YOU GOTTA LOVE IT

Do they ever get tired of it? Scroll around the web and you'll see tens of article with this kind of theme, go out and consume, consume, consume.

Despite three years of a solid recovery in home prices, a surprising number of homeowners don't realize what they've gained.

Most underestimate what their home is worth and, consequently, the amount of home equity that they could draw upon. Even more striking, just more than half of homeowners with a mortgage don't expect to gain any equity in 2016, despite rising home prices. It may be why home equity lines of credit are far less popular today than they were even before the housing boom.

Despite three years of a solid recovery in home prices, a surprising number of homeowners don't realize what they've gained.

Most underestimate what their home is worth and, consequently, the amount of home equity that they could draw upon. Even more striking, just more than half of homeowners with a mortgage don't expect to gain any equity in 2016, despite rising home prices. It may be why home equity lines of credit are far less popular today than they were even before the housing boom.

 "Homeowners who bought during the housing boom are regaining equity many thought was lost forever, yet too many are not aware of the equity they have gained or they are unclear about how to determine changes in their equity," said Bryan Sullivan, chief financial officer at loanDepot, an independent, nonbank lender.


Fifty-seven percent of homeowners said they believe their home value has improved in the last three years, but the majority, 80 percent, underestimated the amount of value it has gained, according to a new survey conducted by Omniweb and commissioned by loanDepot. The survey was based on interviews with 1,000 borrowers, split evenly between men and women.

There are MSM cheerleader articles that can have serious repercussions. Consumers during the economic mess a few years back were blamed for spending too much, having too much debt and so forth. Now, with perhaps a bit of breathing room, real or not, they're urged to let it rip again.

As we always say, you gotta love it.

ECONOMIC HOGWASH

 How to you recognize economic hogwash when you see it?

Simple. Read more articles like this one from Business Insider.

Global economic growth is sluggish, to say the least.

The low-growth environment the world seems to be trapped in, said Raman Srivastava, Standish Mellon Asset Management's co-deputy chief investment officer and managing director of global fixed income, is probably not going to change anytime soon.

There is, however, one thing that could truly kickstart the global economy: fiscal stimulus.

The issue, Srivastava said, is that no country wants to do it.

"What needs to happen is a coordinated fiscal response on a global scale in order to spur demand," Srivastava told Business Insider. "The problem is there isn't a will to do it, which is why we don't think [growth] rates or inflation is going anywhere."

According to Srivastava, central banks have attempted to kickstart growth with ever-lower (and now negative) interest rates and asset buying programs. But at this point those moves are no longer effective.

"The first venture into things like [quantitative easing] drew a powerful response from markets," said Srivastava. "So now there is no real reaction anymore. The markets is basically saying there is not much more they can do. Further rate cuts aren't going to help, more fiscal stimulus is."

In this scenario the stimulus would be a large infusion of cash from the government in the form of infrastructure development, public employment, and so on. This would drive employment, wage growth, and would make up for the demand gap in private sector expenditures.

The biggest thing standing in the way of this plan, said Srivastava, is politics.

According to Srivastava there just isn't an appetite for a large, debt-financed stimulus package on a global scale, especially in the US.

"Look at the US, we're in the middle of an election year, there's not going to be an announcement of a giant stimulus package in this environment," said Srivastava. "We would really need something economically dramatic to happen before stimulus became possible."

 The U.S. and most other developed countries, not to mention developing ones, is already up to its ear lobes in debt. Politicians and bureaucrats around the globe have a well deserved reputation that is now lower than a fat duck's belly. There was a time when used car sales people had a lower reputation than these so-called public servants. The difference here is used car sales people never boasted having any claims to public service. There's was all personal to begin with.

Just the opposite is needed: cut taxes and regulations, unleash the individual business entrepreneur and create real jobs. Few if any of the excesses have been purged out of  over-bloated, global-govern-dependent systems just aching to find an ideal spot to go flip, fly and flop.

Government bail-ins and government-bailouts, phony accounting and conjured M&A activities, to name just a few, all mask the one term that is more unwelcome and rivals the phony concerns currently about the Zika virus--truth.

