Credit Writedowns » Housing

Banks Paying Cash to Homeowners to Avoid Foreclosures

Edward Harrison — Tue, 07 Feb 2012 15:30:50 +0000

Here's the latest story that's been getting buzz around the internet: banks are trying to get troubled mortgages off their books without having to go through costly foreclosure processes and they are offering homeowners cash incentives to do so

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On Canadian and Australian bank risk

Marc Chandler — Mon, 30 Jan 2012 20:00:00 +0000

Banking sectors in both countries are highly concentrated. The top four banks in Australia account for about three quarters of the banking assets. The top six Canadian banks account for upwards of 90% of the Canadian banking assets. According to Fitch, the concentration and high profits of the banking sector is favorable to each as it provides a cushion against losses and need to pursue higher risk activity/lending. Both Canada and Australia are experiencing over-valued housing markets. The IMF estimates Canadian house prices are about 10% risk while Australia is 10-15% over-valued

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[PREMIUM] The Fed’s Rate easing and Obama’s Mortgage refi plan are bullish

Edward Harrison — Thu, 26 Jan 2012 19:30:41 +0000

Investors must still be worried about the fallout from the European meltdown. However, the situation in the US is looking much better than it did last week because of this aggressive policy response

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On building debt

Michael Pettis — Tue, 24 Jan 2012 14:00:00 +0000

I am glad to say that the overinvestment thesis is much more widely acknowledged today than it was even two or three years ago, but one myth, I think, is that most of the overinvestment excesses in China are concentrated in the real estate sector. I have always argued that it is infrastructure where the most amount of investment has been wasted

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A Month In Spain That Didn’t Shake The World

Edward Hugh — Mon, 23 Jan 2012 13:00:00 +0000

Spain’s economic problems are very grave. The country is facing a decade long depression, and if enough young qualified people leave during this period then the country could enter a negative dynamic from which it will never properly recover. At the outset (2007) I and others argued for a 20% internal devaluation to shift resources over to the export sector. This did not happen, and virtually no one is interested in the idea. The main priorities are still reducing the deficit, and restructuring the financial sector without injecting any significant quantity of public money. Both these policies are contractionary in their impact. In addition the proposed labour market reform is timid, and won’t act quickly enough to stop the rot on the growth front

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On the IMF bailouts, Greek defaults and Canadian household debts

Edward Harrison — Thu, 19 Jan 2012 19:39:41 +0000

Below is the link to my latest appearance on BNN with Howard Green and Ryan Avent. Quick thoughts here

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Robert Shiller: “Sweden has a bubble”

Edward Harrison — Tue, 17 Jan 2012 19:30:02 +0000

Sweden may have a bubble in its housing market. But now that housing prices have begun to fall, it is too late to deploy countermeasures

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Jim O’Neill: Chinese GDP numbers are “a blow for the hard landing guys”

Edward Harrison — Tue, 17 Jan 2012 16:30:25 +0000

There has been a lot of discussion about whether China's growth will slow enough to be considered a hard landing and what that would mean for the global economy and investors. Below is an account from Bloomberg featuring Goldman Sachs Chief Economist Jim O'Neill that is more in the soft landing camp. O'Neill also talks about the European sovereign debt crisis and Greece

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Why Spain may be More Worrisome than Italy

Marc Chandler — Thu, 05 Jan 2012 18:54:18 +0000

At the end of last year, Italian 10-year yields were more than 200 bp on top of Spain. The spread has narrowed in recent days, but is still well beyond the euro era average of about 10 bp and the late 2008 extreme near 65 bp. There is more room for Italy to outperform Spain

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Edward Harrison’s Ten Surprises for 2012

Edward Harrison — Thu, 05 Jan 2012 14:12:47 +0000

Welcome to Credit Writedowns Pro. This is the first post in a series here. Let me start this Byron Wien-style and make a predictions list. Wien defines his surprises as events to which investors assign 1-in-3 odds of happening but which he believes have a more than 50 percent likelihood of occurring in 2012. That's how I am playing it too

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John Mauldin: The Matterhorn Interview

Guest Author — Mon, 02 Jan 2012 14:30:47 +0000

Investment advisor John Mauldin explains his attitude towards austerity measures; a return of the gold standard; the euro crisis; and the willingness to bailout everyone that makes capitalism and monetary systems stop working

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The Rain In Spain Falls Mainly On The Journalists, It Seems

Edward Hugh — Mon, 02 Jan 2012 12:30:49 +0000

Nothing in Spain is exactly as it appears to be, and that few of the arguments politicians and so called “experts” advance are entirely innocent. Most “information” circulating in Spain is highly politicised. Really “independent” analysts are virtually unknown

