Friday, January 1, 2010

It is Still Friday Night!

I trust everyone made it through the New Year Party! One of my friends reports that she both drank too much and danced so much she may have pulled some muscles!; Now that's how you have to roll! I did no dancing but was liking Jennifer Lopez's dance on NBC at about 11:30 or so, very nice!

Of course it is still Friday night, and I even got some requests for some music so a few thoughts and then on to the show! This will be so exciting it will be like New Years Eve two nights in a row!!

New Years Resolutions
A new commenter stopped in and left a few kind words for me. Tom of the North runs a great site that I had never stumbled upon before. I would recommend his post New Year’s Resolutions from the Nation's Capitol for a real laugh. Another brother in arms for the army of sarcasm.

If you like 2010 predictions then Some Assembly Required does all the leg work for you and has this compilation list.

Two Items Worth a Look
There were two eye catchers for me today. The first comes from Zero Hedge who did some digging and asks:
Is The Government Misrepresenting Unemployment By 32%?
Now before you go all "It's another Zero Hedge baloney conspiracy" on me please read the article and check the graphs of Unemployment Benefits (paid out) vs. Total Insured Unemployment and then make up your mind. And yes, baloney is just a big hot dog.

The second tale comes via Mish who has some items related to the Vietnamese Dong (it's their currency so stop!) and gold trading over there:
Vietnam Halts Gold Trading; Global Imbalances Mount
Vietnam suspends gold trading on their gold trading floors due to speculation. The snippet that caught my eye:
The government said it was particularly concerned that some investors had been drawn into overleveraging their positions by low interest rates and the ever-increasing price of gold , which has risen from $660/oz when the first trading floor was started in 2007 to almost $1,100/oz today.

The government said that in some cases, investors had only been required to put up 7 per cent of the value of their portfolio.

The regulation will affect around 20 gold trading floors, but it is unclear if the government is intending to re-write the regulations and allow the floors to re-open or if the move is long-term.
Now remember that one of my main arguments against a gold bubble is that there is limited leverage applied to gold on the long side (plenty on the short side though!) but this piece argues otherwise. Worth keeping an eye on.

2010: The Year the Bond Market Makes Contact?
Yes, that header is a spoof on the other 2010 film title.

One of my friends stopped in to make a New Years post and I would of course recommend Jeff from The Housing Time Bomb anytime:
2010: The Year of the Bond Market
A well written piece and I cannot argue with any of the thinking or logic except that I think the FED/Treasury have another trick up their sleeve as it relates to mortgage rates. First from Jeff:
Yields hit 3.9% at one point today on the 10 year before pulling back as stocks began to fall. This is a monster move that we have seen over the past three weeks. Some would call it parabolic.

Remember, if rates soar to 6% housing is toast. You think the drop in housing prices is bad now? HA! You ain't seen anything yet if the 10 year continues to soar. As we all know, mortgage rates are set based on the ten year bond.
I would also note that Karl Denninger also sees rates going higher as well as some other writers.

This brings up a key "IF...THEN..SO" point. Right now the FED/Treasury/White House/CONgress all see a housing price floor as THE CORNERSTONE of any and all policy. I agree with Jeff that the 10 year is going higher, maybe even much higher, but where I am going to disagree is about mortgage rates.

It goes something like this:
IF mortgage rates are over 6-6.5% THEN the housing recovery is dead SO they will not rise to that level.

Mortgage rates are set by the bond market and the bond market is too big for even the FED to really affect except at the short end. I agree with that and it is also irrelevant.

My big prediction for 2010 will be a new arm of either the Treasury or the FED that will become the US mortgage market. Rates will be set at 5% for 30 years and have requirements much like the FHA loans do now (not much). This arm will be funded and backed 100% by the taxpayers. It will be like FNM/FRE are now only all up front and no more pretend games being played. The banks will be all too happy to allow the government a corner on this market.

Of course it will be termed some kind of "short term" or "temporary" program but really it will be in place until home prices truly bottom and begin to rise. This is going to take about 5 years. After that, the banks will jump back in when money can actually be made.

I know this sound crazy. I know this is wild. I know you want to write "but the FED/Treasury cannot do that!" but who could stop them? Trust me, nothing would make me more happy than mortgage rates at 7-8% and home prices cratering. We would be treated to many tales of new owners that took the home buying tax credit being instantly underwater by 5-10X the tax credit and all of their complaining. It would be delicious!

Which is why it won't happen.

Sound off in the comments. You know you want to.

Friday Night Entertainment
All kinds of goodies for you crazy guys and gals.

