Relevant and even prescient commentary on news, politics and the economy.

Morgan Stanley Plans to Turn Downgraded Loan CDO Into AAA Bonds

by divorced one like Bush

Well, well, well, seems our Robert will have some more thinking to do. Via C & L to Radamisto who want’s to know if we have ADD or what comes the Bloomberg story that the money from money machine is being restarted.

Morgan Stanley plans to repackage a downgraded collateralized debt obligation backed by leveraged loans into new securities with AAA ratings in the first transaction of its kind, said two people familiar with the sale.

Morgan Stanley is selling $87.1 million of securities that it expects to receive top AAA ratings and $42.9 million of notes graded Baa2, the second-lowest investment grade by Moody’s Investors Service, according to marketing documents obtained by Bloomberg News. The bonds were created from Greywolf CLO I Ltd., a CDO arranged in January 2007 by Goldman Sachs Group Inc. and managed by Greywolf Capital Management LP, an investment firm based in Purchase, New York.

Gee, Morgan Stanley, Goldman Sachs? Two totally separate companies, just happen to be mentioned together implimenting the same strategic plans.

8/18/08 Morgan Stanley, Goldman link lending to their own creditworthiness

The Financial Times is reporting that Morgan Stanley is implementing systems that tie the prices of credit insurance on their own debt to their commitment to provide financing to their hedge fund clients. The shift would allow the bank to pull out from its funding commitments should it run into a crisis of confidence like that which wiped out Bear Stearns in only a matter of days. Goldman uses a similar arrangement that ties its lending commitments to the firm’s own bond prices.

9/21/08
WASHINGTON (Associated Press)

The Federal Reserve said Sunday it had granted a request by the country’s last two major investment banks – Goldman Sachs and Morgan Stanley – to change their status to bank holding companies.
The decision means that the Goldman and Morgan Stanley will be able not only to set up commercial bank subsidiaries to take deposits, giving them a major resource base, but they will also have the same access as other commercial banks to the Fed’s emergency loan program.

3/9/09 UPDATE 2-Barclays cuts price targets on Goldman, Morgan Stanley

March 9 (Reuters) – Barclays Capital cut its price targets on Goldman Sachs (GS.N: Quote, Profile, Research) and Morgan Stanley (MS.N: Quote, Profile, Research) and said it expects the former investment-banking giants to post losses for December, mostly due to asset markdowns, investment losses and “very subdued” core earnings.

5/19/09
Goldman Sachs and Morgan Stanley have formally asked the Federal Reserve for permission to repay a combined $20 billion in federal bailout money.

6/17/09 JPMorgan Chase, Morgan Stanley cut ties with government

In separate statements, Morgan Stanley and JPMorgan Chase said they will not issue bonds backed by the Federal Deposit Insurance Corp. The banks are striving to show they can raise funds without help from the government. Goldman Sachs and other financial institutions might follow suit.

Continuing the July 8, 2009 Bloomberg article:

A lot of banks and insurers “cannot buy anything but AAA,” said Sylvain Raynes, a principal at R&R Consulting in New York and co-author of “Elements of Structured Finance,” which is due to be published in November by Oxford University Press. “You’re manufacturing AAA out of not AAA, therefore allowing those people who have AAA written on their forehead to buy.”

While the Morgan Stanley deal is the first to involve CDOs of loans, banks have been doing the same with commercial mortgage-backed securities in recent weeks.

Jennifer Sala, a spokeswoman for Morgan Stanley, and Gregory Mount, a Greywolf partner, declined to comment.

Banks are using re-REMICs to protect against losses on residential-mortgage securities during the worst housing slump since the Great Depression…Re-REMIC stands for “resecuritizations of real estate mortgage investment conduits,” the formal name of mortgage bonds.

Nice to know We the People have their backs huh?

NYT asks when will it end?

By divorced one like Bush

Via C & L via CR comes the NYT asking when will the recession be over. They have 11different responses. Roubini is there suggesting we could see an L curve.

We now face a 1 in 3 chance that, if appropriate policies are not put in place, this ugly U-shaped recession may turn into a more virulent L-shaped near-depression or stag-deflation (a deadly combination of economic stagnation and price deflation) like the one Japan experienced in the 1990s after its real estate and equity bubbles burst.

Of course there is one response titled: Stop the Bailouts. Can you guess the ideology? (Hint.)

