
Im pretty sure it was about 70% making the minimum payment, which is below interest only. Rate change means diddly compared to the payment reset to include principal.
Ticker Tape of Doom writes:
This is sort of how I believe this scenario will play out as well. I am just wondering how valuable gold will be if we get to this point.
Ticker Tape of Doom | 11.21.08 - 1:58 pm
FD: I own silver. I don't own gold, platinum, etc.
I only see Gold being used to simplify holdings. Once I have 30 1 oz. bullion, I'd consider selling 10-15 oz. to get 1/4 or 1/2 oz. gold bullion. Less clinking in my bag, easier to count/store.
e.g.
Good: I have to keep up with less to account.
Bad: I lose that one gold coin means I lose more value.
Too many criteria for valuation: color, quality, cut.
Gold however, is gold.
As to PM, I have a stash and foresee what sm_landlord said with silver going to the everyday stuff and the gold for the larger purchases.
That said, don't pull out the silver until you've figured out what else you can use to barter with. Remember that you can also sell the family silver service for use, which is why many refugees from other times made sure to take it with them.
Today's financial world isn't what it was 20 or 30 years ago.
And since many older folks aren't as linked with the 'net, they don't keep up with it.
I can only trust that my mother's financial guy won't totally screw the pooch; he's also the guy for sister so there's at least someone else tuned in watching.
Ultimately, she's competent to make her own decisions and I can only advise if asked. They don't want us to be their parents.
Recently shared what I was doing (financially) with my 80 y/o mother and she was aghast at the financial decisions.
I'm kinda regretting getting a fixed-rate mortgage on my house, actually. As long as the government is giving money they print away to any insider/bank for a wink or a nod, the cost of borrowing is going to be effectively zero.
It kinda argues strongly for margin buying of inflation hedge securities, as long as your time window is beyond a couple of years. Hm...
The rate means diddly. The rate could reset to zero for all I care, but if the borrower owes 450K, they'll need to be earing 150K a year to keep up with the 30-years-same-as-cash payments. And they don't make 150K a year.
"Why 8 years? Let's make it 16 years, or 20, or, hell, why not 28? What's occurred has been a bipartisan consensus, and the blame should get pinned on both sides of the same coin.
Morocco Bama | 11.21.08 - 2:04 pm | # "
I am no fan of either political party, but Bush has been a lesson in exceptional moral hazzard.
Libor & COF wont matter much when it comes to option ARMS, I would imagine most people have been making the minimum neg. am payment. Once they hit 115% or so LTV they recast to a fully amortized loan. These people are facing monthly payments tripling or quadrupling. They will walk. These loans are in fact bombs waiting to explode.
Nice to see this getting coverage. We wrote about it back in March:
The conventional thinking has been that ARM rates would skyrocket from the discounted rates they started with, threatening to push untold numbers of homeowners into default.
That's no longer the case, especially for borrowers holding 'prime' ARMs. Circumstances have, for now, acted to favor ARM holders. Instead of facing a sizeable payment hike, they may see little change in their payment. Many, in fact, could enjoy a decrease in their monthly payments.
Where's Nemo? and What's up with haloscan??
Haloscan = hinky
As long as the ATM on the side of the house is out of order people are going to walk. Screw the interest rate on the mortgage.
Non-pig?
Or else no 2nd without the pig
o way
My first depression
Rally here
going to be a lively year!
regarding the printing press comments from last thread, i've been mulling this over. we have global deflation and no real decoupling. i don't think it is impossible to have global hyperinflation, very unlikely though.
but there are only two things that BB (or any central bank) can do, raise rates (which supposedly caused huge damage in the last depression) or try to inflate out of deflation by printing. the latter would destroy the currency and bond rating (going to happen anyway).
investing in infrastructure is the best option.
God writes:
Rally here
Agreed, all problems solved. If God say so, then ...
..........secondo.....
They could not afford the home in the first place...enough said!
The resets/recast might be less, but so will incomes.
Yes, I proclaim all better. At least for the next hour or 2. Although I reserve the right to change my mind. I may push the Dow over 8k today so look out.
It's great to be near the beginning of a thread, too bad I don't have much to say here. I won't let that stop me, though. In one of CR's great charts, he had laid out for us future resets and recasts (?). That chart alone makes me think that we can not possibly hit 'bottom' until those resets, etc, are in the rear view mirror.
PeakVT writes:
The resets/recast might be less, but so will incomes.
Yes, most would need a big downward recast to keep up the mortgage after getting layed off. And lay-offs won't be the only people with lower incomes.
which God? i like Hanuman!
Free Desktop Wallpaper Hanuman 1024 x 768 pixels
CNBC talking about ZIRP this morning. Are we really going to zero?
Well, all signs are to more cuts which woud effectively fget us to zero, even if the target is 0.5%, no?
"Are we really going to zero?"
Yes, unfortunately.
Now, if I could just get my 19.99% credit card to reset in the same manner...
So what happens after we go to zero? Does ING quit paying me interest and start charging me fees for my savings?
Well, ING has lowered their rates a couple of times recently.
"which God?"
I like Cthulu.
Anywho, I always thought the recast thingy was the bomb. Because aren't like 80% of option ARMS I/O or neg ams, chosing lowest monthly payment?
Nostrovia,
Well, the houses still aren't worth what they were because new buyers can't get such sweetheart deals.
You can stay in your $700,000 3/2, but you can't sell it for more than $400,000. Sounds fun.
I had an interest-only 5/1 ARM in California. 40% of all home buyers did when we bought in 2004, and many of them refinanced since then. Boy, are they ever screwed up the ying yang with secured debt. I have heard of many stories of single working Moms making 75k securing 500k+ loans, with 1.9% teaser rate, interest-only.
YEN is so so so tired. Goes to 97 with Dow up 500-600 today. Any thoughts?
all yur time bombs r belong to u.
"You can stay in your $700,000 3/2, but you can't sell it for more than $400,000."
Glub, glub.
time to fly.
Mustard seeds
people still think housing is going to "bounce back" over the next few years. i hear that crap all the time...
we have been in credit expansionary mode for so long that nobody has any experience with anything else and most cannot even see beyond this recent experience.
reversion to the mean for most mean reverting back to 10+ percentage annual gains in housing and equities.
