March Survey: Almost half of housing market is now distressed properties

"From Campbell/Inside Mortgage Finance HousingPulse: HousingPulse Distressed Property Index Rises for Month; Homebuyer Traffic Flattens

The HousingPulse Distressed Property Index (DPI), a key indicator of the health of the U.S. housing market, rose to 48.6 percent in March – the second highest level seen in the past 12 months.
...
The HousingPulse DTI indicated that nearly half of the housing market is now distressed properties. This trend is likely to continue as a backlog of foreclosures and mortgage defaults make their way through the housing pipeline..."

at http://www.calculatedriskblog.com/2011/04/march-survey-almost-half-of-housing.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+CalculatedRisk+%28Calculated+Risk%29

American Hellholes

"The U.S. economy is dying and we are heading for the next Great Depression. The talking heads in the mainstream media love to spin the economic numbers around and around and they love to make it sound like the economy is improving, but the truth is that it doesn't take a genius to see what is happening to the U.S. economic system. All over the nation many of our greatest cities are being slowly but surely transformed into post-apocalyptic wastelands. All over the mid-Atlantic, all along the Gulf coast, all throughout the "rust belt" and all over the entire state of California cities that once had incredibly vibrant economies are being turned into rotting, post-industrial hellholes. In many U.S. cities, the "real" rate of unemployment is over 30 percent. There are some communities that will start depressing you almost the moment that you drive into them. It is almost as if all of the hope has been sucked right out of those communities. If you live in one of those American hellholes you know what I am talking about. Sadly, it is not just a few cities that are becoming hellholes. This is happening in the east, in the west, in the north and in the south. America is literally being transformed right in front of our eyes..."

at http://theeconomiccollapseblog.com/archives/american-hellholes

Portuguese Budget Deficit Revised Up Second Time to 9.1%

"Courtesy of Google Translate, please consider Portugal again revised upwards the deficit in 2010

Portugal's public deficit stood at year-end 2010 to 9.1 percent of Gross Domestic Product (GDP), five tenths above the 8.6 percent reported three weeks ago.

Early estimates on the Portuguese executive deficit in 2010, which received clearance from Brussels, they set a decline in the deficit to 7.3 percent, which Portugal is ranked as one of the countries of the European Union ( EU) with a greater reduction.

But last March 31, the caretaker government rose to 8.6 percent deficit for the loss of large public transport and a nationalized bank, which had not been included in the accounts submitted to Brussels.

The new upward revision is that the harsh adjustment measures implemented in the country Luso during the past year to reduce the public deficit-increasing tax burden, reducing public spending, cuts in salaries of civil servants, etc .- are having a more limited effect than expected.

These changes also had an impact on the level of public debt, which rose from 92.4 per cent of GDP to account for 93 percent, equivalent to 160,470.1 million..."

at http://globaleconomicanalysis.blogspot.com/2011/04/portuguese-budget-deficit-revised-up.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+MishsGlobalEconomicTrendAnalysis+%28Mish%27s+Global+Economic+Trend+Analysis%29

As The Japanese Government Pension Fund Announces Commencement Of Asset Liquidations, Will The Japanese Bond Market Finally Crack?

"In the world of bonds, few things have perplexed investors as much as the ridiculously low (and going lower) rates of Japanese Government Bonds (JGBs), at last check yielding 1.22%. Granted "deflation" in Japan has long been quoated as the key driver for the ongoing decline in real and nominal rates, but in practical market terms it was always the fact that there was a buyer of first and last resort, usually this being either Japanese citizens directly or their proxy, the Japanese Government Pension Investment Fund (GPIF) that kept yields in check and sliding. No one has been following the story of the perpetually collapsing JGB yield better than SocGen's Dylan Grice (for the best overview of this issue we suggest: "Upcoming Government Funding Crises: Japan Edition"). And while as Dylan has pointed out before, the direct purchase of bonds by the population has slowed if not reversed entirely (and in the aftermath of the March 11 earthquake we are confident many have entered run off mode - we will attempt to confirm as soon as official fund flow data is released), the GPIF has always been a buyer of last resort. Until now. Reuters reports that the Kyle Bass pain trade, which has for so long gone counterintuitively, may be about to pay off in spade.
From Reuters:

Japan's public pension fund is planning to withdraw about 6.4 trillion yen ($78 billion) from its assets in this financial year to cover a shortfall in pension payouts, the Nikkei business daily reported on Sunday.

