Mortgage debt as a percentage of GDP is fictional, imho. That money is not getting paid back.

Nifty doubletop on that top chart there.

The third graph shows household real estate assets and mortgage debt as a percent of GDP.

The third graph extrapolated says mortgage debt as a percent of GDP needs to come down another 25%. That will be a combination of Mortgage defaults, inflation and and economic growth. It is the ratio of those three that will be the $64b question.

from previous thread... not a fan of this practice but thought others here might be interested so kicked it over:

:::::::::::::::

Which is worse - bankers or terrorists wrote:

Why buy mfg capacity when you (Hu) have it at a cheaper basis at home, plus it keeps your constituency employed? If you were going shopping, you'd want the currency you're buying in to the be cheap; right now, Hu is subsidizing his....

Dawg is right.

A couple years ago when Maytag was on the blocks there were rumors Haier [Chinese] was going to acquire Maytag - it would have been a perfect fit and been a spike in the heart of Whirlpool. Haier would have used their Asian sourcing to make transmissions, motors, controls - ship them to assembly plants in US and produce Haier products with Maytag labels. It scared Whirlpool so much they were forced to beat the Haier offer and lock them out for awhile longer.

I've seen what goes into making & engineering a washing machine, drier, etc. - this would have been quite the coup had Haier pulled it off. It would have grown jobs in China even more than here [a mainline for their component producers w/out US Wall Streeters & hedgies taking their cut - it would have gone to Haier mgmt instead].

The stronger the yuan gets the easer these kinds of moves are & the harder it gets for the Whirlpools to block them. It's why the Chinese will eventually let the yuan appreciate.

Exhibit A of why Bernanke propped up the stock market.

dryfly wrote:

A couple years ago when Maytag was on the blocks there were rumors Haier [Chinese] was going to acquire Maytag - it would have been a perfect fit and been a spike in the heart of Whirlpool. Haier would have used their Asian sourcing to make transmissions, motors, controls - ship them to assembly plants in US and produce Haier products with Maytag labels. It scared Whirlpool so much they were forced to beat the Haier offer and lock them out for awhile longer.

Hmm. Proves that you guys are in manufacturing and I am not. Gotcha.

So....when will the yuan appreciate. What triggers need to happen?

"Note: something less than one-third of households have no mortgage debt."

Imagine how outraged they are going to be once Obama starts forgiving mortgage debt.

Is That Fear I Sense? (CDS Regulation) - The Market Ticker

dryfly wrote:

Stapled to the resume he's been dropping off here and there on Wall Street.

LOL-

sm_landlord wrote:

Did Biderman get some too?

Excellent, more bears capitulating, just in time for my end-of-MBS-purchasing shorts. Another 60 S&P points would be nice before the end of the month, I would love to go short at 1200 even.

Which is worse - bankers or terrorists wrote:

So....when will the yuan appreciate. What triggers need to happen?

I think it's already beginning to happen, but it just isn't noticeable yet. By the time it is, it'll probably be too late to make any money on it.

ghostfaceinvestah wrote:

Imagine how outraged they are going to be once Obama starts forgiving mortgage debt.

All ready am!

Imagine how outraged they are going to be once Obama starts forgiving mortgage debt.

Probably not as angry as the foreclosed who are now stuck in some dingy apartment somewhere, when their neighbors who were able to hold out longer now get to live for free.
.

Cinco-X wrote:

I think it's already beginning to happen, but it just isn't noticeable yet. By the time it is, it'll probably be too late to make any money on it.

Being double short the Xinhua 25 has already made me 2.5% today on news that China may be tightening.

Which is worse - bankers or terrorists wrote:

Hmm. Proves that you guys are in manufacturing and I am not. Gotcha.
So....when will the yuan appreciate. What triggers need to happen?

Like dryfly I don't like to pull forward but this is what I said after the pig:

Yes, manufacturing capacity. For the same reason the Japanese did it and a few more. There is a strategic interest in having a US presence. There are some things the US still does better and what cheaper way to gain expertise than to buy at F.I.R.E. sale prices now that we've stopped giving it away and letting them steal it? Third, there are some things the US just won't allow to manufactured offshore. Fourth, it is a competitive move to tie up the assets against potential competition.