Duarte writes:
I had an interest-only 5/1 ARM in California. 40% of all home buyers did when we bought in 2004, and many of them refinanced since then. Boy, are they ever screwed up the ying yang with secured debt. I have heard of many stories of single working Moms making 75k securing 500k+ loans, with 1.9% teaser rate, interest-only.
But the single mom is planning to sell the house for $600k and use the gain to buy Christmas gifts for her kids. She'll be fine.
CA unemployment at 8.2% for Oct, and only headed higher. Ouch.
OT-
I keep reading how yesterday was a huge day in the long bond market? Has anyone read any good write ups?
TIA
......
SEC to hold international session on short selling
Agency chief Cox slates teleconference with overseas counterparts
SEC to conduct international meeting on regulating short sales - MarketWatch
"You can stay in your $700,000 3/2, but you can't sell it for more than $400,000."
On the other hand, research shows that people are solidly in denial about the value of their own homes. This could lead some to try to keep up payments since their home/neighborhood is different.
Holy crap, gold is rocketing...
So, where are the big banks that are tasked with stomping out PM rallies before they get out of control?
Oops.
.
I keep reading how yesterday was a huge day in the long bond market? Has anyone read any good write ups?
Check acrossthecurve.
Boy oh boy do I remember those... ummm... "discussions."
IMO the real problem with resets is not so much "higher v. lower" as it is about "stable v. volatile." Following first reset subsequent resets could be annually, quarterly, even monthly. Even a temporary blip in any of the indicies could tip borrowers into default. Just what we need more volatility.
Mr. T. writes:
people still think housing is going to "bounce back" over the next few years. i hear that crap all the time...
Housing and equities both. Too many people think that these things are 50% off right now and will bounce back. Iguess people are gradually coming to grips with reality but it seems to be taking a long time.
One of my clients has a libor reset. Went up just a smidge. They are late because he's a carpenter and now doing badly, not 'cause of the reset.
Are about even steven on the loan to value ratio.
Years ago, I loved my adjustible, because it went down, down, down without refinancing or anything. I lucked out.
So amortizing a 600K home over thirty years is a 20K a year bump or $1666/mo., that's not looking good for California.
Basel T0000
thanks! Never been to that site. I think its going to become a daily read....
Rob Dawg writes:
"Even a temporary blip in any of the indicies could tip borrowers into default. Just what we need more volatility."
Did that market in SFH futures based on Case-Schiller ever get any traction?
If so, maybe houses will start trading like stocks in the near future. I smell an opportunity for a new ETF...
So you are saying I have plenty of time before I need to invest in Wells, even if I like them for a long-term (30 year horizon)???
I'm starting to get the picture. Not only is housing going to be L-shaped, but so is our entire economy.
labrador writes:
Mr. T. writes:
people still think housing is going to "bounce back" over the next few years. i hear that crap all the time...
Housing and equities both. Too many people think that these things are 50% off right now and will bounce back. Iguess people are gradually coming to grips with reality but it seems to be taking a long time.
labrador | 11.21.08 - 12:56 pm | #
(Semi) On Topic,
Who thinks that they will lower the conforming limits in CA in January like they are scheduled?
Obama may not be as kind perhaps?
Oh, they'll bounce back. Never is a long time. 10 years maybe..
ades writes:
"Who thinks that they will lower the conforming limits in CA in January like they are scheduled?"
Obama owes Cali some serious payback for financing his campaign. And Cali pols are gaining power in Congress.
Housing and equities both. Too many people think that these things are 50% off right now and will bounce back. Iguess people are gradually coming to grips with reality but it seems to be taking a long time.
labrador | 11.21.08 - 12:56 pm | #
I begged my MIL (about 65 yo) to get out of market and she finally got out about a month ago around 8500. Asked her last night wasn't she so happy that she got out and she told me she got back in!!!
I didn't know what to say.
In 10 years incomes here (US) will be lower in real terms and interest rates will be signifigantly higher IMO.
In real terms R.E. is probably never bouncing back at least not in this lifetime.
They are late because he's a carpenter and now doing badly, not 'cause of the reset.
And therein lies the crux. While homeowners may end up getting help because of their rate changes, the unemployed/underemployed are flat out of luck. And those ranks are growing.
RhodesianGreenbackinAZ writes:
So you are saying I have plenty of time before I need to invest in Wells, even if I like them for a long-term (30 year horizon)???
I'm starting to get the picture. Not only is housing going to be L-shaped, but so is our entire economy.
I don't see much in the near future to fuel a V-shaped recovery. If one believes that a short-term, fixable problem is causing current asset pricing to be depressed from true values then maybe a V-shaped recovery is possible. I don't think most people see that, though.
" lawyerliz writes:
Oh, they'll bounce back. Never is a long time. 10 years maybe..
lawyerliz | 11.21.08 - 1:00 pm | # "
For most people, that might as well be in their next reincarnation.
The story goes that most Americans move more often than that. So they'll either sell at a loss or hang in there and stay tied to a particular geographical area by necessity, perhaps against their best interest in other ways (employment, familial, etc.). Neither is good.
Housing and equities both. Too many people think that these things are 50% off right now and will bounce back.
I think what some people don't quite get is that that "appreciation" factor of the two asset classes will be gone for some time. Even when equities return to normalcy, they'll be priced at much more normal multiples.
For at least a generation anyways.
On topic for a sec:
Couldn't the COFI go up fast and hard when the money pumps get up to speed?
This looks like a very temporary reprieve to me. But that's my bias talking, I guess.
We also have to understand the mind of the aggressive ARM borrower. I don't think a measurable fraction ever anticipated actually getting to a reset. Most were "climbing the property ladder" or serial refinanciers or grasshoppers in an ant world.
I didn't know what to say.
PSgirl | 11.21.08 - 1:02 pm | #
After the 1929-32 drop of 89% shown in CR's chart, wasn't there another huge drop in 1937? That implies that people learned little and overpriced equities again within 5 years,and this during a depression when you'd expect money to be in short supply.
