If Bernanke and the Fed cut rates (when they should be raising) to bail out the hedge funds, banks, housing gamblers and homebuilders who made poor decisions these past few years, then all bets are off, especially when it comes to the US dollar, which will immediately and irreversibly melt down.
If the Fed cuts to bail out the bad decisions of homebuilders, housing gamblers and hedge funds, even after Bernanke expressly ruled this out, the moral hazard implications will be off the charts. Kinda like giving in to hostage takers - it only causes more hostage taking in the future.
What will Ben do? Moment of truth HP'ers.
I think he's a puss, run by the bankers and Bush, and cuts 1/4. He'll say he's cutting because of the downturn in the economy due to the housing crash, and softening of the "official" government inflation reading, but we'll all know he'll be cutting to bail out the builders, hedge funds and banks.
But even a cut, and as the economy melts down there'll be cut after cut after cut (see Japan), it won't matter. Housing prices will continue to fall, demand will continue to shrink, the dollar will plummet, and this Ponzi Scheme will come to its rightful and natural end.
It hath been foretold.
Builders Meet With Fed to Discuss Mortgage Crisis - Industry officials are likely to lobby for an interest-rate cut and assistance for struggling homeowners.
Some of the same builders whose companies created the excess inventory that helped push the housing industry into its current downturn are reportedly meeting today behind closed doors with Federal Reserve chairman Ben Bernanke to discuss what can be done to prevent owners from losing their homes to foreclosure.
The actual agenda of the meeting, however, is not completely clear, as NAHB - which arranged this meeting through its High-Production Homebuilders Council - and spokespeople for several large home builders declined to answer questions about it.
September 05, 2007
FLASH: Bernanke having closed-door meeting with homebuilders who f*cked America. So when does he meet Americans f*cked by the homebuilders?
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47 comments:
Correct me if I’m wrong, but how can asset prices drop at the same time the dollar’s value drops? Inflation and deflation are opposite and opposing forces.
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here's the options
raises 1/4 = armageddon but dollar strengthens, Fed shows they're not Greenspan, and avert moral hazard
maintain = risk adjustment continues, healthy cleansing of the system continues
cuts 1/4 = homebuilders, hedge funds, banks and gamblers emboldened, limited risk taking resumes while unavoidable meltdown continues
cuts 1/2 - shows panic, shows they know banking meltdown is serious and historic, panic ensues
Feels like:
raise 1/4: 1%
maintain: 10%
cut 1/4: 74%
cut 1/2: 15%
that's my take
New news! So I'll change my prediction to
raise 1/4: 2%
maintain: 70%
cut 1/4: 28%
cut 1/2: 0%
Fed: Credit Crunch Effects Limited
Wednesday September 5, 2:08 pm ET
By Jeannine Aversa, AP Economics Writer
Fed Sees Credit Crunch Hurting Housing, While Impact on Overall Economy Is Limited
WASHINGTON (AP) -- A painful credit crunch is taking its worst toll on the already ailing housing market, while its impact on the rest of the national economy at least so far seems limited, the Federal Reserve reported Wednesday.
http://biz.yahoo.com/ap/070905/fed_economy.html?.v=6
Anonymous: Let's say that interest rate drops. What that does is make affordable those houses that were out of reach.
Then if the dollar were to drop products would cost more, putting people at the same disadvantage again. Thus they need to drop the interest rates again.
Let's say that interest rate drops and you can just afford your mortgage and you want to sell? Then because there is no housing price inflation you will have no built up equity. And if you happen to have used your house as an ATM you will have negative equity and thus cannot spend, thus slowing down the economy, thus causing jobs to be lost, etc.
The problem of Japan was that they tried to create a "goldilocks" economy and slowly bring down expectations. Did not work and people still are not spending and cannot afford any type of real estate.
What I sooner see in the US happening is that people will not be able to afford anything and thus slow down the economy. They will be servicing a debt, which credit companies all too eagerly wanted people to take.
