Byzantine Ruins - catching up from from an earlier thread:
I started as a extremely conservative security policy analyst.
Unfortunately, I actually believed it, unlike your typical "conservative" in my peer group, who was either a useful idiot with star-spangled eyes and the analytic depth of a bird bath, or strictly in it because being Republican meant you could be an asshole greedy racist douche and proud of it.
I hear ya bud...I too am a recovering "intellectual" libertarian conservative. Then the red pill and all that...
Actually, the nice part about being neither cynical nor an idiot is that eventually you can reason your way out of the circular paper bag.
Jas and the rest of the holders of Treasurys are only losing their a$$ for now. There could easily be a flight to safety back into Treasurys if the stock market and commodities drop sharply again (like they should).
At oil prices like these, a lot of alternative sources of supply are viable if not rather profitable. A local business was described in the fishwrap as being able to convert used ag plastics back into crude oil that would be profitable at $60 a barrel.
Given the horrid state of the residnetial housing market and economy in general, I think mortgage rates should trade at a big premium to the long term spread.
10yr T + 3.5% looks right to me. Absent the fed, rates would be ~ 7.5%. Mortgage lending is riskier than ever nowadays.
i am really surprised companies like WFC and BAC are not down more given the rise in mortgage rates. they have huge mortgage machines that are going to go starving if we see a permanent rise in rates.
not that i am predicting that, but just the increased possibility should hurt their outlooks. well over 80% of mortgage activity lately has been refis. that could literally evaporate with mortgage rates north of 6%. lock activity is dying, and a lot of concessions are being made (i.e. lower profits) to get deals done.
Here's an interesting take on bonds - people are shifting from safe treasury bonds to financial corporate bonds, because financial companies are implicitly backstopped by the US government.
There will be much wailing and gnashing of teeth when the 30-year FRM goes to 6% ... but remember, by historical standards, borrowing money for 30 years at 6% fixed is a steal.
We all know the government being the "buyer of only resort" of mortgages has been keeping an artificial ceiling on mortgage rates. But no amount of purchasing power can keep a lid on rates forever, and my biggest fear is that when the pot does boil over, it's not going to be a slow, gradual climb in FRM rates from sub-5%, to 5.5, to 6, to 6.5, etc., but that it will blow from current levels to, say, 8% virtually overnight.
And that would be an enormous shoe to drop, even in the Imelda Marcos closet that is the housing market these days.
You are correct. not due to the housing market, though, as a buyer of MBS you are facing fannie/freddie credit risk. you willing to face their risk over the next 10 years? who is the govt going to let default first? the treasury, or fannie/freddie?
i can tell you one thing, any foreign buyers are done with agency MBS. the Fed is the market now.
"people are shifting from safe treasury bonds to financial corporate bonds, because financial companies are implicitly backstopped by the US government."
same thing happened with MBS once the FDIC backed bank debt - all the money left MBS and into bank debt. facing the FDIC was seen as safer than facing fannie/freddie.
which is why BB had to step into the MBS market.
we would be so much better off if we just accept failure and let it happen. rip the bandaid off.
Jobless people living in the street and very disgruntled, does not make for a strong Army in my book.
Recruitment goes up in bad times, you get a pay check, three meals a day and so what if people might be shooting at you. Just another day for some of these urban war zones.
"Jobless people living in the street and very disgruntled, does not make for a strong Army in my book. "
Recruitment and retention are up, up, up... because employment in the outside world is down, down, down. Poverty provides the cannon fodder for a large standing army. You can always find prospective soldiers who haven't had their grunts removed yet.
Bernake will need more than a conundrum to solve, he will need a condom to prevent the seeds of runaway inflation turning into green shoots and mighty oaks.
Did you see John Hussman's writeup from a few weeks ago on this topic? About how it's a misnomer that there's a ton of liquidity on the sidelines-- it's just parked in the safest securities (which it seems is at the USG's whim)... and so you just get this hot potato rotation as soon as the newest subsidy is announced. His argument really resonated with me, but I was still not expecting the treasury market to collapse like it is.
Police in Washington D.C. have arrested a person in connection with a shooting on June 10 at the Holocaust Museum, The Washington Post reported. It is still unclear if the shooting was inside or outside the museum. U.S. Park police report one person was shot."
The market barfing up the 10 year Treasuries is clearly a major issue.
I've long been humored by bashers of the 1930's Fed and the Japanese who felt that the US of the 2000's is so much smarter and has learned so much. Clearly, avoiding a major credit collapse is difficult.
I have a headache today and thus I'm having a harder time thinking... so someone help me out. What's the next step?
1) Fed keeps FFR at near 0, and lets the 10 year rise.
