miercuri, 13 octombrie 2010

Mish's Global Economic Trend Analysis

Mish's Global Economic Trend Analysis

All 50 States Probe Foreclosure Fraud; Florida's 30 Second "Rocket Docket" Hits Brick Wall of Suspensions; Emotions Run High

Posted: 13 Oct 2010 05:02 PM PDT

In the wake of massive foreclosure fraud, attorneys general in all 50 states have launched a probe into problems with documents used in foreclosures. In response, Yahoo Finance! reports States' Probe of Foreclosures Could Force Reforms
A joint investigation by every state and the District of Columbia could force mortgage companies to settle allegations that they used flawed documents to foreclose on hundreds of thousands of homeowners.

It could take months, at least, for any settlement to be reached. But legal experts say lenders could be forced to accept an independent monitor to ensure they follow state foreclosure laws. The banks could also be subject to financial penalties and be forced to pay some people whose foreclosures were improperly handled.

For banks, "the most efficient way for them to get out from under this to settle across the board," said Kathleen Engel, a law professor at Suffolk University in Boston.

A key question is whether state investigators can persuade bank employees to divulge some of the industry's secrets, said Ray Brescia, an Albany Law School professor who has tracked the mortgage crisis. Some mortgage company workers could have a powerful incentive to do so rather than face criminal charges, he noted.

"It's quite possible that there will be insiders who come forward to reveal the inner workings of these "boiler room" foreclosure mills, which likely won't be good for the banks," Brescia said.

A lawsuit that Ohio Attorney General Richard Cordray filed this month against GMAC Mortgage and Ally Financial could preview things to come around the country.

Cordray's lawsuit seeks to halt potentially illegal foreclosure practices. It also asks that a judge stop sales of any foreclosed homes involving paperwork filed by a GMAC employee who signed hundreds of faulty documents. And it aims to toss out foreclosure judgments on homes that haven't yet sold.

The Ohio lawsuit also seeks damages for consumers and civil penalties of $25,000 for each separate violation. If similar cases were brought in all 50 states, it could total billions of dollars in damages and fines for lenders and others involved in foreclosures.

The allegations raise the possibility that foreclosure proceedings nationwide could be subject to legal challenge. More than 2.5 million homes have been lost to foreclosure since the recession started in December 2007, according to RealtyTrac Inc.
Florida's Rocket Docket Grinds to a Halt

Please consider Florida's 30-Second Foreclosure Dash Hits Fraud Wall
Home to more foreclosures than 47 U.S. states, Florida sought to clear out its backlog with a system of special court hearings that dispensed with cases quickly, sometimes in less than a minute.

Homeowners like Nicole West now threaten to slow that system, Florida's so-called rocket docket, to a crawl. West, who has been fighting to save her Jensen Beach house from foreclosure, has leveled a new allegation in her three-year battle: the entire process is based on fraud.

West said her case is rife with the kind of flawed mortgage documents that have caused lenders including Bank of America Corp. and JPMorgan Chase & Co. to stop the process of foreclosures and evictions across the country. The banks said they are investigating homeowner charges like West's that signatures were forged and documents were backdated.

Florida has the third-highest foreclosure rate in the U.S. behind Nevada and Arizona. One in every 34 housing units -- double the U.S. average -- was in the foreclosure process or bank-owned as of Sept. 1, data vendor RealtyTrac Inc. said.

Florida's legislature appropriated $9.6 million this year to pay semi-retired judges and case managers to clear the backlog of foreclosures. Some judges have been churning through cases at a rapid clip, such as those last week in Tampa who considered dozens of foreclosures per day, sometimes in as little as 30 seconds.