As to your question, when the current situation no longer serves its purpose. If energy costs in dollars goes up then China will delink. If their housing bubble bursts and there is a crack down the Yuan might actually go down. After all if you cannot buy anything valuable with your currency... and it is that last that I don't think they appreciate. Either the currency is convertible or it isn't. There is no command economy middle ground.

Which is worse - bankers or terrorists wrote:

Cmon...I can believe there isn't an opinion on that in this blog. I mean....that is the big unknown that could change just about everything.

My personal opinion is it [meaning appreciation] will occur when they finally believe US consumer is really tapped out and they can't 'force growth' via CNY:USD manipulation. Then they go into phase two - buy access via Haier-Maytag like acquisitions - to do that they need a stronger yuan. If this recovery is 'real' then they will see their exports climb again w/out buying access so they won't be forced to appreciate now... if not then phase two will be the only option. Watch the US consumer & export numbers.

BTW - that was what brought Toyota here decades ago more than the 'import quotas' - Plaza strengthened the yen so much it made building & buying assembly plants here a slam dunk no brainer [real cheap wrt yen at the time].

Nothing changes but the names and faces.

splat wrote:

Hmm.. we're just selling the farm to China one sq.ft at a time ( or about 92903 mm^2 seeing as they're metric ).

A hectare here, a hectare there and pretty soon you are talking real territory.

Cinco-X wrote:

Put a $20 on red for me please?

I'm actually betting black. China hasn't really been "red" for some time.

ghostfaceinvestah wrote:
Imagine how outraged they are going to be once Obama starts forgiving mortgage debt.
Not as outraged as when they realize that this is tacit admission that the entire 'Home Ownership' and real estate industry in general for the past decade was a Fing scam.

OT: update on building department in Portland
http://djcoregon.com/news/2010/03/10/development-bureau-asks-for-help/

The BDS’ (Portland Bureau of Development Services) overall revenues declined from $13.5 million in 2008 to $2.9 million in 2009. Paul L. Scarlett, the bureau’s director, says it is critical that City Council seriously consider BDS’ budget request so that it can hire additional staff and run effectively.

The BDS revenues are nearly entirely from permit fees. Thats a nearly 80% drop in one year, however, they've only reduced staff a much smaller fraction than that (maybe a third gone). Oh, and they want to rehire people as they are sure things are going to pick up any day now if the City would just give them the money. Things don't seem to be picking up much around here, but we've been about a year behind on the doom timeline from most places.

Outsider wrote:

Probably not as angry as the foreclosed who are now stuck in some dingy apartment somewhere, when their neighbors who were able to hold out longer now get to live for free.

Good point.

Or how about the really honest folks who were underwater and coughed up money to pay off their mortgage when they sold?

Or the people who have been paying on deficiency notes?

This is a fascinating post CR which provides a lot of meat to chew on. Perhaps below adds to CRs post with some other data (some interesting charts for you chart lovers out there like me including housing affordability for you folks in CA).

A good friend sent this to me. Warning it is a ppt-PDF. I'll be interested what people think and their conclusions as I have formed mine but I'll remain silent.

http://www.fcic.gov/hearings/pdfs/2010-0227-Jaffee-ppt.pdf

The Role of the GSEs and Housing Policy
in the Financial Crisis
Dwight M. Jaffee
Haas School of Business
University of California, Berkeley
Testimony for the Financial Crisis Inquiry Commission,
February 27, 2010, Washington D.C.

Huh funny looks like a to me.

Consumer Metrics Institute: Home of Daily Consumer Leading Indicators

sm_landlord wrote:

Being double short the Xinhua 25 has already made me 2.5% today on news that China may be tightening.

What instrument / ETF is that?

I am getting my bids ready for the post-MBS-purchasing short, I think we could see a 10% correction easy, and of course the foreign markets just follow ours.

Which is worse - bankers or terrorists wrote:

Why not just go offshore then to Vietnam....India....Africa?

