More homeowners are choosing to just walk away...and dump on the grandchildren!

By MARCELLA S. KREITER

CHICAGO, Oct. 29 (UPI) -- The financial crisis and ensuing recession apparently changed the mindset of Americans toward their homes, turning what long has been the American Dream into just another financial investment.

The result, strategic defaults -- people walking away from the property and mortgages not because they have to, but because they can.

The key consideration is time, said Jon Maddux, of You Walk Away, which helps people turn their properties back to their banks. Some experts estimate nearly a third of all mortgage defaults -- 31 percent -- are of the strategic variety. Empowering Homeowners Through Intelligent Strategic Default.

ReatlyTrac reported 2 million foreclosures in September and said one in 371 housing units received a foreclosure notice.

Easy mortgages made people glorified renters rather than proud homeowners, with no emotional or financial ties.

"People who made the decision to buy at the wrong time got stuck in a house that may not recover (its value) for 10 to 15 years. Does it make sense to keep it as an asset? No. It's throwing good money after bad when it takes so long to break even. So they decide to stop now. Their credit will recover in three or four years," Maddux told UPI. EXCUSE ME! Got stuck in a house? Getting stuck implies a situation typically beyond one's control like "stuck in the mud," "stuck in the snow," "stuck on hold," a private part "stuck in a zipper" but not stuck in a house.

"Life is too short," Jeff Horton, 33, of Orlando, Fla., told the Chicago Tribune earlier this month. Horton has $400,000 in mortgages with Bank of America and said he decided to walk away from his loans because he can't sell or rent the properties for enough money to cover the payments. Too short! Just imagine parental units stating life is too short to work this hard and feed and clothe my children. "Sorry kids but your self-centered, irresponsible mom and dad want to travel more and you are simply a financial drain on our dreams."

As the housing bubble burst, real estate values plummeted and homeowners found themselves "underwater" -- owing more than their homes were worth.

"I felt guilty at first," Horton told the Tribune. "It all stopped when I saw them (Bank of America executives) take $90 million in executive bonuses. They take bailout money and do nothing for the little guy. They wouldn't do anything for me." Oh you poor human. You must have been issued the rare birth certificate that assured you of no hardships regardless of your decisions in life. From my perspective, there is no viable defense for the banks however you and the banks share a common theme; dump your financial challenges on children and grandchildren?

Banks made the situation worse, giving people who wanted to refinance a hard time, even refusing to do anything for them at all -- sometimes because the homeowners were still making payments.

Chris Deaner of Sun City, Ariz., told CBS' "60 Minutes" he was fed up. Deaner and his wife bought a house in 2006 for $262,000 but the property is worth only $142,000 on today's market. He asked his bank for help.

"They refused to," he said. "They said it was gonna affect my credit and they were gonna take my house. And I pretty much said, 'Go for it.'"  Let me guess, you drive a new car off the lot and expect to be reimbursed for the incurred depreciation by the first semiphore?

The federal government has to take some of the blame. As Washington pushed banks to make homeownership easier, bankers heard "open the floodgates," Maddux said. Banks started offering no-money- or little-money-down mortgages to people who wouldn't be able to sustain the payments for the long-term, then bundled the mortgages into security instruments and sold them off.

"They (the banks) didn't hold the paper any more. … They felt no responsibility to make good loans," Maddux said. "They only had to be good for a little bit of time and then they could sell them off. It was make money quick and pass the hot potato."

Gone are the days of George Bailey's Building and Loan where the bank took its proceeds and invested them back into the community.

But home ownership still is usually one's biggest investment and there are indications attitudes toward mortgages are changing.

Freddie Mac, the Federal Home Loan Mortgage Corp., reported last week people are putting more money into their mortgages rather than taking out when they refinance -- something that was all but unheard of in recent years. The report said 33 percent of refinancers put more money into their principle, compared to 18 percent who pulled equity out.

Foreclosures are running 65 percent higher than last year in the third quarter, RealtyTrac reported.

"The underlying problems that are causing homeowners to miss their mortgage payments -- high unemployment, underemployment, toxic loans and negative equity -- are continuing to plague most local housing markets," RealtyTrac Chief Executive Officer James Saccacio said. "And these historically high foreclosure rates will continue until those problems are resolved."

And the foreclosure process itself is not without problems. A number of large mortgage lenders in the past month halted foreclosures because of paperwork errors and Wells Fargo last week admitted problems with 55,000 of its foreclosures, although saying the problems were minor and no one who was current on payments had been affected.

"People need to know a mortgage contract clearly spells out you have two options: You promise to pay and if you don't you'll give the property back to the lender. It's not a solemn oath you're going to pay," Maddux said.

YouWalkAway.com

Ask Yourself…

• Are you stressed out about your mortgage payments?
• Are you having trouble deciding if it makes financial sense to walk away?
• Do you need to move for work or family and can’t sell?
• What if you could live payment free for up to 8 months or more and walk away without owing a penny?

