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I
am expecting a 60:40 percent chance assault on the old highs and even
a possibility of making relative NEW-Highs, the bullish tonality could
last 6-16 hours and then I am expecting that another exhaustion top
forms (see section below describing a blow-off-top) thereafter an
abrupt reversal according to my Turn-Time
forecast...we are nearing a mega inflection period....My
Inflection wave forecast is getting significantly stronger, and it
pointing toward a HUGE-MEAG inflection
period ahead, the window is tightening as we get nearer to the
potential turn....(10-4 to 10-11) and according to my wave analysis we
have multiple Tsunami waves converging and a major Inflection &
Fibonacci collision possibility hitting the overall markets within the
window above and since we have been in a bullish-up-trend, this should
be the start of a significant major
corrective wave/period ...my system and analysis is telling
me that this could be a significant correction period lasting 14-28
trading days...with the potential for a slight relief rally after the
initial down-cycle then another downward corrective wave will likely
play out. I am looking for what we call a BULL-TRAP
as we could easily see a retest of and push through early this week
(as new-monies flow-into the new-quarter) the recent relative highs,
than before the bulls know it they get trapped in the slaughter-yard!
In my opinion the potential for significant profit taking this week is
huge possibility. The propensity to take profits should be
huge....Funds can always get back in when the clouds darkening the
landscape dissipate. Even Carl Icahn warned on Thursday that the next
couple weeks could be extremely volatile. Friday's selling into the close may indicate the rate cut euphoric party is over and the Bernanke hangover is about to begin. Monday will be a key day for the markets. Do traders head into their offices ready to buy-buy-buy or do they grab a bottle of aspirin a virgin-bloody-Mary and waddle into work in an effort to lock in profits as we head into the last-stretch of 2007....will the unknown fear of the looming earnings season (and with it warnings) be a catalysts to take profits off of the table. The third quarter ended with a whimper instead of going out like a roar lion as conflicting Fed-head speak has the markets embroiled in a huge-wave of uncertainty. Various Fed speakers discussed their views of the economy and the chance for another rate cut in October and the market did not like what it heard. Funds tried valiantly all week to keep the indexes near record territory but selling pressure increased as the week drew to a close; its up to the bulls next week to step up or roll-over. The
key economic reports for this week include the ISM (manufacturing)
report due out on Monday the Services ISM report due out on and of
course the September Non-Farm Payrolls report due out on Friday. The
ISM reports should come in line or be slightly positive but the big
wall of worry the bulls have to climb comes with the jobs report on
Friday, as the consensus estimate is for a gain of 115-120,000 jobs
and a sharp revision higher for the August report that showed the pro
forma loss of 4,000 jobs will be but a memory. If the jobs report
comes in as expected and August jobs-numbers are revised higher the
implications for the economy weakening will be thrown out the window
and the Fed-heads will unmasked as liars. It would indicate that the
4,000 jobs last month was a math error and the economy is much
stronger than everybody thought…as such the fed-heads will no doubt
be forced back to the sidelines and the hopes of further rate cuts
will be . So please stand ready folks as should the payroll report on Friday show that the August job-losses were a math accounting slip and the ISM show a positive gain then the markets will surely succumb to significant selling. Another problem the markets will face this week is the Asian market-contagion as all the major Asian indexes either closed at or near their record highs on Friday as the quarter came to an end; however these markets especially the Asian markets especially the Chinese markets are all flashing MAJOR-sell-signals....with my indicators... and this is opportunistic as they will be closed all week for National Day celebrations and the Australian and Hong Kong markets will be closed on Monday for other respective holidays. This could be the time when the ETF’s and ADR’s tank!! Profit-takers could be in complete control as the various global indexes have exploded since the recent July lows with the Hang Seng up 41%, India 26% and the Shanghai SSE Composite 51%....hell the Dow SPX and Nasdog are not even out of the gates. We are living in a make believe Alice in Wonderland World The current administration is deaf-dumb-and-stupid, as they ignore the massive negative contagions that are affecting all making less than 150,000 a year they are also in an untenable situation with a the ballooning budget deficit; as unfortunately even taxing 100% of all wages, salaries, and corporate profits would not eliminate this ballooning deficit that Bush and his cronies have dumped on the backs of average Americans, their children and most likely many generations to come... According to GAAP accounting standards and the numbers presented in the recent Treasury report....it indicates that the actual deficit number were nearly 25-times greater than the size of the fuzzy math and highly manipulated so called “official” deficit for 2007; worse yet we have seen that total obligations were almost 5-times the overall annual U.S. GDP. The Recent GOA report indicated that Rapidly rising health care costs are not simply a federal budget problem; they are our nation’s number one fiscal challenge. Growth in health related spending—Medicaid and health insurance for state and local employees and retirees—is the primary driver of the fiscal challenges facing the state and local governments. Just when you though it could not get any worse....most Americans will soon start to realize that they have been lied to as there is no proverbial Social Security “lock-box” currently