Video ~ Meredith Whitney talks Banks, States, Munis & Stocks
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Is MS’ QE2 refi for all on the way or is Ben blowing sunshine up our axxes?
So is QE2, (the quantitative easing not the ship), on the way or is Ben blowing sunshine and/or smoke up our axxes again?
From Fed Chairman Ben Bernanke: Challenges for the Economy and State Governments
On the economy:
While the support to economic activity from stimulative fiscal policies and firms’ restocking of their inventories will diminish over time, rising demand from households and businesses should help sustain growth. In particular, in the household sector, growth in real consumer spending seems likely to pick up in coming quarters from its recent modest pace, supported by gains in income and improving credit conditions. In the business sector, investment in equipment and software has been increasing rapidly, in part as a result of the deferral of capital outlays during the downturn and the need of many businesses to replace aging equipment….
UHHH come again? Exsqueeze me? Increased consumer INCOME???? consumer spending?? Have you SEEN the savings rate and the PCE?
Memo to Ben: Wishin’ and hopin’ and thinkin’ and prayin’ is NOT an economic strategy! Give us Growth or tell the SOOPERGENIUSES in the WH to get the hell out of the way!
Ben continues~(…) To be sure, notable restraints on the recovery persist. The housing market has remained weak, with the overhang of vacant or foreclosed houses weighing on home prices and new construction. Similarly, poor economic fundamentals and tight credit are holding back investment in nonresidential structures, such as office buildings, hotels, and shopping malls.
Importantly, the slow recovery in the labor market and the attendant uncertainty about job prospects are weighing on household confidence and spending. After two years of job losses, private payrolls expanded at an average of about 100,000 per month during the first half of this year, an improvement but still a pace insufficient to reduce the unemployment rate materially. In all likelihood, significant time will be required to restore the nearly 8-1/2 million jobs that were lost over 2008 and 2009. Moreover, nearly half of the unemployed have been out of work for longer than six months….
Why yes!!!, that pesky LACK OF FRAKKIN JOBS is holding us back, just a WEE bit, mighty white of Ben to notice, pardon the pun, my days in the Bronx…
Let’s hope QE2 the MS way is coming (see excerpts and linky below), BTW guess who suggested this 1 pg refi for all??? JOHN MCCAIN IN 2008. yep.
The ONLY WAY IN HELL Ben’s forecast for ‘increased consumer spending and income!!!’ will materialize is if plans are in the works or about to be to launch the MS QE2 plan in which all Americans paying on time get an ‘instant 1 pg refi’ drop in their mortgages to market rates (which, following another buying binge by Fed would be 2.99% let’s say) in CONJUNCTION with cutting principle on the defaultees (this way the foreclosures will stop and the prices will stop dropping in housing) with the new rates for all! the larger group who pay on time wont be so pixxed since they get theirs too…
From the MS PDF-If it were possible to inject a significant amount of stimulus into the US household sector, and this stimulus had zero impact on the budget deficit, did not require an exit strategy, did not distort the markets, and took effect almost immediately, wouldn’t it seem like a slam dunk?
Such an option actually exists in the form of a change to
mortgage refinancing requirements. The Fed and
market forces have pushed mortgage rates to historic
lows, yet many homeowners are unable to take
advantage because they are blocked from refinancing.
This problem could be addressed if the Government
merely recognized its existing guarantee on the principal
value of a large part of the mortgage market – the
mortgages that are backed by Fannie, Freddie and
Ginnie – and acted to streamline the refi process.
There are 37 million mortgages outstanding whose
principal value is backed by the Federal government.
When these homeowners apply for a refinancing, the
application is subject to a standard underwriting process
that involves an LTV test (requiring a property appraisal),
an analysis of the borrower’s FICO score, and income
verification.
We estimate a potential average rate reduction of 125 bp on 50% of the outstanding volume of agency-backed mortgages. In the aggregate, the savings amounts to $46 billion per year. That’s more than the cost of the latest extension of unemployment benefits and more than taxpayers saved under the Make Work Pay tax
credits in the 2009 fiscal stimulus legislation.
The bottom line is that market conditions have created a
potential costless windfall that is not being used. There
is no need for a case-by-case analysis of a borrower’s
credit quality when the principal value of the mortgage is
already backed by the government.…How Many Borrowers Could Be Impacted?
