Say, ‘What???’

There's already talk of another bailout for Fannie Mae and Freddie Mac!

"Future profitability is far from assured," said Federal Housing Finance Agency Office of the Inspector General in a report, pointing out that the firms could again chalk up losses on their derivatives portfolios, similar to those, they reported in the fourth quarter.  -Reuters

A lot of other events yesterday obscured this news, but nothing should make your hair stand up more than the idea of another bailout for Fannie and Freddie. How could this be? These guys have made money ‘hand over fist.’

Fannie Mae Financial Streams	2014	2013	2012
Net Income	$14.2	$84.0	$17.2
Loss Reserves	$37.8	$46.7	$61.4

 

Fannie Mae Market Condition	2014	2013	2012
FICO Scores < 660	7%	5%	3%
LTV over 80%	32%	29%	25%

Fannie Mae has paid the U.S. Treasury Department $136 billion since its bailout and covered more than what they had taken from the government, which told investors forever that the agency was quasi-government and were not fully covered by the Full Faith and Credit Clause; oh well. However, the politicians on both sides of the aisle smell a golden goose and are not willing to share their future wealth with investors whose costs are as high as $80 a share.

This coupled with news from the Housing Starts report plunged to a two year low. Perhaps, Housing Crisis 2.0 isn't so far-fetched.

However, some experts are saying to forget all that and to focus on the number of permits for January and February, which is at its highest level in six years.

I think another bailout is not in the offing; I really think the federal government has hijacked these agencies, depriving individual investors a chance to be made whole or to make money. The problem is the stakes are high and the cash is vast. Why not milk it to death and lean on taxpayers when the well runs dry...it will not happen anytime soon, but it is inevitable.

Yesterday's Session

Well, they took out "patient," but it did not matter; it was not the main focus for Yellen and company.  The new chair is putting her personal stamp on the Fed and is rolling back an era of the open language of Bernanke. She has this odd idea of actually making decisions based on data and not on placating the howls of Wall Street.

Plus, they cannot raise rates yet; this economy is in trouble and they know it (see first paragraph of statement). The economy moderating since January was not a barnburner, spending is up only on cheaper oil while housing stumbles and exports vanishes.

For Immediate Release

Information received since the Federal Open Market Committee (FOMC) met in January suggests that economic growth has moderated somewhat. Labor market conditions have improved further, with strong job gains and a lower unemployment rate.  A range of labor market indicators suggests that underutilization of labor resources continues to diminish.  Household spending is rising moderately; declines in energy prices have boosted household purchasing power. Business fixed investment is advancing, while the recovery in the housing sector remains slow and export growth has weakened.  Inflation has declined further below the Committee's longer-run objective, largely reflecting declines in energy prices. Market-based measures of inflation compensation remain low; survey-based measures of longer-term inflation expectations have remained stable.

The stock market loved what it heard, as it is clear that the Fed is looking to stop the guidance drug, but a dose was given yesterday. The Dow reversed a 150-point loss for a 226-point gain.

Today’s Session

The markets gave up some of yesterday’s gains this morning shortly after the weekly jobless claims reports were released. For the week ended March 14^th, initial jobless claims rose to 291,000, which is slightly higher than the upwardly revised jobless claims amount of 290,000 from the prior week, but still below the consensus call for 293,000. The 4-week average increased slightly to 304,750. With this being the sample week for the month, we’re anticipating that the March employment report will be similar to February’s showing a 200,000-build in job creation. Also, continuing claims decreased by 11,000 for the week ended March 7^th to 2.417 million, resulting in the 4-week average decreasing by 1,000 to 2.418 million. Both initial claims and continuing claims have been moving at a steady pace which bodes well for the labor market.

what it heard, as it is clear that the Fed is looking to stop the guidance drug, but a dose was given yesterday.  The Dow reversed a 150-point loss for a 226-point gain.

Comments

News of a slump in new housing starts shouldn't surprise us. We've aborted 30% of the entire younger generation. That adds up to 58 million fewer young people buying computers, going to the dentist, getting married, buying homes, etc. Whats amazing is that thanks to the innovation of companies like Apple we've still had a fairly healthy boom so far. But let's face it, that boom would be at least 40% bigger and better if not for the fact that Americans now consider life so cheap that we'd rather have a dog and a cat than two kids. This is not getting any better, but if it continues, our days as the world's leading economy are numbered. It's just a matter of time. Demographics is still destiny. Dennis Howard on 3/19/2015 2:23:48 PM

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