The pundits do not understand the positive things the FED will do and the Pundits are panicking today.

The pundits do not understand the positive things the FED will do and the Pundits are panicking today.

The Fed $400Billion plan is to take principal payments from its holdings of short term debt and reinvest them into agency mortgage-backed securities from government-sponsored enterprises Fannie Mae and Freddie Mac. That “Twist” is indicative that the central bank is intent on getting and keeping mortgage rates low as well as liquidating mortgage defaults with new refinancing at affordable rates. That will break up the housing market log jamb and create homeowner wealth across America and thus result in consumer sales growth.

The intent is clearly fourfold.
1. First by selling longer term, the turnover of current debt is pushed into the future. That is one reason for wanting lower longer rates. It would have been good for Greece if a few years ago they could have taken on 30-year debt at 3% interest because they would not have to turn over at 15% or higher short term interest rates as they do today.
2. The second benefit is that although the cost of long-term debt is higher than short term, having less short-term debt reduces the susceptibility of the economy to the kind of seasonal attacks by speculators that we have seen in Europe. It enhances economic stability.
3. The third benefit is the FED will loosen up the log jamb of housing defaults so sales will jump and the American labor force will become fluid again so people can move freely to where the jobs are and real estate values will rise and the resulting consumer wealth creation can fuel economic recovery again.
4. Pushing debt into the future by lowering future rates also has an anti-inflationary effect in the future.

But it could raise bank future costs if they are caught with lots of low interest mortgages when inflation rises above the current interest rates. That is where Fannie and Freddie shift that to the taxpayer. Basically it eases markets today at the expense of the future. Therefore the FED will need a strategy to stabilize and prevent the next bubble from forming. The bubble keeps changing form and the FED never seems to recognize it coming. Under Jimmy Carter it was a Malaise with slow growth and inflation. Under Clinton it was a technology-productivity bubble that showed up in over speculation in technology stocks. Under Bush it was a housing bubble that Greenspan did not see coming plus a financial derivatives scam Dodd and Barney Frank created to help socialists in Congress redistribute wealth to people with no means of support by giving them liar-loans to buy houses just by saying they could make the payments. The mortgage lenders and realtors were forbidden to ask for any substantiation of income or Fannie and Freddie would cut them off from doing business. Greenspan and the Democrats running the Senate Banking Committee proved to be quite dense when it came to recognizing fraud. It is even much worse now with the Obama Socialists.

Right now the Obama socialists are just too stupid to understand how their corrupt government meddling to get contributions and kickbacks for Obama’s election war chest… kills jobs everywhere. Obama needs to find a way to tax his appointees and advisors first because he has the mother loadstone of tax dodgers in his government.

Obama also abuses government power by using the justice department to attack honest rating agencies, honest businesses, and honest Republican opposition because they are honest and truthful and point out that Obama has his hands in the pockets of Americans and is corrupt. Obama had a new dream of a socialist America and the whole world now has a new nightmare. At one time America was a leader not an Obama socialist-mediocracy.

Warren Buffett proves the point that parasitic liberals shirk their responsibility and cheat all their way through life. Buffett’s hand picked replacement was not as discrete as Warren and was caught investing in companies before Berkshire Hathaway bought in and drove the value up. What a nice game that is to skim money from their investors.

World markets
Greek’s measures announced yesterday include: a 20 percent cut in pensions of more than 1,200 euros a month, according to a government statement; pensions paid to those younger than 55 will be shaved by 40 percent for the amount exceeding 1,000 euros and wages will be lowered for 30,000 state employees. Greek subway, tram, train, bus and trolley workers and state-school teachers held a 24-hour strike in Athens.

The world now sees the Obama nightmare of high American debt as the world nightmare starting in 2013.
See German Carnival Parade Humor about European and US Politics
http://1389blog.com/2011/08/30/german-rose-monday-carnival-floats-political-cartoons-in-3d/
http://photos.denverpost.com/mediacenter/2011/03/rosemonday-carnival-parade-in-cologne-germany/


China bottoming?. http://finance.yahoo.com/echarts?s=000001.SS+Interactive#chart1:symbol=000001.ss;range=5y;indicator=volume;charttype=line;crosshair=on;ohlcvalues=0;logscale=on;source=undefined

Has Germany bottomed yet? Choose 2 or 5 years. We would say yes.
http://finance.yahoo.com/echarts?s=^GDAXI+Interactive#chart1:symbol=^gdaxi;range=3m;indicator=volume;charttype=line;crosshair=on;ohlcvalues=0;logscale=on;source=undefined