The Government Pension Investment Fund (GPIF) holds assets of about $1.4 trillion, larger than both the Canadian and Indian economies, and is a major force in the Japanese government bonds (JGB) market, where it parks two-thirds of its assets.

And if one isn't buying, it means that one is...

The GPIF is likely to raise cash by selling JGBs and other assets in its portfolio as pension contributions and tax income continue to fall short of pension payouts which are growing as Japan's population ages, the newspaper said.

For the financial year that ended in March, the GPIF withdrew about 6 trillion-7 trillion yen to cover the shortfall, the Nikkei said.

This financial year, the fund plans to secure about 4.7 trillion yen for the purpose by not reinvesting money redeemed from JGBs coming to maturity, and raise another 2 trillion yen by selling stocks and bonds, the Nikkei said..."

at http://www.zerohedge.com/article/japanese-government-pension-fund-announces-commencement-asset-liquidations-will-japanese-bon?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+zerohedge%2Ffeed+%28zero+hedge+-+on+a+long+enough+timeline%2C+the+survival+rate+for+everyone+drops+to+zero%29

China Proposes To Cut Two Thirds Of Its $3 Trillion In USD Holdings

"All those who were hoping global stock markets would surge tomorrow based on a ridiculous rumor that China would revalue the CNY by 10% will have to wait. Instead, China has decided to serve the world another surprise. Following last week's announcement by PBoC Governor Zhou (Where's Waldo) Xiaochuan that the country's excessive stockpile of USD reserves has to be urgently diversified, today we get a sense of just how big the upcoming Chinese defection from the "buy US debt" Nash equilibrium will be. Not surprisingly, China appears to be getting ready to cut its USD reserves by roughly the amount of dollars that was recently printed by the Fed, or $2 trilion or so. And to think that this comes just as news that the Japanese pension fund will soon be dumping who knows what. So, once again, how about that "end of QE" again?
From Xinhua:

China's foreign exchange reserves increased by 197.4 billion U.S. dollars in the first three months of this year to 3.04 trillion U.S. dollars by the end of March.

Xia Bin, a member of the monetary policy committee of the central bank, said on Tuesday that 1 trillion U.S. dollars would be sufficient. He added that China should invest its foreign exchange reserves more strategically, using them to acquire resources and technology needed for the real economy.

And as if the public sector making it all too clear what is about to happen was not enough, here is the private one as well:

China should reduce its excessive foreign exchange reserves and further diversify its holdings, Tang Shuangning, chairman of China Everbright Group, said on Saturday.

The amount of foreign exchange reserves should be restricted to between 800 billion to 1.3 trillion U.S. dollars, Tang told a forum in Beijing, saying that the current reserve amount is too high.

Tang's remarks echoed the stance of Zhou Xiaochuan, governor of China's central bank, who said on Monday that China's foreign exchange reserves "exceed our reasonable requirement" and that the government should upgrade and diversify its foreign exchange management using the excessive reserves.

Tang also said that China should further diversify its foreign exchange holdings. He suggested five channels for using the reserves, including replenishing state-owned capital in key sectors and enterprises, purchasing strategic resources, expanding overseas investment, issuing foreign bonds and improving national welfare in areas like education and health.

However, these strategies can only treat the symptoms but not the root cause, he said, noting that the key is to reform the mechanism of how the reserves are generated and managed.

