Posted By thestatedtruth.com on October 20, 2010

U.S. economic activity continued to rise only modestly in September and early October, according to a report released by the Fed.  Hiring Remains Sluggish as many Fed districts reported little demand for new full-time workers.

The picture painted by the beige book showed consumers spending just a bit more. Retailers told the Federal Reserve Bank of Boston that consumers are focused on “getting a good deal,” and the Cleveland Fed said that consumers “remain price sensitive and focused on buying necessities.”

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Tags: Fed Beige Book

Posted By thestatedtruth.com on October 19, 2010

Pacific Investment Management Co., BlackRock Inc. and the Federal Reserve Bank of New York are seeking to force Bank of America Corp. to repurchase soured mortgages packaged into $47 billion of bonds by its Countrywide Financial Corp. unit, people familiar with the matter said.

The bondholders wrote a letter to Bank of America and Bank of New York Mellon Corp., the debt’s trustee, citing alleged failures by Countrywide to service the loans properly, their lawyer said yesterday in a statement that didn’t name the firms.

Investors are stepping up efforts to recoup losses on mortgage bonds, which plummeted in value amid the worst slump in home prices since the 1930s. Last month, BNY Mellon declined to investigate mortgage files in response to a demand from the bondholder group, which has since expanded. Countrywide’s servicing failures, including insufficient record keeping, may open the door for investors to seek repurchases by bypassing the trustee, said Kathy Patrick their lawyer at Gibbs & Bruns LLP.

“We now are in a position where we have to start a clock ticking,” Patrick, who is based in Houston, said today in a telephone interview.

MetLife Inc., the biggest U.S. life insurer, is part of the group represented by Gibbs & Bruns, said the people, who declined to be identified because the discussions aren’t public. TCW Group Inc., the manager of $110 billion in assets, expects to join BlackRock, the world’s largest money manager, and Pimco, which runs the biggest bond fund, in the group, the people said.

Countrywide also hasn’t met its contractual obligations as a servicer because it hasn’t asked for repurchases itself and is taking too long with foreclosures, either because of document or process mistakes or because it doesn’t have enough staff to evaluate borrowers for loan modifications, Patrick said. If the issues aren’t fixed within 60 days, BNY Mellon should declare Countrywide in default of its contracts, she said.

“The letter states a demand directed to Countrywide to cure the defaults,” said Kevin Heine, a spokesman for BNY Mellon. “It does not ask BNY Mellon to take any action. BNY Mellon will continue to perform its duties as trustee.”

Charlotte, North Carolina-based Bank of America will “defend our shareholders” by disputing any unjustified demands it buy back defective mortgages, Chief Executive Officer Brian T. Moynihan said today.

Most claims “don’t have the defects that people allege,” Moynihan said on Bloomberg Television, referring to so-called putbacks, in which guarantors or investors in mortgage-backed securities ask to return bad loans. “We end up restoring them, and they go back in the pools.”

Mark Porterfield, a spokesman for Newport Beach, California-based Pimco, Brian Beades, a spokesman for New York- based BlackRock, and Peter Viles, a spokesman for Los Angeles- based TCW, declined to comment.

John Calagna, a spokesman for New York-based MetLife, didn’t immediately return messages seeking comments. Jeffrey V. Smith, a spokesman for the New York Fed, declined immediate comment.

“We continue to review and assess the letter, and have a number of question about its content, including whether these investors have standing to bring these claims,” Bank of America Chief Financial Officer Charles H. Noski said today on a conference call with analysts. “We continue to believe the servicer is in compliance with the servicing obligations.”

More: http://www.zerohedge.com/article/pimco-and-new-york-fed-said-seek-bank-america-repurchase-mortgages

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Tags: bank putbacks, PIMCO

Posted By thestatedtruth.com on October 19, 2010

The banks have a $3 trillion footnote on their balance sheets known as CRE. They are lucky they’re not insolvent: the Moody’s REAL/Commercial Property Price Index index dropped by 3.3% in August, and is now 45.1% lower compared to the October 2007 peak.

Moody’s Summary Points:

The National — All Property Type Aggregate Index recorded a 3.3% price decline in August. The index is currently at a new recession low, 45.1% below the peak measured in October 2007.

The data suggest that the commercial real estate market has become trifurcated, with prices for larger trophy assets rising, prices for distressed assets declining sharply, and prices for smaller but healthy properties remaining essentially flat. One way to view index returns is by looking at the interplay of these three components of the overall market. The index again turned negative this month in part because large negative returns on distressed properties created a drag that outweighed the positive and flat results of the performing properties.

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Posted By thestatedtruth.com on October 19, 2010

  

October 19, 2010

By George Friedman

The statements were striking in their bluntness and their willingness to speak of a dominant German culture, a concept that for obvious reasons Germans have been sensitive about asserting since World War II. The statement should be taken with utmost seriousness and considered for its social and geopolitical implications. It should also be considered in the broader context of Europe’s response to immigration, not to Germany’s response alone.

The Origins of the German Immigration Question

Let’s begin with the origins of the problem. Post-World War II Germany faced a severe labor shortage for two reasons: a labor pool depleted by the devastating war — and by Soviet prisoner-of-war camps — and the economic miracle that began on the back of revived industry in the 1950s. Initially, Germany was able to compensate by admitting ethnic Germans fleeing Central Europe and Communist East Germany. But the influx only helped assuage the population loss from World War II. Germany needed more labor to feed its burgeoning export-based industry, and in particular more unskilled laborers for manufacturing, construction and other industries.

To resolve the continuing labor shortage, Germany turned to a series of successive labor recruitment deals, first with Italy (1955). After labor from Italy dried up due to Italy’s own burgeoning economy, Germany turned to Spain (1960), Greece (1960), Turkey (1961) and then Yugoslavia (1968). Labor recruitment led to a massive influx of “Gastarbeiter,” German for “guest workers,” into German society. The Germans did not see this as something that would change German society: They regarded the migrants as temporary labor, not as immigrants in any sense. As the term implied, the workers were guests and would return to their countries of origin when they were no longer needed (many Spaniards, Italians and Portuguese did just this). This did not particularly trouble the Germans, who were primarily interested in labor.

The Germans simply didn’t expect this to be a long-term issue. They did not consider how to assimilate these migrants, a topic that rarely came up in policy discussions. Meanwhile, the presence of migrant labor allowed millions of Germans to move from unskilled labor to white-collar jobs during the 1960s.

An economic slowdown in 1966 and full-on recession following the oil shock of 1973 changed labor conditions in Germany. Germany no longer needed a steady stream of unskilled labor and actually found itself facing mounting unemployment among migrants already in country, leading to the “Anwerbestopp,” German for “labor recruitment stop,” in 1973.

Nonetheless, the halt in migration did not resolve the fact that guest workers already were in Germany in great numbers, migrants who now wanted to bring in family members. The 1970s saw most migration switch to “family reunions” and, when the German government moved to close that loophole, asylum. As the Italians, Spanish and Portuguese returned home to tend to their countries’ own successive economic miracles, Muslim Turks became the overwhelming majority of migrants in Germany — particularly as asylum seekers flocked into Germany, most of whom were not fleeing any real government retribution. It did not help that Germany had particularly open asylum laws in large part due to guilt over the Holocaust, a loophole Turkish migrants exploited en masse following the 1980 coup d’etat in Turkey.

As the migrants transformed from a temporary exigency to a multigenerational community, the Germans had to confront the problem. At base, they did not want the migrants to become part of Germany. But if they were to remain in the country, Berlin wanted to make sure the migrants became loyal to Germany. The onus on assimilating migrants into the larger society increased as Muslim discontent rocked Europe in the 1980s. The solution Germans finally agreed upon in the mid-to-late 1980s was multiculturalism, a liberal and humane concept that offered migrants a grand bargain: Retain your culture but pledge loyalty to the state.

In this concept, Turkish immigrants, for example, would not be expected to assimilate into German culture. Rather, they would retain their own culture, including language and religion, and that culture would coexist with German culture. Thus, there would be a large number of foreigners, many of whom could not speak German and by definition did not share German and European values.

While respecting diversity, the policy seemed to amount to buying migrant loyalty. The deeper explanation was that the Germans did not want, and did not know how, to assimilate culturally, linguistically, religiously and morally diverse people. Multiculturalism did not so much represent respect for diversity as much as a way to escape the question of what it meant to be German and what pathways foreigners would follow to become Germans.

Two Notions of Nation

This goes back to the European notion of the nation, which is substantially different from the American notion. For most of its history, the United States thought of itself as a nation of immigrants, but with a core culture that immigrants would have to accept in a well-known multicultural process. Anyone could become an American, so long as they accepted the language and dominant culture of the nation. This left a lot of room for uniqueness, but some values had to be shared. Citizenship became a legal concept. It required a process, an oath and shared values. Nationality could be acquired; it had a price.

To be French, Polish or Greek meant not only that you learned their respective language or adopted their values — it meant that you were French, Polish or Greek because your parents were, as were their parents. It meant a shared history of suffering and triumph. One couldn’t acquire that.

