The Economy Guy

Stocks fell off today – just some worthwhile profit taking in my opinion.  Bonds went sideways.
The Dollar gained half a cent against the Euro, and gold rose significantly past $1150.
Oil and gasoline dropped slightly

In the news today…..

Mortgage Rates – rose today to 5.31%; up 0.25%.  To put this in perspective, a 0..10% increase is a BIG increase.  A quarter percentage increase is just massive.  This was to be expected as the FED stopped buying mortgage securities last week, the end of March.  We could say that the markets are adjusting to the new “non-buying by the FED” environment.  This is like San Francisco adjusting to the big earthquake; it burned down afterwards.  To put his in perspective, the increase in interest rates will be very negative to home buying.  No one likes to pay higher mortgage payments.  However, it will only slow down home buying as long as the mortgage rate stays below 6%.

60% of Americans – think it is a good time to buy a home.  This sentiment is because most of Americans think that American home prices will be the same or higher one year from now.  This is good for the housing market – but it doesn’t take into account the recent mortgage rate rise.  It doesn’t really matter what actually happens to home prices in the future – as optimistic people will buy through ignorance.

Ex-FED Chairman Greenspan – testifying in Congress today said that he wasn’t aware of the bad decisions of Fannie and Freddie until Sept 2009.  Fannie and Freddie starting buying subprime mortgages in 2003 at massive rates, and bought 40% of the world’s supply of the toxic mortgage securities.  This encouraged the crimes in mortgage lending, appraising, securitization, etc.  If there hadn’t been an outlet for that crap, as much of it wouldn’t have been sold.  Why did Fannie and Freddie buy it?  They were pressured by HUD and Congress to loosen their standards – thank you Barnie Franks and Chris Dodds.  Someone needs to knock off Barnie Franks in the 2010 election – but I don’t see that happening.  Chris Dodds is retiring – and I wish him a peaceful retirement away from DC.  These politicians thought that “social justice” was important in the housing market – and I hope everyone can see the results of that policy.

Fed Chairman Bernanke – said today that there is NOT a sustained correction to the housing market in the US.  Is he reading the economyguy?  Of course there isn’t a sustained correction yet.  When you have banks holding back on foreclosures because they don’t want to own the foreclosed property and must therefore write down the value of that home from their bank reserves, you have a situation where bank regulations (written by our federal government) is just slowing our economy one step at a time, and not allowing it to correct itself within the context of the supply/demand free market.  We are going to see this bank interference in the free housing market for the next 2 years at least.  The Federal government (using your tax dollars) are giving banks a couple of thousand dollars to allow people to foreclose (or deed in lieu) their properties over to the bank – but what’s a few thousand compared to the tens of thousands that some banks are getting from FDIC guarantees on loan losses???  The Federal government doesn’t know what it is doing in the housing market – or another way of looking at it is they are asleep at the switch.  Remember to vote soon and vote often.

New York City Section 8 – payments are being reduced because HUD reduced the amount of money being given to NYC.  Is this a sign of the times?  Is this going to jeopardize the Section 8 rental market around the US?  Is this a sign of things to come?

Tonight’s Dinner Conversation…..

More on drugs.  Russia and NATO (read the US) clashed over whether or not to destroy the poppy production in Afghanistan.  Guess who was on each side of this argument!!!!

Russia wanted the production destroyed – as Afghanistan is the world’s biggest producer for heroin, and heroin is a very big problem in Russia.

The means NATO (meaning the US) didn’t want to destroy the poppy production.  Why would this be so?  Well, maybe it’s economics as heroin is the major producer of cash for the country.  This tells me that the US is on the wrong side of this moral decision, and I am very sorry to have to report it.

However, people reap what they sow.  Afghan President Karzai, and clearly corrupt politician whose brother is reported to be in the heroin trade, is giving the US the middle finger, and provides the biggest challenge that Obama has in Afghanistan as a cornerstone of Obama’s strategy is to have a strong central government, respected by the people of Afghanistan, and providing protection in all corners of the country.  Clearly Karzai isn’t that person.

Here are the last numbers for today:
Dow Jones 30 Industrial – 10,898 (down 72)
10 Year Treasury Bond – 3.96% (down 0.01%)
Euro – $1.3354
Gold – $1152 (up $17)
Oil – $85.76 (down $1.08)
Gasoline – $2.31  (down $0.03)