Free Republic

Yesterday, Fed Chairman Ben S. Bernanke indicated he has little appetite for a premature slowing of the central bank’s asset purchase program because of persistent weakness in the U.S. labor market and a general lack of confidence in the self-sustaining nature of the recovery. At the same time, he hinted that personal credit was too tight. Well, with California, Arizona and Nevada house prices racing like a scalded cat, I shudder to think what will happen if the credit floodgates open wide. Mortgage purchase applications remain stable and back at levels last seen in 1997. And according to Zillow, about...

Fed Chair Ben Bernanke testified this morning in the US Senate. Afterwards, US Treasury 10 year yield rose by around 9 basis points. Fannie Mae MBS current coupon rates have been rising. And the Bankrate 30 year spread over the Fannie current coupon rate remains about 100 basis points. The primary/secondary spread remains elevated from before Fannie and Freddie were put into conservatorship. And as Treasury rates trend upward, Fannie MBS durations are also rising. This results in a slower burn off rate for The Fed’s massive portfolio.

Sharing this for those Freepers concerned about the dollar. It's actually strong compared to the euro and yen, but that's only cuz the Central Bankers there have opted to use more fire power against the weak dollar and make their currencies even WEAKER. What does this mean for those of us with real skin in the game, as in money in the markets?

Recently I asked if housing was in a bubble. Today, Zillow released their house price data by metro area to get a closer glimpse of a potential housing bubble … again. According to Zillow, Phoenix AZ, Sacramento CA, San Jose CA, San Francisco CA, Modesto CA, Vallejo CA, Las Vegas NV, Reno NV, Stockton CA and Santa Rosa CA all grew over 20% Year over year in terms of house prices. Even Detroit rose 13.97%. While California housing is on fire, not all US cities are rising. Rockford IL is the biggest loser in terms of house prices. And Chicago...

When you watch “It’s a Wonderful Life” with James Stewart from 1946, you are given the impression that banks (as represented by Henry F. Potter) are stingy and evil. Savings and Loans (S&Ls) (as represented by George Bailey) are kind-hearted and good. A ridiculous stereotype, of course. Tell that to taxpayers who had to bail out the S&L industry to the tune of more than $124 billion. Bert Ely has a nice discussion of what happened to the S&L industry here. In short, S&L’s were regulated as to how much interest they could pay on deposits (Reg Q) and when...

MORGAN STANLEY: And Now It's Time To Worry About Deflation Again Joe Weisenthal May 19, 2013, 7:04 AMWe were just talking about how the wrongest prediction of the past 5 years was the call for "inflation" or "hyperinflation" due to aggressive monetary easing. In his latest US Macro Dashboard note, Morgan Stanley economist Vincent Reinhart points out that the real story now is the return of deflation risk. With evidence building that the Q2 soft patch is upon us, worrisome chatter about deflation is taking center stage. Our outlook for some time has been that mounting fiscal drag would show...

House prices at the national level have rising since February 2012. Here are the Case-Shiller 20 index, the Loan Performance house price index and the FNC RPI 30 index. They all point to rising house prices. Mortgage rates continue to decline (longer-trend) making housing more “affordable.” Thanks mostly to The Fed’s unorthodox monetary policy. Other economic indicators are positive as well. The University of Michigan Consumer Confidence index is at its highest level since 2007. And the Conference Board’s Leading Economic Indicators increased this morning. The US dollar has been spiking. And the S&P 500 has been on a roll....

The Philadelphia Fed Business Outlook Survey declined to -5.20, according to their latest report. The current activity index has shown no pattern of sustained growth over the past seven months, generally alternating between positive and negative readings (see Chart). The number of firms reporting decreased activity this month (29 percent) edged out those reporting increased activity (24 percent). So, Philly’s Steak isn’t sizzling. Rather, it’s getting cold. Sovereign yields around the globe continue to decline between a rush to safety and Central Bank easing. And there is nothing more vile than a cold Philly Steak sandwich with coagulated cheese sauce.

