Tag: finance

US equity markets were the first to move yesterday on the news of the tapering which is a loosening and not a tightening move by the Fed. Overnight and today has seen stocks stabilize as the rest of the world wakes up to what this slowing of flow actually means… From EM FX to precious metals to collossal flattening in the US Treasury term structure, things are making major moves…

 

And as a bonus, here are some just released thoughts from Goldman on Emerging Market currencies – arguably the biggest wildcard in a post-taper world:

Some EMs are adjusting, others are less clear

 

We have seen higher yields and weaker currencies across most of the troubled EMs; both developments accommodate economic adjustment. But not all economies are responding to these shifts in a similar way. External balances remain challenging for Turkey, Brazil, Indonesia and South Africa. Even though a temporary rally is not out of question, the ZAR, TRY, IDR and BRL remain risky currencies with scope for further depreciation. In contrast, India’s impressive current account improvement is driven both by import restraint and by export growth and, in our view, the INR is likely to remain broadly stable or even strengthen on the margin (Exhibit 3). Given this more positive view, the wide FX forwards, the elevated implied volatility and the skew towards depreciation in FX options create attractive carry opportunities in the INR. Alternatively, long INR positions can help offset the negative carry in short TRY, ZAR or BRL positions.  

 

Equities and credit in ‘DMs of EMs’ offer better risk-reward than EM FX or bonds

 

From a medium-term perspective, a global backdrop where US growth accelerates, US medium-term yields rise (but gradually) and the front end is anchored at exceptionally low levels (but is subject to upside risks) should benefit equities and credit more than bonds or currencies. And, by extension, EM currencies (vs the USD) and bonds are likely to offer inferior risk-reward ratios compared with EM equities and credits (Exhibit 4). As we have argued recently, EM sovereign credit from the ‘DMs of EMs’ (those countries with the stronger institutional set-ups in the EM world) can continue to perform strongly along with US high yield credit (‘’DMs of EMs’ not underperforming significantly despite the rally’, EM Macro Daily, October 28, 2013). That said, for global investors, we still see a better balance of reward and risk in DM equities and credit relative to EM counterparts.  

 

For now, anchored front-end DM rates should help certain ‘risky receivers’

 

Immediately after the September FOMC dovish surprise we argued that EM central banks were likely to respond with dovish responses. Since then, we have seen a slew of such surprises (rate cuts in Chile, Mexico, Thailand and Hungary are among the primary examples). Over the last few days we have seen dovish shifts both in Colombia and in India, while expectations for rate hikes have also moderated in Brazil.

 

South Africa is one of the clearest sources of opportunity in EM front ends relative to our forecasts (Exhibit 5). We expect no hikes by the SARB next year, while the FRAs are pricing in an increase in policy rates from 5% to 6.3% in one year, and to 7.3% two years from now. There is also space for Brazilian DI rates to decline towards the 10.30 area, in line with our Latam Economists’ view of one last hike of 25bp for BACEN. But unless one is ready to position for no further hikes in the near term in Brazil, the risk-reward below that level becomes less appealing. Lastly, the inverted curve in India is a result of the elevated near-term money market rate – a result of tight liquidity measures, which may be eased as the economy continues to show signs of adjustment. 

 

But, at some point, strong US data may test the Fed’s resolve

 

The substantial decline in US (and by extension G3) front ends suggests that the market views the Fed’s commitment to low rates for longer as credible, given the current data flow. However, as activity picks up in 2014 (in our forecasts), there is room for periodic upside data surprises. A few months of meaningfully strong growth data could prompt the market to front-load some tightening premium (Exhibit 6). In other words, there are upside risks to front-end rates next year, stemming primarily from US data strength.

 

This means that bouts of EM pressure driven by US rates are likely to resurface. And the momentum in US data will determine how quickly this occurs. The uncertainty around timing makes it hard to position for such an eventuality via shorting high-carry EM instruments. Instead, low-yielding currencies from economies in need of economic adjustment, such as the THB and MYR, can offer ways to hedge against a Dollar rally vs EM, driven by higher front-end rates. In rates markets, ILS 1-year rates are pricing more than 10bp of policy rate cuts in the year ahead. Our view is that the BoI is more likely to hike by 50bp (see ‘A shift in the Bank of Israel’s ‘policy mix’ in 2014’, EM Macro Daily, December 18, 2013). Israel rates are correlated with US front-end yields and they can offer a way to hedge against such risks, earning positive carry and benefiting from local fundamental drivers that may prompt the central bank to hike next year.

