Mish's Global Economic Trend Analysis |
- Mortgage Default Notices Surge 33% Nationwide, 55% in California, 200% by Bank of America; Corresponding Jump in Foreclosures Will Follow
- Cause for Celebration: Hollywood Florida Residents Vote to Cut Pensions of Police, Firefighters, and City Employees
- Delusional Hopes of Greece "Progress"; Greek Bonds Hammered Again; Lesson of Lehman
- Stocks Rally on Dead-on-Arrival Eurobond Proposals, Rumors, and Patches; More ECB Emergency Funding; Why a Breakup of the Eurozone is Likely
Posted: 14 Sep 2011 11:01 PM PDT At long last, the robo-signing scandal may have finally played out. As evidence, please note the August Surge in Mortgage Default Warnings. The number of U.S. homes that received an initial default notice -- the first step in the foreclosure process -- jumped 33 percent in August from July, foreclosure listing firm RealtyTrac Inc. said Thursday.Huge Jump in Foreclosures Coming Up Reality Check reports Huge Surge in Bank of America Foreclosures Bank of America is ramping up its foreclosure processing, sending out far more notices of default to borrowers in August than in previous months, well over 200 percent more month-to-month.Rising Default Notices and Foreclosures a Good Thing Housing will not bottom in many areas as long as there is a mile-high stack of foreclosures in the pipeline. Thus the faster forecloses increase the better. The bad news is this process will still take a long time. The Foreclosure Pipeline in New York is a staggering 57 years. The pipeline is 51 years in New Jersey. Please see Bad News Overwhelms; Foreclosure Pipeline in NY is 693 months and 621 Months in NJ for details. Those numbers are distorted by various delays, yet even with the pickup in foreclosures, it may takes years to get back to normal. Of course the Obama administration is doing everything it can to stall foreclosures, exactly the wrong thing to do. A side implication of increased foreclosures will be a reduction in consumer spending by those living in their homes for years without paying a cent on their mortgage. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com Click Here To Scroll Thru My Recent Post List |
Posted: 14 Sep 2011 05:52 PM PDT Residents of Hollywood Florida have had enough of exorbitant police, fire and city workers. In a referendum pitting a 23% tax increase against public union benefits, voters made the smart choice. The turnout was small, but that should have favored the unions because every one of them probably voted to keep the gravy train and screw everyone else. Please consider the Miami Herald article, Hollywood voters: Cut the pensions With a low voter turnout — about 13 percent of the city's 84,521 registered voters — residents cast ballots to strip police, firefighters and the city's general employees of their current pension plans, allowing the city to save $8.5 million.Inherent Wrongs Voters went about this the right way. There is no "inherent right" for public union collective bargaining. Indeed, public union collective bargaining is an "inherent wrong" on two counts.
Taxpayers made the only reasonable choice. The changes mean fire, police and general employees will have to work longer in order to retire, will receive a smaller percentage of their salary as pension and will no longer be able to include vacation and cost of living increases into the formula.Change for the Better Huddleston moans the "This city will be changed forever." Mish says "It's about time. The change will be for the better". It is nonsensical for someone to be able to retire at age 46. The sense of entitlement of so-called public servants is galling. It's no wonder Hollywood is broke. Public unions have broken the backs of nearly every city in the country. Taxpayers Still Stiffed If voters had struck down the pension changes, the city was preparing to lay off 75 employees and consider raising the tax rate by 23 percent. Instead, the city will likely stick with an 11 percent tax increase.Note how taxpayers are still paying through the nose with a "mere" 11 percent tax increase. A better option would have been bankruptcy, hoping to void police and firefighter contracts altogether. Cause for Celebration "It's not a victory and not a cause for a celebration," said Mayor Peter Bober. "It's properly viewed as taking an important step toward changing the way we do business in Hollywood." Mayor, please be serious. Of course it's a cause for celebration. However, it's only a start. National right-to-work laws, the scrapping of Davis-Bacon and all prevailing wage laws, and the end to mandated collective bargaining especially for public union workers would set the country in the right direction and be cause for a "grand celebration". One-by-one, city-by-city will come to that conclusion even if Congress fails to address the issues. Cities are broke, and there is no other choice. Unfortunately president Obama wants to head the country in exactly the wrong direction with "card check" rules and other hopeless ideas. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com Click Here To Scroll Thru My Recent Post List |
Delusional Hopes of Greece "Progress"; Greek Bonds Hammered Again; Lesson of Lehman Posted: 14 Sep 2011 01:13 PM PDT The stock market and the bond market have different ideas regarding a Greek default. Yahoo! Finance reports Stocks jump on hopes for progress on Greece's debt Stock indexes jumped in another day of bumpy trading Wednesday after European leaders renewed pledges to help Greece avoid defaulting on its debts.Ass Backwards Thinking The idea of continually throwing away money to prevent the inevitable is ludicrous. We would be far better off now if more major banks had failed and bondholders adequately punished. Instead the crisis drags on and taxpayers pay the price thrice: In a dearth of jobs, in low yields that squeeze those on fixed income, and in higher energy costs. Three Lessons of Lehman
