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I can’t stand this guy, he’s gonna have a heart attack.

He’s a too-tightly-wound pessimistic cheerleader riding shotgun in the bandwagon of irrational exuberance, panic, euphoria and mindlessness typical of today’s volatile markets.

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I searched for the article on that site but didn’t find it. Maybe the CFC hornswoggled them into removing it.

Either way, I think we’ve heard the story: buyer wants lowest monthly payment, doesn’t read fine print, maxes out mortgage payment w/ teaser rate, rate resets, buyer cries.

I look forward to the day when American’s will stop feigning idiocy and take responsibilities for their own actions.

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Thanks guys. I opened a savings account with E*Trade b/c ING just lowered their rates, but I also recently read E*Trade wasn’t doing well financially, and they also didn’t have the best rate for low volume trades, but saving $2 on a trade that takes an extra day probably isn’t worth it.

Anyone used ScottTrade?

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I don’t think we will see a deflationary recession until inflation – the result of lower rates, a weakened dollar, and rising cost of goods – has played out.

The irony is the FED’s watch on “core” inflation doesn’t include food or energy. Still, goods from China will become more expensive with the dollar falling. This lead(Pb) issue is going to raise testing standards and as a result costs, plus the VAT and increases world demand for raw materials. China’s advantage is in labor costs – nothing else. As their economy grows so does their standard and cost of living = higher wages = higher prices.

I’ve asked the same question about this rate cut, and I see nothing but a NET negative. The government spent future money in the 80’s bailing out the S&L’s and what happened to them? Now we’re spending more money we don’t have bailing out who? A few banks that bought bad mortgages? At the expense of the consumers power to expend, and anyone who has money in a bank.

Why?

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Aren’t the credit/bond markets and commercial paper, basically tied to Wall Street through the companies that hold them, particularly MBS that are part of mutual funds? Different yes, but independent?

Agree “Mullet head” is perpetually pessimistic, but I think he’s right about the negative consequences, and I still question the point of this rate cut.

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I posted this here rather than start a new thread. With the 10yr rising and some mortgage rates actually climbing, this guy, while typically bearish, is probably right on.
____________________________________________________

Contrarian Chronicles 9/24/2007 12:01 AM ET
Bernanke: The anti-Robin Hood
By slashing the federal funds rate, the Federal Reserve chief robbed from the country’s future to give a gift to Wall Street. And a lot of ordinary Americans will end up getting hurt.
By Bill Fleckenstein
The Federal Bank of Guardian Angels roared down Wall Street last Tuesday. Its mission — to bail out the stock market — was a success (for now).
But the rate cut was no gift to Main Street, which lies outside the loop of crony capitalism.
Bobble-head Fed
Long ago, the Fed abdicated its responsibility under then-Chairman Alan Greenspan. But now chief Ben Bernanke and the boys at the Fed have taken irresponsibility to a new level, where they have clearly demonstrated that they work for Wall Street — and when Wall Street says jump, the Fed asks, how high?
I don’t quite have the database to research this, but I seriously doubt that we’ve ever experienced a 10% fed funds rate cut, or discount rate cuts of better than 15%, with the stock market a few percentage points off an all-time high.
And at this rate — no pun intended — we could see another record high in almost no time. I suspect that’s never happened before, either, demonstrating that no real pain had been taken prior to the bailout.
Yet the Fed’s board members felt the need — when they knew they were being closely watched and knew they would be telegraphing a message — to telegraph the following message: We don’t care what happens to the dollar or, by extension, the Treasury market. We care only about Wall Street.
A rate cut to be rued
Now the dollar will sink, and inflation will almost certainly rise. And though the Fed was able to drive overnight rates lower by 50 basis points, the most important development in the wake of its action was the decrease in the price of longer-term Treasurys, as rates out 10 years and longer rose over 25 basis points over the next three days.
So while the Fed, in its role of bartender of last resort, can lower short-term interest rates, over time I believe that long rates will rise, as foreigners (and Americans) digest what last week’s Fed action means. Folks will recognize that inflation is not measured excluding food and energy, and will realize that inflation in this country is 5%-plus — which would argue for long-term rates in the neighborhood of 7% or 8%. Thus it has been left up to the currency and Treasury markets to discipline the Fed, which always takes longer and is always far more painful.
Obviously, another consequence is that the moral hazard has been raised yet again. It didn’t take long for someone who probably should have gone out of business for acting irresponsibly to start whining about wanting some more help at the bailout trough. That would be Countrywide Financial (CFC, news, msgs) CEO Angelo Mozilo, who last Wednesday suggested that Fannie Mae (FNM, news, msgs) ought to be allowed to buy mortgages of up to $850,000.
Maybe he’ll get his way, as just that day the Office of Federal Housing Enterprise Oversight reversed itself regarding future growth rates of government-sponsored entities. It’s hard to say exactly what will be possible until some form of financial discipline is brought to bear in this country.
Innocent victims of drive-by central banking
Though it’s obvious the stock market benefited from the Fed’s action, it might not be quite so clear who will get hurt. Obviously, those on fixed incomes, like retirees, will be hurt. Children will be hurt, because they’re the ones who will have to pay for the incredible mess that will have to be sorted out at some point. And anyone old-fashioned enough to save money will be hurt.
Of course, those who will benefit (for now), in addition to the extremely wealthy, are speculators. It seems the national pastime in this country is to speculate and lever up. And then, when one and two plans don’t work, demand to be bailed out. And by the way, your demands will be met.
Cut from the Greenspan cloth
To sum up: Given the fact that folks were going to be scrutinizing what the Fed did, and what message that would send about what the Fed intends to do at future meetings, last week’s 50-basis-point rate cut has to rank up there with the two most irresponsible moves pulled by Greenspan. Those were when:
• In October 1998, on an option-expiration Friday, Greenspan cut rates — with about an hour of trading to go.
• In January 2001, he sprang a surprise 50-basis-point rate cut.
The supposedly clairvoyant crowd at the Fed never sees problems coming, but folks always assume that it will be able to save them via the printing press. Though that’s worked for a long time, in the end it’s going to lead to huge problems for this country, as anyone with an ounce of brains understands.
I don’t think the Fed’s punch-bowl fill-up will be able to ward off recession or restart the housing bubble. All the Fed will have accomplished is to postpone some of the fallout from our current problems while making them even worse in the long run.