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/nkbsvTj05BU/story01.htm Tyler Durden

 

 

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Northern Koreans are queer

The life that they live draws a tear

Games are all banned

Except Missile Command

They need it to fire their gear

The Limerick King

 

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via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/OSiKkVROXk8/story01.htm williambanzai7

Submitted by F.F.Wiley of Cyniconomics blog,

An economist recently recommended that I read a paper by three Fed researchers titled: “Why Did So Many People Make So Many Ex Post Bad Decisions? The Causes of the Foreclosure Crisis.” It was presented at a major conference last year and made the rounds again in the economics blogosphere this year with generally positive reviews. It seems to have been influential.

The authors – Christopher Foote, Kristopher Gerardi and Paul Willen – argue that the financial crisis was caused by over-optimistic expectations for house prices, while other factors such as distorted incentives for bankers played only minor roles or no roles at all. In other words, it was a bubble just like the Dutch tulip mania of the 1630s or South Sea bubble of the early 1700s, and had nothing to do with modern financial practices.

Then the authors make absolutely sure of their work being well-received by those who matter. The financial crisis is surely a touchy subject at the Fed, where the biggest PR challenge is “bubble blowing” criticism from those of us who aren’t on the payroll (directly or indirectly). But Foote, Gerardi and Willen are, of course, on the payroll. They tell us there’s little else that can be said about the origins of the crisis, because any “honest economist” will admit to not understanding bubbles.

Here’s their story:

[I]t is deeply unsatisfying to explain the bad decisions of both borrowers and lenders with a bubble without explaining how the bubble arose. … Unfortunately, the study of bubbles is too young to provide much guidance on this point. For now, we have no choice but to plead ignorance, and we believe that all honest economists should do the same. But acknowledging what we don’t know should not blind us to what we do know: the bursting of a massive and unsustainable housing bubble in the U.S. housing market caused the financial crisis.

We don’t often critique papers like this (who cares about Fed research outside of academic economists?) But what the heck, the bolded sentences above – in particular, the hypocritical reference to “honest economists” – deserve at least a few words of rebuttal.

We’ll limit our comments to two areas. First, we’ll offer a redline edited version of a key section in the authors’ conclusion, mostly to share a different perspective on the financial crisis.  Second, we’ll point out an example of dishonesty from these economists who brazenly claim that their own perspective is the only one that can be called honest.

Where did the bubble come from?

In practice, the authors don’t completely “plead ignorance” about the causes of bubbles as they claim to do.  They offer a few “speculative” ideas about the housing bubble, writing:

One speculative story begins with the idea that some fundamental determinants of housing prices caused them to move higher early in the boom. Perhaps the accommodative monetary policy used to fight the 2001 recession, or higher savings rates among developing countries, pushed U.S. interest rates lower and thereby pushed U.S. housing prices higher. Additionally, after the steep stock market decline of the early 2000s, U.S. investors may have been attracted to real estate because it appeared to offer less risk. The decisions of Fannie Mae and Freddie Mac may have also played a role in supporting higher prices…

This smells to us like a strategy of gently acknowledging criticism (of the Fed’s interest rate policies), while at the same time attempting to neutralize it. The authors imply that low interest rates were an unavoidable byproduct of the Fed’s recession fighting, and then shift some of the blame to foreigners in developing countries before moving on to other possible explanations.

But even if you believe the Fed’s anti-recession measures were worthwhile, the authors’ story is nonsense. It needs corrections for the facts that the Fed continued to slash rates nearly two years after the 2001 recession and then maintained an ultra-easy stance for a few years after that. It also begs the question of why the Fed responded to high foreign savings rates – which were the flip side to U.S. current account deficits and primary source of disinflation – with even greater stimulus.  Moreover, there’s much more to the Fed’s role in the housing boom than these factors.

As we see it, the financial crisis validated certain principles that aren’t reflected in mainstream models but feature in fringe areas such as Austrian business cycle theory or behavioral economics. Economists in these areas offer far more detailed explanations for the housing bubble than the “speculative story” above. For example, recent Nobel Prize winner Robert Shiller filled a whole book with bubble theories. While Foote, Gerardi and Willen would presumably call these economists dishonest, we beg to differ. Borrowing from non-mainstream ideas, here’s our edited version of the excerpt:

If this version is accurate, the Fed’s failures include three whoppers:

1. Monetary policy was too stimulative throughout the boom.
2. Two decades of Greenspan/Bernanke “puts” created a mentality that risky bets couldn’t lose (moral hazard).
3. The Fed applauded rather than stopping the deterioration in lending standards, blithely disregarding its status as only institution that was mandated to set nation-wide lending requirements.

As you might expect, Foote, Girardi and Willen weave a story that either denies or diverts attention from all three failures. One part of the story is their claim that bubbles can’t be explained and anyone who thinks otherwise is dishonest. If the defining feature of the crisis can’t be explained, then it can’t be blamed on the Fed, right?

