Patrick.net

Patrick Killelea‘s site Patrick.net has since 2004 been a great source of news stories (subscribe to the daily newsletter) and shared experience for house buyers who found the housing market being driven bubblicious crazy. All courtesy of Easy-money Al Greenspank, broker-licious fraudsters and banksters, greedy realtards, and get-rich-quick homedebtors.

Patrick shrewdly realized that these like-minded folks needed a place to give expression. I’ve been a subscriber since 2007, his daily newsletter is indispensable for anyone desiring to stay ahead of the bluster of propaganda (bullshit) broadcast throughout the mainstream sources.

Housedebtors
So, you thought you own a house? If you have a mortgage, do you really ‘own’ that house? Or, are you merely renting it from a bank. You might have equity someday, but only if you go by the old bubblicious model pre-2007. What part of that appreciation will be eaten alive by inflation? Seeing as deflation is the current state of affairs (according to Case-Shiller), prices are going down now and for the foreseeable future- even without the added pressure of higher interest rates.

In the end you have to crunch the numbers and decide if owning makes sense for you. If you think it will be cheaper than renting, the Old Gray Lady can help you with that. Consider that many reliable sources foresee the housing market trending down for the next 5, 10, 15 years (pick one). Each potential house buyer has to ask him/herself: Do I really want to catch a falling knife?

[ Part 2 ]  [ Part 3 ] [ Part 4 ] [ Part 5 ]  [ Part 6 ]

Donate here.

Here are some other sites worth regular visits:

Dr. Housing Bubble
Housing Doom
Jesse’s Café Américain
Great Depression of 2006
The Automatic Earth
Of Two Minds Blog
naked capitalism
Mish
Irvine Housing blog
Professor Piggington’s Econo-Almanac for the Landed Poor

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“This is how empires dwindle, grow vulnerable, and then collapse: the productive are taxed while the wealthy game their way out of paying their equitable share, while the status quo (the State/Plutocracy partnership) showers bread and circuses on the unproductive to buy their silence and complicity as the Oligarchy/Plutocracy loots and ransacks what is left of a productive economy and culture.” -Charlie Smith

Goodbye, middle class

“The middle class is finding itself struggling to keep what was once seen as staples of a burgeoning working class in our country. Part of this battle has come from a system that has rewarded easy finance on the backs of the working class. Take for example residential real estate. For decades, this was probably one of the most boring and dull sectors of the economy. Residential real estate, if you were lucky, only tracked the overall inflation rate. That was the case until the banking system figured out a way to securitize bread and butter mortgages and turn them into securities for global consumption. Yet that game is now coming to a quick end. The middle class are literally being squeezed out of their homes. Healthcare costs are also cutting deeper into the wallets of most American families and many are finding that they have no coverage as unemployment is still at record levels. This decade will be a struggle for the middle class to save and prosper.”

[ My Budget 360 ]

Related:

America, the fragile empire [ latimes ]

“Over the last three years, the complex system of the global economy flipped from boom to bust — all because a bunch of Americans started to default on their subprime mortgages, thereby blowing huge holes in the business models of thousands of highly leveraged financial institutions. The next phase of the current crisis may begin when the public begins to reassess the credibility of the radical monetary and fiscal steps that were taken in response. “

American manufacturing sucessfully exported to China! [ American Prospect ]

“Since 2001, the U.S. has lost 42,400 factories — and its technical edge. “

“Something has gone radically wrong with the American economy. A once-robust system of “traditional engineering” — the invention, design, and manufacture of products — has been replaced by financial engineering. Without a vibrant manufacturing sector, Wall Street created money it did not have and Americans spent money they did not have.

“Americans stopped making the products they continued to buy: clothing, computers, consumer electronics, flat-screen TVs, household items, and millions of automobiles.

“America’s economic elite has long argued that the country does not need an industrial base. The economies in states such as California and Michigan that have lost their industrial base, however, belie that claim. Without an industrial base, an increase in consumer spending, which pulled the country out of past recessions, will not put Americans back to work. Without an industrial base, the nation’s trade deficit will continue to grow. Without an industrial base, there will be no economic ladder for a generation of immigrants, stranded in low-paying service-sector jobs. Without an industrial base, the United States will be increasingly dependent on foreign manufacturers even for its key military technology.“

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“All this talk about “free markets” and the virtues of “private market disciplines” go out the window should the actual discipline of markets impose losses on these institutions.” -Marshall Auerback

Dean Baker- Quote du jour

“I don’t see anything being gained by holding housing prices higher than the market rate,” says Dean Baker, economist and co-director of the liberal Center for Economic & Policy Research in Washington. “It is difficult to see why the government would want to pursue policies that would encourage people to pay too much for homes.“

The article this quote comes from is Businessweek which is surprising, really. Reading this in one of those “MSM” publications that co-sponsor lies directly fed from the <ahem> Fed., Inc. (“you’re real governing body”) who substitute artfully penned opinion for fact, and slant figures to support their conclusions.