With housing, a lack of financing might stop that from happening any time soon. On the ther hand, banks have incentive to keep house prices as high as possible.
"But we have to remember a higher interest rate is only one problem."
Why would these people want a house if it is not appreciating 20% a year? That is why they bought them. Now it is depreciating 20% a year. When the ARM Option resets and their rent increases from $500 a month to $5000 a month, those people will leave. And become bandos in a 8000 sq. ft. home next door.
you have to hand it to the banksters and TPTB
the option ARMs will reset to a seemingly tolerable rate
people will stay in their house, and continue to pay down their mortgage even though their house is becoming worthless
then, after enough money has been siphoned off from the homeowner, kaboom, interest rates skyrocket, housing values plummet (we haven't seen anything yet - try 10-15% mortgages - million dollar houses will be an anachronism), but by then J6P has already pissed away a ton more money
yup - looks like the banksters are still smarter than us...
Rob Dawg writes:
We also have to understand the mind of the aggressive ARM borrower.
That's become the predominant mindset in the US. I guess if enough people get corrected harshly enough and often enough, that could change. The PTB are doing their best to reduce the harshness and frequency of the corrections, though.
Why do you CR-folk think Hank held off on blowing the remaining TARP funds? This weekend C wind-down, perhaps ?
The rate is irrelevant if your unemployed and have problems with cash flow. Many of the problems with foreclosures are related to the fact that people can't refinance ahead of resets because they don't have the cash! As far as an ARM like a HELOC, if a person a rate reset as a function of a floating rate that drops, that would be good for them to offset cash burn, right.
Future cash flow is decaying along with home values and deflation is a factor to keep in mind.
^IRX: Basic Chart for 13-WEEK TREASURY BILL - Yahoo! Finance
In the early '60s I asked by father why he didn't buy the vacant lot next door. He said after going thru the GD he would never own RE. It was over 20 years later. Posted this about a year ago on CR and was told it would not be the same this time, recovery would be much faster. Don't think will get as much disagreement now.
bearly,
DSL should go down this evening as well.
I was so happy I got my Mom out 2 months ago. Saved her at least $50k in retirement money.
"I begged my MIL (about 65 yo) to get out of market and she finally got out about a month ago around 8500. Asked her last night wasn't she so happy that she got out and she told me she got back in!!!"
I didn't know what to say.
PSgirl | 11.21.08 - 1:02 pm | #
What a wimpy rally that was. Seems about right to me. Nothing changes means nothing's changed.
OT - Charlie Gasbagarino on the idiotbox trying to save Citi. Is there anyone who didn't expect to see his ugly mug today?
Adjustable mortgages were never the big problem for any of the bad mortgage categories. Subprimes crashed because they switched from teaser rate to usury at the reset; the effect would have been the same if they were otherwise fixed. Alt-A mortgages are defaulting because they're mostly fraudulent - if not outright cash-out fraud, they're no-doc or at least unaffordable DTI. Option-ARM will crash not because of being ARMs but because they become unaffordable when they recast to fully amortizing.
However, although the adjustable mortgages aren't a bomb, they are a trap. If the economy recovers some, interest rates increase, foreclosures soar again, and the economy gets dragged back down.
Charlie Gasbagarino on the idiotbox trying to save Citi.
Why? Does he own a bunch of shares?
bearly writes:
Why do you CR-folk think Hank held off on blowing the remaining TARP funds? This weekend C wind-down, perhaps ?
I actually give Paulson credit here. Perhaps it is wishful thinking but I chose to believe he stopped at ~$320b because it wasn't working. Wow. What a concept. Most of us here knew it wasn't going to work. He just needed to try something but to his credit has stopped once he knew what CR readers have always known.
Do bandos play banjos?
Perhaps it is wishful thinking but I chose to believe he stopped at ~$320b because it wasn't working.
Sorry Dawg. He stopped because the congressional folks told him that they would stop payment on the next $350B. His move was pure face-saving.
Why do you CR-folk think Hank held off on blowing the remaining TARP funds? This weekend C wind-down, perhaps ?
Yes. Rescuing Citi will take quite a big bazooka. Even with the money, I honestly don't see how they can do it. FDIC hasn't got the manpower; no other bank can bear the weight; what's to do? And then there's the problem of Citi's massive international reach.
Loan broker Narbik Karamian of Arvest Financial in Campbell said most of the borrowers he meets with have no idea what index their adjustable loan is tied to. "All they know is they have a five-year fixed," he said. Sometimes he discovers that a client who's set on refinancing has a loan tied to a Treasury index that is likely to remain low, given the economic climate.
"I say, 'How would you like to not do anything and have your rate drop for another year?' " he said. Sometimes the borrower sticks with the ARM. But many homeowners these days are eager for the certainty of a 30-year fixed-rate loan, he said.
@ Fair Economist
Yep...and that is not the only trap. IF we somehow magically did return to trendline growth (worldwide) we would be staring straight into the teeth of real energy issues as demand for oil would continue to march upwards and bump against the capacity to supply it IMO.
That is why there is no recovery that I can see. If we contract we enter Depression....if we grow we hit limits in other ways which lead us right back into contraction.
It is a case of heads we lose tails we don't win.
Gold is up ~$50...any theories?
US (leftist and broke) seeks $300B from gulf states:
Yahoo! 404 - Page Not Found
I am underwater on my mortgage, and I really don't think an interest rate reduction will help me much. My payment was $1100/mnth, for 2 years, but has now reset to $4800/mnth.
A better plan would be if the government could just send me the cash for my mortgage payment each month. Then I could remain living in the house.
worse than lehmans? citis downwind?
Why do you CR-folk think Hank held off on blowing the remaining TARP funds?
Unwinding C would technically be the FDIC's job, and they don't need access to TARP funds to do it. IIRC, the Congress had already approved the increase in the FDIC's line of credit with the Treasury earlier this year.
mykillk writes:
Gold is up ~$50...any theories?
I repeat:
The US stock markets have finally found Nirvana. They are accepting the bad news.
But during the collapse and confusion, money interests ran for the dollar and US treasuries. They ignored the leftist leanings of the US government, yes; even Bush was left of center, though few would recognize the fact.