The last sentence says it all. While China is certainly tired of recycling US Dollars, it still has no viable alternative, especially as long as its own currency is relegated to the C-grade of not even SDR-backing currencies. But that will all change very soon. Once the push for broad Chinese currency acceptance is in play, the CNY and the USD will be unpegged, promptly followed by China dumping the bulk of its USD exposure, and also sending the world a message that US debt is no longer a viable investment opportunity. In fact, we are confident that the reval is a likely a key preceding step to any strategic decision vis-a-vis US FX exposure (read bond purchasing/selling intentions). As such, all those Americans pushing China to revalue, may want to consider that such an action could well guarantee hyperinflation, once the Fed is stuck as being the only buyer of US debt..."

at  http://www.zerohedge.com/article/china-proposes-cut-two-thirds-its-3-trillion-usd-holdings?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+zerohedge%2Ffeed+%28zero+hedge+-+on+a+long+enough+timeline%2C+the+survival+rate+for+everyone+drops+to+zero%29

Home Builders still see no recovery

"From David Streitfeld at the NY Times: Builders of New Homes Seeing No Sign of Recovery

Builders and analysts say a long-term shift in behavior seems to be under way. Instead of wanting the biggest and the newest, even if it requires a long commute, buyers now demand something smaller, cheaper and, thanks to $4-a-gallon gas, as close to their jobs as possible. That often means buying a home out of foreclosure from a bank.

Four out of 10 sales of existing homes are foreclosures or otherwise distressed properties. Builders ... cannot compete despite chopping prices.

This has led to the "distressing gap" between new and existing home sales! Here is a repeat of the graph showing existing home sales (left axis) and new home sales (right axis). This graph starts in 1994, but the relationship has been fairly steady back to the '60s. Then along came the housing bubble and bust, and the "distressing gap" appeared (due mostly to distressed sales)..."

at http://www.calculatedriskblog.com/2011/04/home-builders-still-see-no-recovery.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+CalculatedRisk+%28Calculated+Risk%29

Interest on the National Debt: "Brother Can You Spare a $Trillion?"

"Several people have asked me to comment on the YouTube video "Brother Can You Spare a $Trillion".

Link in case the embedded video above does not play: Spare a Trillion?

I already have, in advance. I have been harping about interest on the national debt for years, and explicitly brought the subject up twice recently, most recent of which is Interactive Map: Paul Ryan vs. Obama Budget Details; Path of Destruction

Interest on the national debt is a serious issue and unfortunately far too many ignore it..."

at http://globaleconomicanalysis.blogspot.com/2011/04/interest-on-national-debt-brother-can.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+MishsGlobalEconomicTrendAnalysis+%28Mish%27s+Global+Economic+Trend+Analysis%29

Axel Merk: Why Is Anyone Still Waiting to Sell the Dollar?

"The Fed can buy billions, even a trillion or so, but if and when the market is moving against the policymakers then there is no stopping. The Fed cannot stem that tide. There is only so much that they can manage and so it is something that they have to watch very carefully. At the same time, they are not terribly concerned. If the bond market is falling, you do not know whether it is because of more economic growth or because of more inflation, and you really only know after the fact..."

at http://www.zerohedge.com/article/interview-ted-butler-end-silver-price-manipulation?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+zerohedge%2Ffeed+%28zero+hedge+-+on+a+long+enough+timeline%2C+the+survival+rate+for+everyone+drops+to+zero%29

JEFF GUNDLACH SAYS THE USA WILL DEFAULT

"At last week’s Morningstar Investor Conference in Chicago Jeff Gundlach, bond guru and founder of DoubleLine Capital said the USA is confronted with a terrible deflationary battle that will ultimately end in default (see the full presentation here). I was shocked to read this from Gundlach who is truly a master of the debt markets. He appears to connect all of the dots with near perfection only to come to what I believe is a maniacal conclusion (that we will default)..."

at http://pragcap.com/jeff-gundlach-says-the-usa-will-default

Another Class Action Suit Filed in Federal Bankruptcy Court Against Lender Processing Services

"The noose is tightening around Lender Processing Services.