Other parts of the story are embedded in 12 “facts” that are said to describe the crisis. As written, many of the “facts” are strictly true. Some may have even added to the public debate because they weren’t widely known in policy circles, even as they were understood in the fixed income business. Others, though, can only distort that debate. The worst of the so-called facts are somewhere in between flat wrong and technically accurate but interpreted in ways that don’t stand up to scrutiny.

Lending standards didn’t really change during the boom?!?

We’ll po
int out a single example, from pages 9-11 of the paper and sub-titled, “Fact 4: Government policy toward the mortgage market did not change much from 1990 to 2005.” In this section, the authors deny that policymakers dropped the ball on lending standards. They don’t mention central bankers explicitly (that would be too obvious?), choosing instead to absolve the Clinton administration of blame for its ill-fated National Home Ownership strategy. Of course, their argument also exonerates the Fed if you happen to believe it.

The argument depends partly on a history lesson that begins like this:

It is true that large downpayments were once required to purchase homes in the United States. It is also true that the federal government was instrumental in reducing required downpayments in an effort to expand homeownership. The problem for the bad government theory is that the timing of government involvement is almost exactly 50 years off. The key event was the Servicemen’s Readjustment Act of 1944, better known as the GI Bill, in which the federal government promised to take a first-loss position equal to 50 percent of the mortgage balance, up to $2,000, on mortgages originated to returning veterans.

The authors then tell a nostalgic tale about loan-to-value (LTV) ratios in the 1950s and 1960s, before skipping ahead to the 1990s and 2000s. For the latter period, we’re told to believe that lending standards didn’t decline in a meaningful way:

Figure 6 shows LTV ratios for purchase mortgages in Massachusetts from 1990 to 2010, the period when government intervention is supposed to have caused so much trouble … But inspection of Figure 6 does not support the assertion that underwriting behavior was significantly changed by that program [Clinton’s National Homeownership Strategy].

Here’s the key chart that goes with this claim:

Here are a few reasons why the thesis doesn’t fit the reality:

1. The authors share data for only one state (Massachusetts), while failing to mention that it didn’t have much of a housing bust. Consider that Boston is one of only four cities (out of 20) in the S&P/Case-Shiller Home Price Index for which prices didn’t fall by more than 20%. During the bear market period for the full index, the Boston component fell only 16%, less than half the 34% drop in the national index.
2. The authors’ sweeping argument relies on not only a single state, but also a single indicator (LTV ratios). You might wonder: What were the credit scores of borrowers at each LTV level? How did their incomes compare to monthly mortgage payments? Were their incomes verified? These types of questions need answers before you can draw general conclusions about underwriting behavior.
3. Even the cherry-picked data – Massachusetts LTV ratios! – doesn’t support the authors’ conclusions. It shows that the incidence of ratios greater than 100% tripled during the housing boom, from about 8% of all Massachusetts mortgages to about 25%. The claim that this change isn’t significant is incredulous.
4. LTV ratios in the 1950s and 1960s, while interesting, are irrelevant to the early 21^st century housing boom. Different era, different circumstances, different implications.

Needless to say, the authors’ attempt at defending fellow public officials falls well short. Lending standards declined sharply during the boom, and this was encouraged by both the federal government and the Fed. No amount of data mining can change these facts.

Overall, the Fed staffers’ paper fits a common pattern. It’s stuffed with enough data to be taken seriously, but inferences are based more on spin than objective analysis. The approach aligns conclusions with an establishment narrative, while protecting the authors’ establishment status. The last thing you would call this paper is an honest piece of research.

Bonus edit

As long as we’re at it, here’s an extra edit, this one offering another perspective on Foote, Gerardi and Willen’s conclusions about our knowledge of bubbles (from the first excerpt above):

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/sWhriAYYszQ/story01.htm Tyler Durden

Submitted by F.F.Wiley of Cyniconomics blog,

An economist recently recommended that I read a paper by three Fed researchers titled: “Why Did So Many People Make So Many Ex Post Bad Decisions? The Causes of the Foreclosure Crisis.” It was presented at a major conference last year and made the rounds again in the economics blogosphere this year with generally positive reviews. It seems to have been influential.

The authors – Christopher Foote, Kristopher Gerardi and Paul Willen – argue that the financial crisis was caused by over-optimistic expectations for house prices, while other factors such as distorted incentives for bankers played only minor roles or no roles at all. In other words, it was a bubble just like the Dutch tulip mania of the 1630s or South Sea bubble of the early 1700s, and had nothing to do with modern financial practices.

