Oh, gee, what a surprise - rates are going up. Gee, this might give our corrupt butts a cover at the NAR as to why home prices are crashing. Let's throw the blame over to the Fed and away from us. Ben Bernanke, you're a big bad man. Stop hurting the American consumer with your bad bad rate increases. Shame on you Ben Bernanke. You're ruining it for everyone! - David Lereah
Brilliant. Except HP and others call their bluff. Thanks D. for the link.
God I can't stand the corrupt David Lereah. What a disingenuine person, no matter who pays his salary. Note to the corrupt David Lereah - IT'S NOT THE FED'S RESPONSIBILITY TO CONTINUE THE HOUSING BUBBLE PONZI SCHEME. IT'S THEIR RESPONSIBILITY TO CREATE STABLE ECONOMIC CONDITIONS.
National Association of Realtors to Fed Chief Bernanke: Stop Raising Rates
The National Association of Realtors on Tuesday lowered its forecast for U.S. home sales in 2006 and called on the Federal Reserve to stop raising interest rates because parts of the housing market are "vulnerable."
"Experiencing a slowing from a hot market is a good thing because we need a solid housing sector to provide an underlying base to the economy, and slower appreciation will help to preserve long-term affordability," said David Lereah, the group's chief economist.
"But this is a time for the Fed to pause on rate hikes because we have some interest-sensitive housing markets that have become vulnerable," he said.
June 07, 2006
Housing Panic to Fed Chief Bernanke: Raise Rates to the F*cking Moon
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I think you may be are a bit misguided in your criticism. FED controls only short-term rates. Mortgage rates (lng-term rates) are set elsewhere by market forces.
Can anybody confirm?
Right, fed sets "fed funds rate", the overnight rate on money between banks. It increases/decreases the money supply to keep this in line.
Anyway, doubt there are more raises. IR here are higher than the rest of the world and there is a big slowdown (led by housing) in progress.
The thought of raising rates sent the dollar up and gold down today.
But I doubt BB raises them. Inflation in goods is a lagging indicator of the previous money being too loose before. No sense in raising them in the teeth of a recession.
And it's "disingenuous", not disingenuine. I believe.
But Keith........if interest rates rise, doesn't that mean that your precious gold will fall?
What do you suggest we do? Buy more GOLD? Sell all our GOLD?
Your listeners are eagerly waiting your response......
Disclaiimer: I bought GLD on a dip a couple weeks back the same time Keith re-bought into it.......feeling kinda pinched with the recent drop in GLD.
Gold will make temporary setbacks each time rates are raised because rate raises strengthen the dollar. The dollar is still going down, which means gold goes up. $850 and ounce in 2007.
But a big geopolitical event can really shake things up and send gold soaring. Just wait and see.
Question to gold bugs: Where do you store your gold?
In your freezer ? Buried somewhere?
I'm just trying to figure out the risks in that (floods, hurricanes, burglar/drunken uncle/jealous ex-spouse stealing it etc). Also, if you are known gold bug storing gold at home and your predictios are correct (gold soars to unprecedent levels) I think you ought to buy a Smith&Wesson as well. Law & order may collapse easily (remember Katrina in NO?).
How are you selling gold in that kind of environment (if dollar has collapsed)? I'm thinking about Mad Max (Mel Gibson escaping from the oil refinary:-)
Personally I haven't invested in gold since I'm lazy and it has increased already so much. Also, it has many risks as well, just like any other investment tools.
we need a solid housing sector to provide an underlying base to the economy
So now housing is "an underlying base" to the economy?
This guy is on fuckin' drugs.
