MERS declared illegal. How will this impact the Foreclosure market, as well as current home sales?

Those who are reading this blog know that I have been discussing the mortgage mess that has been caused by the Mortgage Electronic Registration System (MERS). It was designed to circumvent existing legal recording requirements for transfer of deed and debt note information. Effectively, without MERS the entire Mortgage Securitization industry is out of business. And existing mortgages registered via MERS (over 1/2 half of all mortgages) are now legally suspect.

MERS Declared Illegal

The banking industry has been fighting tooth and nail to maintain the current MERS system, knowing that they are legally "on the hook" for all of those mortgage notes that were originated, sold, traded, and transferred. It anything was done improperly in the origination of these loans, they face massive "put backs" of Mortgage Backed Securities (MBS) on to their balance sheets.

The Mortgage crisis is not over, IMO. We might have just passed through the eye of the storm and are getting ready to be financially pummeled as we pass through the other side.

But in the meantime, this ruling is going to be appealed so that could take another year or so to be accepted, or rejected. There's a lot at stake riding on this ruling. It's going to become very political.

Scrutinizer

The Crux of the Foreclosure Debacle

Florida Foreclosure Report

Foreclosures take place against the Mortgage, not the note.

Read slide 90 especially where it states that the homeowner might face a secondary lawsuit by the actual noteholder

Scrutinizer

Watch that 30 year bond yield.

Signaling bond sell-off, or equities selling off. It's going to be hard for the Fed to manage either.

US 30 year bond at top of 15 year channel.

Edit: that link apparently has expired. So here's the Yahoo chart for the 30 year bond:

30 year bond chart

Scrutinizer

Income In-Equality: The Reason for the Recession?

Now.. I'm not a socialist, so I don't normally align myself with schemes aimed at governmental re-distribution of wealth. What I DO SUBSCRIBE TO is the belief that economic OPPORTUNITY must be made available to the greatest number of people as possible in order to preserve price competition. And that means the greatest economic driver in any economy must be a strong small business sector and middle class which sustains the demand curve in any economy.

For that reason, this article struck me as germane. It asserts that the "rich" have effectively siphoned off economic wealth from the middle class to the point where there is no more purchasing power. And they also, logically, assert that the rich are able to manipulate government officials to pay heed to their needs, and not the needs of "Main Street".


Extreme Inequality helped cause the Great Depression and the current economic crisis

I think we all can recognize that these Wall St. bailouts have essentially done very little for "Main Street USA". We have a unemployment rate FAR HIGHER than what is being recorded (only actual people drawing unemployment are counted in the statistics). Big banks received TARP money, and are now able to borrow from the Fed at nearly 0%, and then loan it back out to the taxpayer financed US Treasury at over 3%. THAT was the reason we had a Trillion dollar stimulus. It created a place to "park" all of that borrowed Fed liquidity, not to make low-interest loans available to the humble masses, most of whom are already up to the necks in debt.

Now I can recognize the need for Governmental intervention into the economy for the purpose of fostering employment. But those projects must be aimed at obtaining an ROI for the US taxpayer. Whether it be re-training people to work in new technologies that enhance productivity and create wealth, or long-neglected infrastructure that will sustain enhanced economic growth, the majority of it must be directed towards projects that create value (short, or long term) for the US Taxpayer.

What are our options? Obviously energy independence that matches or is less than the economic cost of foreign energy.

Renewed efforts towards space exploration and exploiting the resources available there?

Material Sciences.. Carbon Nanotubes.. etc..

Bio-Science.. and health care innovations (17% of the US GDP is health care related and that's TOO MUCH..)

Aqua-culture?

All of these make sense to me.. But what doesn't make sense is just putting people on unemployment for years and claiming they are "creating jobs" by such extensions. You want to create jobs.. then put people to work and obtain an ROI for the taxpayers.

Scrutinizer

Market Reaching Critical Inflection Point?

From Marty Chenard's "StockTiming.com website. He is asserting that the Institutional Index of "core holdings" has reached a double top and if the market fails to push higher, we're due for a major correction off a double top.

