if this comes to pass, then you can kiss the market adios !

20% rise in long term rates. within mere months.

http://www.safehaven...ticle-11086.htm


Let's see. The 20% drop in home prices wiped out about $5 trillion in household "wealth."

The banks are tetering on th ebronk of disaster. More homes foreclosing are only adding to the grim picture as banks just get hit with nore and more losses.

You add another 20% to long term rates, and you add millions more homeowners in the arm category into the death spiral. So even more foreclosures coming.

You are probably close to wiping out 2/3rds to 3/4ths of the entire US GDP. $10 trillion or more. POOF !

Net income of banks has fallen 86% in less than a year. and so the fed with all of the banks in trouble now will add a double whammy of higher FDIC insurance fees.

So the Fed reports about 120 banks now on the [bleeeep] list. Itll be more like 1200 easy before this is over. So they are struglling now to have enough funds to bail out a handful. WTF happens when they have 120 or more like 1200 ?

I think mr market is trying to tiptoe past the cemetary. Freddie Krueger is likely going to pay a visit to the FEd and the banks. Not a pretty Friday nite sight if u ask me.

we ain't even seen close to ugly yet, either in the markets or in housing.

nb...i consider vegas to be the epicenter for the real estate boom...we had more fraud here than anywhere and i got to tell you ...people are starting to get loans again. i called today to reinstate my liscence....i have taken a year sabatical (lol) but sales have jumped back to the 2006 levels which means banks are lending and people are getting loans!!! now prices probably are not going to go up anytime soon but with demand coming in then they certainly have the potential to find a floor in here! btw..check out the chart of the nya....that is an extremely bullish pattern for an index....we saw that same pattern in the ndx twice in the past year and both times it comes out of the consolidation with a very strong move to the upside... i am no nostrodamus...but i would warm up that toilet seat.....

nb...i consider vegas to be the epicenter for the real estate boom...we had more fraud here than anywhere and i got to tell you ...people are starting to get loans again.

i called today to reinstate my liscence....i have taken a year sabatical (lol) but sales have jumped back to the 2006 levels which means banks are lending and people are getting loans!!!

now prices probably are not going to go up anytime soon but with demand coming in then they certainly have the potential to find a floor in here!

btw..check out the chart of the nya....that is an extremely bullish pattern for an index....we saw that same pattern in the ndx twice in the past year and
both times it comes out of the consolidation with a very strong move to the upside...

i am no nostrodamus...but i would warm up that toilet seat.....

ok. now yur getting to me. so first i do...
Kaopectate,
.... known medically as bismuth subsalicylate, is an orally taken medication from Chattem, Inc. for the treatment of mild diarrhoea.

but then there's this lil booger that sooothes the willies a tad...

"The 20% drop in home prices wiped out about $5 trillion in household "wealth."

http://blogs.tampaba...ge-tampa-r.html

and there's this little gem .... "In the statistics a foreclosure results in two home sales. The first is when the house is foreclosed on and the second is when it is disposed of. The deed changes twice therefore each foreclosure will result in two home sales statistically. This constitutes a second sale of one foreclosure, originally sold at $245,150, now only $53,900." Results of Absolute Auction in Tesoro Preserve Postponed by tropical storm, Fay, the sale was held last night. By Toby Tobin Palm Coast, Florida – August 27, 2008 – An absolute auction of a building lot in Tesoro, Bobby Ginn's private golfing community in Port St. Lucie, was scheduled for August 19th. Tropical storm, Fay, caused a delay. The rescheduled auction was held on-site last night under threatening skies. In an absolute auction, the highest bidder wins, regardless of price. Eight bidders registered for the sale. They were joined by a handful of spectators. Bidding began at $25,000, jumped to $30,000, then to $35,000 when the bidding increment dropped to $1,000. It finally stopped at $49,000. A 10% buyer's premium (to pay the auction company) brought the sale price to $53,900. This Tesoro Preserve lot was originally purchased for $245,150. Elliot Paul & Company was the auctioneer

and one of my fav's.... "unrealistic optimism will be punished in due time"

Cash Strapped FDIC Considers Tapping Treasury
The WSJ is reporting FDIC Weighs Tapping Treasury as Funds Run Low.

Federal Deposit Insurance Corp. Chairman Sheila Bair said Tuesday her agency might have to borrow money from the Treasury Department to see it through an expected wave of bank failures.

Ms. Bair said the borrowing could be needed to cover short-term cash-flow pressures caused by reimbursing depositors immediately after the failure of a bank. The borrowed money would be repaid once the assets of that failed bank are sold.

The last time the FDIC borrowed funds from Treasury came at the tail end of the savings-and-loan crisis in the early 1990s after thousands of banks were shuttered. That the agency is considering the option again, after the collapse of just nine banks this year, illustrates the concern among Washington regulators about the weakness of the U.S. banking system in the wake of the credit crisis.

My Comment: Notice when the last FDIC cash shortage occurred. It was at the tail end of the S&L crisis. Arguably we are in the initial stages of this crisis.

