Market Talk

So, the housing report tanked, and the consumer confidence data tanked. As a result, investors are heading for a “safe haven.” No, no, not Treasurys; those are down again, the ninth consecutive session they’re down, in fact. No, we’re talking about the new safe haven, of course.

Stocks.

February’s new home sales were an utter disaster, falling to a record low. Mizuho USA economist Steve Ricchiuto may’ve put it best: “Nothing good can be said about the February report on new home sales.” Nothing good should be said of these abysmal numbers, but that didn’t stop some economists from straining to find the silver lining.

RBS economists accurately noted no sign of recovery, but suggested other data, like a slight uptick in the monthly home-builders’ sentiment index, showed the picture wasn’t “nearly so dire,” so “we are hesitant to read too much into this one report.”

Huh? Don’t want to “read too much” into a record low? Yeah, wouldn’t want to misread the fewest number of new homes ever sold in a month. Credit Suisse economist Jonathan Basile points out that the number of new homes for sale — 186,000, not annualized — was the lowest level since November 1967. Maybe we shouldn’t read too much into that either.

Kidding aside, the small number for sale isn’t a bad sign, as it shows builders being disciplined enough to just try to sell what’s on hand before they ramp up more new construction.

RBS wasn’t alone in reaching for a positive spin. RDQ Economics also cites NAHB’s sentiment index (which rose to 17 from 16; it hit 72 in June ’05 and recently as high as 22 last May). Firm says survey suggests “underlying conditions are improving slightly,” and the firm expects a bounce “over the next two months.” Not exactly a heroic call, expecting a “bounce” off an all-time low.

Mizuho’s Ricchiuto doesn’t sound as optimistic. “The sharp decline in prices also suggests that consumer wealth may be taking another hit even though equity valuations have risen,” he writes. “This report and the existing home sales data released yesterday confirm that the housing market is still in free fall.”

Investors may or may not be looking for a silver lining, but they apparently see home-builders as a sort of “why not?” proposition. One of the best sectors on the day was consumer discretionary, which includes the home builders. PulteGroup (3.6%) and Lennar (1.2%) rose, although DR Horton (0.5%) fell.

After all, how much worse can it get?

The Financial Crisis Inquiry Commission has seemed like an afterthought for some time now. It was especially telling that Congress didn’t even wait for the board’s findings before passing its financial-overhaul bill. There have been one or two moments that were television-worthy, but overall the group has worked in what can charitably be called a state of benign neglect. Nobody in Washington really wanted anything constructive to come out of this effort.

But the latest episode, in which the board’s four Republican members are publishing their own breakaway findings, really brings the point home that the entire thing has been a waste of time, and that the ultimate cause of the housing/credit/banking crash, while painfully obvious to anybody with an even slightly objective lens, is something that just isn’t talked about down in DC.

The bank-lobby apologists would have you believe it was the CRA, or government policy toward housing via Fannie Mae and Freddie Mac that caused the crisis. That is absolute horse manure. The causes of the crisis were, in no particular order: scuttling Glass-Steagall, not regulating derivatives in 2000, Greenspan cutting the fed funds rate in the early 2000s (ultimately to 1% in 2003) and leaving them low for too long, and the SEC’s decision to take the leverage caps of Wall Street banks in if memory serves correct 2005. Those are the four biggies, off the top of my head, and three of the four center on a specific philosophy: deregulating the financial system.

The Times reports today that:

The Republican members of the commission appointed by Congress to investigate the causes of the financial crisis plan to release on Wednesday a document that assigns government housing policies substantial blame for the origins of the 2008 financial crisis.

The release of the 13-page document is an indication of a major partisan division within the 10-member Financial Crisis Inquiry Commission, which was required to deliver its report on Dec. 15 but has pushed that deadline back to January.

This is pathetic. These jokers spent more than a year and I don’t know how much money, and in the end they’re no nearer any agreement than the left/right panelists on a Sunday morning talk show. What was the point of this whole exercise? It wasn’t to uncover the truth; that had come tumbling out in the panic of September 2008. Let’s be for real; Congress didn’t need this commission to find the truth. The truth smacked knocked them on their backsides the weekend of Sept. 12, 2008.