HILARIOUS QUOTES

No, this is not a double entendre.

We like hilarious quotes as well as the next guy and gal. Usually for the better ones, one need look no further than politicians. Here's one of our recent favorites from Italian Prime Minister Mario Renzi who is entering his second year in office.

Queried about America's upcoming presidential election, he was asked if he could work with Donald Trump if Trump won the election. Renzi, as do most politicos when asked a straight question, rolled out his diplomacy spiel, saying:

"As Italian prime minister, it's obvious that I would work well with whoever is president of the United States," Renzi said. "As an Italian citizen and leader of the Democratic Party, and in total respect for American democracy, I'm rooting for Hillary Clinton."

Calling what would clearly be a move toward more government regulation has to do with total respect let alone American democracy is hilarious. But we thank you anyway Mr. Prime Minister for the laugh.

ONCE UPON FOREVER

What do you do when you don't like the  rules?

Search for a way around them. And that's apparently what Bank of America is doing. According to a story in today's WSJ, the mega bank is "rolling pout a new mortgage product that would allow borrowers to make down payments of as little as 3% in an end run around the FHA."

These are the same regulations that punished the mega bank and other lenders for making "errors on similar loans" during the sub;rime mess. The key word here--and it's a kind choice--is errors. What they really mean is lack of due diligence and prudence. But we'll leave that for now.

Here's the crux of it, according to the Journal.
Bank of America Corp. is rolling out a new-mortgage product that would allow borrowers to make down payments of as little as 3%, in a move that would represent an end run around a government agency that punished the bank for making errors on similar loans.

The new mortgage program, which the Charlotte, N.C.-based lender plans to unveil on Monday, will let borrowers avoid private mortgage insurance, a product to protect mortgage lenders and investors that is usually required for low-down-payment loans.
That could make the new loans cheaper than those offered through the Federal Housing Administration, the government agency that has won big settlements from banks in recent years for what the lenders describe as minor errors.

The FHA doesn’t make loans but insures lenders against default on mortgages that can have down payments of as little as 3.5% and a credit score of as low as 580, on a scale of 300 to 850. When lenders make the loan, they have to certify that everything in a loan file is accurate.
Bank of America’s new mortgage cuts the FHA out of the process. Instead, the new loans are backed in a partnership with mortgage-finance giant Freddie Mac and the Self-Help Ventures Fund, a Durham, N.C.-based nonprofit.

Bank of America agreed to pay $800 million to settle claims of making errors on FHA-backed loans in 2014. This month, Wells Fargo & Co. said it would pay $1.2 billion to settle similar claims, joining J.P. Morgan Chase & Co., which settled in 2014, and other big lenders which have settled over the past few years. Nonbank lender Quicken Loans Inc. is currently fighting such claims.

Many big banks have pulled back sharply from FHA-insured lending in the past few years, citing the risk of being hit with penalties for minor errors. A raft of nonbank lenders have rushed in, but the banks’ retreat from the program has made it more difficult for low-income borrowers to get home loans.

“We need an alternative in the marketplace that helps creditworthy borrowers with a track record of paying debts on time,” said Bank of America managing director D. Steve Boland, who noted that “We think there are still a lot of uncertainties out there in working with FHA.”

If you read between the lines of the statement from the Bank of America official, you get the gist. Even if you grant these bankers the benefit of the doubt, what might start out to be a good, decent cause ends up as something else when the money starts rolling through greedy banker hands.

Note too who will be on the hook should the whole grand scheme blow up. Recall too that all the monetary money printing was suppose to revivify the mortgage business. If these folks can figure out someway to subvert these rules, they surely will figure out some way to bundle these products and sell them probably to your state retirement fund.

This is a carousel that never stops.

OVERNIGHT

The yen backed off its recent strength in overnight trading against both the dollar and the euro, a move Japanese exporters  might welcome in what has been an unspoken currency war in the eyes of many investors. The Nikkei was up 0.9% to 16,111 and change.

