Election as Forcing Function - Part I: On Track for a Bond Market Panic - Eric Janszen

[jpetr48]

Re: Election as Forcing Function - Part I: On Track for a Bond Market Panic - Eric Janszen

Though i did not listen to Bernanke interview, i visit FT web site and listened to one of their video interview commentaries. What was mentioned is Bernanke's mention of Michael Woodford book on Interest and Prices by Bernanke. Also mentioned was the shift between concern from price stability to unemployment and how Bernanke is attempting to target GDP growth thru further monetary easing. This all ties to what Eric has been discussing on Fed choice between unemployment and inflation and closing the output gap before the next downturn.

Do i believe all of a sudden Bernanke had an epiphany that the real unemployment rate is higher than 8.1%? No. I do think he understands the impact of permanent unemployment staying above 8% for awhile- way off from their target 5-6%. He also gets that we are one geopolitical event away from a shock to the markets. Could this be the hail mary pass before the end of the game? Time will tell.

[vinoveri]

Re: Election as Forcing Function - Part I: On Track for a Bond Market Panic - Eric Janszen

The problem is not businessmen and speculators and investors taking advantage of stupid goverment/Fed policies that make vast amounts of money available at below-market rates. The problem is that the public wants a government that promises it will fix everything, that will smooth the business cycle, eliminate unemployment, and guarantee never-ending prosperity. And the poor understanding of economics (and human nature) that is taught to the people who grow up to be Fed chairmen and Senate banking committee chairs, etc, etc. It is ridiculous to expect investors not to act in their own self-interest and take the free money that the government is handing out to them. The problem is not the takers. It's the handers-out and the ignorance of the population that put the handers-out in power. Blaming the businessment and grumbling about "how do they sleep at night" completely misses the point.

Agreed (with underlineded portion) however, keep in mind that that Fed is not acting in isolation; it is part of a larger system, e.g., banking cartel, which is part of a larger system including the Fed gov - lobbyist - and very interested business(wo)men.
Your portrayal of the businessman standing around being showered with unsolicited money and putting it to work may be applicable to those further downline the money-chain; however, the policies of the Fed and the gov are heavily influences if not controlled by very interested businessmen who seek and obtain an unfair advantage (broker-dealers in the case of the Fed).

Your point about the system and our collective responsibility for getting the government we deserve is well taken.

As an aside, how we can't see the insanity and blatant injustice of a system wherein, to give a simple and anecodatal example:
Fed anounces QE3 - all risk assets spike including commodities - do equities going up hurt me and every other average joe, no, but when Oil spikes, which means gasoline will follow, and other oil derivatives in time, it is a tax and theft.
Why should everyone have to pay nickel or a dime or more per gallon of gas next month b/c some Fed economist in DC arbitrarily says he going to create more money; short answer is it does not, but does benefit broker-dealers and others who have direct or near-direct access to that "free" money. This is a simple but not hard to understand example of transfer of wealth.

Oh I guess I could buy Goldman, Exxon, and ADM stock and make up the difference ... if I had the money

[bill]

Re: Election as Forcing Function - Part I: On Track for a Bond Market Panic - Eric Janszen

fire boyz... er, 'investors'... $$$ to buy the depressed properties off the poor slobs who lost them in foreclosure, etc... te whole mess caused by the fed's own policies!!!

....and rent back to poor slobs
http://www.businessweek.com/news/201...rcent-of-value