Then the authors make absolutely sure of their work being well-received by those who matter. The financial crisis is surely a touchy subject at the Fed, where the biggest PR challenge is “bubble blowing” criticism from those of us who aren’t on the payroll (directly or indirectly). But Foote, Gerardi and Willen are, of course, on the payroll. They tell us there’s little else that can be said about the origins of the crisis, because any “honest economist” will admit to not understanding bubbles.

Here’s their story:

[I]t is deeply unsatisfying to explain the bad decisions of both borrowers and lenders with a bubble without explaining how the bubble arose. … Unfortunately, the study of bubbles is too young to provide much guidance on this point. For now, we have no choice but to plead ignorance, and we believe that all honest economists should do the same. But acknowledging what we don’t know should not blind us to what we do know: the bursting of a massive and unsustainable housing bubble in the U.S. housing market caused the financial crisis.

We don’t often critique papers like this (who cares about Fed research outside of academic economists?) But what the heck, the bolded sentences above – in particular, the hypocritical reference to “honest economists” – deserve at least a few words of rebuttal.

We’ll limit our comments to two areas. First, we’ll offer a redline edited version of a key section in the authors’ conclusion, mostly to share a different perspective on the financial crisis.  Second, we’ll point out an example of dishonesty from these economists who brazenly claim that their own perspective is the only one that can be called honest.

Where did the bubble come from?

In practice, the authors don’t completely “plead ignorance” about the causes of bubbles as they claim to do.  They offer a few “speculative” ideas about the housing bubble, writing:

One speculative story begins with the idea that some fundamental determinants of housing prices caused them to move higher early in the boom. Perhaps the accommodative monetary policy used to fight the 2001 recession, or higher savings rates among developing countries, pushed U.S. interest rates lower and thereby pushed U.S. housing prices higher. Additionally, after the steep stock market decline of the early 2000s, U.S. investors may have been attracted to real estate because it appeared to offer less risk. The decisions of Fannie Mae and Freddie Mac may have also played a role in supporting higher prices…

This smells to us like a strategy of gently acknowledging criticism (of the Fed’s interest rate policies), while at the same time attempting to neutralize it. The authors imply that low interest rates were an unavoidable byproduct of the Fed’s recession fighting, and then shift some of the blame to foreigners in developing countries before moving on to other possible explanations.

But even if you believe the Fed’s anti-recession measures were worthwhile, the authors’ story is nonsense. It needs corrections for the facts that the Fed continued to slash rates nearly two years after the 2001 recession and then maintained an ultra-easy stance for a few years after that. It also begs the question of why the Fed responded to high foreign savings rates – which were the flip side to U.S. current account deficits and primary source of disinflation – with even greater stimulus.  Moreover, there’s much more to the Fed’s role in the housing boom than these factors.

As we see it, the financial crisis validated certain principles that aren’t reflected in mainstream models but feature in fringe areas such as Austrian business cycle theory or behavioral economics. Economists in these areas offer far more detailed explanations for the housing bubble than the “speculative story” above. For example, recent Nobel Prize winner Robert Shiller filled a whole book with bubble theories. While Foote, Gerardi and Willen would presumably call these economists dishonest, we beg to differ. Borrowing from non-mainstream ideas, here’s our edited version of the excerpt:

If this version is accurate, the Fed’s failures include three whoppers:

1. Monetary policy was too stimulative throughout the boom.
2. Two decades of Greenspan/Bernanke “puts” created a mentality that risky bets couldn’t lose (moral hazard).
3. The Fed applauded rather than stopping the deterioration in lending standards, blithely disregarding its status as only institution that was mandated to set nation-wide lending requirements.

As you might expect, Foote, Girardi and Willen weave a story that either denies or diverts attention from all three failures. One part of the story is their claim that bubbles can’t be explained and anyone who thinks otherwise is dishonest. If the defining feature of the crisis can’t be explained, then it can’t be blamed on the Fed, right?

Other parts of the story are embedded in 12 “facts” that are said to describe the crisis. As written, many of the “facts” are strictly true. Some may have even added to the public debate because they weren’t widely known in policy circles, even as they were understood in the fixed income business. Others, though, can only distort that debate. The worst of the so-called facts are somewhere in between flat wrong and technically accurate but interpreted in ways that don’t stand up to scrutiny.

Lending standards didn’t really change during the boom?!?

We’ll point out a single example, from pages 9-11 of the paper and sub-titled, “Fact 4: Government policy toward the mortgage market did not change much from 1990 to 2005.” In this section, the authors deny that policymakers dropped the ball on lending standards. They don’t mention central bankers explicitly (that would be too obvious?), choosing instead to absolve the Clinton administration of blame for its ill-fated National Home Ownership strategy. Of course, their argument also exonerates the Fed if you happen to believe it.