Top 10 Star Wars Books
I had to rearrange the bookshelves in the den after Christmas and I had a chance to put all of my Star Wars books back in chronological order on the shelves which is the only way I can be at peace (OCD I know! And Sad too). I will show off the depths of my geekness by my own top 10 list of Star Wars novels based upon my opinion. Of course all things Star Wars are my favorite, but here is the list:

10. The Unifying Force
The end of the Yuuzhan Vong War and features Zonama Sekot, a planet capable of hyperspace travel, how cool is that?
9. Outbound Flight
This book ties so many Star Wars elements and characters together it is a must read.
8. Inferno
Non stop action and an emotional novel.
7. Darklord: The Rise of Darth Vader
Get an inside view on hard it was for Anakin Skywalker to become Darth Vader with an expanded role of Darth Sidious as a mentor.
6. Death Star
Ever wonder about all the regular people on the Death Star? Then this book is the one for you.
5. Star by Star
Courage and terrible sadness mark this top notch novel.
4. The Last Command
Any of the three Thrawn Trilogy novels could hold this spot. These books resurrected the Star Wars Universe.

The Big Three
3. Sacrifice
Mara Jade Skywalker (Luke Skywalker's wife) meets her end in maybe the most vicious, hard fought duel in Star Wars history. I was so pissed she died.
2. Darth Bane: Path of Destruction
This novel goes to the very essence of the Darkside and shows the birth of the "Rule of Two".
1. Revenge of the Sith
The single greatest Star Wars novel ever written and 10 times better than the film. Enough said.

Rock Blogging
A few requests rolled in so let's see what I can do.

I get the feeling that Anon is a big Elvis fan, and who could argue with that? Enjoy "Suspicious Minds" live from 1970:


Gawains had requested Black Sabbath's "The Writ" but for some reason I cannot locate a version of it!? Well, some Sabbath never hurts so roll on with "Snowblind":


Emilio Esteves had wanted to use the Bon Jovi song "Wanted Dead or Alive" in the film "Young Guns II" but when asked Jon Bon Jovi did not feel the song fit the film. He insted penned the song "Blaze of Glory" and offered it for use in the film, and I am glad he did! Here is a really great live performance:

Great lyrics:
You ask about my conscience
And I offer you my soul
You ask if I'll grow to be a wise man
Well I ask if I'll grow old
You ask me if I've known love
And what it's like to sing songs in the rain
Well, I've seen love come
And I've seen it shot down
I've seen it die in vain


I have had this one on plenty of times but I am still amazed how many people have never seen the film "Crossroads" and more importantly the classic guitar duel! Go Danielson, I mean, Ralph Macchio!:

NICE!!

You want more? Ok, maybe two more.

A little more guitar? How about Eddie Van Halen doing the work for Michael Jackson's song "Beat It". Oh you did not know that? Eddie Van Halen did the ending solo (at the 2:45 mark) but did not want credit! It rocks:


Last Call! Grab a drink, a girl, a sandwich, whatever is closest!

Closing the show with one of the true Queens of rock, Pat Benatar! I love "Shadows of the Night" and I hope you like it too:


Have a good night.

22 comments:

Anonymous said...

Thanks for the Elvis fix!

Anonymous said...

一沙一世界,一花一天堂,掌中握無限,剎那即永恆..................................................

TomOfTheNorth said...

Perhaps I was the only one in the Country who hadn't seen it previously but Brad DeLong posted the U2/Jagger/Fergie version of Gimme Shelter yesterday. While not quite there musically (it's not really a U2 'sound'), I loved it for its SPECTACLE. Plus you've got the whole 'family tree' thing going what with grampa Mick and Dad Bono......

http://www.youtube.com/watch?v=poSwmXbLBHU

getyourselfconnected said...

Anon,
my pleasure; Elvis is just a legend.

Tom,
I have not seen that yet but I will check out anything with Fergie!!LOL

Tom said...

Dude,

Fergie is one extremely compelling woman.She absolutely owns the stage while dancing between Bono, TheEdge & Mick Jagger.

Damn she's hot.....LOL

getyourselfconnected said...

Tom,
I could not agree more!!!!!!!!!!!!!!

Jeff said...

Get

Happy New Year first of all!

Great post.

IMO we already have a US mortgage market in the form of FHA.

There are basically zero loans being done now without the governmant backstop.

Setting a 5% rate is impossible if the bond market takes rates to 6%. It's a guaranteed loss for the government that already is 12 trillion in debt.

FHA as it is now has a 20% delinquency rate on its loans.

I personally think the game is over but I have been wrong before!

Anonymous said...

"GYSC said...IF mortgage rates are over 6-6.5% THEN the housing recovery is dead SO they will not rise to that level."

I used to think that way too, but then I found this (click on the link for the spreadsheet)

http://mysite.verizon.net/vzeqrguz/housingbubble/

As you can see, back in the 70s and 80s as interest rates were 10-11-12% per year, home prices went up (and up by a lot) on a nominal basis.

I used to not understand this. Like you I was thinking in terms of monthly payment (i.e. if it rises, prices must fall). History shows thats not the case. Transactions fall, (and sometimes precipitously), but prices do not.

Likely you are looking at this and thinking "but that was before - it wont happen this time round". I used to think that way too, but then I realized that made me the "its different this time" guy who used to tell me there was no bubble.

Dont be that guy.

Tom said...

Anon,

While I am in agreement that "history rhymes", I differ with you with regard to the specific period we're "rhyming' with.

