Posts Tagged ‘bonds’

“It’s EZ credit that is the linchpin in today’s fake-money system.

The Deep State’s stocks, bonds, and real estate values… not to mention its careers, incomes, and reputations… depend on it.

And it is made possible by the China trade… by Chinese workers who put in long hours in miserable conditions in order to stock the shelves of Walmart with cheap goods… by Chinese manufacturers who undersell their competitors to keep consumer price inflation in the U.S. at low levels… and by Bank of China, which holds some $1.25 trillion worth of U.S. bonds… thus propping up the whole wobbly capital structure….

In politics and economics, BS is all there is. The calculations are almost always fake; the statistics are quackery; the theories are devilish nonsense. And bad ideas never entirely disappear, they just re-emerge after a few years… often dressed in new duds.”

-Bill Bonner

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The investment-advisory industry is a huge, multi-billion dollar business based on hard work, clever thinking, and sophisticated algorithms….  [T]he unfortunate truth is that the financial establishment rarely looks beyond stocks and bonds.  And if you think about it, why would it want to?  It makes its money by ushering you from one ‘hot’ stock or ‘amazing’ fund to the next….  Because they know that you have heard that ‘diversification of assets’ is good, financial advisers give you the illusion of diversification by filling your stock portfolio with businesses that are ‘diversified’….  But at the end of the day, it’s all invested in stocks or stock derivatives.

Asset allocation is the process by which you spread your wealth across different sorts of investments….  Over the years, I have made hundreds of individual financial decisions….  I could see very clearly that it was not particular buy/sell decisions that accounted for this good fortune.  It was the general decisions about asset allocation that paid off.” -Mark Ford

A recent report by consumer-credit-tracking firm Experian shows the average term for a new car loan is 67 months – a record.  And the average amount financed for a new vehicle is $28,711 – also a record.  The average monthly payment for a new vehicle is $488 – yet another record.  Bank of America predicts that new car-loan securitizations – the packaged sale of car loans – will reach $125 billion this year… Again, a record.  These loans will account for more than half of all consumer loan securitizations.  Keep in mind that roughly 30% of the loans in these securitized packages will be subprime. That’s why credit losses on these bonds are growing and beginning to reach levels last seen in 2008.” -Porter Stansberry

“…depriving young people of jobs is like depriving pandas of bamboo shoots: It’s all they have.  Older people can watch their stocks, real estate, and bonds go up in price.  A young person can only look at the ‘Help Wanted’ ads… and hope for a break.” -Bill Bonner

Building wealth involves much more than just investing in stocks and bonds.  Most rich people get that way by consistently doing five things:  1.  They understand and manage their debt.  They don’t let debt manage them;  2.  They spend their money wisely, getting maximum value for every dollar;  3.   They continuously work to increase both their active and their passive incomes;  4.  They are aggressive savers, far outpacing their peers;  5.  They are disciplined investors.  When they find a good strategy, they stick with it. -Mark Ford

All over the world, in ways that can’t easily be modeled or understood, debt has warped and altered the world’s economy. Think about how much the cost of housing, college, our government, stocks, bonds, etc. have been inflated by both debt and “elastic” supplies of money.” -Porter Stansberry

Well, here we ago again.  Up until now, most of the “questionable” home loans available since the housing meltdown have been rural development loans offered through the USDA.  The questionable part in my mind are the “no down payment required” and “guaranteed loan” aspects.  But, according to a Reuters article, Wells Fargo is again planning to jump back into the “subprime” market.  Why?  Because they are experiencing a downturn in revenue.  Hmm, does this seem like a sound business decision?  (GM is also selling cars to subprime customers to help their sales).  Does this sound promising?

Some interesting points from the Reuters article makes me scratch my head:

1.  “…loosening of credit standards could boost housing demand…”  Shouldn’t demand for housing be boosted because people can actually afford them?  Isn’t it a false demand by any other standard?

2.  “To avoid the taint associated with the word ‘subprime’, lenders are calling their loans ‘another chance mortgages’ or ‘alternative mortgage program’.”  Does changing the name of something actually make it better?  Does duping people make these mortgages safer?

3.  “If the borrower does not meet those hurdles and later defaults on a mortgage, he or she can sue the lender and argue the loan should never have been made in the first place.”  Seriously, then why do we make the purchaser sign on the bottom line?  That point was missed during the initial crisis; purchasers were simply considered victims.  Everyone wants to blame the bank.  Thank you Dodd-Frank!

4.  “Subprime mortgages were at the center of the financial crisis, but many lenders believe that done with proper controls, the risks can be managed.”  I am sure they thought the same thing last time.  Risk is guaranteed to be risky; a la the recent death of the snake handling pastor.

5.  “The bank is looking to lend to borrowers with weaker credit, but only if those mortgages can be guaranteed by the FHA.  Because the loans are backed by the government, Wells Fargo can package them into bonds and sell them to investors.”  And there we have it!  Guaranteed by the government!  In other words, by the American taxpayer!  Let’s see, what would I provide to the American consumer if the government will guarantee it?  Anything!  The second part of the quote explains exactly what they were doing before, turning them into investments.  Subprime investments,  I’ll pass.

It looks like the strategy must be paying dividends.  According to the Wall Street Journal, “Household debt jumps as banks loosen up.”  Wells Fargo knows what works to get people borrowing.  The interesting thing is that they still haven’t resolved all of their issues with Fannie Mae and Freddie Mac from the original crisis, but see no issues with stepping back into those familiar waters.

All I can say is, good luck with that….