The only real solution is to give a hard shake to economy and slap people awake. Though slapping people awake takes big kahunas!
Wrong - the Fed funds rate does not dictate mortgage rates
The lenders are gone. The CDOs are gone. Liar's loans are gone. No-down, no-doc are gone. And mortgage rates will continue to rise as more and more default and more risk is priced into new loans.
Look to Japan. 'Nuff said.
his nickname in DC and Walllstreet is Bendover.
How is it that these builders can go lobby the Fed to help them out by cutting rates but regular folks out there like you and me can't get an audience with Bernanke to tell him to tell the lenders and others to go to hell?
Seems like there should be some rules and restrictions against this type of lobbying.
GAME OVER HP
Bailout was the 1st knockdown
Rate cut - and it will be 50 or 75 not 25 - will be knockdown 2
The TKO will come later this month when Hitlery and Osamabama annouce their bailout plan which will essentially be free homes through subsidized mortgage payments courtesy of Uncle Sam
If this moral hazard is allowed to happens, the dollar is toast. Got Gold and Silver? How about the Swiss Franc? Not recommendations, but history of fiat currency.
If you want to know how home prices can drop at the same time the currency's strength drops, look at Japan.
The buying power of the US$ can drop 50%, and homes in many parts of the country would still be unaffordable with a 30yr fixed rate loan. On top of that, you have much higher food and energy costs due to a weaker dollar, which eats into the buying power of consumers. People will food, medicine, and energy before they buy a house. They will rent in the meantime.
free homes through subsidized mortgage payments courtesy of Uncle Sam
That means renters will get free homes so HP'ers win.
And now? A song:
We'll meet again, don't know where, don't know when
But I'm sure we'll meet again some sunny day
Keep smiling through, just the way you used to do
Till the blue skies chase the dark clouds far away
Now, won't you please say "Hello" to the folks that I know
Tell 'em it won't be long
'cause they'd be happy to know that when you saw me go
I was singing this song
We'll meet again, don't know where, don't know when
But I'm sure we'll meet again some sunny day
I work hard, get my house paid off
didnt buy into the take all the credit you can sceme.. I guess I f#@%ed up. no bail out for me. all i can look forward to is even less on money market accts. our economy is really in trouble when everyone is screaming rate cut. from what { less than 6% } Im not the smartest truckdriver in the world. but something dont seem right here..Good day
"That means renters will get free homes so HP'ers win."
Works for me! :-)
Seriously, assigned housing is pretty communist if you ask me. Not likely a concept that will go over well in this country.
Housing will correct on its own. The Fed is not trying to save housing, they are trying to save the economy and ensure integrity of the banking system. They damn well know housing is out of whack and its not their place to dictate any policy that will maintain the level of an artificially inflated asset class. Hillary can rant and rave all she wants. But in the end, any supposed bailout will have minimal affect. All it will do is delay the inevitable for those who receive a government handout. They may be able to maintain payments, but homes will depreciate in value because new loans will have far stricter standards. That will sap demand. In the end, those that got the "bailout" may end off worse than if they had simply walked away from their homes at this stage.
As for us "bitter renters", we'll continue to build savings the traditional way and then enjoy the housing firesale.
By the way, this notion of the US dollar dropping 50% is rubbish. The US dollar is the foundation of our economy. Are you telling me they will sacrifice our currency to bail out a few flippers and moronic hedge funds? Not a chance. Not to mention that the US dollar is the reserve currency of the world. If it drops in value too much, countries will switch to euros.
My guess is a 1/4 point rate drop is likely for september. But that is nothing more than a token gesture. Do you folks honestly believe we will see interest rates at 1% again? Not going to happen. And for housing, as Keith mentioned, it won't matter. Lenders dictate mortgage rates. Not the Fed.
The problem is that we don't have any effective representation in Washington. The system is what it is and until it's changed we need someone to represent us.