"I would not rule out the possibility that at some point we may need to tap into [short-term] lines of credit with the Treasury for working capital, not to cover our losses, but just for short-term liquidity purposes," Ms. Bair said in an interview. Ms. Bair said such a scenario was unlikely in the "near term."

She said she did not expect the FDIC to take the more dramatic step of tapping a separate $30 billion credit line with Treasury, which has never been used.

My comment: Unrealistic optimism will be punished in due time.

Problem Banks List Rose 30% in Quarter

Bloomberg is reporting Banks on "Problem List" Rose 30% in Quarter.

The U.S. Federal Deposit Insurance Corp. said its "problem list'' of banks increased 30 percent in the second quarter to the highest total in five years as more commercial real-estate loans were overdue.

The list had 117 banks as of June 30, up from 90 in the first quarter and the highest since mid-2003, the agency said today in its quarterly report without naming any institutions. FDIC-insured lenders reported net income of $4.96 billion, down 87 percent from $36.8 billion in the same quarter a year ago.

"More banks will come on the list as credit problems worsen," FDIC Chairman Sheila Bair said at a news conference in Washington.

Second-quarter earnings fell from $19.3 billion in the previous quarter, driven by higher provisions for loan losses, the FDIC said. It was the second-lowest net income reported since the fourth quarter of 1991 behind the $600 million reported in the fourth quarter of 2007, the agency said.

"The results were pretty dismal, and we don't see a return to the high earnings levels of previous years any time soon," Bair said.

My Comment: The time it takes bank earnings to recover may be measured in decades not years.

The agency in October will consider a plan to replenish the account that will likely include an increase in the premiums charged banks, Bair said.

A greater share of the increase will be shifted to "riskier institutions so that safer institutions won't be unduly burdened,'' she said.

My Comment: Risky institutions should be shut down now. Why wait? Postponing the problem only makes matters worse.

So here we are, at the beginning of a credit crunch, and the FDIC is already considering tapping the Treasury. Supposedly it's only for "short-term cash-flow pressures". However, short term will eventually become long term, which bears the question:

How Long Can The Fed Last?

Cumberland Advisors has an interesting chart showing declining securities at the Fed. Let's take a look.

Factors Adding to Reserves and Off Balance Sheet Securities Lending Program
Chart Courtesy of Cumberland Advisors. (see below)

A the current pace, the Fed runs out of treasuries about a year from now. Things are about to get very interesting.

Mike "Mish" Shedlock
http://globaleconomi...is.blogspot.com

Edited by nimblebear, 27 August 2008 - 09:48 PM.

"The recent powerful rally in the dollar has comical overtones when one stops to consider that the intrinsic value of an individual dollar is approximately the same as a snowflake . This is easily the most debased and degraded currency in the developed world, and so the recent rally is inexplicable to many. Dollar bulls appear to have taken heart from the weakening of the Eurozone and there is a theory that heavy buying of dollars could be precipitated by a scramble to pay down debt ahead of massive rises in interest rates. Easy money has been around for so long that it is difficult for many now to imagine seriously high interest rates, so it would be interesting to see how the younger generation, for whom easy access to credit is viewed almost as a birthright, react if interest rates go through the roof.

On the 1-year dollar chart we can see that it has followed through after its strong breakout clear above its 200-day moving average to reach the target zone we delineated in the last update, where the advance is running into trouble. While its continuing overbought condition, as shown by its MACD indicator at the bottom of the chart, combined with its proximity with its falling 300-day moving average, call for it to react back soon, we should keep in mind that the recent surge was the first time that the dollar has broken out upside from a significant trading range and clear above its 200-day moving average since 2005, so there is a fair chance that after due consolidation or reaction it will continue higher in a mini bullmarket of the kind that occurred in 2005. This, however, will not necessarily stop gold going up. It conspicuously failed to do so in 2005. There is an old saying that "In the land of the blind the one-eyed man is king", but sadly we can't even compare the dollar to the one-eyed man, which makes its recent strength all the more remarkable."

"No warning can save a people determined
to grow suddenly rich." - Lord Overstone (gee... that sounds like all those folks who live in vegas... )

Clive Maund,
CliveMaund.com

Edited by nimblebear, 27 August 2008 - 10:05 PM.

nimble, Safehaven is only 4 months late with that inverted head and shoulders long bond chart. Below you'll find a chart I posted here on April 30, 2008. My prediction was long bond yields to 5.19% within 8 months. I still believe that will happen, maybe just take a little longer. Here's something to ponder. The reason yields are still low right now has a lot to do with the continuing flight to quality because of the FN/FR uncertainty. As this mortgage dilemma becomes less critical, U.S. Treasury yields will then begin to rise. But, guess what. So will equities, because the credit crisis will also be seen as moving towards resolution. The examples of a rising stock market and rising interest rates are too many to try to mention. By the way.....Safehaven needs to hire me. At least they'll then be able to produce timely charts! (1 timely chart)

U.F.O.

can't argue with it...."The long term up trend is still technically in place unless the TYX makes a lower low and loses its flag formation:"