Market crash: are we there yet ?

[wind_magic]

Moody's warns of 'social unrest' as sovereign debt spirals

Protests --- fears over Greek debt (I had to remove the word 'fuels' from the title so Sailnet wouldn't mess up the link)

[kootenay]

They need to do something a 20% rise over last year is simply too much. That or raise interest rates.

Canada's top bankers are pushing the government to clamp down on the mortgage market to cool off the rise in home prices.

The heads of the country's six largest banks have privately told policy makers that they fear the wide-ranging economic fallout of a U.S. style binge-and-collapse in housing. To head off any chance of that happening, they are willing to accept tighter rules on mortgages that would slow the real estate market, even though it would mean forgoing some short-term profits from giving out ever bigger mortgages as home prices jump.

The chief executives of the Big Six made their point last November, when they met with Bank of Canada Governor Mark Carney. The country's top commercial bankers, who between them control more than three-quarters of the country's $940-billion mortgage market, said then that they wanted the government to look at far-reaching options, such as raising the minimum down payment to as much as 10 per cent and shortening the maximum amortization period to 30 years.

Mr. Carney didn't disagree, according to people familiar with the November talks.

"We're talking about being pre-emptive here," said a senior bank executive who spoke on condition of anonymity. "We're not in a bubble yet, or a credit crisis."

Btw when they are talking a bout minimums they are talking about Insured loans to first home buyers. Generally all institutions require a 20% down payment on a mortgage.


Big Six banks urge Ottawa to tighten mortgage rules - The Globe and Mail

[TropicCat]

BLS continues to seriously under report job loss. I just don't get it. After being caught manipulating job loss numbers in 2008 which resulted in a 824,000 person adjustment to unemployment numbers this month, they still haven't corrected their birth/death models.

As of January, over 11.5 million people are collecting some form of unemployment insurance benefit, up 27.8%, from the 9.0 million reported in November. Let's pause for a moment.

Does anyone know the the actual size of our American workforce? 140 million.

As of January.... 8% of our entire workforce was actually receiving an unemployment insurance check. Estimates on what percentage of out of work folks who are actually qualified to receive these benefits vary. Here in Florida only 33% of people who've lost their jobs are eligible for unemployment insurance, as the rest were 1099 employees or self employed. Yet BLS insists that our unemployment rate dropped to 9.7% and that the job market is improving?

I think I want BLS to do my taxes this year... I figure if they do it, my tax bill ought to decrease to below zero.

And to think .... we all pay for this 'data'.

[chris_gee]

This short video is very clear and recommended. Talk about americans being taken as turkeys. Video Marketing and Mortgage News Designed for Mortgage and Real Estate Sales

[TropicCat]

A while back I presented my case why interest rates would go up this year. I predicted it would happen in March.

Two things have occurred this morning which are notable:

1.) Bernanke is announcing an end to zero discount rates
U.S. Stocks Retreat as Bernanke Prepares to Raise Discount Rate - Bloomberg.com

2.) The Chinese said that's enough for them. Inner Workings » Blog Archive » China Dumps US Asset Backeds and Corporates



It is now official Chinese Policy to dump any American bond not guaranteed by the US Government.

So... how do you recover from a recession by raising interest rates?

Our "Recovery" is officially over.

[wind_magic]

Trop, I think it is still early to think interest rates are going to go up, I believe we have a ways to go on that yet. Just one person's opinion of course. I think after this second leg down finishes it'll be time to start worrying about all of that, but for right now the world just can't get enough $us, even though they are printing it like crazy. It'll be its own undoing, yes, but just not yet I don't think. Yes rates came up from the lows from the first leg bottom, but that's no surprise, the $us sold because everyone had ran to it, stocks, bonds, commodities, foreign currencies, everything gained on the $us during the "recovery" (I smile as I write the word). You can see it playing out right now, the markets took another 1000 point hit and they dumped foreign currencies, gold dropped back down near 1k$us/oz, sold stocks, bonds, everything, to buy $us and Treasuries again, and that's what I think they'll keep doing as the second leg down plays itself out.

[fjon]

Originally Posted by TropicCat

A while back I presented my case why interest rates would go up this year. I predicted it would happen in March.

Two things have occurred this morning which are notable:

1.) Bernanke is announcing an end to zero discount rates
U.S. Stocks Retreat as Bernanke Prepares to Raise Discount Rate - Bloomberg.com

2.) The Chinese said that's enough for them. Inner Workings » Blog Archive » China Dumps US Asset Backeds and Corporates



It is now official Chinese Policy to dump any American bond not guaranteed by the US Government.

So... how do you recover from a recession by raising interest rates?

