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Archive for March 22nd, 2010
Google To China: Up Yours
March 22nd, 2010 | 
Author: Google To China: Up Yours
Posted by Karl Denninger
“Google has violated its written promise it made when entering the Chinese market by stopping filtering its searching service and blaming China in insinuation for alleged hacker attacks,” said the official.
How about some facts?
Google has no obligation to filter anything provided by a server or facility outside of mainland China. So stick your complaint up your butt, “Mr. Official.”
Second, the attacks were traced to universities with ties to China’s military. If you don’t like that, how about if your country stops stealing literally anything that is not nailed down when it comes to intellectual property, and most things that are!
“This is totally wrong. We’re uncompromisingly opposed to the politicization of commercial issues, and express our discontent and indignation to Google for its unreasonable accusations and conducts,” the official said.
That’s right, it’s “unreasonable” that one should be able to see search results that mention things that your government doesn’t like. Such as, for example, Falun Gong and the Dalai Lama.
Awwwwww….
“Foreign companies must abide by Chinese laws and regulations when they operate in China, ” the official said.
But Google isn’t operating those machines in China! They’re operating them in Hong Kong, remember?
Oh wait – now China gets to find out what the price is of having Hong Kong there playing “special world financial center” while they prattle on about communism in the rest of the nation. We can add Macau to that “special” status, of course, since it’s a gambling mecca. These things don’t really go well with communism but when you have a command economy and simply shoot anyone that disagrees with you all sorts of odd (and wild) distortions become possible.
But, as the Chinese leadership is discovering, such games when exploited for your own purposes (such as rigging international trade) can blow up in your face when used against you – as just happened.
Oops.
Ps: To that “official” – blow it out your ass. We Americans are really getting tired of your cheap Chinese crap and even more tired of your outrageous acts of intellectual property and military theft.
Outrageous And Unsound Lending Continues
Outrageous And Unsound Lending Continues
Posted by Karl Denninger
Yes, we’ll lend you more than a declining-value asset is worth – on purpose:
In fact, Wells Fargo is one of the few lenders that will refinance a vehicle for more than its current value. That means access to cash over and above the value of the new cash out refinance auto loan.
Use the available cash however you choose. For example:
- holiday expenses
- summer landscaping
- unplanned medical bills
- vehicle expenses
- home maintenance
And the first two examples of the uses for the money you gain by “taking advantage” of this ridiculously unsound practice? Outright consumption with no lasting value.
Oh, and when should you consider being a debt serf?
A cash out refinance may be right if:
- you want a lower monthly auto loan payment or rate.
- you qualify for better terms than when you originally financed your vehicle.
- your expenses have increased, and you could benefit from a lower monthly payment. (Ed: you’re going broke with your original terms – that is, you can’t afford the car)
- you rent or have already accessed available equity from your home. (Ed: you are even more irresponsible and already blew all your money from HELOCing the house to the hilt!)
This is our “responsible and consumer-oriented” banking system on display for everyone to see, as of right now, March 22nd, 2010.
As is clearly displayed we have both learned and changed exactly nothing when it comes to financial institution behavior that severely disadvantages consumers and attempts to reduce them to outright destitution and peonage, all for the purpose of driving non-durable consumption spending beyond one’s ability to afford.
Is the much-vaunted Feral Reserve’s charge to oversee and protect consumers going to get involved in putting a stop to this sort of thing? How about CONgress?
Has either put a stop to this sort of nonsense – or even credibly-threatened to do so?
Obviously not.
Posted in Banks, Corruption, Debt, Economic Crisis, Economy, Financial System, loans, Wells Fargo | 
Comments Closed
3 Underground Real Estate Practices Moving the Market – Short Sale Fraud, Squatter Stimulus, and Buying Before Foreclosing.
Posted by mybudget360
In the early days of the housing bubble here in California and other bubble states a handful of people were raising alarm bells that mortgage fraud was occurring at unprecedented levels. The housing industry initially came out skeptically stating this was only a handful of wayward people. As it turns out, it was the vast majority of the industry sticking people into the most toxic loans for the highest level of commission. What was good for the borrower wasn’t necessarily what was the best for the mortgage broker’s bottom-line. After the housing bubble burst, we realized the industry was corrupt to the core and that practices that were standard were largely a joke. The housing market became one big free grab bag of money. Some now think that we somehow have stopped this massive fraud but that is a big misconception. The fix is in.
