Flutterby™! : More mortgage madness 2009-10-15 16:31:31.284341+00

More mortgage madness

2009-10-15 16:31:31.284341+00 by Dan Lyke 5 comments

Note to all those still buying mortgage backed securities: When the company that nominally holds my mortgage is going out of its way to get me to take a lower interest rate, despite neighborhood price adjustments on my property that have negatively impacted my LTV, it's clear that the people who are selling the mortgages have not yet been dictated a reasonable set of incentives by those holding the mortgages.

In other horrendous economic news, the DOW is already over 10k. Which means we're gonna have another harsh painful crash, which means we haven't seen the worst of this recession yet.

Mortgages are going to be screwy for quite some time. What once was the realm of solid, low-return, low-risk investments is now a no-man's land. Made worse by the fact that the bailout has really helped the bankers (see the just posted 3Q profits of JPMorgan and CitiGov). One the positive side, the Fed does seem to understand how to make a return on government investments. I'm sure their share of Citi is starting to look like a very favorable position, just like their share of GM after the Cash for Clunkers.

#Comment Re: made: 2009-10-15 17:38:09.261204+00 by: Dan Lyke [edit history]

Because it should be less than 8500, so what we're seeing now is a "hey, it's safe to get back in the markets!" bubble.

#Comment Re: Recovery, GDP, and the DOW made: 2009-10-15 19:05:11.118388+00 by: jeff

I agree with Dan, that the DOW is currently "overbought," but it could go even higher in the short-term. The DOW has very little to do with the real economy for many.

I know that formal definitions exist for depressions, recessions, and such. However, we won't see REAL recovery until employment numbers get better, and the newly employed are taking jobs other than low paying service sector ones.

#Comment Re: made: 2009-10-15 20:39:08.661995+00 by: meuon [edit history]

Lunch today was with the Chat. Tech Council was with the Chief Economist for IBM giving a presentation. He says it's all uphill from here. I'm not disputing you, just marking the comment for future ridicule or lauding.

He did say, regarding the current price of gold (> 1000 USD /oz) is that is has lost it's intrinsic value in industry/society and may not be the haven people think it is. "Dentists don't even use it anymore". Except for the showing off the gold tooth crowd. I tend to agree with that, but have no facts.

I also believe that the DOW is overbought. That does not apply to individual stocks, some of which are significantly oversold. I am not a goldbug, but the weakness of the dollar may make gold and other commodities attractive.

Enormous amounts of money have flooded into "safe" securities. Some of which pay significantly less than the true cost of inflation which is probably about 4-5%. The reported CPI is about -1.2%, but even the preClinton CPI is at 2%, and the inflation metric was monkeyed with before Clinton. Many who have gotten into such securities are losing 2-4% of the real value of their invested funds a year, and then paying tax on the pittance of interest they get. With that kind of a "payout" there is rational reason to at least consider taking on more risk.

In the last recession the amelioration of unemployment lagged the rest of the business cycle by two years. It is likely to repeat that.

One of the serious issues is interest rates. The Fed is in a real bind here. If interest rates return to something more reasonable, perhaps 3-4% above the true inflation rate, the US will soon owe near a trillion dollars a year on the national debt. This might be a more likely cause of a horrendous economic crash that a somewhat overheated DOW. If the Fed does not allow interest rates to rise, then we face the same stagnation that has afflicted Japan with their near zero interest rates. It also leaves us easy prey for nations that would wage economic warfare against us.