Bank of Israel cuts their interest rate to 1.5% in “surprise move.” Its only a surprise if you haven’t been watching Central Banks around the world. The Bank of Israel, led by Governor Stanley Fischer, lowered the lending rate by a quarter of a percentage point to 1.5 percent, sending the shekel down the most since January. The bank said the steps were “in light of the continued appreciation of the shekel, taking into account the start of natural gas production from the Tamar gas field, interest rate reductions by many central banks — notably the European Central Bank, the...

According to the Wall Street Journal, The Fed is planning to dial back the incredible monetary stimulus. But it won’t go “cold turkey.” We can always rely on The Dallas Fed’s Richard Fisher for a pithy comment: “I don’t want to go from wild turkey to cold turkey,” Richard Fisher, president of the Federal Reserve Bank of Dallas, said in an interview Friday. “I think we ought to dial it back.” Mr. Fisher is part of a contingent of Fed hawks who are wary of the central bank’s easy-money policies. After all, Central Banks have lowered interest rates 511 times...

According to the Wall Street Journal, The Fed is planning to dial back the incredible monetary stimulus. But it won’t go “cold turkey.” We can always rely on The Dallas Fed’s Richard Fisher for a pithy comment: “I don’t want to go from wild turkey to cold turkey,” Richard Fisher, president of the Federal Reserve Bank of Dallas, said in an interview Friday. “I think we ought to dial it back.” Mr. Fisher is part of a contingent of Fed hawks who are wary of the central bank’s easy-money policies. After all, Central Banks have lowered interest rates 511 times...

Now that Benghazi has Obama back-on-his-heels,  its time to AUDIT THE FED and stop the wild print-n-spendathon... A cause initially championed by Ron Paul (HR1207) -and dear to all libertarians- that is currently finding wider support on the American right is the idea that we really ought to be having an audit of the Federal Reserve: with so much done in secrecy there -and a ruthless, radical president that has a habit of exploiting any unlit corner of government- the insane amount of funny money being cranked-out is indeed the last straw. Since reasoned debate hasn't worked -and the Fed's money games have...

In the February 5 Morning Briefing, I outlined the Irrational Exuberance scenario as follows: “In a melt-up scenario, the market [S&P 500] would do just that, jumping to my yearend target [1665] or higher before the middle of the year. … The Fed’s critics, including dissenters on the FOMC, will warn that ultra-easy monetary policy is once again pumping air into a stock market bubble. So a melt-up could be followed by a meltdown, or at least a very nasty 15%-20% correction later this year if the Fed is forced to stop its quantitative easing by soaring stock prices…” Alternatively,...

Fed Chairman Ben Bernanke was nervous as he answered questions at his speech in Chicago today. “In light of the current low interest rate environment, we are watching particularly closely for instances of ‘reaching for yield’ and other forms of excessive risk-taking, which may affect asset prices and their relationships with fundamentals,” Mr Bernanke said. I was waiting for questions or hints as to if or when will take their foot off the monetary accelerator, but NADA. Global sovereign yields rose across the board this morning (except for Greece). The dollar is rising … while commodities plunged this morning (look...

On Fox Business’ Varney and Company today, Stuart Varney asked me about mortgage foreclosures. Are they ending? I said sure, “As long as The Fed doesn’t take away the punch bowl.” Will The Fed take away the punch bowl? Not likely. Sputh Korea just reduced their interest rate making it the 511th rate cut by a Central Bank since June 2007. That’s a whole lot of rate cuts! Sovereign rates are dropping towards the zero barrier. But the GDP growth rates in Europe are stagnant at best. At least China and Australia are experiencing above 3% real GDP growth. In...

On Fox Business’ Varney and Company today, Stuart Varney asked me about mortgage foreclosures. Are they ending? I said sure, “As long as The Fed doesn’t take away the punch bowl.” Will The Fed take away the punch bowl? Not likely. Sputh Korea just reduced their interest rate making it the 511th rate cut by a Central Bank since June 2007. That’s a whole lot of rate cuts! Sovereign rates are dropping towards the zero barrier. But the GDP growth rates in Europe are stagnant at best. At least China and Australia are experiencing above 3% real GDP growth. In...

