Footage of the Highway to Fukushima

Hat tip to Zero Hedge for finding this alarming video!

Gundlach: Two Ways to Lose in Munis

More Gundlach from Morningstar's interview and this time discussing Municipal Bonds. I agree with Gundlach. My take is that yields are better then last year this time, but there is pain to be had. There is going to weakness in price and most muni bond holders are not accustomed to volatility. The panic will create opportunities because most bonds should survive the crisis. I have warned folks if they are confident in their holdings and can stomach "paper" losses they should be okay. Those that are more tactical it makes sense to have some dry powder ready for the next 12-18 months. That could be said for a number of different asset classes... Anyways enjoy Gundlach and his new facial hair.

Gundlach: Two Ways to Lose in Munis

Gundlach: Stock Market Will Have Trouble Topping Bonds

The Mercs are always a fan of anything from the bond maven Jeffrey Gundlach. Follow the link and enjoy!

Gundlach: Stock Market Will Have Trouble Topping Bonds

95% LTV hurray for Australia!

As I'm working on part 2 on my aussie housing bubble problem I stumbled upon this brief headline from the online/magazine publication The Advisor: industry news for mortgage and finance brokers. Which by the way is gold mine of all things bubbly in Australia. Do not think this will be the last time I will post something originating from this publication! The link below is an article talking about one of the majors joining the ranks of 95% LVR or what we in the states call Loan To Value (LTV).

"The Commonwealth Bank has become the latest in a long line of lenders to increase its maximum LVR. Over the weekend, the major announced it would allow all new mortgage customers to borrow up to 95 per cent of the value of a property."

"CBA’s general manager retail products Michael Cant said the decision to increase its maximum LVR was a response to growing competition for a smaller number of borrowers.

“We are certainly looking to grow our lending to the home loan market,” he said."

http://www.theadviser.com.au/breaking-news/5019-major-increases-max-lvr

The money part of the quote: "...was a response to growing competition for a smaller number of borrowers." Umm that sure sounds like a ponzi scheme to me! They seem to be running out of greater fools and they need to ratchet up the risk another notch to keep this thing afloat.

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Radiation Dose Chart

Follow the link from the Big Picture blog to get an idea of radiation dosage. I have been meaning to post this for some time...

It puts these posts into prospective and is a good guideline for what's going on in Fukushima
-Footage of the Highway to Fukushima
-Best/Scariest Chernobyl Documentary: Battle for Chernobyl

Link Source:
http://www.ritholtz.com/blog/2011/03/radiation-dose-chart-2/

Best/Scariest Chernobyl Documentary The Battle of Chernobyl (HQ)

i

The Housing Bubble isn't gone it just moved; Part 1

I find it unbelievable that after what the US & Europe have been through over the last 4+ years with the housing bust that folks around the world would be more vigilant to preventing it from occurring. Well at least temporarily from occurring. History teaches us that humans are bound to repeat similar mistakes. Mark Twain's quote says it best, "history doesn't often repeat itself but it sure does rhyme". Anytime I can quote Twain I take that opportunity! Well the shocker in all of this is Australia hasn't learned 1 bit from the suffering of Europe and the US. Their major banks have all the greatest hits from the housing bubble. I am going to pick on one of their banks but most of them are doing similar irresponsible lending practices. Hell they are trying to out compete each other in the quest of market share without regard to the consequences.

I am going to feature Westpac Bank Corp one of the larger Aussie & New Zealand banks out there. All of this information I will be commenting on is in plain sight and can be gathered on Westpac's website. First I will rattle off some of the terminology like the Rocket & Flexi First Option Loans. Interest Only up to 10 years with Low Doc loan Applications: "If you're self-employed and don't have documentation proof, we can still help." Combination loans that combine a fixed and variable component to the loan. 100% offset loan accounts that act like a margin account. Then a laundry list of different options of: Top-up, Redraw, Portability, Repayment Holiday, Parental Leave, Reduced Repayment, Progress draws for Construction, Smart Pay, and Funds Access. Wow! That my friend is a lot of financial innovation. Now granted some of the options can be useful and are nice. You can put lipstick on the pig, but a pig is a pig. Guess what? Debt is still debt no matter how you dress it up too.

I am in debate with a leading Australian bank analyst and he has passed on some of his reports countering my belief that Housing Bubble in Australia is a major danger. After I look through it I will pass on some of the findings.

*Disclosure: No position in Westpac Bank corp as of the date of this post


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Quantitative Easing Explained

Thoughts on the End of QE 2

Merrill Lynch's Jeffery Rosenburg came out with a fantastic research report on February 16th titled "Double Rainbow". It was an excellent report plus it made me laugh. Unfortunately I can not post it here, but it inspired me to jot some thoughts down of how my best guest of the end of QE2 will play out. Here are those thoughts:

It’s going to get real interesting this summer as QE 2 is schedule to stop. The markets more than ever are being driven by government policy. As a market purist I am not too comfortable with that, but it is what it is. The $100+ billion/mo of “jet fuel” being added to the system through QE 2/POMO is a potent medicine and it has worked thus far. Asset prices are up and company balance sheets are better than they have been in awhile. The wealth effect is beginning to work as “retail” has started the inflows into Equity Mutual Funds. This could carry the market beyond June, but any speed bump (like the Greece crisis after QE 1 or the current middle east turmoil) could scare retail out again. Some research speculate that with the state of the current US deficits it is impossible for the Fed not to start up QE 3. All of these factors can be viewed as positive.

The flip-side is that there is more and more political/international pressure against continuing that policy. The Fed is not getting the desired “good inflation” in housing. Plus the side effects of the medicine are starting to show up in spots that the Fed can’t be too happy with (food, energy, precious metals, etc.). This should have a detrimental effect on an already over levered consumer. Will companies be able to push that commodity inflation on to the consumer without any ill effects? Pricing power has been weak thus far and that has to be concerning to margins. Leverage is still prevalent in the system and deleveraging hasn’t or (better yet) allowed to take its course. I see more cons than pros.

Right now I am bubblish and will hunker down May/June to see how things play out. For fun… my “crystal ball” says that June/July we see the S&P 500 meet a lot of the economist 2011 year end predictions. However by late summer we should see a correction of about 15% and the bearded one institutes QE 3 with an initial market reversal to the positive side. (I don’t think Bernanke will institute QE 3 without a little pain to back him up.) My grand fear is this time it doesn’t work because of the previously outlined bad inflation, margin collapse, higher rates, asset price exhaustion, etc. Plus most of stimulus 2.0 will wear off in 2012 and then we are back to the feared potential tax hikes in 2013. I don’t see what bullets the Fed has to use at that point and we see another bear market with downside of around 30%. 2012 will be a tough year indeed.