Now the US is going full left, congress and the administration, at a time when the US is more broke than ever before.
The next markets to watch are the dollar and treasuries.
And gold. While many see gold as a recent disappointment, the fact is it is doing better than the dollar, oil and stocks.
As the leftist (one can not separate politics from economics and is a fool to try) US government spends and further destroys its currency and treasuries, gold will soar.
The stock markets have officially handed the baton to gold.
It's not so much the rate of interest charged as the increased payments (80% chose minimum payment option) on an even higher principal amount. These are folks who could not afford their house purchase any other way and haven't even mentioned THEY ARE SEVERELY UNDER WATER. (sorry for yelling)
"Why do you CR-folk think Hank held off on blowing the remaining TARP funds?"
To crash C so GS could scoop it up for cheap, using TARP funds.
mykillk writes:
"Gold is up ~$50...any theories?"
No other place left to hide, and the banks are too weak to continue playing games with the price.
/tinfoil
A nice acerbic take on owning vs. renting Here:
"Could it be true? That maybe a large part of our current housing woes are at least somewhat attributable to this borderline pathological need so many of us have to go into massive debt for the majority of our adult lives, just so you can have your own little box to destroy or rearrange or paint any color you want, so long as it's beige or gray or creamy eggshell white? Could be, could be."
Rob - you nailed it!
Ca unemployment @8.2% (I said 8.5%)
still positive growth industry
So I'm supposed to buy Citi based on the rumors being false. Or sell based on 667 $Billion in VIE's that may or may not contain a chicken. I chose the latter.
Comrade Misean is Dope writes:
...
Anywho, I always thought the recast thingy was the bomb. Because aren't like 80% of option ARMS I/O or neg ams, chosing lowest monthly payment?
Thats the big problem. 80% of those with optionARMs are neg-amming. And 80% of alt-a loans in CA are ARMs (though this includes IOs and hybrids).
I'd love to see the loan types broken out from the 'ARM' category.
Rob Dawg | Homepage | 11.21.08 - 12:55 pm | #
Rob,
I just got done pulling some listings in the area of your mom. South Sarasota County. 5 acre lots/homes. Jesus,I thought Charlotte County had a run up...
Can I hide under my desk till this ends???
Chris
Could the move in gold also be influenced by options expiry?
C won't go under - it can't won't happen - gov't won;t let it
now, the equity will get wiped out - there is no question now of that
the only question left is will the bondholders take a haircut
my strong suspicion is no, bondboys are made whole - only move the govt has now is to do so - basically throw money into the pile, much like AIG, until the giant stinking hole is filled with 400 billion+ that it will need to fill the hole completely
I think dementia has set in.....
..........
Warren Buffet boosting stake in USG
Building materials supplier USG Corp. said Friday it plans to raise $400 million by selling convertible notes, most of which will be bought by Warren Buffett's Berkshire Hathaway Inc.
Business Week Online > File Not Found
...........
To crash C so GS could scoop it up for cheap, using TARP funds.
Blackhalo | 11.21.08 - 1:21 pm
Gee, that would be brilliant.
hmm, now where would GS get the money for this scooping of the POS that it is C?
oh wes, I know, the 30bill left in TARP money!
does the ppt just do the market or does it do individual stocks? like c or gs?
To crash C so GS could scoop it up for cheap, using TARP funds.
Blackhalo | 11.21.08 - 1:21 pm
Gee, that would be brilliant.
nova: Pony TimeSharing | 11.21.08 - 1:26 pm | #
It would be interesting to see who has short positions in C.
the real news is that Citi is changing its name this weekend to "Cithing"
RhodesianGreenbackinAZ writes:
I was so happy I got my Mom out 2 months ago. Saved her at least $50k in retirement money.
That is great.
I have no idea where my parents are with everything. They will not discuss it with me. They have always been very private with their money. I send them emails every once in a while with info that I get here. When I try to talk to my mom about it, she says she has no idea and she does not like to think about it because it scares her:(
That is one of the things that pisses me off so much about this. All of these irresponsible people's actions have made my mom (and other older people) feel like this.
does the ppt just do the market or does it do individual stocks? like c or gs?
Since it's your imaginary friend, you can imagine it does whatever you want.
In the world of quantitative easing, the theory now goes that the Fed should be promising long term Fed Funds rates. In theory this would serve to depress LIBOR which would mean ARMs are the best kinda financing going forward.
But, IMHO LIBOR is a risky way to cast a loan as LIBOR is only down becasue Great Britain is backstopping their banks. Since Britain is correctly seen as a big Iceland I think anything tied to LIBOR is a whopper of a risk.
For tied-to-treasurry ARMS your risk is if/when the rates explode associateed with either failing auctions and/or the day the Fed has to jack up rates to soak up liquidity.
So, what we have is a pretty short window where ARMS are okay, but the asset is massively deflating and then the rate will spike which sould cause even more asset deflation.
No, I think ARMS are bombs. The fuse is just slightly longer.
ppt is like the tooth fairy
if you believe in it, it will reward you
could american express bank holding buy citi? or dsl?
Bottom Callers, Capitualtion a writes:
Rob - you nailed it!
Ca unemployment @8.2% (I said 8.5%)
Wow, I thought people only kept track of my predictions so as to rub my nose in the bad calls. Thanks.
Cobradriver writes:
Rob,
I just got done pulling some listings in the area of your mom. South Sarasota County. 5 acre lots/homes. Jesus,I thought Charlotte County had a run up...
Can I hide under my desk till this ends???
No, you cannot hide. Sh¡tstorms are not hurricanes or earthquakes or floods. You are experiencing pyroclastic flow. You concern is appreciated but she owns, really owns and self insures and has a nice pension from a New England state. Bulletproof positioning. Not a coincidence either that she was born the day the banks closed.