Unshackle yourself today from a losing investment and use our proven method to Walk Away. A Losing investment? Pork Bellies are an investment, an apartment building is an investment. The historical home ownership investment returns (excluding the housing bubble period) were absent on your site. Reason?

Dump it on Grandchildren Portion of the Program

We strive to help people understand their rights and know their options. Co-Founders Jon Maddux and Chad Ruyle began with the goal of helping homeowners navigate through the foreclosure process and understand foreclosure consequences by providing tools, resources, affordable legal and tax help, support and peace of mind. Since 2007, YouWalkAway.com’s foreclosure specialists have supported over 4,000 people prepare and strategically navigate through the foreclosure process.

YouWalkAway.com has positioned itself as leader in the industry. We develop a comprehensive and personalized plan for our members who seek assistance through a strategic default and want to understand and minimize foreclosure consequences, while offering unlimited support and individual attention. Helping homeowners on the frontlines of this market and economy, YouWalkAway.com is the nation’s foremost authority on foreclosure laws and consequences.

As Seen On the TV

Featured in a wide range of reputable and powerful media pieces, YouWalkAway.com is acknowledged for being a trustworthy and valid foreclosure resource agency. Our press coverage includes: features in Good Morning America, ABC Nightline, The Today Show on NBC, NBC Nightly News with Brian Williams, NPR, Fortune Magazine, Time Magazine, The New York Times, The Wall Street Journal, USA Today, and many more.

Assisting you with your own Blues Tune

Maddux is a published songwriter with Warner Music.

Comments by Grandpa not UPI

Obama and Co. have bungled the bailout (Jack Kelly)

Nice Job Jack Kelly!!

I Look Forward to Reading More of Your 

"Call It Like It Is Articles"

Sunday, October 31, 2010
By Jack Kelly, Pittsburgh Post-Gazette

Treasury Secretary Timothy Geithner is all that remains of President Barack Obama's original economic team. Budget Director Peter Orszag and Christina Romer, chairman of the Council of Economic Advisers, are long gone, and Lawrence Summers, chairman of the National Economic Council, plans to be back at Harvard in January.

Neil Barofsky wouldn't be sad if Mr. Geithner were to depart, too. Who, you may ask, is Neil Barofsky? And why should you care what he thinks?

Mr. Barofsky, 40, is something of a prodigy. After earning a degree in economics from the Wharton School of Business at the University of Pennsylvania and a law degree from New York University, Mr. Barofsky joined the office of the U.S. attorney for the Southern District of New York, where he prosecuted international drug gangs and later headed the mortgage fraud group.

President George W. Bush tapped Mr. Barofsky to be the special inspector general for the Troubled Asset Relief Program, even though Mr. Barofsky reportedly is a Democrat. TARP, you'll recall, is the bailout of financial institutions that followed the bursting of the subprime mortgage bubble.

TARP consists of 13 programs, for which $474.8 billion has been obligated. TARP recipients have paid back much of it, and $178.4 billion in TARP funds remain outstanding.

On Oct. 26, the second anniversary of TARP, Mr. Barofsky issued a report on the program to Congress. It concludes that, while TARP prevented financial and economic collapse, it has made possible the payment of record bonuses to Wall Street bankers, failed to increase lending to small businesses and fallen short in reducing unemployment or preserving home ownership.

TARP also is encouraging big banks to return to the risky behaviors which caused the last financial crisis, and has increased the risk the next crisis will be worse.

"The biggest banks are bigger than ever, fueled by government support and taxpayer-assisted mergers and acquisitions," the report said. "The repeated statements that the government would stand by these banks during the financial crisis has given a significant advantage to the larger 'too big to fail' banks, as reflected in their enhanced credit ratings borne from a market perception that the government still will not let these institutions fail."

Treasury officials have exaggerated TARP's successes, bungled administration of its programs and concealed information Americans have a right to know, the report said.

J.P. Freire of the Washington Examiner noted Monday that the Treasury Department has contracted with a private firm for a Freedom of Information Act specialist with experience in the "use of FOIA/PA exemptions to withhold information from release to the public."

"When Treasury refuses for more than a year to require TARP recipients to account for the use of TARP funds, or claims that Capital Purchase Program participants were 'healthy, viable' institutions knowing full well that some are not, or when it provides hundreds of billions of dollars in TARP assistance to institutions, and then relies on those same institutions to self-report any violations of their obligations to TARP, it damages the public trust to a degree that is difficult to repair," Mr. Barofsky's report said.

"When the government promotes programs without meaningful goals or metrics for success, such as its mortgage modification programs, or when it makes critical and far-reaching decisions, such as pushing for dramatically accelerated car dealership closings without considering the potential for devastating job losses, or when it fails to negotiate robustly on behalf of the taxpayer, as it did when agreeing to compensate [AIG's] counterparties 100 cents on the dollars for securities worth less than half that amount, the government invites public anger, hostility and mistrust," his report continued.

Financial news is boring, and the TARP revelations are embarrassing to Democrats, which is probably why most journalists have paid little attention to the Barofsky report.