According to the Mortgage Bankers Association, the Refinance Index increased 8 percent from the previous week to the highest level since December 2012. The gain in the Refinance Index was due to increases in both the conventional and government refinance indices of 8.8 percent and 5.7 percent respectively. The seasonally adjusted Purchase Index increased 2 percent from one week earlier to the highest level since May 2010. Here are mortgage purchase applications over the past 12 months. On a longer view, you can see that this is the highest level since 2010. Mortgage refinancing applications continue to rise as well....

A friend of mine is trying to sell a 5 acre lot in Las Vegas and has been trying since 2009. But recently, he has received 3 offers at above the asking price; he has turned all offers down. Why? He thinks The Fed will continue rolling the dice on easy money policies. Reuters had an interesting piece on the Las Vegas “rebound” entitled “Special Report: Cheap money bankrolls Wall Street’s bet on housing.” According to the Reuters article, The Vegas market has unsteady legs. Statistics compiled by the University of Nevada at Las Vegas show some 40,000 homes are...

Warren Buffett has a piece of advice for Ben Bernanke: It's easier to buy than it is to sell. Buffett, speaking on Saturday at Berkshire Hathaway's (BRKA) annual meeting in Omaha, said he is worried about what will happen when the Federal Reserve tries to wind down its recent efforts to stimulate the economy. Via a program nicknamed QE, short for quantitative easing, the Fed in recent years has bought up over $2 trillion in bonds in order to lower interest rates and promote borrowing and investment. Some have warned that when the Fed decides to sell its trove of...

Question: How would a Manchurian Candidate govern if elected President of the United States? Answer: Exactly as Barak Hussein Obama. Is there any doubt that Obama cannot communicate face to face with the Republicans because it is impossible for his handlers to program him in advance to participate in an unscripted conversation. So, Obama fund raises, plays golf, takes vacations, entertains lavishly at OUR house,while his handlers are busy destroying the foundation of our Country.

Realty Trac has an interesting study of the top 25 areas for house flipping. They are primarily dominated by sand states (Arizona, Nevada, California, Florida) and … Tennessee? This comes at the same time that The Fed is keeping rates low and the ECB just announced a rate cut. (Bloomberg) — The European Central Bank cut its key interest rate to a record low as the 17-nation euro region struggles to emerge from recession. Policy makers meeting in Bratislava today lowered the main refinancing rate to 0.5 percent from 0.75 percent. The reaction? Global sovereign yields declined … even more....

FED: WE MAY DO MORE Sam RoMay 1, 2013, 2:10 PMThe Federal Reserve has completed its Federal Open Market Committee meeting, and it has just published its statement. For now, the Fed is on hold with its month purchases of $85 billion worth of bonds in its efforts to keep interest rates low. However, one of line that was new this time around was this: The Committee is prepared to increase or reduce the pace of its purchases to maintain appropriate policy accommodation as the outlook for the labor market or inflation changes. In determining the size, pace, and composition...

<p>Washington (AP) — The Federal Reserve on Wednesday stood by its extraordinary efforts to stimulate the economy. And it signaled that it could increase or decrease the pace of bond purchases depending on how the job market and inflation perform.</p>

Here's The Great Disconnect That Has People Saying The Market Is Rigged By The Fed Matthew BoeslerApril 30,2013The Citigroup Economic Surprise Index, which tracks how various economic data releases come in relative to expectations, is now below zero. That means recent economic data releases have been disappointing relative to the market consensus. Just in the past week, we've seen some nasty surprises – flash PMI, durable goods orders, GDP, and Chicago PMI have all come in below consensus. Yet stocks keep moving higher, and it seems like lately "good news is bad news" (in that if the economy doesn't strengthen,...

The US Census Bureau reported earlier today that the US home ownership rates in the first quarter of 2013 dropped by another 0.4% to a fresh 18 years low, or 65% – the lowest since 1995. This is somewhat surprising given the relative affordability of housing. And The Fed’s unprecedented purchase of Treasuries and Agency MBS in an attempt to stimulate the housing market. And according to Loan Performance, house prices have really been humming since early 2012. Shortly, we will hear the clamor for “getting on the bandwagon” with low down payment mortgages. Like Navy Federal Credit Union. Could...