The irony of this bubble is the industry that created the housing mess (i.e., mortgage brokers, agents, appraisers, banks, and Wall Street) are now on the other end offering loan modifications and assistance on foreclosures. Without any actual financial reform, those that perpetrated the crime actually have firsthand knowledge on what went wrong and are now working the other end of the con. Let us first examine how many bad loans exist in the U.S.:
Source: Census; MBA
The U.S. has 51 million housing units with a mortgage. Another 23 million housing units have no mortgage. A recent MBA survey shows that 15 percent of all mortgage holders are either in foreclosure or 30+ days late (7.7 million mortgages). So in total over 43 million Americans with mortgages are paying on time but all current policy is guided by ignoring what is good for the middle class. Many of those 7.7 million loans are toxic loans and policy is being guided to protect the bottom line of the too big to fail who didn’t practice an iota of due diligence. This is being subsidized by the prudent and those who are paying even though it is antithetical to what is good for them.
So the crux of the problem is how to deal with the 7.7 million homes in foreclosure or that are 30+ days late. The HAMP program has pushed 168,000 mortgages into permanent modification but that leaves over 7.5 million mortgages in distress (and more are entering foreclosure each month). Leave it to the housing industry experts to create additional levels of fraud to siphon off money from the average American.
Con #1 – Short Sale Fraud
Part of the new “help” coming down the pipeline is HAFA. This program is designed to grease the wheels of short sales this year to get those distress properties moving. The central force with HAFA is getting second lien holders to let go of their rights on second mortgages to allow the first lien holder to sell a property. The low $1,000 incentive will not move the market. Short sales have been a tiny part of the market in the last two years so why are we to expect $1,000 is going to make this a big game changer? Keep in mind that in places like California, those second mortgages can range from $50,000 to $200,000 or even higher so banks would rather pretend that loan is worth the book value instead of forcing a major write down.
But the major fraud in short sales occurs off the balance sheet:
“(CNBC) But here’s what’s not legal and what’s apparently happening quite often recently. Since many second lien holders are getting very little, they are now allegedly requesting money on the side from either real estate agents or the buyers in the short sale. When I say “on the side,” I mean in cash, off the HUD settlement statements, so the first lien holder doesn’t see it.
“They are pretty clear and pretty upfront about the fact that if the first lender knows they are getting paid, the first lender will kill the short sale,” says Brandt. “So these second lenders are asking for the payments off the closing documents, off the HUD statement, usually in a cashiers check prior to closing. Once they receive that payment, they will allow the short sale to go through, which according to RESPA laws and the lawyers that we have spoken to on the topic is not legal.”
This is absolutely illegal. Anyone that has been in a real estate deal realizes that the HUD settlement statement accounts for every piece of cash or like money in the transaction. What the above amounts to is a form of extortion. The second lien holder is saying, “give us money under the table or we won’t allow the deal to happen.” In 2009 it appears that 12 percent of all sales were short sales. How many had fraud involved?
Another fraud with short sales occurs with the real estate agent doing a quick flip. Say for example a home has a mortgage of $150,000. The agent negotiates with the bank a $100,000 short sale but has a buyer willing to pay $140,000. He then brings the property under contract for $100,000 then quickly flips it for $140,000. This of course is highly illegal and many buyers don’t even realize this happened unless they carefully scrutinize their records. During this housing bubble how much due diligence occurred? Short sales are designed and setup for massive amounts of fraud. Since we haven’t had any sensible regulation in virtually any industry expect this con to go on for some time.
Con #2 – Squatter Stimulus
It isn’t just toxic loans going bad but also prime loans. Outside of Wall Street the economy is in bad shape:
Source: HousingWire
Loans are going bad across all categories. And as many Americans struggle with the reality of 17 percent underemployment making the mortgage payment is becoming harder and harder. But there is something dubious going on. Banks are no longer going through with the foreclosure process in any stated timeline. In fact, you can live rent free for many months:
“(HousingWire) What the above chart should call attention to is the aging of loans in the default pipeline. Again using LPS data, for all loans more than 90 days in arrears, the average days delinquent is now at 272 days—up from 204 days in early 2008. For loans in foreclosure, the aging numbers are even more staggering: loans in this bucket average 410 days delinquent, up from 260 days delinquent in early 2008.