Last week, various news outlets revealed that Federal banking regulators had issued consent orders against major servicers, MERS, and LPS. Kate Berry of American Banker pointed out that LPS is exposed to making payments to servicers:

In addition to the 14 biggest mortgage servicers, two of the biggest vendors to the industry received cease-and-desist orders from regulators Wednesday. One was stronger than the other.
Lender Processing Services Inc. and Merscorp Inc.’s Mortgage Electronic Registration System were both cited for “significant compliance failures” and “unsafe and unsound business practices” related to foreclosures. Regulators are requiring both companies to hire independent consultants, take remedial steps to address past failures and hire additional staff.
But only LPS, a publicly traded company in Jacksonville, Fla., that provides foreclosure-related services to banks, faces the possibility of having to reimburse servicers and borrowers if an independent review finds anyone was financially harmed by its failure to properly execute mortgage documents.
In a Securities and Exchange Commission filing, the company noted that “the order does not make any findings of fact or conclusions of wrongdoing, nor does LPS admit any fault or liability.” The filing said the agencies “have not yet concluded their assessment of whether any civil money penalties may be imposed.” LPS shares fell 3%, to $30.19 each.

This is still a limited basis for liability, but LPS appears to be on the track of death by a thousand unkind cuts..."

at   http://www.nakedcapitalism.com/2011/04/another-class-action-suit-filed-in-federal-bankruptcy-court-against-lender-processing-services.html

The EU's Dirty Secret: Germany Is The Biggest Welfare Recipient There Is

"The standard way of thinking about the eurozone is this: Germany is strong, France is a bit less strong, and everyone else mooches off their strength.

Certainly that's how it's appeared lately, post-crisis, but that's thinking way too small.
Floyd Norris at NYT sheds some light on what's actually been the case, going back to the creation of the Euro: Germany is the biggest beneficiary around, and everyone else has been losers.

Basically, because periphery countries like Portugal and Greece and Spain are not able to devalue their currencies to a point where they have competitive labor forces, Germany is the huge winner.
Its trade balance has surged from being in a small deficit pre-Euro to a huge surplus post euro.

These charts, via NYT, show how it looks.


Sans euro, Germany's neighbors would be far more competitive than they are now. Also, if we went back to each country having their own currencies, the Deutsche Mark would surge beyond where the euro is now, making Germany even less competitive as BMWs became less affordable for everyone else.

The workers of Spain, Italy, France and everyone else are crippled to benefit the Germans, and its insistence on a strong Euro. Also it should be noted that pre-crisis, the huge consumption booms in countries like Greece were another subsidy to the Germans..."

at http://www.businessinsider.com/germany-benefits-from-the-eurozone-2011-4?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+clusterstock+%28ClusterStock%29#ixzz1KHOs43ig

Bob Chapman : SLV & GLD ETFs are government Operations

"Bob Chapman the international forecaster talking with Discount Gold and Silver trading radio yesterday says : I do not see gold stopping until we get to $1650 , $1600 and get ready for $2000 , and silver they can't cover and it's going to go up like this everyday until HSBC and JPM decide that they gonna do something and I can tell you something and that is that the federal reserve and the treasury and JPM and HSBC have sat down to figure out what the heck they are gonna do , is it partial default is it full default or is the federal reserve gonna come in and buy out the positions and nobody is going to get any silver you know they will be lucky if they get cash ..."

at http://bobchapman.blogspot.com/2011/04/bob-chapman-slv-gld-etfs-are-government.html

Bob Chapman - JPM and HSBC sold 45 ounces of silver for every ounce of silver they own