The IMF may suck at predictions, but they conveniently aggregate a lot of data
IMF Global Financial Stability Report -- Financial Stress and Deleveraging: Macro-Financial Implications and Policy -- October 2008 -- Contents (GFSR Oct 08)
IMF World Economic Outlook (WEO) - Financial Stress, Downturns, and Recoveries, October 2008 (WEO Oct 08)
Image capture from the Oct 07 GFSR of US Monthly Mortgage Resets
US Mortgage Delinquincies by vintage
Prices of Mortgage tranches over time
---cut too many links----
I was going to cover the background over why Dollar Libor would have spiked, but I want to keep this concise so here is something else fun
Banking liabilities to emerging markets
FWIW, I agree with the main page post in that high rates will not be to blame for anything beyond corporate bonds right now
The next person to mention PPT will be struck by a bolt of lightening to rid the world of idiocy.
Give it a rest. The market is down 50+%, most of that in the past 45 days....
The Dawg wrote:
and has a nice pension from a New England state
Both my parents just retied from the state (CT). Both early 60's. So far its been good. But I'm worried about pensions making it thru the next 20+ years.
.......
I am creeped out by the Citi CFO begging for mercy on CNBC.
Have some dignity, man.
Some commonly used indices include the 1
Year Constant Maturity Treasury Rate (CMT), the 6-Month London Interbank Offered Rate (LIBOR), the 11th District Cost of Funds (COFI), and the Moving Treasury Average (MTA), a 12-month moving average of the monthly average yields of U.S. Treasury securities adjusted to a
constant maturity of one year. The margin is the number of percentage points a lender adds to the index value to calculate the ARM interest rate at each adjustment period.
In different interest rate scenarios, the fully indexed rate for an ARM loan based on a lagging index (e.g., MTA rate) may be significantly different from the rate on a
comparable 30-year fixed-rate product. In these cases, a credible market rate should be used to qualify the borrower and determine repayment capacity.
A friend of mine said markets go up and down and it's a good thing he's not retiring soon. He's riding it out.
There are many people who still think this is just another down cycle, so they're riding it out. 401k money still pumping into the market, and the market just swallows it whole.
It won't be capitulation until people feel that the stock market is a money hole
.
I love the money fires.
Mint suspends orders amid rush to buy bullion
Sarah-Jane Tasker | November 22, 2008
Article from: The Australian
FEARS of the unknown long-term effects from the global financial crisis have sparked a new gold rush.
With retail and wholesale clients around the world stocking up on the precious metal, the Perth Mint has been forced to suspend orders.
As the World Gold Council reported that the dollar demand for gold reached a quarterly record of $US32 billion ($50.73 billion) in the third quarter, industry insiders said the race to secure physical gold had reached an intensity that had never been witnessed before.
Talk about being completely out of touch... sighs
Sorry if this has already been posted.
Top official meets rioters as China seeks stability
Yahoo! 404 - Page Not Found
Who thinks we will see a Washington Mututal like dismantling of C? Or will we see a direct loan like AIG to keep the crap floating in the toilet for a few weeks longer?
All of these irresponsible people's actions have made my mom (and other older people) feel like this.
They will not discuss it with me. They have always been very private with their money.
Irresponsible people? Unwilling to take sound financial advice? Is this a matter of kind or degree?
I don't believe in God but sometimes he says smart stuff.
Comrade Misean is Dope writes:
Anywho, I always thought the recast thingy was the bomb. Because aren't like 80% of option ARMS I/O or neg ams, chosing lowest monthly payment?
Yeah, Mr. Mortgage has done a number of posts on this. While the rate may reset lower, the pick-a-pay goes to full amortization at a certain point as values drop. He had #'s on the percentage of borrowers that were paying the BARE minimum. Staggering given the fact that many are already defaulting.
Will try to find links
yagij, completely out of touch with what?
God writes:
The next person to mention PPT will be struck by a bolt of lightening to rid the world of idiocy.
Give it a rest. The market is down 50+%, most of that in the past 45 days....
And on the 46th day you rested? Far be it from me to tell God His business but wouldn't it be far better to drop a "Frasier" cliché on them? Lightning bolts have to be expensive even for You.
Adjustable-rate mortgage indexes explained
https://origin.bankrate.com/ibd/news/mortgages/20040415a1.asp?caret=1a
12-month moving Treasury average (MTA)
An index determined by the monthly average of one-year Treasury bills. Commonly used as a benchmark for adjustable-rate mortgages.
See also: 13-week Treasury bills at zero ... hmm?
conversation I just overheard at my parts counter.
2 drivers waiting for diesel parts.
Driver 1: Citbanks in trouble.
Driver 2: I dont want to hear about it.
Driver 1: I think we are going into a depression.
Driver 2: I dont want to hear about it.
Driver 1: My 401k has lost over 40%.
Driver 2: I dont want to hear about it.
Driver 2 gets his parts, as he walks out the door.... "ads running in the newspaper for $15 dollars an hour to drive trucks, thats embarrassing. I swear this country is going downhill and fast."
Holy Moly:
Why isn't anyone in Jail?
Video interview with William Black:
"But even though the FBI warned of an "epidemic" of mortgage fraud in 2004, they subsequently made a "strategic alliance" with the Mortgage Bankers Association, which serves the major industry players."
Is Treasury crashing rates to help stop foreclosures?
"Who thinks we will see a Washington Mututal like dismantling of C?"
I do. Garage sale with TARP recipients getting first pick at the bargains.
The government can take over C and merge it with AIG--anybody have a good name for this coupling?
Mel, they should call it CIG....as in I need a cigarette right about now
yagij writes:
Mint suspends orders amid rush to buy bullion
Sarah-Jane Tasker | November 22, 2008
Article from: The Australian
FEARS of the unknown long-term effects from the global financial crisis have sparked a new gold rush.
With retail and wholesale clients around the world stocking up on the precious metal, the Perth Mint has been forced to suspend orders.
The thought keeps going through my head.
Who is going to buy all this gold when it hits another peak?
If you are holding or buying gold right now - how does one plan to sell it if you need cash or food?
Why Paulson stopped the TARP - might have something to do with this:
Kashkari: I dont think its a good use of taxpayer money to put taxpayer capital into a financial institution that is going to fail
and the fact that it isn't working. I know it's hard to believe that Paulson would do something responsible.
ahem Citigroup is already holding $138bn in loan from the NY Federal Reserve and serviced by JPM.