For the Europeans, multiculturalism was not the liberal and humane respect for other cultures that it pretended to be. It was a way to deal with the reality that a large pool of migrants had been invited as workers into the country. The offer of multiculturalism was a grand bargain meant to lock in migrant loyalty in exchange for allowing them to keep their culture — and to protect European culture from foreign influences by sequestering the immigrants. The Germans tried to have their workers and a German identity simultaneously. It didn’t work.

Multiculturalism resulted in the permanent alienation of the immigrants. Having been told to keep their own identity, they did not have a shared interest in the fate of Germany. They identified with the country they came from much more than with Germany. Turkey was home. Germany was a convenience. It followed that their primary loyalty was to their home and not to Germany. The idea that a commitment to one’s homeland culture was compatible with a political loyalty to the nation one lived in was simplistic. Things don’t work that way. As a result, Germany did not simply have an alien mass in its midst: Given the state of affairs between the Islamic world and the West, at least some Muslim immigrants were engaged in potential terrorism.

Multiculturalism is profoundly divisive, particularly in countries that define the nation in European terms, e.g., through nationality. What is fascinating is that the German chancellor has chosen to become the most aggressive major European leader to speak out against multiculturalism. Her reasons, political and social, are obvious. But it must also be remembered that this is Germany, which previously addressed the problem of the German nation via the Holocaust. In the 65 years since the end of World War II, the Germans have been extraordinarily careful to avoid discussions of this issue, and German leaders have not wanted to say things such as being committed to a dominant German culture. We therefore need to look at the failure of multiculturalism in Germany in another sense, namely, with regard to what is happening in Germany.

Simply put, Germany is returning to history. It has spent the past 65 years desperately trying not to confront the question of national identity, the rights of minorities in Germany and the exercise of German self-interest. The Germans have embedded themselves in multinational groupings like the European Union and NATO to try to avoid a discussion of a simple and profound concept: nationalism. Given what they did last time the matter came up, they are to be congratulated for their exercise of decent silence. But that silence is now over.

The Re-emergence of German Nation Awareness

Two things have forced the re-emergence of German national awareness. The first, of course, is the immediate issue — a large and indigestible mass of Turkish and other Muslim workers. The second is the state of the multinational organizations to which Germany tried to confine itself. NATO, a military alliance consisting mainly of countries lacking militaries worth noting, is moribund. The second is the state of the European Union. After the Greek and related economic crises, the certainties about a united Europe have frayed. Germany now sees itself as shaping EU institutions so as not to be forced into being the European Union’s ultimate financial guarantor. And this compels Germany to think about Germany beyond its relations with Europe.

It is impossible for Germany to reconsider its position on multiculturalism without, at the same time, validating the principle of the German nation. Once the principle of the nation exists, so does the idea of a national interest. Once the national interest exists, Germany exists in the context of the European Union only as what Goethe termed an “elective affinity.” What was a certainty amid the Cold War now becomes an option. And if Europe becomes an option for Germany, then not only has Germany re-entered history, but given that Germany is the leading European power, the history of Europe begins anew again.

This isn’t to say that Germany must follow any particular foreign policy given its new official view on multiculturalism; it can choose many paths. But an attack on multiculturalism is simultaneously an affirmation of German national identity. You can’t have the first without the second. And once that happens, many things become possible.

Consider that Merkel made clear that Germany needed 400,000 trained specialists. Consider also that Germany badly needs workers of all sorts who are not Muslims living in Germany, particularly in view of Germany’s demographic problems. If Germany can’t import workers for social reasons, it can export factories, call centers, medical analysis and IT support desks. Not far to the east is Russia, which has a demographic crisis of its own but nonetheless has spare labor capacity due to its reliance on purely extractive natural resources for its economy. Germany already depends on Russian energy. If it comes to rely on Russian workers, and in turn Russia comes to rely on German investment, then the map of Europe could be redrawn once again and European history restarted at an even greater pace.

Merkel’s statement is therefore of enormous importance on two levels. First, she has said aloud what many leaders already know, which is that multiculturalism can become a national catastrophe. Second, in stating this, she sets in motion other processes that could have a profound impact on not only Germany and Europe but also the global balance of power. It is not clear at this time what her intention is, which may well be to boost her center-right coalition government’s abysmal popularity. But the process that has begun is neither easily contained nor neatly managed. All of Europe, indeed, much of the world, is coping with the struggle between cultures within their borders. But the Germans are different, historically and geographically. When they begin thinking these thoughts, the stakes go up.

“Germany and the Failure of Multiculturalism

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Tags: Germany and Multiculturalism

Posted By thestatedtruth.com on October 19, 2010

This Is How To Fix Congress!
  
 
Congressional Reform Act of 2010

 
1. Term Limits.

   12 years only, one of the possible options below..

   A. Two Six-year Senate terms
   B. Six Two-year House terms
   C. One Six-year Senate term and three Two-Year House terms

2. No Tenure / No Pension. 

A Congressman collects a salary while in office and receives no pay when out of office.  

3.  Congress (past, present & future) participates in Social Security.

All funds in the Congressional retirement fund move to the Social Security system immediately.  All future funds flow into the Social Security system, and Congress participates with the American people. 

4. Members of Congress can purchase their own retirement plan, just as all Americans do.

5. Congress will no longer vote themselves a pay raise.  Congressional pay will rise by the same amount as it does for Social Security.

6. Congress loses their current health care system and participates in the same health care system as the American people.

8. All contracts with past and present Congressmen are void effective 1/1/11.  

The American people did not make this contract with Congressmen. Congressmen made all these contracts for themselves.

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Tags: congress, congressional reform, senate

Posted By thestatedtruth.com on October 19, 2010

Category: Commentary, Economy, Interest Rates, Bonds, National News, Personal Net Worth, Real Estate, Wall Street, World News | No Comments »
Tags: credit scores

Posted By thestatedtruth.com on October 18, 2010

It’s likely that most informed people will agree with the 3 points made below.  Our Guess is that more class actions are coming, it’s just a matter of time!

Class action lawsuit against the MERS system for mortgage holdings
 

A class action lawsuit by citizens vs MERS and numerous banks depicting fraud and unfair practices has been filed in the state courts of Kentucky. )

1. Sub-Prime Mortgages were made designed to default.  Many were, Agree

2. These Mortgages are packaged into Mortgage Backed Securities (MBS)    and sold to ‘investors’.    Agree

3. MBS packagers and Investors take out Credit Default Swaps (Insurance – remember AIG?) that pays off up to 10x the mortgage amount upon default. Agree

Mortgage Electronic Registration Systems (MERS) is a privately held company that operates an electronic registry designed to track servicing rights and ownership of mortgage loans in the United States.

Class Action Lawsuit:  In law a class action or a representative action is a form of lawsuit in which a large group of people collectively bring a claim to court in which a defendant is being sued.  The ancestor of the class action was what modern observers call “group litigation,” and was common in medieval England from about 1200 onward.

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Tags: class action, class action lawsuit, MERS

Posted By thestatedtruth.com on October 18, 2010

By Amy Walter    ABC News Political Director

In the Senate, the path to the majority runs through NV, CO, IL, KY, WV, PA, WA, CA, and CT. For Republicans to win the Senate they need to win 7 of these 9 states. CT and CA are the toughest for GOP to win.In the House, many key House races have seen some tightening, but it’s not enough to make Democrats feel all that much better. Democrats have 63 seats in serious danger compared to just four for Republicans.

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Tags: Democrats in trouble, political agenda, politics

Posted By thestatedtruth.com on October 18, 2010

As the ongoing strikes in France against austerity continue, and see increasingly more participation, the latest development is all too familiar to all those who travelled through Athens in the summer: huge lines for gas. About 1,000 gas stations across France have run out of fuel because strikers had blocked access to oil refineries and depots, Alexandre de Benoist, a Union of Independent Oil Importers official, told CNN on Monday. It gets worse: per the AP the head of France’s petroleum industry body said fuel reserves were “enough to keep us going for a few weeks.” Jean-Louis Schilansky, president of the Petrol Industries Association, warned however that if the strikers continue to block fuel depots and if the nation’s truckers join the movement, “then we will have a very big problem.” Sure enough, truckers did join the fray on Monday, staging organized slowdowns aimed at snarling highway traffic. French TV showed images of cars and trucks on a “Snail Operation,” driving at a snail’s pace along the main highway between Paris and the northern city of Lille, with red union flags waving out the windows. Will Europe’s little experiment with Austerity be doomed, as the continent realizes that there is no solution to the imminent insolvency of the PIIGS and soon everyone else, and should just enjoy it last months and days of the existing status quo?

www.zerohedge.com

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Tags: french strikes

Posted By thestatedtruth.com on October 17, 2010

www.zerohedge.com

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Tags: equity flows, equity funds, funds

Posted By thestatedtruth.com on October 15, 2010

Dear Readers, this text  echoes some of the news items we have seen and heard today, it can serve as a plain language description of the present foreclosure-suspension mess. There is a lot here.  It will take about ten minutes for you to read it.   David Kotok, Cumberland Advisors.

Homeowners can only be foreclosed and evicted from their homes by the person or institution who actually has the loan paper—only the note-holder has legal standing to ask a court to foreclose and evict. Not the mortgage, the note, which is the actual IOU that people sign, promising to pay back the mortgage loan

Before mortgage-backed securities, most mortgage loans were issued by the local savings & loan. So the note usually didn’t go anywhere: it stayed in the offices of the S&L down the street.

