Market Talk

- The surging US dollar is “eerily reminiscent of the peak worries in the credit crisis when deflation appeared to be taking a death grip on the global economy,” the Pragmatic Capitalist says. “As asset prices decline and bond yields collapse this is a clear sign that inflation is not the near-term concern, but rather that the debt based deflationary trends continue to dominate global economic trends.”

- University of Oregon economics professor Mark Thoma isn’t on board with Yale professor Robert Shiller’s argument in a NYT op-ed that fears of double-dip recession could become a self-fulfilling prophecy. Bigger economic shocks would seem “the more likely trigger” of double-dip, Thoma says. “Even more likely is an outbreak of extreme hawkishness causing us to pull back too fast on fiscal stimulus, and to raise interest rates too fast.”

- Turns out Palm’s sale to Hewlett-Packard (HPQ) last month wasn’t exactly a last-minute deal. Digital Daily blogger John Paczkowski points to a PALM SEC filing, which reveals the buyout process began in February and the company was in contact with 16 potential acquirers.

- HAMP April data shows program slowing down.

- The “shock and awe” effects of Europe’s big bailout package are already starting to fade, and the concern is that long-term viability is being sacrificed for short-term gains, Pimco CEO Mohamed El-Erian writes at FT’s Alphaville blog. So far, the package is just giving investors an escape hatch, without addressing the real issue: solvency.

- GM isn’t putting on the hard sell for an IPO.

- Reuters blogger Felix Salmon looks at how government bailouts affect moral hazard and the role they play in market volatility. “A lot of investors have made a lot of money from the moral-hazard trade over the past 15 years or so. When that trade comes to an end, expect the losses to be just as big, if not bigger.”

- Ryan Avent shows how the role the declining euro plays in the global economy.

- Though it’s still early for conclusive evidence, it appears Apple’s (AAPL) Mac sales haven’t been cannibalized by the iPad, Digital Daily blogger John Paczkowski says, citing research from Piper Jaffray.

- Jason Zweig looks at the debate over holding brokers to a higher standard.

I remember reading somewhere once, and maybe I’ve got this wrong, that Harry Truman’s attitude toward every problem was more or less, we’re gonna try this, whatever this was, and if doesn’t work, well, then we’ll try that. Less dogmatic and more pragmatic. He did have, after all, a sign on his desk that said “The buck stops here.”

I wonder if the groundwork’s being laid for a little bit of that in terms of the housing market. The administration’s efforts don’t seem to doing much besides slowing the inevitable aftermath of the burst housing bubble. January’s stunning new home sales report, the equally surprising existing home sales report today, the expectation of another record year of foreclosures, and of course the anemic results of programs like the HAMP, may have people starting to think about a new approach.

All of sudden I’m seeing more and more references to the HOLC, the Home Owners Loan Corporation, the Depression era government agencies that went around buying mortgages from bank, negotiating the terms with homeowners, and working to keep them in their homes with a mortgage they could afford. The source of it may be this article in the New Republic by Brad Miller, a Democratic Congressman from North Carolina.

Miller’s sympathetic to the administration, but makes it clear that current efforts just aren’t “making a dent” in the mountain of foreclosures. “What can the Obama administration do to alleviate this suffering? Turns out, it doesn’t need a new plan to modify mortgages, since there’s a very good old plan on the shelf.” Miller brings back the idea of the HOLC. It didn’t solve every problem, he notes — about 20% of the mortgagees still went into foreclosure — but it did alleviate a lot of the suffering, and by the time the last mortgage was paid off in 1951, it had turned a slight profit.

There are a couple of issues, off the top of my head. People overall put down much less on their homes these days than during the Great Depression, and loans back then were generally 15-year affairs. Also, a new HOLC would likely need hundreds of billions to fund it, with the ultimate payoffs decades in the futures. I don’t know that the citizenry has the stomach for that kind of thing right now.

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