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We’re Almost Back To 2007

A report from Bloomberg. “As America heads into a deep recession, the $11 trillion residential-mortgage market is in crisis. Investors who buy home loans packaged into bonds are dumping even those with federal backing because of panic that millions might not make their payments. Yet one risky sector had started to show cracks long before the coronavirus pandemic sparked the worst financial meltdown in 12 years: the federal government’s largest affordable-housing program, whose lenient terms are geared toward marginal borrowers.”

“As real estate prices soared in recent years, working-class adults everywhere have increasingly relied on mortgages backed by the Federal Housing Administration — and U.S. taxpayers. Since 2007, the FHA’s portfolio has tripled in value to more than $1.2 trillion, almost 11% of the market. While private lenders make these loans, they are packaged into Ginnie Mae bonds, common in mutual funds and pensions.”

“Before Covid-19 started roiling China, a November FHA report found that 27% of borrowers last year spent more than half their incomes on debt, a level it describes as ‘unprecedented.’ The share of FHA loans souring in their first six months has doubled over the last three years to almost 1%.”

“Not long ago, Alex Castillo drove his shiny black Infiniti SUV through an office park north of the San Antonio airport, along a busy seven-mile stretch of highway that loan officers call ‘Mortgage Row’ because of its abundance of small independent mortgage companies that dominate FHA lending. Castillo, who has the words ‘The Dream Starts Here’ stitched into his jacket, works for Pennsylvania-based American Residential Lending. Oddly, amid the pandemic, his business is booming. His customers locked in FHA mortgages after interest rates plunged this month — adding to federally backed mortgage debt.”

“‘If the government tells me you’re good enough to get a loan, I have to trust and believe in the government,’ Castillo said. ‘Then we just hope and pray that the client doesn’t get foreclosed on.'”

“In downtown San Antonio, scores of investors stood on a parched lawn beside the city’s historic granite-and-red-sandstone courthouse. It was the first Tuesday of February, the day of the foreclosure auction. Matt Badders, a San Antonio lawyer who represents lenders, auctioned off two houses. The failed mortgages remind him of the run-up to the financial crisis 12 years ago, when lending to customers with spotty credit nearly brought down the world’s financial system. ‘We’re almost back to 2007, when mortgage originators are waking people up on park benches, saying sign here,’ Badders said.”

“At the auction, the crowd bid on 338 homes, a third with FHA mortgages, according to Roddy’s Foreclosure Listing Service. One house had dual master bedrooms, a game room and granite kitchen counters. It sold for $202,000 — $52,000 less than the homeowner borrowed only two years ago. The taxpayer-backed FHA insurance fund will take a loss.”

“Dave Stevens, FHA commissioner under President Barack Obama and former chief executive officer of the Mortgage Bankers Association, said a recession will expose hidden risks in home lending. ‘This should be an alarm bell to policymakers,’ Stevens said. ‘Sometimes you get blinded by a good economy and suddenly look at it and see a bubble of defaults coming.'”

“The federal government has decided it doesn’t want to pursue — and has asked a judge to dismiss — a lawsuit against Utah-based Academy Mortgage Corp. The judge refused. The suit claims the company’s staff would repeatedly feed information into an automated federal underwriting system, manipulating it until the computer gave the green light. ‘Decline is a curse word,’ Plaintiff Gwen Thrower, a former underwriter, quoted a manager as saying. ‘We don’t use it.'”

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  1. ‘Before Covid-19 started roiling China, a November FHA report found that 27% of borrowers last year spent more than half their incomes on debt, a level it describes as ‘unprecedented.’ The share of FHA loans souring in their first six months has doubled over the last three years to almost 1%’

    This has been right out in the open, with even the head of FHFA telling congress, under oath, that loans today are crappier than last decade. And that the GSE’s are going to fail. Where’s the NAR’s happy BS now?

    1. An article from 2017 …

      40% of Americans spend up to half of their income servicing debt – MarketWatch
      https://www.marketwatch.com/story/40-of-americans-spend-half-of-their-income-servicing-debt-2017-04-27

      (snip)

      “Some 40% of Americans with debt are spending up to half of their monthly income paying it back. And that may not even be enough to cover how much they owe. That’s according to a study on debt Thursday released by Northwestern Mutual, a life insurance and financial services company. The polling company Harris Poll surveyed more than 2,000 U.S. adults in February 2017 on behalf of Northwestern Mutual.

      “The survey found that nearly half of Americans are carrying at least $25,000 in debt, with an average debt of $37,000, excluding mortgage payments. About one in 10 surveyed said their debt was more than $100,000. ‘It becomes an ongoing cycle and really hard to get out of, given that people are not prioritizing debt and saving for their future as the first part of their budget,’ Rebekah Barsch, the vice-president of planning at Northwestern Mutual, said.”

        1. Some of the scariest charts I have seen in a long time.

          But, yet when listening to interviews with FED governors or the REIC the general tone is “the consumer is in fine shape and paying down debt”..

          No wonder the recent stories of workers going into their bosses offices (or home phone in) and crying a river about how they can’t even miss a single paycheck.

          And us taxpayers are supposed to pay for this cr*p?

  2. ‘The suit claims the company’s staff would repeatedly feed information into an automated federal underwriting system, manipulating it until the computer gave the green light. ‘Decline is a curse word,’ Plaintiff Gwen Thrower, a former underwriter, quoted a manager as saying. ‘We don’t use it’

    Oh, but there’s no fraud, right jingle male? Eat yer crowz.

    1. “Most in the default servicing industry expect government-insured loans to be the primary source of increased foreclosure inflow in 2020, even in the absence of a widespread recession or housing downturn,” said Jesse Roth, SVP of Strategic Partnerships and Business Development with Auction.com. “That’s a rational conclusion given the rising risk profile of FHA-backed loans originated in the last five years.”

      https://dsnews.com/daily-dose/03-25-2020/fhfa-tracks-gse-foreclosure-prevention

      Almost no one realizes how insane the Mel Watt era was. FHA is by charter supposed to be counter-cyclical, and Fannie Freddie pro-cyclical. Since around 2014, FHA went “pedal to the metal”, meaning all government agencies were flat out lending. And that’s how we got here.

      1. October 4, 2019 “The federal government has dramatically expanded its exposure to risky mortgages. In 2019, there is more government-backed housing debt than at any other point in U.S. history, according to the Urban Institute. A growing number of homeowners faces debt payments that amount to nearly half of their monthly income. ‘There is a point here where, in an effort to create access to homeownership, you may actually be doing it in a manner that isn’t sustainable and it’s putting more people at risk,’ said David Stevens, a former commissioner of the Federal Housing Administration. ‘Competition, particularly in certain market conditions, can lead to a false narrative, like ‘housing will never go down’ or ‘you will never lose on mortgages.’”

        “The Federal Housing Finance Agency, at the time under Director Mel Watt, began working on plans to direct Fannie Mae to purchase loans with higher debt-to-income thresholds, Watt said. ‘It is intuitive – you think the higher somebody’s debt-to-income ratio, the more problems they are going to have,’ he said from his home in North Carolina, where he is now retired. ‘But that’s just not the best criteria to apply to be quite honest.’”

        http://housingbubble.blog/?p=2768

        1. “A growing number of homeowners faces debt payments that amount to nearly half of their monthly income.”

          Like it, love it, want more of it.

          Thank you Mel Watts.

          😁

        3. “It is intuitive – you think the higher somebody’s debt-to-income ratio, the more problems they are going to have,” he said from his home in North Carolina, where he is now retired. “But that’s just not the best criteria to apply to be quite honest.”

          Buying votes has never been cheap.

    2. “…automated federal underwriting system, manipulating it until the computer gave the green light…”

      Walk in the morning as a strawberry picker, walk out that afternoon as a University Phd.

      Nothing to see here folks, please keep the line moving…

  3. “dual master bedrooms”

    Sounds like the architect knows what’s really going on in high-income marriages.

    That said, during the height of the 2007 bubble, some of the Tool Brother’s McMansion floor plans had a “princess suite” in addition to the master suite. Basically it was a bedroom with its own on-suite bath, intended for a spoiled rotten Daddy’s little girl Disney daughter. 🙄 It’s possible the San Antonio house was just such an arrangement.

    1. “dual master bedrooms”

      I’m in favor of that in McMansions, preferably one on each floor. Partly in case the adults want to live separately. But partly so they can stay in the same house as they age. My wife wants a 2nd floor master, but I’d like the option to move into the first floor master someday rather than have to change houses to do it.

  4. Telegraph.co.uk
    Property transactions could collapse by 80 per cent in a
    month …
    Overall, the property portal predicts an average of up to 60 per cent fall in transactions across the … “That means I think we won’t get a big glut of repossessions.”
    6 hours ago

    1. ‘Coronavirus has begun to impede market activity in London’s prime residential market, where annual price growth prior to the outbreak had entered positive territory for the first time in more than five years, according to Savills, the estate agent.’

      ‘Lucian Cook, head of residential research at Savills, said: “Given where prices currently sit and the expectation of a V-shaped downturn in the economy, we currently believe the long-term downside risk to the [prime London] market is not significant, though the outlook is much less certain in the near term.”

      https://www.thetimes.co.uk/edition/business/drop-of-more-than-half-in-house-sales-s36rbm96d

  5. When can I expect for the Milpitas, CA in Bay Area single family homes to actually drop? Feeling really frustrated for last 5+ years. I can not compete with these Google, Amazon, Facebook, Netflix and startup millionaires. Will my cash savings be worth less due to this 2 trillion fed money pumping?

    1. Will my cash savings be worth less due to this 2 trillion fed money pumping?”

      That’s a fact you can’t compete with the money printers

  6. My view is all the debt the federal government ran up from 2008 to 2010, during the Great Recession, merely got the U.S. (and world) back to where it was in 2007. And the unbalanced global economy has been holding there, poised for the next 2008 and 2009, ever since.

    The Democrats wanted to blame Trump. Trump wanted to blame the Chinese and Mexicans. Now everyone will blame the coronavirus. But the situation was 40 years in the making.

    1. 40 years in the making

      I’ve long thought 1982 was the inflection point.

      Now we’ll see how well it works to solve the problem of too much debt with even more debt.

      1. In five or ten years…

        1) Will the rich be richer?
        2) Will the former middle class be poorer?
        3) Will taxes be higher?
        4) Will public services be worse?
        5) Will old age benefits for later-born generations be reduced?
        6) Will the life expectancy of those born after 1957 be lower, and or the death rate higher?

        These are the questions. Remember this day, years after the virus is in the rear view mirror?

        1. The future for most ‘Muricans will only get worse. This country’s best days are behind it. Not having kidz was the best decision of my lifetime, because as a parent, one feels obligated to their children to tell them the future will only be better. My parents told me all those lies. I’ve been interested in the parallels between USA and the decline of the Roman Empire since I was a teenager.

          1. “Not having kidz was the best decision of my lifetime, because as a parent, one feels obligated to their children to tell them the future will only be better.”

            I never felt that need. And as the grandson of a woman who lived through WWI, the 1918 Spanish Flu Pandemic, the Great Depression, WWII, and the Cold War, I am unconvinced that things are getting worse, even though my grandmother often expressed that view in her old age.

          2. Not having kidz was the best decision of my lifetime

            I have kids, and wouldn’t trade them for all the money, gold, or thigh gaps in the world. But I feel heartsick when I think of them having to make their way in our oligarch-looted America where the virtues that made this country great, and raised up men and women of quality and character, have been systematically debased and torn down by the globalists and their Cultural Marxist termites in the foundation.

          3. I feel like the 2 trillion stimulus plan is like Ceasar crossing the Rubicon. The republic was already dead by that point but Ceasar needed to make sure.

          4. I am quite certain that various interests have already made sure that the bailouts to come this year will vastly increase the transfer of wealth from the masses to the few.

          5. The masses are getting their stock prices made right. The proles will get their future paychecks paid in devalued dollars.

          1. Cheer up my good friend and remember… as a noted economist said so eloquently, “Nothing raises all boats and diminishes poverty like falling prices to dramatically lower and more affordable levels. Nothing.”

            He’s right.

            Belle Isle, FL Housing Prices Crater 18% YOY As Orlando Housing Market Turns Toxic On Rampant Mortgage Defaults

            https://www.movoto.com/belle-isle-fl/market-trends/

      2. “Now we’ll see how well it works to solve the problem of too much debt with even more debt.”

        The hair-of-the-dog hangover cure never went out of fashion.

        1. Why 1982?

          Sort of for the same reason Cuomo has his hair on fire over infections, the realization that the increase in household and national debt was rising exponentially. Easy to find graphs on the internet. Some of us had rushed to buy gold in the previous few years, but that didn’t catch on.

  7. Kansas City Business Journal

    ‘EPR Properties reacts to coronavirus plunge with stock buyback – Kansas City’

    ‘Although uncertainty about the COVID-19 outbreak hit nearly all stocks hard in recent weeks, EPR’s stock price dropped 75% between Feb. 21 and March 23.’
    18 hours ago

  8. From what little I understand about the latest Bill; small business loans are a focus and U/W standards for these loans will be minimal in an attempt to get money to the small businesses ASAP.

    1. small business loans

      The loans will never be repaid. They’re all going to go bankrupt. We’re just trying to “flatten the curve”.

      1. This is a great point, about flattening the curve, but the Fed isn’t going to get overwhelmed like hospitals. That said, defaults are defaults and even with zero personal risk, having 50% of your originated loans go south isn’t for everybody.

          1. Can the Fed just buy up any loans they choose with Unlimited QE?”

            As long as the lender is important yes

          3. That would lead to pickin’ Winner$ & Lo$er$ … which i$ “China” evil & unAmerican!

          4. I think this is going to be a battle of international currencies as many others want to dethrone the dollar as the world’s reserve currency. The Euro, Peso, etc. are probably going to be toast. If China’s Yuan holds up while we’re bailing out everyone and everything, rates will start to creep up.

            The Fed is going to have to pick winners here and I’m not convinced mortgages are getting another bailout. Cuomo just laid out the financial situation in NY and it’s grim.

            I think they’re going to bail out these first: Unemployment insurance systems (states), healthcare systems, state governments, city governments, critical infrastructure (airlines, car manufacturers), and of course banks.

            The fed could also just cut out the middle men and lend directly to mortgage borrowers with little to no underwriting.

    2. “…U/W standards for these loans will be minimal..”

      Are these the “loans” that don’t have to be paid back?

      And of course, absolutely no chance for fraud.

    3. Almost every small business files yearly taxes as S’corps (through Individual tax fillings). If any of the F*kers in Washington really wanted to help small business owners in the US they would have implemented a tax cut for individuals filling personal taxes or a tax-rebate plan.

      https://www.forbes.com/sites/allbusiness/2019/11/14/s-corporation-election-right-for-my-business/#7f4b74bf7d4f

      But, of course, this bailout bill wasn’t passed to help out real Americans (business owners or not) in need. Was it?

  10. I got a 5% reduction of my April rent for paying by the first.

    The property management company is a small LLC that has a dozen buildings around Denver. Renting from corporations or living in a “complex” of buildings is for loosers. I live in one of a pair of 35 unit buildings in a neighborhood of mostly single family homes or duplexes. In the decade I’ve been here I’ve never heard of anyone living here having their car broken into.

    This is the opposite of Aurora, there it is all large, corporate managed complexes full of poors and their associated social problems.

    1. When the Politicians write up a big bail out under emergency conditions it’s not going to be correct.

      Based on what looks to be the death rate, this virus is not turning out to be the big killer they thought at first.

      Your going to have hot spots like NYC, but the whole Nation can’t shut down for to long.

      Seniors have always been high risk regarding yearly flu.

      Look, I lost a spouse 11 year ago due to a bug caught at the hospital. I also got notice that two of my pensions went bankrupted. All I got was a bunch of medical bills within a week of the death that I had to pay. No bailouts for me in 2009 after spending 12 weeks in the hospital watching someone die.

      So, I have had over 10 years to reflect on matters like what are taking place now.

      The final analysis is shit happens that’s out of your control and it ain’t fair.

      Protect yourself because you can’t count on big nanny Government to do the right thing ,or be fair.

  11. Worst ever unemployment report?

    But Wall Street seems to have ignored that, focusing instead on whatever Powell said on TV this morning.

    1. The Financial Times
      US employment
      US jobless claims surge to record 3.3m as America locks down
      Data demonstrates toll of coronavirus-related closures on US labour force
      New York state, the epicentre of the US coronavirus outbreak, saw more than 80,000 jobless claims
      © AP
      Brendan Greeley in Washington and Colby Smith and Mamta Badkar in New York 2 hours ago

      More than 3m people filed a claim for unemployment benefits last week in the US, a record high that offers the first nationwide snapshot of the coronavirus shutdown’s impact on businesses, cities and entire states.

      According to data released by the labour department on Thursday, claims rose to 3.3m for the week ending Saturday, from 282,000 the previous week. The data eclipsed expectations, showing the staggering scale of job losses in the first full week of claims since parts of the country began to restrict public gatherings and, in some cases, order residents to stay home.

      As states began to release their own claims data ahead of the labour department’s announcement, forecasts have ranged from a Bloomberg consensus of 1.7m claims to an estimate of 3.4m claims by the Economic Policy Institute.
      …

    3. Stimulus trumps shutdown worries…

      The Financial Times
      Markets Briefing Equities
      Wall Street rallies for third day as stimulus cheers investors
      US jobless claims surge as virus shuts down parts of country’s economy
      Philip Georgiadis in London, Jennifer Ablan in New York, Hudson Lockett in Hong Kong and Leo Lewis in Tokyo
      26 minutes ago

      Wall Street rallied for a third day on Thursday as investors digested an unprecedented surge in US unemployment claims and looked ahead to a $2tn stimulus package that had cleared the US Senate overnight.

      The US benchmark S&P 500 index was up 3 per cent by late morning in New York, and European bourses turned positive, as data showed that more than 3m people filed for unemployment benefits in the US last week while coronavirus shut businesses across the country.

      “This record-shattering number is more than a reminder of the huge economic sudden stop that’s already paralysing the US economy,” said Mohamed El-Erian, chief economic adviser to Allianz.
      …

    4. This might be the worst unemployment record now, but it will be even worse a month from now. Businesses who tried to hang on will have to release employees, knowing that Unca Sugar can pay them.

      The estimates of 30% unemployed is probably not far off. That would imply something like 50 (?) million workers in consumer industries.

      I’m not sure whether to feel guilty for having a white collar work-at-home job in an essential industry.

        1. If it’s a few months with the government paying…

          It’s a vacation, not unemployment. The question is, what happens when the virus lockdowns are over? THAT will be unemployment.

      2. whether to feel guilty

        Don’t feel guilty.

        You are participating in a sea change in the way we do business that will probably increase our efficiency as a country dramatically while giving many more leisure time, because they don’t physically commute to the office.

        1. This giant work-at-home experiment is going to be interesting, that’s for sure. I know that some companies tried it years ago and discontinued it, but it might be different this time with new software like Skype or Teams or Webex, with cameras for everybody.

          IMO, w@h is a lot like self-driving cars: If nobody does it, it works well. If everybody does it, it works well. If only some people do it, or only some at a time, it’s a disaster.

          Right now in my job, things are going very well because everybody is at their computer all the time. It’s easier for me to reach someone now than it was a month ago. People are multitaking very well too — they can answer email while listening in on a meeting. I don’t know how this will be handled when people go back to the office.

          (When will people go back to the office? We think it will be months.)

          1. “…When will people go back to the office?..”

            It may be never. Once the spreadsheet guys realize that huge $$$ can be saved by *not* leasing a fancy building and getting the worker bees to pay for their own TP and SoCal Edison Bill, it’s all over.

            Actually, for me, working from home is kinda nice and peaceful quiet. Don’t know if the novelty will wear off a a few weeks or months.. We will see.

            Curious about experiences thus far from other HBB readers suddenly expunged from their office cubicles during the last few weeks.

          2. I know that some companies tried it years ago and discontinued it, but it might be different this time with new software like Skype or Teams or Webex

            You bring up some good things but I still think it’s mostly a management issue. Managers enjoy being onsite more than workers do because they are the kings of that domain. I saw it very clearly in the army, it’s a little more subtle in tech but still there. Why would you want to be home getting nagged by your wife when you could be at work with everyone kissing your butt? My hope is that the gains from this forced experiment will be so good that it doesn’t go back to that as soon as possible.

            The only downside I’m seeing so far is that it’s hard to work at home when kids are at home too. So I think we still need to send them to school :-).

          3. At the office the hotties got flower deliveries, which they would display predominately for all to see; the only thing missing were the sandwich boards in the hallway with an arrow like the Open House signs. And at lunch they would nibble at their Tupperware home-prepared lunch of yogurt and frozen blue berries and mangoes while the phatties wolfed-down their microwave meals and sweets. Like many offices it was “Peyton Place.”

          4. Got a jackhammer pulverizing the next-door neighbor’s driveway while my wife and I try to work from home. Fun times!

          5. Been working from home 100% for ~3 years. Everyone works from home in my current company – we’re distributed all over the country. Small company (<15), 90% of us have worked together going back 10-15 years.

            Its a slow change, but definitely more people are doing it. It drives the need for good connectivity, a home office, and quiet (lawnmowers, kids, etc.).

            As noted, ahole micro managers don't like it – they need the worker bees to pay fealty.

          6. My mother was a biopharmaceutical professional specializing in regulatory affairs and clinical development for stem cell and gene therapies. She went from in-house positions to W@H consulting gigs. Besides the volumes of sensitive and confidential paperwork I’m still dealing with 4 years after her death, her workday lost structure. She’d be up and working by 7AM in her pajamas and most often didn’t stop to shower or eat until 10-11AM. Workdays extended into evenings and weekends. Neighborhood construction and dogs were always a problem. Upshot: there’s value in having a place to go to to focus as well as leave at the end of the day.

          7. in her pajamas

            I worked from home my last 15 years. Typically I started while the coffee was brewing at 6 AM. Correspondence with Europe was all done by 10AM. Keeping it reasonable on the other end takes some discipline, but doable.

          8. Keeping it reasonable on the other end takes some discipline

            Yeah, she wasn’t so good at that.

          9. Working at home is great I just have to figure out how to assembly a bunch of prototypes from 12 miles away . Maybe I can just send it off to China with a Power point instruction ?

  12. “‘If the government tells me you’re good enough to get a loan, I have to trust and believe in the government,’ Castillo said. ‘Then we just hope and pray that the client doesn’t get foreclosed on.’”

    Not a good business plan

  14. Makes me laugh…..everyone with $150k in their retirement 401(k) and $300k of mortgage debt on a house worth $110k.

    Now housing prices are tanking even lower.

    Las Vegas, NV Housing Prices Crater 15% YOY As Underwater Borrowers Try To Unload Their Cash Bleeding Houses

    https://www.zillow.com/las-vegas-nv-89119/home-values/

    *Select price from dropdown menu on first chart

    As a noted economist stated, “If you have to borrow for 15 or 30 years, you can’t afford it nor is it affordable.”

    1. I hope the restaurant business comes back. Don’t know if people are going to be be germ freaks from now on or not.

      The idea of Agenda 21 from 20 years ago was that moving people to big city centers was more sustainable. In terms of flu outbreaks it couldn’t be worse to have high density populations.

  15. The following thought just occurred to me.

    Let’s say one landlord who borrowed 70 percent to buy and, as a result of a second lien to take money out up to 90 percent, for an apartment or commercial property.

    And a second was more conservative and responsible and borrowed 50 percent, down to 40 percent with amortization.

    Now no one is paying rent. Both call their lender, and ask for a mortgage reduction rather than foreclosure. What would the answer be? And what does that mean?

    1. It kind of seems like we are in the rising tsunami tide phase of the market response to stimulus.

      The question going forward is whether the tide will stay in, once the water stops rapidly rising. It doesn’t work that way with physical tsunamis, but perhaps it’s different with financial engineers pulling out all the stops.

      1. The stock market has become irrelevant, in my opinion. It’s divorced from economic realities. Zombie corporations with rocketing stock prices in the face of a massive recession really doesn’t pass the sniff test. Can they remain solvent due to the FED propping them up, even with quarterly losses? Maybe. Does it matter in the grand scheme of life? Not to most people.

        1. People That Matter have lost trillions in the stock market over the past month.

          They must be made whole.

  17. Last 24 hours. Las Vegas 133 new listings. Orlando 64 Austin 100 & San Diego 45. Guess we still have a shortage of inventory keeping prices up, right Diana?

  18. What is the total inventory right now? Are you able to see what the inventory was last year at this time to get a year-over-year increase?

  19. In Boston things are still flying off the shelf. Almost zero inventory, things are going pending within days/hours of being listed, despite the lock-down (who the f*** buys a house without actually touring it?). Sell to list still >100%. I’ve posted here long enough that people should know I am and continue to be a housing bear, but this has shocked me.

    I’m expecting reality to set in soon, but the mania has remained resilient for longer than I expected.

  20. “Needless to say that access to capital for the HY and leveraged loan issuers remains completely shut for the time being … We have never seen a 15% drop in earnings without the credit cycle turning … Turning the page to HY-specific indicators of credit stress we are watching closely Figure 15 shows the proportion of distressed bonds in our index (spreads over 1,000bps). At 30% here, this indicator is at levels we have previously seen in Nov 2000 and Mar 2008 … our default rate model has moved materially higher and reached 9% estimate for overall HY issuer-weighted default rate over the next 12mo. The model also indicates potential energy defaults at 25-30%, leaving us with 6% in ex-energy HY default rate estimate.”

    “@SBarlow_ROB BoA: “leveraged credit issuers are, without an exaggeration, fighting for their survival”

    https://www.theglobeandmail.com/investing/markets/inside-the-market/article-leveraged-credit-issuers-are-without-an-exaggeration-fighting-for/

  21. Ordinarily, I would link to the original article but JtR’s comments are amusing.

    https://www.bubbleinfo.com/2020/03/24/socal-actives-and-pendings/#respond

    “I got a non-parallel to 2008 for you: Every home buyer over the last ten years had to qualify for their mortgage.”

    “All the traditional measurements of the market trends – incomes, jobs, wages, etc – all went out the window a long time ago. The first-timer market is parents & grandparents with gift cash helping their kids get into a starter home.”

    “Exactly – and how tight is grandma with the comps? She just waits for the call, and then sends the money for the down payment! Or the whole thing!”

    “Grandma-funded buyers: 0-10% off retail
    Owner-occupiers who need a deal to move up: 10% to 20% off
    Investors/flippers: 20% to 30% off”

  23. NSDCC = North San Diego County Coastal

    https://www.bubbleinfo.com/2020/03/23/inventory-watch-253/#more-90314

    The total number of pendings should drop off quickly as agents scramble to close their existing escrows and hunker down. Last week we had 55 new pendings, and this week it was 31 – which doesn’t sound too bad. But we’ll be lucky to see half that many by next Monday.

    The number of new listings dropped off too. In what would have been the early stages of the selling season, we only had 59 new listings – when last week we had 83.

    Hopefully people will keep watching the market via the search portals and blogs. It’s ok to think that nothing much will be happening – which is probably true. But keep an eye out, just in case!

  24. Latest offer from Chrysler:

    “NO PAYMENTS FOR 90 DAYS! (when financed through Chrysler capital)”

    What’s next, no payments for 6 months? Then what, no payments for a year? Just lower the fawking price already.

    1. I’m sure a lot of people are wondering if they will still have a job 90 days from now.

      There were a few kids on my son’s soccer team whose fathers lost their pilot’s jobs in 2008. Many were unemployed for a over a year.

    2. Subaru sent me a similar email today! Not enough to incentivize me to buy a new car. Maybe if they knocked the price down 50%?

  25. As real estate prices soared in recent years, working-class adults everywhere have increasingly relied on mortgages backed by the Federal Housing Administration — and U.S. taxpayers.

    Meanwhile, the Fed made housing unaffordable and the cost of living to outstrip wages through its debasement of the currency. The collapse is pretty much baked in the cake at this point, for those who can do arithmetic.

  26. “‘If the government tells me you’re good enough to get a loan, I have to trust and believe in the government,’ Castillo said. ‘Then we just hope and pray that the client doesn’t get foreclosed on.’”

    “The government” is subservient to Wall Street, the corporatocracy, and Democrat votes-for-entitlements rackets. Now that our former Republic has become a mobocracy, trusting and believing in the government is a recipe for disaster.

  28. $oooooooo ea$y to $olve problem$, e$pecially’$ iffin’s you have “UNLIMITED” capabilitie$!

    ECONomic$

    Fed’$ Set to Launch Multitrillion Dollar Helicopter Credit Drop$

    Bloomberg /By Rich Miller / March 26, 2020

    $timulus bill pave$ the way for $uper-charged Fed financing
    Central bank balance %heet could double to $9-to-$10 trillion$

    Call it Helicopter Credit$

    The Federal Re$erve is poised to $pray trillion$ of dollar$ into the U.S. economy once a ma$$ive aid package to fight the coronaviru$ and its after$hock$ is signed into law. These actions are unprecedented, going beyond anything it did during the 2008 financial crisis in a sign of the extraordinary challenge facing the nation.

    “The Fed has effectively shifted from lender of la$t re$ort for bank$ to a commercial banker of la$t re$ort for the broader economy,”

    Effectively one dollar of lo$$ ab$orption of back$top from Trea$ury is enough to $upport $10 worth of loan$.” Fed Chairman Jerome Powell said in in a rare nationally-televised interview early Thursday morning. “When it comes to this lending we’re not going to run out of ammunition$.”

    Combined with an unlimited quantitative ea$ing program, the Fed’s souped-up lending facilitie$ are set to push the central bank’$ balance sheet up sharply from an already record high $4.7 trillion, with some analyst saying it could peak at $9-to-$10 trillion$.

    2. I’ll believe it when I see it. While the Fed is showering trillions in FedBux confetti on its Wall Street and corporate cohorts, it is utterly indifferent to the plight of the proles on Main Street…unless they start reaching for the ptichforks and torches.

  30. The taxpayer-backed FHA insurance fund will take a loss.”

    F**k you, Democrats, for foisting such scams on taxpayers. Happily, you won’t fare well after the collapse you caused.

    1. Story didn’t say she caught it sheltering at home…probably out hitting the covid-19 circuit party.

    1. current battery technology

      The MSM is replete with “journalists” who don’t understand the patent system and peddle Tesla’s lies. Most people can’t tell the difference between a published patent application and issued patent let alone read the scope of issued patent claims. They also mistakenly believe that a patent confers a right to practice when it confers a right to exclude. You don’t file/prosecute patent applications and pay maintenance fees worldwide for a right to exclude you have little to no intent of enforcing. 💰💰💰🚽

    1. My husband’s expecting to get a good deal on a hybrid in the not too distant future.

    1. Mostly I inherit guns. Big high powered ones suitable for big game hunting. Bought one for myself 12 years ago. Just bought my first handgun. Don’t want to shoot a 7.62×51 or .270 in a subdivision ever if I can avoid it…and don’t want to depend on a single shot shotgun for home protection.

      1. .270 in a subdivision

        I was on the Varsity Rifle Team long ago in what seems like a different world. I can still hit the head of a nail at 100 yds or an apple at 200 yards (not every time but close enough). The .270 would go through half a dozen walls I imagine, which would be very inconvenient for my neighbors in town. If I used a pistol here in NY, it would be jail. So it would be the Ithaca M37 Ultralight with bird shot were the unthinkable to evolve, which I doubt. A gang would be quite stupid to target a country town like this.

        1. “…with bird shot…”

          A #4 buck is ideal for urban use. The close range penetration is great, the wounds are irreparable, and the pellets lose their kinetic energy quickly.

          1. urban use

            Frame houses here, not brick or concrete. Neighbors all have kids. Buck will go through numerous layers of drywall.

            If I were so lucky as to have you as an intruder, I would just play some Khatia.

          4. “Has she ever had a wardrobe malfunction?”

            Hmm, better search images…

            Wow, very statuesque and that mean look too. The means ones are much more exciting, IMHO.

      2. …and don’t want to depend on a single shot shotgun for home protection.

        Somewhat covered above, but 12-gauge pump isn’t an option?

        Did ya get a pistol or revolver?

        1. Did ya get a pistol or revolver?

          My first choice for simple home protection was just a Taurus Judge, but when I found out they were illegal in California I got frustrated and picked the top CCW pistol in California just so I could be sure of not getting any undue government attention. It’s a S&W Shield.

          1. I love my H&K 45 USP with recoil system it is a joy to use and super accurate. Also my Walther .22LR pistol is great and super light but requires high velocity 22LR ammo.

  37. NAR, please ask yourself the question we all want to know in these trying times, when do you drop recommended commission rates?

    I don’t think they will ever address that question, the horror that they would entertain such a thought?

  39. Has your FOMO kicked in yet?

    Asset prices always go up! Don’t get priced out forever.

    Dow ends over 1,300 points higher, notching three-day winning streak

    Home Markets U.S. & Canada
    ‘Awesome demand’ for 7-year Treasury auction amid Fed bond-buying
    Published: March 26, 2020 at 1:23 p.m. ET
    By Sunny Oh

    Strong bidding was seen in the sale for $32 billion of 7-year Treasury notes, the last of three coupon-bearing debt auctions this week. The auction stopped through by three basis points, a sign of “awesome demand,” according to Tom di Galoma, managing director of Treasurys trading at Seaport Global Securities. A stop-through indicates by how much the highest yield the Treasurys sold in the auction is below the highest yield expected when the auction began – the “when issued” level. The results helped to push bond yields lower, with the 10-year Treasury note rate (TMUBMUSD10Y, 0.831%) falling 5.8 basis points to 0.798% and the 7-year note yield slumping 6.8 basis points to 0.673%. Bond prices move in the opposite direction of yields. Analysts have pointed to a combination of reasons for the bullish trading in government paper, including the Federal Reserve’s open-ended bond purchases, heightened concerns about the COVID-19 outbreak and expectations for a recession this year. U.S. government bonds are traditionally considered a safe haven.
    …

  40. The end of February to early March is when the HOT spring housing market usually begins here in Raleigh, NC. Last week I noticed that Open Door began dropping their prices. (About $25k off a $300+k house or $15k off a $250-300k house.)

    Now I am noticing that some houses that were listed in mid-Feb to early March have had one or two price cuts already. I have seen multiple houses that were listed around March 5 have two price cuts. They may only be $5-10k off, but it is a start. I think I even saw one house that had a price cut after less than a week. For comparison, the areas I have been window-shopping have normally (in the last year) had most houses go contingent within 3-10 days after bidding wars and $3-5,000+ due diligence fees.

    In NC, due diligence fees are non-refundable fees paid with an accepted offer. During the due diligence period the buyer has the surveys and inspections done. If they want to cancel the contract because the house is in poor condition, they lose the DD fee (but get any earnest money back). In other ways, buyers pay the fee to keep the seller from selling to someone else while they try to set up inspections. This system was new when we bought our house and we only paid $200 in DD fees back in 2011 when nothing was selling. Over the winter I read on a local forum that people were paying $3-5,000 just to get their offers accepted. My spouse and I couldn’t believe that people would risk losing that much if the inspection turned out to reveal major flaws.

  41. The Financial Times
    Opinion Markets Insight
    Bans on short selling are handouts to the ‘corporate socialists’
    We short sellers see risks better than anyone else because it is our job
    Carson Block
    Troubled healthcare provider NMC Health © Bloomberg
    Carson Block 7 hours ago

    There is one sure-fire feature of crises: lawyers and lobbyists from big companies descend on capital cities to try to enact their clients’ punch lists of protectionist fantasies. So it has gone with the recent imposition of short selling bans in South Korea, Italy, France, Greece, Spain and others. Not only are these bans solutions in search of problems, but worse, they harm markets.

    Many of these big companies — let us call them corporate socialists, or CorpSocs — surely understand that the vast majority of selling during this market rout has been from investors with long positions. It is almost amusing to those of us in the short-seller community that anybody thinks we have enough capital to put real selling pressure on the market. During the recovery from the global financial crisis, numerous short sellers shut down and, right now, the two largest dedicated short selling firms in the world each manage much less than $2bn in assets. Contrast that to Fidelity Investments, which manages about $2.5tn of long-only assets.

    Moreover, banning short selling reduces the ability of large long-biased investors to take risk, because it removes their ability to hedge. Say, for example, that a long-biased investor with a strong belief in Fiat Chrysler’s ability to manage through this crisis wanted to increase its exposure by shorting a basket of rival automakers. In this way, the investor would be able to neutralise much of the “beta”, or market movements, of its position in Fiat Chrysler. However, if you take away the ability of these long investors to hedge their long positions in times of extreme movement, such as these, the hypothetical investor above might sell part — or all — of its long position.
    …

  42. Economist: ‘We’re gonna have a shutdown in the housing market’
    Sarah Paynter
    Yahoo Finance
    March 23, 2020, 8:48 AM PDT

    The novel coronavirus outbreak will likely bring the U.S. housing market to a halt, according to one economist.

    With consumers staying at home to slow the spread of COVID-19, open houses have been canceled, and potential buyers will likely decide to put off their home purchase, a large financial commitment as the U.S. spins into a potential recession.

    “We’re gonna have a shutdown in the housing market because people aren’t out there seeing the houses, and also because generally economic activity is contracting in almost every sector of the economy,” said Tendai Kapfidze, chief economist at LendingTree.
    …

  43. The Financial Times
    Coronavirus
    US overtakes China for most confirmed coronavirus cases
    America now has the most Covid-19 cases in the world, as China fears second wave
    China’s new measures will prevent entry by almost all holders of visas and residence permits starting on Saturday.
    © AFP via Getty Images

    Christian Shepherd in Beijing, Lauren Fedor in Washington and Steven Bernard in London 48 minutes ago

    The US has overtaken China to become the country with the largest number of confirmed coronavirus cases in the world, with 81,943 Americans now testing positive for Covid-19.

    State-by-state figures published late on Thursday showed confirmed cases of coronavirus in the US had overtaken the 81,285 cases reported by China, with the biggest outbreaks in New York, New Jersey and California. A total of 1,177 Americans have died from the rapidly-spreading virus.

    The latest US figures underscore how the centre of gravity for the coronavirus pandemic has shifted from Asia to the West. The US overtook China on the same day Beijing said it was temporarily suspending visits from almost all foreign nationals — a marked reversal to policies implemented in the US and Europe in January to limit travellers from China.
    …

    1. It’s heartwarming how much you trust the CCP published data.

      They’ve closed the border to all foreigners I read today, blaming them in China for the second wave of infection, as people go back to work. I suspect that American businesses trying to colonize China will not be a popular play going forward.

  44. The NIAID is a division of NIH. How much stock does Fauci have in Moderna?

    https://www.fiercepharma.com/pharma/amid-deadly-outbreak-nih-hasn-t-found-its-pharma-partner-to-manufacture-coronavirus-vaccines

    “Moderna and the National Institutes of Health quickly struck up work on a potential vaccine against the deadly new coronavirus. But the team hasn’t found a pharma partner to manufacture the vaccine for real-world use, a top official said Tuesday.”

    “NIH and Moderna could develop a vaccine in a little over a year if all goes well, but they wouldn’t be able to produce the doses needed to deploy the shot against the outbreak, National Institute of Allergy and Infectious Diseases director Anthony Fauci said at an Aspen Institute panel. That’d require a pharma partner, and so far, NIH hasn’t found its manufacturer.”

    “On the NIH/Moderna collaboration, Fauci said the team should be able to get into the clinic in about two and a half months from the time it received the initial virus sequence. Then, he expects three months of testing in phase 1. If all goes well, the team could advance to phase 2 testing in China that’d take six to eight months (emphasis added).”

    “After that, the group would be ready to start producing vaccines for use in the field. Production would require an amount of time that’s as ‘problematic’ as developing the shot itself, Fauci said. That’s unless the team produces vaccines ‘at-risk,’ or before getting proof the vaccine will even work.”

  46. Does it mean the sickest patients tend to stay on ventilators longer and are more likely to die? Or do the ventilators themselves have an adverse effect making death more likely?

    It’s hard to say without information on the patient’s condition when the ventilator was required.

    1. Cuomo sounded like he was delivering a primer for death panels.

      Imagine Hillary is infected and has loitered on a ventilator for 21-days. Then Taylor is admitted and needs a ventilator too. You have to make a decision:
      A: Leave Hillary alone on the ventilator?
      B: Taylor is younger, so give her the ventilator?
      C: Or toss a coin, and let Taylor call it?

  47. These states have implemented stay-at-home orders. Here’s what that means for you
    By Alicia Lee, CNN
    Updated 5:29 PM ET, Thu March 26, 2020
    California governor orders residents to stay at home

    (CNN) As the US grapples with the rapid spread of the novel coronavirus that has the health care system at a tipping point, a growing number of states are ordering their residents to stay at home.

    Despite the White House advising all Americans to practice social distancing, the number of coronavirus cases in the US continues to rise. So governors across the nation are taking stronger action by issuing stay-at-home orders in their states.

    By the end of this week, when all 22 current state orders take effect, more than 50% of the US population will be officially urged to stay home.
    …

    1. “By the end of this week, when all 22 current state orders take effect, more than 50% of the US population will be officially urged to stay home”

      Door.knob.death.germ$ is a xaoh! … 👾 … Corona.NO! 🙅‍♀️

  48. I close the 31st of this month on my condo sale on the west coast of FL! Yes I sold and yes I am out of the Fdup state of FL !!

  49. Harbor Bluffs, FL Housing Prices Crater 14% As One Pinellas County Broker Shared, “If You Have A House On The Gulf Coast, Dump It For Whatever It Will Fetch And Do It Soon”

    https://www.zillow.com/harbor-bluffs-fl/home-values/

    As a noted economist said, “If you have to borrow for 15 or 30 years, you can’t afford it nor is it affordable.”

    1. Capitulation Really Means
      By Money Morning Staff Reports, Money Morning • March 26, 2020

      Wall Street is full of old saws. There is one for just about every occasion, including when it’s finally time to take advantage of this current bear market and buy.

      And one you’re going to hear over and over soon is “stock market capitulation.”

      Let’s talk about one of the most hotly debated phrases on Wall Street – one people want to see at the end of bear markets…

      What Is Stock Market Capitulation?

      Capitulation is the final selling in a bear market where even the most ardent bulls give up. They stop trying to pick the bottom while emotions everywhere run so high that people want to sell everything without regard to price. “Just get me out!”
      …

      1. Dumb question of the day: Can Unlimited QE be used to provide the stock market with unlimited support?

        If yes, what took them so long!?

        1. If yes, what took them so long!?

          I don’t know. We used to have this weird tradition of pretending that the markets weren’t rigged.

      2. Mr. Sozzi seems to lack faith in bailout authorities’ unlimited potential to provide unlimited support to the stock market.

        The stock market probably has one more giant coronavirus-driven plunge left to go
        Brian Sozzi
        Editor-at-Large
        Yahoo Finance
        March 23, 2020

        Countless folks on Wall Street are clamoring to be a hero right now by trying to time a bottom for clients in the battered stock market.

        No names needed, you know who you are and thanks in advance for clicking to read this story. You have been exposed.

        Here is a blunt message to you and your ilk — put the superhero capes away and check your ego at the door. Because the reality is that the coronavirus pandemic has become so unpredictable — along with the eventual recovery for the global economy and Corporate America — that’s impossible to say stocks across all sectors are cheap in any way. This is a bear market that likely has one or two major plunges left in it before the long sought after “capitulation” moment that marks a period such as March 2009, where it made sense to roll the dice on equities.

        “There is no question that we’ve seen some signs of at least a short-term capitulation, but unless something is done to quell the “forced selling” that is going on in several different markets, the near-term picture looks quite dire,” says Miller Tabak strategist Matt Maley. “If they can come up with a plan to slow-down the “forced-selling,” the market should be able to bounce strongly over the near-term…and begin the bottoming process………That “bottoming process” will still take time. We believe that it will involve several strong rallies…but some further scary declines as well.”
        …

      3. I$n’t “Capitulation$” & “$oft.landing$” mutually inclu$ive or i$ they mutually exclu$ive?

        (Eye’m $till pondering the debt$ of “UNLIMITED”!)

  51. The BBC
    Covid-19: The history of pandemics
    Throughout history, nothing has killed more human beings than infectious disease. Covid-19 shows how vulnerable we remain – and how we can avoid similar pandemics in the future.
    By Bryan Walsh
    25th March 2020

    The novel coronavirus pandemic, known as Covid-19, could not have been more predictable. From my own reporting, I knew this first-hand. In October 2019, I attended a simulation involving a fictional pandemic, caused by a novel coronavirus, that killed 65 million people, and in the spring of 2017 I wrote a feature story for TIME magazine on the subject. The magazine cover read: “Warning: the world is not ready for another pandemic”.

    There was little special about my insight. Over the past 15 years, there has been no shortage of articles and white papers issuing dire warnings that a global pandemic involving a new respiratory disease was only a matter of time. On BBC Future in 2018, we reported that experts believed a flu pandemic was only a matter of time and that there could be millions of undiscovered viruses in the world, with one expert telling us, “I think the chances that the next pandemic will be caused by a novel virus are quite good.” In 2019, US President Donald Trump’s Department of Health and Human Services carried out a pandemic exercise named “Crimson Contagion”, which imagined a flu pandemic starting in China and spreading around the world. The simulation predicted that 586,000 people would die in the US alone. If the most pessimistic estimates about Covid-19 come true, the far better named “Crimson Contagion” will seem like a day in the park.

    As of 26 March, there were more than 470,000 confirmed cases of Covid-19 around the world and more than 20,000 deaths, touching every continent save Antarctica. This was a pandemic, in reality, well before the World Health Organization finally declared it one on 11 March. And we should have seen it coming.
    …

  52. This is cool — interactive coronavirus map for San Diego County.

    So far there are no cases near our area of Rancho Bernardo, but that could change with the advent of increased testing. Meanwhile, I’m going to keep a safe social distance from my neighbors when we go out for our daily stroll.

    INTERACTIVE MAP: Confirmed coronavirus cases in San Diego County
    Posted: 6:44 PM, Mar 20, 2020
    Updated: 5:52 PM, Mar 26, 2020
    …

  53. I left town on the eve of Mardi Gras.

    Death rate soars in New Orleans coronavirus ‘disaster’ that could define city for generations
    Rick Jervis, Maria Clark, Lorenzo Reyes | USA TODAY Updated 2 hours ago

    NEW ORLEANS — Throngs of revelers may have brought the coronavirus to New Orleans during Mardi Gras celebrations here.

    But the city’s poverty rate, lack of healthcare and affordable housing, and high rates of residents with preexisting medical conditions may be driving its explosive growth and could make it the next U.S. epicenter of the outbreak.

    The number of known coronavirus cases in Louisiana jumped to 2,305 on Thursday, an increase of 510 cases from Wednesday, and a total of 83 deaths, according to the Louisiana Department of Health. Nearly half of Louisiana’s cases — 997 — came from New Orleans.

    The city also reported Thursday that a 17-year-old teen died after contracting the virus, bringing the city’s coronavirus death tally to 46 — more than half of the state’s total death count.
    …

    2. lack of … affordable housing

      I’m not sure how that ties into the spread of a virus?? Gotta inject the social commentary though!

  54. Pummeled by coronavirus, NYC restaurants, performing arts brace for the worst
    By Laura Italiano
    March 26, 2020 | 11:30pm
    A view of an empty MacDougal Street in the West Village.
    Robert Miller

    The city’s restaurants and performing arts are why tourists flock to New York — but thanks to the coronavirus, those industries are bracing for a long haul of nothing.

    While take-out and delivery is still available in many restaurants, that hasn’t helped the legions of wait staff and associated “front-of-house” workers and suppliers.

    “It’s been devastating to the restaurant industry,” said Andrew Rigie, executive director of the New York City Hospitality Alliance.

    “We’ve laid off tens of thousands and it will reach hundreds of thousands — and there’s no end in sight,” he said.

    “People are losing their livelihood. We are the streetscape — it’s why people love New York so much. We are part of the cultural fabric of what makes us such an amazing and unique place.”
    …

  55. I see no problem here that unlimited QE can’t remedy.

    U.S. stock futures slip despite Dow’s third straight day of gains
    Published: March 26, 2020 at 11:39 p.m. ET
    By Mike Murphy

    After starting the session flat, U.S. stock index futures fell Thursday night, following a third straight day of gains by the Dow — technically putting it back into a bull market — and ahead of the House’s expected approval of a $2 trillion coronavirus relief bill. Dow Jones Industrial Average futures (YM00, -1.16%) were down 280 points, or 1.3%, as of 11:30 p.m. Eastern. S&P 500 futures (ES00, -1.24%) and Nasdaq-100 futures (NQ00, -1.08%) were also down more than 1%. Stocks jumped earlier Thursday despite a Labor Department report that showed unemployment claims soared to a record 3.28 million last week due to businesses shutting due to the coronavirus outbreak.
    …

  56. Once expanded, can central bank balance sheets ever again shrink back to their original size?

    2. Mar 26, 2020,11:14pm EDT
      Why The Fed Will Go Negative
      Vineer Bhansali, Contributor
      Markets
      I find opportunities and risks in financial markets.

      Until now, the US has avoided the negative rate phenomenon that has become embedded in the monetary and fiscal environment of Europe and Japan. To recycle and parody parts of a phrase that former Fed Chairman Ben Bernanke used almost twenty years ago reflecting on deflation in Japan – “It (Negative Rates) will likely happen here too”.

      The US Fed has resisted cutting rates below zero so far. In my opinion, it is only a matter of time before either current Fed Chairman Jerome Powell or the one to follow him announces negative interest rates in the US, not because they want to, but because they are forced to. And yes, it will be another pivot or piroutte, and “data-dependence” and a new understanding of the way the economy and the markets work will be used as the justification for the change in philosophy.

      The massive amount of money that is being globally thrown at the economy and the markets will result in this negative rate outcome as the path of least resistance and an unintended consequence of too much liquidity in all the right — and all the wrong — places.
      …

  58. Bonds
    Published 15 hours ago
    Does coronavirus mean negative Treasury yields are here to stay?
    Negative yields are based on the ‘expectation the Fed is going to go all out’
    By Jonathan GarberFOXBusiness

    The world’s nearly $9 trillion pile of negative-yielding debt got a little bigger this week as returns on 1-month and 3-month Treasury notes fell below zero for the first time since 2015.

    The yields on the 1-month and 3-month bills closed at -0.057 percent and -0.044 percent, respectively, the lowest on record. A bond’s yield is the premium demanded by investors, including both interest and any discount on pricing.

    “You’ve just seen a lot of demand from both the Fed and from the investor community for these types of liquid cash, alternative type products,” Leslie Falconio, senior strategist at UBS Global Wealth Management, told FOX Business. “Moving into slightly negative yield isn’t really as much of a concern for them for three months. It’s more of the safe-haven preservation of capital.”

    The Federal Reserve announced on Monday that it would buy unlimited assets, including Treasury securities, to buffer the U.S. economy from the economic fallout related to the COVID-19 pandemic, which has led cities to issue “stay-at-home” orders and resulted in the temporary closing of stores, restaurants and businesses, putting millions out of work.

    The Fed’s introduction of unlimited asset purchases, or so-called quantitative easing, came just over a week after the central bank, at an emergency meeting, slashed its key lending rate by a full percentage point to nearly zero. A week earlier, the Fed made an emergency cut of 50 basis points.

    Falconio says yields falling below zero for longer-term debt would only be temporary, noting it’s “highly unlikely” the Fed embarks on a negative interest-rate policy as such a program has proven ineffective abroad.

    Sri Kumar, president of the Santa Monica, California-based Sri Kumar Global Strategies, has a different view.

    He expects the Fed to cut rates into negative territory before the end of a recession he says has already begun. Kumar sees second-quarter gross domestic product falling by 15 percent and an 8 percent decline over the following three months before close to zero growth at the end of the year.

    Negative yields on short-term debt is the result of “the expectation that the Federal Reserve is going to go all out in terms of turning the faucets on and for lowering interest rates,” he told FOX Business. “So in other words, the short-term interest rate market is leading the Fed rather than the Fed leading the market.”

    Kumar believes shorter-dated Treasury yields will stay negative “for a considerable period of time,” turning positive only once an economic recovery becomes a reality and inflation shows signs of increasing. Yields on longer-term debt may turn negative too, he said, and investors will “probably have to wait at least until the end of the year” for them to climb back into positive territory.

    While Kumar sees the 10-year yield falling to near zero, Falconio says, barring some sort of exogenous shock – like oil going to $5 — the bottom occurred when the benchmark yield hit about 30 basis points a few weeks ago.
    …

    1. Related question: Once the afterglow of Unlimited QE announcements fades, will bulls require new doses of monetary viagra to keep the stock market up?

        1. The Financial Times
          Markets Briefing Equities
          European stocks fall after record Wall Street run
          New evidence coronavirus is hitting global economy shifts market sentiment
          © Reuters
          Philip Georgiadis in London and Hudson Lockett and Daniel Shane in Hong Kong 3 hours ago

          European stocks slipped as a record rally in equities faded amid mounting evidence that the coronavirus pandemic is taking a severe toll on the global economy.

