MICHELLE MEYER: Home Prices Will Continue To Plunge, And 2013 Will Be The Worst Year For Foreclosures In History

"Michelle Meyer, the well-known housing analyst for BofA/ML, has some bad news: The housing crisis isn't over.
In fact, in her 2012 outlook piece, she says it's "far from over" and that prices still have another 7% to decline nationally.
The basic problem: There are still tons more foreclosures or "liquidations" yet to come.

The most crucial input to our forecast for construction and home prices is our assumption for foreclosures. Our securitized products research team estimates another eight million homes will be liquidated over the next four years, which adds to the six million homes that have already been liquidated since 2007. All told, we expect 14 million foreclosures or a quarter of all homeowners with a mortgage.

Not only is the wav of foreclosure not close to over, but 2013 will actually be the worst year yet.
Why the acceleration in foreclosures? Basically because there's still an abnormally large backlog.

Currently, it takes between 25 and 30 months on average for a non-agency mortgage to transition from 60 days delinquent to liquidation, about double the amount of time it took back in 2008. The extended timelines reflect capacity issues with significantly more than normal mortgages in the pipeline, government mandated modification efforts and the nationwide investigation by the state Attorneys General on the foreclosure process. We assume that the latter is resolved in the near term.

The bottom line for prices:

National home prices have declined 33% from the peak in 1Q06 through 3Q11, returning to mid-2002 levels. In our view, this has left prices fairly valued relative to per capita income growth and rent prices. However, we expect prices to undershoot relative to fair valuation, declining another 7% from 3Q11 through 1Q13..."

at http://www.businessinsider.com/michelle-meyer-on-housing-in-2012-2011-12?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+clusterstock+%28ClusterStock%29#ixzz1fVBx046q

German Finance Minister Hatches 'National Redemption Fund' Scheme To Kick The Can Another 20 Years

"Finance Minister Wolfgang Schaeuble hatched a plan to siphon off a huge chunk of sovereign debt for every country in the EU and pretend to do something about it, not now of course, but over the next 20 years.

Allegedly the siphoned off debt would be paid back via a "National Redemption Fund".

Of course the only way to pay that debt back is by raising taxes or cutting spending for 20 years which means it has a snowball's chance in hell of actually working..." 

at http://globaleconomicanalysis.blogspot.com/2011/12/germany-finance-minister-hatches.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+MishsGlobalEconomicTrendAnalysis+%28Mish%27s+Global+Economic+Trend+Analysis%29#ixzz1fVBdbEK2

DOLLAR STARTING TO DOUBLE TOP?

"The US Dollar Index appears to be setting up for a medium-term double top. This week it broke down through a short-term rising trend line drawn from the October low after reaching a level equal to the October top. The PMO made a lower top, creating a negative divergence..."

at http://pragcap.com/dollar-starting-to-double-top

Portugal Is Latest Country To Go "MF Global", Raid Pensions Funds To Delay Fiscal Death

"About a year ago, we discussed the very troubling moves by insolvent countries such as Ireland and Hungary to "raid" their pensions funds for various fungible purposes, a move which in virtually every way a was a progenitor to the MF Global capital commingling, if not outright bankruptcy, and was explained as reflecting "a willingness by governments to use long-term assets to fill short-term deficits, including Ireland’s announcement last week that it would use the country’s €24bn National Pensions Reserve Fund “to support the exchequer’s funding programme” and Hungary’s bid to claw $15bn of private pension funds back to the state system." While it was unclear precisely what the use of funds was, back then FN speculated that it pension funds were being tapped to boost sovereign debt bids. Which if true means that Europe's peripheral pensioners have seen about a 20% drop in the NPV of their retirement assets. Today we add Portugal to the list of countries committing an MF Global type crime on a global scale: the Telegraph writes: "Portugal has raided €5.6bn (£4.8bn) of pension fund assets in a controversial scramble to meet its deficit targets." And since the money is once again implicitly and explicitly used to patch broken fiscal models, it is as good as gone. Which in a paradoxical way is almost welcome, as the true Arab Spring will not come to Europe (and America) until the citizens don't read, in clear writing, that their welfare state entitlement benefits are gone.... They are all gone. And at that point there will be truly nothing left to lose..."