there are no funds held in reserve for Social Security and Medicare obligations that are earned each year, and its only a matter of time until John/Jane Doe realizes that the government that is swore to protect them as this is the land of-the-people-for-the people....is truly bankrupt as they have been protect-big-business instead....and as such our Government has been weaving a massive scam of insurmountable proportions. The GAO calculations from referenced reports shows that the GAAP negative net worth of our government has increased to staggering/whopping $57 trillion, while the total federal obligations using GAAP accounting now totals in excess of $55.1 trillion....these number should make you made as hell, and you should stand up and shout...that you will not take it any more. The Bush administration has sent a host-of hypsters to dispel and discredit the Treasury’s reports….but according to all the years of accounting education I have amassed folks they are right in that Social Security and Medicare liabilities must be shown on the federal balance sheet in the years they accrue. To do anything else would be an outright lie and extremely irresponsible, as it is nothing more than and concerted attempt to hide the extremely painful truth from the American public; and I believe that the American public has a right to know just how bad off the federal government budget deficit situation really is, especially since the it is spinning out of control like a category 5-tornado. And if the government was doing their accounting like the rest of us they would have to acknowledge that they are bankrupt!!!! This real deficit that they do not want you all to know about folks basically equates to a current burden of about $176.250 per American; and this is a staggering number. I believe it is just the proverbial tip of the iceberg as if we truly had accurate GAAP reporting by the various governmental agencies, the financial report that the Treasury produced may indicated even larger deficits and a larger negative net worth It is very-important to watch these developments…..China formally launched its state investment company Saturday wherein they intend to manage about $200 billion of its massive foreign exchange reserves, Chinese. Lou Jiwei, deputy secretary-general with the State Council, will be chairman of the new entity charged with investing a portion of China's foreign-exchange reserves, which reached $1.35 trillion at the end of June (estimates are that they hold 1.65+/--trillion currently). They are touting that the fund should/could be a passive vehicle that invests primarily through professional money managers and hedge funds, while I believe it will be used to purchase strategic reserves of oil and other commodities and to help mainland companies fulfill overseas ambitions while maintaining the playing-field or should I say massive trade imbalance and distorted trading scenario clearly in their grasp. Chinese officials have been quoted in media reports this year saying that the aim of the new fund is to diversify the nation's investments….I see it as a terrorist weapon! FED-HEAD-SPEAK From Hawk to Dove over-night.....We saw that two members of the inflation-hawkish camp indicated Friday that they were more focused on the downside risks of economic growth from the recent financial market turmoil (again paying homage to the markets, large banks and their friends) than inflation. Dennis Lockhart, the new president of the Atlanta Federal Reserve Bank, said that the balance of risks to the economy had shifted in August and September from higher inflation towards slower real growth…too bad the data doesn’t support this conclusion. Lockhart said "I believed, and still do, that the factor weighing most heavily on this change in the outlook has been the potential negative ramifications of the financial turmoil." Lockhart said he was somewhat concerned about the housing market given the turmoil in the mortgage financing market and the large inventory of unsold homes. "I believe the bottom of the housing downturn could be a ways off -- potentially the second half of 2008 or later," Lockhart said. From Hawk to Dove over-night. William Poole, the president of the St. Louis Federal Reserve bank, said the stands ready to cut rates again to keep the economy on a moderate growth track in the face of the financial market turmoil. "My guess is that the inherent resilience of the U.S. economy along with future policy actions, should they be desirable, will keep the economy on a track of moderate average growth and gradually declining inflation over the next few years." Poole said he saw tentative signs that the financial markets are beginning to recover from the recent upset, although financial fragility is obviously still an issue. "If the upset were to deepen in a sustained way, it might have serious consequences for employment stability" he said. Pending Confessional Season & Earnings Season (3rd quarter) Lets face it year/year and quarter/quarter and year/year, comparisons will be extremely difficult to meet/beat in my estimation despite the current path of massaging and lowering of the proverbial-earnings bar! When coupled with the current flow of economic data which is also suggesting that corporations are having a hard time passing increased costs associated with business expenses (especially commodity costs) is not an positive moving forward for corporate earnings heading into Q4/2007. I almost forgot to mention that I believe we have seen a massive pull-forward in demand and inventories that were created by tax incentives and various incentive corporate programs that are about to sunset...also the crumbling dollar has resulted in overseas firms locking in the huge currency-conversion benefits by puling forward supply. Hence I believe we will soon start to see companies (especially domestic) lining up at the confessional podium and the results will not be pretty for their underlying stocks (many of which are already quite bloated) and the indexes/sectors wherein they sit. If this was not enough to be concerned about…please do not forget about the following contagions as well.