There is that too - India isn't as merchantilistic so long term currency risk is there, Viet Nam is too small and Africa is a couple decades behind in development. China knows they have to take the next step - question is how and when [or should that be Hu and Wen]...

Thanks for the link....reading...

Outsider wrote:

Bk one case at a time just seems so inefficient.

That is what makes an "L" recession instead of a depression.

ghostfaceinvestah wrote:

What instrument / ETF is that?

FXP

Outsider wrote:

But the potential for fraud... hmmm. Still thinking this issue thru

We went to this show last night.

Brown Paper Tickets - The first and only fair-trade ticketing company!

"SUBPRIME!: Inside the Heart of the Mortgage Meltdown by Norman Bell.
A fun, fast-paced roller coaster tour through the turbo-charged world of the subprime mortgage industry - a world of fast-talking loan officers, opportunistic condo flippers and hopeful first-time homeowners, all looking for their piece of the American Dream"

It was NOT that funny.
At all.

It was like a 30-minute condensed reading of Casey Serin, HBB and CR.

It's funny...watching the Emmanuelle Chriqui/Tony Danza interview in another window. I'm forever in love with her, and she's talking about how she wants to be an American citizen.

Truth be told, the US still has lots of promise, just not for my industry (real estate/construction). You actually see the US' promise much more when you're not there....it has been that way in even of the 4 non-US countries I've lived in. So reflecting my earlier conversation, any time I make comments like this, I have to keep that in mind.

Oxtail wrote:

It's FXP. I checked it out for a while, but I wasn't impressed with how well it could track Shanghai.

Nice. None of these double inverse track very well over the long term, but I am expecting a sudden move downward.

That is a lot of "juice" that is gonna be removed from the market. Not only will the Fed stop buying, someone is going to have to step in and start buying, so in a way it is a double whammy for all other markets.

Which is worse - bankers or terrorists wrote:

t's funny...watching the Emmanuelle Chriqui/Tony Danza interview in another window. I'm forever in love with her, and she's talking about how she wants to be an American citizen.

Isn't she Canadian?

Actors are dumb. Much better off with a Canadian passport these days IMHO.

If only it were warmer there, I would move in a flash.

CR,

Let me make sure I understand the assumptions for this data series.

1. Houses are valued at market.
2. Mortgages on those homes are valued at par, as if people would pay off all remaining mortgages.
3. Investments by households in mortgage backed securities are valued at market.

See the problems? To the extent that there are nonagency RMBS losses coming due to future foreclosures, it is still counted at par on household debt. If you follow all of those future defaults through to the bank stocks owned by households, and RMBS owned by households, some large portion of those future defaults are already reflected in prices.

Even in normal times, with low detaults and rising home prices, it sounds like the mortgages owed by households stay at par, but any RMBS they own have values being moved around by interest rates (and likely prepayment, etc.).

Currently, a large portion of the loss on home values is hiding in a different place. Part of it is showing up in the RMBS values, and bank values. However, the mortgages owed by individual homeowners are being valued as if they will all be paid off at par. That's probably a holdover from prior times when the great majority of mortgages were paid off at par. Not so for the next few years.

ghostface, I'm not trying to get rid of you, but a quick google found this:

★ Warmest place in Canada?

(I think about Canada sometimes too)

1:06p Indirect bidders buy 23.9% of 30-year bonds

Thanks Ben, drinks are on you.

"Mortgage debt has now declined by $237 billion from the peak, but that seems insignificant compared to the $7 trillion decline in household real estate value."

6M first liens in default, times roughly 200K per, that is $1.2T of mortgage debt that is in default, another 1.5T or so that is underwater but not (yet) in default.

That'll make a debt if/when it is dealt with.

ghostfaceinvestah wrote:

that is $1.2T of mortgage debt that is in default, another 1.5T or so that is underwater but not (yet) in default.

which would drop the mortgage debt/GDP by 20% if you wrote it down to zero. (Yes that would have other consequences, but the perspective is: It puts the "honest" debt closer to the mid-90's level.)

Which is worse - bankers or terrorists wrote:

It is awesome....RD and dryfly....having you on this blog.