Ponder those numbers for just a second. On average, severely delinquent borrowers have gone more than 9 months without making a mortgage payment—and yet foreclosure has not yet started for them. For those borrowers who are in the foreclosure process, it’s been an average of 13.6 months—more than one full year—since they last made any payment on their mortgage.”
Now think about that. The average foreclosure timeline is now 13.6 months. Imagine what this does. Let us say you bought a home in California for $500,000. It is now worth $250,000. Your mortgage payment on your toxic loan is $4,000. You don’t qualify for HAMP or any other modification. You decide that you will strategically default. Now, you’ve freed up at least one year of no housing payment. This will give your balance sheet a new cash flow of $4,000 for whatever else you want to do. Even renters have to pay something. It is interesting that banks seem fine with this because the majority of Americans who are paying on time and bailed out Wall Street are subsidizing this kind of action (remember mark to market being suspended?). Aren’t you glad your tax dollars are going to things like this?
“(WSJ) Mr. Fernandez says he made four attempts to modify the larger of the two mortgages on his home, which add up to $423,000. Ultimately, he was offered a monthly payment that, together with back taxes, was higher than what he had been paying. Today he’s working to partially reimburse his lenders, IndyMac Bank (now OneWest Bank) and American First Credit Union, by selling the home, which he expects to fetch about $300,000.
A spokeswoman for OneWest Bank said the bank “offered Mr. Fernandez the lowest payment possible under the [Federal Deposit Insurance Corp.] loan modification guidelines.” A spokesman for American First said the company always seeks to help clients stay in their homes.
With an income of about $8,300 a month and a rent of $2,200, Mr. Fernandez says he now has the wherewithal to do things he couldn’t when he was stretching to pay the mortgage. He recently went to concerts by Rob Thomas and Mat Kearney. He also kept his black BMW 6 Series coupe, which has payments of about $700 a month.”
Loan Modifications at Work
Now when was the last time your bank offered you a modification for paying your mortgage on time? We must be happy that we are allowing some of these poor homeowners to keep their BMWs. Your tax dollars at work.
Con #3 – Buying Before the Foreclosure
Another big issue in areas where prices have fallen includes buying before the foreclosure. Many already know they are purposefully going to strategically default. They also realize their credit will be damaged for a few years. So what is done is this. Say this person bought a home for $600,000 at the peak. These properties are now selling for $300,000. The owner already has made up their mind that they are foreclosing but like their area. So what they do is they purchase the second place for $300,000 while their credit is still good and then let the first place default. End result? They now have a mortgage obligation of $300,000 and that $600,000 property goes back to the bank (which is subsidized by the trillions in bailouts). These are the kind of cons that simply are not reported and are happening more than you would expect.
Conclusion
What we should learn about this housing mess is that people need to come in with a sizeable down payment of their own money. When I say sizeable I mean at least 10 percent of actual saved cash. The big game in town now is FHA insured loans that now make up 4 to 5 loans out of every 10. And these only require 3.5% down but with the current buyer credit, many are buying with zero down. And what a shock that these are now going bad:
“NEW YORK (CNNMoney.com) — The recent spike in the number of delinquent Federal Housing Administration-insured loans has some people worried that taxpayers will eventually have to bail the agency out.
Seriously delinquent FHA loans, those 90 days or more late, jumped 62.1% in the past year to 558,944, or 9.4% of FHA loans, as of the end of January, according to agency statistics released on Friday.”
And this will setup even more cons like the cases we described above. If you bought a place for say $200,000 and you had to put $20,000 of your hard earned money in, you would think twice about leaving. Plus, you have a nice equity cushion. But say you go with a 3.5% (down payment $7,000) but the current buyer credit is $8,000 so you are paying zero when all is said and done. You will be more apt to walk. But again, this is a Wall Street subsidized con game and the majority of the prudent average Americans are getting taken for a walk on both ends of this crisis.
Posted in Banks, Debt, Economic Crisis, Financial System, Home Equity, Loan modifications, Loss Mitigation, real estate |
Comments Closed
Health Care: Arbitrage Obama And The Dems
Health Care: Arbitrage Obama And The Dems
Posted by Karl Denninger
Yes, I mean it.
And yes, I’ve read the Health Bill. Both the 2,000+ page original and The House changes as voted upon.