Calculated Risk highlighted STEPHEN S.ROACH (Chairman of Morgan Stanley Asia), A. MICHAEL SPENCE (Stanford Professor, Nobel prize, economics) and GEORGE COOPER (author of “The Origin of Financial Crises: Central Banks, Credit Bubbles and the Efficient Market Fallacy”). All three came up with 2010/2011. Although, they all noted “if’s” as to government action, including the world’s governments and maybe lingering effects.

I’ll go with the following.

Niall Ferguson is a professor at Harvard and the author of “The Ascent of Money: A Financial History of the World.”

This is a crisis of excessive debt, the end of the Age of Leverage. It will take longer than a few more months to resolve bank and household insolvency, especially with asset prices continuing to fall so rapidly. Even with zero interest rates and huge deficits, Japan suffered a “lost decade” in the 1990s — and that was when the rest of the world was doing well. This recession is taking place as the rest of the world is doing even worse than the United States. The collapse of trade as measured by East Asian export data is petrifying…At the moment, I find it quite easy to imagine two consecutive years of contraction. And I don’t rule out two more lean years after that.

Carmen M. Reinhart is a professor of economics at the University of Maryland.

Counting the months of decline, however, is a narrow gauge of distress. A better metric is the length of time it takes the economy to recover to the level of per capita income at its prior peak.

After the most severe banking crises around the world in the postwar period, the economy has taken an average of four years to return to its previous peak in personal income. After the Depression, it took the United States 10 years.

Wow? Someone basing the issue of the recession and it’s conclusion on how much income people have.

Do you think we can get her to consider the split of that income? After all, in that 10 year depression recovery the top 1% share declined from 22.35% to 16.68%. But (big but) in 1936 it popped up to 19.29%, then we had 1937. By 1939 (10 yrs) it was back to 16.18% and never saw anything close to it until 1986’s 15.92% (from 12.67the year before). We hit 22% in 2005!

Still KISSING income inequality

by divorced one like Bush

Let’s talk jazz: Still cashing the income inequality
berries, clams, dough, heavy sugar, jack, kale, mazuma, rubes, simoelan, voot. It’s all money.

I started this series to develop a simple model of income inequality so that I wouldn’t sound like I was chewing gum and people wouldn’t get all balled up on the heavy sugar.

The first one presented the model. 100 people, $1000 of total income. 1976: 8.7% of the dough to the One, all the rest of the jack to the Many. 2005: 23% of the sugar to the One, the rest of the voot to the Many. Basically, it showed why income inequality ain’t allowing the Many to by orchids. Also, maybe it’ll help you know one’s onions.

The second post addressed the concerns that the model was to simple. The sugar was heavier, the times were percolating I’m told. Except that the only real issue for my model was that the population would have to increase against the 1000 clams for the model to reflect the coffee made. There was less mazuma for everyone. Oh, and the total dollars to be made up with a tax cut to duplicate the take of 1976 is $1.4 trillion dollars.

In the end, none of this bodes well for the concern about multiplier effects and money velocity. Yet here we are all these plans being put into action to get people spending ’cause that’s the problem and the issue still gets no respect. We want to get more kale into the hands of the many, but we aren’t taking about anything related to increasing the share of income to the many (which would include the trade issue as Stormy has been hammering it).

HELLO! The reason people have no money is not because their taxes are too high, their health care is too high, their interest rates are too high; THEY NEVER HAD IT TO BEGIN WITH!

So, let’s see how much the 99 people of the Many would need in 2005 to have stayed even with their position in 1976.

First here is what the $1000 should be in 2005:
$3,429.93 using the Consumer Price Index
$2,811.66 using the GDP deflator
$3,891.74 using the value of consumer bundle
$3,296.90 using the unskilled wage
$5,013.86 using the nominal GDP per capita
$6,805.40 using the relative share of GDP
My model using actual income data came up with $6940 total, but based on per capita, it was only $5130.

Each of the 99 people had $9.22. In 2005 they would need the following:
$31.62 using the Consumer Price Index
$25.92 using the GDP deflator
$35.88 using the value of consumer bundle
$30.40 using the unskilled wage
$46.23 using the nominal GDP per capita
$62.75 using the relative share of GDP
My model, using per capita income resulted in $39.90.

Interesting No? The total personal income in the model comes out to be pretty close to the GDP per capita and relative share. So, the percolating of the economy did result in the same economic coffee in 2005 as in 1976. Unfortunately for the Many, the semoelan handled is less than the per capita and relative share of GDP. Can you say SCREWED?