But as the report said, what's going on now "dangerously undermines (the government's) ability to respond effectively to the next crisis." We need to understand what's happening, and why.






Telling us what's happening and why is the job journalists are supposed to do. If journalists were doing their jobs, we should know at least as much about TARP as we do about Delaware GOP Senate candidate Christine O'Donnell's teenage dabbling in witchcraft. That we don't is contemporary journalism's enduring shame.

Fed's Hoenig: further easing would be dangerous! Are you listening Ben? Do you listen to anyone Ben?

Do You Listen to Anyone Ben Bernanke?

The Fed, both now and under Greenspan, expressed no concern with

the later stages of investment bubbles.

(Jeremy Grantham)

“Check writing in the trillions is not a bondholder’s friend; it is in fact

inflationary, and, if truth be told, somewhat of a Ponzi scheme..."

(Bill Gross)

The U.S. economy is a "fiscal train wreck" waiting to happen...further

quantitative  easing will have little effect on U.S. growth in 2011."  

(Nouriel Roubini )

"Quantitative easing is more likely to stimulate corporations to devour

each other than to create employment."

(George Soros)

"I expect the coming doses of quantitative easing will finally spark adverse

reactions, first in the dollar and later in the bond market. When a falling

dollar forces consumer prices and long-term interest rates to rise,

the Fed's actions will be rendered impotent."

(Peter Schiff)

"I tried to make clear that I regard that (QE-2) as the wrong way to go.

An excessive, permanent increase in money is, in my view,

an indirect manipulation of the exchange rate.”

(German Finance Minister at the Korean G 20)

In other words, by perpetuating an artificially low 10-year government

bond rate, the Fed may be delaying (even if very modestly, given the

modest impact of the action on long rates) the very fiscal policy action that

the nationmost needs, while doing little to boost an economy whose

principal problem is not high long-term interest rates.

( Peter Orzag)

Let's Try It One More Time Ben...Ben...Ben

Reporting by Jonathan Lynn
10/30/10

(Reuters) - Slight deflation is just as acceptable as low inflation, said a senior Federal Reserve official who has persistently dissented against Fed easy money policies, repeating that further easing would be dangerous.

Kansas City Federal Reserve Bank President Thomas Hoenig said the Fed should not have an inflation target but he would like to see an inflation rate of zero.

Prospects of very low inflation, and the resulting low nominal interest rates that give a central bank little room to cut rates sharply in a crisis, is misplaced as it does not allow monetary policy enough time to take effect, Hoenig said in an interview in Saturday's issue of Swiss daily Neue Zuercher Zeitung.

The interview with Hoenig, who has used all six of his votes in 2010 to dissent against the Fed's pledge to hold rates "exceptionally low" for "an extended period," was conducted on October 26 -- the same day that Hoenig warned in a speech that further easing could be dangerous.

The Fed is expected to approve a new round of "quantitative easing" -- essentially printing money by buying bonds -- at its next policy meeting on November 2/3 because many senior officials fear that low inflation could turn into deflation that would make it harder for companies and households to pay off their debts -- already a drag on the U.S. economy.

VOTE
Under the Fed's system of rotating voting positions for regional bank presidents, Hoenig has a vote on the policy-making federal open-market committee (FOMC) this year but not in 2011.

"A little deflation is no worse than a little inflation," Hoenig said in the interview, published in German.

The situation was not comparable with the Great Depression, when prices fell by 20 percent, which was just as bad as price increases of 20 percent, he said. "Wanting higher inflation is not the same as preventing strong deflation," Hoenig said.

A central bank should aim over time to hold prices stable, or at most tolerate very low inflation, and it was dangerous to argue that monetary policy could reduce unemployment without stoking inflation.

Hoenig said that quantitative easing had succeeded in kick-starting the financial markets but now it had diminishing returns and now that the crisis was over the Fed should allow markets to function normally and reduce its portfolio by allowing bonds it had purchased to mature.

Hoenig cited estimates that long-term rates would fall 25-30 basis points if the Fed embarked on a new round of large-scale quantitative easing.

The Fed had always been quick to pump money into the system in a crisis but slow to withdraw liquidity afterwards, he said. "Thus the Fed is risking higher inflation for a very small incremental benefit in the form of slightly lower long-term interest rates. I'm not prepared to run that risk," he said.

Hoenig recalled that the Fed had eased monetary policy sharply in 2003 as an insurance against deflation. "We paid a horrific premium for that if you look at the recent recession. I still believe that the costs of such a policy are higher than generally assumed," he said.

All Aboard The Consumption Wagon (Michael Pento) and Bernanke's Titanic Ready to Launch

Friday, October 29, 2010
By: Michael Pento

This morning’s GDP report shows that the consumer has regained their profligate habits of borrowing money to consume foreign made goods. The 2% growth in Q3 GDP, albeit still quite anemic, wasn’t achieved by increasing the goods producing sector of the economy or by boosting exports. It was mostly accomplished by boosting household spending.