In what can only be seen as another negative consumer reaction to negative interest rates and a further rock in the shoes of central bankers not just in Japan, the WSJ has a story today proving once again for every action there's a reaction.

TOKYO—Look no further than Japan’s hardware stores for a worrying new sign that consumers are hoarding cash--the opposite of what the Bank of Japan had hoped when it recently introduced negative interest rates.

Signs are emerging of higher demand for safes—a place where the interest rate on cash is always zero, no matter what the central bank does. Cash languishing in safes could thwart the Bank of Japan’s move to get money circulating more vigorously in the economy.

Shimachu Co., which operates a chain of stores selling hardware and home products, said Monday that sales of safes in the week that ended Sunday were 2 ½ times higher than in the same period a year earlier.

“In response to negative interest rates, there are elderly people who’re thinking of keeping their money under a mattress,” said Mariko Shimokawa, a saleswoman at a Shimachu store in eastern Tokyo.

One safe that costs about $700 is now out of stock and won’t be available for a month, the chain said.

The Shanghai Composite Index ended 2.4% higher and Australia’s S&P ASX 200 gained 1%. Futures pointed to a 1.2% opening gain for the S&P 500. Changes in futures don’t necessarily reflect market moves after the opening bell. And stocks in Europe opened up as commodity prices rallied.

OVERLY GENEROUS

How does one spell misallocation of capital?

Actually, without much thought, it's rather easy: reckless monetary policy.

Some folks are a bit kinder than we are; they call it, as was noted in a weekend piece in Barron's, "overly generous" MP. If this term came from an Englishman, we'd better appreciate it, since the Brits are masters of understatement.

In this case, it came from a Frenchman who reportedly has been watching markets for some 40 or so years. We take our hat off to longevity, like its twin brother loyalty, an attribute not much appreciated, in these times. One of today's paradoxes is everyone's a free agent in a world being pushed and shoved into total submission to the shackles and constraints of globalism. We'd tell you to go figure, but that's something high on the hit list of global bureaucrats and regulators, too.

For a long time investors scurried farther and farther out on the limb of market risk, mostly forced by central bank policy that only the limp, the lame and the loony would find appealing. Sometime late last year that changed. 

Anyway, according to the blurb, this Frenchman thinks U.S. stocks will experience a 50% decline in the not too distant future. What you might find interesting about the Frenchman's statement is the premise nearly everyone worries about, over-valuation, really has little to do with big market sell offs.

We will give you three guesses and the first two don't count as to what really causes these cyclical bear markets. We like to be overly generous in our policies.

JUST FINE

Pushback is as pushback does. And in the case of negative interest rates it needs to start with the men and women in the street.

The WSJ is reporting today: A clash Thursday between Japan’s central-bank chief and lawmakers highlighted the downside of negative interest rates: They are making the Japanese public feel negative.Bank of Japan Gov. Haruhiko Kuroda, who announced the nation’s first move into minus rates three weeks ago, found himself dodging a concerted attack in Parliament from lawmakers who charged the policy was victimizing consumers and sending a message of despair. Even a ruling-party member, Masahiro Ishida, called the policy hard to grasp saying.“It could have opposite effect of confusing the market,” he said.

Negative interest rates are are what we call the lemming syndrome. Central bankers are clueless and that cluelessness ruins peoples' lives. Who are these people, who appointed them, what real purpose do they serve and, more impotatant, whose interest?

Despair is a kind be term to describe the state these people have created for millions if not in fact billions. Politicians and bureaucrats will do nothing until forced to do something. And even then the odds are great they will do or create more harmful conditions. 

And if you''re an American planning on voting in the fall's upcoming election, don't be fooled. None of these candidates is going to change anything. Any real change depends on you.

As is most often the case, these culprits, per the WSJ, are  surprised: The criticism has come as a surprise to central-bank officials who thought their efforts to spark lending and faster economic growth would gain more public support. “Those who understand this policy are criticizing us, and those who do not are also criticizing us,” said one official this week.

The idea that the masses just can't understand their policies and that's the problem is about as false as a crockful full of synthetic flowers. The can't make their reckless policies understandable because the evidence is clear they don't understand them themselves.

