Friday, July 11, 2014

Solvency is so 2000s.

From DSNews:
The Federal Housing Finance Agency (FHFA) put out the call on Thursday for public comment regarding the draft of requirements that would apply to private mortgage insurance companies that insure mortgage loans owned or guaranteed by Fannie Mae and Freddie Mac.
The two GSE’s are required by their charters to maintain utilize risk mitigation techniques for loans that they purchase or securitize that have a loan to value ration greater than 80 percent. Obtaining private mortgage insurance is one of the main tactics employed by the enterprises to limit exposure, imposing a minimum set of standard eligibility requirements for an outside insurance company to meet.
The FHFA has mandated that the enterprises revisit and strengthen their eligibility requirements in the wake of the financial crisis. The agency has opened the issue for public comment and invited stakeholders input into the final regulations.
"Mortgage insurance counterparties must be able to fulfill their intended role of providing private capital, even in adverse market conditions," said FHFA Director Mel Watt.  "FHFA's Strategic Plan calls on Fannie Mae and Freddie Mac to strengthen the requirements for private mortgage insurance companies that do business with them in order to reduce Fannie Mae's and Freddie Mac's overall risk exposure and protect taxpayers."
The updated financial requirements call for a new risk based framework to ensure that approved insurance carriers have a sufficient amount of liquid assets to pay claims should the need arise.

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 On the news MJIC Investment Corp, [MTG] fell 10%. 

This actually represents and attempt to get back to sustainable lending standards.  And look at the results; swimming naked companies everywhere. 

Tuesday, June 24, 2014

Big data, big issues

Chicago Tribune reports: The smooth, perforated sheaths of metal are decorative, but their job is to protect and conceal a system of data-collection sensors that will measure air quality, light intensity, sound volume, heat, precipitation and wind. The sensors will also count people by measuring wireless signals on mobile devices. ... Berman... said the list was limited to "nonpersonal" data because the city is still working on a privacy and security policy to govern the protection and confidentiality of any data that the system may collect in the future. Berman expects she and Emanuel will agree on a final version of the document by the end of July.
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Trust me. I'm from the government.

Chimera Worth Trillions

Gallup issued a report Monday showing that a decisive majority of Americans-62 percent- say that social media has no influence on their purchasing decisions. A meager 5 percent said that social media had a great deal of influence on their purchasing decisions. This comes on the heels of another study showing that brand engagement has been plummeting on Facebook over the last year, and that the company is debating charging people to promote their content . ----- Social media and synergy value yet again proven ephemeral.

Monday, June 23, 2014

Executive Overreach

The [SCOTUS] said [24 Jun 2014] that the Environmental Protection Agency lacks authority in some cases to force companies to evaluate ways to reduce carbon dioxide emissions. This rule applies when a company needs a permit to expand facilities or build new ones that would increase overall pollution. Carbon dioxide is the chief gas linked to global warming.
The decision does not affect EPA proposals for first-time national standards for new and existing power plants. The most recent proposal aims at a 30 percent reduction in greenhouse gas emissions by 2030, but won’t take effect for at least another two years.

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I honestly have no idea why the Obama administration has taken this path. 

Housing Looking Toppy

Inflection points are notorious to predict and impossible not to see in retrospect. Looks more and more like It is that time again. Remember August 2006? Yes, eight long years ago. Here's what I wrote:


 Nothing like disaster staring you personally in the face to sharpen the mind and narrow focus to the important facts. These things are “brainers.” The problem is so many people sleepwalking or in denial. It is important to remember that housing is priced at the margins. That’s also why the bubble won’t be as injurious to the general economy as some here believe. Imagine getting a letter in the mail saying you won a million dollars. Next day you get another letter saying a mistake was made, you only won $400,000. Did you just lose $600,000? Only if you went out the night before spent it all (MEW). [Calculations below.] I’m not too worried about the coming and needed recession even if it is late and thereby harder than necessary. The jobs that will be lost are largely parasitical and not ultimately productive nor are they the jobs we wish to have created in a modern economy. Obsolete jobs are best cleared out. A recession will ease our crushing immigration pressures here in California as well. Schools are already talking about closing buildinngs, saving billions. Lower taxes, less crowded schools; what’s not to like? Maybe the national psyche can find enough breathing space to heal as well.

More at the link.  

Back to 2014.  Are we any better now?  Yes.  Much, much better.  Back then there weren't many paying attention.  Back then the blogosphere was lonely.  Back then there were very few who ever dare suggest a plateau never mind a massive decline.  I took no end of respectful dissent for suggesting "stickiness" was a thing of the past. 

Okay, on to the data.  

First, the Zero Hedge observation:
The Great Bifurcation continues apace.  As usual California leads the way. 

Second, Dataquick and the the American Community Survey (JCHS):

The typical monthly mortgage payment that California buyers committed themselves to paying last month was $1,523, up from $1,496 the month before and up from $1,157 a year earlier. ~ DQ

 JCHS ~ The recent deterioration in rental affordability comes after a decade of lost ground. The share of cost-burdened renters increased by a stunning 12 percentage points between 2000 and 2010, the largest jump in any decade dating back at least to 1960. The cumulative increase in the incidence of housing cost burdens is astounding. In 1960, about one in four renters paid more than 30 percent of income for housing. Today, one in two are cost burdened. Even in 1980, following two decades of worsening affordability, the cost-burdened share of renters was just above a third.

Prices, both rent and purchase need to come down to come back in line.  Higher wages, lower prices, lower interest rates, transfer rates.  Any guesses as to the mix that gets us back in balance?  I'll post mine after a bit.