The Swiss market has bottomed. Choose 2 or 5 years http://finance.yahoo.com/echarts?s=^SSMI+Interactive#chart2:symbol=^ssmi;range=2y;indicator=volume;charttype=line;crosshair=on;ohlcvalues=0;logscale=on;source=undefined


Emerging markets are in recovery.
http://finance.yahoo.com/echarts?s=^BVSP+Interactive#chart1:symbol=^bvsp;range=2y;indicator=volume;charttype=line;crosshair=on;ohlcvalues=0;logscale=on;source=undefined

American Economy-
Last week summary
MBA Mortgage listing Index 09/03 -4.9% up considerably from last month’s -9.6%. This is the first of the good news we predicted starting for housing.
MBA Mortgage Purchase Index 09/10 up +6.3% after being down -4.9% last month. Great news again for housing.
Core CPI Aug remained constant at 0.2%… no inflation
Industrial Production Aug increased 0.2% down from 0.9% last month. Still a 2.4% annual rate
Philadelphia Fed Sep -17.5 a big improvement from last months -30.7
Net long-term TIC Flows Jul $9.vs $3.7B means foreign investment in the USA increased.
Sep 16 9:55 AM Mich Sentiment Sep 57.8 up from 55.7 but still very low.
NAHB Housing Market Index Sep was 14 just slightly lower than last months 15. This finally seems to be bottoming out and is more evidence the housing market is turning around. Remember GE/MSNBC/Pravda’s Jim Crammer claimed the market already bottomed in July two years ago. That is the accuracy of MSNBC/Pravda’s commentary.
Housing Starts Aug 571K down from 604K last month
Building Permits Aug of 620K while down to 597K they exceed for the first time the houses built in each of the previous two months. Since most permits generate houses this seems to be a turning point.
FOMC Rate Decision Sep unchanged (0.25%) from August.
We need to see Home Sales pick up next

Yesterday
MBA Mortgage Index 09/17 up 0.6% after up +6.3% last month. Very good for housing.
Sep 21 10:00 AM Existing Home Sales Aug up to 5.03M from 4.67M last month. Very good for housing.
Sep 21 10:30 AM Crude Inventories 09/17 down -7.336M after down -6.704M last week. Higher prices coming.
Sep 21 2:15 PM FOMC Rate Decision Sep 0.25% no change. The twist will help liquidate defaults and help housing.

This Week
Sep 22 8:30 AM Initial Claims 09/17
Sep 22 8:30 AM Continuing Claims 09/10
Sep 22 10:00 AM FHFA Housing Price Index Jul
Sep 22 10:00 AM Leading Indicators Aug


Market Outlook September 22 2011
Sharp stock market sell-offs are occurring now. The longer Greece holds off default the worse it becomes. Greece needs to get kicked out of the EU ASAP. Greece is a socialist-communist dead albatross lying across the bow of the EU. Greece is a curse on free enterprise because their unions are thieves with no will power at all.

It is good news that housing starts are moving up, construction spending appears to have bottomed out, and sales are rising now. We need to see Home prices pick up today.
http://www.martincapital.com/index.php?page=graph&view=permits_and_construction

The only thing stopping this emerging economic boom is negative barking Obama and his rules and Obamacrap legislation that the democrats and socialists passed without even reading. When he takes his $Billion campaign war chest and moves it to a bank in Nigeria we will know the Obama malaise is finally leaving the USA.

So far the trading range of equities has not even tested the resistance levels. We expect a normal advance of up to at least 50% of the total August decline. See:
http://finance.yahoo.com/q/ta?s=^NYA&t=1y&l=on&z=l&q=l&p=e50%2Ce100&a=&c=

Bulk trade seems to have bottomed and is finally improving. See 1yr chart at:
http://www.bloomberg.com/apps/quote?ticker=BDIY:IND

Stock market update:

Asian Stocks were mixed last night. China down -2.8%, Hong Kong down –4.9%, India down –0.2%, Seoul down -2.9%, and Japan down –2.1%.

European markets are down sharply in a range -3% to -5% half way through their day.
.
American markets futures are down about -2% at 8AM EST.

Obama, the creator of American socialist corruption and the Obama mediocracy, still runs wild. We predict a gradual recovery but with high Obama caused unemployment until the stupid Obama socialists are all voted out of office. When Obama leaves, corporations can safely grow jobs again and unemployment will drop. Right now the Obama socialists are just too stupid to see how their corrupt government meddling to get contributions and kickbacks creates widespread uncertainty and kills jobs everywhere.