Sense on Cents

12th Street Capital Provides Perspective on the Foreclosure Fiasco

Posted by Larry Doyle on October 22nd, 2010 11:23 AM |

What the hell is truly going on within the entire mortgage foreclosure fiasco? There are seemingly more angles to this mess than there ever were choices of mortgage products themselves. Where can we turn to make some ‘sense’ of this madness? Let’s check in with the crowd on the cutting edge of this sinkhole, that is our friends at 12th Street Capital. Today they write,

Not surprisingly the ones that look to be best positioned during this mortgage foreclosure/put back fiasco are the lawyers. As reported by HousingWire.com late yesterday, “A spokesperson for the New York law firm Quinn, Emanuel Urquhart & Sullivan confirmed to HousingWire it has been hired by the Federal Housing Finance Agency, a move some say means the government-sponsored enterprises are going after bad mortgages it bought from originators.” Guess what, the GSEs have ALWAYS pursued repurchases. Read the rest »

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Ray Dalio’s ‘Hyper-Realism’ Defines ‘Sense on Cents’

Posted by Larry Doyle on October 22nd, 2010 9:12 AM |

In a world awash with lies, obfuscation, backstabbing, conflicts of interest, and those who prosper via these machinations, are there individuals and companies whose very core is defined by a perpetual pursuit of truth, transparency, and integrity? Of course there are many people who cherish these virtues and try to live and work by them. That said, within even the most well-intended organizational structure these principles will seemingly often be compromised for a variety of reasons. Is there an organization that not only promotes the pursuit of these virtues but has actually made them the foundation on which it operates and invests?

In fact there is. Let’s take a hard look at perhaps the single most successful fund in the markets today with a track record of success that would be the envy of all. I am talking of Bridgewater Associates based in Westport, CT.

Bridgewater is run by Ray Dalio. What does Ray have to say about his corporate philosophy? Let’s navigate as Ray writes, Read the rest »

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Federal Reserve: Economic Prognosticators or “Just Winging It”?

Posted by Larry Doyle on October 21st, 2010 6:47 AM |

All hail the mighty and powerful Federal Reserve!!

Is that right?

Are we all supposed to bow down and prostrate ourselves at the throne of Ben Bernanke and assume he is ‘all knowing’? The fact is the Federal Reserve has assumed a mantle of being ‘all powerful’ but who in our country is willing to challenge the Federal Reserve? Are we supposed to merely turn over the economic fortunes of our nation and our children’s future to one individual and one institution without aggressively calling them on the carpet? What happened to the calls for increased Fed transparency? What happened to the pressure on the Fed to justify their actions? The silence is deafening.

Those with a degree of sense on cents understand and appreciate the following: Read the rest »

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The UK Takes a “Hard Road to a Better Future”

Posted by Larry Doyle on October 20th, 2010 8:47 AM |

The United Kingdom may be our closest political ally but in terms of financial paths, our friends across the pond are taking a decidedly different tact in terms of addressing their mountainous fiscal deficit. Today’s news that the UK will undertake real fiscal austerity was a foregone conclusion with the election of new Prime Minister David Cameron this past May. That said, the reality of the news does pack a wallop when contrasted to the deficit spending here in the United States. For details on the UK’s renewed sense of austerity, let’s review The WSJ’s U.K. Treasury Chief Details Spending Cuts:

U.K. Chancellor of the Exchequer George Osborne laid out sweeping spending cuts Wednesday, sticking to the timetable for paring back the budget deficit that he unveiled in June. Read the rest »

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“Why Isn’t This Liquidity Being Utilized to Hire New Workers and Reduce Unemployment?”

Posted by Larry Doyle on October 19th, 2010 2:37 PM |

Sense on cents implies that capital and liquidity will flow to areas in which it is protected and can generate a reasonable rate of return.

Thus, the question facing our nation is why all the liquidity injected into our system has not gained traction and promoted job growth and increased economic activity. Although I have written voluminously on this issue over the last two years, let’s allow Richard Fisher, the head of the Dallas Federal Reserve, to weigh in with his version of sense on cents. Read the rest »

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Aiding and Abetting Mortgage Fraud

Posted by Larry Doyle on October 19th, 2010 4:54 AM |

While selected Wall Street banks and their cronies in Washington may want to downplay the depth and impact of the mortgage fraud embedded in our national foreclosure crisis, anyone with a modicum of ‘sense on cents’ knows that this fiasco has many players with their hands in the till. Our friends at The Center for Public Integrity recently highlighted the manner in which those in the legal profession have aided and abbeted this enormous fraud. Let’s navigate.

The role of lawyers in the foreclosure process has garnered less attention, but they play a big role, especially in those states that require banks to go to court to get a foreclosure order. (The same states where the lenders have suspended foreclosures). In these states, banks are required to produce a notarized affidavit of a loan officer and submit the mortgage documents. Those documents, though, are difficult to produce, thanks to the securitization craze.