My model also resulted in the number of $47.31 for each of the 99. That is the number to make up for the share of income lost to the One. It is essentially the number calculated based on nominal GDP per capita. Or, the unscewed number.

But, these numbers just show that using the percentage split, the One stayed even with the percolating economy and the Many dropped down to something less. It does not show the loss of purchasing. For that, we need to reverse calculate.
For the Many, they have $39.90 each in 2005. In 1976 it looks like this:
$11.63 using the Consumer Price Index
$14.19 using the GDP deflator
$10.25 using the value of consumer bundle
$12.10 using the unskilled wage
$7.96 using the nominal GDP per capita
$5.86 using the relative share of GDP

I think what we are seeing here by looking forward and then backward, is that the Many are earning more for their labor (wage went up), but they are not earning wages comparable to the contribution made to the rising GDP by their laboring. Who knew, Slave Wages is a real wage!

Unemployed Populace Threatening to Break the Cell Size

Unemployed persons (seasonally adjusted) appears to be approaching 10,000,000.

The other interesting thing about the table is that December 2007 now looks as if it was much worse than was reported at the time: another piece of data that might indicate that we have been in a recession since Q4 2007.

A Quick One: Inflationary Credit Recession Strategies

Tom’s doing some heavy lifting, PGL is in form, Bruce has started SocSec 101, and the entire economics blogsphere is having so many conniptions over Hillary that you’d think the CEA was actually the Shadow Government.

So I just want start easy, and take a look at three easy-to-compare data points:
First, the Federal Funds target rate since 2007 (I include the last change in 2006 since it was the rate for the first 8.5 months of 2007):

If you make money easier to get, standard theory says that people will get it. While this raises the “threat” of inflation, it makes credit easier to get as well. So the theory goes.

Steven J. Balassi (h/t Aaron Schiff for bringing his blog to my attention) notes that this isn’t happening. Pull quote:

Friends in the mortgage industry are telling me you have to be “rich” just to get a home loan now.

Even granting I have a vested interest right now in peole being able to get mortgages, this is keeping the market from clearing and expanding the housing crisis. Again, contrary to the theory that easier money means, well, easier to get money.

So we have easier money and tighter credit. The implication is that the banks are keeping that money, no circulating it. No wonder they want to be paid interest on reserve requirements.*

But what about the inflation fears of easier money? Surely, if the money is not circulating, that shouldn’t be a fear?

Not so fast, says Kansas City Fed President Thomas Hoenig (h/t Mark Thoma):

Hoenig said rising inflationary pressures are “troublesome” and a “serious” matter. “The bigger concern is that these increases are beginning to generate an inflation psychology to an extent that I have not seen since the 1970s and early 1980s,” he said. Hoenig added that “there is a significant risk that higher inflation will become embedded in the economy and require significant monetary policy tightening to reduce it.” He tied rising prices primarily to overseas factors, including a “sizable decline” in the U.S. dollar’s value.

Welcome to the Global Economy. But Hoenig is sanguine about the Fed Funds rate, even if he is willing to use the R word:

Hoenig’s views on the economy were relatively upbeat, even as he described the nation as being “at the brink of a recession.” He suggested interest rates were close to where they needed to be.

“The current accommodative stance should be sufficient to cushion the economy
from a deeper slowdown and the risks that financial disruptions could spill over to the broader economy,” he said. As the economy and markets improve “it will be necessary for the Federal Reserve to remove the policy accommodation in a timely manner.”

Citing “room for optimism,” Hoenig said “financial markets appear to have stabilized somewhat, and the economy should pick up in the second half of the year as fiscal and monetary stimulus take hold.” The official said he believe markets’ role in the current turmoil has been overstated, and that higher energy prices and housing woes have exacted the greater toll. He also said he believes the “credit crunch” hasn’t proved as damaging as some had feared.

So there we have it. We have inflation, but cutting rates was the right thing. And the credit crunch isn’t too bad, even if only the rich can buy a house. And that 325 basis points of easing in the past eight months just hasn’t gotten into the economy yet; give the banks another six months or so.

I feel better; how about you?

*Meanwhile, I am reliably informed that Bank of America just cut the rates on their (currently in place) contracts with consultants by 5-15%, depending on length of service (greater for longer).