But once mortgage loan securitization happened, things got sloppy—they got sloppy by the very nature of mortgage-backed securities.

The whole purpose of MBSs was for different investors to have their different risk appetites satiated with different bonds. Some bond customers wanted super-safe bonds with low returns, some others wanted riskier bonds with correspondingly higher rates of return.

Therefore, as everyone knows, the loans were “bundled” into REMIC’s (Real-Estate Mortgage Investment Conduits, a special vehicle designed to hold the loans for tax purposes), and then “sliced & diced”—split up and put into tranches, according to their likelihood of default, their interest rates, and other characteristics.

This slicing and dicing created “senior tranches,” where the loans would likely be paid in full, if the past history of mortgage loan statistics was to be believed. And it also created “junior tranches,” where the loans might well default, again according to past history and statistics. (A whole range of tranches was created, of course, but for the purposes of this discussion we can ignore all those countless other variations.)

These various tranches were sold to different investors, according to their risk appetite. That’s why some of the MBS bonds were rated as safe as Treasury bonds, and others were rated by the ratings agencies as risky as junk bonds.

But here’s the key issue: When an MBS was first created, all the mortgages were pristine—none had defaulted yet, because they were all brand-new loans. Statistically, some would default and some others would be paid back in full—but which ones specifically would default? No one knew, of course. If I toss a coin 1,000 times, statistically, 500 tosses the coin will land heads—but what will the result be of, say, the 723rd toss? No one knows.

Same with mortgages.

So in fact, it wasn’t that the riskier loans were in junior tranches and the safer ones were in senior tranches: rather, all the loans were in the REMIC, and if and when a mortgage in a given bundle of mortgages defaulted, the junior tranche holders would take the losses first, and the senior tranche holder last.

But who were the owners of the junior-tranche bond and the senior-tranche bonds? Two different people. Therefore, the mortgage note was not actually signed over to the bond holder. In fact, it couldn’t be signed over. Because, again, since no one knew which mortgage would default first, it was impossible to assign a specific mortgage to a specific bond.

Therefore, how to make sure the safe mortgage loan stayed with the safe MBS tranche, and the risky and/or defaulting mortgage went to the riskier tranche?

Enter stage right the famed MERS—the Mortgage Electronic Registration System.

MERS was the repository of these digitized mortgage notes that the banks originated from the actual mortgage loans signed by homebuyers. MERS was jointly owned by Fannie Mae and Freddie Mac (yes, those two again. they just keep coming back).

The purpose of MERS was to help in the securitization process. Basically, MERS directed defaulting mortgages to the appropriate tranches of mortgage bonds. MERS was essentially where the digitized mortgage notes were sliced and diced and rearranged so as to create the mortgage-backed securities. Think of MERS as Dr. Frankenstein’s operating table, where the beast got put together.

However, legally—and this is the important part—MERS didn’t hold any mortgage notes: the true owner of the mortgage notes should have been the REMICs.

But the REMICs didn’t own the notes either, because of a fluke of the ratings agencies: the REMICs had to be “bankruptcy remote,” in order to get the precious ratings needed to peddle mortgage-backed Securities to institutional investors.

So somewhere between the REMICs and MERS, the chain of title was broken.

Now, what does “broken chain of title” mean? Simple: when a homebuyer signs a mortgage, the key document is the note. As I said before, it’s the actual IOU. In order for the mortgage note to be sold or transferred to someone else (and therefore turned into a mortgage-backed security), this document has to be physically endorsed to the next person. All of these signatures on the note are called the “chain of title.”

You can endorse the note as many times as you please—but you have to have a clear chain of title right on the actual note: I sold the note to Moe, who sold it to Larry, who sold it to Curly, and all our notarized signatures are actually, physically, on the note, one after the other.

If for whatever reason any of these signatures is skipped, then the chain of title is said to be broken. Therefore, legally, the mortgage note is no longer valid. That is, the person who took out the mortgage loan to pay for the house no longer owes the loan, because he no longer knows whom to pay.

To repeat: if the chain of title of the note is broken, then the borrower no longer owes any money on the loan.

Read that last sentence again, please. Don’t worry, I’ll wait.

You read it again? Good: Now you see the can of worms that’s opening up.

The broken chain of title might not have been an issue if there hadn’t been an unusual number of foreclosures. Before the housing bubble collapse, the people who defaulted on their mortgages wouldn’t have bothered to check to see that the paperwork was in order.

But as everyone knows, following the housing collapse of 2007-’10-and-counting, there has been a boatload of foreclosures—and foreclosures on a lot of people who weren’t sloppy bums who skipped out on their mortgage payments, but smart and cautious people who got squeezed by circumstances.

These people started contesting their foreclosures and evictions, and so started looking into the chain-of-title issue, and that’s when the paperwork became important. So the chain of title became crucial and the botched paperwork became a nontrivial issue.

Now, the banks had hired “foreclosure mills”—law firms that specialized in foreclosures—in order to handle the massive volume of foreclosures and evictions that occurred because of the housing crisis. The foreclosure mills, as one would expect, were the first to spot the broken chain of titles.

Well, what do you know, it turns out that these foreclosure mills might have faked and falsified documentation, so as to fraudulently repair the chain-of-title issue, thereby “proving” that the banks had judicial standing to foreclose on delinquent mortgages. These foreclosure mills might have even forged the loan note itself—

Wait, why am I hedging? The foreclosure mills did actually, deliberately, and categorically fake and falsify documents, in order to expedite these foreclosures and evictions. Yves Smith at Naked Capitalism, who has been all over this story, put up a price list for this “service” from a company called DocX—yes, a price list for forged documents. Talk about your one-stop shopping!

So in other words, a massive fraud was carried out, with the inevitable innocent bystanders getting caught up in the fraud: the guy who got foreclosed and evicted from his home in Florida, even though he didn’t actually have a mortgage, and in fact owned his house free –and clear. The family that was foreclosed and evicted, even though they had a perfect mortgage payment record. Et cetera, depressing et cetera.

Now, the reason this all came to light is not because too many people were getting screwed by the banks or the government or someone with some power saw what was going on and decided to put a stop to it—that would have been nice, to see a shining knight in armor, riding on a white horse.

But that’s not how America works nowadays.

No, alarm bells started going off when the title insurance companies started to refuse to insure the titles.

In every sale, a title insurance company insures that the title is free –and clear —that the prospective buyer is in fact buying a properly vetted house, with its title issues all in order. Title insurance companies stopped providing their service because—of course—they didn’t want to expose themselves to the risk that the chain –of title had been broken, and that the bank had illegally foreclosed on the previous owner.

That’s when things started getting interesting: that’s when the attorneys general of various states started snooping around and making noises (elections are coming up, after all).

The fact that Ally Financial (formerly GMAC), JP Morgan Chase, and now Bank of America have suspended foreclosures signals that this is a serious problem—obviously. Banks that size, with that much exposure to foreclosed properties, don’t suspend foreclosures just because they’re good corporate citizens who want to do the right thing, and who have all their paperwork in strict order—they’re halting their foreclosures for a reason.

The move by the United States Congress last week, to sneak by the Interstate Recognition of Notarizations Act? That was all the banking lobby. They wanted to shove down that law, so that their foreclosure mills’ forged and fraudulent documents would not be scrutinized by out-of-state judges. (The spineless cowards in the Senate carried out their master’s will by a voice vote—so that there would be no registry of who had voted for it, and therefore no accountability.)

And President Obama’s pocket veto of the measure? He had to veto it—if he’d signed it, there would have been political hell to pay, plus it would have been challenged almost immediately, and likely overturned as unconstitutional in short order. (But he didn’t have the gumption to come right out and veto it—he pocket vetoed it.)

As soon as the White House announced the pocket veto—the very next day!—Bank of America halted all foreclosures, nationwide.

Why do you think that happened? Because the banks are in trouble—again. Over the same thing as last time—the damned mortgage-backed securities!

The reason the banks are in the tank again is, if they’ve been foreclosing on people they didn’t have the legal right to foreclose on, then those people have the right to get their houses back. And the people who bought those foreclosed houses from the bank might not actually own the houses they paid for.

And it won’t matter if a particular case—or even most cases—were on the up –and up: It won’t matter if most of the foreclosures and evictions were truly due to the homeowner failing to pay his mortgage. The fraud committed by the foreclosure mills casts enough doubt that, now, all foreclosures come into question. Not only that, all mortgages come into question.

People still haven’t figured out what all this means. But I’ll tell you: if enough mortgage-paying homeowners realize that they may be able to get out of their mortgage loans and keep their houses, scott-free? That’s basically a license to halt payments right now, thank you. That’s basically a license to tell the banks to take a hike.

What are the banks going to do—try to foreclose and then evict you? Show me the paper, Mr. Banker, will be all you need to say.

This is a major, major crisis. The Lehman bankruptcy could be a spring rain compared to this hurricane. And if this isn’t handled right—and handled right quick, in the next couple of weeks at the outside—this crisis could also spell the end of the mortgage business altogether. Of banking altogether. Hell, of civil society. What do you think happens in a country when the citizens realize they don’t need to pay their debts?