The argument depends partly on a history lesson that begins like this:

It is true that large downpayments were once required to purchase homes in the United States. It is also true that the federal government was instrumental in reducing required downpayments in an effort to expand homeownership. The problem for the bad government theory is that the timing of government involvement is almost exactly 50 years off. The key event was the Servicemen’s Readjustment Act of 1944, better known as the GI Bill, in which the federal government promised to take a first-loss position equal to 50 percent of the mortgage balance, up to $2,000, on mortgages originated to returning veterans.

The authors then tell a nostalgic tale about loan-to-value (LTV) ratios in the 1950s and 1960s, before skipping ahead to the 1990s and 2000s. For the latter period, we’re told to believe that lending standards didn’t decline in a meaningful way:

Figure 6 shows LTV ratios for purchase mortgages in Massachusetts from 1990 to 2010, the period when government intervention is supposed to have caused so much trouble … But inspection of Figure 6 does not support the assertion that underwriting behavior was significantly changed by that program [Clinton’s National Homeownership Strategy].

Here’s the key chart that goes with this claim:

Here are a few reasons why the thesis doesn’t fit the reality:

1. The authors share data for only one state (Massachusetts), while failing to mention that it didn’t have much of a housing bust. Consider that Boston is one of only four cities (out of 20) in the S&P/Case-Shiller Home Price Index for which prices didn’t fall by more than 20%. During the bear market period for the full index, the Boston component fell only 16%, less than half the 34% drop in the national index.
2. The authors’ sweeping argument relies on not only a single state, but also a single indicator (LTV ratios). You might wonder: What were the credit scores of borrowers at each LTV level? How did their incomes compare to monthly mortgage payments? Were their incomes verified? These types of questions need answers before you can draw general conclusions about underwriting behavior.
3. Even the cherry-picked data – Massachusetts LTV ratios! – doesn’t support the authors’ conclusions. It shows that the incidence of ratios greater than 100% tripled during the housing boom, from about 8% of all Massachusetts mortgages to about 25%. The claim that this change isn’t significant is incredulous.
4. LTV ratios in the 1950s and 1960s, while interesting, are irrelevant to the early 21^st century housing boom. Different era, different circumstances, different implications.

Needless to say, the authors’ attempt at defending fellow public officials falls well short. Lending standards declined sharply during the boom, and this was encouraged by both the federal government and the Fed. No amount of data mining can change these facts.

Overall, the Fed staffers’ paper fits a common pattern. It’s stuffed with enough data to be taken seriously, but inferences are based more on spin than objective analysis. The approach aligns conclusions with an establishment narrative, while protecting the authors’ establishment status. The last thing you would call this paper is an honest piece of research.

Bonus edit

As long as we’re at it, here’s an extra edit, this one offering another perspective on Foote, Gerardi and Willen’s conclusions about our knowledge of bubbles (from the first excerpt above):

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/sWhriAYYszQ/story01.htm Tyler Durden

If yesterday’s large tailing 5 Year paper sale exhibited some curious ESP ahead of the FOMC’s tapering announcement, with a very ugly tail and atrocious internals, then today’s 7 Year was quite aware of what was coming. Which is why it was not surprising that the just concluded sale of $29 billion in belly-buster bonds, once again came with a flopping 2 bps tail, pricing at 2.385% or 2 bps wider of the 2.365% when issued, indicating the hiccups in the auction process continue.

Also of note: the 2.385% closing yield was the highest since June 2011, while the Bid to Cover, despite posting a modest bounce from last month’s 2.36 to 2.45, has continued the downward trend confirming a notable split in demand for auctions: everything to the left of 5/7 Year is being bid up without failure (due to its assumed “money-good” nature and promises of ZIRP into 2016 and further), while the 7 Year and onward are increasingly starting to spook investors. Finally, the internals showed that while Directs took down less than the TTM average of 19.5% at 17.1%, this was offset modestly by a pick up in Indirect bidders who took down 41.74% of the auction, leaving 41.2% to dealers.

Bottom line: if indeed the Fed continues to taper at $10 billion/meeting (it won’t), expect to see the high yield to keep rising every higher in order to find the required buyers now that the Fed – at least superficially – is stepping away.

