Sunday, October 2, 2011

notes on the week ended Oct 1st

not entirely unexpectedly, the government will continue to run this week, and likely will do so for at least 6 weeks more after that, as the impasse over disaster relief funds was solved by adding $2.65 billion to the continuing resolution to fund the government until november 18th; the Senate stayed on monday to pass the stopgap measure, which was less than the $6.9B FEMA requested, but didnt include the offset cuts to the Bush clean car program that the house had wanted...since the vote in the senate was bipartisan, the house is expected to follow through; they also passed another short continuing resolution to tide the government till the 4th, so the House could approve that by unanimous consest without having to travel back to DC...

  the postponing of the budget for fiscal year 2012 until Nov 18th seems likely to open a whole new can of worms at that time, since it will fall the week before the thanksgiving deadline for the 12 member supercongress to present their $1.5 trillion in spending cuts that was negotiated in the debt limit deal; moreover, by that time they should have an entire budget for 2012 on the table, not just FEMA emergency funds; whether they do or no remains to be seen; it took 7 continuing resolutions over 6 months to get a budget for this year, and there's no telling what kind of riders that the tea party might want to add in an attempt to control or influence policy...also, we've yet to see movement on obama's jobs bill (it hasnt even been introduced) nor his tax the rich "buffett plan"; another problem we might want to think about is that with the economy tanking, if the jobs bill were passed while tax receipts plunge, it will start to become likely that the debt limit could be reached again before the election next year - so much for the best laid plans...

   in somewhat of a surprise, the administration has asked the supreme court to rule on the constitutionality of the health care reform law, known as the Affordable Care Act; specifically, they are appealing a decision by a 3 judge panel in the 11th circuit court of appeals in atlanta; as far as i know, that is the only ruling that has gone against the act; there have been at least two, maybe more, rulings by other courts that the law was constitutional; although i havent followed it closely, most of the challenges to the law involve the individual mandate, which requires individuals to purchase health insurance, which i always thought was just another sop to the insurance industry (my own not well articulated position during the health care debate was for single payer, to the left of kucinich; i would have abolished the insurance companies entirely & replaced it with something akin to medicare, which is less expensive) ...that individual mandate is also what the atlanta decision related to...

   there was another major health care story as well this week; the kaiser foundation's annual study of health care costs found that family insurance costs rose 9% this year to $15,073; that's double what the cost for a similar insurance policy was a decade ago...the kaiser report also showed that lower cost, high deductible plans had risen to over 16% of health insurance plans; as recently as 2006, they numbered only 4% of plans...& even though most of the articles about the study clearly stated that as per kaiser only 1-2% of the increase could be attributed to the Affordable Care Act (pdf), i've already seen several posts laying all the health care cost increases at the feet of "obamacare"...

New Home Sales and Recessionsthere were a few housing related reports out this week; new home sales for august were down 2.3% from july at a seasonally adjusted annual rate of 295,000; looking at the report from the census bureau (pdf), it seems they dont actually report the actual number of homes sold; even the regional figures are adjusted to that annual rate, which i find odd...even though both the total of completed homes and those under construction is at the lowest level since records were kept, the new home inventory, although down from the peak, is still at an unusually high 6.6 months of supply, and at the rate homes are selling, this is shaping up to be the worst year on record for new home sales (click chart) despite an incrementally higher population... competition from distressed properties on the market knocked the median new home sales price down nearly 9 percent to $209,100...with interest rates still moving in anticipation of the Fed's operation twist, both the 30 year & 15 year fixed mortgage rates were again at all-time record lows, at 4.01% and 3.28% respectively...

this week also marked the release of the popular case-shiller home price index for july (which is an average of prices from may thru july); affected by normal seasonal demand, the prices in the 20 major cities covered rose 0.9% from the june report; that's still down 4.2% from last years prices, and 31.8% down from the bubble peak; on a seasonably adjusted basis, bill mcbride reports the 10 city price index down slightly, & the 20 city index up slightly...case shiller reports prices up in 18 out of the 20 cities, but on a seasonably adjusted basis, prices only rose in eight...(WSJ has an interactive table of prices in the 20 cities, if anyone is interested)...recent reports from other indexes for july were comparable; both corelogic & FHFA reported prices up 0.8%, FNC reported prices up 0.1, & radarlogic reported prices unchanged in july...related to this home price release, i had the unfortunate experience of catching robert shiller being interviewed by a talking airhead from reuters...although he repeatedly told her that prices would likely be flat for years, and possibly fall further, she kept probing for when there would be a "recovery"...some of you have heard this from me before, but homes are not an appreciating asset any more than a car or other durable is, & they are no more like to "recover" to their former high prices than are dutch tulip bulbs going to recover to the prices they sold for in 1637...houses deteriorate over time & eventually are torn down, just as automobiles deteriorate & are eventually junked...originally, the reason houses seemed to appreciate in value was the inflation of the 70s; because money depreciated faster than houses, houses went up in price...if inflation was 100% per year, cars would appear to go up in price every year too; you could then buy a car & drive it three years & sell it for more than you bought it for...as shiller said, the history of house prices in this country (before the bubble) was that they barely kept up with inflation...measures of inflation expectations are now low; the expected rate of inflation over the next 30 years, as measured by the difference between Treasury Inflation Protected Securities, (TIPS) and regular treasury bonds, dropped to 1.85% this week; moreover, as we saw a couple weeks ago, household median income is down 6.4% over the recession, so there is less household money available to go into housing...

