"You mean to tell me that the coins being stamped out at the Mint are, the very same night, melted down into bullion on Threadneedle Street?" [1] Yesterday, Doomer NVmike asked: "John, can you explain, in simple terms, the differences between “Agency” and “Treasury” debt?"  This post is an attempt at a response.  The plan is to start off simply, and then go off on a rant.  There’s more here than meets the eye, and some of the issues are critical. Doomer Yossarian’s reply to NVmike’s query is a good place to start.  It points to this rather dated (Sallie…
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You’ll love this one from the Austin Business Journal.  The number of housing permits has fallen in the Austin, TX area, and job creation has slowed considerably.  However if you combine the two,  Voilà!  Things start looking much better: While the last two years of declines in new housing activity have been difficult for Central Texas, some housing market indicators show Austin is relatively balanced, according to a report from the Austin Chamber of Commerce. Residential permits for 2008 will be at their lowest level in decades, at approximately 14,000 units, a total similar to the activity of the late…
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"Central banks were the main source of financing for the US deficit all along." [1] We have quietly achieved another historic milestone in this story.  To put it starkly, the blue line in Chart 1 of Brad Setser’s Oct 16th blog post has just plunged below the x-axis for the very first time. UPDATE: Twist is on the job working her chart magic.  Here’s Doom’s first cut at what Setser’s chart extended to the present now looks like.  Note that twist is using Doom-standard yellow for treasuries and red for agencies.  The long-term back-and-forth between the two types of paper…
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Falling home prices haven’t just put a strain on budgets, they’ve put a strain on marriages- and divorces.  No one wants custody of an underwater house: With nearly one in six homes worth less than the mortgage owed on it, according to Moody’s Economy.com, divorce lawyers and financial advisers across the country say the logistics of divorce have been turned around. "We used to fight about who gets to keep the house," said Gary Nickelson, president of the American Academy of Matrimonial Lawyers. "Now we fight about who gets stuck with the dead cow." As a result, divorce has become…
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"In hindsight, many economists say, the United States should have recognized that borrowing from abroad for consumption and deficit spending at home was not a formula for economic success. Even as that weakness is becoming more widely recognized, however, the United States is likely to be more addicted than ever to foreign creditors to finance record government spending to revive the broken economy." [1] Everyone seems to have figured out that the one safe spot on the world’s economic "ship" is US Treasury Debt, so just about everyone is racing there. That can’t bode well for the stability of the…
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The [Canadian] federal and provincial government’s willingness to backstop the [ABCP] restructuring came amid a threat earlier this month from the foreign banks involved in the restructuring that they would walk away and scuttle the reorganization. [1] The dead period between Christmas and New Years is an especially good time to pillage the public purse — especially with Washington in lame-duck mode with potentially $100s of billions burning a hole in Neel’s pocket.  Was the Madoff Ponzi really too big to fail?  Tribune Corp? CalPERS?  Please drop us a line if you’ve got a hint as to where our great-grandchildren’s…
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Things are rough everywhere these days, even at the North Pole.  More expensive gift requests have hit Santa hard: [Hat tip Freedom's Phoenix!]  

The H.4.1 statistical release for the week ended December 24, 2008, will be published on Monday, December 29, 2008, because the federal government is closed on both Thursday, December 25 and Friday, December 26. [1] That was decent of the government to give everyone Boxing Day off this year Doom was waiting with bated breath for the release until we saw this article [2] that noted the announcement buried in last week’s version.

 January’s Realtor magazine is out, and in an article titled Overcoming Buyer Reluctance, the authors outline various arguments for convincing buyers that now is the time to buy.  Among other things, they recommend the following exercise: [The comments in blue are mine.]  A simple technique to prove to potential buyers, or even sellers, that they can’t perfectly time the market is to do this easy demonstration: Take out a blank sheet of paper and pen. Now, starting at the top of the paper, draw a line going down and at the same time ask the buyers to stop you when…
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"I believe each government partner has contributed a fair proportion to facilitate this restructuring plan in keeping with its interests. I am confident that the use of this backstop facility is not likely to be required, and the risk to taxpayers is low." [1] Yeah, Jim, and that’s why you’re going to pretend that Monday is too late for second thoughts, or parliamentary debate. At least the auto-industry bailout made a pretense of public participation.

There are some frustrated homesellers out there, but this one takes the cake- or passes "spiked" cake out, as the case may be. There’s no mention in this video of WHY this woman decided to slip drugs in her realtor’s gingerbread. The house wasn’t even listed yet, so it wasn’t that her agent wasn’t doing his job. It’s really gotten tough to be a realtor these days! [Thanks L!]

Lower interest rates have spurred a wave of mortgage applications- there’s a lot of people looking to refinance.  There does not appear to be a wave of buyers out there however.  Scott Sambucci of Seeking Alpha says that the solution may higher interest rates and lower prices.  He explains:   I ran the numbers based on a $300,000 home price and a $240,000 loan (though I’m not sure someone buying a $300,000 house will have $60,000 to put down to cover the 20% down payment requirement, but this is an experiment). At a 5.5% rate, the monthly payments are $1,712.69….
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    Today it is Christmas, it’s time to forget, The rising foreclosures and national debt, Don’t think about swaps or about CDOs Forget “mark-to-model” and new market lows. Forget Hank, Ben and “Dubbya”, and CNBC, Forget bailouts and stimulus, forget the Big 3. Derivatives? Who needs them- forget what they are. Forget credit crises both here and afar. That’s stuff’s for tomorrow- forget while you may. Enjoy food, enjoy family- no cares for today. It will be there tomorrow, don’t ever you fear, But Christmas, dear Christmas is just once a year. So unwrap some presents, have holiday cheer,…
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The deal will be welcomed in global markets because it will prevent a fire sale of derivatives originally valued at more than $200-billion that would have threatened to further destabilize the financial system. [1] Tonight visions of sugar-plums (and unfrozen RIFs — that’s Canadian for 401(K) unwinds) are dancing in the heads of retail investors of Canada’s Asset-Backed Commercial Paper (ABCP) market. Who wouldn’t be ecstatic at this definitive language that their 16+ month ordeal is nearly over? "… As a result of these latest developments, we can begin the process of completing this restructuring with the posting of documents…
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Before all hell broke loose, Bernie says, he didn’t secure extra financing, saying to himself: "I have Madoff – what do I need with a line of credit?" Now the layoff of employees who have worked for Norman S. Bernie Co. for 30 or more years has begun. [1] The real danger of the Madoff scandal is that it makes crystal clear things we were never meant to understand. According to this story,[1] San Mateo CA draper Cliff Bernie is one of the Madoff’s victims.  His over $1.7 million account suddenly became worthless when the scandal broke.  But let’s take…
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