A man on the street is pointing up to the sky.
"Look, an angel!" he yells.
Passersby laugh.
"You fool, that is only a cloud.
"How wonderful it would be
to see angels where there are only clouds.
How sad it would be
to see only clouds where there are angels.
Anonymous
Those who do not remember the past are condemned to repeat it. - George Santayana: Obama must have failed history in school
I'm all but speechless at the sheer incompetence and insanity of this; I think it may constitute grounds for impeachment by Obama's intention to replicate the same factors that exacerbated the housing bubble. I'm quoting salient material from a Washpo news item published earlier this week:
- Administration officials say they are working to get banks to lend to a wider range of borrowers by taking advantage of taxpayer-backed programs — including those offered by the Federal Housing Administration — that insure home loans against default.
- Housing officials are urging the Justice Department to provide assurances to banks, which have become increasingly cautious, that they will not face legal or financial recriminations if they make loans to riskier borrowers who meet government standards but later default.
- Officials are also encouraging lenders to use more subjective judgment in determining whether to offer a loan and are seeking to make it easier for people who owe more than their properties are worth to refinance at today’s low interest rates, among other steps.
- Deciding which borrowers get loans might seem like something that should be left up to the private market. But since the financial crisis in 2008, the government has shaped most of the housing market, insuring between 80 percent and 90 percent of all new loans. It has done so primarily through the Federal Housing Administration, which is part of the executive branch, and taxpayer-backed mortgage giants Fannie Mae and Freddie Mac, run by an independent regulator. If borrowers with FHA loans default on their payments, taxpayers are on the line
Let's be clear: the lesson Obama got from nearly half the loans of the loans bought by the GSE's of high-risk homeowners before the GSE's went bankrupt at taxpayer expense is to back lower-risk borrowers in a stagnant economy as private equity companies have bid up prices in an unsustainable way (see below)? And this crap about "subjective factors" is a violation of transparency and the rule of law. This reeks of socializing losses from bad loans and cronyism. No more exploitation of the taxpayer by predatory borrowers! Boehner needs to stop the madness now.
Bernanke Print Money Fever Contagion Spreading the Globe
I feel very badly by what's going on in Japan. If you had invested in YCS, a short-the-yen vehicle, you would be up 21% YTD, almost 7% today. DXJ, a currency-hedged Japanese equity fund, closely follows behind. (I do not hold Japanese investment positions.) This is because the Japanese are doubling the money supply and government bonds over the coming 2 years. This will not end well; this is a desperation tactic by an aging population nation which has tried every Keynesian trick in the book over the past 2 decades, including massive public boondoggles, such as Obama's beloved high speed rail. The "new" Japanese prime minister is hoping to jump-start the economy by making Japanese exports cheaper. The problem is "beggar thy neighbor" by competitive devaluation is a race to the bottom in a global recessionary spiral.
They aren't alone. China, which lectures the US over monetary and fiscal policy, has increased its money supply by nearly $10T. Given a slowing economy Putin is not replacing his central bank chair with an inflation hawk. Whereas England and Europe seem to be holding off in the short term, easy money options are on the table.
What would I do in Japan's place? As a start, embrace a strong currency; adopt free market principles; expand trade; and encourage immigration and pass family-friendly policies. I would not flirt with easy money policy I think the Fed, Japanese and other central banks are painting themselves into a corner because what happens when they take the foot off the gas pedal? I think when you play with fire, you get burned. You may have to resort to tough policy tools to break the back of inflation, which could trigger a tough recession.
A Brief Sequester Note: Did You Notice?
One of the points I made while Obama was like the boy crying wolf one too many times, was the numerous ways companies often cut back during tough times, e.g., defer training, minimize travel, postpone projects and purchases, etc. US Airways and Delta are attributing revenue misses on lower than expected federal employee traffic. Good to hear the government is finally taking some obvious steps to cost savings
One Word: RoboPresident
You Read It Here First
In my March 28 post, I have a commentary entitled "A New Kind of Housing Bubble" I openly fret about "fickle speculators" propping up the market and confounding the appearance of a recovery. Banks are also sitting on inventory. (Why? If and when they sell, they will likely have to book a loss, eroding equity. Like many inexperienced stock investors, they seem to hope the current rally will eventually make them whole.) I would never say other people didn't express similar opinions somewhere else on the Web, but I felt a little like the boy observing the emperor is wearing no clothes. I could understand why others might be skeptical: I've never worked in the mortgage or real estate industries; I'm not an economist; I'm not even a homeowner! (However, I have lived in the Chicago and DC suburbs and Silicon Valley where I think homes start in the mid six-figures...)