The Dollar is still on a crash-path mode….but we are getting close to a near term bottom due to excessive-over-sold-conditions in my opinion and at any point the dollar could enter crash mode very quickly The Liquidity flood gates are wide open, look out for we could drown!! There's a lot of money coming into the markets from some where....so where is the liquidity being generated from?....we know the money supply is ballooning from all angles (and thanks to the FOMC we don't know exactly how much they have been inflating the M-3 money supply which use to specifically measures the Fed's activities with money supply...they stopped reporting on their market manipulating activities, as they did/do not want Americans to know the real-truth about how they are screwing the average American by hyper-inflating the money supply). This easy money that they continue to inject into the main financial stream in massive proportions never-before-seen and it makes it's way into the banking system through their primary dealers which are for the most part the major brokerage houses that are making most of their profits lately by trading the markets with the Fed’s easy/cheap money infusions. I would love to be a primary fed-manipulator as their large brokerage trading teams (that so often take opposite positions than the positions they are placing their clients in) are basically able to take virtually "risk-free" trades as they are in position to see the inflows of Fed-head monies coming into the market-stream, they simply take on a risk-free-easy leverage trade with their considerable trading capital and make huge bets that pay off nicely; and if for some reason the Fed withdraws liquidity these large trading-teams sell short, buy puts, and make money on the ride down (enough said on this manipulation, and what I believe is insider illegal trading). The question that we need to ask/ponder is why the so called inflation fighting Fed would be pumping up the money supply. The Fed manipulations our money supply to massage the economy and especially the markets far more often and with significantly more leverage than they do with their interest rate policy changes. If they're concerned about a slowing economy (and a deflating housing bubble) they can and will as we have seen pump mega-huge amounts of liquidity into the economy to keep the proverbial pump primed. The longer term problem with this is that they will without a doubt increase the very inflationary pressures that they are suppose to combat. Hence every time they start to jawbone the need to stay vigilant against the proverbial inflation monster (that there are creating by their freewheeling liquidity inflation activities); it makes me laugh loudly. The main reason for the increase in global liquidity (out side of all the liquidity infusions by central banks around the globe) is associated with the fact that more and more households across the globe are buying equities by sacrificing savings. We have seen that bank deposit share as a portion in the global financial assets has dropped significantly to 26.8% compared to 45% in the 80's….it has taken the world less than 30 years to change the ratio of savings from 45% to almost 25%....according to the recent McKinsey report that I read as it stated. They went on to state that we could/should continue to see a surge in liquidity which will likely guarantee volatility. Across the world and in the ever-volatile emerging markets; corporate debt is one of the fastest growing areas. I read a report that indicated that this year the money-supply growth in the 12-euro nations accelerated at the fastest pace in more than 20 years, and this no doubt will support the case for higher European Central Bank interest rates. The report indicated that M3 money supply, which the ECB uses as a gauge of future inflation, jumped a whopping 11.6% from a year earlier after increasing at an annual 10.9%, according to their own data. That's the highest growth rate since April 1990, according to ECB records. This mega excess liquidity build up (just as our FOMC is doing) has without a doubt been the primary-fuel-driver that has attributed to increased inflationary risks and this clearly signals the potential for further rate increases, not rate-cuts…this probably will not bne likely as they are the subservient-lap-dogs for the large-banks and brokerage houses! LIQUIDITY the Bubble-inflator: We are awash in easy and virtually free-flowing monies on a global basis and that has been the primary driver for the stock markets and their bullish-tonality…just as it was in 1998-2000 due to central-banks around the globe flooding markets with easy money ahead of the proverbial worrisome Y-2-K contagion. As I have mentioned many times the global markets seem to be feasting on locoweed as they have become intoxicated by the mega-over-leveraged what is perceived to be a risk-free-carry trade as this huge wave of "liquidity" seems to have no limit. I believe that our economy is under-siege and that it is being exploited by pushers (not drug pushes, but far worse they are credit/debt-pushers) not to mention the loose lending participants that have taken their primary lead from the FOMC. The US economy, and for that matter even the global