Copyright 2010, Cumberland Advisors. All rights reserved.

The preceding was provided by Cumberland Advisors, Home Office: One Sarasota Tower, 2 N. Tamiami Trail, Suite 303, Sarasota, FL 34236; New Jersey Office: 614 Landis Ave, Vineland, NJ 08360. 1-800-257-7013. This report has been derived from information considered reliable, but it cannot be guaranteed as to accuracy or completeness.

 It is not our intention to state or imply in any manner that past results and profitability are an indication of future performance. This does not constitute an offer to sell or the solicitation or recommendation of an offer to buy or sell any securities directly or indirectly herein.

Please feel free to forward this Commentary (with proper attribution) to others who may be interested.

Category: Commentary, Economy, Finance, National News, Real Estate, Wall Street | 49 Comments »
Tags: bank troubles, foreclosures, real estate foreclosures

Posted By thestatedtruth.com on October 14, 2010

U.S. mortgage rates fell for a third straight week.  They now sit at the lowest level on record as housing demand slumps.

Rates for 30-year fixed loans declined to 4.19 percent in the week ended today from 4.27 percent, Freddie Mac said in a statement. It is the lowest rate since the McLean, Virginia- based company began tracking the data in 1971. The average 15- year rate tumbled to 3.62 percent from 3.72 percent.

A six-month decline in mortgage rates has spurred a surge in refinancing while doing little to increase property demand as U.S. unemployment hovers near 10 percent. Sales of existing homes were the second-lowest on record in August, the National Association of Realtors in Washington said Sept. 23.

The Mortgage Bankers Association’s applications index increased 15 percent in the week ended Oct. 8, the Washington- based group said yesterday. Refinancing jumped 21 percent, the most in four months. Purchase applications fell 8.5 percent.

Sales of foreclosed properties accounted for almost a third of all U.S. transactions in September, a sign that a prolonged delay in repossessions may hurt the housing market, data vendor RealtyTrac Inc. said in a report today.

www.bloomberg.com

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Tags: mortgage rates

Posted By thestatedtruth.com on October 14, 2010

Confidence among chief executive officers in the U.S. fell in October to the lowest level since May 2009 according to a survey from the Business Council.

The Washington-based group’s sentiment gauge dropped to 51.2 this month from a two-year high of 66.6 in May, a report showed today. As calculated by the Conference Board, readings greater than 50 signal economic growth.

“The momentum in the U.S. and global economy evident in recent surveys has subsided,” Jamie Dimon chief executive officer of JPMorgan Chase & Co. in New York and vice chairman of the Business Council, said in a statement. “Members sent a strong message about increasing government regulation and intervention,” and “the federal budget deficit remains a critical concern,” he said.

The group’s gauge of expectations for the economy six months from now fell to 51.7, the lowest since February 2009, while the executives’ outlook for their own industry dropped to 54.6 from 66.4.

www.bloomberg.com

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Tags: onfidence sinks, survey

Posted By thestatedtruth.com on October 14, 2010

10-14-2010

Unfortunately, surreal stories like this may very soon become daily news. As was pointed out yesterday, Simi Valley has just seen the first case of a forced reclamation of a foreclosed home, after Jim and Danielle Earl took their nine (9!) children, ages 9-23, and a locksmith and broke into the six-bedroom house that had been foreclosed upon for lack of payment, and on which the couple owed $880,000! And where would such brilliant advice originate from? Why, the couple’s lawyer of course, who will one day be seen as the prophetic visionary who stole the bankers wealth from underneath them and handed it out to America’s millions of starving lawyers, one billing sheet at a time: “The move was recommended by their lawyer” as the WSJ suggests. Already in process: millions of cases identical to this one, billions in legal fees, and hundreds of billions in lost market value of associated equity and credit instrument, not to mention very unpleasant days for LPs in “Recovery” funds.

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Tags: bank owned, fraud, squatters

Posted By thestatedtruth.com on October 14, 2010

By Bill Dunkelberg

October 14, 2011

Dr. William Dunkelberg is the Chief Economist of the National Federation of Independent Business.

The Treasury Department has just announced a new program to encourage lending to small businesses, the State Small Business Credit Initiative.  Selected states can access the $1.5 billion fund if they can demonstrate that each dollar provided by the Treasury will generate $10 in loans to small businesses.  Exactly what factual information led the Treasury to conclude that this program was needed was not made clear.  More likely it is a result of the incessant drumbeat in Washington blaming the slow recovery on the reluctance of small banks to lend money to “creditworthy” (by Congressional and Treasury standards) firms.  If they can’t blame it on the banks then the impotence of the policy makers would be exposed.

This $10 to $1 multiple requirement is based on the textbook model of banking.  If $100 is deposited in a bank and reserve requirements are 10%, then the bank has $90 it can lend out.  The borrower of that money writes a check to someone who deposits it in another bank which is obliged to keep $9 as required reserves and can lend out $81 which will be spent.  This check is deposited in another bank which must keep $8.10 in reserves and can lend out $72.90.  Carried to its limit, loans will rise by 10 times the initial amount of excess reserves, 10 x $90 = $900 in loans.  Notice of course that this is identical to the increase in checking accounts along the way which make up the bulk of the M1 measure of the money supply (which is the basis for concerns among those who see an inflation threat from Quantitative Easing).

The important thing to note is that for this to happen, someone must borrow and spend all of the excess reserves.  If no one shows up to borrow the initial $90 in excess reserves, none of this happens and the $90 is just added to excess reserves held at the Federal Reserve.

This is the current state of affairs.  The percent of small business owners who report not even being interested in a loan is at a record high 53%.  Housing starts (and related loans) are a million short of “normal”, removing immense amounts of credit demand from the system.  Capital spending by small firms is at a 35 year low.  Consumers are reducing their debt.  Banks have over a trillion dollars in excess reserves now held at the Fed earning 0.25% interest.  Applying the money multiplier to that would produce $10 trillion in new loans (and money supply growth!) – if there were agents willing to borrow the money and spend it.  But obviously no one is because if there were credit-worthy borrowers (by Main Street criteria, not those of Washington critics who have never made a loan or worked at a real bank), any bank would be happy to make a 6% loan instead of earning 0.25% on the savers money they are holding.

One possible conclusion seems to be that the Treasury Department doesn’t understand this (or they have data confirming their view that credit availability to credit-worthy borrowers is actually slowing growth, yet to be revealed to us).   If it did understand, such a program would not be launched (especially since the Congress just authorized another special $30 billion of funds to be made available to banks who promise to increase their lending to small businesses).  If the “problem” is not understood, bad policy is a result.  If this is just “PR”, it’s an expensive program indeed.

We thank Bill Dunkelberg for this guest commentary.  

Copyright 2010, Cumberland Advisors. All rights reserved.

The preceding was provided by Cumberland Advisors, Home Office: One Sarasota Tower, 2 N. Tamiami Trail, Suite 303, Sarasota, FL 34236; New Jersey Office: 614 Landis Ave, Vineland, NJ 08360. 1-800-257-7013. This report has been derived from information considered reliable, but it cannot be guaranteed as to accuracy or completeness.

Cumberland manages portfolios for clients in 47 states, the District of Columbia and in countries outside the U.S. Cumberland Advisors is an SEC registered investment adviser. For further information about Cumberland Advisors, please visit our website at www.cumber.com.

Please feel free to forward this Commentary (with proper attribution) to others who may be interested.

Category: Commentary, Economy, Finance, Interest Rates, Bonds, National News, Wall Street | No Comments »
Tags: small businss

Posted By thestatedtruth.com on October 13, 2010

 ICI has just reported the 23rd sequential outflow from domestic equity mutual funds, this time redeeming $5.6 billion, the highest since the beginning of September, bringing the total YTD mutual fund redemptions to $80 billion.

Weekly Outflows:

Cumulative Outflows:

www.zerohedge.com

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Tags: mutual fund outflows, redemptions

Posted By thestatedtruth.com on October 13, 2010

Art Cashin on the floor of The New York Stock Exchange…..Something to think about!

Originally, on this day (-2) in 1922, the German Central Bank and the German Treasury took an inevitable step in a process which had begun with their previous effort to “jump start” a stagnant economy.  Many months earlier they had decided that what was needed was easier money.  Their initial efforts brought little response.  So, using the governmental “more is better” theory they simply created more and more money. 

But economic stagnation continued and so did the money growth.  Th-ey kept making money more available.  No reaction.  Then, suddenly prices began to explode unbelievably (but, perversely, not business activity).

So, on this day government officials decided to bring figures in line with market realities.  They devalued the mark.  The new value would be 2 billion marks to a dollar.  At the start of World War I the exchange rate had been a mere 4.2 marks to the dollar.  In simple terms you needed 4.2 marks in order to get one dollar. Now it was 2 billion marks to get one dollar.  And thirteen months from this date (late November 1923) you would need 4.2 trillion marks to get one dollar.  In ten years the amount of money had increased a trillion fold.