He is truly the “Deaner,” having identified and wrote often about the trouble with our bubble.

A few of us noticed.

I suggest reading the rest of the article as well, because if you like your dope straight, it is rare that you’ll find it in an officially sanctioned news source:

America’s housing market implosion was the epicenter of the Great Recession. It’s hardly surprising that the federal government directed enormous resources at the market. Besides bailing out vulnerable banks, the federal government nationalized mortgage behemoths Fannie Mae and Freddie Mac, opened the lending spigot at the Federal Housing Administration (FHA), passed a first-time home buyers’ tax credit, and established a mortgage modification program for troubled homeowners. The Federal Reserve embarked on a $1.25 trillion purchase of mortgage-backed securities in an effort to engineer lower mortgage rates.

The Herculean efforts may be understandable. But they were a mistake in the early months of the downturn—and now stand as a public policy blunder in the early months of a recovery. That’s a harsh judgment, but it’s way past the time for ending taxpayer support of the housing market.

These policies are geared toward propping up home prices, the definition of a perverse public policy. Artificially holding prices at above-market levels harms new potential buyers, from young adults starting their own households to immigrants putting down stakes in the American Dream. The subsidies wrongly delay the inevitable home market price adjustment to excess supply in many markets across the country.

[ Businessweek ]

So yeah, if you start out from a disadvantage in life in this great nation, not only do you have to work triply harder than someone who started life, say, on third base, but you have the added struggle of public policy stacking the deck against you.

Many people will work hard to overcome their backgrounds and find a way to live the American dream (not home ownership, btw, but justice and equality under the rule of law) in spite of this.

It’s just that fewer and fewer will realize that dream.

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“All this talk about ‘free markets‘ and the virtues of ‘private market disciplines‘ go out the window should the actual discipline of markets impose losses on these institutions.” –Marshall Auerback

Today’s quotations offering insight, perspective, apportioning responsibility, pointing out delusion

“The only lesson that central bankers and politicians have learned is that there is nothing wrong with a Ponzi scheme. It is just that you can’t allow the game to end. Present initiatives to arrest the problems are merely designed to prolong the game without addressing the root cause and imbalances.” -Satyajit Das, New Money

“With its talk of new taxes on banks, is Team Obama reverting to its now well established pattern of crony capitalist giveaways with the occasional phony populist reform as an increasingly ineffective disguise?” -Yves Smith, Administration Bank Tax Plan: An Empty Populist Gesture by Design?

“Almost all people are delusional and think the post-bubble housing crash is the aberration, and that the housing market will return to normal one day in the (near) future. They do not understand that the bubble was the aberration, and those days are over and dead. They thought the bubble prices were the new norm. And the strange thing is that they liked it. They delighted in receiving a high price for their home, and never seemed to be able to factor in the reality that they would also pay a higher price for another home. Not understanding the bubble is a principal part of the problem in getting those people to understand the whole of their financial problem. Also, people do indeed desire to avoid default and they fear the effect that a poor credit rating will have on their future. I agree with Lowenstein that most credit rating fears are a bit overblown, and besides, it is far less problematic to absorb the short-term trauma from a shoddy credit rating and radically improve your long-term financial prospects while shedding the iron monkey on your back.” -Karen De Coster, It May Be Financially Irresponsible to Pay Your Mortgage

“Much of the devolution we now face is a direct result of the degradation of integrity. This moral/ethical component of financial implosion is glossed over by the MSM because the Power Elites have implicitly undermined integrity and morality as a means of soldifying their control of the propaganda machine (the media) and of the national income.” Charlie Smith, The Inherent Problem with Offering Specific Advice

Also, check out this Youtube rant Massive Tzunami of Home Defaults Coming or How to Rob America Blind

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“If the Mortgage Bankers Association is against defaults, its members, presumably the experts in such matters, might take better care not to lend people more than their homes are worth.” -Roger Lowenstien

Why Bank Of America Fired Me

Battle Royale with cheese

The shit is wide, the shit is deep, but one man has employed a boat full of lawyers to fight the power:

This shit is global

“Countrywide’s lawsuit was filed in the name of Countrywide as loan servicer, and MERS as mortgagee. I thought it strange that some unknown entity (MERS) was in a fight with me. I started doing research. This is what I found (explained in layman’s terms). Countrywide had sold the note to a trust that had been set up by the gurus on Wall St. There were 16,000 notes in the trust owned by god knows how many investors. They of course could do this because for the first time in the history of world finance, these “gurus” had separated the mortgage (collateral) from the note. MERS holds my mortgage which is recorded per law at my county court house. They don’t and will never be my, or your, note holder. This separation of the note and mortgage gives Wall St. the ability to “transfer/sell” my note at a click of a mouse thus circumventing the age old process of recording the transfer in my county court house. This slight of the hand is the fraud that created the entire secondary mortgage market and eventually the trouble we are in today. Countrywide is my loan servicer…which means they are nothing but a bookkeeper and collection agency. The holder of my note was yet to be determined.”

