The number of mortgages issued in January slumped by nearly half, as UK homebuyers deserted the market after stamp duty relief ended. |
The lack of confidence in the market was further laid bare by the level of people remortgaging falling by 15 per cent to 24,000 in January – the lowest level for eight years. |
| The Council of Mortgage Lenders said that house purchase loans plummeted by 49 per cent to 32,000, worth £4.7bn, in January compared to the previous month. |
The data will reinforce concerns that the UK housing market may be set to suffer its own double-dip recession, following the Halifax last week reporting a 1.5 per cent fall in house prices between January and February. Nationwide also reported a 1 per cent fall in house prices in January. |
| The Peterson/Walker plan would have slashed
social security entitlements, at a time when Wall Street has destroyed the
home equity and private retirement accounts of potential retirees. Worse, it
would have increased the social security tax, disguised as a “mandatory
savings tax.” This added tax would be automatically withdrawn from your
paycheck and deposited to a “Guaranteed Retirement Account” managed by the
Social Security Administration. Since the savings would be “mandatory,” you
could not withdraw your money without stiff penalties; and rather than enjoying
an earlier retirement paid out of your increased savings, a later
retirement date was being called for. In the meantime, your “mandatory savings”
would just be fattening the investment pool of the Wall Street bankers managing
the funds. |
The same sequence of events happened in Japan in the 1970s and 1980s: 1) export success, 2) property boom, 3) property crash, 4) deflation. They spent a long time pretending the banks were not bankrupt too.
The Asian superpower is in the midst of such a vast property boom, with prices
leaping 20pc a month in some regions, that developments are taking on
fairy-tale dimensions.
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Literally. The sight of a “real” alpine village rising from the
grimy industrial suburbs of Huairou outside Beijing provokes an increasingly
common reaction when discussing China’s
property market: “You’ve got to be kidding me, right?”
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Making sense of such developments, along with the forests of empty new office
blocks in Beijing and the tripling of land prices in some Chinese cities
over the last 12 months, is now leading some heavyweight investors to cry “bubble”. |
“Dubai
times one thousand – or worse”, was the verdict of Jim Chanos,
the short-selling hedge fund manager who was among the first to predict the
demise of Enron and says that the Chinese asset bubble will pop “sooner
rather than later”.
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I would not be surprised if some kind of special drawing rights (a new currency) will be issued by the US government, specifically for the purpose of bailing out State Governments because they are too big to fail. Otherwise, banks and foreigners would not have their loans repaid.
Jamie Dimon, chairman of JP Morgan Chase, has warned American investors should
be more worried about the risk of default of the state of California than of
Greece’s current debt woes.
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California however poses more of a risk, given the state’s $20bn (£13.1bn)
budget deficit, which Governor Arnold Schwarzenegger is desperately trying
to reduce.
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| Earlier this week, the state’s legislature passed bills that will cut the
deficit by $2.8bn through budget cuts and other measures. However the former
Hollywood film star turned politician is looking for $8.9bn of cuts over the
next 16 months, and is also hoping for as much as $7bn of handouts from the
federal government.
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Earlier this week, John Chiang, the state’s controller, said that if a
workable plan to reduce the deficit and increase cash levels is not reached
soon, he will have to return to issuing IOU’s, forcing state workers to take
additional unpaid leave and potentially freezing spending.
Read more at www.telegraph.co.uk |
What happens when the higher tax bills actually arrive in the mailbox at the same time as thousands of government employees are being laid off? The government will have to hire a lot more tax collectors … The Greek bond markets fell sharply on Thursday after the second ratings agency in as many days warned that the country’s long-term credit ratings could be downgraded. |
Greek two-year bond yields, which have an inverse relationship with prices, rose nearly half a percentage point following warnings from Standard & Poor’s on Wednesday and Moody’s Investors Service in the early hours of Thursday morning. |
The Athens stock exchange and the euro were also down, while credit default swaps rose, as concerns over the ability of the Greeks to finance their debt rose, particularly following the warning from Moody’s. |
Pierre Cailleteau, managing director of sovereign risk at Moody’s, said in an interview in Tokyo that the agency could downgrade Greek two notches. |
| “If in a few months it appears there are significant deviations from the plan, then it is pretty likely that we would adjust the rating accordingly,” Read more at www.ft.com |
Bets by some of the same banks that helped Greece shroud its mounting debts may actually now be pushing the nation closer to the brink of financial ruin. |
| Echoing the kind of trades that nearly toppled the American International Group, the increasingly popular insurance against the risk of a Greek default is making it harder for Athens to raise the money it needs to pay its bills, according to traders and money managers. |
These contracts, known as credit-default swaps, effectively let banks and hedge funds wager on the financial equivalent of a four-alarm fire: a default by a company or, in the case of Greece, an entire country. If Greece reneges on its debts, traders who own these swaps stand to profit. |
| a little-known company backed by Goldman, JP Morgan Chase and about a dozen other banks had created an index that enabled market players to bet on whether Greece and other European nations would go bust. |
Banks must be getting very worried again. That’s when they stop lending and make things worse. Delinquency and foreclosure rates among US homeowners climbed to their highest levels on record in the fourth quarter of last year, as the Obama administration unveiled its latest effort to aid the housing market’s hardest hit areas. |
The Mortgage Bankers Association said that 15 per cent of all home loans were either in foreclosure or late on a payment, the highest proportion since the group began surveying the housing market in 1972.
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“The pattern of mortgage delinquencies now very much follows the pattern of unemployment,” said Jay Brinkmann, MBA’s chief economist. “Until the issue of this large segment of long-term unemployed is resolved, many of the longer-term mortgage delinquencies will remain a problem with a strong likelihood of turning into foreclosures.” Read more at www.ft.com |
The more educated people walk away, the poor stick it out to the end. Prices are still falling. So the extent of losses banks and investors will have to take on mortgages that are still being paid every month, but may not be for longer, hangs large over the US economy. Without a recovery in house prices, consumer spending and confidence in the US is expected to remain muted, reducing the potential for economic growth. |
| Further losses on mortgages could result in more pain for banks, too, reducing the amount of new credit that they can make available to consumers and businesses. This, in turn, would have knock-on effects for the global economic outlook, |
| higher the negative equity, the higher the rate of non-payments. |
Particular concern surrounds defaults by people who merely face negative equity rather than monthly funding problems. These “strategic defaults” may be accelerating as more people shrug aside societal pressure to meet debts if they can. |
| landlords already have signs out saying “bad credit accepted”. |
If this works, it will significantly reduce the power and income of banks acting as intermediaries. Opportunities for direct investment in assets for storing value are likely to follow, further marginalising banks. The other exciting thing about this develoment is that the Paypal infrastructure could be for exchanging community and barter currencies. | nobody is as ambitious as PayPal. In November, it further opened up its code, giving anyone with rudimentary programming skills access to the kind of technology and payment-industry experience that Ivey used to build Twitpay. The move could unleash a wave of innovation unlike any we’ve seen since self-publishing came to the Web. |
| Two months after PayPal opened its platform, 15,000 developers had used it to create new payment services, sending $15 million through the company’s pipes. Software developer Big in Japan, whose ShopSavvy program lets people find an item’s cheapest price by scanning its barcode, used PayPal to add a “quick pay” button to its app. |
| Previously, anybody who wanted to create a service like this would have had to navigate a morass of state and federal regulations and licensing bodies. But now engineers can focus on building applications, while leaving the regulatory and risk-management issues to PayPal. “I can focus on the social side of the business Read more at www.wired.com |
| Goldman Sachs Group Inc. managed $15 billion of bond sales for Greece after arranging a currency swap that allowed the government to hide the extent of its deficit. |
| No mention was made of the swap in sales documents for the securities in at least six of the 10 sales the bank arranged for Greece since the transaction, according to a review of the prospectuses by Bloomberg. The New York-based firm helped Greece raise $1 billion of off-balance-sheet funding in 2002 through the swap |
| “If a bank was selling them to investors on the basis of publicly available information, and they were aware that information was incorrect, then investors have been fooled.”Read more at www.businessweek.com |
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Mortgage lending dives after end of stamp duty holiday