I second that notion... raise the rates to 9% or more... until inflation is reversed with 18mos of deflation...then take them down to 7% and leave it there, unless you put 20% down, then you should get 6%
I'm all for more affordable housing but be careful what you wish for here. Jacking rates to the moon will kill housing prices and kill the economy. Remember the great depression? (Of course we don't, but there are books about it.) Houses were nice and cheap back then too. David L. is a professional cheerleader but he is correct that our economy is built on housing (currently). We had a major recession coming after the nasdaq meltdown and greenspan created excess liquidity by dropping rates to nothing. The housing bubble rose up in the wake of nasdaq. All those rising house prices created tons of jobs (builders, mortgage brokers, agents) and the house became a piggy bank with a cashout re-fi. You yank all that liquidity, sink housing prices, get rid of all those jobs and you're in a full blown US or maybe global recession. A steady decline in house prices over the next ten years is about the best the US can hope for. An all out crash ain't going to be pretty for homeowners or renters.
Remember the great depression?
Uh no, but I can look up what the interest rates were.
In 1929, fed funds was 6%.
In 1930, it dropped to 1.5%.
Lot of good that did. There were many efforts to flood the economy with money to get things going. Nothing worked.
Anon 3:19:
I think a lot of people here are fully aware of what could happen if/when the rug is pulled out from under the housing market.
We're not scared. We want a SOLID economy back. One with sound fundamentals and potential for growth and competition with other emerging economies that ARE based on sthg. other than an over-inflated housing market.
Is that too much to hope for? IMO, a quick, albeit painful end to this nonsense so we can get back to building a strong economy that is not indebted-consumer based.
The answer is simple.
Ben should say:
"I will raise rates to ensure no excessive inflation and lower rates to counteract demonstrable economic weakness.
To preclude future excessive speculation without economic foundation the Federal Reserve will regulate the mortgage market more strictly to ensure traditional underwriting standards. We want people to afford their homes because of authentically growing real incomes, not dangerous loans or speculative excitement."
Yep, the Friedman myth that the FED's "tight" monetary policy created the Great Depression is crap.
The depression was created by MANY factors, that the FED didn't get a handle on like it was created for(price stability) because of political reasons. Then the Gold Standard failed creating the banking holocaust of the early 30's, which killed liquity.
"But I doubt BB raises them."
I disagree. BB basically just took a stand. His credibility has already been a problem; It would be disasterous for him to now talk tough on inflation, as he just did before congress, and then not "walk the walk". The last thing he needs now is to be known as the boy who cried wolf.
Yeah, mortgage rates are tied to the 10 year bonds. But if BB raises the short term rate to 5.25%, and the 10 year bond doesn't go up from its current 5.00 yield to at least match, that's a pretty hefty yield inversion. I think it's quite certain that if BB raises, mortgage rates are going up.
winjr
"But Keith........if interest rates rise, doesn't that mean that your precious gold will fall?"
Anon,
Keith wont answer you on this because when you call him out on his lousy picks all you get is crickets chirping. He is the true novice trader; just another idiot in his boxers pumping gold and calling chicken little. He will get crushed, as will many many people who got long gold recently.
An all out crash ain't going to be pretty for homeowners or renters
If one buys a house with common sense (15 yr FIXED or 30 yr. FIXED mtg) then they have nothing to worry about as their payment should be cheaper than renting in the 1st place. Mine is on a 4800 sq ft. house that I built. I am cheering on this all out crash so we can show who the tards are and who is financially responsible.
They are? What's your source?
Ben
Was the great depression trigerred by the stock market crash of 1929? I think that was a bubble based on thin margin requirements. There are a lot of people in a similar boat now with their houses since they have borrowed on inflated "equity" and as the rates raise their margin calls are coming in. As people get less and less easy money to spend (I should call it "blow" because a lot of crap being bought is just that, crap) the economy slows, hurting even those who are financially sound.
Maybe the only ones who will come through unscathed, or profit, are those who were ready for trouble. Cash, no debt, good skills which translates to earning power. This gloomy scenario may not come to be, but there are clouds forming and I do not think there are many people that are prepared. History may be getting ready to repeat.
BTW, great pic. Scumbag realtor has just gotten two FBs. Poor guy standing next to the skinny woman who probably got Suzanne's help in trapping him into that house. He has been "sold", probably very badly. Not me.