In the late 70s we had commodity inflation (bubble) and then Commercial Real Estate inflation (bubble). In the early 80s those bubles burst in what is now referred to as the S&L crisis. As a result Continental Bank became the first TBTF....ever.

Over 1000 banks were seized by the FDIC during that period. The Resolution Trust Corporation was established to clear the decks of the siezed banks' assets at any price.

So with respect to the stage of the cycle, I would suggest that we're in a post-bubble phase rather than still ramping up as we were in the 70s & early 80s. The size of the current bubbles was significantly larger here in the US than they were in the 70s & 80s. This is compounded by the Global reach of the bubbles (caused by the securitization boom), that was not in evidence in the 70s & 80s. Numerous countries are experiencing similar shocks simultaneously - a phenomena not experienced since the 30s.

A significant difference between now and the Resolution Trust days (whether we agree on the specific parallells of where we presently are in the cycle) is Governments' reluctance (inability?) to nationalize the insolvent institutions. I suggest that this is our 'tell' that the scale of the insolvencies exceeds Governemnts' wherewithal to manage them. Thus the 'buying time' approach is in full evidence.

So where do I think this all ends up? You got me....no clue. At least no certainty. That said,if I draw a parallell to my own activities, I'd say this will end badly. The functional equivalent at a personal level would be to max your credit, lose your job, and take out a bunch more credit. If you used the new credit to create some new opportunity for yourself, it MIGHT work out (i.e. education; buy a business). However if all you did was to spend the new credit to maintain your previous lifestyle, you've done nothing to address the structural problem in your finances. You've merely 'kicked the can down the road'. That IMO is what our Governemnt has/is done/doing.

The 'Stimulus' has not been investment. Rather it's mostly transfer payments designed to paper over the structural problems while we hope the imbalances correct themselves. The TBTF institutions on life support impede the solvent institutions ability to prosper - the opposite of natural selection if you will.....

To revert to the individual's scenario, there will come a point where the individual needs some 'windfall' to keep him going (think Powerball or an inheritance) or he will likely have to default on his debt through bankruptcy......

Even under the best of circumstances, default is painful.....

Tom said...

Zero Hedge has a 'must read' this morning on the GSEs

http://www.zerohedge.com/article/origins-american-kleptocracy#comments

getyourselfconnected said...

Anon,
the two eras you cite have nothing in common as Tom pointed out. It is not so much a case of "its different THIS time" than "its totally different". Rates are the key and the monthly payment is concern number one; especially for all those unemployed that are going to be bying all these houses!

Tom, thanks for the thoughts.

Jeff,
"Setting a 5% rate is impossible if the bond market takes rates to 6%. It's a guaranteed loss for the government that already is 12 trillion in debt."
Was that a question? LOL

GawainsGhost said...

Yes, Elvis is pure legend. I actually got to see him live once, in 1972. And believe me no one could command an audience like he could. American Trilogy is his best song, IMHO.

As far as Black Sabbath goes, I can't tell you how many hard [expletive] times that band got me through.

What this economy is going through now is a debt crisis. People, cities, counties, states, the federal government simply owe too much money. How it's all going to work out is beyond my ken, but I don't think it's going to end well.

Might as well eat, drink and be happy. Wine, women and song, as the old saying goes. Or sex, drugs and rock and roll, in the modern vernacular. It's worked for centuries, why not now?

getyourselfconnected said...

Gawains,
reminds of that film "Weird Science" with Kelly Lebrock:

"Gary is going to a party, you know sex, drugs, rock and roll, chips, dips, chains and whips!"

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getyourselfconnected said...

Anon,
maybe one of the more tech savy readers can help you out; All I can do is turn on the computer and I know little else about the tech side of things.

Can anyone help?

Anonymous said...

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Stagflationary Mark said...

"The government said that in some cases, investors had only been required to put up 7 per cent of the value of their portfolio."

Warren Buffett from 2006...

"I don't think there's a bubble in agricultural commodities like wheat, corn and soybeans. But in metals and oil there's been a terrific [price] move. It's like most trends: At the beginning, it's driven by fundamentals, then speculation takes over. As the old saying goes, what the wise man does in the beginning, fools do in the end. With any asset class that has a big move, first the fundamentals attract speculation, then the speculation becomes dominant.

Once a price history develops, and people hear that their neighbor made a lot of money on something, that impulse takes over, and we're seeing that in commodities and housing...Orgies tend to be wildest toward the end. It's like being Cinderella at the ball. You know that at midnight everything's going to turn back to pumpkins & mice. But you look around and say, 'one more dance,' and so does everyone else. The party does get to be more fun -- and besides, there are no clocks on the wall. And then suddenly the clock strikes 12, and everything turns back to pumpkins and mice."

Oil went to $140+ the last time, and then it was pumpkin and mice time.

Anonymous said...

"Tom and GYSC said...

Its different this time"

Tom said...

No I didn't.

getyourselfconnected said...

Neither did I.

Maroussia said...

It will be great to watch A Little Night Music, i have bought tickets from http://ticketfront.com/event/A_Little_Night_Music-tickets looking forward to it.

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