Homebuilders, the NAR, the rest of the REIC spend a lot of money to see that congress acts in their interest. We spend nothing. So we can't be surprised that we get nothing. Ron Paul is about our only hope right now.
Anonymous said...
free homes through subsidized mortgage payments courtesy of Uncle Sam
That means renters will get free homes so HP'ers win.
September 05, 2007 8:07 PM
=================================
Silly renter! The bailout applies only to EXISTING owners. Sorry kiddies, you should have listened and bought something.
Enjoy your rentals everyone.
Oh and thanks for the tax dollars in financing my home. On top of the generous tax deduction you give me you'll now prop up my home value thanks to the Bush/Clinton/Dodd bailout.
What a country!
Anonymous said...
How is it that these builders can go lobby the Fed to help them out by cutting rates but regular folks out there like you and me can't get an audience with Bernanke to tell him to tell the lenders and others to go to hell?
It's simple, Big campaign contributions to those in power = access to anybody in government.
I just called the Fed Board of Governors in DC and asked to be connected to Bernanke's office...I got his admin. She was very nice and civil. I spoke to her for a few minutes and gave her my views on how the Fed should not be bailing out the lenders and flippers...that they made their own bed and they have to sleep in it; that it's not the Fed's charter to devise policy to help specific businesses or people; that home debtors won't be on the streets but rather will rent homes now, etc.
Since Bernanke won't meet with us like he is with the lenders and builders, everyone should call his office and lobby against the rate cut...here's the number:
202-452-3000
Be civil if you call!
I really think he does not give a crap about the builders. You guys want to build even more homes? Ah ha ha ha... Their market caps are peanuts compared to large banks and lenders. Its not rocket science to start a construction company. I say the low hanging fruit will be purged. They might intercept a problem with cfc or large banks etc.
Lets see ... KB Homes was around $12 a share in 2000. But they had a 2:1 stock split. So, given the same conditions they should be $6 a share.
Ben is under huge pressure and so far he has resisted doing anything drastic. The liquidity he provided was just loans that are paid back in a matter of days. We should at least wait and see what he does before we get on his case. He may surprise us. Or not.
Our system cannot benefit wallstreet bagholders through asset price depreciation.
In lay terms, falling homeprices cornjulio's wallstreets ever ending ponzi.
Oh, the glory of it all!
You are all forgetting that Ben B works not for your interests but for the interests of banks. Remember the Fed is a private entity created for the purpose of keeping banks liquid.
Whether or not you, Mr Renting HPer likes what they do is irrelevant. It is like the CEO of IBM making a decision. He doesn't care how it affects you, all he cares about is how it affects his shareholders.
"That means renters will get free homes so HP'ers win."
No, free homes for people who bought homes during the boom they could not afford. HP'ers will not get the time of day for free.
"Homebuilders, the NAR, the rest of the REIC spend a lot of money to see that congress acts in their interest. We spend nothing."
But you can change this. If all of the housing bloggers chip in, I am sure you can raise at least $700 by the end of the year to give to Congress. Sure, NAR and NAHB will contribute nearly $10 million, but your money will pay all of the transaction fees for depositing the NAR and NAHB money into the bank accounts.
While $700 won't get you a meeting with the people in Washington, if your lucky, maybe you will get a signed picture from Hillary/Dodd/Obama/Schumer/ or Bernanke. You can hang that lovely picture you get in the living room of your 1 bedroom rental.
It just proves how this American system is soooo RIGGED!
Wow, this country is going down so fast...
Good point of view:
"(Fortune) But even if this crisis is contained, we are facing some near certainties that should be understood.
First, house prices may move on euphoria in the short term, but long term they depend on family income - the ability to pay mortgages and rent. At levels well above the normal four times family income, the market gradually loses first-time buyers until prices break and fall back to affordable levels.
House prices are in genuine bubble territory in the U.S., Britain and many other markets. In Britain and in some critical large cities in the U.S., for example, the multiple of family income has risen to over six times from below four times, and in London last year the percentage of first-time buyers was the lowest since records began.