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Footnote 2011: Being cautiously optimistic was right

Edward Harrison — Tue, 27 Dec 2011 17:00:45 +0000

In January, I wrote my prognosis for 2011. The title was "Cautiously Optimistic Into 2011". I intend to write another post like this early in 2012 with asset allocation and market calls for the new newsletter. But right now I just want to review the basic outlook I presented. I had seven major conclusions. Here's what I said and how well it has stacked up

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Chart of the Day: China’s Financial Architecture

Global Macro Monitor — Tue, 20 Dec 2011 22:00:49 +0000

Now the bubble is visibly bursting. How much damage will it do to the Chinese economy — and the world? That is our homework assignment over the holiday. Getting it right will determine 2012′s investment and trading returns, in our opinion. We leave you with an excellent flowchart and table from the IMF explaining China’s financial architecture

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Thoughts on Europe and the global synchronised slowdown

Edward Harrison — Tue, 20 Dec 2011 15:00:01 +0000

We are in a second synchronised global growth slowdown. Moreover, the policy response must be more muted this go round as the public sector is more indebted and has less policy space than in 2008 or 2009. Expect policy inaction followed by fits of volatility due to inaction. This points to a risk off a lot more than a risk on environment

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Full Text: Moody’s revises rating outlook for Australian mortgage insurers to negative

Edward Harrison — Tue, 20 Dec 2011 02:29:46 +0000

Below is the press release issued by Moody's in conjunction with the down grade of Australia's mortgage insurers

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The 2012 Blind Side: China’s Housing Bust

Global Macro Monitor — Mon, 19 Dec 2011 14:49:10 +0000

Foreign Affairs has just posted a must read piece, "China’s Real Estate Bubble May Have Just Popped", which will sound very familiar to Global Macro Monitor readers. We’re going to be spend a lot time over the holidays thinking how this plays out in China’s financial sector and the implications for markets

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Is Finland Really A Closet Member Of The Eurozone Periphery?

Edward Hugh — Mon, 19 Dec 2011 02:36:20 +0000

The country’s debt dynamics are far from unsustainable at this point, but given the weakening in the country’s export performance and the steady unwinding of the housing boom we can now anticipate I would expect growth to be weaker than either the EU or the IMF are currently anticipating, and pressure on the country to increase fiscal spending to maintain expectations to rise, with the implication that pressure on the Finnish spread over 10 year German bunds will continue, as the country risks drifting off from being part of the core towards the growing periphery, at least in the eyes of investors

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Market Facing Strong Headwinds

Comstock Partners — Fri, 16 Dec 2011 13:15:11 +0000

All in all, the negative fallout from the EU sovereign debt crisis and the outlook for the U.S. economy are likely to have a strong downward pull on the stock market. Rather than reflecting fear, the market seems unusually complacent as investors are overconfident that the world financial authorities can pull a rabbit out of the hat at the last minute.

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Full text: Moody’s reviews five Spanish covered bond programmes for downgrade

Edward Harrison — Tue, 13 Dec 2011 20:00:04 +0000

The following is the press release Moody's issued in putting the covered bonds of five Spanish banks on review for credit ratings downgrades

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The Collapse of Construction Employment

Global Macro Monitor — Fri, 09 Dec 2011 12:42:05 +0000

Here’s a great chart from the BLS showing the collapse of construction employment from May 2006-10. No surprise the largest declines are in the four housing bubble states — Nevada, Arizona, Florida, and California. Stunning employment in this sector is down 40-55 percent and one reason why the traditional monetary transmission mechanism is broken — lower rates sparks construction spending and thus hiring of construction workers

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House Prices Plunge in Chinese Ghost City

Global Macro Monitor — Tue, 06 Dec 2011 01:00:15 +0000

Could this be part of the reason the Shanghai was the only major index we track that was down last week

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How do we know that China is overinvesting?

Michael Pettis — Sat, 03 Dec 2011 19:00:47 +0000

For years I have been arguing that the Achilles heel of the Chinese growth model is the unsustainable rise in debt that comes as a necessary consequence of capital misallocation fueled by bank lending. Capital misallocation, I argued, was the nearly inevitable consequence of high investment growth over many years in a system in which price signals are severely distorted and there is political incentive to maximize economic activity in the near term. If capital misallocation is funded by debt, the increase in debt is necessarily unsustainable

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News Links: Draghi – If fiscal policy becomes hawkish, monetary policy will be dovish

Edward Harrison — Fri, 02 Dec 2011 14:31:16 +0000

News links from 2 December 2011 include links on the European sovereign debt crisis, the UK economy, the latest on mortgages and technology as well as other stories.