Our "Recovery" is officially over.

Thanks for that AsiaTimes blogpost. I was wondering what was causing big cap bonds to take such a pounding.



The 10 yr Treasury auction of $25B was sour today as well, but I figure that is a bit of contagion spilling over from the Greece fire in Europe as everyone is looking now for more compensation for default risk. Let's see if spreads begin to blow out again ala '08.

I think schlock markets are in the next wave down now, and if that is correct, the dollar should continue strengthening as debt get extinguished, and I had thought treasuries would gain in price in a flight to safety. But wtfk as this point. Markets are about as stable as a teenage bi-polar on acid.

[TropicCat]

I really get upset when politicians reinforce the notion that the American public are basically stupid people.

I'm talking about this news item this morning:

Obama report: 95,000 jobs to come each month - Yahoo! News

This news article appears to be saying ... look folks...great news.. except... We know that America needs 147,000 jobs created each and every month just to tread water, as that's how many young people join the work force each month..

What this article is really saying is they are forecasting the loss of an additional 50,000 jobs a month. Recession over?

This is the best we can do???

[kootenay]

At some point it has to be recognized that the real value of the US dollar has been diluted by an increase in Money supply and an increase in debt levels. Those foreign entities that hold US currency will seriously come to the US shopping for hard assets or converting them. Up here in the GNW I wish we would see a small bump in interest rates in March but I dont think that will happen. The market in select areas is way to hot and needs a cold bath of water. Government is looking at setting up more stringent rules for loan approval to slow the pace of sales and it will help but not enough. We unfortunately will not see rates rise until this fall

As an aside FYI

CPP Fund posts 1.8 per cent return

Boyd Erman
11:55 EST Thursday, Feb 11, 2010



The Canada Pension Plan Fund posted a 1.8-per-cent return in the final three months of 2009, thanks mostly to rising stocks. That boosted the fund's total assets to $123.9-billion.

The CPP Investment Board generated $2.2-billion in investment income in the quarter, the board said in a release, which was largely offset by $2.1-billion in cash outflow to pay benefits. The fund said there's a seasonal factor where it pays out more cash in the last part of the calendar year.

The quarterly performance brings the fund's rate of return for the first nine months of its fiscal year to 14 per cent, which translates to $15.2-billion in investment income.

“By staying the course with our long-term strategy and strategic asset weightings, including public equities, the fund has benefited from the rebound in equity markets around the world,” David Denison, CPPIB's chief executive officer, said in a statement.

[wind_magic]

Originally Posted by wind_magic

So the question is - what would make you sell cash ? What would make you lose confidence in the $us to the point that you would refuse to hold it, because the answer for you individually is the answer for all of us as a whole. Right now, you (and everyone) sitting there in front of your keyboards reading this - you know on some fundamental level that the $us isn't completely as safe as a silver dollar, you may not know consciously why you believe that, but on some basic level you do - everyone knows that silver and gold is mined in limited quantities, that is has never been worthless, and that paper grows on trees. We all play the game with $us, we all hold it, it is very convenient, and right now it is appreciating in value. Everyone wishes they had wads of the stuff to pay their mortgage with, so you're probably happy to be holding it now and you probably wish you'd sold stocks a year or two ago and bought more of it. So what would make you want to sell it ? What would make you lose faith in its value, what would make Camaraderie afraid to hold his savings in $us ?

If you can answer that question for yourself, you can answer it for all of us.

What would convince everyone, at once, to sell $us ?

The answer to the question is the same as what would make everyone sell houses like they are doing right now when they were excited to be buying them not 5 years ago. It's the same as the answer to the question of what would make people sell stocks right now when they were excited to be buying them 3 years ago.

What would make everyone sell $us is that everyone else is selling it - and what makes people start selling it is that at some point its value becomes unsustainable and people stop believing in the fairy tale, just like they've stopped believing in real estate and stocks.

What would cause you and everyone else to stop believing the fairy tale ?

The most recent hyper-inflation has happened in Iceland. Iceland is a small island country of 300k people, yet it had a massive banking system and issued piles of currency, the currency was sought after all over Europe. At some point during this financial crisis people stopped believing, they started to sell Iceland's currency, and by the time it got going the currency had collapsed and even the locals were scrambling to buy canned goods, guns, gasoline, and whatever else they could get their hands on to try to get rid of the currency they had, because virtually over night it became worthless. Why them, why now, what made it happen now ? The currencies fundamentals didn't change, it is the same currency it was two years ago, same people involved, same banks, same investors, so why now ?

What made people stop believing in the Icelandic Krona ?

First Iceland, then Greece, who is next ?

In Greece, the people carry on