at http://www.zerohedge.com/news/portugal-latest-country-go-mf-global-raids-pensions-funds-delay-fiscal-death

Bank of Korea Increases Gold Reserves by Massive Nearly $1 Billion or 39% in November Alone

"...The Bank of Korea’s continued diversification of its foreign exchange reserves is a bullish factor which may have led to the price gains today.
The central bank of South Korea announced that it had purchased 15 metric tonnes of gold in November to raise its reserve of bullion in an effort to diversify its portfolio of its foreign reserve investment and reduce risks caused by market volatilities.
According to the Bank of Korea (BOK), it made a purchase of 15 tons of gold last month to increase the nation’s gold reserves to 54.4 tons worth $2.17 billion as of the end of November.
It boosted the size of its gold reserves by US$850mn in November, up a massive 39% from the previous month. Its total gold reserves are now worth US$2.17bn..."

at http://www.marketoracle.co.uk/Article31882.html

Eurozone Being Swallowed by Expanding Debt Black Holes, Mega Bond Market Profits and Default Booms

"The stock markets plunged last week and euro-zone bond market volatility increased with PIIGS yields spiking to new Euro highs as pressure mounts on the ECB to start printing money to monetize bankrupting PIIGS debt that effectively act as expanding debt black holes that threaten to swallow first the whole of the Eurozone and soon after collapse the worlds financial system.

The pressure cooker reached a new extreme with the apparent shock of the FAILURE of a German Bund auction as the eurozone debt crisis contagion appeared to have spread to Germany as it experienced its worst bond auction since the launch of the Euro in failing to sell some 2/3rds of a routine auction which the mainstream press took as evidence of the flight of capital from the euro-zone accelerating on risks of announcements for a Euro-bond and the start of inevitable money printing of several trillions of euros as I have warned of several times over the year as being inevitable, where the longer the delay will result in more desperate actions.
However the facts of the German bond auction failure are more to do with German greed than imminent euro-zone contagion, as Germany has sought to benefit from the internal flight of capital by offering its bonds at successfully lower interest rates culminating in the record low yield offering of just 1.98%, a rate which is in the face of 3% Inflation which the bond markets were just not able to stomach, so in reality it is a technical failure and nothing akin to that which has hit the PIIGS and lately spreading to hit France and Belgium.
The Germans continue to resist out right money printing and implementation of Euro bonds because they know where it will lead to, i.e. lazy southern states that constantly spend far beyond their means (tax revenues) will put ever greater pressure on the ECB to print ever greater amounts of euros this resulting in ever higher annual inflation rates until the whole eurozone resembles what the likes of Greece, Italy and Spain were before they joined the Euro, i.e. basket case high inflation economies that rely on euro-zone core to finance government spending..."

at http://www.marketoracle.co.uk/Article31794.html

Bank of England Gives "Systemic Crisis" Warning, Merkel says Eurozone "Will Take Years" to Solve Debt Problem

"...German chancellor Angela Merkel however, in a speech to the Bundestag this morning, repeated her objection to the notion that the European Central Bank might follow the Bank of England and the Federal Reserve by embarking on quantitative easing.
"The European Central Bank has a different task from that of the US Fed or the Bank of England," Merkel said, adding that resolving the Eurozone crisis "is a process and this process will take years."
Merkel also again rejected the idea of jointly-issued 'Eurobonds'. European Union leaders are due to meet next Friday to discuss their next steps.
Elsewhere in Germany, bakery chain Wiener Feinbaecker is advertising a 5-Year bond at 7%, the Financial Times reports – noting that it is an "eloquent sign" that we could be entering another credit crunch.
"When a thriving business with profits growing at 30% a year resorts to this kind of financing, it is a pretty sure sign that banks are not fulfilling their traditional role," the FT report says.
Bank of England governor Mervyn King yesterday warned banks to prepare for a "systemic crisis".
"An erosion of confidence, lower asset prices and tighter credit conditions are further damaging the prospects for economic activity and will affect the ability of companies, households and governments to repay their debts," he said..."

at http://www.marketoracle.co.uk/Article31883.html

America’s Lost Half Century and the Loss of Values

"Real economic growth in the United States fell precipitously during the last half century.
The reason: A severe values deficit.
During this period, society valued the acquisition of materials in lieu of knowledge and wisdom. The values deficit triggered economic turmoil and the subsequent financial implosion..."

at  http://www.marketoracle.co.uk/Article31885.html

Unemployment Falls, But Is It Good News?