The Longest Recession Ever!

The other day Spencer posted a chart that Cactus had sent and then Cactus posted the link to the data. After looking at the data, and considering the question being asked: Are we seeing a recession? I thought, maybe looking at just median weeks of unemployment or number of unemployed is not going to capture the true picture.

During a recession or in determining a recession would not the amount of idle labor be more of a factor? If we have 5 of 10 people unemployed for 5 weeks, is that worse than 6 of 10 unemployed for 4 weeks?

For this chart I used average weeks unemployed times the number of unemployed looking at the first day of the first month and the first day of the seventh month to come up with a factor we can call Person Weeks Unemployed: PWU.

As you can see, our economy has been performing worse as time goes on. The Y axis number need to by X1000.

We are leaving a lot of work on the table and the swings have gotten larger. Larger swings in labor sitting idle is the opposite of what we are praising in the GDP swings. And, note when the big swings started, right when we de-coupled the rise in productivity from the rise in wages: 1974 Up until that time, the lost labor fluctuates around the 50,000 mark. During the first oil shock, we hit a new high of 125,000 person weeks. No wonder the mood sucked during Carter’s years. At least it came back down to the upper end of the range we had been in since 1958. Unfortunately, since we decided to focus on money (yes Reagan) we seem to waffle around 125,000. A full 75,000 person weeks of lost work.

However, what is more interesting is the peaks of PWU in relation to the official recession dates.
Recession 11/48 to 10/49 but the PWU peaks 1/1950 3 month delay
Recession 7/53 to 5/54, PWU peaks 7/1954, 2 month delay
Recession 8/57 to 4/58, PWU peaks 7/1958, 3 month delay
Recession 4/60 to 2/61, PWU peaks 7/1961, 5 month delay
Recession 12/69 to 11/70, PWU peaks 1/1972, 14 month delay
Recession 11/73 to 3/75, PWU peaks 1/1976, 10 month delay
Recession 1/80 to 7/80, PWU peaks 1/1981, 6 month delay
Recession 7/81 to 11/82, PWU peaks 1/1983, 2 month delay
Recession 7/90 to 3/91, PWU peaks 7/1992, 16 month delay
Recession 3/01 to 11/01, PWU peaks 7/2003, 20 month delay (updated to correct math error)

Some may say: Hey, Reagan did good! But, if we ignore the blip of economic reprieve it is 30 months from the end of the first recession to the peak of PWU after the second. And he set it good, going from a previous high of 125,000 to 223,000!

So what do you think? I think that what matters to people regarding a recession is whether they are working and not when the government states the turn-around began. Thus, the peak of a recession is in the eye of the beholder. If you’re a person earning money from labor, a recession these days can last a very long time. This data would suggest that what we are seeing in the Spencer post is not a decreased risk but a lull before the storm. One other thing. It appears the Republicans fail again. As a group they have the longest turn-around to seeing a reduction in lost labor. In fact, the recent Bush years could be considered the longest lasting recession ever based on my PWU metic.

Bail or re-sell after the bums are kicked out?

NYT sells bailout story with no alternatives:

“You get to where people can’t trade with each other,” said James L. Melcher, president of Balestra Capital, a hedge fund based in New York. “If the Fed hadn’t acted this morning and Bear did default on its obligations, then that could have triggered a very widespread panic and potentially a collapse of the financial system.”

Already, investors are considering whether another firm might face financial problems. The price for insuring Lehman Brothers’ debt jumped to $478 per $10,000 in bonds on Friday afternoon, from $385 in the morning, according to Thomson Financial. The cost for Bear debt was up to $830, from $530.

Dean Baker reminds us:

According to the current plans being crafted in Washington, you will. Bear Stearns, one of the longstanding giants of Wall Street investment banking, is now on life support, the victim of its own excessive greed and bad judgment. Apparently, the wizards who run the show at Bear Stearns (I will resist the temptation to us initials) somehow couldn’t see an $8 trillion housing bubble in the US economy. They made highly leveraged bets on assets backed by mortgages.
….

If they can’t get away with the “no bailout” nonsense, the Wall Street welfare boys will then try the route of claiming we have to bail them out in order to prevent the whole financial system from collapsing. Such a collapse could turn the recession into a depression leaving millions unemployed for years.
This is also nonsense. We know how to keep banks operating even as they go into bankruptcy. England just did this with Northern Rock, a major bank that managed to get itself into huge trouble because of its holding of bad mortgage debt. After it was clear the bank was insolvent, the Bank of England stepped in and essentially took over the bank. It replaced the incompetent managers who had ruined the bank and brought in a new team to straighten out the books. The plan is to resell the bank to the private sector once the books are in order.

