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bubba99
ParticipantI am reminded of a term from my economics class, cateras parabas – all other things being equal. Today we have two different actions causing economic term oil. The FED printing money at hyper speed which should cause hyper-inflation, but the cateras parabas condition does not hold true.
At the same time we have an economic recession caused by hyper inflated assets like housing and credit card debt which are causing rapid deflation in both real and financial assets. This mechanism is causing losses in income, jobs and demand for services. All additional deflationary impacts.
It could be that stagflation is the more likely outcome. Less costly goods (cost less in real terms because of lower effective demand) being paid for in inflated dollars. Will the dollar deflate in value faster than the value of assets deflate due to bubble bursting and economic slow down? And even more important is “Is it too late to invest in currency independent assets like gold that are already at historic highs?”
Even the new exchange traded funds in currency like FXE dollar vs the euro are only hedges against the losses in the dollar, you can’t actually make more than you lose in dollar value. In the short term, all of those new dollars being printed by the FED need to go somewhere. The stock market seems to be the only place that can absorb enough of it to have an impact – until the next bubble becomes visible.
And I can believe I am saying this, effective stock selection may be the best hedge against stagflation – stocks that do well when the economy tanks like COSTCO, Trader Joes, Liquor sales, etc. Low overheads, high consumer demand. But definitely hedge them with a short hedge like SDS which can make money as the rest of the stock market deflates. (SDS is an inverse hedge fund that goes up 2% for each 1% the S&P falls)
ParticipantI am reminded of a term from my economics class, cateras parabas – all other things being equal. Today we have two different actions causing economic term oil. The FED printing money at hyper speed which should cause hyper-inflation, but the cateras parabas condition does not hold true.
At the same time we have an economic recession caused by hyper inflated assets like housing and credit card debt which are causing rapid deflation in both real and financial assets. This mechanism is causing losses in income, jobs and demand for services. All additional deflationary impacts.
It could be that stagflation is the more likely outcome. Less costly goods (cost less in real terms because of lower effective demand) being paid for in inflated dollars. Will the dollar deflate in value faster than the value of assets deflate due to bubble bursting and economic slow down? And even more important is “Is it too late to invest in currency independent assets like gold that are already at historic highs?”
Even the new exchange traded funds in currency like FXE dollar vs the euro are only hedges against the losses in the dollar, you can’t actually make more than you lose in dollar value. In the short term, all of those new dollars being printed by the FED need to go somewhere. The stock market seems to be the only place that can absorb enough of it to have an impact – until the next bubble becomes visible.
And I can believe I am saying this, effective stock selection may be the best hedge against stagflation – stocks that do well when the economy tanks like COSTCO, Trader Joes, Liquor sales, etc. Low overheads, high consumer demand. But definitely hedge them with a short hedge like SDS which can make money as the rest of the stock market deflates. (SDS is an inverse hedge fund that goes up 2% for each 1% the S&P falls)
ParticipantB of A may be getting a bargain in CFC’s mortgage servicing rights(MSR) CFC’s MSR services $1.48 trillion in mortgages and the cash flow alone is 7.5 billion/month (using 6% avg interest rate – my be higher/lower) (9million mortgages)
Even with a .5% service fee, the annual service fee is 440 million or npv of about 9.8 billion – scale the .5% up or down to get a better idea of the real value of the loan processing – somewhere between 5 and 10 $billion before losing a two million customers to foreclosure.
Yes there can be some real losses in the loan portfolio, but the loan servicing may be worth what BofA is paying. Iam holding my BofA shares.
ParticipantB of A may be getting a bargain in CFC’s mortgage servicing rights(MSR) CFC’s MSR services $1.48 trillion in mortgages and the cash flow alone is 7.5 billion/month (using 6% avg interest rate – my be higher/lower) (9million mortgages)
Even with a .5% service fee, the annual service fee is 440 million or npv of about 9.8 billion – scale the .5% up or down to get a better idea of the real value of the loan processing – somewhere between 5 and 10 $billion before losing a two million customers to foreclosure.
Yes there can be some real losses in the loan portfolio, but the loan servicing may be worth what BofA is paying. Iam holding my BofA shares.
ParticipantB of A may be getting a bargain in CFC’s mortgage servicing rights(MSR) CFC’s MSR services $1.48 trillion in mortgages and the cash flow alone is 7.5 billion/month (using 6% avg interest rate – my be higher/lower) (9million mortgages)
Even with a .5% service fee, the annual service fee is 440 million or npv of about 9.8 billion – scale the .5% up or down to get a better idea of the real value of the loan processing – somewhere between 5 and 10 $billion before losing a two million customers to foreclosure.
Yes there can be some real losses in the loan portfolio, but the loan servicing may be worth what BofA is paying. Iam holding my BofA shares.
ParticipantB of A may be getting a bargain in CFC’s mortgage servicing rights(MSR) CFC’s MSR services $1.48 trillion in mortgages and the cash flow alone is 7.5 billion/month (using 6% avg interest rate – my be higher/lower) (9million mortgages)
Even with a .5% service fee, the annual service fee is 440 million or npv of about 9.8 billion – scale the .5% up or down to get a better idea of the real value of the loan processing – somewhere between 5 and 10 $billion before losing a two million customers to foreclosure.
Yes there can be some real losses in the loan portfolio, but the loan servicing may be worth what BofA is paying. Iam holding my BofA shares.