Dryfly is the eyes on the ground. He deserves this praise.

some investor guy wrote:

If you redraw the red line on the last graph as "market value of mortgage debt" instead of "mortgage debt at par" it has already dropped substantially, perhaps back to historic averages.

Exactly my point as well. KD is on to it to today.

New Fed Z1: Market Move Is NOT Sustainable - The Market Ticker

His point is the drop is debt is fatal to the economy. I agree, but the delay in recognizing mortgage debt losses is temporarily supporting the economy.

I have made this point before - allowing 6M mortgages to stay delinquent is HUGE stimulus, nearly 9B a month. And the cost of this stimulus isn't nearly 9M, because that 9M isn't all showing up on lender's loss assumptions - it is being assumed away.

This is extend and pretend at its finest (or worst, depending on your viewpoint).

But make no mistake, it is not sustainable. The longer you allow people to stay in their homes without paying, the more people take you up on the offer.

I am starting to see Feb mortgage data, and I can tell you, the growth in default inventory is not slowing down at all. Even as some mortgages are "dealt with" (become REOs or short sales), even more delinquent mortgages are taking their place. It is simply unbelievable, even I thought at this point delinquency inventories would shrink as delinquencies are dealt with, but they are not, inventories continue to grow at a pace that is not slowing.

Florida tomato shortage pushes up prices at fast food chains - Mar. 11, 2010

Tomato pandemonium..... good bye dollar menu hello $2.

It is awesome....RD and dryfly....having you on this blog.

All the tent spots around dryfly & Rob are going to get filled first...

But make no mistake, it is not sustainable. The longer you allow people to stay in their homes without paying, the more people take you up on the offer

+1

ghostfaceinvestah wrote:

Much better off with a Canadian passport these days IMHO

I'm now afraid to piss off all of the Americans I've already pissed off on this board, but if I had a Canadian passport, I could be chilling in Cayo Largo, Cuba at the moment....

Outsider wrote:

All the tent spots around dryfly & Rob are going to get filled first...

I'm angling for a spot next to mp's bunker. Maybe I can get invited in for a Coke once in a while.

Outsider wrote:

All the tent spots around dryfly & Rob are going to get filled first...

Yeah, yeah....next time you all want to buy real estate in places where woman wear burkhas, you'll come crawling back to me....

Don't worry, we'll get to it.

At this point, why doesn't he just leave it to 2012 and the next guy? Or maybe that is the plan.

Geithner: We'll Get to GSE Overhaul

Treasury Secretary Tim Geithner on Wednesday defended the administration's decision not to outline a plan for the future of Fannie Mae and Freddie Mac until 2011, saying it was focused on other issues.

"We are doing a lot of things," Geithner told lawmakers at a hearing. "We've just got a lot going on, and we just thought to do it well and to do it carefully, do it right, we wanted to go through a process of more careful reflection.

From the Greek strike article, linked above:

While their colleagues clashed with groups of protesters, some police joined the demonstration.

About 200 uniformed police, coast guard and fire brigade officers, who cannot go on strike but can hold protests, gathered at a square in the center of the city shortly before the marches got under way.

"The police and other security forces have been particularly hard hit by the new measures because our salaries are very low," said Yiannis Fanariotis, general secretary of one police association. He said the average policeman made about euro1,000-euro1,200 ($1,360-$1,635) a

month if weekend and night shifts were included.

Joining the protest "doesn't feel strange, because we are working people like everybody else and we are all shouting out for our rights," he said.

Love it.
.Gov: "Yo, cops, go bust that demonstration over there!"
Cops: "Can't; we're demonstrating in support of the demonstrators. Fight the man!"

the appropriate measure is accesible home equity-so what if my home is worth more. given the tighter lending standards the by this measure the decline is probably continuing.

Jonathan wrote:

There's an unlimited credit line firehosing cash from Fannie/Freddie into servicers and banks, in return for defaulted loans.

Not entirely. F&F are also pushing back a bunch of bum loans to the originators.
Unfortunately, some of the worst originators have already vaporized.

Rob Dawg wrote:

Constitutional Convention. I suggest we try it with California first and then use the results as a framework for greater reform.