The goal is to clear 62 percent of the backlog by next July, according to Craig Waters, a spokesman for the Florida Supreme Court. J. Thomas McGrady, chief judge of Florida's Sixth Judicial Circuit, said he once thought that was achievable. Now that Charlotte, North Carolina-based Bank of America, New York- based JPMorgan and Detroit-based Ally Financial Inc. have put the brakes on foreclosures or evictions to look for irregularities, he said he's "very doubtful" his courts can resolve that many cases. The circuit, which covers the area around Clearwater and St. Petersburg, has a backlog of 33,000 foreclosure cases, he said.

"All of a sudden all of these issues pop up with the lenders," McGrady said in an interview at his Clearwater office. "It's going to slow down the whole process because there will be more backlog. We're still getting 1,000 cases a month."

At the Clearwater court, lenders as of yesterday had canceled more than half of the 84 hearings to approve foreclosures that were scheduled for today, according to Ron Stuart, a court spokesman. Half of the 110 hearings originally set to take place tomorrow were canceled as well.
Emotions Run High

Without a doubt there is massive foreclosure fraud. In case you missed it please see


Get a Grip on Reality

Fraudulent foreclosure or not, it is high time people like Nicole West need to get a grip on reality. The reality is she is facing foreclosure because she is in default. It is amazing how clowns think that bad practices could or would bail out their own stupid mistakes.

The simple fact of the matter is that anyone in default should be foreclosed on. Those hoping to win a house free and clear because of bad foreclosure practices have another thing coming. Personally, I find the attitude of those like Nicole West disgusting.

Here's the deal. You don't pay your mortgage, you deserve to lose your home.

It is as simple as that, and it is unfortunate that robo-fraud has delayed the foreclosure process. Too many are attempting to game the system, blaming others for their own stupid mistakes.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post List
Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.

Emerging Market Economies Turn to Capital Controls; Forex Market in State of Disarray; Gold's Message; Life Imitates Art

Posted: 13 Oct 2010 09:42 AM PDT

Emerging market economies are under increasing stress as a result of the horrendous economic policies of the Fed.

In order to prevent unwanted strengthening of their currencies, Emerging Asia sets up controls to curb capital inflows
Thailand announced on Tuesday that it will impose a 15 percent withholding tax on interest and capital gains made by foreign investors on Thai bonds, accentuating the emerging economies' drive to put in place regulatory controls to curb capital inflows that contribute to a surge in currencies.

A persistent low interest rate regime in the developed world is pushing global investors to tap into the high-yielding markets, leading to currency worries in most of emerging Asia.

Export-dependent economies like Japan, China and Brazil have been in a race to rein in their currencies of late as huge amounts of money flowed from anemic western economies to their systems. China has maintained a tight leash on the yuan to ensure their export competitiveness, while Japan intervened in the markets to stem the yen's gains. Brazil last week raised a tax on foreign portfolio inflows into bonds and some other financial instruments to 4 percent to contain the rise of its real currency.

Traders believe South Korea has intervened repeatedly in the currency markets to rein in the won. In the Philippines, government officials have said the rise of the peso is a matter of concern.

Analysts say the afflicted Asian countries are addressing the problem in three ways.

In countries like South Korea, Australia, the Philippines and Indonesia policy rate hikes are either being scaled-back or delayed. "Less monetary tightening in Asia will help to contain interest rate differentials, thereby reducing the incentive for capital inflows," say the analysts.

Secondly, currency market intervention has increased and foreign reserves are going up, providing the countries a cover against further shocks in the financial system.

The third route, the analysts say, is the imposition of capital controls.

"For now the restrictions are mild and targeted toward speculative inflows. This will probably stay the focus. Draconian measures were introduced in Thailand in late 2006 but these are widely-recognized across Asia as having been a disaster."
Japan's Vows Decisive FX Moves

It's not just emerging markets feeling huge stress as Japan's Noda vows decisive FX moves after G7 meeting
Japanese Finance Minister Yoshihiko Noda said on Tuesday that Japan will continue to take decisive steps against excessive currency moves, including intervention, helping the dollar to recover further from a 15-year low against the yen.