Numbers like billions and trillions tend to numb the mind.  They are too large to grasp in any “real” sense.  Thirty years ago an older member of the NYSE (there were some then) gave me a graphic and memorable (at least for me) example.  “Young man,” he said, “would you like a million dollars?”  “I sure would, sir!”, I replied anxiously.  “Then just put aside $500 every week for the next 40 years.”  I have never forgotten that a million dollars is enough to pay you $500 per week for 40 years (and that’s without benefit of interest). To get a billion dollars you would have to set aside $500,000 dollars per week for 40 years.  And a…..trillion that would require $500 million every week for 40 years.  Even with these examples, the enormity is difficult to grasp. 

Let’s take a different tack.  To understand the incomprehensible scope of the German inflation maybe it’s best to start with something basic….like a loaf of bread. (To keep things simple we’ll substitute dollars and cents in place of marks and pfennigs.  You’ll get the picture.)  In the middle of 1914, just before the war, a one pound loaf of bread cost 13 cents.  Two years later it was 19 cents.  Two years more and it sold for 22 cents.  By 1919 it was 26 cents.  Now the fun begins.

In 1920, a loaf of bread soared to $1.20, and then in 1921 it hit $1.35.  By the middle of 1922 it was $3.50.  At the start of 1923 it rocketed to $700 a loaf.  Five months later a loaf went for $1200.  By September it was $2 million.  A month later it was $670 million (wide spread rioting broke out).  The next month it hit $3 billion.  By mid month it was $100 billion.  Then it all collapsed.

Let’s go back to “marks”.  In 1913, the total currency of Germany was a grand total of 6 billion marks.  In November of 1923 that loaf of bread we just talked about cost 428 billion marks.  A kilo of fresh butter cost 6000 billion marks (as you will note that kilo of butter cost 1000 times more than the entire money supply of the nations just 10 years earlier).

How Could This All Happen? – In 1913 Germany had a solid, prosperous, advanced culture and population.  Like much of Europe it was a monarchy (under the Kaiser).  Then, following the assassination of the Archduke Franz Ferdinand in Sarajevo in 1914, the world moved toward war.  Each side was convinced the other would not dare go to war.  So, in a global game of chicken they stumbled into the Great War.

The German General Staff thought the war would be short and sweet and that they could finance the costs with the post war reparations that they, as victors, would exact.  The war was long.  The flower of their manhood was killed or injured.  They lost and, thus, it was they who had to pay reparations rather than receive them.

Things did not go badly instantly.  Yes, the deficit soared but much of it was borne by foreign and domestic bond buyers.  As had been noted by scholars…..“The foreign and domestic public willingly purchased new debt issues when it believed that the government could run future surpluses to offset contemporaneous deficits.”   In layman’s English that means foreign bond buyers said – “Hey this is a great nation and this is probably just a speed bump in the economy.”  (Can you imagine such a thing happening again?)

When things began to disintegrate, no one dared to take away the punchbowl.  They feared shutting off the monetary heroin would lead to riots, civil war, and, worst of all communism.  So, realizing that what they were doing was destructive, they kept doing it out of fear that stopping would be even more destructive.

Currencies, Culture And Chaos – If it is difficult to grasp the enormity of the numbers in this tale of hyper-inflation, it is far more difficult to grasp how it destroyed a culture, a nation and, almost, the world.

People’s savings were suddenly worthless.  Pensions were meaningless.  If you had a 400 mark monthly pension, you went from comfortable to penniless in a matter of months.  People demanded to be paid daily so they would not have their wages devalued by a few days passing.  Ultimately, they demanded their pay twice daily just to cover changes in trolley fare.  People heated their homes by burning money instead of coal.  (It was more plentiful and cheaper to get.)                                                                                                                 

The middle class was destroyed.  It was an age of renters, not of home ownership, so thousands became homeless.

But the cultural collapse may have had other more pernicious effects.

Some sociologists note that it was still an era of arranged marriages.  Families scrimped and saved for years to build a dowry so that their daughter might marry well.  Suddenly, the dowry was worthless – wiped out.  And with it was gone all hope of marriage.  Girls who had stayed prim and proper awaiting some future Prince Charming now had no hope at all.  Social morality began to collapse.  The roar of the roaring twenties began to rumble.

All hope and belief in systems, governmental or otherwise, collapsed.  With its culture and its economy disintegrating, Germany saw a guy named Hitler begin a ten year effort to come to power by trading on the chaos and street rioting.  And then came World War II.

We think it’s best to close this review with a statement from a man whom many consider (probably incorrectly) the father of modern inflation with his endorsement of deficit spending.   Here’s what John Maynard Keynes said on the topic:

By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens.  By this method they not only confiscate, but they confiscate arbitrarily; and, while the process impoverishes many, it actually enriches some…..Those to whom the system brings windfalls….become profiteers.

To convert the business man into a profiteer is to strike a blow at capitalism, because it destroys the psychological equilibrium which permits the perpetuance of unequal rewards.

Lenin was certainly right.  There is no subtler, no surer means of over-turning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose….By combining a popular hatred of the class of entrepreneurs with the blow already given to social security by the violent and arbitrary disturbance of contract….governments are fast rendering impossible a continuance of the social and economic order of the nineteenth century.

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Tags: price inflation

Posted By thestatedtruth.com on October 13, 2010

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Tags: real estate fraud;real estate foreclosures

Posted By thestatedtruth.com on October 13, 2010

A source of mine pointed me to a recent conference call Citigroup had with investors/clients.  It featured Adam Levitin, a Georgetown University Law professor who specializes in, among many other financial regulatory issues, mortgage finance. Levitin says the documentation problems involved in the mortgage mess have the potential “to cloud title on not just foreclosed mortgages but on performing mortgages.”

The issues are securitization, modernization and a whole lot of cut corners. Real estate law requires real paper transfer of documents and titles, and a lot of the system went electronic without much regard to that persnickety rule. Mortgages and property titles are transferred several times in the process of a home purchase from originators to securitization sponsors to depositors to trusts. Trustees hold the note (which is the IOU on the mortgage), the mortgage (the security that says the house is collateral) and the assignment of the note and security instrument.

The issue is in that final stage getting to the trust. The law demands that when the papers get moved around they are “wet ink,” that is, real signatures on real paper. But Prof. Levin tells me that’s not the worst of it. Affidavits assigned to the notes and security instruments are supposed to be endorsed over to the trust at the time of sale, but in many foreclosure scenarios the affidavits have been backdated illegally.

So with the chain of documentation now in question, and trustee ownership in question, here is one legal scenario, according to Prof. Levitin:

The mortgage is still owed, but there’s going to be a problem figuring out who actually holds the mortgage, and they would be the ones bringing the foreclosure. You have a trust that has been getting payments from borrowers for years that it has no right to receive. So you might see borrowers suing the trusts saying give me my money back, you’re stealing my money. You’re going to then have trusts that don’t have any assets that have been issuing securities that say they’re backed by a whole bunch of assets, and you’re going to have investors suing the trustees for failing to inspect the collateral files, which the trustees say they’re going to do, and you’re going to have trustees suing the securitization sponsors for violating their representations and warrantees about what they were transferring.

Josh Rosner, of Graham-Fisher, put the following out in a note today, claiming violations of pooling and servicing agreements on mortgages could dwarf the Lehman weekend:

Nearly all Pooling and Servicing Agreements require that “On the Closing Date, the Purchaser will assign to the Trustee pursuant to the Pooling and Servicing Agreement all of its right, title and interest in and to the Mortgage Loans and its rights under this Agreement (to the extent set forth in Section 15), and the Trustee shall succeed to such right, title and interest in and to the Mortgage Loans and the Purchaser’s rights under this Agreement (to the extent set forth in Section 15)”. Also, an Assignment of Mortgage must accompany each note and this almost never happens.

We believe nearly every single loan transferred was transferred to the Trust in “blank” name. That is to say the actual loans were apparently not, as of either the cut-off or closing dates, assigned to the Trust as required by the PSA.

Rather than continue to fight for the “put-back” of individual loans the investors may be able to sue for and argue that the “true sale” was never achieved.

Quite the can of worms. Anyone who says that the banks will fix all this in a few months is seriously delusional.

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Tags: bank fraud, mortgage fraud, real estate put backs

Posted By thestatedtruth.com on October 12, 2010

3 Billion Individuals or more than two thirds of the global adult population have wealth below USD $10,000. 

Figures for mid-2010 indicate that 24.2 million adults are above the threshold for dollar millionaires. While they make up less than 1% of the global adult population, they own more than a third of global household wealth.  Figures for mid-2010 indicate that there were (22 million) in the USD 1–5 million net worth range.

Interestingly, here is a chart that everyone has seen as it pertains to America, but few have seen in terms of the entire world. Per CS, Figure 1 shows “The global wealth pyramid” in striking detail. It is made up of a solid base of low wealth holders with upper tiers occupied by fewer and fewer people. We estimate that 3 billion individuals – more than two thirds of the global adult population – have wealth below USD 10,000. A further billion adults (24% of the world population) are placed in the USD 10,000–100,000 range, leaving 358 million adults (8% of the world population) with  assets above USD 100,000. Figures for mid-2010 indicate that 24.2 million adults are above the threshold for dollar millionaires. While they make up less than 1% of the global adult population, they own more than a third of global household wealth. More specifically, individuals with wealth above USD 50 million are estimated to number 81,000 worldwide.