I thought that was dead, Captain.

sm_landlord wrote:

Rob Dawg wrote:
Constitutional Convention. I suggest we try it with California first and then use the results as a framework for greater reform.
I thought that was dead, Captain.

Dammit Jim. I'm a doctor not a politician!

Yes, dead for now but the next round of muni/state reductions will squeeze the wrong people and then we might get some traction.

Well, You do have to buy health care now to get into Cuba. Hoocooodnood, people from US going to Cuba for healthcare.

sm_landlord wrote:

I'm actually betting black. China hasn't really been "red" for some time.

Thanx- forgot about that......though Red is a good luck color for the Chinese-

Rob Dawg wrote:

Yes, dead for now but the next round of muni/state reductions will squeeze the wrong people and then we might get some traction.

That worries me. What if the Cali ConCon ends up being dominated by the prison guards and teachers unions?

Rob Dawg wrote:

Exactly right. Time for a new path. The guiding principle: "Change will not be effected from within." Time for Constitutional Convention. I suggest we try it with California first and then use the results as a framework for greater reform.

Because using California ideas as a template for the country has been good for what?

The Associated Press: Mass school closures approved in Kansas City, Mo.

This is what gets me about these situations - people throwing good money after bad. I realize I may sound like a prick sometimes, but this is only rational - if you are underwater, and un-or-underemployed, just stop paying. Why blow your savings on a house you are going to have to default on anyway. And a short sale won't help your credit much. Just let it go, you can probably stretch out your period of unemployment by living for free.

It is only rational, folks.

"“That silicon valley executive may have lost his job more than a year ago,” said Andrew Jeffery, a principal at Cirios Real Estate in San Francisco, who adds he is seeing a rise in real real-estate owned (REO) jumbo properties. “For along time sellers had a capital cushion, and thought they could sit on the investment. Now they are facing the reality that their reserve funds are greatly diminished.”

This week alone, Cirios listed two such jumbo REO properties, and the momentum appears to be picking up. “We’ve seen a big rise in distressed sales,” said Jeffery, “and we’ve seen a big rise in distressed investors.”

Bailey adds that such developments in the delinquency space will likely continue to keep Jeffery busy. “In the 05, 06, 07 vintages, close to 50% of borrowers are underwater,” Bailey said. “That keeps a negative pressure on borrowers and, therefore, we keep a negative outlook on delinquencies.”"

o/t cap utilization^ = ^energy use

sm_landlord wrote:

That worries me. What if the Cali ConCon ends up being dominated by the prison guards and teachers unions?

I think at worst you'd just end up with what you have now. They already control the state legislature.

Outsider wrote:

ghostface, I'm not trying to get rid of you, but a quick google found this:
★ Warmest place in Canada?
(I think about Canada sometimes too)

I've heard that the Gulf Stream warms Nova Scotia nicely, and I didn't see that mentioned on the blog-

Which is worse - bankers or terrorists wrote:
>

a loaf of broad is worth $2 trillion

I'm not paying $2 trillion for sex, I don't care what the currency looks like.

Re: Financial reform deal fails, hopes for 2010 dim - Yahoo! News

Talks largely broke down because of disagreements over the powers of a new consumer watchdog for financial products, though Senator Bob Corker, who was the leading Republican on the compromise talks, blamed the White House's push for healthcare reform.

Yeah, that makes a lot of sense.

Analysts said the breakdown imperils chances that Congress will pass reform legislation this year. Democrats, who hold only 59 seats in the Senate, will likely need 60 votes to move a bill forward.

Well, of course, you wouldn't expect any Republican to vote "for" anything, would you?

broward wrote:

People aren't rational.

Irrational behavior during a panic is the rational thing to do-

This pathetic zombie market may actually post the lowest volume of the year today. It just keeps getting better......

....Atari vs. Commodore 64 for market supremacy!

Which is worse - bankers or terrorists wrote:

Must have been looking at the Arabic characters on my keyboard again.

Thought he was looking at:

"a loaf of broad is worth $2 trillion, and I pormise "

Something Freudian going on there....

