Subprime “Alt”-Mortgages from Nonbanks, Run by former Countrywide Execs, Backed by PE Firms Are Hot Again

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Housing Bubble 2 comes full circle

Mortgage delinquency rates are low as long as home prices are soaring since you can always sell the home and pay off the mortgage, or most of it, and losses for lenders are minimal. Nonbank lenders with complicated corporate structures backed by a mix of PE firms, hedge funds, debt, and IPO monies revel in it. Regulators close their eyes because no one loses money when home prices are soaring. The Fed talks about having “healed” the housing market. And the whole industry is happy.

The show is run by some experienced hands: former executives from Countrywide Financial, which exploded during the Financial Crisis and left behind one of the biggest craters related to mortgages and mortgage backed securities ever. Only this time, they’re even bigger.

PennyMac is the nation’s sixth largest mortgage lender and largest nonbank mortgage lender. Others in that elite club include AmeriHome Mortgage, Stearns Lending, and Impac Mortgage. The LA Times:

All are headquartered in Southern California, the epicenter of the last decade’s subprime lending industry. And all are run by former executives of Countrywide Financial, the once-giant mortgage lender that made tens of billions of dollars in risky loans that contributed to the 2008 financial crisis.

During their heyday in 2005, nonbank lenders, often targeting subprime borrowers, originated 31% of all home mortgages. Then it blew up. From 2009 through 2011, nonbank lenders originated about 10% of all mortgages. But then PE firms stormed into the housing market. In 2012, nonbank lenders originated over 20% of all mortgages, in 2013 nearly 30%, in 2014 about 42%. And it will likely be even higher this year.

That share surpasses the peak prior to the Financial Crisis.

As before the Financial Crisis, they dominate the riskiest end of the housing market, according to the LA Times: “this time, loans insured by the Federal Housing Administration, aimed at first-time and bad-credit buyers. Such lenders now control 64% of the market for FHA and similar Veterans Affairs loans, compared with 18% in 2010.”

Low down payments increase the risks for lenders. Low credit scores also increase risks for lenders. And they coagulate into a toxic mix with high home prices during housing bubbles, such as Housing Bubble 2, which is in full swing.

The FHA allows down payments to be as low as 3.5%, and credit scores to be as low as 580, hence “subprime” borrowers. And these borrowers in many parts of the country, particularly in California, are now paying sky-high prices for very basic homes.

When home prices drop and mortgage payments become a challenge for whatever reason, such as a layoff or a miscalculation from get-go, nothing stops that underwater subprime borrower from not making any more payments and instead living in the home for free until kicked out.

“Those are the loans that are going to default, and those are the defaults we are going to be arguing about 10 years from now,” predicted Wells Fargo CFO John Shrewsberry at a conference in September. “We are not going to do that again,” he said, in reference to Wells Fargo’s decision to stay out of this end of the business.

But when home prices are soaring, as in California, delinquencies are low and don’t matter. They only matter after the bubble bursts. Then prices are deflating and delinquencies are soaring. Last time this happened, it triggered the most majestic bailouts the world has ever seen.

The LA Times:

For now, regulators aren’t worried. Sandra Thompson, a deputy director of the Federal Housing Finance Agency, which oversees government-sponsored mortgage buyers Fannie Mae and Freddie Mac, said nonbank lenders play an important role.

“We want to make sure there is broad liquidity in the mortgage market,” she said. “It gives borrowers options.”

But another regulator isn’t so sanguine about the breakneck growth of these new nonbank lenders: Ginnie Mae, which guarantees FHA and VA loans that are packaged into structured mortgage backed securities, has requested funding for 33 additional regulators. It’s fretting that these nonbank lenders won’t have the reserves to cover any losses.

“Where’s the money going to come from?” wondered Ginnie Mae’s president, Ted Tozer. “We want to make sure everyone’s going to be there when the next downturn comes.”

But the money, like last time, may not be there.