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/UXUg5k9y6ew/story01.htm Tyler Durden

 

Click here to follow ZeroHedge in Real-time on FinancialJuice

Call it what you will. Arrogance is overbearing pride, the self-importance of being superior and a public display of haughtiness that knows no bounds. We have the overt showy pride right here in our own back yard in Silicon Valley. The arrogant bigots that have made a fast buck on a techy idea have forgotten first of all where they came from and secondly who made them rich big-shots. The wheel of fortune turns and those at the top come tumbling down, one day. The higher they get, the harder that fall is, as they come crashing to the ground. Trouble is along the way they have amassed so much that they have lost touch with the reality of society. They either want to go it alone in some fake, unreal world that has seceded from the United States or at the very least to keep the poor at bay and scrubbing their floors still. Silicon Valley is cronyism at its ultimate, arrogance at a peak and boundless meritocracy at its best stroke worst.

Poor at Bay

Greg Gopman of AngelHack fame wrote on his wall on Facebook that “the difference is in other cosmopolitan cities, the lower part of society keep to themselves. They sell small trinkets, beg coyly, stay quiet, and generally stay out of your way. They realize it’s a privilege to be in the civilized part of town and view themselves as guests. And that’s okay”.

It’s a shame that certain people seem to believe that money bestows on them the ability to be bigoted and self-righteous regarding the rights of other human beings. People live in a free society and their poverty has nothing to do with their right to walk along the sidewalk. It’s a shame that Mandela’s death taught him nothing about Apartheid in modern cities these days. It’s not based on just color and creed. But, it’s the money thing that pops out right in your face too today.

The rich get to save on average 15-25% of what they earn. But, they of course get the right to put away what the workers end up spending. Workers spend (that’s the 99% of the US), rather than saving these days.

A New World

There are billionaires that would like to see the construction of brave new worlds in which entrepreneurs have the space and the comfort to “peacefully test ideas for government” (The Seasteading Institute), floating cities, where there will be a “blueprint for a new way of life – one that is more equitable, tolerant ad entrepreneurial”.

That’s just as long as you are one of the rich few. Pure Hollywood motion picture becoming reality.

They want to be able to build societies, cities that float off the coast of the US. Just near enough to be dropped from the helicopters and the private jets; but just far away enough to see the poor masses swimming over if they need to take cover and protect themselves. Government doesn’t need the techies to think up new ideas to change the way they govern us. They are doing pretty well all on their own thinking of new ways to keep the people down.

The Jungle

Naturally, the poor people that Gopman wanted to see on the other side of town where those that live in The Jungle.

• It’s the Silicon Valley eyesore; the place where people live in encampments.
• The USA has seen its homeless figures fall by 17% over the past 2 years.
• Silicon Valley increased by 8%.
• There are 7, 600 people that are sleeping rough and homeless every night in the Valley.

Once upon a time it was the banksters that were reviled for their aloofness and towering over the poor people with their millions. Now, they have become so commonplace that it’s the techies that are getting the flack, assailed with abusive language. Trivializing the situation and the poverty of the majority will never get you very far.

The techies have turned their Silicon Valley into the Promised Land and they are the gods.

It’s the techsters now that are taking over from the banksters.

The United States has been divvied up between the grubby ideas of the political leaders already that have ensured that the poor and the people in the middle class get no look in on what is being decided. We know from research that Senators and Representatives see little effect on them brought about by the bottom third of the strata of society. There’s no surprise that people are demoralized by what’s going on in the country and disinterested in politics.

The politicians stopped listening to people many years ago. Now, the country pie is being cut up and doled out yet again by the handful of arrogant masters of Silicon Valley. Profiteers and privateers are the ruling class.

But, in the mainstream of society there are people that are living like dogs. The only thing that the arrogant techies should take heed of is that dogs usually have nasty bites at some point.

Originally posted: The Arrogance of Silicon Valley

 Water and Agriculture | Mandela and Obama: Millions of Miles Apart |  Potato Juice Just Got Upped | Government: Byword for Corruption | Getting Ready for the Big One: February 2014 | Pornvestments | The Stooges are Running the Show, Obama |  Banks: The Right Thing to Do | Bitcoin Bonanza | The Super Rich Deprive Us of Fundamental Rights |  Whining for Wine |Cost of Living Not High Enough in EU | Record Levels of Currency Reserves Will Hit Hard | 

Technical Analysis: Bear Expanding Triangle | Bull Expanding Triangle | Bull Falling Wedge | Bear Rising Wedge | High & Tight Flag 

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/G_ORHgTfBcI/story01.htm Pivotfarm

First CSCO cited Government (NSA)-related cuts for its dismal results and now Boeing, considered the front-runner, has lost a $4.5 billion contract to provide jets to Brazil because, as officials exclaimed, “the NSA problem ruined it for the Americans.” Sweden’s Saab won the contract instead for 36 new fighters to be delivered by 2020. As Reuters reports, one U.S. source close to the negotiations said that whatever intelligence the spying had delivered for the American government was unlikely to outweigh the commercial cost of the revelations. “Was that worth 4 billion dollars?” the source asked.