In this case the banks will benefit from a steeper yield curve.
however it will crush the housing markets and probably reduce consumption which exacerbates the situation
2) Fed lets FFR raise, and also the 10 year rise
In this case banks don't benefit from steeper yield curve.
housing and consumption still crushed
3) Fed keeps FFR at 0, and starts buying 10 year Treasuries
this flattens the yield curve, bad for banks.
this lowers the 10 year, "good" for consumption
but we run into inflationary problems and the Foreigners will simply buy our short term debt and avoid our longer term debt
that leaves the Fed buying all the Treasuries... how to escape this?
4) Fed raises FFR and also buys 10 Years.
flattens yield curve even more, destroying the banks
then WTF?
I'm confused. As I said, I have a headache. I'm gladd Bernanke is so much smarter to me.
Seems to me that even at 5.8% the 30yr rate would be unusually low...somewhere in the 7.5% range seems right. There is no way the Fed can sustain the rate of purchases of Agency MBS or the rate of Treasury purchases, the yield will have to climb on both of these...it's gravity responding to QE. Yay for my mining stocks.
Jas and the rest of the holders of Treasurys are only losing their a$$ for now. There could easily be a flight to safety back into Treasurys if the stock market and commodities drop sharply again (like they should).
That depends on the type of position they have. Somebody making bullish bets on treasuries by being leveraged into long bonds, long the futures, or writing puts on something like TLT could easily be wiped out by the kind of move we've seen recently.
I traded 20+ year zero coupon treasuries for a while. I found if I wanted to it would be very easy to buy enough of them on margin where a 100 bps move upward would wipe out my account.
Funny last I read recruitment was very low due to Iraq and Afghanistan?
Yes. Then things changed. Go to Google News and do a search with keywords
army recruitment goals
Edit -- up to a couple of years ago, the majority of recruits were coming from small-town, rural America. Relatively fewer from the larger metro areas. Given economic times, I wonder if that's changed.
It looks like the market has completed the first shoulder and head and is now started work on the second shoulder. The S&P should fall to around 880, trade there for a few days and then drop off to complete the shoulder.
The Washington D.C. Fox News affiliate is reporting that two people have been shot, and an unconfirmed report says at least one person has a gunshot wound to the head. Fox also reports that the gunman entered the museum and shot at a security guard, to which another security guard returned fire, hitting the suspect. A SWAT team is on the scene. WUSA, Channel 9 News is reporting that an Emergency Medical Services representative has said one person has been shot, who appears to be a police officer."
New recruitment, as well as re-enlistment is back up.
It helps that they can re-enlist in Iraq, etc and get their bonus tax free. And you know that is one give away I do not mind seeing.
Speaking of CA, it's more likely than not going to be the next anvil shaped shoe to drop.
$24 billion is a lot to cut out of the budget. There are only so many police, firemen, teachers, municipal workers, programs and initiatives that can be cut.
I think the state will default (and avoid painful choices) and force the USGs hand to step-in, and doing so will mean USG has to assume the CA rating.
As soon as the first airline declares bankruptcy, I'm buying with both hands. They won't/can't let the airlines go down
I don't know about that. GM & Chrysler prove that outside of banks, nobody is TBTF. Besides, the government used to regulate airlines, not to mention utilities.
Yield curve volatility could just be technical factors at work as all the wacky bets made on the End Of The World come unwound furiously.
Jibber-jabber from China and Russia about dumping Treasuries means nothing. You do not publicly talk down a $100 billion or $1000 billion dollar investment before you sell it.
I agree that if the 10-year continues to grind higher, Bernanke will have a serious conundrum. I do not agree that this is a foregone conclusion. (And 4% is frankly not a problem. Yet.)
It looks like the market has completed the first shoulder and head and is now started work on the second shoulder. The S&P should fall to around 880, trade there for a few days and then drop off to complete the shoulder.
I'm watching SPX ~925 for confirmation that the cascade is about to begin. We got close on Monday and then turned around in a big hurry, apparently when Timmy got back on the buy button an hour before close.
"In looking at gasoline demand an indicator of economic strength, then the worst of the recession may well be over, said Nicholas Colas, chief market strategist at BNY ConvergEx Group. But escalating energy prices could also curtail consumer spending at a time of still-low housing prices and high unemployment, Colas said."
HOW CAN PEOPLE BE ALLOWED TO MAKE THESE KINDS OF STATEMENTS!!!! THE PETROLEUM NUMBERS FOR THE PAST 18 MONTHS:
08 Jan 2.83%
08 Feb -5.30%
08 Mar -3.30%
08 Apr -0.96%
08 May -2.79%
08 Jun -2.47%
08 Jul -4.00%
08 Aug -4.57%
08 Sep -7.94%
08 Oct -11.00%
08 Nov -8.17%
08 Dec -6.21%
09 Jan -6.68%
09 Feb -9.21%
09 Mar -10.06%
09 Apr -11.76%
09 May -13.48%
09 Jun -11.10%
Those are all negative signs, not dashes. And June is only the first week, the number will be more like 14% down when the month is complete.