From these high levels, prices are guaranteed to fall. In doing so, they will reduce consumer borrowing and spending power. They will also increase mortgage defaults, most of which lie ahead, and lower financial profits and confidence.
Second, profit margins are at record levels around the world. They have lifted stock prices directly alongside the rising earnings. They have served to raise P/E multiples as well, for surprisingly, investors on average reward higher margins with higher P/Es. This is fine for an individual stock, but for the entire market, multiplying boom-time profits by high P/Es is horrific double counting and sends markets far too high in good times (and far too low in bad times)."
*If* a tax-payer bail-out is required, it will get *really* nasty for alot of folks.
Politically, I don't see this as a good move ... but who knows with this corrupt and misguided administration.
this meeting should be called "insider trading"
Ben is *only* under pressure from
those who have an interest to loose alot if we are to just let the market take care of the housing crisis - which is the right thing to do.
I don't envy any house debter who is now stuck with a place they cannot sell but wish to get rid of, but most bought knowing full well the risks involved.
If I were to gamble in Las Vegas and loose my money, I shouldn't expect the goverment or anyone else to pay for my mistake.
The same holds true for most of those who took on house payments they really couldn't afford, especially those who speculated with 2nd and 3rd houses.
Housing should have *never* become speculative ... and we now see what a big mistake that was, for our entire economy.
Any politician who *values the good of the common people across this nation*, would just let this entire housing fiasco play itself out.
In the end, we may actually get back to housing that makes sense, where families can have the time off from work to actually create a home, instead of a place to try and find some rest after a stressful work day.
It will be very interesting too see what decision our govenment makes concerning a proposed bail-out.
The decision will clearly tell people across this country in who's behalf the government is *really* working for.
~~~
brokersleaveyoubroke said...
Ben is under huge pressure and so far he has resisted doing anything drastic. The liquidity he provided was just loans that are paid back in a matter of days. We should at least wait and see what he does before we get on his case. He may surprise us. Or not.
anon 8:58
You, Sir, are delusional. I seriously doubt this is anything other than a ploy to keep you paying your mortgage. Meanwhile, the note on your house has probably ALREADY been paid. Too bad you'll never know it, even after they foreclose on you.
Good luck in debtors prison. You're going to need it.
Anonymous said:
By the way, this notion of the US dollar dropping 50% is rubbish. The US dollar is the foundation of our economy. Are you telling me they will sacrifice our currency to bail out a few flippers and moronic hedge funds? Not a chance. Not to mention that the US dollar is the reserve currency of the world. If it drops in value too much, countries will switch to euros.
Newsflash:
Its already dropped 40% since 2001.
Didn't the pound used to be the reserve currency?
You are right, the dollar is the foundation of our economy.
Think about that. Now that's saying something.
It doesn't matter if he makes the cut. Mortgage rates will still rise on an attempt to capture some of the losses. If you don't have 15% down and pay 8.75 fixed you're just not getting a house next month. Period.
I, and many others like me would rahter say no to 100 flakes a day than put up with their crap. I'll lend to who I want. Many many of us are not destitute. You are thinking of the bartenders and strippers that are leving in droves. About 25% of us have had enough. We'll drive the rate up to what it needs to be.
meeting today behind closed doors with Federal Reserve chairman Ben Bernanke to discuss what can be done to prevent owners from losing their homes to foreclosure.
-----------------------------
Bernanke: Soooo... what can be done to prevent owners from losing their homes to foreclosure?
Bob Toll: (to the tune of Sam Kinison) Hmmmmm...you can tell them they can pay their F@CKIN' MORTGAGE!!! Oh! OHHHH!
Sam Kinison - HBO
0% chance of rate hikes
if this bailout succeeds, david lereah will come out and say - told you so!
Ben will do as he is told by his masters. Otherwise he'll get an offer he can't refuse.