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There’s already mainstream specualtion as to whether this cut was beneficial or not, given how the 10Yr and dollar responded.

Just rip the band-aid off, bleed out, and get it over with.

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It’s so easy to rip on the NAR because they do make some ridiculous statements , but you have to believe they are informed and have some idea of reality despite what they say.

They probably know most people are not as informed as anyone reading these posts, so they feel it’s better to sugarcoat everything so people don’t panic.

People are emotional with money, and if they see prices fall by 50%, most people WON’T buy. They’ll think prices will contine to drop 50%.

So while people like us WOULD buy, the NAR would rather present the illusion that everything is okay, at the expense of those who listen, while people like us WOULD by at a 50% drop.

The NAR got themselves into this mess though with slogans like “it’s a great time to buy or sell”, and now they can’t do much but lose credibility while waiting it out.

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That Murray guy is a perfect example why the government should NOT do anything.

As you guys said, $1800/mo pamynet with a $90,000 income. That guy financed a lifestyle behind his above average income, and here’s his reply to facing reality:

“If they gave us that money, we’d be able to be out of this predicament,” he said.

What a joke? This guys want welfare for the relatively rich, financially reckless, and completely clueless.

Fortunately, I’m starting to think Bush’s plan is nothing but hot air:

Twenty-seven percent have already missed a payment, said First American LoanPerformance, which owns the largest database of U.S. mortgages. That makes them ineligible for the Federal Housing Administration bailout proposed last month by President George W. Bush.

Good.

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srd – what do you mean by get through this?

If those rates hold constant and rents rise enough to meet average home prices say in 2 years, incomes will still be too low to support those prices.

It’ll be interesting.

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Guys it’s okay, stocks are up today, and people’s credit card rates went down about a half a point too – consumers will now be able to spend all that money they couldn’t and stave off a recession.

Right, and at the same time, the dollar will equal the Euro, oil will hit $60, inflation will dip below 1%, savings accounts will gain 8%, and pigs will fly.

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I’m going to get those inflation numbers and go to the stores and demand those prices!!

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The DOW is up again today, which just makes me wonder how long this feel good rally will last until the reality sets in the people are still up to their ears in debt, still can’t pay off their mortgages, and still don’t have incomes keeping up with even core inflation, much less food and energy costs. Anything over 1% in one day to me is a sign of irrationality, regardless of the news. Our economy is simply not growing at that rate.

As far as the rate cut, the LA times had mixed articles. I pasted them because after today they will require a subscription, so I apologize for the length:

“THE ECONOMY
Cut will aid homeowners
The Fed’s action will result in lower rates on certain loans. Savers, however, will see a drop in their earnings.
By Tom Petruno, Los Angeles Times Staff Writer
September 19, 2007
The Federal Reserve’s interest-rate cut will help many people save money on home-equity credit lines and adjustable-rate mortgages — but whether it will revive the troubled housing market is far from clear.

One risk is that the Fed’s move Tuesday could ignite inflation fears, which could drive up conventional mortgage rates and make matters worse for housing.