Consumer spending grew at a 2.6% annual rate, which was the most in four years. Of course, this should make Ben Bernanke happy, as the thought process of the Fed is to get banks to lend more and for consumers to start piling on debt again. Now if only we can get an asset bubble in real estate once again he would become completely ecstatic.

The Titanic II sails next week and even if the market is initially disappointed in its size the long term outcome is a lower dollar and higher commodity prices.

The R-squared or inverse correlation of the USD to the S&P500 has been over .90 for the last two months. Thatmeans 90% of the markets move to the upside is based upon the dollar going down—I hate that. There was a time in the early 80’s when dollar up was great for stocks. It meant low inflation, a falling cost of capital, a growing middle class and strong foreign investment. But the Fed wants nominal growth in GDP and asset prices and that’s what they are going to achieve.

The true answer to creating viable GDP growth is to grow the goods producing sector of the economy. That can be accomplished by lowering the corporate tax rate, abolishing minimum wage laws, reducing regulations, busting unions, reforming the public school system, balancing the budget and supporting the currency by raising rates and reducing the Fed’s balance sheet. It cannot be accomplished by printing and borrowing money.

The main problem with this counterfeiting and debt bonanza is that we are quickly approaching the day when a sinking USD doesn’t send stocks higher and Bernanke’s purchases of US debt doesn’t send interest rates lower but instead sends them inexorably rising.

Consumer Spending in October is Anemic (Gallup)

Spending averaging $62 per day in October

-- up from September, but down from a year ago

By Dennis Jacobs
10//29/10

PRINCETON, NJ -- Americans' self-reported spending in stores, restaurants, gas stations, and online averaged $62 per day during the first four weeks of October. That figure is up from $59 in September and is about the same as the $63 figure from August. From a broader perspective, spending remains in the 2009-2010 new normal monthly average range of $59 to $72 and is far below the 2008 recessionary spending range of $81 to $114.

Weekly Self-Reported Spending Up From 2010 Lows

Gallup's consumer spending measure over the last two weeks (ending Oct. 17 and Oct. 24) has averaged $67 per day and $65 per day, respectively, slightly higher than the estimate for all of October to date. The increase is likely a result of Halloween shopping, given that in the past, Gallup has seen increases in spending during the second half of October.

The latest weekly figures are also up from late September, which saw some of the lowest spending weeks of 2010. Over the past four weeks, spending has averaged slightly below year-ago levels.

Another Tough Christmas for Retailers

While spending is up slightly in October from September, year-over-year comparisons are not encouraging, with spending remaining in the new normal range established in 2009 and continuing into 2010. In turn, this is consistent with Gallup's October Christmas spending estimate that suggests another anemic holiday season for the nation's retailers.

Continued high underemployment, at 10.0% on a not-seasonally adjusted basis, also suggests another weak Christmas spending season, as Americans who are unemployed or fearing job loss tend to spend less, even around the holidays. Further, the increasing cost of gas and other commodities may limit the ability of many Americans to spend in other areas.

While retailers may be able to encourage consumer buying with aggressive discounting, they will do so at the cost of reducing their margins. At the same time, even as consumers enjoy price discounting, they may experience a reduced selection of goods as retailers try to keep their inventories lean.

There could be better news ahead, perhaps if the Federal Reserve acts next week to promote economic growth and/or if the results of the midterm elections make some consumers feel better. Regardless, until there is an indication of significant change, Gallup's data suggest another anemic holiday sales season ahead. Gallup

Warm Weather Blamed for Flat Retail Sales

Welcome to retail excuses....to hot, too cool, too wet...

WASHINGTON, Oct. 27 (UPI) -- U.S. retail sales remained muted in the week ending Oct. 23 compared to the previous week, again due to unseasonably warm weather, a trade group said.

The International Council of Shopping Centers (ICSC) said warm weather slowed sales of fall items with sales week-to-week rising 0.3 percent and sales from the same week a year ago rising 1.9 percent.

The chain store sales index from a year ago was "sluggish," the group said. "Once again, warm seasonal weather curbed consumers' appetite for fall merchandise," the report said Tuesday.

Nationally, temperatures averaged 2.8 degrees Fahrenheit above the same week a year ago and 1.8 degrees Fahrenheit above long-term historic averages, Weather Trends International said.

Falling gasoline prices left a bit more for consumers to spend in the week. Gas prices dropped to an average of $2.817 per gallon on Oct. 25, down from $2.834 per gallon a week earlier.

Grandpa

In May, cooler and wetter weather were used as excuses for slower retail sales. Of course the rabbit also shared in the blame. Rabbit Link

P. J. O'Rourke shares his disgust with politicians with Dylan Ratigan

P. J. O'Rourke entertains Dylan Ratigan as P. J. shares his disgust of Democrats and repulsion of Republicans.

Ancillary Musings from P.J. O'Rourke:

Anyway, no drug, not even alcohol, causes the fundamental ills of society. If we're looking for the source of our troubles, we shouldn't test people for drugs, we should test them for stupidity, ignorance, greed and love of power.