I do not agree that this is a foregone conclusion. (And 4% is frankly not a problem. Yet.)
First, I agree it's not a foregone conclusion. However, the 4% rate, combined with a falling dollar and soaring commodities are a problem in my view. A lot of marginal homeowers will not be able to refinance. Many others will have to accept lower sales prices as a result of higher interest rates.
Which is say I'm not sure why more are not paying attention to the ramifications of our largest state economy really imploding.
Their debt gets FDIC insured, or insured by some kind of federally-funded monoline. In keeping with the 'Where's my frackin' pony?' principle and so there's no capital flight from other states, so does everyone else's.
So, question is do I play the fool and hang on to my shorts... i just need a two or three days in a row about like today. OR, do I trade the hockey stick and bail out of everything that's in the money by around 3pm? Questions, questions... the ones we must ask in a manipulated "market".
I go to the museum a lot. They have, outside of Germany, one of the best research libraries in the world. They also have excellent security. Outside of the WHite House - probably the best in DC.
It's not so much the 4% rate, it's the fact that we are still in the "speculative" area of the Minsky model-- where it's all about cashflows barely meeting debt service. 200 bp in the 30yr mortgage rate means a 15%-20% hit to "affordability" on a cashflow basis. That is a problem.
I don't know about that. GM & Chrysler prove that outside of banks, nobody is TBTF. Besides, the government used to regulate airlines, not to mention utilities.
And AIG too... (insurance, although for the benefit of the banks)
the solution is clear. Have the airlines become a bank holding company, and then they're immediately TBTF as well.
nova, I had heard their security is excellent. Apparently one guard was shot, the shooter was shot and a bystander was injured by broken glass. Details are sketchy right now...
nova (homepage, profile) wrote on Wed, 6/10/2009 - 1:58 pm replyIgnore userI go to the museum a lot. They have, outside of Germany, one of the best research libraries in the world. They also have excellent security. Outside of the WHite House - probably the best in DC.
Gives you just what you're looking for - representation of how much you can afford on a given income for a range of FRM rates. Pretty impressive linear deterioration it's got going on!
Anyone loaning for 30 years at 7.5% with 20% down in Sonoma county ca is going to get their head handed to them within a year to 18 months.Fortress Sebastopol dropped 30% YoY in may,and there are few stronger areas in the county.I MIGHT be willing to loan someone $ at 12% for 2 years with a 30% down in the best parts of the county but I would be a bit uneasy about it.Price to income does not make sense with a stable economy here or in much of the SF Bay Area.
Unusually high deficit spending for TARP, bailouts and stimulus, would seem to imply record levels of Treasury issuance or printing/QE, Neither of which, should be bullish for bonds, independent of international action on a supply/demand basis.
Geez, this country has officially gone insane. The shooter is a white male in his late 80's. What prompts 80 something year olds to go on shooting sprees?
Does anyone know what the funding rate estimates were in the budget? Just wondering how much higher our deficit will go if we are funding at 4% versus, say, 3% (or whatever the estimate was).
I think we have no choice now but to monetize the debt, which should really help my oil position.
Either that or we cut spending and stop bailing out companies and individuals... LOL!!! Like that is going to happen.
WASHINGTON (MarketWatch) -- Five of the Federal Reserve's 12 district banks reported that the downward trend in the economy is showing signs of moderating, according to the central bank's Beige Book report on recent economic activity released Wednesday. Contacts for several Fed districts said their expectations had improved, but none saw growth returning this year. The report showed the choppy nature of the recession, with some sectors doing better while others are suffering. Wages and prices were either flat or falling. Credit remained hard to get and commercial real estate was souring. But there were reports of an up-tick in home sales at the low-end of the market in several districts. Activity in non-financial services, a bellwether sector, declined further
Thanks for that link, it has been a long time since I have been to that site, a lot of improvements. My math was never really that good so it is a great resource. PIGGED AGAIN.
Man, I liked this topic, lot's of good information coming out.
ZackAttack (homepage, profile) wrote on Wed, 6/10/2009 - 12:52 pm "30 year bounced around in the 7 - 8% range in the late 90s and it was never a problem then."
Zack--
True, I had a 7% loan on my first house in '99. But back then we hadn't yet had the massive ponzi runup of housing prices. The problem with 7-8% mortgages today is they would completely cut the legs out from under house valuations (even from the 2009 post-peak price levels).
Some here note that 30yr mortgage rates of around 6% are low, historically. However, that's not the point.