Marty also mentions that yields on 30 year T-bills and mortgages has climbed precipitously, suggesting that the Fed risks permitting yields getting out of control. So what's the solution for making bond yields come back into line??.. Generate a decline in the equity markets that drives capital into the "safe haven" of government debt. This is how it works.. huge sums of money slushes from equities to debt on a regular basis. It would appear we're getting due to see that happen again.

Today's very poor retail sales for Best Buy certainly didn't help matters either. It was off 15% on poor earnings. And if BBY can't produce good earnings (given all the gadgets it sells), it doesn't bode well for the rest of the sector.

It's a scary thing to be short this liquidity driven market, funded by QE2, but I'm almost getting tempted to give it a try. It's also "quadruple witching" this Friday, but the CNBC article tells us not to worry.. Well.. when CNBC tells us not to worry, the Contrarian in me tells me we should worry.

Another thing.. JP Morgan was caught red-handed in a massive short position in Silver. It's rumoured that they controlled about 40% of the market via swaps and other derivative positions. So just the other day they announced that they were unwinding that position in Silver.

Why is this important? Because if JPM has stopped trying to hold down the silver market, some speculators assert that that it lifts the resistance to further silver (and gold) upside.

But what if JPM merely sold off it's exposure to other institutions, thereby keeping that pressure on the silver market? Then any decline in the price of silver will correlate to upside pressure on the Dollar (and downside pressure on almost all commodities).

And the prevailing theory is if the USD rises, it will be bad for equity markets as well, especially for those companies dependent upon overseas sales for profits. Now.. most of the "core holdings" discussed above are international companies that are vulnerable to movements in the dollar.

So I concur with Marty Chenard.. we're at an inflection point in the markets. And we're certainly long overdue for a correction.

The rest of the week, and next, should provide some general trend guidance of future market direction..

Scrutinizer

ARMS (Trin) is at levels not seen since 1956

Zerohedge noted that the ARMS index has ascended to highs not seen since 1956, primarily due to QE2 and the Fed financing the buying of Equities (they lend cheap money to Wall St/Banks) who then buy the stock market.

ARMS index at post-1956 highs

This can, and likely will, continue until the Fed drains the liquidity.. Recent drops in the bond market suggest a movement of capital from bonds into equities. This is something the Fed desires, IMO, but they want to control the velocity of such movements in order to prevent a wholesale sell-off in the bond market, forcing them to raise rates before they are ready.

Now.. those who have been following my blog (you lonely sod, you!!), you may recall that back in June the creator of the ARMS index, Richard ARMS, was flashing a raging buy signal for the markets and he was proven absolutely correct (I wish I had paid more attention.. sigh):

ARMS post from June, 2010

So it will be interesting to see what he has to say now. What seems clear is that the US markets are getting very frothy with all this added liquidity.

But we also should bear in mind that I believe that the Fed has recognized that sinister "Mother of all H&S" formations I mentioned in a post back in May. That formation will not be nullified until we reach 14K on the DOW. So it remains in effect until that point, and a "double-top" is also nullified by new highs.

IMO, this is the whole purpose of QE2.. Pump up the markets until such negative technicals are neutralized. Of course, this means inducing inflationary pressures through a weak USD.

The question is whether events overseas, both in Europe and Asia, will thwart the Fed's best efforts to accomplish their goals.

Scrutinizer

Ireland's Banking Crisis: The REAL Story of Who Bankrupted It's Banks..

Very interesting analysis and commentary of the Irish Banking Crisis and how it impacts other European Banks, as well as many Global Corporations who have been attracted by Ireland's low tax rates and loose financial regulatory standards.

Who Bankrupted Ireland?

In sum.. it's argued, convincingly IMO, that the Private Banks are attempting to wrangle a public bailout and place the financial burden and austerity upon the Irish people. And the more the state (taxpayers) are tapped for that bailout, the more it permits private corporate capital to engage in transferring their money out of Ireland.

Scrutinizer