Some more details on the various tiers of the pyramid:

Bottom of the pyramid

The various tiers of the wealth pyramid have distinctive characteristics. The base level is spread broadly across  countries. It has significant membership in all regions of the world, and spans a wide variety of family circumstances. The upper wealth limit of USD 10,000 is a modest sum in developed countries, excluding almost all adults who own houses, with or without a mortgage. Nevertheless, a surprisingly large number of individuals in advanced countries have limited savings or other assets.

A high proportion are young people with little opportunity or interest in accumulating wealth. In fact, limited amounts of tangible assets  combined with credit card debts and student loans lead many young people to record negative net worth. In Denmark and Sweden, for example, 30% of the population report negative wealth. This is an important and often overlooked segment, not least in the context of the credit crisis.

Low wealth is also a common feature of older age groups, particularly for those individuals suffering ill health and exposed to high medical bills. In fact, the means testing applied to many state benefits, especially contributions to the cost of residential homes, provides an incentive to shed wealth. Nevertheless, relatively few people in rich countries have net worth below USD 10,000 throughout their adult life. In essence, membership of the base section of the global wealth pyramid is a transient, lifecycle phenomenon for most citizens in the developed world.

The situation in low-income countries is different. More than 90% of the adult population in India and Africa fall in this band; in many low-income African countries, the fraction of the population is close to 100%. However, the cost of living is usually much lower. For a resident of India, for instance, assets of USD 10,000 would be equivalent to about USD 30,000 to a resident of the United States. In much of the  developing world, this is enough to own a house or land – albeit possibly with uncertain property rights – and to have a comfortable lifestyle by local standards.

Middle of the pyramid

The billion adults in the USD 10,000–100,000 range form the middle class from the perspective of global wealth. With USD 32 trillion in total wealth, it certainly carries economic weight. This tier has the most regionally balanced membership, although China now contributes almost a third of the total. The wealth range would cover the median person over most of his adult life in high income countries. In middle income countries it would apply to a middle class person in middle age. However, in low-income countries only those in the top decile qualify, restricting membership to significant landowners, successful businessmen, professionals and the like.

High segment of the pyramid

When we consider the “high” segment of the wealth pyramid – the group of adults whose net worth exceeds USD 100,000 – the regional composition  begins to change. With almost 358 million adults worldwide, this group is far from exclusive. But the typical member of the group is very different in different parts of the world. In high income countries, the threshold of USD 100,000 is well within the reach of middle-class adults once careers have been established. In contrast, residents from low-income countries would need to belong to the top percentile of wealth holders, so only the exceptionally successful, well endowed or well connected qualify.

The regional contrast shows up in the fact that North America, Europe and the Asia-Pacific regions account for 92% of the global membership of the USD 100,000+ group, with Europe alone home to 39% of the total. As far as individual countries are concerned, the membership ranking depends on three factors: the population size, the average wealth level, and wealth inequality within the country. Only 15 countries host more than 1% of the global membership. The USA comes top with 23% of the total. All three factors reinforce each other in this instance: a large population combining with high mean wealth and an unequal wealth distribution. Japan is a strong runner-up, the only country at present to seriously  challenge the hegemony of the USA in the global wealth ranking. Although its relative position has declined since the year 2000 due to lackluster stock market and housing market performance, Japan is still home to 15% of individuals with wealth above USD 100,000.

Top of the pyramid

At the top of the pyramid, we find the world’s millionaires, where we again witness a slightly different pattern of membership. The proportion of members from the United States rises sharply to 41%, and the share of members from outside of the North America, Europe and Asia-Pacific regions falls to just 6%. The relative positions of most countries move downwards, but there are exceptions. The French share is estimated to double to 9%, while Sweden and Switzerland are each now credited with more than 1% of the global membership.

And next, is a detailed look at the very top of the pyramid: those individuals which have over 1 million in net worth.

To assemble details of the pattern of wealth holdings above USD 1 million requires a high degree of ingenuity. The usual sources of data – official statistics and sample surveys – become increasingly incomplete and unreliable at high wealth levels. A growing number of publications have followed the example of Forbes magazine by constructing “rich lists,” which attempt to value the assets of particular named individuals at the apex of the wealth pyramid. But very little is known about the global pattern of asset holdings in the high net worth (HNW – greater than USD 1 million) and ultra high net worth (UHNW – from USD 50 million upwards) range.

We bridge this gap by exploiting well-known statistical regularities in the top wealth tail. Using only data from traditional sources in the public  domain yields a pattern of global wealth holdings in the USD 250,000 to USD 5 million range, which, when projected onward, predicts about  1000 dollar billionaires for mid-2010. Although not exactly comparable, this number is very close to the figure of 1,011 billionaire holdings reported by Forbes magazine for February 2010. Making use of the regional affiliation recorded in rich lists allows us to merge the top tail  details with data on the level and distribution of wealth derived from traditional sources in order to generate a regional breakdown of HNW and UHNW individuals. At this time, we do not attempt to estimate the pattern of holdings across particular countries, except China and India which are treated as separate regions. However, as a rule of thumb, residents of the USA account for about 90% of the figure for North America.

The base of the wealth pyramid is occupied by people from all countries of the world at various stages of their lifecycle. In contrast, HNW and UHNW individuals are heavily concentrated in particular regions and countries, but the members tend to share a much more similar lifestyle,  often participating in the same global markets for high coupon consumption items. The wealth portfolios of individuals are also likely to be  similar, dominated by financial assets and, in particular, equity holdings in public companies traded in international markets. For these reasons, using official exchange rates to value assets is more appropriate, rather than using local price levels to compare wealth holdings.

Our figures for mid-2010 indicate that there were 24.5 million HNW individuals with wealth from USD 1 million to USD 50 million, of whom the vast majority (22 million) fall in the USD 1–5 million range. North America dominates the residence ranking, accounting for 11.1 million HNW individuals (45% of the total). Europe accounts for 7.8 million (31.7%) and 4.1 million reside in Asia-Pacific countries other than China and India. We estimate that there are now more than 800,000 HNW individuals in China, each worth between USD 1 million and USD 50 million (3.3% of the global total). India, Africa and Latin America together host the remaining 740,000 HNW individuals (3.0% of the total).

Category: Commentary, Economy, Finance, National News, Personal Net Worth, Wall Street, World News | 384 Comments »
Tags: global net worth, net worth, net worth pyramid

Posted By thestatedtruth.com on October 12, 2010

October 12, 2010

Advanced economies risk a lost decade unless policy makers recognize the severity of the wounds left by the financial crisis, said Mohamed El-Erian, chief executive officer of Pacific Investment Management Co.

El-Erian, who popularized the phrase new normal to describe how growth will be depressed by consumer retrenchment and financial regulation, said governments and central banks haven’t detected the ongoing paradigm shift in their economies that will require remedies beyond stimulus programs. Among the fault lines he spots are strained balanced sheets, persistently high unemployment and a misunderstanding of financial markets.

“Having won the war, industrial-country societies are in the process of losing the peace, El-Erian said in a speech yesterday in Washington during the annual meetings of the International Monetary Fund and World Bank. If they are not careful, they risk slipping into a lost decade of low growth, high unemployment and welfare destruction.

Such threats were exposed last week as the U.S. reported its economy lost more jobs than forecast in September and the IMF cut its 2011 economic growth forecast for advanced nations to 2.7 percent from 2.9 percent. To reverse the weaknesses, officials must increasingly look beyond the immediate economic cycle to solve structural flaws in their economies, said El- Erian, 52, who helps manage more than $1.1 trillion of assets at Newport Beach, California-based Pimco.

Advanced economies and investors find themselves in a rather unsettling situation where expectations involve an unusually broad range of potential outcomes and equally unusually high risks, he said.

He pointed to the Greek-led debt crisis in Europe as an example of the balance-sheet challenges facing advanced economies.

“It is far from assured that some of these countries will be able to grow their way out of their problems, he said. In the process, they will discover the disruptive nature of debt overhangs.’

While the European Central Bank is providing liquidity and governments have joined with the IMF to give budgetary aid, new investors are not entering the economies, with Greece and Ireland continuing to face dangerous risk spreads in financial markets, El-Erian said.

Investors still demand a yield premium of 754 basis points to lend to Greece rather than Germany for 10 years, the most of any euro nation. That’s down from a euro-era record of 973 basis points on May 7. The Irish spread is 422 basis points, just below last month’s record.

Without investment, growth and hiring, some economies will find it hard to limit the decline in gross domestic product and subsequent rise in unemployment, while concerns will mount about the contamination of the ECB’s balance sheet, he said.

“The risk of contagion will grow and the revolving nature of IMF resources will be exposed to considerable risk,El- Erian said.

Policy makers must also tackle structural changes in their economies, he said, noting how despite their stimulus efforts companies have resisted hiring and investment. American firms added 64,000 jobs last month, less than forecast, and the jobless rate held at 9.6 percent, the Labor Department said Oct. 8.

“Persistently high unemployment is becoming more structural in nature, thereby eroding the skills of the labor force and putting pressure on inadequate social safety nets and already-strained government budgets, El-Erian said. Rather than question the limited effectiveness of the cyclical approaches, the response by too many has been just to advocate doing more of the same.