9-10-2012
Fannie Mae’s first auction of foreclosed homes to be managed as rentals sold for $78.1 million, or 96 percent of the properties’ estimated value, the Federal Housing Finance Agency said.
The purchase, of 699 homes in Florida, was the first to be completed in Fannie Mae’s auction of almost 2,500 repossessed properties in six states. The buyer was San Diego, California-based Pacifica Companies LLC, the FHFA said in a statement today. The homes had a total value of $81.5 million, including joint-venture financing from Fannie Mae, according to a transaction summary.
Investors are pouring money into single-family homes, seeking to capitalize on rising demand for rentals and real estate prices that have more than 30 percent from their July 2006 peak. Firms including Blackstone Group LP, Colony Capital LLC and Oaktree Capital Group LLC plan to spend about $8 billion buying foreclosed properties to rent, according to company statements and interviews.
“Seeing it traded at that high value means we’re probably going to see more pool sales coming,” Jim Warren, senior vice president of Tenant Access, a single-family rental management company based in Austin, Texas, said in a telephone interview.“Institutional money can aggregate a lot quicker. It’s easier to evaluate an entire pool than one property at a time.”
Deepak Israni, president of Pacifica, a property investment and management company that operates hotels and multifamily housing, didn’t immediately return a call seeking comment.
Winning Bidders

Fannie Mae, the government-sponsored mortgage company that owned 109,000 foreclosed properties as of June 30, offered the homes for auction in February. The other properties are in Georgia, Illinois, Arizona, California and Nevada.
The FHFA will announce the winning bidders of homes in other areas in the coming weeks after the transactions are completed, according to the statement. The 541 properties in Atlanta weren’t sold, the Washington-based agency said.
Colony, a Santa Monica, California-based investment fund headed by Tom Barrack, and Cogsville Group LLC, a New York-based company led by Don Cogsville, were the top bidders for other Fannie Mae portfolios, four people with knowledge of the transactions said in July.
Pacifica, which will manage the Florida properties, paid $12.3 million for its share in a joint-venture with Fannie Mae, which will get 90 percent of cash flow until it receives $49.3 million, according to the transaction summary. After that, Fannie Mae’s share will drop to 50 percent of cash flow. Pacifica will also receive 20 percent of gross rental income as a management fee. The deal restricts the value of the properties that can be sold to third parties for three years.
“The transaction is designed to promote home price stability, improve quality of housing stock and enhance rental inventory of markets by utilizing a rent-and-hold strategy,”according to the summary.

http://online.wsj.com/article/SB1000...756462974.html

9-13-2012 The central bank likely will be buying half of the $140 billion of the mortgage-backed debt that Fannie Mae, Freddie Mac and Ginnie Mae sell each month, said analysts at Nomura Securities. "There is no supply in this market," said Sreeni Prabhu, chief investment officer at Angel Oak Capital.

[littleshark]

Re: Election as Forcing Function - Part I: On Track for a Bond Market Panic - Eric Janszen

To me Bernanke sounded frightened. So what is the acute crisis? other than unemployment at depression levels about to be openly announced; perhaps before the election as an election ploy?

I think it's Europe. Europe is a disaster. The Level 2 balances and the bad debts and the fact that any eurozone country's debt was considered reserves. The are also clueless over there as to how to fix it. I think the US and China, as bad a things are, feel like we have to help and the only way they know to help is to print.

I actually thought the US economy has been getting a little better, and I must say I'm impressed by the resolve that the CBs globally have shown in working together. I would have thought there would be trade and currency wars going on by now, but that could be coming if things don't get better, it's perkolating.

I think Bernanke and all his cronies in the CBs globally are so scared right now.......

[metalman]

Re: Election as Forcing Function - Part I: On Track for a Bond Market Panic - Eric Janszen

The problem is not businessmen and speculators and investors taking advantage of stupid goverment/Fed policies that make vast amounts of money available at below-market rates. The problem is that the public wants a government that promises it will fix everything, that will smooth the business cycle, eliminate unemployment, and guarantee never-ending prosperity. And the poor understanding of economics (and human nature) that is taught to the people who grow up to be Fed chairmen and Senate banking committee chairs, etc, etc. It is ridiculous to expect investors not to act in their own self-interest and take the free money that the government is handing out to them. The problem is not the takers. It's the handers-out and the ignorance of the population that put the handers-out in power. Blaming the businessment and grumbling about "how do they sleep at night" completely misses the point.

not businessmen... the friggin fed. 1st the fed creates a housing bubble... lets one pack of fire boyz sell homes to poor slobs who can't afford them... convinces them they can afford them... encourages them to lie on mortgage applications, etc, etc... then bubble crashes... & per ej crashing... crashing... crashing... then the fed hands another pack of fire boyz... er, 'investors'... $$$ to buy the depressed properties off the poor slobs who lost them in foreclosure, etc... te whole mess caused by the fed's own policies!!!



