US Dollar (DX) Longer Term Charts

Here is the longer term view of the US Dollar as measured by a basket of currencies.

Can it 'break out' here? Yes, certainly. Europe and Japan have their problems, and in the world of fiat, the grading of the paper is done 'on a curve.' The central banks and their mavens, who intervene at least indirectly in the currency markets with a certain obsessiveness these days of non-stop financial engineering, like to shove their manipulation around the plate as well. They don't 'tweak' the economy; they are the economy, at least at the margins.

Can it also fail and break down here? Yes, certainly. A stronger dollar will step hard on the weak US economic recovery. It will serve to lower import prices, but dampen exports, which is what they call 'bad news' when your domestic demand is slack.

There is the fundamental detail an enormous amount of dollars being held overseas that are not in circulation so to speak. At some point they, like the swallows of Capistrano, will return, and have trouble finding a place to comfortably roost.

But the market does not care about our theories, or even the charts. They are just rough estimates of a very complex reality. This is a disclosure that all pundits should place on their prognostications.

And in these days of thin markets and bank prop desks as a major source the income, the fundamentals are less relevant than the short term reality of the squid's need to feed.

Let's see what happens. Then we will know something actionable.

There Can Be No Bubble in China and the Madness of the Nobility

Just now on Bloomberg Television Peter Levene, the former Lord Mayor of London and distinguished chairman of Lloyds of London, said that there is no bubble in China because "China is so big, their domestic markets are so big, you cannot have bubbles there."

A sincere interpretation of the theoretical underpinnings of this statement would be that the potential demand in China is so great, there can be no possible bubbles there because they are incapable of excess. Interesting theory. Perhaps the US relief effort in the Caribbean is on the right track but insufficient. They can ship their excess and foreclosed housing for the poor souls there. Think of the demand gap that exists between sub-Saharan Africa and Europe. Well perhaps not.

My God, could this be a variant of Efficient Markets Theory? Or a cousin of Too Big To Fail? Apparently the logic in 'The bigger they come the harder they fall" has been repealed.

Of course China is in a financial bubble. It has been caused by years of pegging their currency at an artificially low rate to stimulate exports, multiplied by a state banking system that acted with command and control subsidies. And of course the US can been exporting monetary inflation for years through its dollar reserve currency. Someone had to absorb it.

But it is what China does next, how they react to the bubble, how they manage the consequences of their financial engineeering, that matters. The US has been in several bubbles of late, and is handling them rather badly, as a result of their tolerance for Mad Hatters like Larry, Tim, and Ben in key policy positions.

To be fair, Chairman Greenspan came out with his own howlers of this caliber, and was accepted by many intelligent people in the States for years. In fact, a whole industry was based on ideas and falsified evidence about the impossibility of a housing bubble in the US that in retrospect seems like barking madness.

Come to think of it, both of these fine men are nobility, KBE, Knights of the British Empire. Perhaps it is something deleterious, or even contagious, that occurs when one is subsumed into nobility? Caligulitis? Did the Queen give them a concussion in the ceremony?

I suspect Lloyds is exposed rather badly to China, and m'Lord is talking his book. What is Greenspan's excuse? Whose book was he talking?

This is why the banks and financial organizations must be retrained, because they seem to be peopled by an ersatz nobility that is disposed to spectacular flights of self-serving fantasy. Come to think of it, there is room in the asylum for the government as well.

The US needs a political system that is not so amenable to soft bribery in campaign contributions, and the world needs a reserve currency that is not controlled by the Anglo-American banks. Control the currency, control the world.

And as for the bubbles that keep taking down the developing nations, well, here is their mother.







When these trends break, and they will as all Ponzi schemes do, it will be notable.

US Financial Markets: A Broader Perspective

Wall Street feeds on a short term mentality, as it herds the crowd from one investment to the next. This is because it makes its steady income on transactions, as well as front running the short term moves and gaming the system in general.

Yesterday some of the Wall Street mouthpieces were urging the rally on because of a potential Republican victory in Massachusetts. Today the market sells off hard on that Republican victory. In the short term, its all a game.