PennyMac was founded in 2008 by former Countrywide executives, including Stanford Kurland, as the LA Times put it, “the second-in-command to Angelo Mozilo, the Countrywide founder who came to symbolize the excesses of the subprime mortgage boom.” Kurland is PennyMac’s Chairman and CEO. The company is backed by BlackRock and hedge fund Highfields Capital Management.

In September 2013, PennyMac went public at $18 a share. Shares closed on Monday at $16.23. It also consists of PennyMac Mortgage Investment Trust, a REIT that invests primarily in residential mortgages and mortgage-backed securities. It went public in 2009 with an IPO price of $20 a share. It closed at $16.64 a share. There are other intricacies.

According to the company, “PennyMac manages private investment funds,” while PennyMac Mortgage Investment Trust is “a tax-efficient vehicle for investing in mortgage-related assets and has a successful track record of raising and deploying cost-effective capital in mortgage-related investments.”

The LA Times describes it this way:

It has a corporate structure that might be difficult for regulators to grasp. The business is two separate-but-related publicly traded companies, one that originates and services mortgages, the other a real estate investment trust that buys mortgages.

And they’re big: PennyMac originated $37 billion in mortgages during the first nine months this year.

Then there’s AmeriHome. Founded in 1988, it was acquired by Aris Mortgage Holding in 2014 from Impac Mortgage Holdings, a lender that almost toppled under its Alt-A mortgages during the Financial Crisis. Aris then started doing business as AmeriHome. James Furash, head of Countrywide’s banking operation until 2007, is CEO of AmeriHome. Clustered under him are other Countrywide executives.

It gets more complicated, with a private equity angle. In 2014, Bermuda-based insurer Athene Holding, home to other Countrywide executives and majority-owned by PE firm Apollo Global Management, acquired a large stake in AmeriHome and announced that it would buy some of its structured mortgage backed securities, in order to chase yield in the Fed-designed zero-yield environment.

Among the hottest products the nonbank lenders now offer are, to use AmeriHomes’ words, “a wider array of non-Agency programs,” including adjustable rate mortgages (ARM), “Non-Agency 5/1 Hybrid ARMs with Interest Only options,” and “AltQM” mortgages.

“AltQM” stands for Alternative to Qualified Mortgages. They’re the new Alt-A mortgages that blew up so spectacularly, after having been considered low-risk. They might exceed debt guidelines. They might come with higher rates, adjustable rates, and interest-only payment periods. And these lenders chase after subprime borrowers who’ve been rejected by banks and think they have no other options.

Even Impac Mortgage, which had cleaned up its ways after the Financial Crisis, is now offering, among other goodies, these “AltQM” mortgages.

Yet as long as home prices continue to rise, nothing matters, not the volume of these mortgages originated by nonbank lenders, not the risks involved, not the share of subprime borrowers, and not the often ludicrously high prices of even basic homes. As in 2006, the mantra reigns that you can’t lose money in real estate – as long as prices rise.

But there are consequences of high home prices – even in San Francisco: one of its “biggest new-housing construction booms in history.” And all this supply is about to flood the market. Read…  This Will Bust San Francisco’s Insane Home Price Bubble

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  46 comments for “Subprime “Alt”-Mortgages from Nonbanks, Run by former Countrywide Execs, Backed by PE Firms Are Hot Again

  1. December 1, 2015 at 2:55 am

    How did you get inside my head???

    Going through a module of education hours this fall to hopefully separate myself from the crowd and recently had a class in creative financing. The lender described all these programs that amounted to higher down payment requirements and higher interest rates but with the same ease to obtain of 2005. I put a draft article together for that lender who taught the class to review and comment. Waiting to receive that back from him.

    This issue came up in class though – why are we going down this road again? We have all been here before, seen the show, know how it ends. He said that the thing saving this from becoming 2005 is that the values are solid now. Appraisers aren’t inflating value to get a loan done.

    I hope that is true but I still can’t wrap my mind around no doc loans, loans given to people just weeks out of foreclosure, loans given to foreign buyers who are using our housing market to launder some cash. It’s scary.

    • MC
      December 1, 2015 at 3:54 am

      “Why are we going down this road again?”