Noda's reiteration of Japan's currency stance highlighted the risk of another round of intervention to weaken the yen after Japan weathered a flurry of weekend Group of Seven and IMF meetings with no overt criticism of last month's yen selling -- its first in six years.
Forex Market In State of Disarray

Rosenberg discussed Forex stress in Tuesday's Lunch with Dave.
Meanwhile, the foreign exchange market is in a state of disarray and while everyone gazes at every nuance coming out of the Fed, a really big story is unfolding in this increasingly unstable currency backdrop. Thailand, following in Brazil's footsteps, imposed a 15% tax on foreigner bond income. The Korean won is falling from its lofty heights on FX intervention concerns. The BoJ has already aggressively moved twice in the past month to weaken the yen to no avail — Japanese consumer confidence was released overnight and it fell for the third month in a row in September — as has been the case with the Swiss National Bank, which has tried with futility to weaken the Swiss franc.

China is printing money at nearly a 20% annual rate to prevent a yuan appreciation even in the face of intense global efforts to encourage the country to strengthen the unit. (The last thing China wants to do is buckle to U.S. pressure like Japan did following the 1985 Plaza Accord, which strengthened the yen and sent the country into a 25-year deflationary stagnation period.)

The Bank of England is talking about QE as well … these beggar-thy-neighbour money printing exercises to stimulate local economic conditions increasingly look like a zero-sum-game. Only the euro has held steadfast because Trichet refuses to cut interest rates or embark on quantitative easing — though the fiscal problems in the periphery are worrisome and will continue to cloud the future of the currency; however, don't worry, owners of German bunds think they will ultimately get repaid in D-marks.

Of course, gold could be the only asset class that makes sense here. If the bond market is right then we get deflation and gold is a hedge against the uncertainty such an environment would entail. If the equity market is right, then we get gobs of liquidity out of the Fed and then we go off to a new reflationary credit cycle — gold benefits here too. And, if the commodity complex is right, then we are heading towards a new inflationary cycle and of course gold is a classic way to play this scenario. So in response to Mr. Tepper, it's not the equity market that is in position for a win-win, it is the precious metals market. Gold is hugely overbought right now and long overdue for a corrective phase, which will likely pose yet another great buying opportunity.
Life Imitates Art

I received an interesting email from reader "Jack B" regarding capital controls.

Jack writes ...
Hello Mish

I recall reading last week that Brazil had imposed limits on incoming capital. Now Thailand has imposed a tax on interest and capital gains made by foreign investors to Thailand.

The reason I find this so fascinating is it is an eerie example of life imitating Hollywood. In the 1983 wall street movie "Rollover," there's a great scene in which an older "statesman of Wall Street warns a young upstart that, "...first you'll see a lot of jawboning by the president, and that won't work. Then, they'll take to selling gold, and that won't work. (BIS has already done this) And then you'll see capital controls!

And that will be the end. Then you'll see a Depression that makes the thirties look like a Kindergarten!"

Bernanke & Co are just continuing the ol' Greenspan PUT: always and everywhere, coddle the Wall Street fraternity. Well, if that is the Chairman's wish, fine; but the entire global economy is at risk.

Please keep up the excellent coverage of our post-WW II-like global economy!

Jack
Rollover 1981... world economic collapse

With thanks to Jack, please consider


Message of Gold

Gold is up another $25 today and has been on a tear ever since late 2008.



By now it should be obvious to everyone (including Prechter), that gold is acting like a currency for the simple reason that gold is money. Gold is performing well in these conditions because it should.

For more about why Gold is Money, please see ...


By the way, those articles were penned under the name "Trotsky" who is also my friend "HB", who now has his own fine blog on Austrian economics: Acting Man

As money, one should expect gold to perform well against all the other currencies that every country is in a mad race to debase.

Finally, please note that Gold is not rising because of inflation in the US, but rather because of the Fed's foolish attempt to defeat deflation. For more on this line of thinking, please see Inflation Expectation Noise

Because all the central banks have joined in on competitive currency debasement, gold is rising in terms of every fiat currency, again, just as one should expect.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post List
Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.