Let's see if the support holds, or if we are finally getting that correction to the intermediate trends. I would like to finally be able to hold a short position for more than a day. 1110 on the SP futures is key support if the trendline at 1126 breaks.

Here is some perspective from the daily charts.

HUD Suspends Anti-Flipping Rule for FHA Loans

"As a dog returns to its vomit, so a fool repeats his folly." Prov 26:11

"Mortgagees" in this case would be the banks and their subsidiaries that have foreclosed on the home. So all you entrepreneurial flippers need to check the fine print, and perhaps team up for a percentage from the banks, who are in the driver's seat on this HUD exception to the anti-flipping rule passed in 2003.

This does provide yet another opportunity for the banks and their subsidiaries to skin more money from the foreclosure transaction with the help of public subsidy. So if you are the entrepreneurial sort, you'll have to grease the palms of the banks to gain access to the FHA for those quick flips.

The waiver from the HUD Website is here.

HUD No. 10-011
Lemar Wooley
(202) 708-0685 FOR RELEASE
Friday January 15, 2010

HUD TAKES ACTION TO SPEED RESALE OF FORECLOSED PROPERTIES TO NEW OWNERS

Measure to help bring stability to home values and accelerate sale of vacant properties

WASHINGTON - In an effort to stabilize home values and improve conditions in communities where foreclosure activity is high, HUD Secretary Shaun Donovan today announced a temporary policy that will expand access to FHA mortgage insurance and allow for the quick resale of foreclosed properties. The announcement is part of the Obama administration commitment to addressing foreclosure. Just yesterday, Secretary Donovan announced $2 billion in Neighborhood Stabilization Program grants to local communities and nonprofit housing developers to combat the effects of vacant and abandoned homes.

"As a result of the tightened credit market, FHA-insured mortgage financing is often the only means of financing available to potential homebuyers," said Donovan. "FHA has an unprecedented opportunity to fulfill its mission by helping many homebuyers find affordable housing while contributing to neighborhood stabilization."

With certain exceptions, FHA currently prohibits insuring a mortgage on a home owned by the seller for less than 90 days. This temporary waiver will give FHA borrowers access to a broader array of recently foreclosed properties.

"This change in policy is temporary and will have very strict conditions and guidelines to assure that predatory practices are not allowed," Donovan said.

In today's market, FHA research finds that acquiring, rehabilitating and the reselling these properties to prospective homeowners often takes less than 90 days. Prohibiting the use of FHA mortgage insurance for a subsequent resale within 90 days of acquisition adversely impacts the willingness of sellers to allow contracts from potential FHA buyers because they must consider holding costs and the risk of vandalism associated with allowing a property to sit vacant over a 90-day period of time.

The policy change will permit buyers to use FHA-insured financing to purchase HUD-owned properties, bank-owned properties, or properties resold through private sales. This will allow homes to resell as quickly as possible, helping to stabilize real estate prices and to revitalize neighborhoods and communities.

"FHA borrowers, because of the restrictions we are now lifting, have often been shut out from buying affordable properties," said FHA Commissioner David H. Stevens. "This action will enable our borrowers, especially first-time buyers, to take advantage of this opportunity."

The waiver will take effect on February 1, 2010 and is effective for one year, unless otherwise extended or withdrawn by the FHA Commissioner. To protect FHA borrowers against predatory practices of "flipping" where properties are quickly resold at inflated prices to unsuspecting borrowers, this waiver is limited to those sales meeting the following general conditions:

•All transactions must be arms-length, with no identity of interest between the buyer and seller or other parties participating in the sales transaction.

•In cases in which the sales price of the property is 20 percent or more above the seller's acquisition cost, the waiver will only apply if the lender meets specific conditions.

•The waiver is limited to forward mortgages, and does not apply to the Home Equity Conversion Mortgage (HECM) for purchase program.

Specific conditions and other details of this new temporary policy are in the text of the waiver, available on HUD's website.