economy is just being propped up by a false-sense of wealth, and they the credit/debit pushers have Americans standing on their tip-toes just to keep their proverbial heads above water; due to this seemingly limitless stream of extremely easy/cheap credit which has resulted in historically unserviceable huge debt loads; extremely loose and willfully manipulated lending practices; and an the main fuel in what we have seen is the unsustainable housing bubble, that is now falling apart. Also a large part of this liquidity is also the result of what I call hot-money players (speculators) has developed into a never-ending stream into the most perilous of emerging markets (where geopolitical concerns have been ignored and reporting requirements and standards are lackluster to say the least), also they have enabled the most hopeless of troubled companies (those firms that should have become defunct due to the regular business cycle) and the most overextended of home buyers (sub-prime borrower’s) to remain afloat....how mush more monopoly money can they print?. A Mega-Disappointment Sales of new homes dropped a whopping 8.3% in August to a seasonally adjusted annual rate of 795,000, and this was the slowest rate of sales since June 2000, according to the pro forma reporting Commerce Department. Sales are down 21.2% in the past year, and there appears to be no sign of a bottom in our crumbling housing market despite the hyping positive chorus being sung on bubblevision. This report was just plain hideous, and it supports my premise and forecast that the contagion is just showing the tip of the proverbial iceberg; and this deteriorating process will be extremely painful for many hard working Americans. Its unfortunate but this weakening housing market will be with us for a significantly longer time (30-36 more months by my most optimistic forecast. These housing numbers were significantly weaker than the 825,000 expected by most analysts. Worst yet sales in May, June and July were revised lower as well, painting a very dismal; also another negative was that this data does not account for canceled sales contracts, as such the numbers could be far worse. Just
when you thought it couldn’t get any worse the data the median sales
price fell 7.5% to $225,700 when
the data is compared with a year earlier and this was the largest
year-over-year decline in over 38 years; and the price does not
include non-monetary incentives, such as upgrades, free vacations and
new cars. On a semi-positive note we did see that inventories of unsold homes fell by 1.5% to 529,000, and this was the fifth straight decline as builders struggle to bring their inventories down, this inventory level represents an 8.2-month supply at the August sales pace, the highest since March. However the number of completed homes that have not yet sold rose 1.1% to 180,000, and this was the first increase since May. Completed homes now represent a whopping 34% of all homes on the market, the highest percentage in this cycle. This will no doubt put further down-ward pressure on homebuilders and encourage further incentives and likely price cuts. Not great for the bottom line at all! On Thursday, KB Home reported a mega quarterly loss and predicted "seriously challenging market conditions" would last into next year. KB said its cancellation rate rose to a whopping 50%. Remember New-home sales are reported when a contract is signed, not at the closing of the sale; worse yet home builders have reported a large increase in cancellations in recent months. As usual cancellations are not reflected in the government data, so the reported sales are likely to be overstated….As, most buyers of new homes normally obtain a mortgage commitment before signing a contract; but as we have seen many buyers have found that their loans have fallen through between the commitment and the closing. The bad news is this data only partially reflects the ongoing tighter mortgage credit conditions. The ongoing carnage in the mortgage industry has been affected homes which had been under-contract months ago, but only closing now as their new home is completed. Once again these lost sales will still be counted in the government data and as such skew the results in a more positive fashion. Those on bubblevision and the media in general fail to recognize that consumers don't like following thru on their loans to buy depreciating assets (and they sure have been falling of late), and Banks/lenders don't like to lend their money at assets that are not valued the same as they once were either; hence the propensity to back-away from these deals. Foreclosures are soaring and the pending increase in mortgage resets won't even kick into gear until we get into the first six months of next year…a very-dismal forecast heading into a slowing economy….hence why I’m a long-term-bear right now….we saw that Bloomberg recently reported that as many as 250,000 subprime borrowers will have their mortgages reset within the next 3-4 months. Many, if not most, of these people will probably lose their homes as they are way over their heads in debt and these vultures that sold them properties on teaser rates worse yet if they've already missed at least one payment (which many have) it makes them ineligible for help from the U.S. government under last month's Bush proposal for FHA assistance (A sneaky little clause they introduced into his generous bail out plan for Middle/Lower Class Americans). The average reset for these mortgage holders will come in around 26-28% or $400-500 a month in additional payments. For those who could only afford the mortgage payments at best at the teaser rate you can imagine how difficult it will be to absorb that kind of additional payment, hence the contagions are huge. The number of mortgage resets this upcoming quarter will likely be huge and as I have written before the number really start to balloon next year. The Fed funds rate reduction is a mere smoke screen. Mortgage rates don't tend to move down after the Fed-heads start on a rate reduction path. That's because the bond market doesn't always have the same opinion and agree with the path the fed-heads embarking upon. The other problem with these adjustable-rate mortgages is that they are generally pegged to the LIBOR index, not the fed-funds rate. Also we have seen that most-large-banks are hoarding cash for fear that they'll end up having to buy back the commercial paper that is coming due (and there's almost 350-billion coming due). So when they do lend their pent up monies to another bank they will without a doubt want better compensation for their money! So we could easily the LIBOR rate squeezed higher then these adjustable rate mortgages will also be forced higher, and this will happen most-likely regardless of what the Fed-heads do with their manipulated rates; and herein lies the problem for the markets to battle with and reflect upon as the markets are more powerful at times due to greed and fear very-powerful emotions so the proverbial omnipotent Fed-heads (or so they think of themselves). This is generally why the Fed-Funds rate historically follows the market and not the other way around. And from what I am seeing the bond market (as well as other global markets) are sniffing out higher inflationary pressures and we could see further selling which could raise rates; and this could place the fed-heads into a proverbial boxed in corner; as they may be forced to follow the wake of the markets, just as the BOE is being forced to raise the LIBOR rate to reflect true market rates and conditions. Philadelphia Fed-head Plosser said a the weak August unemployment report, coupled with moderate inflation, were key factors in his support of last week's surprising 50-basis point rate cut. The 4,000 decline in jobs in August and downward revisions to the prior two months suggested that income and spending might be weaker in coming months, Plosser stated. The turbulence in financial markets and sharp decline in house prices were also factors. "The pace of economic activity is likely to be somewhat slower in the next few quarters than I expected earlier," Plosser said in a speech to the New Jersey Technology Council. "A slower economy means that real interest rates must decline to bring about the appropriate adjustments to restore growth. In recognition of this, I believe last week's action to lower the fed funds rate target was appropriate," he said.Plosser is not a voting FOMC member this year. He will be a voter in 2008. Prior to the meeting, most Fed watchers thought that Plosser might argue against any rate cut. In a speech 10 days before the FOMC meeting, Plosser said that a rate cut might not be necessary. Plosser defended the rate cut, saying it was not a change in the Fed's approach to monetary policy. Plosser said inflation in the spring and early summer seemed to moderate and inflation expectations appeared to be stable. "While I did not and do not take that evidence as a sign that inflation is no longer a risk, it was encouraging," he said, this is a mega a crock of crap in my opinion! He stressed that the economy is going to grow more slowly in coming months despite last week's rate cut. "Therefore, I will not be surprised to see weaker statistics making headlines. But weaker numbers will not lead me to revise my outlook or my view of the appropriate funds rate target, unless they are much weaker than already anticipated and accumulate sufficiently to generate another downward revision in my outlook," he said. HOUSING CONTAGION A massive growing contagion, as more and more of the proverbial housing titanic iceberg is unveiled, on Tuesday we saw that home prices in major cities are falling at the fastest rate in 16 years. For 10 major cities, home prices fell 0.6% in July and are down a staggering 4.5% in the past year, this is the fastest decline since 1991, according to the Case-Shiller home price index released by S&P on Tuesday. For 20 major cities, prices fell 0.4% in July and are down 3.9% in the past year, the largest decline in the seven-year history of the index.The Case-Shiller index, which tracks multiple sales of the same homes, is considered to be the best gauge of national and metro real-estate values. These dropping prices make it more difficult for homeowners to tap their diminishing home equity or refinance their mortgages; also millions of homeowners who took out adjustable-rate loans in 2004-2006 face sharply higher mortgage resets over the next three years