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View Diary: The Stock Market is Not Crazy and the Republicans are Toast (210 comments)

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  •  Ridiculous crap. The Fed is not "giving it out (10+ / 0-)

    to bankers".

    QE is a BOND BUYING PROGRAM and the bonds are US Treasuries and GSE MBS ( both from government entities).

    You have been reading too many swern diaries.  Inform yourself please.

    "The way to see by faith is to shut the eye of reason." - Thomas Paine

    by shrike on Tue Apr 30, 2013 at 03:59:03 PM PDT

    [ Parent ]

    •  Right, they're just "injecting money" (3+ / 0-)
      Recommended by:
      chuckvw, JesseCW, banjolele

      into the economy. But they aren't giving it out. It just gets magically put into the economy. And then it magically doesn't cause inflation. You're kidding me right?

      If debt were a moral issue then, lacking morals, corporations could never be in debt.

      by AoT on Tue Apr 30, 2013 at 04:04:08 PM PDT

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      •  By buying 100% guaranteed US debt like (8+ / 0-)

        Treasuries/MBS the Fed frees other monies to go into private investments.

        So the Fed does not "inject" QE willy-nilly.  It is safely stored in US bonds and

        1- lowers interest rates
        2- increases the money supply responsibly
        3- chases other money into projects and investment

        It does so with such little risk that the only downside (inflation) is now a mere mirage among goldbugs.

        "The way to see by faith is to shut the eye of reason." - Thomas Paine

        by shrike on Tue Apr 30, 2013 at 04:10:32 PM PDT

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        •  If interest rates are at .25 (10+ / 0-)

          then it lowers them below zero and effectively funnels money to various banks. You live in a magical world where giving money to banks somehow makes them invest it, even though we did that for years and it didn't work. We live in a consumer economy, this is more trickle down bullshit.

          If debt were a moral issue then, lacking morals, corporations could never be in debt.

          by AoT on Tue Apr 30, 2013 at 04:17:08 PM PDT

          [ Parent ]

          •  People AVOID banks when rates are low. (6+ / 0-)

            And no one is GIVING money to banks!

            How do you get everything backward?

            "The way to see by faith is to shut the eye of reason." - Thomas Paine

            by shrike on Tue Apr 30, 2013 at 04:21:43 PM PDT

            [ Parent ]

            •  Um, yeah, people don't *save* (5+ / 0-)

              But if you think that banks don't have money then you really are living in a different world. They're investment banks. They invest their money in financial instruments and other nonsense, along with some other things. The fact that you're trying to convince me that this has nothing to do with banks is absurd. I mean, seriously?

              If debt were a moral issue then, lacking morals, corporations could never be in debt.

              by AoT on Tue Apr 30, 2013 at 04:24:23 PM PDT

              [ Parent ]

          •  Your comment is on Point (9+ / 0-)

            The Fed bond/mortgage buying program forces investors to "reach for yield".  After all, CALPERS promises an 8.0% return on investments, a return they can no longer get by allocating resources to safe investments.

            So Calpers, and many others, "reach for yield", buying stocks and bonds.  The high yield index is as strong as it's ever been, even stronger then during Drexel's heyday.

            http://marketrealist.com/...

            Against all odds, the high yield bond yields ended last week setting a new record low.

            The average yield for the BAML High Yield Index was at 5.5%, after having started the year at record lows around 6%. To put it in perspective, the high yield bond market is supposed to be composed of the riskiest debt securities, and they’re yielding almost what the 10 year Treasury was yielding back in 2007. The market had never dipped below 7%, but the returns on the week ended lower.

            And frankly, I can't blame pension fund managers for reaching for yield.

            When it blows up, it's going to blow up on all their colleagues, so no one gets fired.

            If they opt for "safer" investments, and Bernanke doesn't pull the punchbowl in the short-term, their returns will trail those who did "reach for yield".  And if that happens, you get fired.

