Saturday, September 29, 2007

Crap Fed Data: The Cat is Getting Out of the Bag

Minyanville points to mainstream reporting of what every adult knows: Inflation is already here. Reader's Digest version: the CPI (Consumer price Index) is bullshit.

The counter argument to this is that some items are falling in price like cars, shoes and computers. Here's the problem: I'm not dumping my 2005 Ford Taurus which is now worth $8000 because new ones have gone from $21,000 to $19,000. The cheap shoes are not worth wearing or buying. Is shopping for cheap Chinese crap at WalMart supposed to be an enriching experience? Again, my PC is two years old, am I supposed to cheer that a 3Ghz processor is now only $1200?

All this needs to be against a back drop of 8% health insurance increases, gasoline prices that have doubled in 3 years, a 50% increase in electricity (thank you, Keyspan). Wait until the oil bills hit this winter. There's a picture that summarizes this scenario:

Fed Slashes Rate, Mortgage Rates Go Up

Since the last post the Fed slashed rates. All investors take note of stuff like this. One of the assumprions is that the cut in the Fed funds rate will trickle down to consumer and help create lower mortgage and credit card interest rates.

Well, not so far. From this interest rate newsletter I get from HSH Associates:

Mortgages: Rate Spreads Narrowing

September 28, 2007 -- Short-term interest rates may be lower, but fixed mortgage rates are drifting in the other direction, according to the nation's leading survey of good-credit mortgage prices. The average 30-year fixed rate mortgage (FRM) rose by two basis points this week to close the week at 6.82%. Hybrid 5/1 ARMs, often a popular alternative to the benchmark FRM, slipped backwards by seven basis points to 6.54%.

I've been intrigued by the scathing criticism of Barry Ritholz and Peter Schiff, gentlemen featured on Larry Kudlow's CNCBC show. I guess we're seeing the "Helicopter Ben" effect after all, swooping down to the rescue of investment firms and the banks who made the risky loans.

It's welfare for the rich!

Sunday, September 9, 2007

Countrywide Slashing Jobs

From the

Countrywide (CFC), the lender laid low by the troubles in the mortgage market, is prepared to slash up to 20% of its work force.

The California-based mortgage banker said Friday afternoon that it could shed 10,000 to 12,000 workers in the next three months. The eliminations will occur "in areas most impacted by lower mortgage market origination volumes," the company said.

Countrywide, for those of you who do not know is the nation's largest home lender.
There's another lender, not a bank, but a speciality lender who does business with the
richest of Americans, whose default rate is about .1% (slight exaggeration) who may very well go out of business: Thornburg Mortgage (TMA). This analysis comes from Jim Cramer, NCBC host of Mad Money.

He's got this theory that the Fed is seeking to crush any mortgage provider who is not a deposit-holding bank. On Kudlow and Co., Larry Kudlow is claiming that he banks are hoarding cash so as to crush the investment bank who have been honing in on their business for years. Hence, the Fed's discount window rate cut has done nothing to settle things down.

This is an interesting thread that I'll be following. The Fed Chairman seems intent on creating a Depression at this point.

Monday, September 3, 2007

How Can the Fed Know Anything When Their Data is Crap

Seeking Alpha explains how the Fed ignored real home prices, overextended the economy and caused this whole mess.

Sunday, September 2, 2007

They Know Nothing

Note to FED: 7 million Americans losing their homes is a bad thing especially after you enticed them with teaser mortgage rates and then raised rates on them 17 times. This is the seminal event that sorta got me going. More on this later.

France Gets Back to Work

Madame Can-Do will get France working

WHEN Christine Lagarde, France’s first female finance minister, returned to Paris in 2005 after a six-year stint at an American law firm, she was bewildered by the change that had come over her countrymen. Nobody seemed that keen on working.

“They were more interested in chatting about their holidays, about their long weekends,” said Lagarde, a willowy figure of 51 in an elegant suit. “Doing nothing was very much the mantra and work was disregarded.”

Since then Lagarde, former head of Baker & McKenzie, the world’s largest law firm, has set an example: her diligence has helped to turn her into the most powerful woman in France, the key general in President Nicolas Sarkozy’s campaign to get the country working again.

Speaking of France: I was eyeballing investing in Total S.A. (TOT), until I heard that they are basically financing Iranian terrorists in Iraq killing American soldiers. Hmm... that'd definitely go against my investing ethos.

Perhaps there will be other investment opportunities now that the French have decided to rejoin the real world.

Mission Statement

I'll be posting on all things economic especially in regard to social trends and the stock market. I run another blog on another topic all together which I hope now to keep a bit more pure but the two will relate.

Like in my other blog, I choose sides and make no apologies for it.

First Post: the Inspiration

Jesus entered the temple area and drove out all who were buying and selling there. He overturned the tables of the money changers and the benches of those selling doves. Matthew 21:11-13 (RSV)
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