 

Via Reuters,

Brazil awarded a $4.5 billion contract to Saab AB on Wednesday to replace its aging fleet of fighter jets, a surprise coup for the Swedish company after news of U.S. spying on Brazilians helped derail Boeing’s chances for the deal.

 

…

 

Aside from the cost of the jets themselves, the agreement is expected to generate billions of additional dollars in future supply and service contracts.

 

…

 

The timing of the announcement, after more than a decade of off-and-on negotiations, appeared to catch the companies involved by surprise.

 

…

 

Until earlier this year, Boeing’s F/A-18 Super Hornet had been considered the front runner. But revelations of spying by the U.S. National Security Agency in Brazil, including personal communication by Rousseff, led Brazil to believe it could not trust a U.S. company.

 

“The NSA problem ruined it for the Americans,” a Brazilian government source said on condition of anonymity.

 

A U.S. source close to the negotiations said that whatever intelligence the spying had delivered for the American government was unlikely to outweigh the commercial cost of the revelations.

 

“Was that worth 4 billion dollars?” the source asked.

 

…

 

“We are a peaceful country, but we won’t be defenseless,” Rousseff said on Wednesday at a lunch with senior officials from Brazil’s military, where she said the announcement was forthcoming. “A country the size of Brazil must always be ready to protect its citizens, patrimony and sovereignty.”

 

It seems the NSA Spying blowback is just beginning…

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/pK6hO3PWUwY/story01.htm Tyler Durden

Take one serving of pre-triple dip recessionary France, add a dash of US-made drones, drop a pinch of Al Qaeda scapegoating and the now generic false flags, and let it all simmer in the latest global conflict in which the uninvited west has decided it is its moral role to intervene, and what you get is the latest hilarious development out of military superpower France, which is now preparing to unleash US drones in West Africa. The comedic possibilities one ends up with are countless.

From Reuters:

France will deploy its first U.S.-made unarmed surveillance drones to West Africa by the end of the year, Defence Minister Jean-Yves Le Drian said on Thursday, as it seeks to “eliminate all traces of al Qaeda”.

 

France’s military intervention in Mali in January exposed its shortage of surveillance drones suitable for modern warfare, forcing it to rely on the United States to provide French commanders with intelligence from drones based in neighbouring Niger.

 

Paris said in June it would buy 12 Reaper reconnaissance drones built by privately owned U.S. firm General Atomics to eventually replace its EADS-made Harfang drones.

 

“Two drones that we have bought will be operational by the end of the year in Africa, in the Sahel. That is their main mission,” Le Drian told Europe 1 radio.

 

Niger gave permission in January for U.S. surveillance drones to be stationed on its territory to improve intelligence on al Qaeda-linked Islamist fighters in the region. Le Drian said pockets of militants remained in Mali, whom Paris would go after. They included veteran Islamist commander Mokhtar Belmokhtar, who claimed responsibility for attacks in Niger and on Algeria’s In Amenas gas plant earlier this year.

The humor does not end there:

“We have led successful counter-terrorism attacks in recent days and we will continue to act to eliminate all traces of al Qaeda,” he said. “These terrorist groups come and go, regroup and then disperse, so we need to follow them closely. This will be the role of our forces in 2014. There will be 1,000 soldiers in Mali whose main mission will be counter-terrorism.”

 

French forces killed 19 Islamist fighters during security operations in Mali’s northern region of Timbuktu earlier this month.

 

France intervened in Mali at the start of the year as Islamist forces, who seized control of the north in the confusion following a military coup in March 2012, pushed towards the capital Bamako.

 

Their advance lifted Mali to the forefront of U.S. and European security concerns, with fears the Islamists would turn the country into a base for international attacks.

Such pristine, unrequited nobility…

Of course, what was not mentioned anywhere, is that France, with its multi-decade high unemployment, is on the verge of a recession. And not just any recession, but a triple-dip, which would make it Europe’s first country to undergo a triple dip in the Eurozone’s history. So what is this socialist paradise to do? Why read chapter 1 of Keynes for Idiots of course: when in depression, start – or escalate – a war.

Q.E.D.

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/Vv90rsqJmOA/story01.htm Tyler Durden

Wolf Richter   www.testosteronepit.com   www.amazon.com/author/wolfrichter

The feverishly awaited taper announcement, after months of deafening Fed cacophony, is in the can. The Fed, unless it backtracks again, will cut its purchases of Treasuries and Mortgage Backed Securities by $10 billion in January, and possible every month until it’s done with its money-printing and paper buying binge. The program repressed mortgage rates and inflated the value of MBAs.