Cleanliness becomes more important when godliness is unlikely.

Feeling good about government is like looking on the bright side of any catastrophe. When you quit looking on the bright side, the catastrophe is still there.

Giving money and power to government is like giving whiskey and car keys to teenage boys.

The Democrats are the party that says government will make you smarter, taller, richer, and remove the crabgrass on your lawn. The Republicans are the party that says government doesn't work and then they get elected and prove it.

You know your children are growing up when they stop asking you where they came from and refuse to tell you where they're going.



P. J.'s site

Pretty Please: SEC Asks Banks to Disclose Potential Losses from Foreclosures

SEC Urges Banks to Disclose

Potential Losses From Foreclosures

(Pretty Please with Sugar on Top) 

By Jesse Westbrook

Oct. 29 (Bloomberg) -- The U.S. Securities and Exchange Commission urged banks to disclose their expected losses from flawed foreclosure documents, as mortgage-bond investors demand refunds on billions of dollars of securities.

Lenders must disclose circumstances that they “reasonably expect” to have an “unfavorable impact” on financial results, the SEC said in a letter posted on the agency’s website today. The letter was sent because of “concerns about potential risks and costs associated with mortgage and foreclosure-related activities,” the SEC said.

Federal regulators and attorneys general from all 50 states are investigating whether loan-servicing companies used improper procedures during foreclosure proceedings, including so-called robo-signers who didn’t check documentation. Investors such as Pacific Investment Management Co. (PIMCO) have demanded that banks buy back faulty loans that were bundled into bonds.

Banks should set aside funds for litigation and “other contingencies when it is probable” that they will have losses, the letter said. If companies can’t estimate losses, then they should say so, the SEC said.

JPMorgan Chase and  Co., Bank of America Corp., Wells Fargo and Co. and Citigroup Inc. have set aside a combined $10 billion to cover buybacks. SEC spokesman John Nester declined to say which banks received the letter.

Banks should also disclose financial obligations that stem from packaging loans into securities, the letter said. Other topics lenders should discuss include potential delays in completing foreclosures and risks posed by “potentially higher repurchase requests,” the letter said.

Nouriel Roubini: U.S. Economy is a "fiscal train wreck"

by John Stonestreet
10/29/10

(Reuters) - The U.S. economy is a "fiscal train wreck" waiting to happen that risks ushering in a period of stagnation featuring by minimal growth, high unemployment and deflationary pressure, U.S. economist Nouriel Roubini wrote on Friday.

In a commentary for the Financial Times, Roubini -- one of the first economists to predict the housing crash in the United States and known as 'Dr Doom' for his pessimistic forecasts -- said fiscal and monetary stimulus had prevented another depression.

But he said that further quantitative easing likely to be announced by the Federal Reserve next Wednesday will have little effect on U.S. growth in 2011, "so fiscal policy should be doing some of the lifting to prevent a double dip recession," he said.

He said the U.S. remains on an "unsustainable fiscal course" and the likely make-up of Congress after elections next Tuesday, in which the Republicans look set for strong gains, virtually takes fiscal reform off the agenda.

"The risk ... is that something on the fiscal side will snap ... The trigger could be a debt rollover crisis in a major U.S. state government," he wrote.

"The worst of the coming fiscal train wreck will be prevented by the Fed's easing. But the risk is (Obama) ... will then preside over ... a Japanese style stagnation, where growth is barely positive, and deflationary pressures and high unemployment linger."

Where's the HAMP Loan Data?

By Julie Vorman
The Center for Public Integrity
10/27/10

The Treasury Department should stop dragging its feet and release some of the specific loan-level data it has collected from mortgage servicers in the Home Affordable Modification Program (HAMP), a consumer advocacy group says.

“For over a year, it has promised to release the loan-level data to policymakers, researchers, and the public, but whenever asked, the promised date of release is pushed back,” Julia Gordon, a lawyer with the Center for Responsible Lending, told the Congressional Oversight Panel on TARP at a hearing today.

The data – once scrubbed of names and Social Security numbers – can shed light on which borrowers are getting HAMP modifications, the types of modifications being provided, and patterns of re-defaults that are occurring, she said. “Given the significant racial and ethnic inequities that have plagued the mortgage market, detailed demographic data for each servicer is of vital importance to all stakeholders,” she added.

Gordon also said one of the first priorities of the Consumer Financial Protection Bureau should be to “quickly move to regulate the [loan] servicing industry” and whether they are complying with contractual obligations to the Federal Housing Administration and the Veterans Administration. The bureau officially opens its doors in July with wide-ranging powers to write regulations that protect consumers from abusive practices by the financial services industry.

Likewise, the FHA and VA should ensure their loan servicers are following all relevant laws, Gordon said. And the Housing and Urban Development Department should terminate contracts with loan servicers that don’t follow the rules, and disclose the “loss mitigation” efforts by servicers to renegotiate mortgage terms to help homeowners avoid foreclosure, she said.