"I just posted this at CBS News:
The Department of Labor released the employment report on Friday, and it shows 120,000 jobs created in the month of November, and the unemployment rate falling from 9.0 percent to 8.6 percent.
At first glance the fall in the unemployment rate seems like good news, but a closer look at the numbers reveals some weakness in the report.
First, note that depending upon which estimates you look at, it takes from 90,000-125,000 jobs just to keep up with the growth in the population. Thus, the 120,000 jobs that were created in November is enough to keep the unemployment rate from going up, but it is not enough by itself to absorb all the new workers entering the labor force and at the same time reduce the fraction of people that are currently unemployed. So the fall in the unemployment rate cannot be attributed to robust job growth.
Second, the report shows a decline in the labor force of 315,000 for November, and about half of the decline is attributed to discouraged workers giving up the search for a job. This exit of workers rather than job creation is the main source of the fall in the unemployment rate, and since so much of it is from discouraged workers this is not an encouraging development. Note, however, that there is a lot of month to month variability in the labor force participation numbers, and some of this may simply be month to month noise in the measurement.
Third, many of the unemployment duration numbers continue to increase. Average search duration reached a new peak for this downturn of 40.9 weeks, and hence long-term unemployment is getting worse, not better.
Fourth, many of the jobs that were created are in the retail sector. Thus, while some workers are finding new jobs, the new employment does not, in general, pay as well as previous employment. In addition, if the seasonal factors are different this year, e.g. if some of this is hiring for the holidays that seasonal adjustment procedures miss, then the picture is even weaker than the numbers suggest..."

at http://economistsview.typepad.com/economistsview/2011/12/unemployment-falls-but-is-it-good-news.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+EconomistsView+%28Economist%27s+View+%28EconomistsView%29%29

“EUROPE IS HEADED FOR A BLOOD IN THE STREETS OUTCOME”

"Warren Mosler recently got back from Washington DC and his takeaway on the situation in Europe is not pretty:

“My takeaway from two days in DC is that Europe is headed to a blood in the streets outcome. While ECB funding remains ongoing even as it’s uncertain, in any case the underlying theme remains austerity.
There is no plan B. Just keep raising taxes and cutting spending even as those actions work to cause deficits to go higher rather than lower. So while the solvency and funding issue is likely to be resolved, the relief rally won’t last long as the funding will continue to be conditional to ongoing austerity and negative growth.
And the austerity looks likely to not only continue but also to intensify, even as the euro zone has already slipped into recession. So from what I can see, there’s no chance that the ECB would fund and at the same time mandate the higher deficits needed for a recovery, In which case the only thing that will end the austerity is blood on the streets in sufficent quantity to trigger chaos and a change in governance.”

at  http://pragcap.com/europe-is-headed-for-a-blood-in-the-streets-outcome

Bob Janjuah Explains Why The Worst Is Still Ahead Of Us

"The other global strategic thinker with a decent white beard, Bob Janjuah of Nomura, sees weaker growth, weaker earnings and a great deal more volatility in the short- and medium-term for the US. Not a fan of the decoupling miracle, Janjuah explains (following our last discussion of his thoughts) in this Bloomberg TV interview that US data is showing only a temporary improvement with the forthcoming fiscal drag into next year likely to slow the economy to a practical standstill. Noting that 'The worst is ahead of us' he sees the implications of the hard-default he expects for Greece in early 2012 (that is not priced into the market) as very concerning with a cluster of defaults more than possible. Uncomfortably viewing the banking sector as a curse (and not a cure) for our problems, he sees the Japanese Zombie bank experience playing out which guarantees sustainable growth is not around the corner and suggests we would be far better off medium-term if bank defaults occurred and the painful medicine is taken..."

at http://www.zerohedge.com/news/bob-janjuah-explains-why-worst-still-ahead-us

Have You Heard About The 16 Trillion Dollar Bailout The Federal Reserve Handed To The Too Big To Fail Banks?