[How I am beating the crap out of Countrywide/MERS]

I think he means “sleight of hand” but pedantics aside, he absolutely nails it- that moment in time when our goose went into the oven at 450 degrees.

It is not done yet, but someone should check because I think I smell something burning.

I like the way in which the author reveals the sort of institutionalized chicanery that has evolved throughout the financial system unchecked, and employed like a truncheon on the back of the head of the unsuspecting little guy walking along Main Street.

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Additional perspectives on MERS:

Mortgage Electronic Registration System Loses Legal Shield
[ Barry Rtitholtz ]

Has a MERShole opened up?
[ Karl Denninger ]

Mortgage Electronic Registration Systems (MERS): A System Designed to Create the Mortgage-Backed Security Bubble
[ Dr. Housing Bubble ]

Waking up to discover the mortgage market was a giant criminal enterprise
[ Matt Taibbi ]

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Debts are not always repaid. The financial markets are not always in equilibrium.

Weekend reading

The US-China Ponzi scheme
by Jon Markman

By unwittingly tying together their fortunes as they pursued their own interests, the 2 nations have put themselves on an economic path of mutually assured destruction.

Over the past decade, Americans were able to outspend their incomes by easily rolling their debts forward through serial home refinancing. The situation was never ideal, but it worked as long as the value of their collateral — their homes — kept rising.

Madoff clients’ households crashed, and now one-time millionaires are broke. The reality is that they were always broke; they just didn’t know it yet.

“People need to realize that China doesn’t actually have any real U.S. money,” Das says. “Unless they can turn in their bonds and exchange them for something else, they’re only paper assets. Yet if they try to exit the position, they’ll destabilize the dollar, and the value of the rest of their assets will plunge. And that’s not even their biggest problem. It’s that they also need to keep buying Treasurys, or interest rates will go up and their capital losses will be terrible.”

In short, Das says, Beijing thought it had discovered the perfect scheme for establishing independence from the West, yet it has instead made its dependence worse than ever. And he observes that one unspoken reason that China has gone whole-hog on its massive, $650 billion fiscal stimulus program — creating more factory capacity in a country that is already reeling from overcapacity — is that the effort gives it cover to stockpile copper, oil, iron ore and other hard assets that it considers to be better stores of value than dollars.

There is only one solution left: a long, slow, boring, lonely, soul-crushing process of digging out from under the piles of debt that got us into this mess.

[MSN]

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The Seigniorage Curse
by Gregor MacDonald

Another country that now looks quite arrested in its development is the United States. But not because of an Oil Curse. Rather, the United States appears to have finally succumbed to its multi-decade “advantage” via dollarization. In dollarization, the US Dollar has been the world’s reserve currency, and the United States economy has “enjoyed” the freedom to borrow and print ad infinitum without the usual penalties.

Seigniorage had allowed us to stop earning our living, and eventually we “bundled up and packaged” our real estate. Interestingly, it’s only in the aftermath of the burst housing bubble that we observe how many Americans are being ‘forced to sell” their homes. In fact, Americans had already sold them.

[Gregor.us]

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Washington’s Dilemma: This Isn’t a Recession, It’s a Collapse
by Gregor MacDonald

Nothing in the public record since the year 2000 indicates that Larry Summers, Ben Bernanke, or Tim Geithner understood that we had been building a skyscraper of private sector debt in textbook blow-off style, since the deflation scare of 2001. Now, two years after FED repair operations began on the broken credit system, and over 3 years since US real estate topped in price, major portions of the country are staring at further home price declines in most major markets. Indeed, it appears that the same macro cycle of the last two Autumns is about to repeat, with more waves of foreclosure, more withdrawals from savings and investment to pay for living expenses, and the attendant bailouts of financial institutions that comes around each time.

[Seeking Alpha]

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“Free is coming to an end.” -Gregor MacDonald

Madoff’s Ponzi Partner Roams Free

This guy is one of apparently many accomplices that benefited (and perhaps helped direct) such massive fraud. They are doing everything in their power to stay off the radar.

Let’s hope the Madoff “victims” continue to keep the cross-hairs zeroed on Bernie’s fellow Ponzers.

After reading this account of Jeffry Picower’s involvement (let’s call it bezzling) with big pharma (see this series of articles on Milken too), I am starting to come to the conclusion that the games these investor types  (among their cohorts: Martha Stewart) are playing with pharma is but nothing better than a very advanced shell game.