They are already AIGed, it's just on the down low. Causing a ruckus over it would just scare depositors (Citi is global mind you) to other banks
GM to return two leased jets amid criticism -- Reuters ::: LOL!!! What a pathetic PR attempt...too little, too late my friends
god i really wanted an answer,so you tell me. okay?
WTF is this??
his Treasury Financial Manual (TFM) bulletin publishes the CVFR percentage based on the current value of funds to the Department of the Treasury (Treasury).
The CVFR percentage is based on the investment rates for the Treasury Tax and Loan accounts set for purposes of Public Law 95-147, 91 Stat. 1227 (October 28, 1977).
Annually, Treasury computes the CVFR percentage by averaging investment rates for the 12-month period ending on September 30, rounded to the nearest whole percentage. Quarterly, if the annual average (on a 12-month moving average basis) changes by 2 percent, Treasury revises the rate. Treasury's Financial Management Service (FMS) publishes the presiding rate in the Federal Register and in a TFM bulletin.
Agencies may obtain current and previous rates from the CVFR Web site at Treasury Current Value of Funds Rate.
The CVFR percentage during the period January 1, 2009, through December 31, 2009, is 3 percent. This rate reflects the average investment rates for the 12-month period ending September 30, 2008.
Thanks for the chart porn EHP!
Mel writes:
The government can take over C and merge it with AIG--anybody have a good name for this coupling?
No, but their kids are sure to get into Harvard.
ChangeYourDogCanRollIn writes:
You just made all the Ron Paul fanatics happy with your Gold Bug observatio
Hmmm,
Treasury Current Value of Funds Rate
Treasury Current Value of Funds Rate
The Current Value of Funds Rate (CVFR) is used to calculate interest on overdue Federal Government receivables and to determine the effectiveness of taking cash discounts on Government payments. Interest charged is simple interest at the rate in effect at the time the debt becomes overdue. The rate of interest remains fixed for the duration of the indebtedness ...??
2nd rally dead,now for the slow grind down and then speeding up late.Down 3-500 for day.
ppt is protecting the plunge now, not protecting from it. it's that legacy thing for W now, his administration will look good next to the smoking crater that he leaves behind
I think an important level to watch is 7,528 which is the 2002 closing low....as soon as we break that we're back to 1997 levels!
i know what we can name the depression.W
Irresponsible people? Unwilling to take sound financial advice? Is this a matter of kind or degree?
sdtfs | 11.21.08 - 1:36 pm | #
Why would they think I was giving them sound financial advice over their planner? I am not in the financial industry.
EHP, what's the vertical axis here represent?:
US Mortgage Delinquincies by vintage
Is it % of mortgages outstanding?Hundreds of thousands?
irreverent writes:
ppt is protecting the plunge now, not protecting from it. it's that legacy thing for W now, his administration will look good next to the smoking crater that he leaves behind
irreverent | 11.21.08 - 1:45 pm | #
Yeah, and if W's leave behind a smoking crater, O's leaving behind a paradise? Please.
Here is a graph of ALT A and POA resets:
ALT-A: The Risk Abatement Disaster is Coming « Your Mortgage or Your Life…
And here is an update on the rate of resets an recasts:
The Mortgage Lender Implode-O-Meter News Pick-ups: Premium Alert: Wells Fargo Closing Operations Across The Nation
mykillk writes:
yagij, completely out of touch with what?
mykillk | 11.21.08 - 1:38 pm
Gold coins & bullion has been flying off of the shelves of mints and dealers for months. There is a reason that the US Mint could only honor orders placed before April 1, 2008 for some kinds of coins, and if the Perth Mint has found themselves "shocked" or "surprised", it is because they are lying or out of touch with the true market demand.
The physical PM v. paper PM markets have been out of whack for just as long, and the gold/silver/bugs knew it. Hoarders knew it. It is the reason that my only local dealer charges 18 USD for Silver American Eagles when the price of paper silver is almost half that amount.
Ticker Tape of Doom writes:
Who is going to buy all this gold when it hits another peak?
If you are holding or buying gold right now - how does one plan to sell it if you need cash or food?
Ticker Tape of Doom | 11.21.08 - 1:41 pm
I think you made a jump there.
You may not go into Wal-Mart to have your gold and silver honored, but if you find yourself bartering, I think people would prefer hard assets for food over a USD if it is quickly devalued. Depends on how you want to bet.
StewPDX,
Percent. I double checked
Yeah, and if W's leave behind a smoking crater, O's leaving behind a paradise? Please.
Duarte | 11.21.08 - 1:48 pm | #
I think he's making an observation about actual recent economic events/current conditions, not a prediction about the economy after an Obama administration.
Bush shunned by other world leaders.
World Leaders Don't Shake Bush's Hand At G20 Summit (VIDEO)
Wow...C is below $4 now -- do I smell toast?
so I have a scanner in my office for CB radio chatter.
Swear to gawd, these guys are now talkling about a one world curency...
say goodnight to teddybear.
"Yeah, and if W's leave behind a smoking crater, O's leaving behind a paradise? Please.
Duarte | 11.21.08 - 1:48 pm | #"
Are you better off now, or 8 years ago..
What are the deltas for income, cost of living and consumer confidence from beginning to end of either administration or the republican or democrat controlled congress?
Voodoo and trickle down are bad for business.
A single world currency makes no sense. Even if you're paranoid that there is an upper echelon which wishes to enslave the entire world, it makes no sense for them to bring in a single currency.
Yeah, and if W's leave behind a smoking crater, O's leaving behind a paradise? Please.
Duarte | 11.21.08 - 1:48 pm | #
Sorry Duarte.
It's not about Obama.
Most politicians are mediocre oportunists at best, regardless of party affiliation.
In George the lesser's case, though, we have the most spectacular failure by any measure.
We don't need Obama to deliver us to the promised land. We just need him to not fuck up at every available opportunity.
Gold and the Dow will cross at 4000.
All aboard........
Somebody shoot the dollar already so we can rally
As of June 3, 2008, the interpolated yield was dropped as a yield curve input and the on-the-run 52-week bill was added as an input knot point in the quasi-cubic hermite spline algorithm and resulting yield curve.
Treasury does not provide the computer formulation of our quasi-cubic hermite spline yield curve derivation program. However, we have found that most researchers have been able to reasonably match our results using alternative cubic spline formulas.