'how does he sleep at night... this guy...

[goadam1]

Re: Election as Forcing Function - Part I: On Track for a Bond Market Panic - Eric Janszen

My take on this is slightly different to EJ in that I was most impressed with the tone of voice we heard, (late last night as a short item at the end of BBC TV's Newsnight), when Bernanke's voice sounded as though he was in deep fear.. to me it sounded like a frightened man talking. So my question is; is this new, (sort of), QE instead action taken out of fear of something we cannot easily see?

EJ opens with this statement: "No Fed action before the election unless there is an acute crisis."

I return to something that I placed on The Times, London web site a few weeks ago regarding that Dan Ammerman had posted his contention that the unemployment figures showing 8.3% unemployment were fiction. http://danielamerman.com/resources/SumDepress.html At the time, no one seemed to react; but over the last few days I keep hearing people say something to the effect that the figure for US unemployment is roughly 8% but that "they may be higher".

I also contended here on iTulip that the Fed seemed to be making economic decisions on figures that were wrong and in which case, they were being misled into making wrong policy decisions.

Is it at all possible that at last the Fed has wakened to the prospect of true figures for overall unemployment reaching 20% with near 50% of the 16 - 19 age group?

That the real unemployment figures are the "acute crisis"?

To me Bernanke sounded frightened. So what is the acute crisis? other than unemployment at depression levels about to be openly announced; perhaps before the election as an election ploy?

I agree. There is something we aren't aware of or it's about Romney/ryan.

[Bundi]

Re: Election as Forcing Function - Part I: On Track for a Bond Market Panic - Eric Janszen

EJ, I am reminded here of a quote from Warren Buffett.

"You can only be as smart as your dumbest competitor"

He was talking about how hard it is to compete with a business competitor who is willing to behave irrationally (lose money) but I think the same thing must apply in Fed Kremlinology when trying to predict behavior.

A very smart analyst who is usually right can make the mistake of thinking the analysand is as smart and therefore as predictable as the analyst.....

This looks like reasonably big QE3 to me at first blush. I was about 70/30 biased in favor of some QE3 and positioned accordingly, but this seems bigger than I would have bargained for.

Not to worry, Congress is very smart and oh so chaste what with the Tea Party influence and all.

[Chris Coles]

Re: Election as Forcing Function - Part I: On Track for a Bond Market Panic - Eric Janszen

My take on this is slightly different to EJ in that I was most impressed with the tone of voice we heard, (late last night as a short item at the end of BBC TV's Newsnight), when Bernanke's voice sounded as though he was in deep fear.. to me it sounded like a frightened man talking. So my question is; is this new, (sort of), QE instead action taken out of fear of something we cannot easily see?

EJ opens with this statement: "No Fed action before the election unless there is an acute crisis."

I return to something that I placed on The Times, London web site a few weeks ago regarding that Dan Ammerman had posted his contention that the unemployment figures showing 8.3% unemployment were fiction. http://danielamerman.com/resources/SumDepress.html At the time, no one seemed to react; but over the last few days I keep hearing people say something to the effect that the figure for US unemployment is roughly 8% but that "they may be higher".

I also contended here on iTulip that the Fed seemed to be making economic decisions on figures that were wrong and in which case, they were being misled into making wrong policy decisions.

Is it at all possible that at last the Fed has wakened to the prospect of true figures for overall unemployment reaching 20% with near 50% of the 16 - 19 age group?

That the real unemployment figures are the "acute crisis"?

To me Bernanke sounded frightened. So what is the acute crisis? other than unemployment at depression levels about to be openly announced; perhaps before the election as an election ploy?