The S&P/Case-Shiller index of property values in 20 cities rose 9.3 percent in February from the same month in 2012, more than forecast, after rising 8.1 percent in the year ended in January. Compared with the prior month, prices rose the most since October 2005. From January to February, Las Vegas was the big winner NSA. Minneapolis was the biggest loser (followed by Chicago and Cleveland). The supply of homes in the US is back to 2005 levels. Low supply, low mortgage rates, rising house prices? In related news, the Chicago Purchasing Manager Index fell below 50 and the Milwaukee...

According to the Dallas Fed, the general business activity index plummeted from 7.4 to -15.6, reaching its lowest level since July 2012. What is unusual about this plunge is that it occurred in April. The last three plunges occurred in June or July. Here is the breakdown: Definitely not good news for Texas! And the stock market reaction? Between pending home sales increasing and speculation that Central Banks will continue to ease, the Dow Jones Industrial Average is up over 100 points as on 1:20pm EST. I hope this doesn’t put an end to the meteoric rise in Dallas area...

Pending home sales rose more than expected while real personal income continues to struggle. And the personal savings rate remains low. Looks like a zero interest rate, leveraged recovery to me! April 29 (Bloomberg) — More Americans than forecast signed contracts in March to buy previously owned homes, another indication of progress in the housing market. The index of pending home sales increased 1.5 percent after a revised 1 percent decline the prior month. Excluding the April 2010 first time homeowner tax credit, this is the highest print since 2007. In related news, consumer spending in the U.S. rose more...

During 2006, the slope of the US Treasury Curve (10 yr – 2 yr) slightly negative. Beginning in 2007, the curve began steepening, particularly in the latter half. The 10-2 curve kept steepening through 2008. Enter The Federal Reserve. Starting in September 2007 and through December 2008, The Fed reduced The Fed Funds Target Rate from 5.25% to 0.25% where it has remained. While The Fed has pinned The Fed Funds Target Rate at 0.25%, the 10-2 slope has continued to rise, partly due to the various quantitative easing programs starting in December 2008. Quantitative Easing 1 (QE1, December 2008...

During 2006, the slope of the US Treasury Curve (10 yr – 2 yr) slightly negative. Beginning in 2007, the curve began steepening, particularly in the latter half. The 10-2 curve kept steeping through 2008. Enter The Federal Reserve. Starting in September 2007 and through December 2008, The Fed reduced The Fed Funds Target Rate from 5.25% to 0.25% where it has remained. While The Fed has pinned The Fed Funds Target Rate at 0.25%, the 10-2 slope has continued to rise, partly due to the various quantitative easing programs starting in December 2008. Quantitative Easing 1 (QE1, December 2008...

The Federal Reserve, Bank of Japan, and the European Central Bank are in a race to the bottom … on interest rates. After Germany’s output fell, the ECB is prepared to … turn its monetary volume to 11. Currently, the ECB Rate is at 0.75, but a meeting is coming up on May 2nd where it may be lowered (hopefully to 0.11!). And here is Germany’s Manufacturing PMI Market Survey for April that may drive the ECB to turn up the volume. Europe’s GDP growth is anemic to say the least. With sovereign yields in larger economies already below 2%...

What would it mean for the worldÂ’s principal central bank to have negative net worth? As odd as it may seem to us now, under the National Banking Act from 1863 to 1913, local banks with national charters were the official issuers of U.S. currency, and the government had no central bank. Hundreds of national banks in towns and cities all across the country were issuing dollar bills. They were replaced in this essential role by the Federal Reserve Banks under the Federal Reserve Act of 1913.Consistent with their responsibility as the issuers of U.S. paper money, national banks were...

Yields on European sovereign bonds plummeted today in the expectation of another round of global monetary easing. In particular, the PIGS (minus Greece) fell over 10 basis points. Greece actually rose. Japan’s 10 year sovereign yield rose today by 2.9 basis points. However, the Japanese sovereign curve remains below the level when the Bank of Japan announced their mega-easing. Here is a different look at the yield surface for Japan: On this side of the Pacific Ocean, the US 10 year Treasury fell 1.2 basis points to remain under 1.7%. And Bankrate’s 30 year fixed average has fallen to 3.51%...