What it needed the commission for was to whitewash the truth, because the people who pay the bills in Washington (incidentally and largely the same people responsible for the crisis) want no part of the truth. They want business as usual.

This was never going to be a modern Pecora Commission. But it didn’t have to devolve into a total joke. Yves Smith over at naked capitalism goes pretty apoplectic over it, and rightly so:

The intent is pretty transparent: to discredit an effort at fact finding into the roots of the crisis, what was hoped to be a Pecora Commission, by making it appear partisan and launching an alternative narrative to muddy the waters. And the reason is clear. Even though FCIC is certain not to have the same effect that the Pecora Commission did, of discrediting major financial services industry figures and exposing various forms of chicanery, it appears that even lesser forms of criticism of the banksters must be sandbagged (the bizarre part of this drama is that at least some Democrats and very selectively, Republicans in office are willing to call out the predatory, extractive behavior of the large banks. But no one has the guts to buck an industry that is a major paymaster in a very serious way.)

This whole line of thinking is garbage, the financial policy equivalent of arguing that the sun revolves around the earth. Yes, the US and other countries provide overly generous subsidies to housing, and curtailing them over time would not be a bad idea. But that’s been our policy for decades. Calling that a major, let alone primary, cause of the crisis, is simply a highly coded “blame the poor” strategy, In reality, both the runup to the crisis and its aftermath were on of the greatest wealth transfers from the citizenry at large to a comparatively small group of rentiers in the history of man.

If you’re trying to sell a house, you probably already know how rough it is out there. If you’re not, well, trust us, it’s not good and it’s not going to get better next year, either.

Dow Jones Newswires Amy Hoak reports: (subscription required.)

Brace yourself for another rough year in housing. The number of foreclosures is expected by many to increase in 2011 as more troubled mortgages work their way through the pipeline.

Foreclosures may well peak next year, said Rick Sharga, a senior vice president for RealtyTrac, an online marketplace for foreclosure properties. The market is expected to tally about 1.2 million bank repossessions in 2010, up from 900,000 in 2009, he said.

“We expect we will top both of those numbers in 2011,” he said.

That’s partly due to issues the industry faced with foreclosure processing that began in the fall and delayed a portion of foreclosures from being completed this year, he said. In the so-called robo-signing controversy, some lenders halted foreclosures after learning procedures for signing off on foreclosure documents might not be in accordance with the law.

Continued high unemployment is also expected to exacerbate the foreclosure problem in the year ahead, as will upcoming interest-rate resets on adjustable-rate mortgages that will increase monthly payments for some homeowners, Sharga said.

Imagine what’ll happen if this current sell-off in the Treasury market picks up steam. The housing market is in the pits even with rates at historic lows. If they rise, it will just twist the knife a little deeper into the back of an industry that is still struggling to recover from its having its bubble burst.

We’re not tough enough to take the pain.

That’s why it’s come down to this, citizens — the Fed priming more QE, doing “whatever it takes” to alleviate the hardship. The ceaseless efforts to artificially prop up asset prices. The extraordinary amount of Americans’ monthly personal income now derived directly from Uncle Sam.

It should be much more expedient and ultimately less costly for the government to simply step back and let the economic chips fall where they may. But it’ll hurt, and the nation’s leadership doesn’t think we citizens can handle the sting.

Indeed, we often come across like a society of coddled whiners who can’t stand to even be the slightest bit inconvenienced, never mind subjected to any degree of physical or psychological travail. We can’t handle bad reception on our iPhones, why should the government expect us to deal with the hardship that would come with allowing home prices to reach their natural level, to finally unleash market-clearing prices and probably the failure of more big banks and other institutions? Continue reading…

So, what do you think is driving today’s rally, the dollar or earnings? The dollar has completely reversed yesterday’s gains, and as you can see by looking at the euro, stocks, gold, oil and commodities like corn and cotton, yesterday’s losses have also been erased. Interesting, huh?

In today’s video, we take a look at two big stories, earnings and the foreclosure mess, and how the latter may affect a still limping housing market.

