Did you know that housing price declines are going to stop in June 2008? I bet you were unaware that mortgage defaults will not only stop accelerating, but reverse back to their low end scale exactly in June 2008! Bank losses will stop and and funky level III assets will recover their full "mark to model" values on the first weekend of June 2008! All I can say is, that's a relief. All the upset and turmoil in the market is starting to be depressing, so if we can just wait until Spring of 2008, all will be great.
The above lunacy is a rough encapsulation of the FED, the banks, the home builders, the retailers, and anyone on financial TV. Reading through FED testimony, listening to conference calls, and watching CNBC for a while brings repetition of the Spring 2008 miracle. Not even Miracle Max from "The Princess Bride" could provide that kind of magic. Those rebound forcasters must be living in Never Land. In case they did not get the memo, even Never Land is being foreclosed on:
Is Ron Paul the Only Public Official with a Clue?
The Mess That Greenspan Made, a wonderful blog in the blog roll, has a tremendous post today on the testimony of Ben Bernanke before the Joint Economic Committee today. I absolutely require that you read the post in full: http://themessthatgreenspanmade.blogspot.com/2007/11/dumb-things-said-at-jec-meeting-today.html
While the dummies from both sides of the aisle are basically begging for more rate cuts to help "stimulate the consumer", only Ron Paul sees what rate cuts have done and will do to the US dollar and economy. Excerpt:
Rep. Ron Paul, R-Texas
The best way I could describe the problems that we face here in this country, as well as the problem the Federal Reserve faces, is that we are indeed between a rock and a hard place because we have a serious problem but we don't talk about how we got here. We talk about how we're going to "patch it up". The bubble has been burst - we saw what happened after the Nasdaq bubble burst and we don't ask how it was created and then we had a housing bubble and it's deflating and it's spreading.Yet nobody says, "Where does it come from?" and what is the advice that you generally get? Inflate the currency. They don't say "inflate the currency", they don't say "debase the currency", they don't say "devalue the currency", they don't say "cheat the people who have saved", they say "lower the interest rates". But they never ask you and I never hear you say, "the only way I can lower interest rates is I have to create more money"
....Unless we get down to the bottom of it and define what inflation is and not look at only prices... this was taught by the free market economists all through the 20th century, they said, "Beware, they will increase the money supply but they will make you concentrate on prices and they will give you CPIs and PPIs and they'll fudge those figures and they'll talk about wage and price controls to solve our problems".We ignore the fundamental flaw and that is that not only have we had a subprime market in housing, the whole economic system is subprime in that we have artificially low interest rates. And it wasn't under your tenure in office - it's been going on for ten years or longer and now we're bearing the fruits of that policy. A one percent interest rate and that's not a distortion? Instead of looking at consumer prices, that nobody in this country really believes, we need to talk about the distortion, the malinvestment, the misdirection, the bad information that is gotten from artificially low interest rates.
This is not a political blog, and I am extremely uninterested in any type of political debate, but I will tell you I donated money tonight to Ron Paul's election campaign before I started writing this post after reading his clear and thoughtful analysis of the current mess. Ben Bernanke must have been very uncomfortable being faced with such truth. I have a new poll question up tonight that asks the readers just what Bernanke wanted to say to Paul if only he could! Please vote.
The question right now is at what point will the forecasts for a recovery become untenable? In August the cheerleaders pointed to a post September rebound. Today Toll Brothers homebuliders reported cancellations of purchases accelerated in Octeober. The CDO, SIV, and mortgage paper markets are deteriorating, not improving. Retail sales suggest a weakeng consumer. A definite time point must be set by which if the silly and comical "rebound crowd" is still clearly wrong, the market votes with its feet. The call for a Spring 2008 hairpin turnaround is both impossible and naive. As we move to the end of the year and into late winter, watch for the goalposts to be moved once again. Perhaps October 2008 will be the new miracle month?
Have a Good Night!