631 Million Credit Cards for 113 Million Households – Credit Card Excess Contracting for First Time in 40 Years. How Plastic Hid Middle Class Financial Decay.

http://www.mybudget360.com/631-million-credit-cards-for-113-million-households-%E2%80%93-credit-card-excess-contracting-for-first-time-in-40-years-how-plastic-hid-middle-class-financial-decay/

ghostfaceinvestah wrote:

Pretty healthy trading in C today. LOL!!

Has there been a stock in history more manipulated that C?

It's kind of funny how many people still want this situation to "work out fair".

It's just not going to happen, no matter what.

The money isn't real, it has no backing, it can't be turned into anything real (for the most part). LL and CK were talking about double sales last week. Well, this whole thing is really just one big double-sale. There's no way it can be resolved in a "fair" fashion.

MBS are the key to this whole thing - and you're right - it's all abstracted out of the main figures. I honestly doubt that total paper mortgage debt has really dropped, even with the amount of recognised defaults, since the BIS figures for securitized loans show an increase of over $1.5 trillion outstanding for the last year - that's dropping into the hole created by the Federal Reserve buying $1 trillion of the existing. Leaving aside the very large amount of completely unsubstantiable paper valuations out there.

But MBS doesn't show on the bank balance sheets, since those loans are sold off into the private sector, which then allows the banks to continue lending. Who to is the interesting question, but i would be personally suspicious of a lot of these supposed 'cash buyers' that have been mass buying in the distressed sales markets.

Presumably it stops when total debt payments on all existing debt exceed the available money supply - i don't see anything else standing in the way at the moment. The available money supply is something of a local variable too, so significant parts of the economy, Florida to start with, are obviously already there.

Outsider wrote:

TEU? I need a hint.

= 20'

MaryAnn,
You have
Gotta go-

It's kind of funny how many people still want this situation to "work out fair".

It's just not going to happen, no matter what.

The money isn't real, it has no backing, it can't be turned into anything real (for the most part). LL and CK were talking about double sales last week. Well, this whole thing is really just one big double-sale. There's no way it can be resolved in a "fair" fashion.

Paper is a PONZI.

Outsider wrote:

TEU? I need a hint.
Edit - ah, found it.

Ain't bulletproof or radiation proof. At least the regular ones aren't.

Seriously, TEUs are twenty foot equivalent units. a standard measure of containerized cargo vessels that started with ocean going cargo vessels but since adopted by rail and road transport.

U.S. Taxpayers on the Hook for $5 Trillion of Fannie, Freddie Debt … No Matter What Barney Frank Says (VIDEO) - Home - The Daily Bail

Lol $5 Trillion, I am sure the average Tax payer has this laying around hahah! We truly live in the land of make Believe.

The longer the current Administration holds court, the sweeter the deal to be had by those homeowners who default. Principal forgiveness will lead to massive numbers of default. But, the Administration will introduce such a program regardless. (Does BHO want to increase defaults?)

shill wrote:

Paper is a PONZI.

Paper is what you pay your taxes in. What you keep as a store of value is a different question.

TAMF,Cinco-X, Got it.

sm_landlord wrote:

There should certainly be plenty of spare TEUs right now.

Large diameter culvert is another option for aspiring Morlocks.

Bill,

What percentage of the reduced mortgage debt has been paid down and what percentage has been forgiven?

Citi Goal Is Up To 1.5% Return On Assets
Huh? That dirtbag Pandit can barely make crime pay!

broward wrote:

Debatable.

Japan's managed to go twenty years now.

To me that's a fascinating point. I doubt the average Japanese is any worse off than 20 years ago.

fudge_hend wrote:

Rob Dawg wrote:
Ain't bulletproof or radiation proof. At least the regular ones aren't.
You just need a track hoe and you bury them. Insta-doomstead.

Shhh. If this keeps up all the good ideas will be disseminated.

Things get as bad as that and I may end up subsistence ice fishing for Dryfly Inc. I can turn the screw and jig the line as well as any. Besides, Catholic is durn neer enuf Lutern fer a little forgiveness.