To slow the housing collapse and foreclosures (and more to the point, systemic-risk level losses at banks) the rates have to be lower than historic lows. They have to be lower than about 5%, or we risk falling back into the death spiral we were in a short while ago...
"Blackhalo - Dinkytown generally has the best financial calculators for these sorts of exercises; here's one that would answer your question- http://dinkytown.net/java/MortgageMax.html"
Neat. So, just on the recent move from 4.5% to 5.5%, the affordable median house price goes from 143K to 128K. Green shoot?
What's the big fuss about? Surely you didn't expect the government would be able to keep borrowing at 3% over 10 years forever? Even 5% is a steal over 10 years. The bigger question should be why are all these fools still giving the government money in return for a measly barely inflation beating 4% return over 10 years! The high end move upwards is very normal in my opinion and the steepening yield curve is a normal function towards the bottom of a downturn. It's only be exaggerated by exceptionally low short term rates that are bound to increase soon enough.
Geez, this country has officially gone insane. The shooter is a white male in his late 80's. What prompts 80 something year olds to go on shooting sprees?
When elected government officials secretly collude with bankers to create a non-governmental Federal Reserve Bank that controls the currency of the country and systematically generates inflation to allow government to spend at an ever increasing rate.
Taxing citizens to create bureaucratic government agencies and programs that fail to accomplish their mission while continuing to grow in size as politicians use them to reward the contributors to their re-election campaigns.
It is characteristic of US government policy for the last couple of decades to get into reckless adventures with no exit plan.
Bernanke's careen into the abyss is no exception.
Nemo!
Quite a conununundrum.
Doh!
Yield curve is twisting and turning like a... like a... twisty, turny thing.
Byzantine Ruins - catching up from from an earlier thread:
I started as a extremely conservative security policy analyst.
Unfortunately, I actually believed it, unlike your typical "conservative" in my peer group, who was either a useful idiot with star-spangled eyes and the analytic depth of a bird bath, or strictly in it because being Republican meant you could be an asshole greedy racist douche and proud of it.
I hear ya bud...I too am a recovering "intellectual" libertarian conservative. Then the red pill and all that...
Actually, the nice part about being neither cynical nor an idiot is that eventually you can reason your way out of the circular paper bag.
Ok, now maybe I'll read the post!
Where's Jas?
There is no debtors' prison for nations, with strong armies, that is.
Yield ramp if you ask my opinion.
dr munch,
Jas and the rest of the holders of Treasurys are only losing their a$$ for now. There could easily be a flight to safety back into Treasurys if the stock market and commodities drop sharply again (like they should).
At oil prices like these, a lot of alternative sources of supply are viable if not rather profitable. A local business was described in the fishwrap as being able to convert used ag plastics back into crude oil that would be profitable at $60 a barrel.
Given the horrid state of the residnetial housing market and economy in general, I think mortgage rates should trade at a big premium to the long term spread.
10yr T + 3.5% looks right to me. Absent the fed, rates would be ~ 7.5%. Mortgage lending is riskier than ever nowadays.
i am really surprised companies like WFC and BAC are not down more given the rise in mortgage rates. they have huge mortgage machines that are going to go starving if we see a permanent rise in rates.
not that i am predicting that, but just the increased possibility should hurt their outlooks. well over 80% of mortgage activity lately has been refis. that could literally evaporate with mortgage rates north of 6%. lock activity is dying, and a lot of concessions are being made (i.e. lower profits) to get deals done.
Yes, the stock market and commodities "should" drop. And the lakers' cheerleaders "should" come over and service me later.
I'd say Bernanke's conundrum is his adherence to monetarism-- a doctrine proven wrong many, many times in the last 40 years
Here's an interesting take on bonds - people are shifting from safe treasury bonds to financial corporate bonds, because financial companies are implicitly backstopped by the US government.
Unintended consequences indeed.
There will be much wailing and gnashing of teeth when the 30-year FRM goes to 6% ... but remember, by historical standards, borrowing money for 30 years at 6% fixed is a steal.
We all know the government being the "buyer of only resort" of mortgages has been keeping an artificial ceiling on mortgage rates. But no amount of purchasing power can keep a lid on rates forever, and my biggest fear is that when the pot does boil over, it's not going to be a slow, gradual climb in FRM rates from sub-5%, to 5.5, to 6, to 6.5, etc., but that it will blow from current levels to, say, 8% virtually overnight.
And that would be an enormous shoe to drop, even in the Imelda Marcos closet that is the housing market these days.
Agreed. And Washington's conundrum is its adherence to Keynesian fiscal policy-- a doctrine that has never been really proven to work at all.