As seen in Exhibit 3, roughly half of all US households have a
mortgage. Of these 55 million households, 37 million have
mortgages whose principal value is already guaranteed by the
Federal government. Yet, when these homeowners apply for a
refinancing, the application is subject to a standard
underwriting process that involves an LTV test (requiring a
property appraisal), an analysis of the borrower’s FICO score,
and income verification. Obviously, the drop in home pricesduring the past few years means that many borrowers will notmeet the LTV requirement – especially since there has been a significant tightening in the appraisal process according to press reports. Indeed, our housing analyst Oliver Chang estimates that more than one-third of all agency-backed mortgages outstanding now have an LTV above 80% (see Exhibit 2). Looking at the principal value of these mortgages, the proportion is even greater (a little above 40% of the total) because an outsized share are located in California, where property values are higher than the national average. There are probably an additional 10% or so of borrowers who don’t qualify for refinancing because of job loss or a low FICO score.
Thus, we believe that perhaps 50% of the outstanding principal value of agency mortgages may not be refi-able at present. As seen in Exhibit 4, this estimate is broadly consistent with actual versus predicted prepay9(ment speeds that currently prevail in the mortgage market. (go read the entire paper and how they propose this be addressed, seems a win/win to me)
but if they do not plan to do this then he is either totally disconnected or full of shxt and lying to us, neither is good…
Market Mover Friday: May Retail Sales drop 1.2% (forecast was for a gain of .2%)
So much for Gentle Ben’s testimony this week …
In a setback for the U.S. economic recovery, retail sales unexpectedly (-haha I think of Ed at HotAir every time they say this now!-MiM ) fell hard in May as consumers pulled back their spending on things from cars to clothing.
Retail sales tumbled 1.2%, the Commerce Department said Friday. Economists surveyed by Dow Jones Newswires were expecting a 0.2% increase. The decline was the biggest — and the first — since September 2009, when sales fell 2.2%….
What Ben said:
…The disappointing report conflicted with remarks this week by Ben Bernanke. The Federal Reserve chief, testifying to Congress, said consumer spending and company investments are picking up the baton from fading government stimuli in lifting the economy.
Over the past year, demand in the U.S. has been subsidized by such things as the home-buyer tax credit, the “cash-for-appliances” rebates, and the “cash-for-clunkers” program created to spur car purchases.
But Mr. Bernanke cautioned that consumer spending, a key engine for the economy, is likely to grow at a moderate pace due to persistently high joblessness and tight lending.…
Gee ya think?? Consumers may spend less due to JOBLESSNESS and TIGHT LENDING?! HOOCOODANODE!!!!
Song Lyrics:
My wife has a charge card.
Til I got it the other day.
I owe five hundred dollars.
That’s just for yesterday.
I said, “Honey, here’s a present.
Go out an shop around.
Get a couple a-dresses.
An browse around downtown”.
She did just what I told her.
Bought one, two or three.
Then came home lookin’ silly.
Makin’ goo-goo eyes at me.
Mastercharge, (mastercharge).
I’m bringin’ back her card.
Mastercharge, (mastercharge).
I’m bringin’ back her card.
Mastercharge (mastercharge).
I’m bringin’ back her card.
Video: Scott Brown proposes payroll tax holiday for workers
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Scott Brown proposes payroll tax holiday for *workers*…
Yay Scott! Finally, stimulus I can believe in! We have suggested just this here many times, but look! here is an actual DC pol proposing it! Scott will be on Kudlow at 700pm EST tonight….
U.S. Sen. Scott Brown’s first piece of legislation is a proposal to return unspent stimulus cash in the form of a payroll tax cut for workers, a proposal that came as the Bay State Republican was named to the prestigious Armed Services committee.
“The best way to revive our economy and spur job creation is by returning money directly to the American people so they can save and put money back into the economy,” Brown said yesterday. “Families are still hurting and their hard-earned tax dollars are sitting unused in a stimulus slush fund in Washington.”
Aides described Brown’s proposal as a temporary tax cut that applies to workers making roughly $200,000 or less a year, designed to “help out people who make less more.” It would kick in immediately upon passage, saving the average worker about $100 a month for a total of at least $500 for individuals and $1,000 for working couples, the senator’s aides said.
The tax cut would expire in about six months, or when the roughly $80 billion in unspent stimulus money drains down….
I believe in miracles…..