Okay... I'm admittedly very naive when it comes to the forces that drive the economy. That being said, if the pressure to raise interest rates is driven by inflation, then shouldn't we be attacking the underlying cause for inflation, rather than moving interest rates? To me it seems pretty obvious why inflation is so rampant these days: the price of oil. It is reflected in EVERYTHING we purchase. It's no coincidence that when the big oil monopoly finally discovered that us ditto-heads would pay anything to feed our oil-addiction (as evidenced in the wake of Katrina), the cost of fuel doubled overnight and this increased cost has been passed along in the price of all consumer goods. As such, I am inclined to think that all of the interest rate hikes in the world will do nothing to stem inflation unless the US government finally does something to break up the US oil cartel and to ban price gouging. Ha, like that's ever going to happen under this $hitty regime.
It's the oil, Stupid.
The US oil cartel?
What % of oil do they produce? 25%? Most oil is produced by OPEC and other countries.
Output from oil countries is at an all time high. New discoveries haven't been made in 30 years. There's no possibility that oil at prices cheaper than bottled water just isn't in the cards anymore?
AS for raising interest rates to create a "good solid economy". Was the great depression a good solid economy?
The US oil cartel?
What % of oil do they produce? 25%? Most oil is produced by OPEC and other countries.
Output from oil countries is at an all time high. New discoveries haven't been made in 30 years. There's no possibility that oil at prices cheaper than bottled water just isn't in the cards anymore?
AS for raising interest rates to create a "good solid economy". Was the great depression a good solid economy?
"But Keith........if interest rates rise, doesn't that mean that your precious gold will fall?"
"Anon,
Keith wont answer you on this because when you call him out on his lousy picks all you get is crickets chirping. He is the true novice trader; just another idiot in his boxers pumping gold and calling chicken little. He will get crushed, as will many many people who got long gold recently."
Laugh all you want...
Interest rates will rise... temporarily. When the U.S. economy is thrown into a recession, rates will come back down. By/at this point, not least because the Fed will be forced to bring rates back down, foreign central banks will be dumping dollars and buying gold by the ton.
"...shouldn't we be attacking the underlying cause for inflation, rather than moving interest rates? To me it seems pretty obvious why inflation is so rampant these days: the price of oil."
Inflation, as currently measured, is also increasing due to rising rental costs, not only because of the cost of oil. An increase in interest rates will help deflate housing prices and eventually, rental rates as well, as houses become more affordable.
This was from the Wall Street Journal Online in their "Marketbeat" section for Tuesday:
Generalized angst about interest rates is almost certainly contributing to builders' pain. What's also not helping today is a rather startling cri de coeur from the National Association of Realtors, which cut its forecast for new and preowned home sales this year. More interestingly, NAR chief economist David Lereah called for the Fed to stop this instant with interest-rate increases, warning the economy depends on a strong housing market.
But the Fed's rate increases still haven't had much of an effect on the long-term rates most critical to the housing market, independent economist Bob Brusca pointed out. The 10-year note is still yielding just 5%, and 30-year mortgage rates are still historically reasonable. In that light, Mr. Lereah's demand "smacks of desperation," Mr. Brusca says, and might cause enough alarm to make potential first-time home-buyers more likely to stay on the sidelines. "I would see this as a mistake [on Mr. Lereah's part] and not an indicator of bad things to happen," Mr. Brusca said, adding: "Except for home builders."
That poor poor schmuk in the picture. Why is he smiling? he has been badly sold by a realtor and now has become trapped with that consumption additiced wife in his overpriced dungeon. The only thing missing is the kid which is why the wife will get the house and he will get the payments.
Bet he thinks it is a KEEP.
Will Bernanke Tank Housing?
JUNE 8, 2006
NEWS ANALYSIS
By Peter Coy
The housing market has gone from boom to gloom. And another rate hike by the Fed would make matters worse
Ouch. It's getting harder and harder for real estate agents to put a happy face on the market. Sales are slowing, prices are falling, and the backlog of unsold homes is rising fast. And now it's suddenly looking like the Federal Reserve will raise interest rates again.