and we have seen that foreclosures have already soared as a result of payment resets; and it will only get worse. The last time prices fell like this it took more than eight years for home prices to return to their prior highs. In a separate report, we saw that the (NAR) National Association of Realtors report indicated that sales of existing homes fell to a five-year low of 5.50 million units in August, while inventories of unsold homes rose to an 18-year high. The housing outlook remains very-grim in my opinion as home sales decline and inventory levels escalate…the contagions will grow and according to my forecast (and you all know how accurately I can forecast) calls for a decline in home prices of 22-26% from the peak; I expect a 6.8% decline this year, 7.7% next-year and 9.1% in 2009, before we start to see a trough form. Right now there's no end in sight, and the largest impact will be felt next year and into the first few quarters in 2009; and these contagions in my opinion will lead to a significant retraction in consumer spending and a subsequent decline in confidence that could result in a deep recession. I have been researching and studying the American Housing Industry for many years; and the credit/debit cycles and contagions surrounding it as such I have observed several cycles involving the slackening and then the inevitable tightening of credit-underwriting regulations/standards and unfortunately for Americans this cycle resembles a bad-scary-cartoon. Of course, the (illegal and highly manipulative) Federal Reserve now with Helicopter Bernanke and his band of merry “terrorists” historically stand at the epicenter of each boom and bust cycle, and each cycle is seeing greater and greater speculation and excesses. However this cycle is like nothing I have seen before as cheap-easy money was injected by the fed-heads in record amounts and credit exploded like a neutron-bomb where there were little-to-no unattractive credit risks. When it appeared likely that the historical and logical business cycle would mature and eliminate the massive excess that were created by Greenspam and his band of merry-misfits through their easy-money and reckless massive infusions of liquidity that kept poor and pitiful firms alive and prevented the business cycle from playing out as it should. Their irresponsible policies also spewed forth a magnitude of speculation that we had never before seen. They stated that their efforts were to prevent the economy from heading into a recession, after the collapse of the dotcom and telecom bubbles, which they were directly responsible for creating after they opened up the proverbial free-flowing-money-spigots and encouraged all to drink with reckless abandon until they were faxed into a drunken drug-induced stupor, their drink was low-cost-easy-credit with the most popular "flavor of booze/drug" was the Alt-A/subprime mortgage loans and large-durable goods like cars/trucks/boats etc. The Federal Reserve and large institutional bankers/brokers were the drug-pushers while the mortgage lenders became the bartenders serving anyone who walked in the door no matter how drunk (they were with excessive credit/debt). To reach this monstrous-ballooning Tsunami of a contagion in this mortgage-lending fiasco, but there are many willing culprits that should shoulder the blame for this debacle as even the regulators were asleep at the wheel as the "Five Cs" of credit which were completely ignored regardless what the mortgage loans were classified as Alt-A, or subprime etc.. This is the main reason why the home-mortgage meltdown has commenced and it’s just the tip of the proverbial iceberg. Ten or so years ago, household balance sheets were much healthier. Back then, in proportion to household net worth, savings were 12-times higher than they are today and debt levels (especially automobile, credit card, and mortgage debts) were only 15-20% on average of where they are today. It is alarmingly all too common, today, to see households with well under $5,000 in savings yet $500-600,000 in mortgage debt, not to mention on average $22,900 in credit card debt and on average $30,000 in automobile debt. These house holds are ticking time-bombs as they are literally one only one-two paychecks (one disastrous illness or family catastrophe) away from being forced into a severe liquidity crunch that could forced them into bankruptcy and onto the streets. Yet, amazingly, these folks are still considered to be high-level-prime borrowers this is because the lenders do not care about being repaid, they only care that there is adequate income (from the multi-wage earners) to cover the monthly debt service and of course fees. What has happened, in the sphere of personal-credit underwriting, is that risk parameters have been redefined with the word "prime" is now synonymous with “is this borrower breathing.” Please remember that, our great-nations unfolding mortgage-debt crisis did not emerge in a vacuum; there were many key participants the chief architect was Alan Greenspam’s Federal Reserve as they hammered the federal funds rate down to 1%, in June of 2003, it is crucial to understand that it was this irresponsible (and I believe sincerely that these actions were methodically