Market Mover Wednesday: Weekly jobless claims, personal income/spending and durable goods…
Update: Weekly claims dropped to 466,000, continued claims 5.423 million
Oct personal income up 0.2%, personal spending up 0.7%
Durable Goods down 0.6%
Gold just hit another record $1181 an oz
_______
Another heavy day for data with light volume expected…
CNBC:…Weekly jobless claims are expected at 8:30 a.m., along with October durable goods, personal income, and consumer spending. Consumer sentiment is released at 9:55 a.m. and new home sales are released at 10 a.m. Jobless claims could be below 500,000 for the first time in months.
Stocks finished slightly lower Tuesday, after shaking off a triple digit Dow loss. The Dow was down 17 at 10,433, and the S&P 500 was down less than a point at 1106. The worst performers were the financials…
Meredith Whitney: “I am the most bearish I have been in a year”
Meredith Whitney agrees with MiM and thinks we will have a double dip. She echoed the sentiments of this morning’s post. “I don’t know what’s going on in the market right now because it makes no sense to me,” she said.
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Airtime Mon. Nov. 16 2009 1:11 PM ET
CNBC: Stocks are overvalued and the US economy is likely to fall back into a recession next year, well-known analyst Meredith Whitney told CNBC…The banking index has advanced some 136 percent but the sector may have been at least fairly valued, says Meredith Whitney, Meredith Whitney Advisory Group CEO. In a wide-ranging interview, Whitney, CEO of the Meredith Whitney Advisory Group, also said:
“I haven’t been this bearish in a year,” she said in a live interview. “I look at the board and every single stock from Tiffany to Bank of America to Caterpillar is up. But there is no fundamental rooting as to why these names are up—particularly in the consumer space.”
- She was disappointed that Fed Chairman Ben Bernanke didn’t spell out how the Federal Reserve planned to exit “the biggest Fed program to date, which is the mortgage-backed purchase program.” In a speech earlier Thursday, Bernanke said the central bank was watching the dollar’s decline but is likely to keep interest rates low.
- The US consumer was going through the biggest credit contraction ever—even bigger than that during the Great Depression. “That credit contraction is accelerating,” she said. “There’s nowhere to hide at this point.”
- The banking sector is not adequately capitalized and will need to raise more capital in the coming year.
- The residential real estate market is likely to worsen and remains a much bigger threat than the commercial property market. The government’s mortgage modification program won’t result in any major improvement in homeowners’ ability to stay above water, she added.
“I don’t know what’s going on in the market right now because it makes no sense to me,” she said.
“The scariest thing about the Fed’s program is that the money on the sidelines isn’t going to support that asset class,” she added. “So the trillion dollars of Fannie (Mae), Freddie (Mac) and mortgage-backed securities that the Fed is holding—there’s no substitute buyer there.”
World Bank President gives markets reality check: ‘unemployment may cause loan defaults’ Gee ya think?!
Seriously. That is the CNBC headline: ‘Unemployment May Cause Loan Defaults in US’. Well that is a keeper for the No Shxt Sherlock files. In other news Water is Wet!
Since it is the World Bank President saying it and not we little people maybe the markets will BUY A FRAKKIN CLUE!
Stubbornly high joblessness threatens to trigger loan defaults and drag on consumption next year, hobbling a U.S. economy struggling to rebound from recession, World Bank President Robert Zoellick said Wednesday.
...”You’re going to have problems with delinquencies of credit card loans, consumer loans, people won’t be able to pay their mortgages,” Zoellick told reporters in Singapore. “Some banks are going to continue to be troubled by bad loans.”
Government stimulus spending will likely fuel economic growth through the middle of next year, Zoellick said. After that, consumer spending and business investment must take the baton to boost expansion, he said.
“If you’ve got large scale unemployment, if you’ve got consumers rebuilding savings and deleveraging, I don’t think the consumer is going to play that role,” he said. “What’s the other source of demand?”
Gee that sounds familiar! Cause we have been saying it here at MiM for OVER A YEAR!!
…Governments should execute existing stimulus packages, but hold off on implementing new ones, he said.
Asian authorities should consider ways to tighten monetary liquidity, such as raising interest rates, before asset price bubbles get out of hand, Zoellick said. Asian stock indexes and some property markets have soared since March….
Can you say China bubble? Hong Kong real estate bubble?
Moderate in the Middle 