... The reality of the Fed's actions, when combined with expansionary fiscal policy, is that neither fiscal nor monetary policy is effective any longer in dealing with the systemic structural issues in the Western world's economies. Additionally, the Federal Reserve's policies are borderline negligent and irresponsible. The Fed is creating the next bubble that will make the housing bubble bursting look tame. When interest rates have been maintained at near zero rates for over five years, entire economic structures and systems/businesses become dependent upon such low rates. The Fed's current policies fail to reflect that economic uncertainty is preventing the...

Imitation is the most sincere form of flattery. Now, South Korea is mimicking the Bank of Japan and The Federal Reserve and is attempting to stimulate economic growth mostly through issuing new debt (15T won), April 16 (Bloomberg) — South Korea plans 19.3t won of additional fiscal support to spur growth, Finance Ministry says in an e-mailed statement. • Stimulus package will boost growth by 0.3 percentage points and create 40,000 jobs • Of the total stimulus amount, 15.8t won will be financed by issuing new bonds and adjusting a debt buyback program • Additional bond issuance may raise bond...

The week's financial news is the collapse of the price of Gold. As of this article's publication, the highly volatile commodity had fallen below $1375 per ounce from a high of nearly $1900 in September 2011. Gold is most often traded in highly levered securities such as futures or the equity of mining corporations, so such a drop in the actual, or spot price of the metal is big news. So, why is gold falling? Some reports cite a slowing demand from China as well as Cyprus's plan to sell $500 billion in bullion as reasons for the collapse. However,...

Unlike Mr. Rogers, it is NOT a beautiful day in the neighborhood. At least for markets. May be its Jim Rogers neighborhood in Singapore. The NAHB Housing Market Index took an unexpected turn down to 42 from 44. The Empire Manufacturing Index also turned down to 3.05 after posting a surge to 9.24 in March. And the Dow is down 155 points as of 12:36pm EST. Commodities are dipping as well. And the Japanese sovereign 10 year yield is back to mid March levels after the April 4th announcement of “Bank of Japan Goes Wild!” change in monetary policy. Global...

The Wall Street Journal has an interesting article entitled “A Yen for Yield Could Rock U.S. REITs.” In a low-return world, the steady dividends U.S. REITs provide have made them an investor favorite, especially in Japan, where the central bank is going all out to end two decades of stagnation that has left an aging population desperate for income. No kidding. With Japan’s Fed-like asset purchase targets, the yield curve for Japan lies well below that of the QE-crazy US. The Japanese ten year sovereign yield is at a measly 0.609%, over 100 basis points under the US 10 year...

Gene Fama from the University of Chicago had an interesting paper in The American Economic Review entitled “Interest Rates and Inflation: The Message in the Entrails [Vol. 67, No. 3 (Jun., 1977), pp. 487-496]. Well, we know that inflation has been declining since the Volcker experiment. Paul Volcker, a Democrat, was appointed chairman of the board of governors for the Federal Reserve System in August 1979 by President Jimmy Carter and reappointed in 1983 by President Ronald Reagan. The Fed raised the federal funds rate, which had averaged 11.2% in 1979, to a peak of 20% in June 1981. The...

I hate days like this when all economic indicators are negative. Retail sales and consumer confidence plunged. Mama said there’d be days like this. Not only did the University of Michigan Consumer Confidence plunge from 78.6 to 72.3, it plunged compared to an expectation of a 78.6 print. This was not only a 9 month low in the index, but more importantly the biggest miss to expectations since the index was created. Retail sales were down across the board, the biggest decline since June. Note that big swing and a miss versus the expectations of retail sales. Of course, energy...

It also wouldn’t be news if you were one of the more than 100 people — including employees at investment banks like Citigroup Inc. and Goldman Sachs Group Inc., along with congressional staff members and trade groups — that received this market-moving information 19 hours before the public. Brian Gross, a member of the Fed’s congressional liaison staff, distributed the March 19-20 minutes of the Federal Open Market Committee meeting at 2 p.m. Tuesday Washington time. The release was “entirely accidental,” Ms. Smith said. “This was a list of professional contacts that one individual had,” she said.