As CNBC notes in this helpful primer to the foreclosure crisis, every time a mortgage changes hands, the new owners are supposed to receive an “assignment” of the mortgage notes from the buyers. For securitized loans, the mortgages are assigned to a specially created investment vehicle.

During the housing bubble, however, the notes and other critical documents were often either not properly transferred or simply not created. Other records vanished along with failed brokers and lenders. This means that lawyers charged with putting together the paper trail often have a tough job. Over the past few years, some have used shortcuts. Read the rest »

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“States of Denial” or “Do Pensioners Have Even Greater Rights Than Bondholders?”

Posted by Larry Doyle on October 18th, 2010 6:54 AM |

Do we just need to get through the next year or two in order to regain our feet? Really? Do not think that Fed chair Ben Bernanke is not fully aware of what lies ahead on our economic landscape as he hopes and prays for an economic revival. However, as he contemplates the perils of more quantitative easing the stranglehold of future pension obligations continues to put deflationary pressures on our economy. No surprise why Ben and most of his Fed colleagues are bound and determined to create inflation in an attempt to monetize our national debts. For greater focus on the state pension obligations, let’s review a fabulous commentary recently published by The Economist entitled, A Gold-Plated Burden,

CHUCK REED is the Democratic mayor of San Jose, California. You might expect him to be an ally of public-sector workers, a powerful lobby in the Golden State. But last month, at a hearing on pension reform held by the Little Hoover Commission, which monitors the state’s government, Mr Reed lamented his crippling public-pensions bill. “City payments for retirement benefits have tripled over the last ten years even though our workforce has declined dramatically, and we have billions of dollars in unfunded liabilities that the taxpayers must pay,” he said. Read the rest »

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Wall Street’s Chickens Are Coming Home to Roost

Posted by Larry Doyle on October 15th, 2010 4:09 AM |

Fraud is fraud.

No matter how you disguise it — or dare I say, securitize it — fraud smells. That stench associated with improperly, and often fraudulently, originated mortgages is growing rapidly and is poised to back up into the Wall Street plumbing. The losses connected with the inevitable outcome of Wall Street banks having to repurchase fraudulently originated mortgages are enormous, although hard to quantify.

I highlighted this reality two days ago in writing, The Real Issues Behind the Foreclosure Crisis:

The imposition of principal forgiveness may actually be less expensive for banks and servicers than addressing the real root problem behind many mortgages. What is that problem? The fact that a lot of mortgages in our nation today were fraudulently underwritten from point of origination and were then fraudulently conveyed via mortgage securitizations.

I actually initially addressed this reality in November 2008 in writing, The Wall Street Model is Broken…and Won’t Soon Be Fixed: Read the rest »

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Did the 2010 Economic Slump Just Surpass the 2008 Great Recession? Let’s Ask Rick Davis

Posted by Larry Doyle on October 14th, 2010 7:26 AM |

Economics is the most inexact of sciences. As much as we may think we can understand our future economic landscape based upon the study of the past, a variety of twists, turns, and unknown challenges inevitably come upon us. This reality has never been more prevalent than in our ‘Uncle Sam’ economy circa 2010. Do not think for a second that the ‘grand wizards’ in Washington currently undertaking the massive financial experiment throughout our economy do not appreciate this. They do. They just would not admit it.

Can we look toward private enterprises in an attempt to ‘see through’ the Washington smoke and mirrors? In fact we can. I make no bones about my admiration for the work of Rick Davis at Consumer Metrics Institute. As Rick so boldly states, the work at CMI is focused on:

“Bringing the measurements of critical economic activities into the twenty-first century by mining tracking data for an understanding of what American consumers were doing yesterday.”

Well, what were our fellow Americans doing yesterday and the days before that? Read the rest »

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The Real Issues Behind the Foreclosure Crisis

Posted by Larry Doyle on October 13th, 2010 12:32 PM |

What is really going on in regard to the moratorium on mortgage foreclosures? A lot. Not all of it would qualify as the best of “sense on cents.” My thoughts include the following:

1. Can we now declare the HAMP (Making Home Affordable) program to be totally futile? How is it that everybody on Wall Street and in Washington is now promoting that the economy will be harmed if we forestall the mortgage foreclosure process? What the hell have the wizards in Washington been doing via HAMP and through Freddie and Fannie for the last 18 months? The simple fact is our policy makers have done everything in their power to inhibit the markets from working. Now, all of a sudden, they become proponents of free market principles? Were we born yesterday? Not here at Sense on Cents.

I have continually harangued our Washington politicos for not allowing the housing market to clear, and highlighted how forestalling that process would only prolong our economic pain. We’re feeling that pain now and will be for the foreseeable future.

2. Where are we going with this moratorium? Read the rest »

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