Stocks made solid gains in early trade following some fairly positive economic data. The March Consumer Price Index increased .1%, the ex food and energy core rate was unchanged, on a year ago basis the CPI is running well below its long-term average of 3.1% coming in at just 2.4%. Were it not for large increases in energy costs the CPI would be much lower, perhaps even negative.
Mortgage applications fell for a second week, dropping 9.6% as the Index registered just 484.6. Refi’s fell 9% to 2,047.1 while purchase apps slipped 10.5% despite a so far essentially non-existent spike in interest rates following the Feds completion of its 1.25 Trillion Dollar Mortgage backed Bond purchases. Rates actually increased about .25% but now seem to be drifting back down with the 30-year contract rate at 5.17% during the latest week.
Maybe its just me but if I was a private investor in mortgages I would want a rate much higher than this to compensate for the risk inherent in real estate at this juncture based on a careful review of the relevant fundamentals. Either that or place very tight limits on Loan to Value to help control future losses, essentially requiring large down payments.
Retail sales posted strong gains in March as per the Census Bureau gaining 1.6% from February. On a year ago basis sales jumped 7.6% but that figure needs to be taken with a grain of salt considering that it was the depths of the financial panic. Strong gains were reported in auto sales, building materials and clothing indicating a broad increase.
The Fed’s Beige Book on regional economic conditions for March reported that economic activity increased somewhat. St. Louis reported a softening in conditions. Real estate is doing its usual spring pickup while a number of districts expressed concern over the sustainability of home sales growth following the expiration of the tax credit. Commercial real estate and construction remains weak.
The government’s attempts at mortgage modification essentially proven to be failures. The focus now shifts to principal reductions and or short sales. The banks demonstrating a keen interest in fairness and equality are increasingly voicing concerns that principal forgiveness is unfair and according to JP Morgan Chase would likely cost the government 150 billion Dollars.
Gee an underwater mortgage is a bad debt held by an individual mortgage holder aka your average American. The catastrophic losses created by the banks recklessness created so many bad debts held by the banks that we the tax payers had to bail them out to the tune of 700 billion under the TARP Program.
Allowed them to swap another trillion plus questionable assets for Treasuries under the various special lending programs. Allow them to value assets at whatever they feel is appropriate and game the accounting rules to the point where their balance sheets and income statements aren’t worth the paper their printed on. Borrow at the Fed’s discount window at .75% and purchase Treasuries that yield some 4% collecting a risk free spread of 3.25%. Instrumental in their profits rocketing back to almost pre bust record levels. Compensation packages that reward their executives not only for their gross incompetence, but what is most likely criminal behavior in some cases as well and at a rate 100’s of times greater than the average employee.
Despite all of this they have the unmitigated bleeping gall to state that principal forgiveness is unfair, yet another shining example of their blatantly outrageous behavior that goes well beyond any sense of decency and or fairness.
Hi and welcome to The Profit Motive, I’m your host Caleb Lawrence. Once upon a time in America the media acted as the watchdog of the corporations and the state. In the modern era it’s all about ratings and profits, opinion has been substituted for news and frequently is presented as fact. Much like my daily radio show on KPIG 107.5 FM in Santa Cruz California and KPYG FM 94.9 Cayucos/San Luis Obispo California. A thousand Blogs were able to spot the current problems and many began discussing it years before it reached crises proportions. While there were exceptions, and these exceptions are becoming more common, the mainstream media failed to get it and largely continue to do so.