it appears that the mortgage fraud settlement with the banks negotiated by the state attorney generals & pushed by the administration is finally toastcalifornia attorney general kamala harris, who had been on the fence, said she will no longer be a party to it; so with new york, delaware, nevada, massachusetts, kentucky, & minnesota now opposed, a national settlement is impossibleharris complained the banks wanted broad immunity from other claims that might arise, & she couldnt go along with that…the SEC has also launched a fraud investigation of several banks, including RBS & credit suisse, on securities tied to mortgage loans, JP Morgan & BofA were sued by german lenders for $4 billion for “knowingly providing false information to credit rating agencies” about RMBS that the germans were sold, & BofA is facing another $50 billion securities fraud suit over their merrill acquisition…i havent been mentioning it, but there have been ongoing decisions by various state courts of appeals as to the legitimacy of mortgage titles only recorded by MERS (electronic records); most states have ruled them invalid, but a California appellate court affirmed MERS right to foreclose, so it wouldnt surprise me to see MERS heading to the supreme court as well..

it's becoming increasingly difficult for me to get a handle on what's happening in europe...the seriousness of the situation seems to have finally gotten thru to the world leaders - they've been described as frightened, angry & visibly scared at their meetings by the financial times - yet every deal that seems to be making headway is denied by those who would approve it...at any rate, some kind of "leveraging up" of the EFSF, their bailout facility, seems to be in the works, but i've yet to see an explanation of that i could wrap my head around...& although an expansion of the bailout has been passed in germany, german polls show 75% opposition, so it may not survive the next election there - even if it should be approved by parliaments in all 17 countries; the latest is that slovakia is holding out...& more pay cuts & pension cuts have been imposed on greece, as well as a punitive property tax which will be assessed as part of their electric bills; if its not paid, the implicit threat is that their power will be cut off...so of course, the strikes in opposition to austerity continue in greece...& again, there are links to more than 80 stories & opinions on the situation in europe are at the end of this week's blogpost...

i want to close with a short personal story...every week, i receive news forwarded from legitgov (http://www.legitgov.org/# breaking_news) at my yahoo mail email address - this week's package included 3 links to stories about the protests in new york known as "occupy wall street" (https://occupywallst.org) ...i had heard that yahoo mail was censoring mention of those protests but it never occurred that it might happen to me; but what i encountered when i tried to forward that package was exactly what the video in this post from thinkprogress shows:  Yahoo Appears To Be Censoring Email Messages About Wall Street Protests ... i was repeatedly confronted with a captcha, which i always completed correctly, yet i was continually blocked from sending that link package with the message "Your message was not sent. Suspicious activity has been detected on your account. To protect your account and our users, your message has not been sent."  i was able to send other test emails from my yahoo account without hindrance, but not the one with "occupy wall street" in it...twitter had also been censoring mention of those protests; here's the post by yves smith where that is described: Welcome to the Police State: NYC Cops Mace Peaceful Protestors Against Wall Street...so once again, i am surprised by my own naivete...i thought this only happened to protesters in iran or china, but i guess i was wrong...our whole system system is geared to protect the banks; the people, the bill of rights, & everything else is secondary...
    these wall street protests - which are going national - do not really fall within the purview of my blog, but i've accumulated links to a few of the stories about them that i've encountered during the week, and they're included in the miscellaneous links section at the end of my emailed links package, where i also deposit links on political & other stories that i encounter during the week that i think someone might be interested in...as i was working on this last evening, i had the live feed from the protests in the background, and as i understand it, their were 700 arrests; protesters said the police had tricked them, herding their march onto brooklyn bridge, and even escorting them partway across, only to trap them in orange police netting after they were all on the bridge...so if anyone's interested, there's gonna be a bunch of naive kids who will be needing bail money this morning...

the above is my weekly commentary 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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