The Fed’s continuing QE policy has helped push mortgage rates to near all-time lows. Yet it is not helping US households obtain a purchase mortgage. The Mortgage Bankers Association (MBA) today released their weekly mortgage application indices and it revealed that purchase applications decline 1.27% from the previous week. Mortgage purchases applications remain in the Zona de Muerte (red box). The 30 year fixed-rate mortgage was 10.20 on March 30, 1990. It has fallen to 3.57% by Monday, April 9th. But the bloom is off the monetary rose. On the other hand, mortgage refinancing applications grew 6.32% from the previous...

Don’t put it past our politicians to try it in a financial emergency. The breaking of contracts by the U.S. government, unfortunately, has happened before, and what’s under way in Cyprus shows that feckless politicos will continue to try such things. In 1933–34, amid the depths of the Great Depression, the U.S. government seized the American people’s gold holdings. From that point, until 1975, it was illegal for Americans to own gold, other than in some forms of jewelry or collectors’ coins. In the panic of the Depression years the courts upheld this unconstitutional confiscation. Yes, people received dollars in...

While flying back to Washington DC from Dallas (mercifully American Airlines has Wifi!), I saw this article in the Financial Times: “Fed warned to rein in QE.” Essentially, Blackrock’s Rick Rieder warns that The Fed’s unorthodox approach to stimulating the economy (or at least the stock market). “Fed policy has had a distorting effect on capital allocation decisions of all kinds at virtually every level of the economy,” he told the Financial Times. “It is a very large and dull hammer for markets.” I wonder if Fed Chairman Ben Bernanke sings “If I had a (dull) hammer,” Thanks to Bernanke’s...

As the months go by, it is becoming clear that the Federal Reserve's "QE3" program, which is supposed to be "doing something" about unemployment, is having the exact opposite effect. We can only wonder how long it will take Fed Chairman Ben Bernanke to realize this. Friday's "Employment Situation" report from the Bureau of Labor Statistics (BLS) was really, really, really bad. The reported 0.1 percentage point decline in the "headline" unemployment rate (from 7.7% to 7.6%) fooled no one. Total employment actually fell by 206,000. The only reason that the reported unemployment rate went down was because 496,000 Americans...

For Americans, financial and economic Armageddon might be close at hand. The evidence for this conclusion is the concerted effort by the Federal Reserve and its dependent financial institutions to scare people away from gold and silver by driving down their prices. When gold prices hit $1,917.50 an ounce on August 23, 2011, a gain of more than $500 an ounce in less than 8 months, capping a rise over a decade from $272 at the end of December 2000, the Federal Reserve panicked. With the US dollar losing value so rapidly compared to the world standard for money, the...

<p>The Bank of Japan unleashed the world’s most intense burst of monetary stimulus on Thursday, promising to inject about $1.4 trillion into the economy in less than two years, a radical gamble that sent the yen reeling and bond yields to record lows.</p>

The decision of the government in Cyprus to simply take money out of people's bank accounts there sent shock waves around the world. People far removed from that small island nation had to wonder: “Can this happen here?” The economic repercussions of having people feel that their money is not safe in banks can be catastrophic. Banks are not just warehouses where money can be stored. They are crucial institutions for gathering individually modest amounts of money from millions of people and transferring that money to strangers whom those people would not directly trust... [snip] One of the big differences...

Exclusive: Porter Stansberry says printing press maintains façade The latest news out of Cyprus – the government levying taxes on bank account holders – is very, very interesting. If you understand it on a deep level, Cyprus’s actions cut to the core of whether we are going to live in a socialist world or a capitalist world. Banking is at the center of the economy, and the policies you set in banking determine who gets capital and under what conditions. That’s the definition of capitalism: how to allocate capital and under what terms. Right now, the world is completely socialist,...

This morning, the Mortgage Bankers Association (MBA) released their weekly mortgage application indices. Mortgage purchase applications rose 1.74% NSA from the preceding week. You can see the rise since the turn of the year. If we look at Seasonally Adjusted applications over a longer time frame, mortgage purchase applications were the highest since June 2010 and are back to June 1997 levels. Mortgage refinancing applications, on the other hand, fell 5.58% NSA from the previous week. They remain slightly below the average for the past 12 months. “Total purchase applications increased last week, due to an almost 7 percent increase...