Drunken Horses and Drunken Horses' Asses in Academic Wonderland

Posted: 13 Oct 2010 08:09 AM PDT

The stock market and commodities are rallying once again over the upcoming QE announcement. Every bit of news, no matter how trivial, supportive of what everyone already knows (that QE is coming), gets market participants get more excited every time.

Will the actual announcement of what we all know result in the biggest sell-the-news event since the Fed's interest rate cut in January of 2001?

While pondering that, please consider Fed Minutes Lend Weight to Stimulus
The minutes of the Sept. 21 meeting of the Federal Open Market Committee indicated that several officials "consider it appropriate to take action soon," given persistently high unemployment and uncomfortably low inflation.

Now, with unemployment near 10 percent and with inflation well below the Fed's unofficial goal of nearly 2 percent, the Fed is considering renewed intervention: creating money to buy long-term Treasury debt. That would put additional downward pressure on long-term rates, making credit even cheaper.

Former Fed officials interviewed on Tuesday appeared to be just as divided as the current ones.

"If you lead the horse to water and it won't drink, just keep adding water and maybe even spike it," said Robert D. McTeer, who was president of the Federal Reserve Bank of Dallas from 1991 to 2005 and is a well-known inflation "dove," particularly attuned to the harm of joblessness. "You definitely don't want to take the water away."

H. Robert Heller, a Fed governor from 1986 to 1989, had the opposite view, urging the Fed to show restraint.

"I would do nothing," he said, expressing concern that the Fed might appear to be "monetizing the debt," or printing money to make it easier for the government to borrow and spend.

"If they start to monetize the federal debt, they will dig themselves a much deeper hole later on," he said. "That's what we learned from the 1970s, when the Fed undertook a very expansionary monetary policy. It took a double recession in the early 1980s to wring inflation out of the economy. We don't want to repeat that."

William C. Dudley, president of the Federal Reserve Bank of New York, recently raised the possibility that inflation could be allowed to run above the implicit target for some time in the future, to make up for inflation today being lower than desired. That could temporarily raise inflation expectations and lower real interest rates.
Economic Illiterates Trapped In Academic Wonderland

Only the back end of a horse would think that adding water or alcohol to an ocean of liquidity will solve anything. The fact of the matter is small businesses are the economic driver for jobs, and small businesses will not expand even at 0% interest rates.

For details, please see NFIB Small Business Trends for October Continue to Show No Recovery, Inflation Not a Threat; Fed Governor Hoenig Blasts Bernanke's QE Strategy
Rising commodity prices

It would sure help if the economic illiterates at the Fed would get out in the real world and talk to small business owners.

But they don't and they won't. Instead they sit in their academic wonderland of Monetarist stupidity that says if horses won't drink, give the horses more water and if that does not help, offer them whiskey.

Moreover, William Dudley, proves he has as much sense as a beached whale with his suggestion of higher inflation targets.

Small businesses are already crucified by rising input prices in the face of falling demand and falling prices for their goods. They need customers not higher input prices.

Imagine what would happen to the economy if there was a price shock and the price of oil doubled. Would that cause an increase in the demand for loans? Of course it wouldn't. However, it would crucify those on fixed incomes.

The problem is not falling prices, but falling demand for loans. We are in this mess because of overleveraged consumers, businesses, and financial institutions. Just as you do not cure an alcoholic by offering him another drink, you do not cure a problem caused by excessive liquidity, still more liquidity.

Lowering interest rates does more harm than good as both Hoenig and now Robert Heller, a Fed governor from 1986 to 1989, have suggested.

For now, this QE is supportive of the stock market and commodity prices. Unfortunately, it adds to the problems in the real economy, and it surely adds to the Fed's exit problems down the road. Ultimately, this experiment will make Ben Bernanke one of the biggest horses' asses in history. Until then, party on.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post List
Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.
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