He isn’t under investigation, he isn’t answering questions, he’s laying low and and he’ll do everything he can to stonewall any and all inquiries until people just lose interest. And he’ll likely keep every cent (and then some) of his billion-dollar bezzle proceeds.

Clawback Now! Disgorgement is the Way Forward!
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Dem snake oil salesmen have come a long way, baby.

The hyperinflation argument, part deux

Perhaps the current crises in housing/credit/derivatives/leadership/good governance are not the most important problems this country is facing- just the most immediate. Perhaps this is merely just the tip of the iceberg… and the future this country is facing is an increasingly downward slope. (Got snowbaord?)

For far too long we have conveniently ignored the demographic reality of a swelling tide of retiring of boomers (and we’re still giving it the silent treatment, officially). As the event horizon comes into focus, a harsh reality intrudes into this golden time-space.

Boomers retiring in ever- large, successive waves, will undoutedly have a very significant impact on aggregate investments and retirement accounts.

By cashing out and drawing down pensions and 401(k) accounts en masse… and with fewer able bodies left to support the Social Security/Medicare Ponzi scheme debt load… the only way to mathematically meet that promise at nominal value is to (brace yourself, Sheila) inflate. Of course, the wizards behind the curtain will likely overshoot and hyperinflation could very likely result.

Due to the political expediency of growing an economy out of the last Great Depression (GD1), perhaps politicians and policy makers didn’t have any interest in listening to the few actuaries who undoubtedly realized what the end game might look like. After all, they’d be long gone…  and who listens to actuaries?

If only…

Still, it was fun while it lasted… get ready, ladies and sperms, if you are in the camp which believe hyperinflation is the final leg down (or is it up?), then it’s nearing time to pay the piper!

Baby Boomers: It’s All Your Fault

The big question, of course, is what happens when boomers start to retire. The oldest of them became eligible for Social Security in 2008, and as we move forward in time, more and more of the bulge will switch from middle age — when they’re busy earning and spending — to retirement, when they start to draw down on their savings. According to the “age wave theory,” popularized by money manager Harry Dent in the late 1990s, when the boomers hit this transition point, the U.S. will enter a long bear market, as new retirees start tapping into their pension funds and 401(k)’s, selling their stocks and bonds to pay for their golden years.

Seen in this light, the credit boom and bust was almost an inevitable byproduct of demographics. As the boomers hit their peak spending and borrowing years in the late 1990s and 2000s, they splurged on second homes, SUVs, and went crazy on credit. At the same time, pension funds and retirement accounts peaked in size. There was more money than ever, since boomers had entered their final decade before retirement, and fund managers grew desperate to find attractive returns for the huge piles of cash they managed. Hence, when charming bank salesmen came bearing AAA-rated CDOs backed by subprime mortgages, it was an offer they couldn’t refuse. The subsequent crash marked the turning point, after which the boomers will buckle down, try to rebuild their nest eggs in the final years before retirement, and soon thereafter start to draw down on the assets they’ve accumulated over a lifespan.

[Newsweek]

I don’t have to tell you what happens when everyone wants to exit the market at once.

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Proper planning prevents piss-poor performance.

The hyperinflation argument

According to this, the “very smart” money sees this as the gummint and the Fed, Inc.’s preferred option:

Ah, there’s the tough question. We know where the dumb money is…but where’s the smart money? Jeff Clark says it’s short stocks. But there’s some very smart money that is betting that the government will turn this around. They’re putting their money on inflation…or even hyperinflation. Our old friend, Marc Faber, for example, says he is sure the United States is headed for hyperinflation. If so, shorting stocks may not be such a shrewd move. Stocks could soar too – as investors try to buy anything and everything that didn’t have dollar signs on it.

You see, there are two ways to deleverage an economy.

The obvious way is the traditional, honest way – in which people actually try to pay their debts. This causes the problems we see as falling asset prices, bankruptcies, joblessness and the other hallmarks of a Great Depression.

But the feds have their hearts set on preventing a depression. And they’re doing it the only way they can…by the old ‘hair of the dog’ technique. The economy suffers from too much debt – so they’re going to give it more! Much more.

We have had many laughs following the feds and their war against capitalism. They’re gambling an amount nearly equal to the entire U.S. GDP to try to prevent people from getting what they have coming. In the process, they’re almost certain to make a mess of things.

The smart money is betting that they fail to stop deleveraging. But the very smart money is betting that they create a new, worse problem – inflation, maybe hyper-inflation. Inflation reduces the real value of debt…but in a perverse and unpredictable way. Debtors don’t pay their bills; savers pay them. Inflation – like bailouts – rewards the least responsible players…those who have gotten themselves heavily in debt…and punishes those who have done the ‘right’ thing.

[Daily Reckoning]