planned) manipulative policy that kept interest rates artificially low due to the Fed-heads aggressive creation of money and levels of mountainous debt/credit. Basically in a nut-shell America’s most-trusted monetary central planners "knew/devised" this massive inflationary bubble, they claim they were just coming to the economies "rescue" The American middle/lower classes through the Bush agenda for home-ownership his promise to the American people…homes were specifically targeted by the Fed-heads as it serve as their key distribution channel for their manipulated monetary policy; which resulted in this colossal inflation of the money supply to mega-bubble proportions. They knew as they had conducted published research that during such episodes of massive inflation, of easy-money people tend to lose their sense of value; they through excessive greed induced herd behavior normally suspends fear of debt and clouds rational behavior. They very-well knew that consumers would lose their sense of reality when it came to their debt-loads, and they totally disregard the inflationary ramifications. Hyperinflation occurs when a government (or in this case an illegal-entity the Federal Reserve) starts printing money at break-neck-speeds that is to say, they in effect become a counterfeiter. Inflation ensues when as a result of government action (or inaction) the distinction between real money and monopoly money begins to quickly dissolve and become quite blurred; the result is a massive cancerous corrosive effect on our society. As you all know money is one of the primary measures of real value in any mature society, it’s what we call the principal repository of value. As such, money is a central source of economic stability, continuity, and coherence. Hence when these manipulative terrorists tamper with our money supply they are tampering with the very core of our country’s existence. The Fed-heads by making our money practically worthless have created a massive tsunami wave of inflation which by its existence threatens to undermine and dissolve all sense of value in our society (what I believe was their underlying intention, the massive redistribution of wealth). To be sure, when the federal funds rate declined to the surreal level of 1%, lenders and borrowers behaved as if they were embroiled in a marathon, monopoly secession with a limitless supply of funny money.As the housing mega bubble was expanding, the private sector (banks, brokerage firms etc.) aggressively jumped into the mortgage-lending battle with an eye toward making mega profits from securitizing and selling bundles of mortgage loans in the form of mortgage-backed securities (companies such as Countrywide and Bear Stearns, Lehman Brothers…now for the disclosure these mortgage-backed securities are not backed by the full faith and credit of the government. Worse yet these private brands of low-value mortgage-backed securities were created by bundling mortgage loans that were originated using ridiculously low underwriting standards. Competition ran rampant as such to compete in this arena many of these firms dropped their lending standards down to the lowest common denominator. They didn’t care as the private firms producing these MBS products weren’t being retained as they were being securitized and sold for nice profits to a herd of lame and unknowing bag holders as they had placed faith (blind-faith) in the issuers , hence the shoddy credit underwriting contagion was transferred off to the MBS purchasers. Regrettably for the American consumer, when the Federal Reserve and the Bush administration targeted housing to move to one bubble to another as they hit the high-peed printing-press button as the inflated the our economy with colossal/ enormous doses of easy-money and credit, Americans were hooked by the credit pushers and the pushers were knee deep in fertile ground to grow and fuel the monstrous housing bubble. Mortgage lenders irresponsibly/methodically said "yes" to just about any borrower while Alan Greenspam the master bubble creator cheered them on. It is no wonder why so many Americans have the most debt-laden, maladjusted personal financial statements we have seen in the history of this great nation…and the ramifications could be far worse than the great-depression. Even the Federal Reserve’s own data supports my observations as domestic household debt has increased from approximately $2.5 trillion in 1986, to $7.9 trillion in 2001, to $14.9 trillion thru 2006 (with 76% of the 2006 figure being mortgage debt). Their toxic combination of mind-numbing inflation and ballooning credit has crippled American’s household finances from coast to coast. Hence do not believe the talking-butt-heads who claim that the mortgage mess is limited to just the subprime maybe a little Alt-A. As this housing bubble continues to implode the ensuing financial fallout will be like none before result in nothing short of an international economic disaster. The Fed-head’s panic 50-basis point rate cut in their fed funds and the follow thru 50 basis point cut in the discount window rate will not very-little to nothing to head off America’s ballooning and looming household-insolvency crisis!!!!
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