"Absent the fed, rates would be ~ 7.5%. "
You are correct. not due to the housing market, though, as a buyer of MBS you are facing fannie/freddie credit risk. you willing to face their risk over the next 10 years? who is the govt going to let default first? the treasury, or fannie/freddie?
i can tell you one thing, any foreign buyers are done with agency MBS. the Fed is the market now.
Yields bouncing around like financials before all the backstoppin. Go US sovereign debt, go.
".......because financial companies are implicitly backstopped by the US government."
....except for when they aren't - i.e. Chrysler's bondholders
Dr. Munch- Here's hoping that both of those things happen...we will both have a shit eating grin going.....
There is no debtors' prison for nations, with strong armies, that is.
Jobless people living in the street and very disgruntled, does not make for a strong Army in my book.
"people are shifting from safe treasury bonds to financial corporate bonds, because financial companies are implicitly backstopped by the US government."
same thing happened with MBS once the FDIC backed bank debt - all the money left MBS and into bank debt. facing the FDIC was seen as safer than facing fannie/freddie.
which is why BB had to step into the MBS market.
we would be so much better off if we just accept failure and let it happen. rip the bandaid off.
Barney Frank is losing it on CNBC. Good sign for the bears.
shill -
Jobless people living in the street and very disgruntled, does not make for a strong Army in my book.
Recruitment goes up in bad times, you get a pay check, three meals a day and so what if people might be shooting at you. Just another day for some of these urban war zones.
ghostfaceinvestah wrote:
we would be so much better off if we just accept failure and let it happen. rip the bandaid off.
Then what would we do for the next 20 years? Let's string this out, what could possibly go wrong?
"Jobless people living in the street and very disgruntled, does not make for a strong Army in my book."
Why not?
shill -
Barney Frank is losing it on CNBC. Good sign for the bears.
Congressional slap down. CNBC needs to stop the shouting and interruptions. They act like a bunch of punks.
"Jobless people living in the street and very disgruntled, does not make for a strong Army in my book. "
Recruitment and retention are up, up, up... because employment in the outside world is down, down, down. Poverty provides the cannon fodder for a large standing army. You can always find prospective soldiers who haven't had their grunts removed yet.
Bernake will need more than a conundrum to solve, he will need a condom to prevent the seeds of runaway inflation turning into green shoots and mighty oaks.
ghostfaceinvestah--
Did you see John Hussman's writeup from a few weeks ago on this topic? About how it's a misnomer that there's a ton of liquidity on the sidelines-- it's just parked in the safest securities (which it seems is at the USG's whim)... and so you just get this hot potato rotation as soon as the newest subsidy is announced. His argument really resonated with me, but I was still not expecting the treasury market to collapse like it is.
As soon as the first airline declares bankruptcy, I'm buying with both hands. They won't/can't let the airlines go down.
Our government is turning me into a day trader.
" June 10, 2009
Police in Washington D.C. have arrested a person in connection with a shooting on June 10 at the Holocaust Museum, The Washington Post reported. It is still unclear if the shooting was inside or outside the museum. U.S. Park police report one person was shot."
"As soon as the first airline declares bankruptcy, I'm buying with both hands. They won't/can't let the airlines go down."
Can't they let some of them go down? And annoint one or two of the stronger lines as the survivors through orchestrated mergers?
The market barfing up the 10 year Treasuries is clearly a major issue.
I've long been humored by bashers of the 1930's Fed and the Japanese who felt that the US of the 2000's is so much smarter and has learned so much. Clearly, avoiding a major credit collapse is difficult.
I have a headache today and thus I'm having a harder time thinking... so someone help me out. What's the next step?
1) Fed keeps FFR at near 0, and lets the 10 year rise.
In this case the banks will benefit from a steeper yield curve.
however it will crush the housing markets and probably reduce consumption which exacerbates the situation
2) Fed lets FFR raise, and also the 10 year rise
In this case banks don't benefit from steeper yield curve.
housing and consumption still crushed
3) Fed keeps FFR at 0, and starts buying 10 year Treasuries
this flattens the yield curve, bad for banks.
this lowers the 10 year, "good" for consumption
but we run into inflationary problems and the Foreigners will simply buy our short term debt and avoid our longer term debt
that leaves the Fed buying all the Treasuries... how to escape this?
4) Fed raises FFR and also buys 10 Years.
flattens yield curve even more, destroying the banks
then WTF?
I'm confused. As I said, I have a headache. I'm gladd Bernanke is so much smarter to me.
I long for the days again of 18% interest rates and $20-billion federal deficits.........almost 30-years ago now.
Funny last I read recruitment was very low due to Iraq and Afghanistan?
