Best of the Week
Most Popular
1. Stock Markets and the History Chart of the End of the World (With Presidential Cycles) - 28th Aug 20
2.Google, Apple, Amazon, Facebook... AI Tech Stocks Buying Levels and Valuations Q3 2020 - 31st Aug 20
3.The Inflation Mega-trend is Going Hyper! - 11th Sep 20
4.Is this the End of Capitalism? - 13th Sep 20
5.What's Driving Gold, Silver and What's Next? - 3rd Sep 20
6.QE4EVER! - 9th Sep 20
7.Gold Price Trend Forecast Analysis - Part1 - 7th Sep 20
8.The Fed May “Cause” The Next Stock Market Crash - 3rd Sep 20
9.Bitcoin Price Crash - You Will be Suprised What Happens Next - 7th Sep 20
10.NVIDIA Stock Price Soars on RTX 3000 Cornering the GPU Market for next 2 years! - 3rd Sep 20
Last 7 days
Trump and Coronavirus Pandemic Final US Catastrophe 2021 - 19th Jan 21
How To Find Market Momentum Trades for Explosive Gains - 19th Jan 21
Cryptos: 5 Simple Strategies to Catch the Next Opportunity - 19th Jan 21
Who Will NEXT Be Removed from the Internet? - 19th Jan 21
This Small Company Could Revolutionize The Trillion-Dollar Drug Sector - 19th Jan 21
Gold/SPX Ratio and the Gold Stock Case - 18th Jan 21
More Stock Market Speculative Signs, Energy Rebound, Commodities Breakout - 18th Jan 21
Higher Yields Hit Gold Price, But for How Long? - 18th Jan 21
Some Basic Facts About Forex Trading - 18th Jan 21
Custom Build PC 2021 - Ryzen 5950x, RTX 3080, 64gb DDR4 Specs - Scan Computers 3SX Order Day 11 - 17th Jan 21
UK Car MOT Covid-19 Lockdown Extension 2021 - 17th Jan 21
Why Nvidia Is My “Slam Dunk” Stock Investment for the Decade - 16th Jan 21
Three Financial Markets Price Drivers in a Globalized World - 16th Jan 21
Sheffield Turns Coronavirus Tide, Covid-19 Infections Half Rest of England, implies Fast Pandemic Recovery - 16th Jan 21
Covid and Democrat Blue Wave Beats Gold - 15th Jan 21
On Regime Change, Reputations, the Markets, and Gold and Silver - 15th Jan 21
US Coronavirus Pandemic Final Catastrophe 2021 - 15th Jan 21
The World’s Next Great Onshore Oil Discovery Could Be Here - 15th Jan 21
UK Coronavirus Final Pandemic Catastrophe 2021 - 14th Jan 21
Here's Why Blind Contrarianism Investing Failed in 2020 - 14th Jan 21
US Yield Curve Relentlessly Steepens, Whilst Gold Price Builds a Handle - 14th Jan 21
NEW UK MOT Extensions or has my Car Plate Been Cloned? - 14th Jan 21
How to Save Money While Decorating Your First House - 14th Jan 21
Car Number Plate Cloned Detective Work - PY16 JXV - 14th Jan 21
Big Oil Missed This, Now It Could Be Worth Billions - 14th Jan 21
Are you a Forex trader who needs a bank account? We have the solution! - 14th Jan 21
Finetero Review – Accurate and Efficient Stock Trading Services? - 14th Jan 21
Gold Price Big Picture Trend Forecast 2021 - 13th Jan 21
Are Covid Lockdowns Bullish or Bearish for Stocks? FTSE 100 in Focus - 13th Jan 21
CONgress "Insurrection" Is Just the Latest False Flag Event from the Globalists - 13th Jan 21
Reflation Trade Heating Up - 13th Jan 21
The Most Important Oil Find Of The Next Decade Could Be Here - 13th Jan 21
Work From Home £10,000 Office Tour – Workspace + Desk Setup 2021 Top Tips - 12th Jan 21
Collect a Bitcoin Dividend Without Owning the King of Cryptos - 12th Jan 21
The BAN Hotlist trade setups show incredible success at the start of 2021, learn how you can too! - 12th Jan 21
Stocks, Bitcoin, Gold – How Much Are They Worth? - 12th Jan 21
SPX Short-term Top Imminent - 12th Jan 21
Is This The Most Exciting Oil Play Of 2021? - 12th Jan 21
Why 2021 Will Be the Year Self-Driving Cars Go Mainstream - 11th Jan 21
Gold Began 2021 With a Bang, Only to Plunge - 11th Jan 21
How to Test Your GPU Temperatures - Running Too Hot - GTX 1650 - Overclockers UK - 11th Jan 21
Life Lesson - The Early Bird Catches the Worm - 11th Jan 21
Precious Metals rally early in 2021 - 11th Jan 21
The Most Exciting Oil Stock For 2021 - 11th Jan 21
Financial Market Forecasts 2021: Navigation in Uncharted Waters - 10th Jan 21
An Urgent Message to All Conservatives, Right-Wingers and Patriots - 10th Jan 21
Despite Signs to the Contrary, Gold Price at or Near Top - 10th Jan 21 -
Ultimate Guide On The 6 Basic Types Of Index Funds - 10th Jan 21
Getting Vaccinated at TESCO - Covid-19 Vaccinations at UK Supermarket Pharmacies and Chemists - 10th Jan 21
Cheers for the 2021 Stock Market and These "Great Expectations" - 9th Jan 21
How to Plan Your Child With Better Education - 9th Jan 21
How To Find The Best Casino - 9th Jan 21
Gold Is Still a Bargain Buy - 8th Jan 20
Gold Price Set to Soar as Hyperinflation Looms - 8th Jan 21
Have Big Dreams? Here's How to Pay for Them - 8th Jan 21
Will the Fed Support Gold Prices in 2021? - 8th Jan 21
Stocks trading strategies for beginners - 8th Jan 21
Who is Buying and Selling Stocks in 2021 - 8th Jan 21
Clap for NHS Heroes 2021 as Incompetent Government Loses Control of Virus Again! - 8th Jan 21