A third challenge is that policy makers have too little understanding of financial services, El-Erian said. They failed to realize how their rescue of banks would spur a recovery in financial markets that outpaces that of households and businesses and that banks will remain reluctant to finance expansion. U.S. stocks advanced last week, sending the Dow Jones Industrial Average above 11,000 for the first time since before the May 6 crash.

“It highlighted once again an outcome that is unacceptable in democratic society: the privatization of massive gains and the socialization of enormous losses, he said. Markets are reflecting the expectation the Federal Reserve will ease monetary policy further and the test will be whether further quantitative easing pays off with stronger economies, he said.

The longer policy makers fail to address secular changes to their economies, the greater the difficulties that industrial countries will experience in reducing joblessness, sustaining high growth, strengthening safety nets and overcoming sovereign risk concerns,El-Erian said.

He called on the IMF to do more to encourage global policy coordination that has been weakening since the Group of 20 nations united to fight the recession. Recent meetings of international policy makers, including the IMF talks in Washington, have been marred by splits over currencies and budget policies, he said.

“A once-promising global response has now been replaced by inadequately coordinated national economic policies and growing frictions among countries,he said. The IMF is still not where we need it to be to fill the growing vacuum at the center of the international system.

Category: Commentary, Economy, Finance, Interest Rates, Bonds, National News, Pensions and Retirement, Wall Street, World News | No Comments »
Tags: pimco's El -Erian, Pimco;Economic risks, privatization

Posted By thestatedtruth.com on October 11, 2010

MINIMUM Average Gross Income REQUIRED TO BE IN TOP 1% of TAXPAYERS

1980 — $  80,580
1985 — $108,134
1990 — $167,421
1995 — $209,406
2000 — $313,469
2005 — $364,657
2007 — $410,096
2008 — $380,354

Figures from www.wsj.com

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Tags: top 1% earners, top earners

Posted By thestatedtruth.com on October 11, 2010

Retired folks are now getting liitle or no interest on their savings (if they have anything left) and now this happens to them!  For many older people, every little bit matters.  It really looks to this observer as if our government is out of touch with reality and favoring the rich.

WASHINGTON      As if voters don’t have enough to be angry about this election year, the government is expected to announce this week that more than 58 million folks on social scurity will go through another year without an increase in their monthly benefits. Based on inflation so far this year, the trustees who oversee Social Security indicate there will be no COLA for 2011.

It would mark only the second year without an increase since automatic adjustments for inflation were adopted in 1975. The first year was this year.

“If you’re the ruling party, this is not the sort of thing you want to have happening two weeks before an election,” said Andrew Biggs, a former deputy commissioner at the Social Security Administration and now a resident scholar at the American Enterprise Institute.

“It’s not the congressional Democrats’ fault, but that’s the way politics works,”  Biggs said. “A lot of people will feel hostile about it.”

The cost-of-living adjustments, or COLAs, are automatically set each year by an inflation measure that was adopted by Congress back in the 1970s.

Category: Commentary, Economy, Interest Rates, Bonds, National News, Pensions and Retirement, Wall Street | No Comments »
Tags: retirement, social security

Posted By thestatedtruth.com on October 11, 2010

Russia Bought More Than 100 Tons of Gold This Year, RIA Novosti Reports

By Brad Cook – Oct 11, 2010

Russia’s central bank has bought more than 100 tons of gold this year, all of it on the domestic market, RIA Novosti reported, citing Bank Rossii.

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Tags: gold, russia buying gold

Posted By thestatedtruth.com on October 10, 2010

Here are the latest ranking of ETF’s by asset size.  It was no surprise to see State Street Global Advisors’ SPDR S&P 500 (SPY) on top, with $78 billion in assets. It was the second and third spots that is the most titillating.

The World Gold Trust Services’ Gold Trust ETF (GLD) came in second, now worth amazing $54 billion, and BlackRock’s (BLK) iShares MSCI Emerging Market Index Fund ETF (EEM) came in third at $45 billion.

One can’t blame Investors for departing the U.S. en masse and heading to emerging markets.  It’s all about returns, and trading in a projected  2% growth rate at home for a more robost 6%-10% growth rate abroad makes logical sense.

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Tags: etf's, funds, stocks

Posted By thestatedtruth.com on October 9, 2010

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Tags: john mauldin, thoughts from the frontline

Posted By thestatedtruth.com on October 8, 2010

Recently J.P. Morgan Chase, Bank of America and Ally Financial have temporarily halted foreclosures in 23 states due to flawed affidavits used in legal proceedings. Now Bank of America has expanded this halt to all 50 states, while PNC Financial Services said it was stopping foreclosures in 23 states for a month.

Banks insist the problems are administrative and can be cleared up in a short period of time, maybe a few weeks or months. But should investors be concerned?

The affidavit problems may yet point to more serious issues with the documentation and the legal basis for mortgages that were securitized, or sold to investors.  “Is there a question about who owns things?” said Christopher Peterson, a law professor at the University of Utah who has studied securitization and mortgage-title issues. “If you don’t think so, you’re kidding yourself.”

So, banks may face higher-than-expected legal expenses, a further slowdown in the foreclosure process and that adds to the housing-price pressure, and creates potential new actions from investors trying to force them to repurchase previously bad or improperly documented mortgages.

What is the foreclosure problem?  In some cases, as part of foreclosure proceedings, banks submitted affidavits that were flawed. That might be an administrative issue. But consider that the affidavit’s often were submitted in place of promissory notes that cover the actual debt. It is possible the promissory notes actually were mislaid or destroyed as lenders tried to keep pace with the frenzied housing boom.

While that wouldn’t in itself negate a mortgage claim, it could mean the bank needs more documentation to proceed with a foreclosure and this takes time. Given the haphazard record keeping, it’s not a strech to see a mushroom cloud here.   At the least such problems give attorneys representing homeowners more opportunity to contest and lengthen foreclosure proceedings and they can freeze some of them altogether.

Meanwhile, legal issues are swirling around the role of a company known as Mortgage Electronic Registration Systems, or MERS. It played a key role in the mortgage boom, helping firms package and sell mortgages without having to record each transaction with county offices.

This was done by showing MERS as the holder of the mortgage, something that confers the right to foreclose and seize the underlying property, even as the promissory note was transferred to third-party investors. The trouble is that MERS’s legal standing has been questioned because it doesn’t also own the actual debt; traditionally, the mortgage and note weren’t split between different parties. Top courts in four states have said MERS can’t foreclose. If more state courts adopt this position, it could throw further doubt on foreclosure proceedings.

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Tags: bank owned homes, forclosures, Real Estate

Posted By thestatedtruth.com on October 8, 2010

Billionaire investor George Soros said he shared concerns about a “currency war” and China must do more to accept its responsibilities in the global monetary system.

“I share the growing concern about the misalignment of currencies,” Soros wrote in an article for the Financial Times. “Brazil’s finance minister speaks of a latent currency war, and he is not far off the mark. It is in the currency markets where different economic policies and different economic and political systems interact and clash.”

China this week stiffened its opposition to a rapid appreciation of the yuan, with Premier Wen Jiabao saying his country will stick to its policy of gradually increasing the currency’s flexibility and lashed out at European Union leaders for teaming with the U.S. to pressure his government.

China’s case may be bolstered by the recent willingness of Japan, Brazil, Switzerland and other nations to temper the strength of their currencies through intervention.

The world’s second-largest economy remains the target of the greatest criticism. Even as it boasts the fastest-growing major economy, it has limited the yuan’s appreciation to about 2 percent versus the dollar since pledging in June to make it more flexible.

“Whether it realizes it or not, China has emerged as a leader of the world,” said Soros. “If it fails to live up to the responsibilities of leadership, the global currency system is liable to break down and take the global economy with it.”

Category: Commentary, Economy, Finance, Gold and Silver, National News, Wall Street, World News | No Comments »
Tags: currency, world economies

Posted By thestatedtruth.com on October 8, 2010

This is just the begining for government layoffs!

Government payrolls decreased by 159,000 last month. State and local governments reduced employment by 83,000, while the federal government lost 76,000 jobs as census workers were fired.

State and local governments from New Jersey to California are firing workers to balance their budgets as declining property values and slowing economic growth squeeze tax revenue.

Public schools in New Jersey were set to start the academic year down 10,000 jobs, including 7,000 educators who chose to retire, Steve Wollmer, a spokesman for the New Jersey Education Association, a union that represents teachers, said in August after Governor Chris Christie slashed $1.3 billion in aid to schools and local governments.

www.bloomberg.com

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Tags: employment, payrolls

Posted By thestatedtruth.com on October 7, 2010

Former Federal Reserve Chairman Alan Greenspan said the fiscal deficit in the U.S. is “scary” and the government needs to reduce entitlement programs.

“We’re involved in a dangerous game,” Greenspan said today at a foreign-exchange conference in New York sponsored by Bloomberg LP, the parent of Bloomberg News. “We’re increasing the debt held by the public at a pace that is closing” the gap between our debt and “any measure of borrowing capacity,” Greenspan said. “That cushion is growing very narrow.”

U.S. companies may be holding back on investment because of the rising federal deficit, which causes uncertainty about future tax policies, Greenspan said in an opinion article for the Financial Times this week. Weak investment by businesses in capital equipment and fixed assets has helped to crimp the U.S. economic recovery, he said.