Seems to me that even at 5.8% the 30yr rate would be unusually low...somewhere in the 7.5% range seems right. There is no way the Fed can sustain the rate of purchases of Agency MBS or the rate of Treasury purchases, the yield will have to climb on both of these...it's gravity responding to QE. Yay for my mining stocks.
dr munch,
Jas and the rest of the holders of Treasurys are only losing their a$$ for now. There could easily be a flight to safety back into Treasurys if the stock market and commodities drop sharply again (like they should).
That depends on the type of position they have. Somebody making bullish bets on treasuries by being leveraged into long bonds, long the futures, or writing puts on something like TLT could easily be wiped out by the kind of move we've seen recently.
I traded 20+ year zero coupon treasuries for a while. I found if I wanted to it would be very easy to buy enough of them on margin where a 100 bps move upward would wipe out my account.
Moody's upgrades GMAC to 'Ca'
hahahahah!
I long for the days again of 18% interest rates and $20-billion federal deficits.........almost 30-years ago now.
I really was kinda hoping we'd be getting the Volcker treatment, but I think Larry and Timmay knocked him out and tied him up with duct tape.
Funny last I read recruitment was very low due to Iraq and Afghanistan?
Yes. Then things changed. Go to Google News and do a search with keywords
army recruitment goals
Edit -- up to a couple of years ago, the majority of recruits were coming from small-town, rural America. Relatively fewer from the larger metro areas. Given economic times, I wonder if that's changed.
YTL,
That pretty much covers "there's is no such thing as a free lunch" theory. Bernanke and Obama just think that theory is bunk.
Unintended consequences: guessing which companies will be backstopped by the taxpayers is highly lucrative. Pass the dice.
Shill,
No, that is Ca Ca.
It looks like the market has completed the first shoulder and head and is now started work on the second shoulder. The S&P should fall to around 880, trade there for a few days and then drop off to complete the shoulder.
thank you Yancey.
" June 10, 2009
The Washington D.C. Fox News affiliate is reporting that two people have been shot, and an unconfirmed report says at least one person has a gunshot wound to the head. Fox also reports that the gunman entered the museum and shot at a security guard, to which another security guard returned fire, hitting the suspect. A SWAT team is on the scene. WUSA, Channel 9 News is reporting that an Emergency Medical Services representative has said one person has been shot, who appears to be a police officer."
Could be significant in a larger context.
New recruitment, as well as re-enlistment is back up.
It helps that they can re-enlist in Iraq, etc and get their bonus tax free. And you know that is one give away I do not mind seeing.
shill,
Speaking of CA, it's more likely than not going to be the next anvil shaped shoe to drop.
$24 billion is a lot to cut out of the budget. There are only so many police, firemen, teachers, municipal workers, programs and initiatives that can be cut.
I think the state will default (and avoid painful choices) and force the USGs hand to step-in, and doing so will mean USG has to assume the CA rating.
--bh
Yearning:
I'll take whats behind door #3 for $100T
As soon as the first airline declares bankruptcy, I'm buying with both hands. They won't/can't let the airlines go down
I don't know about that. GM & Chrysler prove that outside of banks, nobody is TBTF. Besides, the government used to regulate airlines, not to mention utilities.
BH the cuts in municipals around my state is incredible....schools are getting whacked also.
when is beige book out?
Too many bears. So let me make the bullish case.
Yield curve volatility could just be technical factors at work as all the wacky bets made on the End Of The World come unwound furiously.
Jibber-jabber from China and Russia about dumping Treasuries means nothing. You do not publicly talk down a $100 billion or $1000 billion dollar investment before you sell it.
I agree that if the 10-year continues to grind higher, Bernanke will have a serious conundrum. I do not agree that this is a foregone conclusion. (And 4% is frankly not a problem. Yet.)
That does it! First the Supreme Court knocks down the D.C gun ban, and a year later someone gets shot in the city.
It looks like the market has completed the first shoulder and head and is now started work on the second shoulder. The S&P should fall to around 880, trade there for a few days and then drop off to complete the shoulder.
I'm watching SPX ~925 for confirmation that the cascade is about to begin. We got close on Monday and then turned around in a big hurry, apparently when Timmy got back on the buy button an hour before close.
"There could easily be a flight to safety back into Treasurys if the stock market and commodities drop sharply again"
I am doubting the US Treasurys are the place to be for "safety." To me, based on yields, that would be Japan.
30 Year Fixed 5.56%
"Using their tool, with the Ten Year yield at 3.99%, this suggests that 30 year mortgage rates will rise to 5.8%"
Anyone have a graph/chart as to how much median house you can buy on a median income, as rates rise?
Which is say I'm not sure why more are not paying attention to the ramifications of our largest state economy really imploding.
They can't print money. Politically they can't screw over the bond-holders. Politically and practically I doubt they can balance any budget.
July will be their independance month.
