Thursday, October 18, 2012

Friday October 19 Housing and Economic stories



TOP STORIES:

How to erase a debt that isn't there - (www.nytimes.com) “We are canceling the remaining amount you owe Chase!” says a letter that JPMorgan Chase sent recently to thousands of home loan borrowers. “You are approved for a full principal forgiveness of your Home Equity Account,” says another, from Bank of America. Jackie Esposito, of Guilford, Conn., got a letter like that. But she wasn’t elated — because she doesn’t owe the money anymore. She and her husband filed for bankruptcy three years ago. The roughly $64,000 they owed Chase has been legally wiped out. What’s going on? Cast your mind back to February. Five of the nation’s big banks, including Chase and Bank of America, agreed to pay $25 billion to settle state and federal claims over questionable mortgage practices and promised to work harder to help borrowers who were in trouble. To prod the banks, the government said it would give them credits against the amounts they agreed to pay.So, to the ire of customers who couldn’t get banks to work with them before, banks are now forgiving debts that no longer exist.

Widening JPMorgan CIO Loss Could Be Next ‘Shock’ Event - (www.silverdoctors.com) The market seems to have completely forgotten the fact that JPM’s massive CIO positions have yet to be closed.  Unfortunately for Mr. Dimon, at least $90 billion in potential losses remain, and the strategy of slowing unwinding the positions will blow up in The Morgue’s face and exponentially exacerbate JPM’s losses with any further downturn in the economy. The JP Morgan (JPM) trading blunder could result in a $100 billion loss, a contagion of its massive portfolio, and even the wipeout of its entire asset base. Even worse, these extremely risky and potentially-illegal actions on behalf of the CIO office and the “London Whale” could be the unexpected “shock” that breaks the market, derails the Fed’s huge monetary stimulus, and sends us back into a global recession. There is one event that may ultimately solve the mystery of the global economy. This event would not only plunge the economy back into a deep recession and lose investors hundreds of billions of dollars, but it could bring about the collapse of some of the world’s largest financial institutions and even render central bank stimulus and QE completely ineffective and futile. This event is by no means a guarantee; its probability is even likely under 5 percent. But this event has all the necessary ingredients to culminate into a major panic. Together with slowing global economies and an extremely unstable financial system, this could be the next Lehman Brothers.

Financial Guru Max Keiser Calls Actor John Cusack A Financial Terrorist - (www.mfi-miami.com) - If you didn’t catch today’s Keiser Report on RT, Max Keiser and Stacy Herbert talk about my article last week about how John Cusack’s buddies over at Mortgage Resolution Partners (MRP) want to use eminent domain to seize performing mortgage contracts. Max and Stacy also showed the clip from the interview Max did with the Lois Lane of finance journalism, Teri Buhl back in July after her trip to San Bernadino to investigate MRP’s push to get San Bernadino to go along with this. (Max and Stacy talk about MFI-Miami at 9:05).  Max Keiser basically agrees with me, Teri Buhl and Felix Salmon that their eminent domain plan is an elaborate scam. MRP is using people like actor John Cusack and Arianna Huffington into misleading cities and foreclosure activists about MRP’s plan.  What MRP wants to do is not seize abandoned homes and homes already in foreclosure like they claim but to seize performing mortgage contracts where the homeowner only faces a negative equity position so MRP can sell the mortgage loans to FHA.  Although the homeowners are upside down, their loans are still contributing to the positive cash flow of the mortgage backed securities Trust that holds the note.

October Stock Plunge, Gold & The Fear Index - (www.kingworldnews.com)  Richard Russell continues: “We're now dealing with October, which historically is both a down month and a bottoming month. As for my position, I continue to believe that the primary trend of the market turned bearish in 2007, and that it is still bearish (although the bear trend has been suspended for awhile due to the Fed's actions). The VIX, often called the ‘fear index,’ is a forward looking metric (it's actually a measure of the implied volatility of the S&P index over the coming 30 days).  The VIX in recent months has been fluctuating in a very low area below 20 (see chart below).  Back in June the VIX jumped up to 26.66, then settled back to its low range. In past history, extended periods of very low volatility have been followed by major upward thrusts in the VIX.  The cycles in the VIX tend to be repetitive.  Following the recent bouts of extremely low volatility, a period of super-high volatility may be anticipated. 

IMF: recovery will take 'at least' a decade - (www.telegraph.co.uk) In an interview published today, Olivier Blanchard told Hungarian website Portfolio.hu: It's not yet a lost decade... But it will surely take at least a decade from the beginning of the crisis for the world economy to get back to decent shape. He also said that Germany would have to get over its fear of inflation if it is to help weaker eurozone countries recover. A somewhat higher inflation rate in Germany should simply be seen as a necessary and desirable, relative price adjustment (desirable even from the narrow point of view of Germany, as this real appreciation increases the real income of the German people). Given overall demand conditions and the ECB’s strong mandate to ensure price stability, this is not the beginning of hyperinflation...





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