            Learn about Centrist Economics, learn about Robert Rubin's Hamilton Project. www.hamiltonproject.org

            by PatriciaVa on Tue Apr 30, 2013 at 05:03:24 PM PDT

            [ Parent ]

        •  Except it isn't (6+ / 0-)
          Recommended by:
          AoT, Palafox, chuckvw, JesseCW, banjolele, srkp23

          Currently, monies are being "freed" into stock dividends, not investment.  In fact, corporations are making use of low interest rates to buy debt in order to pay for these dividends.  Apple's mega-sale of bonds is just the most recent example of this.  By contrast, private investment is at an all-time low.

          •  Not true. Capital expenditures are at all time (4+ / 0-)

            highs too.

            "Core Cap-ex" - private only - was up 6% y/o/y in Q1.

            Apple's huge bond auction was to pay investors without repatriating its huge off shore cash.

            "The way to see by faith is to shut the eye of reason." - Thomas Paine

            by shrike on Tue Apr 30, 2013 at 04:25:45 PM PDT

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          •  Come on (0+ / 0-)
            In fact, corporations are making use of low interest rates to buy debt in order to pay for these dividends.  Apple's mega-sale of bonds is just the most recent example of this.
            You do understand, right, that what Apple is doing is borrowing $17b against its assets of $145b so as not to take a significant tax loss for sending out those dividends, right?

            I'm not quite sure how this is a bad thing, except in the generic 'no goddamn American companies pay taxes' kind of way. And honestly, it's also not terribly common. In fact, I suspect that (no google-cheating, now!) you can't name another company that has done it in the last year. And that the first three that you find via google will be doing it for the same reason: good cash flow and good profits, but for one reason or another they don't want to commit their cash right at the moment.

            •  Seriously? (5+ / 0-)

              First, yes is obviously is a bad thing that American corporations are shuttling revenues overseas to avoid taxes.  Yes it is a bad thing that they can take advantage of ridiculously low interest rates to raise money to then funnel it to their wealthy investors.  And that amidst all this continues the austerity agenda and the suffering of the American people.  The effective tax rate paid by corporations as a whole is at the lowest level on record and it's doing no favors to our social safety net.

              Second, that "they don't want to commit their cash" was precisely my point.  They aren't investing into the American economy, they are sitting on cash rather than make capital investments that would generate economic growth broadly felt by the American people.  Instead, they convert their cash into dividends felt by their stockholders.  QE isn't doing jack s*** for the economy despite its nominal purpose to "create jobs."

        •  not all MBS's are 'guaranteed' (0+ / 0-)

          "We can't solve problems by using the same kind of thinking we used when we created them." - Albert Einstein

          by pickandshovel on Tue Apr 30, 2013 at 06:03:19 PM PDT

          [ Parent ]

    •  Put 2+2 together (4+ / 0-)
      Recommended by:
      Palafox, chuckvw, banjolele, Kristina40

      The fact that the US government is buying mortgage-backed securities ("MBS" in your parlance) means the state has intervened to artificially prop up the mortgage securities market.  This intervention makes money in the immediate sense for the financial firms that traffic in these securities.  It has ripple effects through the economy.  The rebound in mortgage-backed securities means there is an increased demand for .. you guessed it ... mortgages.  Investment banks want them again, which means lenders have an incentive to put out more mortgages to home buyers.  As demand grows for securities, lenders will want to expand its pool of buyers accordingly.  This means restarting the sub-prime market.

      The combination of dirt-low interest rates plus a government guaranteed "MBS" market means that lenders can reignite the housing bubble.

      So, in response to your "crap" assertion, who does this benefit?  Bankers.  It isn't money "directly" put in their pocket, but in effect it's a system designed to resurrect finance capital.

      •  MBS no longer enjoys its bogus AAA cover. (1+ / 0-)
        Recommended by:
        Satya1

        Try again.

        "The way to see by faith is to shut the eye of reason." - Thomas Paine

        by shrike on Tue Apr 30, 2013 at 04:26:33 PM PDT

        [ Parent ]

      •  There is way too much new regulation (2+ / 0-)
        Recommended by:
        shrike, artmartin

        on mortgage brokers now to create anything like the subprime mess we had earlier.  I'm not saying that can't ever change some day with a Republican led push.  But it isn't going to happen anytime this business cycle.