The Dodd-Frank reform law requires loan servicers to disclose how they arrived at the decision to deny a loan modification. The Treasury Department is also required to create a website so homeowners can access the HAMP program’s net present value model and see if loan servicers used it accurately in their case.

HAMP, created in early 2009, offered $50 billion in incentives for U.S. banks to restructure home mortgages and initially projected the program would help 3 to 4 million homeowners. However, as of last month, only 429,000 mortgages were permanently modified under the program.

David Rosenberg: this is a classic case of a muddle-through economy (Q3 GDP)

U.S. REAL FINAL SALES 60 BASIS POINTS

SHY OF DOUBLE-DIPPING

David Rosenberg
Source: Gluskin-Sheff
(via Zero Hedge)
10/29/10



To be sure, 2.0% is fractionally better than the 1.7% pace posted in the second quarter when double-dip risks began to surface. And, while a plus sign front of any GDP print may be viewed as constructive in some circles, this is an anaemic pace for this stage of the cycle because it is completely abnormal to be seeing the economy slow down heading into the second year of a recovery phase. On average, at this juncture, real GDP growth is accelerating, not decelerating, and typically advancing at a 5% clip, not 2%.

The major problem in the third quarter report was the split between inventories and real final sales. Nonfarm business inventories soared to a $115.5 billion at an annual rate from the already strong $68.8 billion build in the second quarter — this alone contributed 70% to the headline growth rate last quarter. If we do get a slowdown in inventory investment in Q4, as we anticipate, it would really not take much to get GDP into negative terrain. We estimate that if the change in inventories slowed to about $94.0 billion in Q4 (about $22 billion below Q3 levels), GDP would contract fractionally. In other words, it won’t take much for GDP to slip into negative terrain.

It would have been much more encouraging to see real final sales — the rest of the economy — do better than the tepid 0.6% annual rate gain that was posted. And that 0.6% annualized growth rate in real final sales follows a string of exceptionally weak performances — 0.9% in Q2, 1.1% in Q1, 2.1% in Q4 of last year, 0.4% in Q3 2009 and 0.2% in Q2. Historians will note that this goes down as the weakest recovery in real final sales on record, despite the fact the economy has been on the receiving end of the most pronounced dose of fiscal, monetary and bailout stimulus ever. Quite an accomplishment.

The recession may have technically ended, but outside of inventories, and the best days of the re-stocking process look to be behind us, this has been a listless recovery. At 60 basis points above zero, real final sales are just a shock away from double-dipping — a shock like looming tax hikes, accelerating fiscal cutbacks at the state/local government level or the millions of “99ers” about to fall off the extended jobless benefit rolls at the end of November.

In terms of components, the good news was that consumer spending did accelerate to a 2.6% annual rate from 2.2% in the second quarter — the best performance since Q4 2006. Non-residential construction eked out a 3.8% annualized gain, the first advance since Q2 2008. But the good news pretty well stopped there.

Capital spending came in at a decent 12% annual rate, but the momentum is clearly receding after the 20%-plus growth rates of the prior two quarters. And, as we saw with the core capex orders for September, business spending intentions are coming off the boil. Residential construction collapsed at a 29.1% annual rate in response to the expiry of the tax credits, the steepest decline since Q1 2009, and there appears to be little recovery in sight, though it stands to reason that we won’t see another decline of this magnitude again, at least not over the near-term. At some point inertia sets in, even on the moribund residential real estate sector.

It is also no surprise to see imports bulge when inventories did the same, but what caught our eye in the external trade portion of the GDP report was the sharp slowing in export growth, to a 5% annual rate trend — half the pace we saw in the first half of the year. Weren’t the overseas economies supposed to be providing a big lift to the U.S. economy?

Finally, state and local government spending dipped 0.2% — the fourth decline in the past five quarters. At a 12% share of the economy, this sector is nearly twice as large as business spending, and can be expected to be a dead-weight drag on the economy as far as the eye can see.

Here is the bottom line: the double-dip has been delayed but not derailed; despite widespread cries from the economic elite to the opposite. The economic recovery is extremely fragile and unless we get an improvement in real final sales, all it would take would be a modest inventory drawdown to pull real GDP back into contraction mode.






U.S. real GDP expanded at an as-expected 2% annual rate in the third quarter in what is turning out to be a classic case of a muddle-through economy. Inching ahead but not at a fast enough pace to have any meaningful impact with regard to addressing the unprecedented amount of excess slack in the labour market.

A CNBC Halloween Special

Just in from wikileaks...

CNBC TV Personalities Halloween Costumes
Erin Burnett turns heads as Marilyn Manson
Michelle revisits her Hooters roots
Cramer revisits his Beetlejuice roots
Maria Bartiromo pumps iron for Royal Rumble
Mark "Haines Bottom" crudmudgeon goes Ozzy

Trick or Treat!

Just a touch more eye shadow and...

He was like a god walking amongst mere mortals

Nuff said...

Just need to lose the tie and I am ready to party...