Do nothing.
The Fed will do nothing. Doing anything, either up or down, and Benjamin will go down in history as the guy who started the 2nd Great Depression because that Depression is probably unavoidable.
Best to not do anything and avoid taking the blame.
Oh, I own a house and if a bail-out seems imminent I'm going to take out a home equity loan for the full value of my equity (house has tripled in value and I've never borrowed on it), bury the money, tell the "homeowner welfare office" I lost it in Vegas and get them to moratorium my mortgage payment.
Woo Hoo! Another way to screw the frugal.
Here's one. When you get old and Social Security is broke, but you saved and have a retirement nest egg, the government will say, "Those who have enough will have to sacrifice Social Security" and those that didn't save, who spent everything will get benefits you paid for.
Think about that one you suckers.
you have much higher food and energy costs due to a weaker dollar, which eats into the buying power of consumers. People will food, medicine, and energy before they buy a house. They will rent in the meantime.
September 05, 2007 8:06 PM
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What you are missing is that wages are stagnent. No body wil actually afford the higher good and services and the price of a house!
the CEO of IBM making a decision. He doesn't care how it affects you, all he cares about is how it affects his shareholders.
September 05, 2007 11:02 PM
...and that is not always the case!
Here's what Bush is up to: http://articles.moneycentral.msn.com/Investing/SuperModels/BushMortgageBailoutJustMightWork.aspx
Buying another election with taxpayer dollars. Stand up and say hell no.
ask the public owned builders why they bought thousand dollar lots for millions of dollars with shareholder moneys if they were not getting a peice of the brokerage commisions and trandsaction costs and how the hell they convinced anyone to buy the houses they built there?.
Newsflash:
Its already dropped 40% since 2001.
Didn't the pound used to be the reserve currency?
===================================
Reard, how about taking some math classes at the local jr. high?
Jan 2001 dollar was at 0.93 Today it's 0.75
That is not 40%.
No wonder you fools think prices will crash 80%, you can't even do basic math and have no idea how to calculate percentages.
I think homedebtors will get a 5% rate cut, and bitter renters will be taxed egregiously to subsidize it.
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(filling in for) DOPES
Anonymous said...
Newsflash:
Its already dropped 40% since 2001.
Didn't the pound used to be the reserve currency?
===================================
Reard, how about taking some math classes at the local jr. high?
Jan 2001 dollar was at 0.93 Today it's 0.75
That is not 40%.
No wonder you fools think prices will crash 80%, you can't even do basic math and have no idea how to calculate percentages.
Reard, I was using that silly little thing called the Dollar Index. What does .93 & .75 mean?
Who are you , a Fed Official trying to hedonically adjust my comment?
from Jim Sinclair
www.jsmineset.com
There is no more "if this happens that will happen" scenario. It has already started to happen and the result will be a bull market for all commodities to a level that even the wildest (rational) bull cannot not even imagine. The dollar is headed below the estimates of the biggest (rational) bear.
I take what is said here very seriously. What I have just said, I have never uttered before.
The over-the-counter shaking mountain of derivatives can't be fixed by trying to hide it. The problems cannot be fixed by any interest rate action. The problem will not even be fixed by a monetary inflation of unprecedented scope. The problem is coming home by 2012 or much SOONER. click here
You are so correct, and it sure doesn't take a financial wiz or economics expert to see we're headed straight to the gutter as a country.
When the infrastructure that *effects us all* within this country is destroyed, we're all in a bad spot - home owners, house debters, renters - it doesn't matter.
Let's just hope, as a whole, we can all weather this economic hurricane.
Anonymous said...
I work hard, get my house paid off
didnt buy into the take all the credit you can sceme.. I guess I f#@%ed up. no bail out for me. all i can look forward to is even less on money market accts. our economy is really in trouble when everyone is screaming rate cut. from what { less than 6% } Im not the smartest truckdriver in the world. but something dont seem right here..Good day
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