“If the Fed does revive inflation it’s going to put a damper on housing and other activity in the economy” by pushing up long-term rates, said Gregory Hess, professor of economics at Claremont McKenna College in Claremont.

In the short term, there will be some definite winners — and losers — as a result of the central bank’s half-point cut in its key short-term rate, to 4.75%.

Savers will lose as their interest earnings decline. But homeowners who have home-equity credit lines will see their interest costs reduced almost immediately, said Greg McBride, senior analyst at BankRate Inc. in New York. That’s because the majority of those credit lines are tied to banks’ prime lending rate, he said.

Major banks including Bank of America, Wells Fargo, Citibank and others quickly reduced the prime Tuesday to 7.75% from 8.25%. They typically keep it three percentage points above the Fed’s rate.

Many banks also link credit card rates to the prime, but card rates tend to be adjusted more slowly than home-equity loan rates, McBride said.

Some homeowners with adjustable-rate mortgages that will reset soon already were expecting a bit of relief, and the Fed’s cut may ensure that they get it.

Many ARM loans are tied to an index of one-year Treasury bill rates. That index has fallen since midyear; it was 4.15% on Monday, down from 4.99% on July 23, according to the Fed.

Rates on Treasury securities have slumped because some investors have rushed into those issues as a haven amid global financial market turmoil, and because others bought Treasuries betting that the Fed would be forced to ease credit.

“The bond market was far ahead of the Fed,” said Rick Keller, head of Keller Group Investment Management Inc. in Irvine.

Now, if the market anticipates more Fed rate cuts, it’s possible the one-year Treasury index will fall further, experts say.

Paul McCulley, a bond fund manager at Pacific Investment Management in Newport Beach, said his firm expected the Fed to continue paring its rate to at least 3.75% in 2008 because of the threat the sinking housing market poses to the economy.

“This is not a one-and-done type of world,” McCulley said of the rate-cut outlook.

But homeowners who have sub-prime ARMs with very low teaser rates, and who are facing a rate reset soon, may still be facing a new rate that’s far more than they can afford — 8%, say, instead of 8.5%, depending on how the loan is structured.

New home buyers and homeowners who want to refinance into a 30-year loan face the biggest question mark, because it isn’t certain that the Fed’s reduction in its short-term rate will translate into lower long-term mortgage rates.

That’s because long-term interest rates are set by the marketplace, not by the Fed. And one key consideration of investors in determining long-term rates is what inflation rate they expect, because inflation eats away at bonds’ fixed returns.

If investors think the Fed’s credit-easing move could stoke the economy and boost inflation pressures in 2008, that could result in long-term rates rising, analysts warn.

For the beleaguered housing market, that would mean “putting it in a worse bind” than it already faces, said George Goncalves, Treasury-market strategist at brokerage Morgan Stanley in New York.

On Tuesday, the 10-year Treasury note yield inched up to 4.47% from 4.46% on Monday, even as short-term rates fell. Thirty-year mortgage rates tend to track the 10-year T-note.

Still, because the 10-year T-note yield has tumbled from 5.05% in mid-July, 30-year home loan rates also have fallen. They averaged 6.31% nationwide last week, down from 6.73% in mid-July, according to mortgage finance giant Freddie Mac.

Keith Gumbinger, vice president at loan tracker HSH Associates in Butler, N.J., said there may be another obstacle to lower mortgage rates: Some struggling lenders, he says, “won’t be in any great hurry to pass along their savings” from cheaper money because they’re trying to fix their own battered finances.

For savers, meanwhile, the Fed’s rate cut is almost certain to mean that banks will trim the yields they pay on savings certificates, experts say. So some savers may want to lock in yields on longer-term CDs, depending on their income needs.

Those yields already have been drifting lower since mid-August as rates on Treasury securities have come down, in part anticipating the Fed’s move.

The average annualized yield on a one-year, $25,000 bank CD nationwide now is 4.16%, according to rate tracker Informa Research Services.

The key is to shop around, BankRate’s McBride said. Banks set their CD rates based on their funding needs, he noted, which means some may trim their payouts much less than others.

By contrast, yields on money market mutual funds are expected to fall across the board, assuming the Fed’s move has the intended effect of lowering rates on the short-term corporate IOUs that many funds buy.

Money fund yields should decline by about half a point over the next eight weeks or so, said Deborah Cunningham, chief investment officer at Pittsburgh-based Federated Investors. The average seven-day annualized yield on money funds was 4.69% last week, according to IMoneyNet Inc.

[email protected] ”

AND –

“Fed’s rate cut may be bad news for some
7:13 PM PDT, September 18, 2007

If Tuesday’s larger-than-expected cut in interest rates makes it cheaper and easier for people to get loans, that could be bad news for Yusupha Touray.