“You need” austerity, said Greenspan, a paid speaker at the event. “We’re going to have to start to cut” from government entitlement programs, he said, adding that reducing the budget is better than raising taxes in closing the U.S. budget deficit. Still, Greenspan reiterated that he supports allowing tax cuts enacted under President George W. Bush to lapse at the end of 2010.

The White House Office of Management and Budget in July projected the deficit for fiscal 2010, which ended Sept. 30, at $1.47 trillion and the gap for fiscal 2011 at $1.42 trillion. President Barack Obama formed a commission in February charged with presenting a plan by Dec. 1 on how to reduce deficits over the next decade.

More at: http://www.bloomberg.com/news/2010-10-08/greenspan-says-u-s-engaged-in-dangerous-game-as-debt-deficits-increase.html

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Tags: national debt

Posted By thestatedtruth.com on October 7, 2010

President Barack Obama won’t sign legislation that critics said would have eased the way for banks to process home foreclosures, his spokesman said.

The bill would have required courts to recognize notarizations across state lines, including electronic signatures. White House press secretary Robert Gibbs said the administration was concerned about the potential impact on home foreclosure proceedings.

“Out of an abundance of caution, and to ensure that those unintended consequences don’t harm consumers, the president will send the bill back,” Gibbs said.

Obama’s “pocket veto” puts to an end, for now, a five- year effort by some of the nation’s 4.8 million notaries to streamline court proceedings involving notarized documents. The Interstate Recognition of Notarizations Act for years had won approval from Democrats and Republicans in Congress as a piece of mundane, good-government legislation.

More at: http://www.bloomberg.com/news/2010-10-07/obama-will-veto-notary-recognition-bill-on-possible-abuse-in-foreclosures.html

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Tags: notary bill, Real Estate

Posted By thestatedtruth.com on October 7, 2010

No surprise here, it’s called the prudent man’s rule!  The only problem is the government isn’t leading by example.

Consumer borrowing declined in August as Americans trimmed credit-card balances and remained reluctant to take on more debt as job losses climbed.

Credit declined by $3.34 billion after falling a revised $4.09 billion in July.  This was more than the previous estimate according to a Federal Reserve report released today in Washington. Credit-card debt decreased for the 24th consecutive month.

The unemployment rate increased to 9.6 percent in August, the first gain in four months, and economists project a report tomorrow will show it rose again last month. A lack of jobs is restraining consumer spending, which accounts for about 70 percent of the economy.

“People are spending cautiously and getting their debts down,” said Gary Thayer, chief macro strategist at Wells Fargo Advisors in St. Louis. “It’s holding back the economy, but it’s good for the long-run.”

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Tags: personal debt

Posted By thestatedtruth.com on October 7, 2010

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Tags: stratfor, terrorism, warnings

Posted By thestatedtruth.com on October 6, 2010

Former Federal Reserve Chairman Paul Volcker an adviser to President Barack Obama said he doesn’t expect consumer spending to spur growth, and the U.S. and other developed nations face the prospect of protracted joblessness.

“This has not been an ordinary recession,” Volcker, 83, said today in a speech in Toronto. It’s “very difficult to find a sector in the American economy that has any spark to it,” he said.

Developed nations may undergo “prolonged unemployment,” he said. “It’s going to take years to turn it around,” presenting an “enormous political challenge for all leaders.”

U.S. companies unexpectedly cut jobs last month as employment decreased by 39,000, the biggest drop since January, after a revised 10,000 rise in August, according to figures from ADP Employer Services. A loss of jobs raises the risk that consumer spending, the largest part of the U.S. economy, will retrench and halt the recovery.

Category: Commentary, Economy, Finance, National News, Wall Street | No Comments »
Tags: consumer spending, volcker says prolonged unemployment

Posted By thestatedtruth.com on October 6, 2010

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Tags: food stamps

Posted By thestatedtruth.com on October 6, 2010

Today’s POMO is over: at $2.069 billion, the operation was right in line with  expectations, coming in at a lofty 12.16 submitted to accepted ratio, as investors apparently are not too crazy about the yield perspective of the 4 2013 CUSIPs that were repruchased. However, what is far more important is that with holdings of $821.1 billion, the Fed is now officially the second largest holder of US Treasurys. Number one China lies dead ahead.

While the official breakdown will likely be a few weeks in coming, here is the math:

Fed holdings as of September 30: $811,669

Add:

• POMO – September 30 (October 1 settlement): $2,200
• POMO – October 5 :$5,190
• POMO – October 6: $2,069

Total: $821.128 Billion, which just passed Japan’s total of $821.0 Billion as of July 2010 The U.S. central bank is just $25 billion away from being the Treasury’s largest creditor. Will the Fed dominate any and all future debt restructuring negotiations with what is, essentially, itself……inquiring minds want to know.

www.zerohedge.com

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Tags: central bank holdings, national debt

Posted By thestatedtruth.com on October 6, 2010

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Tags: mutual fund outflows

Posted By thestatedtruth.com on October 6, 2010

 
Chris Whalen (one of the top banking analysts): “Rising operating costs in banks will be more significant than in past recessions and could force the U.S. government to restructure some large lenders as expenses overwhelm revenue.”  “We are less than one-quarter of the way through the foreclosure process,” said  Whalen, in remarks prepared for an American Enterprise Institute event.

By Ronald D. Orol, MarketWatch
Oct. 6, 2010, 10:31 a.m. EDT

WASHINGTON (MarketWatch) — The U.S. banking industry is entering a new crisis where operating costs are rising dramatically due to foreclosures and defaults, an analyst said in remarks prepared for Wednesday afternoon.

“We are less than one-quarter of the way through the foreclosure process,” said Christopher Whalen, managing director at Institutional Risk Analytics in remarks prepared for an American Enterprise Institute event.

“Rising operating costs in banks will be more significant than in past recessions and could force the U.S. government to restructure some large lenders as expenses overwhelm revenue.”

He added that recently agreed-to foreclosure moratoriums by GMAC, Bank of America and J.P. Morgan Chase & Co are “only the start of the crisis” that threatens the financial foundations of the entire U.S. political economy.

The three lenders announced recently they would halt some foreclosures until they could determine whether or not employees signed off on affidavits without verifying the information in the paperwork.

Whalen argues that the largest U.S. banks remain insolvent and must continue to shrink. “Failure by the Obama Administration to restructure the largest banks during 2007-2009 period only means that this process is going to occur over next three to five years – whether we like it or not. The issue is recognizing existing losses — not if a loss occurred,” he said.

Category: Commentary, Economy, Finance, National News, Real Estate, Wall Street | No Comments »
Tags: bad mortgages, bank risk, foreclosures

Posted By thestatedtruth.com on October 6, 2010

By DAVID STREITFELD and GRETCHEN MORGENSON
Published: October 6, 2010

The uproar over bad conduct by mortgage lenders intensified Tuesday, as lawmakers in Washington requested a federal investigation and the attorney general in Texas joined a chorus of state law enforcement figures calling for freezes on all foreclosures.

Representative Nancy Pelosi, the House speaker, and 30 other Democratic representatives from California told the Justice Department, the Federal Reserve and the comptroller of the currency that “it is time that banks are held accountable for their practices.”

In a request for an investigation into questionable foreclosure practices by lenders, the lawmakers said that “the excuses we have heard from financial institutions are simply not credible.”  Officials from the federal agencies declined to comment.

Texas Attorney General Greg Abbott, a Republican, sent letters to 30 lenders demanding they stop foreclosures, evictions and the sale of foreclosed properties until they could provide assurances that they were proceeding legally.

More:  http://dealbook.blogs.nytimes.com/2010/10/06/foreclosure-furor-rises-many-call-for-a-freeze/

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Tags: bank owned, foreclosures, mortgage fraud

Posted By thestatedtruth.com on October 6, 2010

Middle Class Slams Brakes on Spending
    By SARA MURRAY

Middle-class Americans made their deepest spending cuts in more than two decades, slashing spending on such discretionary items as restaurant meals and alcohol during the recession.

Households in the middle fifth of the population sliced their average annual spending to $41,150 in 2009, the Labor Department said Tuesday in its annual spending breakdown. That was down 3.1% from 2007 and 3.5% from 2008, the steepest one-year drop since records began in 1984. The drop came even as those households’ after-tax income remained relatively stable over the two years, at an average $45,199.

Meanwhile, the poorest Americans spent more as prices for necessities like food and rental housing climbed. Spending rose 5.6% from 2007 to 2009 for the poorest fifth of consumers, the most of any other income group, despite a 5.5% drop in after-tax income to an average $9,956 a household. In some cases, elderly people and others with low incomes dipped into savings or relied on credit to get by.

“What you’re looking at here is people at the bottom trying to hang on,” said Timothy Smeeding, public affairs professor and director of the Institute for Research on Poverty at the University of Wisconsin in Madison. “You can’t go below a certain level.”

Average annual expenditures for people in all income groups dropped 2.8% from 2008 to 2009, the first spending decline on record. The numbers don’t account for inflation, which has been significant in some areas such as food and rent. One consistently rising cost for all income groups was health care, where spending rose 9.6% from 2007 to 2009 as the cost of care climbed.

More…

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Tags: spending cuts