In the meantime, the bank keeps operating. The depositors can continue to make deposits and withdrawals just as before. This prevents any chain reaction from bringing down the financial system.

The difference between the Northern Rock route and what happened with Bear Stearns last week is that in the Northern Rock, the highly paid managers that ruined the bank are sent packing. Similarly, the shareholders will get little or nothing. They own a bankrupt company; why should the government give them money?

As the financial crisis deepens, it is important the public realize the distinction between what the Bank of England did with Northern Rock and the handout from the Fed to Bear Stearns. There are other banks in serious trouble that are also looking to the Fed for help.

The best thing the Fed can do is to go the Northern Rock route. Instead of giving more money to troubled banks, it should give less. It should end the Term Auction Facility and other special mechanisms for injecting money into banks. The economy will recover quickest if we let the banks and the bankers get the full benefit of their own bad judgment. When they have written down their bad debts and are taken over by new management, the banks will again be able to play a productive role in financing growth.

Has it begun?

The NYT reports on the Fed, Bears Stearns valuation, and interventions.

The Fed, working closely with bank regulators and the Treasury Department, raced to complete the deal Sunday night in order to prevent investors from panicking on Monday about the ability of Bear Stearns to make good on billions of dollars in trading commitments.

In a potentially even bigger move, the Federal Reserve also announced its biggest commitment yet to lend money to struggling investment banks. The central bank said its new lending program would make money available to the 20 large investment banks that serve as “primary dealers” and trade Treasury securities directly with the Fed.

Much like a $200 billion loan program the Fed announced last Tuesday, this program will essentially allow the government to hold as collateral a wide variety of investments that include hard-to-sell securities backed by mortgages. But Fed officials told reporters on Sunday night that the new program would have no limit on the amount of money that can be borrowed.

Text of FED statement

Hedge Fund implode-meter for broker dealers insolvency issues (much less liquidity).

Bloomberg dollar watch

Marketwatch Dow Jones

World Exchanges(MG link)

CNN money (MG link)

There certainly is a lot happening. Bear Stearns sold at $2/share. Another quarter point dropped on the interstate bankrate. Unlimited borrowing being authorized to ‘market participants’ and ‘primary dealers’ from the Fed.

How are reasonable arguments even in the running? I sure hope it works. The whiplash in other areas is sure to be wicked.

Where DID the money go? Part 2

Bloomberg Magazine, in “Unsafe Havens”. (Hat tip to Naked Capitalism.)

reports that money market funds run by Bank of America Corp., Credit Suisse Group, Fidelity Investments and Morgan Stanley owned over $6 billion of CDOs with subprime debt in June.

The reason this is a serious issue is that money market funds have a $1 NAV, meaning “net asset value” rule. The funds are required by the SEC to invest conservatively. In practice, they always to maintain principal value. But as the article explains, this sort of investment puts the funds at risk of breaching the $1 NAV requirement.

What this article tells us, in effect, is that investors weren’t completely nuts to have dumped money market funds for Treasuries in August. Of course, they probably should have called the fund manager first, since most large fund management firms, such as Vanguard, correctly see this sort of paper as in appropriate for a money market fund.

The article is quite long but very much worth reading in its entirety; we’ve excepted the juicy bits. From Bloomberg Magazine:

Unbeknownst to most investors, some of the largest money market funds today are putting part of their cash into one of the riskiest debt investments in the world: collateralized debt obligations backed by subprime mortgage loans….

Money market funds with total assets of $300 billion have invested in subprime debt this year….

Under SEC rules, money market managers must invest in securities with “minimal credit risks.” Joseph Mason, a finance professor at Drexel University in Philadelphia and a former economist at the U.S. Treasury Department, says subprime debt in money market funds is far from safe.

“This creates tremendous risk for today’s money market investors,” says Mason, who wrote an 84-page report on CDOs this year. “Right now, I’m not comfortable investing anything in CDOs.”….

On Aug. 9, BNP Paribas SA, France’s biggest bank by market value, froze withdrawals on three investment funds with assets of 2 billion euros because the bank couldn’t find a way to value its U.S. subprime bonds and other assets. CDOs aren’t bought and sold on exchanges and their trading has little transparency….