--bh
YW, it was in a museum/park, the Holocaust Museum to be exact, perhaps guns in parks aren't such a good idea after all?
30 year bounced around in the 7 - 8% range in the late 90s and it was never a problem then.
Municipalities had to pay higher rates then and it wasn't a problem.
credit-
I believe at 11am PST.....a few minutes from now.
Ciao
MS
"In looking at gasoline demand an indicator of economic strength, then the worst of the recession may well be over, said Nicholas Colas, chief market strategist at BNY ConvergEx Group. But escalating energy prices could also curtail consumer spending at a time of still-low housing prices and high unemployment, Colas said."
HOW CAN PEOPLE BE ALLOWED TO MAKE THESE KINDS OF STATEMENTS!!!! THE PETROLEUM NUMBERS FOR THE PAST 18 MONTHS:
08 Jan 2.83%
08 Feb -5.30%
08 Mar -3.30%
08 Apr -0.96%
08 May -2.79%
08 Jun -2.47%
08 Jul -4.00%
08 Aug -4.57%
08 Sep -7.94%
08 Oct -11.00%
08 Nov -8.17%
08 Dec -6.21%
09 Jan -6.68%
09 Feb -9.21%
09 Mar -10.06%
09 Apr -11.76%
09 May -13.48%
09 Jun -11.10%
Those are all negative signs, not dashes. And June is only the first week, the number will be more like 14% down when the month is complete.
I do not agree that this is a foregone conclusion. (And 4% is frankly not a problem. Yet.)
First, I agree it's not a foregone conclusion. However, the 4% rate, combined with a falling dollar and soaring commodities are a problem in my view. A lot of marginal homeowers will not be able to refinance. Many others will have to accept lower sales prices as a result of higher interest rates.
"there's is no such thing as a free lunch"
what do you mean? I got free cookies at the Red Cross. Then suddenly I woke up pale and whoozy!
I'll take whats behind door #3 for $100T
unfortunately, I agree.
Still don't see how that exit strategy will work though.
Which is say I'm not sure why more are not paying attention to the ramifications of our largest state economy really imploding.
Their debt gets FDIC insured, or insured by some kind of federally-funded monoline. In keeping with the 'Where's my frackin' pony?' principle and so there's no capital flight from other states, so does everyone else's.
Dollar is about to stop falling. Once that carry trade reverses; dollar will rise and commodities will fall.
Weeelll... we got awfully close to 4% today.
So, question is do I play the fool and hang on to my shorts... i just need a two or three days in a row about like today. OR, do I trade the hockey stick and bail out of everything that's in the money by around 3pm? Questions, questions... the ones we must ask in a manipulated "market".
I go to the museum a lot. They have, outside of Germany, one of the best research libraries in the world. They also have excellent security. Outside of the WHite House - probably the best in DC.
It's not so much the 4% rate, it's the fact that we are still in the "speculative" area of the Minsky model-- where it's all about cashflows barely meeting debt service. 200 bp in the 30yr mortgage rate means a 15%-20% hit to "affordability" on a cashflow basis. That is a problem.
I don't know about that. GM & Chrysler prove that outside of banks, nobody is TBTF. Besides, the government used to regulate airlines, not to mention utilities.
And AIG too... (insurance, although for the benefit of the banks)
the solution is clear. Have the airlines become a bank holding company, and then they're immediately TBTF as well.
So does the 10-yr yield close above 4% today?
The tendency has been for Treasuries to fall into the close, so absent a strong rally over the next 90 min or so, I think there's a good chance of it.
nova, I had heard their security is excellent. Apparently one guard was shot, the shooter was shot and a bystander was injured by broken glass. Details are sketchy right now...
shill,
Are those year on year numbers; and did you get them from the EIA?
Can I haz a Biege book Green Shoot?
nova (homepage, profile) wrote on Wed, 6/10/2009 - 1:58 pm replyIgnore userI go to the museum a lot. They have, outside of Germany, one of the best research libraries in the world. They also have excellent security. Outside of the WHite House - probably the best in DC.
Nova,
On that note: where's michael?
--bh
Blackhalo - Dinkytown generally has the best financial calculators for these sorts of exercises; here's one that would answer your question- Maximum Mortgage - Financial Calculators from Dinkytown.net
Gives you just what you're looking for - representation of how much you can afford on a given income for a range of FRM rates. Pretty impressive linear deterioration it's got going on!
To your point, the EIA stats on retail gasoline deliveries by refineries:
Natural Gas and Petroleum Navigator Error Page
Rajesh,
Very interesting. How much skin in the game do you have on that outcome?