Market Oracle FREE Newsletter

FIRST ACCESS to Nadeem Walayat’s Analysis and Trend Forecasts

US Home Owners Debts Exceed Equity

Stock-Markets / Credit Crisis 2008 Mar 08, 2008 - 02:12 AM GMT

By: Anthony_Cherniawski

Stock-Markets Best Financial Markets Analysis ArticleThe pace of expansion of all forms of debt is decelerating in the fourth quarter of 2007. Domestic non-financial debt rose 8% as a whole over 2007, .75% lower than in 2006. That may not seem like a slowdown, but consumers are changing course at the fastest pace, slowing from a pace of 6.75% annualized growth of debt in the third quarter to 5.5% in the fourth quarter. For the year, household debt rose at 6.75% compared to 10.25% in 2006. State and local government debt expanded at a rate of 9.75% for the entire year, while the Federal Government claims to have expanded its debt burden by 5%. I don't believe that last figure, since much of the Federal Government spending is “off the books.” Read the report and weep. We're all a bunch of debt junkies. Kicking the habit will be very hard.

Homeowner equity dips below 50%.

Homeowner's equity dropped to 47.9% in the fourth quarter and the second quarter number was revised downward to 49.6%, making this the third quarter in a row that homeowner's equity fell below 50%. This is the first time that homeowner's debt exceeds their equity since the Feds kept track in 1945. Moody's estimates that 8.8 million homeowners, or about 10.3 percent of homes, will have zero or negative equity by the end of the month. Even more disturbing, about 13.8 million households, or 15.9 percent, will be "upside down" if prices fall 20 percent from their peak.

The latest Standard & Poor's/Case-Shiller index showed U.S. home prices plunging 8.9 percent in the final quarter of 2007 compared with a year ago, the steepest decline in the 20-year history of the index.

Bernanke wants to share your pain...

In a speech given at the Independent Community Bankers of America annual convention, Mr. Bernanke outlines his plan to mitigate the losses of foreclosure through a write-down program.

“Reducing the rate of preventable foreclosures would promote economic stability for households, neighborhoods, and the nation as a whole.  Although lenders and servicers have scaled up their efforts and adopted a wider variety of loss-mitigation techniques, more can, and should, be done.  The fact that many troubled borrowers have little or no equity suggests that greater use of principal writedowns or short payoffs, perhaps with shared appreciation features, would be in the best interest of both borrowers and lenders.  This approach would be facilitated by allowing the FHA the flexibility to offer refinancing products to more borrowers.”

…and it's getting worse.

The graph to the left shows that we are only halfway through the mortgage resets (3% or higher) that are causing all the problems in the mortgage market. The housing market is in free-fall. The values of homes fell 9.1% in 2007, according to the Case-Schiller Index . That only tells half of the story. Home values nationally fell at an annualized rate of 18% in the fourth quarter and are gathering speed. What this is telling us is that the Federal Reserve rescue has failed.

Are we now in a RECESSION?

March 7 ( Bloomberg ) -- The U.S. unexpectedly lost jobs in February for the second consecutive month, adding to evidence the economy is in a recession. Payrolls fell by 63,000 jobs, the most in five years, after a revised decline of 22,000 jobs in January, the Labor Department said today in Washington . The jobless rate dropped to 4.8 percent, reflecting a shrinking labor force as some people gave up looking for work, or simply weren't counted.

Credit Markets scorched by margin calls.

March 7 ( Bloomberg ) -- The collapse of the subprime- mortgage market has engulfed Carlyle Group, the world's second- biggest leveraged-buyout firm by assets. The odd thing about this announcement is that Carlyle only trades in quality bonds and mortgages issued by Fannie Mae and Freddie Mac. The unfortunate thing is that the management had leveraged its funds 32-to-1. This turned a hiccup into pneumonia as Wall Street de-leveraged this month. It may also be the reason why there was massive selling in quality bonds, recently.