Bruce Bent, who in 1970 created the first money market fund, The Reserve Fund, says no money market fund should invest in subprime debt.

“It’s inappropriate,” Bent, 70, says. “It doesn’t have a place in money market funds. When I created the first money market fund, I said you have to have immediate liquidity, safety and a reasonable rate of return. You also have to have a situation where you’re not giving people headline risk.”

Investors have sought safety during the subprime meltdown by moving their holdings to U.S. Treasuries and money market funds. On Aug. 8, just after the Bear Stearns hedge funds filed for bankruptcy protection, U.S. money market fund total assets reached a record high of $2.66 trillion, with investors pouring $49 billion into such funds in one week, according to the ICI.

Reader Jack asked about money disappearing. Some was pure vapor wares in a bidding war for promises on ROI. Other money came from what were safe havens of money markets, municipal bonds, and other financial vehicles that were supposed to be only steady and safe.

Springfield MA sued and won their $14 million from Merryl Lynch based on their agent’s inappropriate behavior by disregarding the town’s mandate of investment vehicles.

Housing and Recession

My thoughts are with the residents of New Orleans and the Gulf Coast tonight.

This week two prominent economists predicted a housing bust and possible recession in ’06; three if you count Chairman Greenspan. Actually Greenspan’s comments, made at the Federal Reserve’s Jackson Hole Conference, were not predictions, but general observations. Quoting from Greenspan’s closing remarks (emphasis added):

“… the housing boom will inevitably simmer down. As part of that process, house turnover will decline from currently historic levels, while home price increases will slow and prices could even decrease. As a consequence, home equity extraction will ease and with it some of the strength in personal consumption expenditures. The estimates of how much differ widely.”

There is no question that equity extraction has been an important driver of consumer spending over the last few years. Even if housing prices remain elevated, a housing slowdown will lead to lower equity extraction, lower consumer spending and an economic slowdown. How much will the economy slow? Estimates “differ widely”. But clearly there is reason for concern; from Greenspan’s opening comments:

“… newly abundant liquidity can readily disappear. Any onset of increased investor caution elevates risk premiums and, as a consequence, lowers asset values and promotes the liquidation of the debt that supported higher prices. This is the reason that history has not dealt kindly with the aftermath of protracted periods of low risk premiums.

Is Greenspan predicting a recession? Maybe. Princeton economist Dr. Krugman went much further predicting the housing bubble would “burst” soon:

“I’ll give you a forecast which might very well be wrong, but I think it will burst in the spring of next year,” he said at a derivatives conference in Brazil’s winter resort of Campos do Jordao.

As all economists do, Krugman then offered some caveats (see article). Dr. Leamer, of UCLA’s Anderson Forecast, also suggested that a recession was very likely:

In Leamer’s view, the housing market appears to have peaked “in California and elsewhere. It will take more than a year for this weakness to turn into job losses and to affect the economy in general.”

And, yes, he’s using the “R” word. As in “recession.”

If housing has peaked, why will it take a year for the economy to slide into recession? I believe Dr. Leamer is relying on historical evidence that shows recessions start about 8 to 12 months after the number of housing transactions peak. Here is a look at the last three consumer recessions (four counting the ’80s double dip). The gray area signifies that the economy was in recession based on the National Bureau of Economic Research’s cycle dates. Even both recessions in the early ’80s were preceded by significant declines in sales volume.


Click on Graph for larger image.

I believe this historical evidence is the reason Dr. Leamer is suggesting “it will take more than a year” for the housing slowdown to impact the economy.

It is possible that the economy will slow sooner this time since housing is a much larger percentage of the economy. Also, unlike the previous periods, housing is now the main engine of the economy. This is especially true when the substantial contribution of equity extraction to consumer spending is included. Even if housing prices stay stable, lower equity extraction could lead to significantlyly lower consumer spending, as has happened in the UK.

As an aside, the Bank of England rate cut hasn’t helped the UK housing market:

House prices in England and Wales fell for the 14th straight month in August for an annual rate of decline of 3.7 percent, a survey showed on Monday.

And I see Fleckenstein is declaring: It’s RIP for the housing boom. It is possible that housing has peaked (in transaction volumes), but we cannot be sure for several months.

Best Regards, CR Calculated Risk