But mere talk of ending it has sent mortgage rates soaring – and mortgage applications plunging to the “lowest level in more than a dozen years,” lamented the Mortgage Bankers Association. The Refinance Index has crashed. The all-important Purchase Index is now 12% lower than last year.

People who need mortgages to buy homes – hence, not hedge funds, private equity firms, oligarchs, and other sundry investors – have been throttling back. Sales of existing homes slumped for the third month in a row in November, down 4.3%, to a seasonally adjusted annual rate of 4.9 million, 1.2% below last year – the first annual decline in over two years. It’s just getting too darn expensive. Home prices have soared over the last two years. And mortgage rates have soared since May. A toxic concoction.

The average contract rate for 30-year mortgages with conforming loan balances ($417,000 or less) rose to 4.62%, up from 3.59% in early May. Over a full percentage point. Just on taper talk – though the Fed has continued its bond-buying binge with relentless determination. Where will mortgage rates go when the Fed actually stops trying to repress them?

Interesting times.

Now comes part three of the debacle, after soaring home prices and mortgage rates. It was drowned out by the hullaballoo over the Fed’s taper announcement. It came from our favorite bailed-out, taxpayer-owned Fannie Mae and Freddie Mac that purchase mortgages from banks and then either keep them on their books or stuff them into MBAs that they sell with some guarantees. Biggest buyer? The Fed. It has been plowing $40 billion a month into them – to be reduced to $35 billion in January.

The banks love this system because they get the fat fees from originating the mortgage without having to absorb the risks. The GSEs and the Fed run the show. Banks are involved just enough to cream profits off the transaction. It’s not exactly the paragon of a free market.

But there are some efforts underway to encourage private capital to play a larger role. So last week, the Federal Housing Finance Agency announced that it would impose a 10 basis-point increase (1/10th of 1 percentage point) in guaranty fees that Fannie Mae and Freddie Mac charge banks. And now Fannie Mae and Freddie Mac have announced that they would revamp their risk-based matrix of fees that they charge lenders.

Lenders roll these fees into the mortgage, which drives up monthly payments. The change will hit borrowers with a so-so credit score who cannot come up with a down payment of at least 20% – hence the majority of all borrowers – the hardest.

“What had been an exercise by regulators to systematically attract private capital into the mortgage market has now turned into an attempt to shock private capital back into the system,” explained Mortgage Bankers Association CEO David Stevens. “The timing of this could not be worse, especially with the Qualified Mortgage Rule, which is already tightening credit, going into effect in January.”

And with mortgage rates already jumping.

Based on the Mortgage Bankers Association’s analysis, guarantee fees – Loan Level Price Adjustments, they’re called – could increase by 0.75 to 1.5 percentage points for borrowers stuck in so-so credit-score purgatory.

“As a result, a borrower with a 730 FICO score making a 10% down payment will pay an LLPA of 2.25% for a 30-year fixed-rate loan, up from today’s fee of 0.75%,” the Mortgage Bankers Association pointed out. “These increases are in addition to the 10 basis point ongoing guarantee fee increase. The estimated net impact on this borrower would be a 50 basis point increase in the interest rate costing borrowers thousands over the life of the loan.”

Half a percentage point! On top of the full percentage point that mortgage rates have already increased, on top of any increase in mortgage rates that might occur as a result of the Fed’s withdrawal from binging on MBAs. That’s the first hint of what might happen when a subsidized industry as housing is being encouraged to try to stand on its own wobbly feet.

The Mortgage Bankers Association, which represents banks that have gotten fat by creaming off profits from this subsidized process, is now aggressively lobbying against the change. They want neither the Fed nor the taxpayer to abandon them.

It was a “dangerous and misguided” approach, Stevens said. “These fee increases could have a negative effect on the fragile housing recovery and could harm the very potential home buyers and borrowers that the housing market needs to sustain that recovery.”

Of course, home buyers only have to pay the fees if they want to get the lower mortgage rates that these government guarantees make possible. If they don’t want to pay the fees, they can always pay an even higher rate for a mortgage that is not guaranteed by the GSEs. In either case, owning a home is in the process of getting much more expensive.

Hard-pressed consumers are hitting a wall. So, something will have to give: either mortgage rates (if the Fed were to backtrack) or home sales and eventually prices. And that would be the end of the “housing recovery.”

These hard-pressed consumers are already showing their teeth. Discount retailer Loehmann’s did what other retailers – and a large number of other junk-rated companies – will do once the Fed allows a sense of reality into the markets: it filed for bankruptcy. Read…. Junk-Debt Time Bomb: Ticking Till The Fed’s Money Dries Up

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