Shah Gilani, a Wall Street veteran and former hedge fund trader, has recently penned a relevant piece, Are "Wall Street Buyers" Like Blackstone Group Creating Another Housing Bubble? (If I was going to summarize his message, it's a variation of 'don't fight the Fed', only in this case private equity companies. There's a reason why the Fed has been pushing out the end date to ZIRP and its bond-buying binges. Everybody knows bond prices will plunge once the principal buyer leaves the stage, so they think they'll have divested before the crowd has. Sound familiar? Everybody else was sure they could time the peak of the housing bubble, the Nasdaq bubble, etc. How many of these geniuses actually pulled it off? Invest at your own risk.)
I just want to point out a few insights:
- Is the trend sustainable? No
- Price increases have been across the huge inventory of existing homes, mostly those in foreclosure and in other "distressed" circumstances, not new homes.
- New home prices averaged $246,800 in January. That's up only 3% from a year ago. And sales of new homes in February were down 5% from January.
- That means investors are behind the rapidly rising prices for pre-owned homes, not your average investors. They are big institutional buyers.
- Just because institutional investors are thought to be long-term investors and can theoretically wait out any further bumps in the housing market, it doesn't mean they won't head for the exit doors all at the same time like they did with the mortgage-backed-securities they all speculated in.
- Everything is "tradable" now-even the houses in your neighborhood
Karl Borden has an interesting essay on this subject, where an elderly gentleman at a restaurant, whom had recently had surgery, mentioned he wasn't feeling well, found himself dealing with EMT's, etc., unable to enjoy his now cold dinner in peace, and he himself had to fly on a business trip while passing kidney stones and found himself in a similar situation. (I remember a few years back I had an outpatient surgery early in the morning; I was hungry afterwards because I didn't have breakfast, although I didn't feel all that well. I wasn't in pain: it was discomfort. I can't relate to Borden, but I do recall on my second trip to Brazil (it was one of those overnight flights from Miami) I was stuck in a middle seat in coach and woke up nauseated, my hair completely soaked in sweat, like I just came out of a shower. I made my way to an airplane bathroom and sat on the toilet for maybe 15 minutes with my head between my legs; my sleeping fellow passengers didn't hassle me. I know even though I would have been appreciative of the concern of others, if I had wanted help I would have asked for it; otherwise, MYOB. (Obviously it's different if you find someone whom is unconscious.)
I Call It "Iceberg Accounting"
This is an "oldie but goodie" video from Cato Institute. Progressives talk a good game about transparency, but what you often see is an elaborate shell game, the bureaucratic version of money laundering. Take, for example, the social security program--do costs really include true personnel costs, including supplemental/contract personnel, prefunded retirement liabilities and other benefits, training and travel, overhead (including facilities, computing, banking-related, etc.)?
Why do progressives purposefully understate true government program costs? There's an ideological anti-profit/private sector obsession. There are apples to oranges comparisons all over the place: I've mentioned before, for example, healthcare administration costs compared on a proportional vs. per-user basis. The government doesn't use the same accounting standards as the private sector (consider the accounting for infrastructure, for example).Progressives compare salary versus total compensation. Pension and entitlement contributions are grossly understated by private-sector standards. The net effect is to rig comparisons by using artificially low prices to promote statist "solutions".
Political Humor
Public Policy Polling asked a group of 1,200 registered voters, and 13 percent said they believe Obama is the Antichrist and another 13 percent were not sure. I feel if he were the Antichrist,
[...ObamaCare would actually lower the deficit and policy premiums...]
The White House has now put together a website for kids. It's a website to teach kids how to manage a budget responsibly. The website is called "Irony.gov." - David Letterman
[Here are the tax revenues and expenditures; balance them. PS Don't forget to factor in debt service for all your money we spent before you had the chance to vote.]
Political Cartoon
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| Courtesy of Chuck Asay and Townhall |
U2, "Beautiful Day". One of my favorite 2000's tracks, with its upbeat message and musical arrangement.