So I have another side...

First reporter to report live from the NYSE floor

and First woman to enter the Royal Rumble

Comcast nixed the Daisy Duke option

The crudmudgeon King transforms into the

Prince of Darkness

There's something about Drury

Spotted wearing the same costume last year.

MI Sentiment for October 2010: Survey says.....

Index of Consumer Sentiment: 67.7 (down 4.1% versus October 2009)

Index of Consumer Expectations 61.9 (down 9.8% versus October 2009)

Current Conditions Index 76.6 (up 3.9% versus October 2009)

Surveys of Consumers
Thomson Reuters/Univeristy of Michigan
10//29/10

There has been no discernable change in the overall level of consumer confidence during the past four months. At its current level, the Sentiment Index is about 20 index-points below its all-time mean, ranking barely above the bottom decile of all monthly surveys.

Not only has the Sentiment recovery been slow and shallow, confidence has declined since the start of 2010 mainly due to a weaker outlook for economic growth during the years ahead. Consumers never anticipated that economic growth would be strong enough to quickly improve their job and income prospects, but they did think that they had already weathered the worst of the declines. Long term economic prospects are now less favorable than anytime since the recession lows in late 2008 and early 2009.

Rising Concerns about Long Term Economic Prospects

The majority of consumers reported that the economy had recently weakened, as consumers have increasingly reported hearing news of job losses over the past several months. Importantly, consumers were more likely to anticipate improvement in the year ahead rather than a renewed economic downturn. Nonetheless, nearly six-in-ten consumers thought that overall conditions in the national economy would still be unfavorable.

While positive economic growth was anticipated, it was expected to be so slow that consumers anticipated that the unem-ployment rate was more likely to rise than fall during the year ahead. Overall, just 17% expected a declining unemployment rate. A turnaround in this grim jobs outlook was not expected anytime soon. Indeed, when asked about growth prospects for the economy over the next five years, the largest proportion of consumers (59%) since the start of 2009 anticipated a renewed economic downturn sometime during the next five years.

Consumer Sentiment Index

The Sentiment Index was 67.7 in the October 2010 survey, slightly below the 68.2 in September, but below last year’s 70.6. The Current Conditions Index improved, while future expectations for the economy worsened.

A year-to-year decline of 9.8% was recorded in the Expectations Index, a component of the Index of Leading Eco-nomic Indicators. The decline in the Expectations Index compared with a year ago was due to less favorable prospects for both personal finances as well as for the overall economy.

Surveys of Consumers chief economist, Richard Curtin

"Confidence in government eco-nomic policies has fallen to the low-est level since the closing months of the Bush presidency, with just 11% of consumers holding favorable evaluations of Obama’s policies. Although mid-term elections primarily respond to local rather than national issues, residents of nearly all local areas expressed economic discontent. It would not be surprising for confidence to rebound after the election; it would be surprising if those gains proved to be more than temporary. If the lame duck Congress does not immediately pass an extension of the Bush tax cuts, not even deep discounts will secure modest gains in holiday sales."

Who's really on the hook for the mortgage mess? (Diana Olick)

Dealing with robo-signings and trying to figure out who's really on the hook for the mortgage mess, with CNBC's Diana Olick and Kate Kelly.

And while the banks and courts deal with robo-signers and overall sloppy paperwork, the volume of defaults and foreclosures continue to rise. From Diana Olick's blog: Foreclosure "actions" in Q3, which include anything from default notices to bank repossessions, rose in 65 percent of the nation's top 200 housing markets. More from Diana Olick

Professor William Black does a Freddy Krueger on Larry Summers

No Mr. President, Larry Summers

Did Not Resolve the Financial Crisis

for a Pittance, He Just Papered Over the Problem

Professor William Black
Posted on Huffington Post
10/28/10

I passed up the obvious title: "Heckuva Job Larry!" That was the moment of President Obama's appearance on The Daily Show with Jon Stewart that set all Americans cringing. Yes, he really said that Summers "did a heckuva job." The candidate that was gifted the opportunity to run against the legacy of one of the worst presidents in U.S. history has, as president, used Bush as his role model to continue many disastrous policies. It was strangely fitting that he would channel Bush's infamous praise ("Heckuva job Brownie") for the FEMA chief who failed New Orleans so badly in the hurricane.

President Obama understandably wishes to focus attention on the economic disaster he inherited from President Bush. But Jon Stewart's question to him, which led to the president's gaffe, correctly asked about the message that Summers' appointment sent about the administration's commitment to fundamental change.

Summers had financial red ink on his hands at the time he was appointed. He was Rubin's chief minion in the successful effort to defeat effective financial regulation and supervision. (Yes, the effort was bipartisan and the Republican leadership shares in the guilt.) Summers was not simply wrong, but also arrogant and brutal, in blocking effective regulation at the SEC and the Commodity Futures Trading Commission. Summers was made rich by Wall Street in one of those sordid consulting arrangements designed to buy influence and reward past and future favors.