ParticipantB of A may be getting a bargain in CFC’s mortgage servicing rights(MSR) CFC’s MSR services $1.48 trillion in mortgages and the cash flow alone is 7.5 billion/month (using 6% avg interest rate – my be higher/lower) (9million mortgages)
Even with a .5% service fee, the annual service fee is 440 million or npv of about 9.8 billion – scale the .5% up or down to get a better idea of the real value of the loan processing – somewhere between 5 and 10 $billion before losing a two million customers to foreclosure.
Yes there can be some real losses in the loan portfolio, but the loan servicing may be worth what BofA is paying. Iam holding my BofA shares.
ParticipantI am in a similar situation, but my gold has been less than I would like. GDX is going up and down more like a stock, than a commodity – but GLD has been o.k. I am also long in Euro bonds that are doing well, but expiring this month.
I am real leary of stocks, but all that money has to go some where and the stock market may be the only place that can absorb all of the “new” dollars. I am hedging with SDS which goes up double when the S&P goes down.
I may want to shoot myself later, but I am thinking that there may be some bargains in the market, and that the overall market may be lackluster, but some discount consumer staples may do O.K.
My real worry is a fire sale on the dollar, and any dollar denominated CD’s and bonds may be seriously hurt.
ParticipantI am in a similar situation, but my gold has been less than I would like. GDX is going up and down more like a stock, than a commodity – but GLD has been o.k. I am also long in Euro bonds that are doing well, but expiring this month.
I am real leary of stocks, but all that money has to go some where and the stock market may be the only place that can absorb all of the “new” dollars. I am hedging with SDS which goes up double when the S&P goes down.
I may want to shoot myself later, but I am thinking that there may be some bargains in the market, and that the overall market may be lackluster, but some discount consumer staples may do O.K.
My real worry is a fire sale on the dollar, and any dollar denominated CD’s and bonds may be seriously hurt.
ParticipantI am in a similar situation, but my gold has been less than I would like. GDX is going up and down more like a stock, than a commodity – but GLD has been o.k. I am also long in Euro bonds that are doing well, but expiring this month.
I am real leary of stocks, but all that money has to go some where and the stock market may be the only place that can absorb all of the “new” dollars. I am hedging with SDS which goes up double when the S&P goes down.
I may want to shoot myself later, but I am thinking that there may be some bargains in the market, and that the overall market may be lackluster, but some discount consumer staples may do O.K.
My real worry is a fire sale on the dollar, and any dollar denominated CD’s and bonds may be seriously hurt.
ParticipantI am in a similar situation, but my gold has been less than I would like. GDX is going up and down more like a stock, than a commodity – but GLD has been o.k. I am also long in Euro bonds that are doing well, but expiring this month.
I am real leary of stocks, but all that money has to go some where and the stock market may be the only place that can absorb all of the “new” dollars. I am hedging with SDS which goes up double when the S&P goes down.
I may want to shoot myself later, but I am thinking that there may be some bargains in the market, and that the overall market may be lackluster, but some discount consumer staples may do O.K.
My real worry is a fire sale on the dollar, and any dollar denominated CD’s and bonds may be seriously hurt.
ParticipantI am in a similar situation, but my gold has been less than I would like. GDX is going up and down more like a stock, than a commodity – but GLD has been o.k. I am also long in Euro bonds that are doing well, but expiring this month.
I am real leary of stocks, but all that money has to go some where and the stock market may be the only place that can absorb all of the “new” dollars. I am hedging with SDS which goes up double when the S&P goes down.
I may want to shoot myself later, but I am thinking that there may be some bargains in the market, and that the overall market may be lackluster, but some discount consumer staples may do O.K.
My real worry is a fire sale on the dollar, and any dollar denominated CD’s and bonds may be seriously hurt.
ParticipantThe credit report stays negative – reports the foreclosure for seven years and seven days after the last legal action. So after all the creditors get done with their paper work – which may be a while with todays volume of repos, then seven years + of notes on the TRW, Trans Union, and Equifax reports will include the negative item.
There will be a lot of these negative items and maybe future lenders will be more lax, but I doubt it. There is no “repairing” a public record item.
Is it is a good idea to walk away or not depends on the tax consequences and new rental costs. Between the state and fed tax relief, there is a $24,000 deduction/year. At 22% fed, and 8% state nominal tax rates, that is $7200/year that would need to be offset by an equal reduction in rent vs own. If their tax rates are much lower, then . . .
It may not be a great idea to walk and rent with todays variable credit card interest rates. When a foreclosure triggers a higher rate, who know?
ParticipantThe credit report stays negative – reports the foreclosure for seven years and seven days after the last legal action. So after all the creditors get done with their paper work – which may be a while with todays volume of repos, then seven years + of notes on the TRW, Trans Union, and Equifax reports will include the negative item.
There will be a lot of these negative items and maybe future lenders will be more lax, but I doubt it. There is no “repairing” a public record item.
Is it is a good idea to walk away or not depends on the tax consequences and new rental costs. Between the state and fed tax relief, there is a $24,000 deduction/year. At 22% fed, and 8% state nominal tax rates, that is $7200/year that would need to be offset by an equal reduction in rent vs own. If their tax rates are much lower, then . . .
It may not be a great idea to walk and rent with todays variable credit card interest rates. When a foreclosure triggers a higher rate, who know?
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