"What you are about to read should absolutely astound you. During the last financial crisis, the Federal Reserve secretly conducted the biggest bailout in the history of the world, and the Fed fought in court for several years to keep it a secret. Do you remember the TARP bailout? The American people were absolutely outraged that the federal government spent 700 billion dollars bailing out the "too big to fail" banks. Well, that bailout was pocket change compared to what the Federal Reserve did. As you will see documented below, the Federal Reserve actually handed more than 16 trillion dollars in nearly interest-free money to the "too big to fail" banks between 2007 and 2010. So have you heard about this on the nightly news? Probably not. Lately Bloomberg has been reporting on some of this, but even they are not giving people the whole picture. The American people need to be told about this 16 trillion dollar bailout, because it is a perfect example of why the Federal Reserve needs to be shut down. The Federal Reserve has been actively picking "winners" and "losers" in the financial system, and it turns out that the "friends" of the Fed always get bailed out and always end up among the "winners". This is not how a free market system is supposed to work.

According to the limited GAO audit of the Federal Reserve that was mandated by the Dodd-Frank Wall Street Reform and Consumer Protection Act, the grand total of all the secret bailouts conducted by the Federal Reserve during the last financial crisis comes to a whopping $16.1 trillion..."

at http://theeconomiccollapseblog.com/archives/have-you-heard-about-the-16-trillion-dollar-bailout-the-federal-reserve-handed-to-the-too-big-to-fail-banks

Dec. 9th: The Beginning Of The End Game For The Eurozone

"December 9th is a do or die date for the EU (European Union) and especially for the EZ (eurozone). For this reason it is highly likely that, in the run-up to the EU summit scheduled for this date, policy makers will make announcements calculated to restore market confidence. Indeed, mere anticipation of such announcements will tend to provide an upward bias to the market. For this reason, despite my medium term bearishness regarding the European situation, I am going into the December 9th summit with only a relatively small core short exposure.

The ultimate fate of Europe depends on the policies that are revealed on or around December 9th. I am not optimistic. The “solutions” currently being discussed will not work. In particular, the issue of “fiscal union,” which is the focus of current discussions and negotiations, is completely misplaced.

I maintain my view that by April of 2011, the S&P 500 (^SPX) will initiate a downturn that will penetrate recent lows of 1,075 and ultimately test the region between 950 and 1,020 on the S&P 500. Furthermore, I maintain my view that the European financial system and economies could begin to unravel even before the New Year.

PIIGS Are Insolvent With Or Without Fiscal Union

Contrary to popular belief, the fundamental problem faced by the PIIGS is not necessarily the size of their debts – or even of the extent of their present fiscal deficits. If those nations could sustainably grow at a healthy rate, their debt levels would be manageable..."

at http://seekingalpha.com/article/311298-dec-9th-the-beginning-of-the-end-game-for-the-eurozone?source=feed

Fed’s Bullard: Europe Issues Will Continue ‘For A Long Time’

"A U.S. central bank official warned Thursday it will take a long time to sort out Europe’s debt problems, and told financial markets not to place unreasonable expectations on the European Central Bank‘s ability to mitigate the crisis.

“I do not think you should expect the crisis to be solved with a silver bullet,” and “it will take years” to sort out the issues ailing the European Union, Federal Reserve Bank of St. Louis President James Bullard said..."

at http://blogs.wsj.com/economics/2011/12/01/feds-bullard-europe-issues-will-continue-for-a-long-time/?mod=WSJBlog

The Eurozone debt crisis: Slipping into a double-dip recession?

"Those following developments in Europe fear another Lehman Brothers disaster, where one failure triggers several others and a global recession follows. This column suggests that recent history may already be repeating itself – but with even more severe consequences unless drastic action is taken.

The Eurozone is trapped in a debt crisis which is generating a massive lack of confidence in global financial markets, and which threatens to become systemic and plunge developed economies into a new recession (see on this site Muellbauer 2011). International investors have been running from European assets in a stampede that the two EU summits in July and August have failed to stop, and are now in a “wait-and-see” mode, making extremely difficult the renewal of huge amounts of public and private debt. Although the Eurozone as a whole will end 2011 with lower levels of public debt and deficit than the US or the UK, the poor management of the heterogeneity among members and the absence of efficient political institutions able to handle this heterogeneity are pushing financial stress in the Eurozone to limits even higher than those observed during the Lehman crisis..."

at http://www.voxeu.org/index.php?q=node/7369

LPS: Mortgages In Foreclosure Process at an All-Time High

"The October Mortgage Monitor report released by Lender Processing Services, Inc. (NYSE: LPS) shows mortgage delinquencies continue their decline, now nearly 30 percent off their January 2010 peak. Meanwhile, foreclosure inventories are on the rise, reaching an all-time high at the end of October of 4.29 percent of all active mortgages. The average days delinquent for loans in foreclosure extended as well, setting a new record of 631 days since last payment, while the average days delinquent for loans 90 or more days past due but not yet in foreclosure decreased for the second consecutive month.

Judicial vs. non-judicial foreclosure processes remain a significant factor in the reduction of foreclosure pipelines from state to state, with non-judicial foreclosure inventory percentages less than half that of judicial states. ...

The October data also showed that mortgage originations are on the rise, reaching levels not seen since mid-2010. Mortgage prepayment rates have also spiked, as much of the new origination is related to borrower refinancing ..."

at http://www.calculatedriskblog.com/2011/12/lps-mortgages-in-foreclosure-process-at.html

EU Bank Writedowns to Exclude Pre-2013 Debt; French Bond Yields Drop Most on Record; Italian Bond Yields Drop Below 7%

"EU officials have hatched a plan to make banks and bondholders take losses for risks, not now of course, but after 2013. In the meantime, taxpayers will shoulder 100% of the losses for bank lending stupidity. On this confidence inspiring news, European bonds rallied sharply.

Bloomberg reports EU Bank Writedown to Exclude Pre-’13 Debt

The European Union may exempt bank debt issued before 2013 from proposals forcing investors to take losses at failing lenders, said a person familiar with the plan.

Excluding the debt is designed to prevent lenders’ funding costs from rising, said the person, who declined to be identified because the discussions are private. The exemption could be extended if banks struggle to raise funds, the person said. The law would need approval from national governments and the European Parliament before taking effect.

Michel Barnier, the EU’s financial services chief, has promised to propose draft rules to end the need for taxpayer bailouts of failing banks.

Under draft proposals obtained by Bloomberg News, holders of long-term unsecured senior debt in a collapsing bank would be first in line to take losses once a lender’s capital and other subordinated debt is exhausted. Long-term bonds would be those with a maturity of more than one year.

A spokeswoman for the European Commission declined to comment on the draft law.

Short-term debt, with a less than one-year maturity, and derivatives should only be written down by regulators as a last resort if losses from longer-term debt aren’t “sufficient to restore the capital of the institution and enable it to operate as a going concern,” according to the draft.

“Exempting short-term debt and derivatives may be justifiable, but this would increase the use of systemically risky derivatives and excessive levels of short-term debt that contributed to the ongoing crisis,” said Sony Kapoor, managing director of policy advisory firm Re-Define. Taxing them “may help alleviate some of these distortions.”

Three Key Provisions

1. Taxpayers would be screwed for all losses up to 2013
2. The year can be extended
3. Writing down Derivatives is a last-resort..."

at http://globaleconomicanalysis.blogspot.com/2011/12/eu-bank-writedowns-to-exclude-pre-2013.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+MishsGlobalEconomicTrendAnalysis+%28Mish%27s+Global+Economic+Trend+Analysis%29

Yes, The BoomBustBlog Forecast Pan-European Bank Run Has Breached American Soil!!!

"In the post "The Ironic, Prophetic Nature of the MF Global Bankruptcy Filing and It's Potential Ramifications"
I identified the MF Global event as something that the mass media and
many analysts are resisting to do. I called it for what it was - a run
on the bank - plain and simple. I forecasted this "new-ish" style of
bank run (a run where instiutional counterparties cause the drain) about
6 months ago, see The Anatomy Of A European Bank Run: Look At The Banking Situation BEFORE The Run Occurs!

Well,
there have been runs on the bank in Europe, and it has skipped the pond
to arrive here in the states. It's just that no one want to call it
that, even though that is exactly what it is. On of the pertinent points
about these bank runs is the abject risk it showers the brokerage
account holder in those banks with. Remember, thanks to TBTF, banks
customers are no longer those silvery haired grandmas walking out with
toasters. Which brings me to an interesting story by Jonathan Weil over
at Bloomberg: MF’s Missing Money Makes You Wonder About Goldman..."

at http://www.zerohedge.com/contributed/yes-boombustblog-forecast-pan-european-bank-run-has-breached-american-soil

What Does the Fed Know That We Don’t?

"The thought that should be on every investor’s mind today is “Why did the Fed have to stage the coordinated intervention yesterday?’

Put another way, what exactly does the Fed know that we don’t?

The whole thing smells fishy to me. Aside from the fact that the Fed clearly leaked its intentions as early as Monday night (hence the reason stocks rallied while credit markets weakened), there’s something peculiar about the fact the Fed chose to do this at the end of November.

Why November 31? Why not today or Tuesday?

I think the answer is that the Fed stepped in to help its institutional investor/ hedge fund buddies. November was a horrible month for this crowd. And with Bank of America approaching $5 per share (a level which would require many institutions to liquidate due to regulations), the Fed was also helping out its favorite insolvent bank as well.

Aside from this, Europe was approaching the End Game. Germany won’t permit the ECB to print nor to issue Euro-bonds. The EFSF plan was dead before arrival, failing to even stage a 3 billion Euro bond auction without having to step in and buy the bonds itself. And the IMF wasn’t going to be an option either.

Put another way, ALL other bailout options had failed for Europe. The Fed was the lender/ intervener of last resort. That alone should have everyone worried as it indicates just how dire things had become in Europe.

However, there’s something far more worrisome about the Fed’s move which is that: IT SOLVES NOTHING..."

at http://www.zerohedge.com/contributed/what-does-fed-know-we-don%E2%80%99t?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

What Have The Central Banks Of The World Done Now?

"The central banks of the world are acting as if it is 2008 all over again. Desperate times call for desperate measures, and right now the central bankers are pulling out all the stops. The Federal Reserve, the European Central Bank, the Bank of England, the Bank of Canada, the Bank of Japan and the Swiss National Bank have announced a coordinated plan to provide liquidity support to the global financial system. According to the plan, the Federal Reserve is going to substantially reduce the interest rate that it charges the European Central Bank to borrow dollars. In turn, that will enable the ECB to lend dollars to European banks at a much cheaper rate. The hope is that this will alleviate the credit crunch which has gripped the European financial system by the throat. So where is the Federal Reserve going to get all of these dollars that it will be loaning out at very low interest rates? You guessed it - the Fed is just going to create them out of thin air. Our currency is being debased so that Europe can be helped out. Unfortunately, the impact of this move will be mostly "psychological" because it really does nothing to address the fundamental problems that Europe is facing. It is up to Europe to solve those problems, and so far Europe has shown no signs of being able to do that.

The major central banks of the world say that they want to "enhance their capacity to provide liquidity support to the global financial system." But essentially what is happening is that the Federal Reserve is going to be zapping large amounts of dollars into existence and loaning them out to the ECB very, very cheaply. Think of it as a type of "quantitative easing" on a global scale..."

at http://theeconomiccollapseblog.com/archives/what-have-the-central-banks-of-the-world-done-now