Here’s the bottom line:
- If you refuse to buy health insurance, you will be fined on a sliding scale that amounts to 2% of your AGI. So if you make $100,000 a year, you could be fined $2,000 for “refusing” to buy insurance.
- You cannot buy a catastrophic policy any more. The “cheapest” acceptable policy will cost somewhere around $15,000 for a single person, and over $20,000 for a family. This is, for most people, more than five times the maximum possible fine – each and every year. The law makes it effectively impossible to maintain an existing catastrophic policy as they “renew” every year, and should any change be made you are then forced to buy something “acceptable” in the law (or pay the fine.)
- When the “pre-existing condition” bar comes down you cannot be charged more or denied coverage due to pre-existing conditions.
- I fully expect 20-50% premium increases immediately, and for the next three years sequentially, in all existing policies. This is precisely what the banks did in front of the CARD act becoming effective, and it will happen here as well. That is the cause of the short-term rocket shot in the health-related stocks this morning.
- In addition the capital gains tax changes will do severe damage to capital formation immediately, and these changes will become especially severe starting in 2014. The market will anticipate these changes and react accordingly, although you certainly wouldn’t know it today.
Ok, this one’s easy.
When the fines and pre-existing coverage “stop-out” go into effect (now for kids, in a couple of years for the rest) drop all coverage for those affected.
Why?
Because:
- The fine is 1/5th or less the cost of the “insurance.”
- For routine care, you now can negotiate for your care before it is provided. It will be cheaper to do so than to buy the insurance – for routine events. Don’t try to tell me it’s not either – I’ve been carrying a catastrophic-only policy now for more than a decade, and as a consequence I’ve negotiated these fees and costs for routine things and saved tens of thousands compared to simply “buying a full-boat policy.” The only reason for me to carry the “catastrophe” policy – the possibility of being screwed if I developed a serious condition and thus got excluded – has just been erased by this law, effective in a couple of years.
- If you have a catastrophe of any form, buy the insurance at that point in time. You cannot be turned down or charged more.
Screw the government. They are the ones who set the standards – we simply have to live with them, and this is the only logical action to take given what they have just done.
Is there a risk in this strategy? Sure. You could have a “zero notice” catastrophe before you (or someone with a power of attorney) could buy a policy. So you have to be able to survive that sort of “short-term” event – but remember, you’re going to be banking $10-20k per person during the time you’re running “naked.” So do exactly that – bank it for a year or two - so you have the ability to cover the instant expense from one of those “aw crap!” catastrophic circumstances. Fact is, they don’t happen often and in a year or so you can have a very nice cushion against them.
Businesses will be dropping people like flies from business-covered “insurance”; there will be no reason for anyone as an employer to be providing this “benefit” into an environment where insurance prices will double – and probably double twice – in the next four years. If you think not, look at what was done to credit-card holders in front of the provisions of the CARD act going into effect.
This, by the way, will bankrupt the insurance companies in the end. Nobody will buy until they have HIV, Cancer or some other serious illness – then they will buy, and the companies will have to pay – with no lifetime caps or exclusions for pre-existing conditions.
The health care companies that are getting a rocket shot today in the stock market are being bought by fools.
If you have any belief whatsoever in the efficient market hypothesis this is exactly what people will do as the effective dates for these provisions approach, as it will save them ten thousand dollars a year or more – each. The insurance companies will instantaneously lose the “pool” of healthy people who buy against risk – rather, they will have a pool of all sick people who buy against known costs.
Forget it folks – this is the end of the health industry in America, and I will be looking for the recognition in the market (as expressed by technical analysis on the stocks in this sector) that the efficient market will come to the fore.
The intention of The Democrats (and liberals generally) in this legislation is clear and impossible to hide – they intend to completely destroy private health care in favor of a fully-government-run single-payer system. The efficient market guarantees this outcome given the law they passed, and they know it.
I cannot stop this idiocy but I can sure attempt to profit from it.
I am looking to establish the largest targeted short positions of my investing career if and when the technicals confirm that this obvious arbitrage is about to, or is, taking place.
This is one place where a fistful of PUTs can easily turn thousands into hundreds of thousands, and is an extremely-high probability play.
Disclosure: No positions in the sector yet, but as discussed I will have some extremely large ones in the coming months and years!
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for Congress
Michigan 11th District
By Bill Still
There is only one answer for the world economic situation; monetary reform.
1. No More National Debt
2. No More Fractional Lending
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