U.S. Treasury - Treasury Yield Curve Methodology
Of the resets though, what percent is on homes that are underwater. Key issue. A great percentage will just walk away.
I think you made a jump there.
You may not go into Wal-Mart to have your gold and silver honored, but if you find yourself bartering, I think people would prefer hard assets for food over a USD if it is quickly devalued. Depends on how you want to bet.
yagij | 11.21.08 - 1:50 pm | #
This is sort of how I believe this scenario will play out as well. I am just wondering how valuable gold will be if we get to this point.
fwiw-
I have some silver set aside for this scenario.
Bush shunned by other world leaders.
As much as I despise Bush, I have to laugh when I see this. Who cares? As if these scum are any better than him. They were rubbing shoulders with him for 4-8 years....and now they're going to shun him when it no longer matters? Also, as if they're without sin and need to be throwing stones?
Finally, some have posted yesterday that this is not what it seems. Bush met with all of them and shook their hands prior to this, so no need to shake again.
Or sell based on 667 $Billion in VIE's that may or may not contain a chicken. I chose the latter.
OnTheRun | 11.21.08 - 1:24 pm | #
With Darren's help, they'll get that chicken!
We've found our solution:
citigroup -> kramergroup
Ticker Tape of Doom;
"I am just wondering how valuable gold will be if we get to this point.
fwiw-
I have some silver set aside for this scenario."
The silver would be for routine small transactions. The gold would be for larger purchases.
I am just wondering how valuable gold will be if we get to this point. - Ticker Tape of Doom
Same as last time. The nice Treasury Agent will help you open your safe deposit box. Not to worry. Submit your claim and after careful review if you can prove ownership and have tax witholding then you can can get a check for your precious metals at the government determined price.
That's why gold won't go up.
EvilHenryPaulson writes:
StewPDX,
Percent. I double checked
EvilHenryPaulson | 11.21.08 - 1:50 pm
Oh wow, is that ever bad on the late vintages. 16% of all 2006 Alt-As are delinquent, and if the trend continues unstopped it'll be more like 24% in another year. And that's before the big wave of Alt-A resets.
Jebus.
So boring, especially for an expirations day, waiting for 3:00 to roll around.
How many of you have ever bought and sold gold or silver bullion? To say that it isn't liquid is stupid.
It is the most liquid monetary unit in the world. There is nowhere on Earth that I can't go today and sell gold for any currency I choose.
Or moreover, no change into a local currency is required.
Change your dog can roll in... I assume everyone is left of center, from where you sit.
Are you better off now, or 8 years ago..
Why 8 years? Let's make it 16 years, or 20, or, hell, why not 28? What's occurred has been a bipartisan consensus, and the blame should get pinned on both sides of the same coin.
StewPDX,
To be precise, it's "(60+ day delinquencies, in percent of original balance) " so is you assume the smaller mortgages, because their credit was so bad they couldn't borrow much, are more likely to become delinquent then the % of mortgage delinquent would be even greater.
Why gold? Why not loose diamonds? Or highly polished .357 cartridges?
Why 8 years? Let's make it 16 years, or 20, or, hell, why not 28? What's occurred has been a bipartisan consensus, and the blame should get pinned on both sides of the same coin.
Morocco Bama | 11.21.08 - 2:04 pm | #
True. Our system is not a two party one. I don't see how anyone can really believe that it is.
We don't need Obama to deliver us to the promised land. We just need him to not fuck up at every available opportunity.
Bush has even fucked up our expectations. After 8 years of shit sandwiches we will now settle for a mere nothingburger.
Rob Dawg you are wrong.
As of today bullion can freely travel outside US Borders with no requirement for claim to US Customs.
\t
Monetary instruments that must be reported by travelers or persons sending or receiving them (other then by electronic means by a banking concern) are:
Coin or currency from the U.S. and/or other countries, including gold coins;
Travelers Checks;
Checks, promissary notes or money orders that can be cashed by the bearer. This includes checks or money orders made out to someone other than the bearer that are endorsed without restriction(i.e. for deposit only.), and incomplete checks, money orders, promissary notes that are signed but on which the name of the payee has been omitted (the "To" line is left blank);
Securities or stocks in bearer form.
Monetary instruments that are made payable to a named person but are not endorsed or which bear restrictive endorsements are not subject to reporting requirements, nor are credit cards with credit lines of over $10,000.
Gold Bullion is not a monetary instrument for purposes of this requirement. You can obtain the currency reporting form FinCEN 105 for more information.
Link here:
http://help.cbp.gov/cgi-bin/customs.cfg/php/enduser/std_adp.php?p_faqid=332&p_created=1043364938&p_sid=1cBvmkgj&p_accessibility=0&p_redirect=&p_lva=&p_sp=cF9zcmNoPTEmcF9zb3J0X2J5PSZwX2dyaWRzb3J0PSZwX3Jvd19jbnQ9NzIsNzImcF9wcm9kcz0mcF9jYXRzPSZwX3B2PSZwX2N2P
Thar she blows!
You may not go into Wal-Mart to have your gold and silver honored, but if you find yourself bartering, I think people would prefer hard assets for food over a USD if it is quickly devalued. Depends on how you want to bet.
In the ME and Subcontinent women wear their families' savings as jewelry. On any given day, you can walk into a gold souk and buy and sell gold in any form based on price per gram.
Gold10 Tola bars are a favoured form.
They have smooth rounded edges and are an ideal size for smuggling, if necessary inside the smugglers body.
They are currently about 2700 USD. I'm picking a few up in Dubai. Hopefully I won't have to test the rounded edges feature.
Why gold? Why not loose diamonds? Or highly polished .357 cartridges?
nova: Pony TimeSharing | 11.21.08 - 2:06 pm | #
Diamonds? Is it safe?
Rob Dawg said:
Same as last time. The nice Treasury Agent will help you open your safe deposit box. Not to worry. Submit your claim and after careful review if you can prove ownership and have tax witholding then you can can get a check for your precious metals at the government determined price.