This foreclosure thing needs a name. It’s a growing scandal that needs some kind of short-hand, so you don’t have to waste precious time at cocktail parties saying, “you know, that problem with the foreclosure process whereby the people who are foreclosing upon home-owners can’t prove they actually hold the note and thus have the legal standing to foreclose.” Try saying that with a drink in each hand.

I’ve seen “foreclosure-gate,” but, man, that’s so last century. Plus, it’s cliche. Plus, it doesn’t really capture the true nature of just how big and bad and nasty and potentially ruinous this thing may be. It is the proverbial Pandora’s Box — but “Foreclosure Box” doesn’t really ring, neither does “Pandclosure’s Box.”

It’s not just Zero Hedge talking about how big a deal this whole thing is. It’s got disaster written all over it. The odds of it spiraling out of control and causing another panic are rising. This thing needs a nickname that reflects that potentiality.

How about “Foreclosuregeddon”? You know, like “foreclosure” and “Armageddon” mashed together. The final battle between good and evil, with the fight taking place in courtroom across America. Has some ring to it, right? Foreclosuregeddon. Tell you’re friends, spread the word on Facebook and Twitter and any of those other social media sites that nobody uses anymore but somehow manage to hang around.

Oh, and make sure you know who holds the note to your bomb shelter. Just in case.

I have pass this along. You think the foreclosure thing is a hornet’s nest? It could be worse than that. Get this, this is from a Georgetown law professor interviewed by CNBC’s Diana Olick (and which I first saw this morning via Art Cashin.)

The mortgage is still owed, but there’s going to be a problem figuring out who actually holds the mortgage, and they would be the ones bringing the foreclosure. You have a trust that has been getting payments from borrowers for years that it has no right to receive. So you might see borrowers suing the trusts saying give me my money back, you’re stealing my money. You’re going to then have trusts that don’t have any assets that have been issuing securities that say they’re backed by a whole bunch of assets, and you’re going to have investors suing the trustees for failing to inspect the collateral files, which the trustees say they’re going to do, and you’re going to have trustees suing the securitization sponsors for violating their representations and warrantees about what they were transferring.

Oh, good grief. So now what you’re saying is, these home owners can argue that they’ve been making payments, maybe for years, to an entity that in actuality had no legal right to those payments, because it didn’t actually own the mortgage note (or can’t prove it.) So they’re going to sue? And everybody involved in the mortgage can sue everybody else for some measure of malfeasance?

This thing gets worse by the day. This isn’t a hornet’s nest, it’s a rat hole, and we are going to down it. Let’s hope it doesn’t lead down to perdition.

QE2 can create money out of thin air, apparently, but it can’t create jobs of out thin air, evidently, and that is the crux of the limitations of and problems with continuing central-bank tinkering at this state of the game.

ADP, the big check-processing outfit, gave its take on the September jobs picture, and it wasn’t pretty. The firm estimated the economy shed 39,000 jobs in September, below the Street view that it would report a gain of 20,000. Among a work force of 150 million some-odd workers, that’s not a big number either way, although psychologically it hurts more to see a negative number than a positive one. Now, ADP’s methodologies don’t exactly align with the BLS, which reports the “official” numbers on Friday, but they’re not that far off, so you can expect another weak report Friday.

This is the entire problem, Mousketeers. Jobs aren’t being created, not anywhere on the level needed. Jobs are not being created because demand is not there. Maybe, in a world where the 10-year yield is at 7% or 8%, and mortgage rates are running even higher, the Fed can have success in goosing demand by lowering rates. But with the 10-year currently, right now, this morning, at 2.42% — close and getting closer to its all-time low of 2.40% 2% hit at the depths of the crisis — with mortgage rates already at all-time lows, what are lower rates going to do? Not much.

Continue reading…

Stocks were wavering earlier, when we taped this segment. They’ve chosen a direction now, and it’s down. Stocks have had a topping-off feeling about them lately, and I wonder if that is in actuality what’s happening. I still think the market’s going to ride this Fed easing/midterm elections wave through October, but it’s just a hunch. This may be a top.

But Treasurys aren’t wavering, they’re rising, with yields falling, as the bond market continues to reflect the fears in the marketplace.