As recently as June 2, the real estate biz was breathing a sigh of relief that the Fed was finally through with raising rates, after 16 quarter-point increases. But then Federal Reserve Chairman Ben Bernanke gave a hawkish anti-inflation speech on June 5 that strongly signaled another increase in the federal funds rate at the next rate-setting meeting on June 29 (see BW Online, 06/06/06, "The Chill in Bernanke's Words").
Bernanke's gladiator-like aggressiveness on inflation is producing scowls at the National Association of Realtors, which worries that higher mortgage rates will make the housing market even softer. The group put out a public statement on the issue this week, in which David Lereah, the Realtors' chief economist, said: "This is a time for the Fed to pause on rate hikes because we have some interest-sensitive housing markets that have become vulnerable."
BLEAK DATA. Lereah couched his plea for a "pause" in rate hikes with upbeat remarks about how 2006 stands to be the third-best year ever for home sales. He even said that the slowdown "is a good thing because slower appreciation will help to preserve long-term affordability." But it's clear that the Realtors' association isn't happy with the way things are unfolding. It predicts that existing-home sales will drop 6.8% this year, to 6.6 million, while new-home sales will tumble 13.4%, to 1.11 million.
Up until his June 5 speech, Bernanke gave the impression that he was being careful not to tank the housing market, vowing in congressional testimony on Apr. 27 to "monitor housing markets closely." Since then, though, the housing market has done nothing but weaken, points out David Rosenberg, Merrill Lynch's chief North American economist. Housing starts are down over the past three months at a 56% annual rate. "So Mr. Bernanke is 'monitoring,' all right," Rosenberg wrote in a report on June 7. "He's monitoring the collapse of the housing market, and by the sounds of it he wants to reinforce the bear market already under way."
Most economists don't think Bernanke is actually trying to reinforce a bear market in housing, but they do say that the market has turned decidedly bearish. Richard DeKaser, chief economist of National City in Cleveland, calculates that over the six months through April, median sales prices have fallen at a 4.4% annual rate for new homes and at a 5.6% annual rate for existing homes. (To do that calculation, DeKaser had to make his own seasonal adjustment to the numbers. As reported, the data show only year-over-year price changes, which are still positive.)
NO SOFT LANDING. Real estate stocks have been on a steep slide. Shares fell further this week after a downgrade by Wachovia Securities. Since their peaks last summer, Pulte Homes (PHM ), D.R. Horton (DHI ), Lennar (LEN ), KB Homes (KBH ), and Toll Brothers (TOL ), among others, have lost anywhere from one-third to more than a half of their stock market values. In a note to clients, A.G. Edwards & Sons wrote, "If it is not already painfully apparent, the soft-landing thesis for the homebuilding industry is dead."
One more quarter-point increase in the federal funds rate may not seem like it could have much of an effect on housing. But DeKaser points out that the market still hasn't fully adjusted to the rate hikes that have already occurred. In fact, he says, according to an analysis that he plans to release next week, some of the most overvalued markets are continuing to see some big increases in prices. That's setting them up for an even bigger fall to come, he says.
Mortgage bankers also see the market slowing, but they aren't echoing Realtors in asking for a pause in rates. That could be because they, like the Fed, hate inflation -- it erodes the value of the fixed-rate loans they make. "We've never publicly given the Fed instruction on how to conduct monetary policy," Douglas Duncan, chief economist of the Mortgage Bankers Assn., said June 7.
DANGER OF OVERSHOOTING? That said, Duncan noted there is still a danger that the Fed could overshoot and raise rates so high that they hurt the job market, which is the real underpinning of housing. "If employment falls, that could precipitate price declines and all the speculation that's supported the market would be expunged," says DeKaser. "You could see things swing the other way to where there's an irrational fear."
To put it differently, some economists say: What goes up must come down. One housing bear, Ian Shepherdson, chief U.S. economist for High-Frequency Economics in Valhalla, N.Y., wrote June 6: "Ultimately, we expect the level of home sales to head down to, or even below, the long-term trend. When bubbles burst, they usually burst properly. Gentle deflations are rare."
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