        The regulations have done much to slow down the typical recovery in which housing sector plays a heavy role.  But the slowly improving housing sector along with better quality mortgages is building a more stable and likely longer lasting financial foundation.

        I'm not liberal. I'm actually just anti-evil, OK? - Elon James White

        by Satya1 on Tue Apr 30, 2013 at 07:45:29 PM PDT

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        •  Really? (1+ / 0-)
          Recommended by:
          JesseCW

          Too much regulation and the gubmint is slowing down the recovery?  Why don't you find a neoliberal blog and go sing love songs to Alan Greenspan.

        •   Appraisals are going flat out nuts (1+ / 0-)
          Recommended by:
          Vespertine

          again, and I can tell you from first hand experience that multiple banks have been eager to loan my wife and I 50% more than we could reasonably pay the note on.

          We're not sub-prime borrowers, but even a short period of unemployment with what they're offering would end in foreclosure if we were dumb enough to take it.

          Wash. Judge Tells Cops To Return Man’s Marijuana Or Be Found In Contempt

          by JesseCW on Wed May 01, 2013 at 03:12:03 AM PDT

          [ Parent ]

          •  That is interesting (1+ / 0-)
            Recommended by:
            artmartin

            but I don't think the US has the same degree of carelessness as that which led to the massive subprime abuse.  I'm not saying all brokers are going to scrupulously follow all regs but there are some clearly defined limits.  And I also am not saying consumers should disregard the first rule, "buyer beware".  But at least there is a new place to go for guidance if consumers are willing to do a little homework for their own self interest.

            ... the new Consumer Financial Protection Bureau issued regulations spelling out how lenders must ensure that borrowers can repay their loans.  Banks that follow the criteria would be protected from most lawsuits.  To meet the standard of a qualified mortgage, a bank would have to verify the borrower's income, employment and total debt, which could not be more than 43 percent of his or her income.

            The criteria also would prohibit subprime loans, teaser low-rate mortgages with balloon payments later, interest-only mortgages, and fees of more than 3 percent.

            I just closed on Friday for a refi and while I've talked to many eager bankers, I found the process to be much tighter than the refi we did a few years ago.  And every broker was openly discussing how the process had been tightened for them.  I also found that unlike years ago, the range of offered interest rates was a much tighter number range this time.  I think perhaps fewer brokers are willing to do teaser rates.  Obviously this is a narrow experience in my area of suburban Chicago and doesn't represent the huge mortgage industry.  I don't think the process is just tighter enough that some of those marginal situations won't get mortgages quite as  easily.

            As for the other layers of the process that contributed toward the collapse: the bundling, the credit rating entities, etc - I'm not sure what is  happening there.

            I'm not liberal. I'm actually just anti-evil, OK? - Elon James White

            by Satya1 on Wed May 01, 2013 at 07:59:58 AM PDT

            [ Parent ]

            •  That lenders are less insanely reckless than they (0+ / 0-)

              were six or seven years ago does not mean that they are not insanely reckless.

              They're lending at prices that likely cannot be sustained when interest rates eventually increase again.

              This isn't about "buyer beware", it's about the contention that lending practices which hand out mortgages that will go into default if even one of the borrowers on the note losses a job for even a few months are somehow insurance against another major crash.

              They're not.  Moving from "completely insane" to "really stupid" isn't a reason to start feeling secure.

              Wash. Judge Tells Cops To Return Man’s Marijuana Or Be Found In Contempt

              by JesseCW on Wed May 01, 2013 at 11:03:45 AM PDT

              [ Parent ]

            •  Jesse will always (1+ / 0-)
              Recommended by:
              Satya1

              take the sky is falling side to any issue and insinuate that everyone involved is corrupt.  Your breath isn't wasted though.  I've very much appreciated your input.

    •  and what are they paying for those GSE MBS's? (1+ / 0-)
      Recommended by:
      AoT

      pennies on the dollar for what they are worth? Or face value, to help the owners of them????

      "We can't solve problems by using the same kind of thinking we used when we created them." - Albert Einstein

      by pickandshovel on Tue Apr 30, 2013 at 05:47:36 PM PDT

      [ Parent ]

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