"...what the market is telling you is that there is a terrible problem out there and it is not being solved and that problem is JP Morgan Chase and HSBC are short , they can't cover their shorts that means they've been betting silver is going to go down and right now at that price over $46 an ounce they're offsite they are losing 90 billion dollars now somewhere along the way they to call a force majeure and what that means is : we can't deliver and what they is they leveraged their bet on the short side and for every ounce of silver they had they sold 45 , which normal is 9 in fractional banking they're trapped and they can't get out ..."

at http://bobchapman.blogspot.com/2011/04/bob-chapman-jpm-and-hsbc-sold-45-ounces.html

Greece "Velvet Restructuring" Imminent, Blames Upcoming Second Bankruptcy On Citigroup Trader

"It appears rumors that Greece is set to restructure its debt are about to come true. According to Greek daily Ta Nea, reported by the Guardian, "the government was mulling "a velvet restructuring" that would include extending outstanding debt and a voluntary agreement with lenders to modify repayment terms." More: "Greece is considering ways to restructure its debt – such as by extending the life of its loans – two national newspapers claimed on Friday, joining a flurry of recent reports on the prospect that Athens might be forced to default." Not surprising, this comes hot on the heels of continued lies about the stability and viability of the eurozone and the euro, which recently surged to nosebleed levels only to allow it to drop from the highest possible position when the realization that the dominoes are falling finally sets in. But never one to be bound by the confines of reality, where one is accountable and responsible for their actions¹ (1: except all millionaires and billionaires bailed out by the Bernanke Put), Greece is now calling in Interpol to put the blame for its latest and greatest bankruptcy on a Citigroup trader: "A London trader working for US bank Citigroup is to be questioned by investigators over an email at the centre of an investigation by the Greek authorities into rumours that Athens could be forced to restructure its national debt as early as this weekend." So, it is a trader fault for pointing out the market's reaction to what is so glaringly obvious even a caveman finance minister from Athens will realize it, and not the fact that one needs to apply a new patch in order to express Greek debt to GDP. The lunacy. The lunacy..."

at http://www.zerohedge.com/article/greece-velvet-restructuring-imminent-blames-upcoming-second-bankruptcy-citigroup-trader?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+zerohedge%2Ffeed+%28zero+hedge+-+on+a+long+enough+timeline%2C+the+survival+rate+for+everyone+drops+to+zero%29

24 Signs Of Economic Decline In America

"The following are 24 more signs of economic decline in America. Hopefully you will not get too depressed as you read them....

#1 On Monday, Standard & Poor’s altered its outlook on U.S. government debt from "stable" to "negative" and warned the U.S. that it could soon lose its AAA rating. This is yet another sign that the rest of the world is losing faith in the U.S. dollar and in U.S. Treasuries.

#2 China has announced that they are going to be reducing their holdings of U.S. dollars. In fact, there are persistent rumors that this has already been happening.

#3 Hedge fund manager Dennis Gartman says that "panic dollar selling is setting in" and that the U.S. dollar could be in for a huge decline.

#4 The biggest bond fund in the world, PIMCO, is now shorting U.S. government bonds.

#5 This cruel economy is causing "ghost towns" to appear all across the United States. There are quite a few counties across the nation that now have home vacancy rates of over 50%..."

at http://theeconomiccollapseblog.com/archives/24-signs-of-economic-decline-in-america

Three Years of Happy Headlines Have Done Nothing

"The NYT just can’t understand what the heck is wrong with people:

Amid rising gas prices, stubborn unemployment and a cacophonous debate in Washington over the federal government’s ability to meet its future obligations, the poll presents stark evidence that the slow, if unsteady, gains in public confidence earlier this year that a recovery was under way are now all but gone.
Capturing what appears to be an abrupt change in attitude, the survey shows that the number of Americans who think the economy is getting worse has jumped 13 percentage points in just one month. Though there have been encouraging signs of renewed growth since last fall, many economists are having second thoughts, warning that the pace of expansion might not be fast enough to create significant numbers of new jobs.
The dour public mood is dragging down ratings for both parties in Congress and for President Obama, the poll found..."