[Slimprofits]

Re: Election as Forcing Function - Part I: On Track for a Bond Market Panic - Eric Janszen

Prices Surged for Producers in August

The increase in prices received by farms, factories and refineries overshot economists’ expectations for a 1.1 percent advance. Energy prices, which had their strongest surge in three years, accounted for more than 80 percent of the rise in wholesale inflation.

[Raz]

Re: Election as Forcing Function - Part I: On Track for a Bond Market Panic - Eric Janszen

The problem is not businessmen and speculators and investors taking advantage of stupid goverment/Fed policies that make vast amounts of money available at below-market rates. The problem is that the public wants a government that promises it will fix everything, that will smooth the business cycle, eliminate unemployment, and guarantee never-ending prosperity. And the poor understanding of economics (and human nature) that is taught to the people who grow up to be Fed chairmen and Senate banking committee chairs, etc, etc. It is ridiculous to expect investors not to act in their own self-interest and take the free money that the government is handing out to them. The problem is not the takers. It's the handers-out and the ignorance of the population that put the handers-out in power. Blaming the businessment and grumbling about "how do they sleep at night" completely misses the point.

Yes indeed, Pogo Possum had it right: "We have met the enemy, and they is us".

But I'm not sure Metalman meant the money takers as much as the money printers. Bernanke and his toads on the FOMC are despicable.

[goadam1]

Re: Election as Forcing Function - Part I: On Track for a Bond Market Panic - Eric Janszen

Not to my knowledge. But like any criminal investigation we ponder: means,motive and opportunity. What is the essential philosophical dislike of Romney. There have been an unusual number of public comments on the fed but I assume it is red meat rhetoric. Maybe there is a real distrust for Romney after picking ryan. Maybe Bernake truly fears his work and legacy will be ashes if the federal government belt tightens now.

[gwynedd1]

Re: Election as Forcing Function - Part I: On Track for a Bond Market Panic - Eric Janszen

http://finance.yahoo.com/echarts?s=V...rce=undefined;

Yes I think this will be about played out.
SEC yield 4.83%. I had averaged in at over 7% since the implosion. The sheep kept coming. The up side is increasingly not much.

[thriftyandboringinohio]

Re: Election as Forcing Function - Part I: On Track for a Bond Market Panic - Eric Janszen

Who gets the $40 B each month by selling MBS to the Fed?
Is the market widely dispersed, or can we expect a few huge concentrated sellers to get the benefit?

[metalman]

Re: Election as Forcing Function - Part I: On Track for a Bond Market Panic - Eric Janszen

I'm going to put on my tinfoil hat and get out the spitball gun.

A. Recent events in the middle east have forced Obama to soon take military action. A forewarned fed is front running the "downside" of this action.

B. European bankers have warned of a coming bank failure or an inability to save the eu union as is. The fed is front running.

C. A coup has happened or near happening in china. Those who are about to take power are unfriendly to the dollar position and will dump treasury bills regardless of money mad. The fed is trying to stimulate global demand in an attempt for stability. Also creating money at low rates creates liquidity now in the event of a bond crisis.

D. Bernake hates Romney and told him to kiss his t~bills.

any precedent for agressive fed action such as this 57 days from a potus election?

[wayiwalk]

Re: Election as Forcing Function - Part I: On Track for a Bond Market Panic - Eric Janszen

anecdotal point - this all may be part of an orchestrated effort that has been in play/preparation for a few months or more. Part of the effort by the Fed to get some of the money that is sitting on the sidelines bank into circulation?

My business recently managed to open a line of credit, when we were rejected one year ago, and yet there has been minimal change in our cash position, A/R, and overall outlook (well, maybe in the last few months we've become somewhat more cynical).

The bank rep was clear that the bank was VERY anxious to get some business in, ie, that the bank had $$$$ to loan.

The same broker was also pushing for me to refinance my home mortgage. No surprise - he's a fairly aggressive salesman type....although not all bad.

What was most notable was that he actually asked if I wanted the 15 year fixed.

I don't know - I don't think in any past times I've ever financed or refinanced a home mortgage, the banker ever brought up the 15 yr mortgage in the first breath.....

....but certainly would fit in the "new class" of MBS....