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Jim Chanos on China, Hong Kong and Australia

Edward Harrison — Thu, 24 Nov 2011 00:49:27 +0000

Famous shortseller Jim Chanos was in Hong Kong and Australia and reported back on what he saw to Bloomberg Television. Copy provided below including a link to the video

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BofA delays Countrywide bankruptcy

Edward Harrison — Thu, 10 Nov 2011 03:16:08 +0000

The word is that BofA did in fact consider declaring their Countrywide subsidiary bankrupt to ring fence the rest of the company from Countrywide. It got as far as a board vote this past summer. This Wall Street Journal video discusses the issues of why it has postponed the bankruptcy filing

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Australia: There goes the neighbourhood

Guest Author — Tue, 01 Nov 2011 12:00:00 +0000

The last two days have seen the latest monthly data on credit growth in Australia from the RBA, and the latest quarterly data on house prices from the ABS. Together they confirm trends that I’ve identified on numerous occasions between the acceleration of mortgage debt and the change in house prices

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Deleveraging, Banks and Economic Recovery in Ireland

Guest Author — Fri, 28 Oct 2011 15:15:48 +0000

The challenge that the Irish economy faces can best be described in the context of flows and stocks of assets and liabilities. Under the Memorandum of Understanding (MoU) with the IMF/EU/ECB Troika, Ireland must implement a severe fiscal austerity programme and reduce the size of its banking system. These goals must be achieved in the context of a deleveraging process in the household sector brought about by the need to repair balance sheets following a collapse in the value of housing assets. The current policy mix, which aims to reduce these stocks simultaneously, is unlikely to be successful, a feature we term the domestic trilemma. An external trilemma arising from the constraints of EMU membership also limits the policy choices for high-debt economies attempting to engineer an export-led recovery. This paper argues that a sequencing of policies is required for Ireland to achieve its goals

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Shanghai property values plunge, recent buyers protest

Edward Harrison — Thu, 27 Oct 2011 14:30:28 +0000

The Chinese property market has come off the boil according to this video from NTD Television. The issues are reminiscent of the US subprime crisis in which developers, under the gun from a falling market, were forced to slash prices to sell new apartments. Recent buyers are seeing their investments implode overnight

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Secular decline in US housing equity

Global Macro Monitor — Wed, 12 Oct 2011 18:46:33 +0000

We stumbled upon this interesting chart from the Financial Stability Oversight Council’s 2011 Annual report which shows the share of owner equity in household real estate. It surprised us, not so much in that it is at record lows, but that owner equity showed only a blip upward during the housing bubble. The secular decline in owner equity is also an eye opener

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Why is a bank that failed the stress tests in Spain getting bought at a 31% premium?

Edward Harrison — Fri, 07 Oct 2011 16:12:17 +0000

I don’t follow the Spanish banking sector well enough to know what hidden value Banco Pastor has but I find it curious that it is the subject of a takeover bid at a 31% premium by Spain’s fifth largest bank, Banco Popular

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Private Lending: Disintermediation in China’s Banking System

Global Macro Monitor — Tue, 27 Sep 2011 11:45:32 +0000

The consequences of negative real interest rates and financial repression. We know how this story ends. Keep this one on your radar

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Why Nobody Went to Jail During the Credit Crisis

William Black — Mon, 19 Sep 2011 21:50:59 +0000

The following is a transcript of an interview with Financial Sense Newshour, a free financial/market broadcast hosted by money manager Jim Puplava on the week's market action, interviews with financial experts, and Jim's personal perspective on the markets/economy

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Monetary Policy and the Future of China

John Lounsbury — Sun, 18 Sep 2011 03:38:47 +0000

There is a road open for China involving controlled inflation that would lead to re-balancing, both domestically and internationally, which has some uncertainties. These must be compared to those of sustaining the export-led growth model, basically an even bigger currency mismatch in the PBoC balance sheet and ever more unproductive capital investments

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No Bottom in Sight for Housing

John Lounsbury — Wed, 07 Sep 2011 05:21:21 +0000

From Global Economic Intersection Guest author: Keith Jurow is the author of the MVP Housing Market Report. This article was posted at Minyanville with the title “There Is No Housing Bottom in Sight” At the end of June 2011, macromarkets.com released the results of a poll in which 108 leading economists and housing market analysts

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