Any scenario where you need gold to trade would be a "black market" transaction anyway, so keeping your gold "in the system" (safety deposit box) seems pretty silly to me.
labrador,
Diamonds are good for cross border unreported financial transactions. They are not a good store of wealth as diamond pricing is entirely dependent on hoarding. Even with DeBeers you could go to a market in India, near where most of the world's diamonds are polished, and get them for a fraction of the price you would in North America
I can't help it, really..
Assessing the Effects of Variability in Interest RateDerivative Pricing
http://www.lib.ncsu.edu/theses/available/etd-08302006-133536/unrestricted/etd.pdf
a knot is a point that divides two such sectionsof the data. Between knot points, a smooth curve is fit to the data, and conditionsare met so that the curves in each section of the data connect at each knot point.Generally, derivative conditions must be met at the knot points to ensure smoothnessin the spline. The result is a smooth curve that fits the data according to a criteriondefined by the spline method itself.
The Hull-White model also improved upon the Ho-Lee modelby incorporating mean-reversion, which the Ho-Lee model lacks. Both of these modelstake the initial zero curve as an input, but neither model requires that the zero curvebe differentiable. Some no-arbitrage models can be implemented in a discrete-timesense through the use of trees. Section 1.3.1 details the construction of a trinomial treein the case of the Hull-White model.
Hull (2003) notes that one negative aspect of the HJM model framework is thedifficulty of calibrating the model to the prices of actively traded instruments. Yan(2001) also points out that since HJM models use continuous compounding of theinstantaneous forward rate curve, specifying a lognormal process in the HJM frameworkis no longer possible.
This result implies that there exists a convenience premium for Treasury instru-ments due to their liquidity (among other factors). The implication for the currentresearch is that the interest rate being used in the Hull-White trinomial tree to dis-count future payments might not be as close to the true riskless rate as one woulddesire. An extension to this work could involve an adjustment to the discount rates inthe tree so that they are closer to the riskless rate....
Zero?
Im pretty sure it was about 70% making the minimum payment, which is below interest only. Rate change means diddly compared to the payment reset to include principal.
Forget Diamonds, Gold and Treasuries. Buy the Spice.....before it's too late.
Ticker Tape of Doom writes:
This is sort of how I believe this scenario will play out as well. I am just wondering how valuable gold will be if we get to this point.
Ticker Tape of Doom | 11.21.08 - 1:58 pm
FD: I own silver. I don't own gold, platinum, etc.
I only see Gold being used to simplify holdings. Once I have 30 1 oz. bullion, I'd consider selling 10-15 oz. to get 1/4 or 1/2 oz. gold bullion. Less clinking in my bag, easier to count/store.
e.g.
Good: I have to keep up with less to account.
Bad: I lose that one gold coin means I lose more value.
You are experiencing pyroclastic flow.
Rob Dawg | Homepage | 11.21.08 - 1:30 pm | #
OH that's why we are so utterly...choose your epithet of choice. Nice metaphor (well, apt anyways).
EvilHenryPaulson writes:
labrador,
Diamonds are good for cross border unreported financial transactions.
I've heard stories of $100,000 watches such as these being used to move wealth undetected across borders. The courier just wears them on the flight.
Diamonds? Is it safe?
Schnell!
Diamonds are worthless rocks. DeBeers sits on a mountain of them and controls their price.
Gerkinov,
I've heard of private banking doing this to abet tax evasio
EvilHenryPaulson writes:
Gerkinov,
I've heard of private banking doing this to abet tax evasion
Hmmm ... the one theme that always runs through white collar crime is that they all spill their guts and cut a deal from the moment they get caught.
Fotget diamonds.
Too many criteria for valuation: color, quality, cut.
Gold however, is gold.
As to PM, I have a stash and foresee what sm_landlord said with silver going to the everyday stuff and the gold for the larger purchases.
That said, don't pull out the silver until you've figured out what else you can use to barter with. Remember that you can also sell the family silver service for use, which is why many refugees from other times made sure to take it with them.
Save those guns for later.
PSGirl:
Today's financial world isn't what it was 20 or 30 years ago.
And since many older folks aren't as linked with the 'net, they don't keep up with it.
I can only trust that my mother's financial guy won't totally screw the pooch; he's also the guy for sister so there's at least someone else tuned in watching.
Ultimately, she's competent to make her own decisions and I can only advise if asked. They don't want us to be their parents.
Recently shared what I was doing (financially) with my 80 y/o mother and she was aghast at the financial decisions.
morocco bama you are so right about the spices. dont even think about them but try to do without them.
Reminded of the John Belushi line from "Blues Brothers":
How much for the leeetle geeerl?
Gary
Just checking to see that all were still paying attention.
I'm kinda regretting getting a fixed-rate mortgage on my house, actually. As long as the government is giving money they print away to any insider/bank for a wink or a nod, the cost of borrowing is going to be effectively zero.
It kinda argues strongly for margin buying of inflation hedge securities, as long as your time window is beyond a couple of years. Hm...
The rate means diddly. The rate could reset to zero for all I care, but if the borrower owes 450K, they'll need to be earing 150K a year to keep up with the 30-years-same-as-cash payments. And they don't make 150K a year.
"Why 8 years? Let's make it 16 years, or 20, or, hell, why not 28? What's occurred has been a bipartisan consensus, and the blame should get pinned on both sides of the same coin.
Morocco Bama | 11.21.08 - 2:04 pm | # "
I am no fan of either political party, but Bush has been a lesson in exceptional moral hazzard.
PM rally....anything they can get at this point
Mortages tied to treasuries will cause trouble soon enough.
see:
Debt man walking a TNR story
and:
TYX Thirty year treasury
The timing might be difficult to guage, but the rationale for a significant spike in rates is there.
Libor & COF wont matter much when it comes to option ARMS, I would imagine most people have been making the minimum neg. am payment. Once they hit 115% or so LTV they recast to a fully amortized loan. These people are facing monthly payments tripling or quadrupling. They will walk. These loans are in fact bombs waiting to explode.
11th district cost funds will be appropriated though the obama funds. I found this really interesting:
"Obama motivates D.C. to initiate new lower and middle class bailout"
Obama's Taxpayer Bailout
Nice to see this getting coverage. We wrote about it back in March: