Friday, October 27, 2006
Do the dems take the house?
Do the dems take the house in two weeks? The liberal talk radio sure seems to think so. Democrats are charged while republicans are deflated. Many republicans are plainly disgusted. This should hold the voter turn out down on the republican side. Democratic turn out can never be gauged very well, but it seems like it may be large. Two weeks is a short time but it is also a very long time and I don't think we've seen every surprise yet...
Thursday, October 26, 2006
Redefine and conquer
Earlier this week, the newspaper ran a story on the Georgia-Florida game. According to the story the networks, CBS and ESPN, have forbidden their commentators to use the term “World’s Largest Outdoor Cocktail Party” during the broadcast. The reason being, that the two university presidents “want to do away with the game’s reputation as a drunkfest for tailgaters”.
Let me get this straight, if we abstain from referring to the game as a cocktail party, then suddenly no one will drink? Yeah, that makes sense. While we’re at it, why don’t we just refer to colleges as “convents”, then we can stop the drinking on campus as well.
What makes this dangerous is that it is the climate in the country. The university president’s didn’t come up with this out of the blue; they take it from the leadership of the nation, the Bush administration.
They are the masters of “new-speak”; re-defining an issue to lessen the impact on the public. That’s why the media refers to the civil war in Iraq as “sectarian-violence”.
The problem with re-defining an issue is that regardless of what you call something, it doesn’t affect the reality of it. Giving euphemistic titles to tough issues is just a way to avoid dealing with them, which is quickly becoming Americas’ favorite pastime.
In the financial vernacular “re-stating earnings” is a way to gloss over a loss. In housing prices don’t drop, they “correct.” In the economy, negative growth becomes a “rough-patch”.
Maybe if melanomas were called age spots, they wouldn’t be cancer. Anybody can see the idiocy of such a notion. Pretending that cancer isn’t cancer only guarantees that it will become worse. It’s the same with everything else.
Let me get this straight, if we abstain from referring to the game as a cocktail party, then suddenly no one will drink? Yeah, that makes sense. While we’re at it, why don’t we just refer to colleges as “convents”, then we can stop the drinking on campus as well.
What makes this dangerous is that it is the climate in the country. The university president’s didn’t come up with this out of the blue; they take it from the leadership of the nation, the Bush administration.
They are the masters of “new-speak”; re-defining an issue to lessen the impact on the public. That’s why the media refers to the civil war in Iraq as “sectarian-violence”.
The problem with re-defining an issue is that regardless of what you call something, it doesn’t affect the reality of it. Giving euphemistic titles to tough issues is just a way to avoid dealing with them, which is quickly becoming Americas’ favorite pastime.
In the financial vernacular “re-stating earnings” is a way to gloss over a loss. In housing prices don’t drop, they “correct.” In the economy, negative growth becomes a “rough-patch”.
Maybe if melanomas were called age spots, they wouldn’t be cancer. Anybody can see the idiocy of such a notion. Pretending that cancer isn’t cancer only guarantees that it will become worse. It’s the same with everything else.
Wednesday, October 18, 2006
The Daily Reckoning by Bill Bonner
"The surest way to ruin a man who doesn't know how to handle money is to
give him some."
-George Bernard Shaw
Approximately two weeks ago, a group of regulatory agencies voiced their concern about what have become standard practices in the mortgage business. They released what amounted to a new set of standards, in a report entitled "Interagency Guidance on Nontraditional Mortgage Product Risks."
And now, cometh the Comptroller of the Currency, John C. Dugan, speaking about the innovations of the mortgage industry: "Lenders who originate these types of loans should follow sound underwriting practices that consider the borrower's repayment capacity."
Traditionally, the lender judged both his man and his market. If both were deemed solid, he would take a chance, lending the man a mortgage and hoping that the market was strong enough to allow him to recover his money if the man failed.
Nontraditionally, however, lenders wouldn't even bother with the man; instead, they would judge the market...and judge it foolproof. As long as house prices were rising at double-digit annual rates, non-traditional lenders considered mortgage lending a 'can't lose' enterprise; any fool could do it.
They were right. It was a no-brainer, in the sense that anyone with any brain at all would have avoided the new products. From reading the newspaper, we learned about the number and variety of non-traditional mortgages that flourished in the last six years. Adjustable rates, of course, became common. But so did mortgages with zero-down payments, alluringly low starter rates...including interest-only mortgages, flexible payments, and 'stated income' applications...in which the borrower is left
to use his own imagination in describing his financial circumstances.
From Grant's Interest Rate Observer, we learn also that as recently as 2000, only 25% of sub-prime mortgages were of the 'stated income' variety. Only one percent consisted of 'piggyback loans' - junior mortgages designed to eliminate the need for a real down payment. And none were I.O., or interest only.
Today, 44% of sub-prime loans have 'limited documentation,' 31% are piggyback loans, and 22% are I.O. And now that rising housing prices are no longer a sure bet, lenders are becoming more careful. They're beginning to do on their own, precisely what the feds are encouraging; that is, they're beginning to ask if the customer can really pay for what he is trying to buy.
Daily Reckoning readers will chuckle to themselves recalling that the stated purpose of both the federal government's housing policy and that of the lenders themselves was to 'help Americans buy their own homes' or words to that effect. Easy credit was meant to increase homeownership; renting was seen as a social disease awaiting a cure.
But the effect of 'EZ credit' was to turn Americans into a race of housing speculators, not of homeowners. At the margin - where renters were enticed to become homeowners - people did not actually buy houses...they merely paid for an option to buy them in the future. That's what an interest-only mortgage actually is, and as the I.O.'s, limited doc, flexible payment ARMs reached farther and farther into the general population of homeowners, fewer and fewer people really owned their homes at all. More and more of them became gamblers, betting that property values would rise
fast enough for them to keep on refinancing until they actually pulled in enough to afford to pay the principal down.
Meanwhile, we will all get an even bigger chuckle when we consider that the gullibility of the poor, sub-prime borrowers is at least matched by the gullibility of the great, super-prime lenders. Cheap suits, expensive suits - when you got down to it, they all fell for the same line of guff.
While the marginally lumped idiots took out ARMs, the hedge fund, pension fund, and insurance fund geniuses bought MBSs, mortgage-backed securities. The securities were backed by the mortgages, which were in turn backed by the imaginary incomes of the borrowers. Thus, the credit agencies rightly judged the quality of the mortgages as less than perfect, BBB. And then with the miraculous powers of modern finance, these same mortgages were put into MBSs and turned into triple-A credits!
This particular feat is attributed to the fact that the sliced and diced processed mortgages - the Spam of the lending industry - are less risky than the individual cuts. While this may be true for an individual 'can'of the stuff, it certainly cannot be true for the whole lot of it. The grease and fat that went in has to come out somewhere. In other words, one MBS buyer might get lucky, but they can't all do better than average. We don't know, but we suspect that when the tins are finally opened, the glop inside will not be very appealing.
give him some."
-George Bernard Shaw
Approximately two weeks ago, a group of regulatory agencies voiced their concern about what have become standard practices in the mortgage business. They released what amounted to a new set of standards, in a report entitled "Interagency Guidance on Nontraditional Mortgage Product Risks."
And now, cometh the Comptroller of the Currency, John C. Dugan, speaking about the innovations of the mortgage industry: "Lenders who originate these types of loans should follow sound underwriting practices that consider the borrower's repayment capacity."
Traditionally, the lender judged both his man and his market. If both were deemed solid, he would take a chance, lending the man a mortgage and hoping that the market was strong enough to allow him to recover his money if the man failed.
Nontraditionally, however, lenders wouldn't even bother with the man; instead, they would judge the market...and judge it foolproof. As long as house prices were rising at double-digit annual rates, non-traditional lenders considered mortgage lending a 'can't lose' enterprise; any fool could do it.
They were right. It was a no-brainer, in the sense that anyone with any brain at all would have avoided the new products. From reading the newspaper, we learned about the number and variety of non-traditional mortgages that flourished in the last six years. Adjustable rates, of course, became common. But so did mortgages with zero-down payments, alluringly low starter rates...including interest-only mortgages, flexible payments, and 'stated income' applications...in which the borrower is left
to use his own imagination in describing his financial circumstances.
From Grant's Interest Rate Observer, we learn also that as recently as 2000, only 25% of sub-prime mortgages were of the 'stated income' variety. Only one percent consisted of 'piggyback loans' - junior mortgages designed to eliminate the need for a real down payment. And none were I.O., or interest only.
Today, 44% of sub-prime loans have 'limited documentation,' 31% are piggyback loans, and 22% are I.O. And now that rising housing prices are no longer a sure bet, lenders are becoming more careful. They're beginning to do on their own, precisely what the feds are encouraging; that is, they're beginning to ask if the customer can really pay for what he is trying to buy.
Daily Reckoning readers will chuckle to themselves recalling that the stated purpose of both the federal government's housing policy and that of the lenders themselves was to 'help Americans buy their own homes' or words to that effect. Easy credit was meant to increase homeownership; renting was seen as a social disease awaiting a cure.
But the effect of 'EZ credit' was to turn Americans into a race of housing speculators, not of homeowners. At the margin - where renters were enticed to become homeowners - people did not actually buy houses...they merely paid for an option to buy them in the future. That's what an interest-only mortgage actually is, and as the I.O.'s, limited doc, flexible payment ARMs reached farther and farther into the general population of homeowners, fewer and fewer people really owned their homes at all. More and more of them became gamblers, betting that property values would rise
fast enough for them to keep on refinancing until they actually pulled in enough to afford to pay the principal down.
Meanwhile, we will all get an even bigger chuckle when we consider that the gullibility of the poor, sub-prime borrowers is at least matched by the gullibility of the great, super-prime lenders. Cheap suits, expensive suits - when you got down to it, they all fell for the same line of guff.
While the marginally lumped idiots took out ARMs, the hedge fund, pension fund, and insurance fund geniuses bought MBSs, mortgage-backed securities. The securities were backed by the mortgages, which were in turn backed by the imaginary incomes of the borrowers. Thus, the credit agencies rightly judged the quality of the mortgages as less than perfect, BBB. And then with the miraculous powers of modern finance, these same mortgages were put into MBSs and turned into triple-A credits!
This particular feat is attributed to the fact that the sliced and diced processed mortgages - the Spam of the lending industry - are less risky than the individual cuts. While this may be true for an individual 'can'of the stuff, it certainly cannot be true for the whole lot of it. The grease and fat that went in has to come out somewhere. In other words, one MBS buyer might get lucky, but they can't all do better than average. We don't know, but we suspect that when the tins are finally opened, the glop inside will not be very appealing.
Friday, October 13, 2006
U.S. to allow spare parts exports to Iran airline
U.S. to allow spare parts exports to Iran airline
The Associated Press
Despite a standoff with Iran over its nuclear programs, the United States said Wednesday it was approving export of spare parts to Tehran for its national airline because safety was at issue and the United States had no interest in threatening civil aviation. link
Over the past year, through a relentless blitz of press conferences, radio addresses and television shows, the Bush administration has informed the public that, short of the third Reich, Iran is the most dangerous nation the history of the world.
So though we may be on the brink of war with this fanatical nation determined to wipe Israel off the map and enrich uranium for weapons, out of the kindness of their hearts the administration has seen fit to make sure Iran’s civil aviation is safe.
Sure, we may have to attack Iran in the near future but we can’t allow any civilian aircraft to threaten public safety due to the lack of spare parts.
What a crock of shit!
When it comes to policy we see that it is firmly in place… in the hands of the corporations.
IHT, “State Department spokesman Sean McCormack said the General Electric Co. was in line to receive a license from the Treasury Department to provide the equipment to Iran.”
Rules need not apply to General Electric, number 14 on the top 100 defense contractors list, when it comes to policy concerning Iran.
Iran is vilified on a daily basis by Bush, Rice and a host of others, but apparently they aren’t nasty enough to preclude GE getting big contracts on the sale of parts.
It reminds me of the Chavez paradox. Chavez the president of Venezuela, who would be an unknown leftist hack were it not for the vast amount of oil his country sits on, derives all of his power from the money his country makes from selling oil to Americans. While Bush rails publicly on what a menace Chavez is to the entire region.
It’s all a game. Incite the rubes with rhetoric while lining the pockets of the corporations with the money received from supposed enemies. What a farce!
The Associated Press
Despite a standoff with Iran over its nuclear programs, the United States said Wednesday it was approving export of spare parts to Tehran for its national airline because safety was at issue and the United States had no interest in threatening civil aviation. link
Over the past year, through a relentless blitz of press conferences, radio addresses and television shows, the Bush administration has informed the public that, short of the third Reich, Iran is the most dangerous nation the history of the world.
So though we may be on the brink of war with this fanatical nation determined to wipe Israel off the map and enrich uranium for weapons, out of the kindness of their hearts the administration has seen fit to make sure Iran’s civil aviation is safe.
Sure, we may have to attack Iran in the near future but we can’t allow any civilian aircraft to threaten public safety due to the lack of spare parts.
What a crock of shit!
When it comes to policy we see that it is firmly in place… in the hands of the corporations.
IHT, “State Department spokesman Sean McCormack said the General Electric Co. was in line to receive a license from the Treasury Department to provide the equipment to Iran.”
Rules need not apply to General Electric, number 14 on the top 100 defense contractors list, when it comes to policy concerning Iran.
Iran is vilified on a daily basis by Bush, Rice and a host of others, but apparently they aren’t nasty enough to preclude GE getting big contracts on the sale of parts.
It reminds me of the Chavez paradox. Chavez the president of Venezuela, who would be an unknown leftist hack were it not for the vast amount of oil his country sits on, derives all of his power from the money his country makes from selling oil to Americans. While Bush rails publicly on what a menace Chavez is to the entire region.
It’s all a game. Incite the rubes with rhetoric while lining the pockets of the corporations with the money received from supposed enemies. What a farce!
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