The “R” word may not be good for gold.

NEW YORK ( MarketWatch ) -- Gold futures swung between gains and losses Friday after the government reported the biggest drop in nonfarm payrolls since March 2003, signaling the U.S. economy might already be in a recession.

The jobs numbers have fallen short of expectations for a “moderate growth” economy. A recession may cause speculators to rethink their position.


The sagging Nikkei; blame it on the politicians.

It's the politics, stupid , The mantra for Japan's sickly stock market is getting louder. Foreign and local economists, brokers, investors, restaurant owners, barmen and taxi drivers, Peter Douglas, head of GFIA, a hedge fund consultancy, reels off the list after a recent trip to Tokyo. “They are all spitting blood in a very un-Japanese fashion.”

“The consensus right now is that the reason why the market is falling and Japan appears to be stuck is down to Japanese politicians.”

Shanghai Composite shows increasing worry over U.S.

SHANGHAI , China — Chinese stocks fell Friday amid mounting worries over a weakening U.S. economy and inflation-fighting credit controls at home. The benchmark Shanghai Composite Index fell 60.47 points, or 1.4%, to 4,300.52. The Shenzhen Composite Index slipped 1.3 % to 1,369.84.

What a topsy-turvy market! While we are loosening the purse strings (lower interest rates) China is tightening to curb inflation.

Everyone is hopping off this one!

Investors are abandoning the U.S. dollar and speculating in commodities, instead. For example, crude oil prices shot up a stunning $5 ( U.S. ) to a new closing record of $104.52 a barrel yesterday as investors dumped U.S. dollars and fuelled a broad commodity market frenzy. Just when it seem obvious to everyone, the trend can change, so be on the alert!


Late payments getting later.

The share of all home loans with payments more than 30 days late , both prime and fixed-rate loans, rose to a seasonally adjusted 5.82 percent, the highest since 1985, the bankers' group said in today's report.

``We're seeing people give up even before they get to the reset because they couldn't afford the home in the first place,'' said Jay Brinkmann , vice president of research and economics for the Washington-based trade group.


Is the Midwest getting preferential treatment?

The Energy Information Administration's This Week In Petroleum asserts that the Midwest is the only region where gasoline prices did not increase this week. It remained unchanged at $3.08 per gallon. The West Coast, on the other hand, is getting socked by the highest gasoline prices in history. The price of diesel also surged over 10 cents to $3.658 per gallon.


In like a Lion…Out like a lamb?

The Natural Gas Weekly Update reports, “Boosted by record-high crude oil prices and declining working gas in storage, the prices of natural gas futures contracts increased on the week, reaching levels not seen in the market in more than 2 years. The price of the futures contract for April 2008 delivery increased 68 cents per MMBtu to $9.741.” Cold weather that blanketed much of the country, with the exception of the Northeast, as well as the high crude oil prices, led to price increases at nearly all natural gas spot market locations. Spot price increases in the Lower 48 States ranged mostly between 20 and 50 cents per MMBtu. Well, folks, Spring is just around the corner.


Mish does it again.

In his latest article entitled, “ An Unmitigated Disaster in Jobs ,” Mish handles the details of today's jobs report. It never ceases to amaze me that these government reports have such damning evidence hidden in full view. I suspect that they don't think most people will read the details and figure out for themselves that it's worse than the smiley face report says.

From the BLS: "Both the civilian labor force, at 153.4 million, and the labor force participation rate, at 65.9 percent, declined in February."

Here is the same sentence in plain English. "The unemployment rate dropped because we stopped counting everyone who is unemployed." Expect to see more of this kind of nonsense from the BLS and you will not be disappointed.

We're on the air every Friday.

Tim Wood of , John Grant and I are back in our weekly session on the markets. This week should be fascinating. You will be able to access the interview by clicking here .

New IPTV program starting in March.

I will be a regular guest on starting on Thursday, March 6 th at 4:00 pm EDT . Stay tuned for news and views!

Please make an appointment to discuss our investment strategies by calling Claire or Tony at (517) 699-1554, ext 10 or 11. Or e-mail us at .


Anthony M. Cherniawski,
President and CIO

As a State Registered Investment Advisor, The Practical Investor (TPI) manages private client investment portfolios using a proprietary investment strategy created by Chief Investment Officer Tony Cherniawski. Throughout 2000-01, when many investors felt the pain of double digit market losses, TPI successfully navigated the choppy investment waters, creating a profit for our private investment clients. With a focus on preserving assets and capitalizing on opportunities, TPI clients benefited greatly from the TPI strategies, allowing them to stay on track with their life goals

Disclaimer: The content in this article is written for educational and informational purposes only.  There is no offer or recommendation to buy or sell any security and no information contained here should be interpreted or construed as investment advice. Do you own due diligence as the information in this article is the opinion of Anthony M. Cherniawski and subject to change without notice.

Anthony M. Cherniawski Archive

© 2005-2019 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.

Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules