Happy Memorial Day

You’ve probably noticed that I do a lot of critical analysis on the economy, our lawmakers and the industry in this space. If I think something is working or not working, I’m never afraid to tell you about it. But I want to make one thing clear. I don’t speak up about the problems I see impacting us all because I’m filled with anger or hatred or want to see the entire system burned to the ground. I speak out because I love this country.

That’s a message I want to be sure to get across, especially on Memorial Day, when we give thanks and remember the sacrifices made by those who came before us.

So, let me make sure you heard me. I’m not saying that I kinda like living here and that it’s okay until I retire to an island somewhere, I’m telling you that I love America. I love raising my family here and running my business here. It may be outdated, but I still think America is the greatest country on Earth, and I want that to continue, for my children’s sake and my grandchildren’s as well.

So, when I see Americans and their politicians making bad decisions or making short term decisions for personal gain or decisions that benefit only their constituents, it concerns me. My analysis of the Founding Fathers was, regardless of how you interpret the Constitution or the Bill of Rights, these men believed that there was a moral foundation and a camaraderie and a sense of being one united nation under God that all Americans would share. And I know those words were written into the Pledge of Allegiance long after the Founding Fathers were dead, but they were written by someone who, like me, was still a believer in that dream.

And so on this holiday weekend (we’re celebrating Memorial Day in the States, a holiday that deserves it’s own post sometime), I’m not going to focus on what’s wrong in America, I’m going to direct my passion in a different direction. I’m going to go out with my beautiful wife and family and have a great time.

One of the things I love being able to do is collect, rebuild and show Hot Rods. Here’s one of my cars, and my wife Christine.

 

Enjoying classic cars is a uniquely American pass time and it’s just one more reason I love this country. If you also love America and living a full life outside of work, Friend me on Facebook. I hope you all have a great holiday weekend.

A Long, Slow Recovery

If you’ve been reading my blog very long, you know that my interest in our economy goes well beyond the mortgage industry. A lot of what I’ve been saying was echoed last week in one of the better bloggers I follow, John Mauldins.

Check out what John has to say about the state of our recovery.

I've commented on much of this. Now, look back at some recent posts and you’ll more of the story.

Money Management at the Treasury

Still Manipulating the Markets

And listen to my most recent podcast here: http://michaeldetwiler.blogspot.com/2011/05/podcast-my-thoughts-on-quantitative.html

I would love to hear your thoughts on this. Leave a comment.

Paul Sperry on the Fate of Smaller Banks

In this article from Investors Business Daily, Paul Sperry lays out some very real threats to smaller institutions that will come about as an unintended consequence of the Dodd-Frank Wall Street Reform and Consumer Protection Act.

“Bankers say the bureau is empowered to demand any information it wants from any bank at any time and in any form. That means spending more time and money filing reports and huddling with regulators vs. serving customers.

Banks will be subject to some 20 new reporting mandates under the Home Mortgage Disclosure Act, including data fields on loan pricing designed to help regulators police "predatory lending."

Paul was kind enough to address the Mortgage Cadence team and our customers in Vail at our recent Aspire Users Conference. I think he did a great job and the many comments we received from attendees afterward indicate they agree with me. He has some great ideas and I’m happy to support him.

As for smaller banks and their reporting requirements, those that use the right technology will find it significantly easier to provide their business partners, their customers and their regulators with the information they need when they need it.

Are you ready to provide information to the CFPB?

Podcast: My Thoughts on Quantitative Easing

I've been promising to send out my thoughts on the whole quantitative easing concept and what it means to our economy, the housing industry and the world economy. This podcast fulfills that promise.

As I point out in this recording, I don't consider myself an academic. Normally, concepts like QE might be considered squarely in the territory of financial analysts and Ph.D.'s. But when the signs become so clear and the evidence so compelling that it can no longer be ignored, those of us working to keep our country and economy strong are called to speak out.

That's what I'm doing here and I hope you get some value out of it. I also hope you respond. Don't be afraid to leave a comment on this page. Sure, we moderate all comments to this blog, but I won't prevent anyone from speaking out if they present a good argument, respectfully and with a goal of making things better. So, let me know what you think.

More Money Management Problems at the Treasury

You may have already seen this item on the Zero Hedge blog. I read it this morning and can only shake my head.

Now what? How can we expect a GSE (Government Sponsored Enterprise) to be successful when the Government itself is in such disarray and clearly has no understanding of how to run anything within a budget, let alone profitably?

Meanwhile, over at Dan Norcini’s blog we find that the Long Bond Flops on Poor Auction Results.

Reports are that the $16 billion, 30 year bond auction, generated poor demand. That should not come as much of a surprise after the big rally has dropped yields down to levels that no one in their right mind would want to lock up capital at for 30 years.

Bonds dropped nearly a full point on the auction news but are once again finding buying at a critical technical juncture. No surprise there also in this heavily rigged market.

No one wants US debt….gee, I wonder why.

Understanding Housing Data

Throughout the downturn, the mainstream press has suffered through the task of explaining the crisis to their readers. Some reporters have done better than others, but most have missed the point.

This story in USA Today is an example of a media outlet reporting on an oxymoron without seeming to realize it. Yes, more homes were sold during the period studied, a slight increase was noted.

But prices fell at the same time.

Existing home sales rose 3.7% from February to a seasonally adjusted annual rate of 5.1 million, the National Association of Realtors reported Wednesday. That marked the sixth monthly rise for existing home sales in the past eight months. "We're clearly on a recovery path," says Lawrence Yun, NAR chief economist.

If the real estate crash taught us anything, it was to scrutinize the source of the statistic as carefully as the data itself. We all remember the reports NAR was putting out just prior to the crash. Perhaps those that sell homes can be forgiven for attempting to convince buyers that a recovery is imminent, but they should not be trusted.

In the same article, NAR reported that 40% of sales during the period were distressed homes, up from 35% a year ago. That’s a statistic worth considering.

Bottom line: we’re not in a recovery. Not yet.

Thoughts on the Impact of Quantitative Easing

I’ll be uploading a podcast shortly that will give you my take on the whole QE question, but I want to set the stage first with some information I’ve been tracking from around the industry.

Jim Sinclair is a gold trader I follow. You can always expect the price of precious metal to go up in time of uncertainty. It appears now that the price of gold is out of control. Look what he says about where gold will go next.

Consider for a moment what things would have looked like if QE did not exist in the US as well as other major Western financial systems. What would this so called recovery look like? Now think how things will look if the Fed, pressured politically, ceases QE. Then think how fast and big the next program (with a new name for QE) will be to manufacture money before all legislators, Democrats and Republicans, get sent home along with the Administration in 2012. Be realistic. Before our beloved politicians give up their power forever the master of the financial universe will burn down the dollar barn. Gold is locked and loaded for $1650 and 

We don’t have to look far to see where a lot of this uncertainty is coming from. You probably saw how China put a scare in the markets not long ago. I found this story on the Zero Hedge blog.

China has decided to serve the world another surprise. Following last week's announcement by PBoC Governor Zhou (Where's Waldo) Xiaochuan that the country's excessive stockpile of USD reserves has to be urgently diversified, today we get a sense of just how big the upcoming Chinese defection from the "buy US debt" Nash equilibrium will be. Not surprisingly, China appears to be getting ready to cut its USD reserves by roughly the amount of dollars that was recently printed by the Fed, or $2 trilion or so. And to think that this comes just as news that the Japanese pension fund will soon be dumping who knows what. So, once again, how about that "end of QE"?

Can we really expect our government to be capable of controlling the markets? I’ll give you my thoughts in a podcast shortly, but please leave your comments here.

Mixed Messages from the Government

By now you’ve probably seen the “guidelines and goals” HUD has put out for lending to underprivileged, non-qualified borrowers. The government can’t very well turn its back on voters who are eager to buy into the American Dream, not if they want to get re-elected.

Now, the Federal Reserve Board has issued a proposed rule under Regulation Z that would require creditors to determine a consumer's ability to repay a mortgage before making the loan and would establish minimum mortgage underwriting standards.

Lenders have a number of options for complying with the rule, according to the proposal. They can verify specified underwriting factors and conclude that the borrower can repay; they can make a “qualified mortgage,” which hasn’t been fully defined yet but that would offer the lender protection from liability; the lender can make a loan with a baloon payment; or it can refinance the borrower into a loan with a lower monthly payment.

The rule is out for comment, but since the Fed won’t even be the body that finalizes the rule, it’s not clear who will comment. The Consumer Financial Protection Bureau will take up the work once it comes up to speed.

Hopefully, when that happens and more regulatory power is put into one agency, we’ll get some clarity on what the government wants lenders to do: make loans to people who the industry can prove can repay them, or make loans to borrowers we know cannot.

Is the Federal Reserve Killing America?

At least one blogger I know thinks so. I just his read his post “The Saddest Commentary I know of on the United States of America; Requiescat in Pace.”

Folks, "soaring profits" at oil companies are not to blame for the price of gas. No more than windfall profits for farmers are to blame for rising food prices. The same people who are misleading you about the real cause are decrying capitalism while feigning they have any understanding of such. These people are destroying the dollar which is the real reason why gas and food and everything else is going through the roof.

I look forward to your comments.