Monday, February 14, 2011

notes on the week ended Feb 12th

last week i mentioned the census figures on the number of vacant homes (18.4 million) and this week we got some numbers on those that are occupied but otherwise having mortgage trouble; there are currently 6.9 million homes owned & occupied where the owner has not been paying on the mortgage; 2.2 million of those are in the process of being foreclosed on; moreover, of those in foreclosure, they've been in that process without paying for an average of 507 days...considering that to be an average, it seems almost certain that some homes have even been in limbo since the crisis hit in 2008...what could be going on?  it cant just be the recent robo-signing related moratoriums... it must be that with so many vacant properties already on the market, the banks just dont want to own any more houses; they'd rather have someone living in the house even if they;re not making mortgage payments rather than have it vacant and have it vandalized or have all the copper fixtures and appliances tore out & sold for scrap, which is what's happening in many hard hit locales with rising metal prices...mortgage rates are now at a 10 month high, and marginal home buyers arent shopping anymore...

the other major housing related news was an administration proposal on how to reduce the government's role in Fannie & Freddie, the two government sponsored corporations that are now backing 92% of new mortgages, and have cost us (the taxpayers) over $150 billion so far, with a potential liability to us far greater as more mortgages go sour...the treasury floated a package with three options, and both zandi at moodys and brookings floated ideas of their own which also seem to be given serious consideration...i havent really had a chance to get into the detail, but as the administration plan will be enacted over 7 years i saw to reason to cram on the details, but gauging by market reaction (big rally in bank stock & mortgage insurers), it sounds like it's another sop to the banksters that run the government...

there was a mention in one plan that could put an end to 30 year mortgages, which might be a silver lining...long term debt, be it mortgage or student loans, is just a stealth way to put people into indentured servitude, not much different than the company stores that the appalachian miners ended up owing their souls to...other countries dont have 30 year mortgages; why should people have to go into debt to the banksters for 30 years & be forced to work off the debt?  in what we can now clearly see coming, the people's wages are driven down to below the level needed to service the debt, and the plutocracy succeeds in reducing the people into virtual slaves, which they look to do whenever the prevailing politics change to support such a system of mass debt bondage...the egyptians may be free, but not many americans are...

i imagine a few of you read about or watched the bernanke testimony before the house this week, or you may have otherwise heard that when challenged on inflation by the congresscritters, he testified that the Fed believes inflation is too low; the same story was reiterated by other Fed presidents in speeches later in the week; if you're confused by that & think inflation is already getting out of hand, its because you're spending too much of your income on eating, gasoline and heating...to avoid inflation, you should be spending much more on furniture, appliances, entertainment, electronics and new cars, and borrowing more to do it...

with the temporary resolution of the crisis in egypt, the price of oil in the US backed off its high, but not until after the spread between the price of WTI in the US and Brent in europe hit a record $16...the given reason that oil is so much lower here is excess supplies at the main pipeline terminal in Cushing OK, but ive got a feeling there's something more afoot here...recall, a couple years back the Saudi's stopped pricing oil in WTI and went to brent as a benchmark, saying the the US markets were being manipulated...but ill keep my suspicions about the present situation under my tinfoil hat until i see some evidence to support them...the other "oil" news you may have heard was of the release of wiki-cables alleging that the saudis have been inflating their reported reserves by 40%, that their production might peak in 2012, and they're in no position to pump more oil to hold the price at these levels...it may have been news to MSM, but many oil analysts had already reported on that suspicion years ago, and given that OPEC members have an incentive to over-report reserves to allow them a larger sales quota any such official numbers should be considered suspect...

in other commodities, corn, cotton and some grades of coffee all hit new highs this week, and wheat prices stayed near the same elevated level as the UN food agency warned that severe drought conditions continued in 42% of the wheat growing regions in China, the world's top wheat producer...as china is typically self sufficient in wheat, any shortfall there that brings them into the international markets could spell trouble for countries without their buying power...& even in iraq, which can buy, supply & distribution problems there has caused their flour price to triple...there are still some blaming the commodity price spikes on speculation driven by US monetary policy, but if you recall when i first wrote about QE2, this round of QE is only 1/3 the size of the first round, at which time prices were falling...and at this point, QE2 is just over half done, with only about $320billion of treasuries purchased so far...on the other hand, 4 of the top five producers of export wheat, russia, canada, australia, and the ukraine, have all experienced weather related crop shortfalls...the demand isnt driven by speculators, but by end consumers, as in seeing what has happened in egypt & the other arab countries has led governments across the globe to buy and stockpile more grain than they normally would...even mexico, where the average family spends 22% of their income on food, & corn and wheat are a large part of their diet, is at risk as their oil revenue declines in the face of depleted oilfields...

australia continues to look like hell on earth, as even with the southeast & northeast quadrant still flooded, NewSouthWales, the east central area, is experiencing a record heat wave, and the abnormal humidity has given rise to a plague of super-locusts devouring everything in their path...and it isnt just australia's crops hit by flooding; the UN food agency says parts of Botswana, Lesotho, Mozambique, Namibia, Zambia, Zimbabwe, South Africa and Madagascar are now underwater, right in the middle of the growing season, with the normal rainy season only half over...but in another part of the southern hemispere, the second amazon "drought of the century" has left so much vegetation dead that instead of being a carbon sink, decaying plant matter will likely result in more CO2 being released there than the US emits in a year of fossil fuel burning...

and just when we thought we could ignore europe for a while, the crisis there is back again, as portugal's borrowing costs rose to a record 7.64% for the ten year, and the ECB was forced to step in & buy their debt for the first time in over 2 weeks in an attempt to stabilize the markets, which havent been helped by bundesbank president Axel Weber's sudden withdrawal from apparent succession to head the ECB, leaving the future central banks leadership in limbo...meanwhile, the chairman of anglo irish said the Irish banks are gonna need another $68 billion bailout to clean up their balance sheets; it seems like the banks there have been engaged in the same kind of "mark to fantasy" accounting for their toxic assets, which means that just like in the US, non-performing loans & bundled securities are still being valued as if they property backing them had not declined in value...so far, since their crisis started, irish citizens have moved €110bn of their funds out of the country, an amount equal to 60pc of gross national product...spain seems to be getting the message, ordering their "cajas" to raise teir 1 capital to 10% before the nationalization planned for later this year...and under the eurozone imposed austerity, greek unemployment rose to a record 13.9%...

the above are my weekly comments that accompanied my sunday morning links mailing, which in turn was selected from my weekly blog post on the global glass onion…if you’d be interested in getting my weekly emailing of selected links that accompanies these commentaries, most coming from the aforementioned GGO posts, contact me...

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