Instead we suffer prolonged torture and delusional hope from by those who think this situation is fixable short of default. Greek 1-Year Bonds Greek 10-Year Bonds The bond market, not Uri Landesman, has this correct. For further discussion, please see Stocks Rally on Dead-on-Arrival Eurobond Proposals, Rumors, and Patches; More ECB Emergency Funding; Why a Breakup of the Eurozone is Likely Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com Click Here To Scroll Thru My Recent Post List |
Posted: 14 Sep 2011 11:02 AM PDT The ECB stepped in today to provide emergency liquidity to at least two banks (without specifying the banks). The implication of course is that all banks are suspects. Meanwhile, rumors of China buying significant amounts of debt of Italy has been denied by China's premier, clearly overruling meaningless statements made by Zhang Xiaoqiang, a vice chairman of the National Development and Reform Commission. Also in the news today is a meaningless statement by European Commission President, Jose Barroso, who will "soon present options for the introduction of euro bonds" Dead-on-Arrival Eurobond Proposals The Financial Times as have sever others reported several days ago the Eurobond idea is Dead following the German court ruling that allowed some of the Greek bailout ideas to continue. Please consider Stop rejoicing. This was no victory for the eurozone As an advocate of eurozone bonds, I have to admit their prospect looks grim after last week's ruling of the German constitutional court. The court upheld the European financial adjustment facility, the crisis mechanism. This was, undoubtedly, good news. But after I read the whole ruling, which ran to 29 tightly written pages, I realised that this judgement was not a victory for the eurozone at all. On the contrary, it categorically rules out any policy option beyond what has been agreed so far. I cannot see how it can be consistent with the survival of the eurozone, given the policies of member states and the ECB.Why a breakup of the euro zone is likely Edward Harrison writing for Credit Writedowms thinks the issue seals the fate and a breakup of the euro zone is likely In June, I wrote that the chances of a euro zone breakup are now increasing, giving background for the current political turmoil surrounding Greece. My conclusion was "the policy decisions that governments and the EU are making cannot be maintained politically in the periphery or in the core".German Court Bans Fiscal Union Ambroze Evans=Pritchard at The Telegraph comes to the same conclusion in German court curbs future bail-outs, bans EU fiscal union Germany's constitutional court has at last delivered its Solomonic judgment on Europe's rescue machinery.Politicians Can't Take No For An Answer Clearly, Eurobonds are dead-on-arrival, regardless of how the proposal is worded. Even disregarding the German court ruling, the likelihood that Austria, Finland, and all 17 countries need to change the treaty would agree to allow Eurobonds is zero. Nonetheless, Bloomberg reports Barroso Vows Euro-Bond Options European Commission President Jose Barroso said he is close to proposing options on joint euro-area bond sales, putting officials in Brussels on a collision course with Germany over steps to contain the debt crisis.Let the Euro Die The Eurobond idea may be alive in the minds of fools who do not understand the ruling of the German court or the court of public opinion which is decidedly against more bailouts. Elections are coming up and the leaders of Germany, Italy, Spain, and France may all go down in flames. Voters are fed up with all of them. French President Nicholas Sarkozy may be bumped by a candidate running on a "Let the Euro Die" platform. Please see Europe Out of Time; Differences Impossible to Untangle; Merkel's Mind is Fried; Eurozone Breakup Inevitable; "Let the Euro Die" for details. Stubborn, Foolish Arrogance So, is this latest Eurobond idea stubborn arrogance by fools or an purposeful attempt to placate the markets, buying more time? Occam's Razor suggests the first: stubborn foolish arrogance rather than a purposeful conspiracy to delay things. Geithner Weighs in on "Political Will" German Chancellor Angela Merkel, French President Nicolas Sarkozy and Greek Prime Minister George Papandreou will hold a conference call at about 7 p.m. today Athens time to discuss developments in Greece and the euro area.Political Will Cannot Overrule Market Forces Geithner is yet another politician who thinks political will can overrule market forces, common sense, and in this case a German court ruling as well. Temporary Liquidity Patch More liquidity (and solvency) issues are on the front burner today as the ECB Lends Dollars to European Banks The European Central Bank said it will lend dollars to two euro-area banks tomorrow, a sign they are finding it difficult to borrow the U.S. currency in markets.Expect the ECB at some point to offer "Unlimited Liquidity". That will not work either because the crisis is a solvency issue, not a liquidity issue. The ECB's stopgap measures do nothing to solve the issues at hand:
So why are the markets rallying on news that is meaningless and proposals that cannot possibly happen? The answer is short-term sentiment is too bearish, even if long-term sentiment is not. Things do not move in a straight line and dip-buyers fail to understand the severe implications of the German court ruling. This is not a good time to "buy the dip". Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com Click Here To Scroll Thru My Recent Post List |
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