--bh
Beige Shoots
Anyone loaning for 30 years at 7.5% with 20% down in Sonoma county ca is going to get their head handed to them within a year to 18 months.Fortress Sebastopol dropped 30% YoY in may,and there are few stronger areas in the county.I MIGHT be willing to loan someone $ at 12% for 2 years with a 30% down in the best parts of the county but I would be a bit uneasy about it.Price to income does not make sense with a stable economy here or in much of the SF Bay Area.
10-year auction is done, so I bet the yield does not climb much higher today.
30-year is another matter...
"So let me make the bullish case."
Unusually high deficit spending for TARP, bailouts and stimulus, would seem to imply record levels of Treasury issuance or printing/QE, Neither of which, should be bullish for bonds, independent of international action on a supply/demand basis.
juvi in meatspace today?
Geez, this country has officially gone insane. The shooter is a white male in his late 80's. What prompts 80 something year olds to go on shooting sprees?
Five of 12 regional Fed banks say downturn is moderating
I really hope it was not him. The resulting publicity is not what CR needs...
Does anyone know what the funding rate estimates were in the budget? Just wondering how much higher our deficit will go if we are funding at 4% versus, say, 3% (or whatever the estimate was).
I think we have no choice now but to monetize the debt, which should really help my oil position.
Either that or we cut spending and stop bailing out companies and individuals... LOL!!! Like that is going to happen.
Senate Renews Push to Expand Homebuyer Tax Credit to $15,000
Senators Want Homebuyer Tax Credit to Rise to $15,000 (Update2) - Bloomberg.com
Werner?
Moin from Germany,
lots of Green Shoots.......
WASHINGTON (MarketWatch) -- Five of the Federal Reserve's 12 district banks reported that the downward trend in the economy is showing signs of moderating, according to the central bank's Beige Book report on recent economic activity released Wednesday. Contacts for several Fed districts said their expectations had improved, but none saw growth returning this year. The report showed the choppy nature of the recession, with some sectors doing better while others are suffering. Wages and prices were either flat or falling. Credit remained hard to get and commercial real estate was souring. But there were reports of an up-tick in home sales at the low-end of the market in several districts. Activity in non-financial services, a bellwether sector, declined further
beige book seems to drenched in yellow...
U.S. Treasury reports a May deficit of $189.7 B. Ouchie.
The shooter was an 89 year old White Supremist...go figure....just confirmed....
Mook
Blackhalo - Dinkytown -
Thanks for that link, it has been a long time since I have been to that site, a lot of improvements. My math was never really that good so it is a great resource. PIGGED AGAIN.
Man, I liked this topic, lot's of good information coming out.
What prompts 80 something year olds to go on shooting sprees?
Didn't you get the memo about the Jews getting Matlock cancelled?
ZackAttack (homepage, profile) wrote on Wed, 6/10/2009 - 12:52 pm "30 year bounced around in the 7 - 8% range in the late 90s and it was never a problem then."
Zack--
True, I had a 7% loan on my first house in '99. But back then we hadn't yet had the massive ponzi runup of housing prices. The problem with 7-8% mortgages today is they would completely cut the legs out from under house valuations (even from the 2009 post-peak price levels).
Some here note that 30yr mortgage rates of around 6% are low, historically. However, that's not the point.
To slow the housing collapse and foreclosures (and more to the point, systemic-risk level losses at banks) the rates have to be lower than historic lows. They have to be lower than about 5%, or we risk falling back into the death spiral we were in a short while ago...
"Blackhalo - Dinkytown generally has the best financial calculators for these sorts of exercises; here's one that would answer your question- http://dinkytown.net/java/MortgageMax.html"
Neat. So, just on the recent move from 4.5% to 5.5%, the affordable median house price goes from 143K to 128K. Green shoot?
What's the big fuss about? Surely you didn't expect the government would be able to keep borrowing at 3% over 10 years forever? Even 5% is a steal over 10 years. The bigger question should be why are all these fools still giving the government money in return for a measly barely inflation beating 4% return over 10 years! The high end move upwards is very normal in my opinion and the steepening yield curve is a normal function towards the bottom of a downturn. It's only be exaggerated by exceptionally low short term rates that are bound to increase soon enough.
Geez, this country has officially gone insane. The shooter is a white male in his late 80's. What prompts 80 something year olds to go on shooting sprees?
Faux News?
When elected government officials secretly collude with bankers to create a non-governmental Federal Reserve Bank that controls the currency of the country and systematically generates inflation to allow government to spend at an ever increasing rate.
Taxing citizens to create bureaucratic government agencies and programs that fail to accomplish their mission while continuing to grow in size as politicians use them to reward the contributors to their re-election campaigns.
good articles for slow news days: Econ & Finance Articles Updated Daily
It is characteristic of US government policy for the last couple of decades to get into reckless adventures with no exit plan.
Bernanke's careen into the abyss is no exception.