Tuesday, May 13, 2008

Nationalization of Home Prices Not Far Away

Hello out there. Sorry for the spotty blogging, but I have been very busy at work, in the garden, using the new grill, and getting the fishing gear ready. I need to buy a new spinning rod this season so I get to buy a new St. Croix rod, my absolute favorite fishing pole ever made.

Thanks for the comments. I always thought that loyal reader G's letter G stood for "Gold" but perhaps he can elighten us otherwise?

Gold Getting Hammered
I sold out all of my gold and silver miners a while back, pocketing a nifty 160% profit. I have only been lightly following the gold price, but today was another beating. Over at The Mess That Greenspan Made Tim Iacono has a mid year price of gold and oil contest running. I have gold at $870, and oil at $98. Seems like I am going to be close for Gold, but WAY off for oil.

With the dollar catching a bid as of late, gold was sure to go down a bit. The current "stagflationary" environment may mean that thr gold rush is over, but I would expect most of the price of gold above $800 to remain intact. Should Gold get down to the $800 mark, I may be a buyer, and you know how much of a chicken I am!

FED Balance Sheet; Starting to Resemble The US Consumer's Balance Sheet
Calculated Risk had a graph that was presented by Janet Yellen (San Francisco Fed President) and it was a real good view into where the FED is headed. Just like the US consumer whose savings rate has been zero for some time, soon the FED will have lent out all their moolah in an attempt to bailout wall street. Take a look:

All the pretty colors represent all the assorted lending facilities in use by the desperate FED. Take home point: When the grey color of the graph is gone, the FED is going to have to go out and get some more money from someplace to keep helping the financial system avoid a "systemic collapse" or something. That cash is going to come from you, me, and the children of the future so millionaire bankers can stay millionaires and not have to take smaller limos. Imagine having to downsize your limo? The Horror!

The Next Bailout - SUV Prices in FreefallAll across the nation the same kind of blind fools that purchase huge SUV's are now trying to dump them for better mileage vehicles. The huge influx of SUV inventory has depressed used SUV prices, and thus are affecting new SUV prices as well. Prices offered can be as much as 30% lower that "bluebook" value at a dealership trade in.

So I have a proposal. Seeing the big push to bailout mortgage jokers has now been accepted as the right thing to do, how can we in good conscience leave these strapped SUV loan holders to endure a financial loss? Where is the bailout plan to save the vehicle market form "systemic collapase"? I mean, a car loan bailout must be smaller than a mortgage bailout, so why not?

Nationalization of Home Prices Not Far Away
Final thought for this evening. Even Nouriel Roubini is in favor of major move towards nationalization that the Barney Frank bill gurantees. Makes me want to puke. The reason why no plan has worked so far (Hope Now, CFC reworking, others) is because to make the plan palatable to the taxpayer and the more fiscal conservative of the government, the plans all have qualification criteria. The problem with that is any plan that will omit home flippers, fraud mortgage borrowers, and people that cannot afford the home at any loan structure is GOING TO MISS ALL THE PEOPLE LOSING THEIR HOMES. By definition any plan has to have some sort of rescue plan for the worst offenders of the housing bubble. Nobody seems to get this.

The next step is of course to put some kind of a floor under home prices. Price controls always work well. There was that time..., oh nope there never was. We are moving closer to a point where the FED, FHA, and you and me will basically write a new loan for all the losers out there for about half the original balance, have the new mortgage rate at about 3% fixed, and allow repayment over 50 years. Can't wait to see it.

Have a good night.

1 comment:

Anonymous said...

Nationalization of housing will come no doubt along with something like: If you need a home and cannot afford one one will be appointed for you.