By his estimate, Long Beach resident Touray, 27, owes about $93,000 in credit card, phone, utility and hospital bills. “When my bills come, I know I don’t have any money to pay them,” he said. “So I don’t bother anymore.”

Nevertheless, Touray said he gets pitches from credit card issuers in the mail almost every day. If those pitches become a smidge more attractive because of lower interest rates, he said he may just be tempted to go even deeper in the hole.

“It’s amazing,” Touray said. “You keep saying no, and they just keep making more offers.”

The Federal Reserve said its decision to cut short-term interest rates by half a percentage point was intended to ease the credit crunch in the housing market. That’s another way of saying the main beneficiaries are heavyweight financial institutions that got slammed by investments in sub-prime loans.

For consumers, the rate cut will mean lower mortgages for some, but also lower credit card rates and lower rates for auto loans. And for those who aren’t careful, it could result in even more debt for a country that’s already drowning in consumer debt.

“There’s definitely a danger that people will be tempted to take out too much credit,” said Linda Sherry, a spokeswoman for Consumer Action in Washington. “They’ll use it for things they want rather than things they need.”

Since consumer spending accounts for about two-thirds of the U.S. economy, that’s not necessarily a bad thing. But unless managed prudently, it can spell trouble for many households.

According to Fed statistics released last week, U.S. consumers are carrying a record $2.456 trillion in debt (not including mortgages).

The amount of revolving credit, such as credit cards, carried by consumers rose in July at an annual rate of 6.6%, or by $5 billion — the third straight month of significant gains. Revolving credit was up 6.4% in June and a whopping 10.9% in May, the Fed reported.

Nonrevolving credit, which includes auto loans, registered only a modest 1.9% gain in July. That compares with 5.6% in June and 5.5% in May.

With lower interest rates, it’s possible that revolving and nonrevolving credit will shoot higher. And with it, consumers’ debt load.

Sima Azim knows all about that. The windows and display cases of her downtown L.A. jewelry store drip with bling — gold chains, gold bracelets, gold watches.

Azim, 45, said that with the economy the way it is, she’s seeing more people using plastic instead of cash to buy baubles.

“People love the gold,” she said with a shrug. “So they use their credit.”

Prowling the downtown area, I had no trouble finding people with debt problems.

Frank Banueloz, 44, works as a legal analyst for the state Department of Justice. He said he tries to manage his finances wisely. Even so, he and his wife are carrying about $10,000 in credit card debt.

“I’m trying to use cash more instead of credit,” he said. “It’s hard to do.”

The flip side of consumers’ record high debt level is a pathetically meager personal savings rate. According to the Commerce Department, the nation’s savings rate for all of last year was minus 1%, the worst showing since the Great Depression.

That means people were spending every last penny they earned, and then were dipping into savings, stocks or other resources to spend just a little bit more. The savings rate crept up to 0.7% in July from 0.5% a month earlier.
load during the first three months of the year, according to the liberal-minded Center for American Progress. That’s up from 13% in the first quarter of 2001.

Toluca Lake resident Daryl Sanchez, 40, is typical of many middle-class Southern Californians. He’s well educated, works hard, yet still struggles to ease his debt burden. Yet with student loans, credit cards and other bills, Sanchez said he’s more than $50,000 in the hole.

“Everything’s so expensive,” he said. “Just the basics, like gas. It’s so easy to get into debt.”

Sanchez said he’s trying hard to reduce his debt. “It’s challenging,” he said. “There’s only a finite amount of income coming in.”

The experts advise consumers to limit themselves to only one or two credit cards, and to pay off the balance each month. Resist the temptation to make minimum payments, which can trap you in an endless cycle of debt.

And throw away all those solicitations from card issuers spilling into the mailbox, no matter how attractive the terms may appear, especially with lower interest rates.

John Barnes, 76, works as a construction inspector. On Tuesday, shortly after the Fed slashed rates, Barnes was watching as a power shovel dug a trench in a downtown street.

Credit card debt? Nah. He said he doesn’t even carry plastic.

“If I can’t pay for it, I don’t get it,” Barnes said.

Such simple advice. And it can make all the difference.

Consumer Confidential runs Wednesdays and Sundays, and frequently in between. Send your tips or feedback to [email protected].”

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I love it – people don’t care what’s true, they just want to hear what they want hear.

Recession/Election ’08

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Contraman, I don’t doubt what you say one bit. Somewhere along the line though a summary of opinions has to come her way. They can’t ignore everyone.

I agree with your points hipmatt, and it is a joke.

patientrenter, I like your idea, though I equally like the idea of a grass roots movement. If you have any specific suggestions on where to put my slowly devaluing savings shoot me a line a dcoop14 at hotmail.

It seems the long run is getting shorter and shorter.

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