President Obama's appointment of Summers as his chief economic advisor made the administration's overall response to the crisis predictable. (Robert Kuttner gives a detailed explanation of the policies that Rubin's protégés championed in his new book, A Presidency in Peril.) The response would follow the disastrous Japanese model that has harmed their economy and damaged their integrity. The dominant characteristics can be summarized quickly: (1) the government would act for the benefit of the largest financial firms and their CEOs, even when they directed massive frauds, by (2) engineering a cover up of the banks' losses and the CEO's misconduct; (3) the administration would use the fictional reports generated to conduct the cover up to declare victory (due to their brilliance); and (4) the same strategy would impair the recovery. 

The strategy was also an assault on integrity, the rule of law, and the core precepts of the Obama campaign for president. This is why we warned from the beginning that the cover up could enrage the nation and make him a one-term president.

Creating fictional numbers and hiding losses at the Fed doesn't

reduce losses. Unfortunately, it increases real losses.

First, it leaves the looters in charge, lets them pay themselves enormous bonuses, and lets them cause greater losses.

Second, accounting cover ups prevent markets from clearing. That prolongs the recession. Japan shows how severe this problem can become.

Third, integrity is important. I really shouldn't have to explain this. It depresses me that I have to argue that it is wrong to lie. Our democracy, our economy, our society, and our souls depend on restoring our integrity and the rule of law.

Randy Wray and I have proposed a step that would demonstrate the president's complete repudiation of Summers' strategy and a return to the rule of law: Place Bank of America in receivership for its tens of billions of dollars in fraudulent loans and its multitude of foreclosure frauds. Don't talk about doing the right thing -- do it -- and do it to a major contributor. Don't do it because it's a contributor, but because a bank that commits tens of thousands of frauds should immediately be placed in receivership.  Click here as Professor Black has more to say

Consumers Issue a Cautious Christmas Spending Forecast

Forecasts...excluding consumer input

10/5/10: The International Council of Shopping Centers forecast 

that holiday sales will increase by 3 to 3.5 percent

from a year ago, marking the biggest jump in four years

(sales in 2006 increased 4.4 percent).

  10/6/10: National Retail Federation (NRF) Forecasts Holiday Sales

Increase of 2.3 Percent

--Total Holiday Sales Expected to Reach $447 Billion—

Forecasts...including consumer input

10/25/10: PRINCETON, NJ -- Gallup's initial measure of Americans' 2010 Christmas spending intentions finds consumers planning to spend an average of $715 on gifts, roughly on par with the $740 recorded in October 2009.

The $25 decrease in Americans' holiday spending intentions between October 2009 and October 2010 (not a statistically significant change) contrasts with a $61 year-over-year reduction in intended spending found last October and a $108 reduction found a year prior.

The muted nature of this year's decline is reflected in consumers' own evaluations of their spending changes. According to the Oct. 7-10 poll, 27% of Americans intend to spend less on Christmas gifts this year than what they spent last Christmas -- higher than the 11% who now say they will spend more, but down from the 35% and 33% in 2008 and 2009 saying they would spend less. Prior to the recent recession, Americans were much more closely divided over whether their holiday spending would exceed or trail their spending of the prior year, while more said their spending would be "about the same."

Bottom Line

Americans' average prediction of the total amount they will spend on Christmas gifts this year is not highly encouraging for retailers, who may be hoping for a return to pre-recessionary buying habits. The good news, however, is that the $25 decline in this year's October forecast is far less than what Gallup found in each of the prior two years at this stage in the season and, according to Gallup modeling, would point to a fairly flat year in holiday retail sales if it holds at this level through December. According to the National Retail Federation, there was a steep 3.9% year-over-year decline in holiday spending in 2008. Compared with that, a repeat of the "flat" holiday sales seen in 2009 may be a tolerable, if unwelcome, outcome for retailers who have grown accustomed to the new, more budget-conscious consumer.

Gallup will update this measure in early November and again in early December. The December forecast has historically been a strong indicator of the direction of holiday retail sales, forecasting the extent to which sales will be higher or lower than the previous year. The October figure is not always predictive of the December forecast, however. In 2002, consumers' estimates of how much they would spend increased between October and December; in 2007 and 2008, their estimates decreased, while in 2009, they stayed about the same.

Other than 55,000 cases, Wells Fargo's foreclosure affidavits are accurate...

“Our records show that Wells Fargo's

foreclosure affidavits are accurate,”

said company spokeswoman Vickee Adams.

10/15/10

10/27/10
WASHINGTON (AP) -- Wells Fargo admits it made mistakes in 55,000 foreclosure cases and promises to fix them.

The San Francisco-based company says it is plans to refile the documents by mid-November. The company describes the mistakes as technical and says it sees no need to halt the foreclosure process.

"We don't' believe that there are instances in which the foreclosures would not have occurred otherwise," says Teri Schrettenbrunner, a Wells Fargo spokeswoman.

The documents are being refiled in the 23 states where a judge's approval is needed to complete a foreclosure.