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Tag Archives: FED

The Big Short In Pictures (The Subprime Crisis, Lehman, Bear And Countrywide)

Suddenly, many of my students are reading Michael Lewis’ “The Big Short.” Even in a real estate development class! Having read Lewis’ book (I can’t wait for the movie with Christian Bale and Brad Pitts!), I thought I would explain the subprime crisis in a few, colorful charts. First, Lehman Brothers declared bankruptcy on September 15, 2008. But Lehman knew they were in trouble before that date (hint: Bear Stearns was sold to JP Morgan Chase in a fire sale in March 2008). Here is what was...

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Here Comes Fannie Mae’s Instant Underwater Mortgage——3% Down, No Cash Needed

Fannie Mae, the Washington DC mortgage giant, has announced their latest program: HomeReady. According to Fannie Mae, “HomeReady is designed for creditworthy, low- to moderate-income borrowers, with expanded eligibility for financing homes in designated low-income, minority, and disaster-impacted communities. HomeReady lets you lend with confidence while expanding access to credit and supporting sustainable homeownership.” The confidence part sounds like a Viagra or Cialis commercial. Here...

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Gov’t Gone Wild! Obama Signs Budget “Deal” That Suspends Debt Limit And Lifts Spending Caps

(Bloomberg) — President Obama signs legislation that suspends the debt limit into March 2017 and lifts caps on defense and non-defense spending in equal amounts in fiscal years 2016 and 2017. Bill is a “signal of how Washington should work,” Obama says NOTE: For 2016, the caps would be raised by $25b in each category; in 2017 caps would be lifted by $15b, for a total of $80b; Congress cleared the bill, H.R. 1314, early Friday morning. At least the short-end Treasury auctions will look...

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Fed Head Williams Says Low Rates Are Warning——But Admits He’s Clueless About What!

Federal Reserve of San Francisco President John Williams said he does not fully understand what is going on, but he wants to raise interest rates anyway. Bloomberg – San Francisco Federal Reserve President John Williams said on Friday that low neutral interest rates are a warning sign of possible changes in the U.S. economy that the central bank does not fully understand. “I see this as more of a warning, a red flag that there’s something going on here that isn’t in the models, that we maybe...

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Negative Rate Alert! 8 European Countries Now Have Negative 5 Year Yields

Europe now has 8 countries with negative 5 year sovereign yields. The European Financial Stability Facility (EFSF) is also negative at 5 years. Sweden is on the cusp of a negative 5 year sovereign yield. The are 14 European countries with negative 2 year sovereign yields. But only 1 with a negative 10 year sovereign yield (Switzerland). Let’s see in negative sovereign rates are the next thing to be imported from Europe.

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Danish Blues: Low Inflation, Low Interest Rates and a Housing Bubble (Just Like the USA)

In the recent CNN debate, Democrat Presidential candidate Bernie Sanders said that he wished the USA was more like Scandinavian countries like Denmark. I have news for Bernie — the USA is already like Denmark in terms of low inflation, near zero Central Bank rates and a housing bubble. Like the USA, Denmark has a housing bubble … again just like Denmark. Both the USA and Denmark has Central Banks rates that are ZIRPIE (near zero), helping to create asset bubbles. And inflation YoY looks...

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Crazy Train: Rents Skyrocket While Core Inflation Remains Nonexistent (Fed Can’t Generate Inflation)

All aboard the central bank crazy train! The Consumer Price Index (CPI) fell 0.2% in September. The Fed continues to fail to generate “inflation.” But the real crazy train is housing where rents are skyrocketing at 3.09% YoY, the Case-Shiller 20 home price index is rising at 4.96% YoY, while CORE CPI YoY is only […]

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Draghi Says ECB’s Bond-Buying Plan Working Better Than Expected (Really Mario?)

(Bloomberg) — Mario Draghi said the European Central Bank’s quantitative-easing program is working better than expected, even though the institution will take longer than intended to reach its inflation goal. “We are satisfied with QE, as it has met and even surpassed our initial expectations,” the ECB president said in an interview with Greece’s Kathimerini […]

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