          London’s FTSE 100 fell 2.7 per cent at the open, snapping three days of gains that have seen the index rise more than 10 per cent this week. Stock markets dropped across Europe, leaving the Stoxx 600 index of the region’s largest companies down 1.7 per cent.

          The shift in sentiment followed rises in Asia and Wall Street’s best three-day run since the 1930s. The MSCI All-World index of global stock markets is currently on course for its best week on record following the run of gains.

          Still, investors have warned that the rebound in markets would quickly run out of steam without signs that the outbreak is decelerating. Futures pointed to opening losses of more than 1 per cent for the S&P 500 later in the session.

          The US benchmark index closed up 6.2 per cent on Thursday after the US Senate approved a $2tn stimulus deal. The emergency bill to provide relief to taxpayers and businesses could be voted on in the House of Representatives on Friday.

          This “support has alleviated the panic in markets”, said Johanna Chua, an emerging Asia strategist at Citi. But she cautioned that the rebound would not last against the dire economic background and growing rates of infection. “Many market participants view this ‘squeeze up’ in the markets as a bear market rally,” she said.
          …

        2. Why this wild coronavirus rally has Wall Street experts fearing a bull-market trap
          Published: March 27, 2020 at 6:36 a.m. ET
          By Steve Goldstein
          A medical worker directs a patient to enter a COVID-19 testing site at Elmhurst Hospital Center on March 25, 2020, in New York, U.S. Associated Press

          Blink and you may have missed it — the Dow Jones Industrial Average (DJIA, +6.37%) is in a bull market, reached on a day when data showed a record number of people filing for unemployment benefits.

          Yes, that’s right. The 21% gain in the last three days ends what was just an 11-day bear market for the blue chips.
          …

      2. Unlimited QE

        They will try to hold the center and let the flanks fall.

        “Turning and turning in the widening gyre
        The falcon cannot hear the falconer;
        Things fall apart; the centre cannot hold;
        Mere anarchy is loosed upon the world,
        The blood-dimmed tide is loosed, and everywhere
        The ceremony of innocence is drowned;
        The best lack all conviction, while the worst
        Are full of passionate intensity.”

        Yeats, 100 years ago.

  60. Well I am on the sidelines waiting for inventory to rise and prices to fall in Sacramento. Homes below 500k go pending fast now. I am seeing prices start to drop in the higher end Sacramento market. Like one place has been on Zillow for 200 days and was originally listed at 750k and now is listed at 650k but it still is 200k overpriced.

    1. Based on the pace of real estate price adjustment in the early 1990s real estate bust and the post-2007 real estate bust, it may take five years for prices to bottom out (think 2025).

      1. five years for prices to bottom out

        Maybe our lives and our vision are so short that we can only grasp and play the short term business cycles.

        Long term readers of Ben’s Blog have been exposed to the idea that today and 2005 are the same bubble, the biggest one in history, and that full correction after the 2005 peak never happened.

        1. I’m on board with that perspective. I was just speaking to the empirical regulatory in the timing of the last two housing troughs.

          Long-time readers here know the last bottoming out process was punctuated by the advent of housing-targeted QE3, circa 2012. Will the Fed intervene again to support current homeowners, with rates already tipping negative? Time will tell!

          1. rates already tipping negative

            There is a distinction between negative rates and negative yields. I don’t think any treasuries have been issued with negative rates, even if some have traded hands with a baked in loss. I could be wrong.

          2. The MSM has loosely made reference to “negative rates”, but I believe the way short-term Treasurys normally work is that the buyer purchases at a discount to face value, then gets repaid full face value at maturity.

            Initial purchase at a premium to face value would result in a negative yield.

    2. I am seeing prices start to drop in the higher end Sacramento market.

      In my opinion all data from before the virus is now meaningless. Now everything is frozen waiting to see what will happen next. Nobody wants to sell at a lower price if things are going to snap back quickly, and nobody wants to buy at a higher price if things are going to crash. So now we wait.

  61. Futures Movers
    Oil marks first decline in 4 sessions as fears of demand crunch grow
    Published: March 26, 2020 at 3:21 p.m. ET
    By Myra P. Saefong and
    William Watts

    Oil futures settled lower on Thursday as growing worries about the decline in energy demand due to the global COVID-19 pandemic prompted prices to mark their first decline in four sessions.

    Prices for oil have “depreciated 60% since the start of 2020 thanks to the coronavirus outbreak and [an] aggressive price war between Saudi Arabia and Russia,” said Lukman Otunuga, senior research analyst at FXTM.
    …

    1. U.K. Prime Minister Johnson tweets he has tested positive for coronavirus
      Published: March 27, 2020 at 7:23 a.m. ET
      By Steve Goldstein

      U.K. Prime Minister Boris Johnson has tweeted that he has tested positive for coronavirus. “Over the last 24 hours I have developed mild symptoms and tested positive for coronavirus. I am now self-isolating, but I will continue to lead the government’s response via video-conference as we fight this virus,” he said.
      …

  64. How do you know a realtor is lying???

    Realtors lips are moving.

    1533 Sheridan Ave, Escondido, CA 92027

    “this property is being sold by the ORIGINAL OWNERS! That?s right, this property was purchased new in 1977. “

    You sure about that realtor….

    Price history
    DATE EVENT PRICE
    3/26/2020 Listed for sale $559,000
    Source: HomeSmart, Evergreen Realty
    8/20/2018 Listing removed $2,700
    Source: Pacific Rim Property Management
    8/6/2018 Price change $2,700 (-1.8%)
    Source: Pacific Rim Property Management
    7/24/2018 Price change $2,750 (-5%)
    Source: Pacific Rim Property Management
    7/7/2018 Listed for rent $2,895 (+5.3%)
    Source: Pacific Rim Property Management
    5/30/2017 Listing removed $2,750
    Source: Pacific Rim Property Management
    4/24/2017 Listed for rent $2,750 (+6%)
    Source: Pacific Rim Property Management
    7/13/2016 Listing removed $2,595 (-7.2%)
    Source: Pacific Rim Property Management
    6/1/2016 Listing removed $2,795
    Source: Pacific Rim Property Management
    8/24/2015 Sold $495,000

    1. That’s actually a huge red flag for me — more often than not, a house like has not been kept updated, and may have horrifically out of date infrastructure, unless those things are priced in (and usually couched in such realtor-speak as “bring your remodeling ideas”).

    2. 1533 Sheridan Ave, Escondido, CA 92027

      Zillow’s description is probably from the 2015 sale. Redfin and Realtor.com show a different one.

      Description on Zillow: CALL Wes Hankins Direct 951-757-4852 1533 Sheridan Ave Escondido CA 92027 Stop and take a deep breath, this property is being sold by the ORIGINAL OWNERS! That?s right, this property was purchased new in 1977. Since that time this property has been maintained perfectly. Upgrades include tile and laminate wood floors, upgraded cabinets, upgraded kitchen lighting, vinyl windows, vinyl sliding glass doors, water softener and alumawood patio cover. All on one level this energy efficient property has a 2 car garage, dual master closets, dual master sinks, slider off the master, formal living, formal dining, 4 bedrooms, mature fruit trees and extensive views! There are too many unique features to list come and see for yourself.

      Description on Redfin and Realtor.com: FIXER-FIXER !!! Wonderful location. SOLD “AS IS”. Lots of Potential. Amazing 4 bedrooms, one story home with Views and Views. Older upgrades which include tile flooring and engineered wood floors, kitchen lighting, vinyl windows, vinyl sliding glass doors, Dual master closets, dual master sinks, and patio cover.

      1. Trulia is showing the same description as Zillow.

        I know Zillow’s filter for “single-story only” sucks, which is why I use realtor.com even though it’s not as user-friendly for recent neighborhood sales. Upshot: triangulate information.

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