In their minds stupidity and foolishness is a one-way street only the masses follow. It times for the masses, however, to speak up, demand the end of central banking. The globe will be just fine.

WITHOUT RISK

When are defaults on oil company debt bullish for oil prices and negative for banks?
Energy prices can stay flat for a while, as previous episodes prove. But the pieces

are starting to come together. The Russia-Saudi cap even at current production levels is just one example. There is evidence of some smart money picking up strategic companies. At some point drilling for oil on Wall Street favors drilling hole in the ground. And there are others. bloomberg.com/news/articles/2016-02-18/shale-faces-march-madness-as-1-2-billion-in-interest-comes-due

Despite low energy prices and all the turmoil demand for secondary offerings are strong, according to the WSJ.

Oil prices remain at depressed levels, but investors in new shares issued by energy companies are acting like they have detected a bottom. North American oil-and-gas producers have sold more than $5 billion of new shares so far this year, including three deals on Wednesday. 

As nearly everyone knows, shale production has been one of the huge reasons for the oil glut in the U.S. Observers have been waiting for months for the real declines in production to start there. According to a story today on blogs.platts.com, the official cutback in the Bakkan area has arrived. The Bakkan reserves are In North Dakota, an area that enjoyed a huge boom from the shale industry until the bottom started falls out on prices.

The U.S. shale industry must come up with $1.2 billion in interest payments by the end of March as $30-a-barrel oil makes it harder for companies to scrape up the cash needed to stay current on their debts.

Almost half of the interest is owed by companies with junk-rated credit, according to data compiled by Bloomberg on 61 companies in the Bloomberg Intelligence index of North American independent oil and gas producers. Energy XXI Ltd. said in a filing Tuesday that it missed an $8.8 million interest payment. The following day, SandRidge Energy Inc. announced that it didn’t make a $21.7 million interest payment. 

"You’ve seen two of these happen in two days, and I wouldn’t be surprised to see more in the next month as these payments come due," said Jason Wangler. 

Wangler is an energy analyst at a securities firm in Houston.

Just how all this will play out remains to be seen. But without  risk there is really no opportunity.

OTHER VOICES

Amid persistent anemic global growth and signs that central-bank policy is losing its potency, investors should brace for a period of “lower than normal returns with greater than normal risk”.

That's the word from Ray Dalio, the wealthy hedge fund manager who is reported as the 29h richest person in the world. Like many others Dalio thinks monetary policy has just about seen its day when it comes to effectiveness, not that there won't more of it.

To read more about his reasons check the link below.

businessinsider.com/ray-dalio-lower-than-normal-returns-with-greater-than-normal-risk-2016-2?

OVERNIGHT

Falling oil prices and a down day on Wall Sreet reportedly rolled back what was a short lived rally in Asian stocks as investors changed their minds again, this time choosing to avoid riskier assets Friday morning.

The Nikkei was off 2.3% early but remains on track for a positive week just nothing near the more 11% the index shed a week ago. Those pesky on again off again oil price changed directions heading lower after data showed record U.S. crude supplies. Word about a Russian-Saudi cut jade the rounds, but some question it's validity.

The WSJ reported: Most shares in Asia slipped Friday, capping a week that saw spurts of bargain buying and sharp rebounds in beaten down sectors such as banks.

Australia’s S&P/ASX 200 and Japan’s Nikkei Stock Average have gained 4% and 6%, respectively, since the beginning of the week, although on Friday they had slipped 0.7% and 1.9%.

Both the Shanghai Composite Index and Hang Seng Index were off fractionally on Friday. South Korea’s Kospi was roughly flat. Those markets have also recovered this week after steep selling earlier in the month, when worries about the health of banks in Europe and declines in Japanese equities sparked turmoil in markets around the world.

In currency markets the Korean, already a beaten down currency, hit a new low ad investors apparently believe the government will cut interest rates further in the next few months.The dollar- yen hit another low settling around 112, down from 115 just a week or so ago and Japanese trade many are concerned will weaken further.