at  http://blog.mises.org/16598/three-years-of-happy-headlines-have-done-nothing/?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+MisesBlog+%28Mises+Economics+Blog%29

Gold - a Flight to Quality

"The New York Times reports Gold Tops $1,500 an Ounce in 'Flight to Quality'

The list of factors that have supported the price of precious metals in recent weeks is long. It includes worries about the sustainability of European debt levels — and whether countries like Greece will soon default; the threat of a possible downgrade of U.S. credit ratings amid an impasse over raising the debt limit and dealing with the budget deficit; the weaker dollar; rising inflation in many parts of the world and continued unrest in North Africa and the Middle East, which has pushed up oil prices.

“We’re seeing a perfect storm for gold and silver prices,” said Robin Bhar, a senior metals analyst in London for the French bank Crédit Agricole.

“Gold is sometimes a currency, sometimes a commodity and sometimes a store of value,” analysts at Merrill Lynch wrote recently. “As purchasing power of workers in emerging markets increases, we see demand for gold as a commodity increasing over the next few years,” the Merrill Lynch report said..."

at  http://globaleconomicanalysis.blogspot.com/2011/04/gold-flight-to-quality.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+MishsGlobalEconomicTrendAnalysis+%28Mish%27s+Global+Economic+Trend+Analysis%29

Even Ben Stein Is Warning That An Economic Collapse Is Coming

"He sure has come a long way since "Ferris Bueller's Day Off". During a recent television segment for CBS, Ben Stein declared that "the tea leaves are ominous" and he warned that an economic collapse may be coming. In particular, Ben Stein is deeply concerned about inflation. During his recent appearance on CBS, Stein proclaimed that the Federal Reserve is "just shoving money out the door as fast as it can" and that this could have horrific consequences for the U.S. financial system. Sadly, Ben Stein is exactly right on this point. The Federal Reserve has already injected enough money into the financial system to create an inflationary disaster. Fortunately most of this liquidity is still being held by the banks (this will be further explored below), but once all of that money starts getting released into the financial system it is going to unleash economic chaos..."

at http://theeconomiccollapseblog.com/archives/even-ben-stein-is-warning-that-an-economic-collapse-is-coming

Whipsaw Wednesday – Dollar’s Destruction Saves Markets (apparently)

"The Dollar is down from 76 yesterday to 74.5 this morning, a stunning 2% drop for a currency in a country that didn't have an earthquake or a revolution overnight. 75.63 was our low of last November (a one-day spike and we were back at 81 by the end of the month as the market fell apart) and before that we only touched 74.23 briefly in November of 2009 (it's a bad month for the Dollar) and we flew up from there to 78 in December and 80 in January..."

at  http://www.zerohedge.com/article/whipsaw-wednesday-%E2%80%93-dollar%E2%80%99s-destruction-saves-markets-apparently?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+zerohedge%2Ffeed+%28zero+hedge+-+on+a+long+enough+timeline%2C+the+survival+rate+for+everyone+drops+to+zero%29

A new IMF reserve currency without the problems of the substitution account – The creation of Special Transaction Rights

"With discontent at the current state of the international monetary system still lingering, is there an alternative to the decades-old discussions about gold, Bretton Woods Systems, and Special Drawing Rights? This column claims there is. It proposes a new IMF reserve currency with the creation of Special Transaction Rights.

In the wake of the global financial crisis, the discontent with the current international monetary system lingers on (see for example Vines 2010). But is there an alternative given the decades-old discussions about gold, Bretton Woods Systems, Bancor, and Special Drawing Rights (SDRs)? Yes, there is.
In this column I outline a proposal for the creation of Special Transaction Rights. Special Transaction Rights (STRs) would circumvent the problems of the substitution account associated with SDRs (and the Triffin dilemma), and they would also foster reserve diversification and the build up of local bond markets..."

at http://www.voxeu.org/index.php?q=node/6366