Bernanke poured honey into my ears

I was extremely pleased with today Bernanke speech. Finally, instead of the regular Elmer Greenspan bu11shit I hear the words of the honest and responsible man whose mouth is not full of hair after kissing the Dubya Bush ass.

 

Too poor to rent, or who is exactly screwed here

The theme of toxic loans to buy real estate for ridiculously low monthly payments is often referrred to as “a mousetrap“, i.e. picturing the long struggle of those people to save and repay their home.

I don’t think so. As professional bubble trackers point out, many people do default in the very first month of loan life.

The reason is, in many states the date from the first missed payment to the moment when you are forced out from your house is 6 to 10 months. And sometimes it is prohibited to foreclose during winter times. So, the new trend is that some buyers do not expect to make any mortgage payment at all, because it gives them 10 month of free living in a decent house. And better do that after you pushed your loan to 110% of inflated appraisal value using negative amortization.

You can’t beat free, can you? It’s a mousetrap for the bank, not for the owner. Just watch the credit spread on those toxic loans on secondary market to raise:

As you can see the Wall Street is paying $95 for $100 of a loan value. Watch those banks to crack…

 

Stocks slip because… there are too many idiots

When I read the market “commentary” like this: “Stocks Slip After Yahoo Shakeup” I wonder how those idiots who write for financial newspapers are getting paid? Why they are even allowed to write? Day after day, I see tons of low-quality reports on the frontpages, written by clueless people.

If the Pfizer 12% one-day crash did not move the markets down, how can 1.7% decline of Yahoo shake the markets.

The reason is different. Look at the Nasdaq:

The resistance is 2460, support is 2400. Suppose Nasdaq has 50/50 chance to go up or down. But from the current level of 2446 upside is 14 points and downside is 46 points. So if you gamble the chance is heavily on the house side.

Will you hold it overnight before tomorrow 8:30am initial claims release? I would not. Even if good news come, your gain is only 14 points.

Disclaimer: I’m short Nasdaq

 

First day of recession

Bad, but expected, news are that came today. Welcome to the first day of the next U.S. economy recession. Buh-Bye Goldilocks!

1. The manufacturing ISM index posted the first contraction since April 2003. That’s when FED rate was at 1%, you remember?
2. The construction index posted the biggest decline since September of 2001. You remember September of 2001? That’s where we are today

That was today. Earlier this week we had more of news at that sort

1. Prices of existing homes fell by the biggest amount ever
2. New unemployment applications jumped well above expectations
3. Dollar fell into multi-year lows
4. Wall-Mart announced the decline in sales

Now to trading. There is a good rule:

In bull market you must be either long or neutral. In bear market you must be either short or neutral

This is a very important rule. Looking at the charts:

we see that the Monday drop was corrected, then topped, and started falling again. Both fundamentals and technicals point to the bear market, until either a miracle happens or we reach a deep bottom.

Following the rule, all long positions must be eliminated (what I did earlier this week).

Thank you Mr. Greenspan for this mess!

 

Housing bubble: is the worst behind?

So Greenspan is saying that the worst is behind us. I would say the worst is still ahead. Why?

I think we fundamentally differ in the definition of the worst. If the definition of worst is the speed of nominal price declines (that will be about -10% for this year) then it’s probably over. We may have couple of years of -5% y/y declines, but the days of -10% are over.

But if we define the worst in the sense of spilling off the housing troubles into economy then the worst is in front of us. Let’s check.

1. The consumer perception of price declines is not there yet. Amazingly, as reported by Calculated Risk, 66% of people still think that the value of their home increased in the last year. Those people are in total denial, as I doubt there are any spots on U.S. maps where prices rose this year. Just check the housing tracker.

2. We don’t see any major contraction in construction and construction employment. It’s coming

3. We don’t see consumer spending declines. It’s coming soon. Just watch the price war between Wallmart and Target.

4. We don’t see record delequency and foreclosure rates yet. Look at England or Australia, they have it already. For U.S., it’s coming next year

Thank you Mr. Greenspan for this mess!

 

Congratulations to my fellow bloggers!

Now, after cleaning out our champagne glasses, I want to say to my fellow bloggers – we did it!

Bush came to his office 6 years ago when blogosphere was virtually non-existing. We, the people, lost badly then and our voices were muted. Two years ago, when blogosphere was still in its infancy – and we lost again. Now, when we are finally strong and we can fight – we did it!

Millions of people lined out this past tuesday to kick G.W. Bush into his stupid fat ass. I saw him yesterday on TV and his ass was swelling and it was red like a tomato. Not even a baboon has it so bad.

Me, and a million of my fellow bloggers, we give and accept congratulations for the great job we did for this country and its people.

Congratulations!

 

Housing bubble: trouble zones

4 months ago I’ve published the list of areas that were hit but housing decline the most. Frankly, looking back to June, it was not too bad back then.

Let me revisit the housingtracker and give you the list of the trouble zones that declined by more than 3% since July:

1. Baltimore -4%
2. Boston -3.4%
3. Chicago -3.2%
4. Cleveland -3.5%
5. Detroit -3.4%
6. Long Island (many small cities) -3.7%
7. Miami -3.3%
8. Orlando -4.8%
9. Salt Lake City -5.4%
10. San Jose -4.1%

This list leaves behind some trouble zones that declined back in spring and not so much lately. For example, Washington, D.C. had declined by 6.3% from April.

Thanks Mr. Greenspan for all our joys!

 

Greenspan is talking bullshit

Greenspan is on record to speak garbage suspiciously often. He is probably the biggest bullshitter from all former and current Bushites. But usually it takes a while until his words are proved (un)intentionally misleading. But today it was pretty spectacular:

• 9 a.m. Greenspan saying “Most of the negatives in housing are probably behind us“
• 10 a.m. “New-home prices plunge 9.7% in past year“, the biggest drop in 35 years

 

Take my word on Rumsfeld

Former chief of staff Andrew Card tried but failed to convince Bush to fire Defense Secretary Donald Rumsfeld. Maybe he didn’t find the right words? Let me try:

Mister Bush, please do me a favor, I know you can. Just get out of your presidential chair, take your big foot and give Mister Rumsfeld a big nice kick into his stupid fat ass.

Please?

 

New home sales – don’t fool yourself

All the articles that are trying to sugar the shit of current situation by saying that new home sales unexpectedly increased 4.1% in August are comparing apples to oranges. They are comparing unrevised data for August to revised July numbers.

As shown by calculate risk, the initial July numbers were 1.072 million, revised down later to 1.009 million. Comparing apples to apples August numbers (1.05 million) fell by 2%. Because later on, they will be revised down, too. They always do.
Don’t fool yourself!