      Very simple: in 2008-2009 there wasn’t enough pain to teach a lesson. Compared to how many PE firms and financial entities should have gone burst, what happened was very mild.
      The demise of Lehman and Countrywide Financial was small fries compared to the purge that should have been allowed to happen. Not enough CEO’s and CFO’s were forced to resign and not enough people found themselves in the middle of the street.
      That’s the reason subprime lenders (whatever they are called in different countries) are not only back at it again, but doing it with a vengeance. Even assuming another 2008 (chances of which are quite small), the risks are more than acceptable compared to the rewards.

      I am also ready to bet the shiny €1 coin I have on my desk subprime lenders have come to the not unreasonable conclusion this time is different: there won’t be no sudden Lehman/Freddie Mac moment. Just a long slide downward as property prices start first to stagnate and then come downward and creditors become maxed out and start struggling servicing their debts, no matter of monetary policies. That will give them plenty of time to abandon ship, like it’s happening in the commodity market. The hot money has been conducting an orderly retreat and leaving the dumb money to hold the bag and be killed by a thousand cuts. The smart money is patiently waiting at the sidelines (after piling into safe assets) to buy the best assets at cents to the dollar when the time will come.
      Subprime lending will be no different.

      • Petunia
        December 1, 2015 at 11:14 am

        I think the next default will be a big corporate owner. Some of these companies own 100K and 200K houses. If one of them defaults on any of their paper the cascade will be huge.

        See my other post for the reasons why.

      • JohnS
        December 1, 2015 at 2:25 pm

        The powers that be never wanted to treat the financial crisis as a correction.

        They have always pursued a strong policy of propping up the housing prices as much as they could.

        To them, there should never have been a correction.

        So therefore the goal is to bring back the bubble (for the folks that think it is a bubble) but for the powers that be it is not a bubble, it is merely rectifying the financial crisis and not letting the crisis bring down the market – since 2008 was a mistake, not a correction that was supposed to happen.

    • economicminor
      December 1, 2015 at 12:47 pm

      when you look at the picture of sub prime auto loans, the vulture squid of health care, the real decline in average household incomes to the above picture all one can wonder is when the breaking point will happen. You can not have all the big monopolistic vulture squid swimming the seas where the prey is being consumed faster and faster with out consequences… Then add in the HUGE military industrial complex with no bid contracts and a Congress that is beyond dysfunctional as far as doing its job in protecting its citizens from real harm.. Again it is just the timing that is in question, not the irrefutable facts or the direction we are headed. The light at the end of the tunnel appears to be the edge of the cliff with the bridge out.. It just doesn’t seem real most of the time.

  2. Keith
    December 1, 2015 at 4:08 am

    When your only product is debt, you just have to shift the stuff.

    It’s the banker’s only option.

  3. Mark
    December 1, 2015 at 5:59 am

    It is the same gang again second time around.
    History always repeats itself and sheeple never seem to learn.
    Next correction will be of monumental proportion.

  4. Dan Romig
    December 1, 2015 at 7:51 am

    There is only one way to fix this mess, and it’ll never happen. Uncle Sam needs to step in and make it law that a real estate mortgage is a non transferable contract. Whoever lends the money for a home, must keep the contract in house and separate from others until the mortgage is paid off or the loan is defaulted on by the borrower.

    This goes against my libertarian values, but it would sure make these crooked ex-Countrywide Ponzi-schemers do an about face. Imagine what would happen if each mortgage in the USA was an individual contract kept between the two parties that signed it.

    OK, back to reality.

    • economicminor
      December 1, 2015 at 12:57 pm

      “mortgage is a non transferable contract” can’t happen. It would crash the system. It would be better if we just put the real criminals in jail with all the drug addicts and mentally ill. There is a law called Fiduciary and another called Fraud that seem to be missing from our current unjustice system. Or at least from our ability to actually prosecute those that do not act justly.

  5. merlin
    December 1, 2015 at 7:58 am

    why aren’t these white-collar criminals in jail with the regulatory agency hacks and congressmen that allow the whole deal? ARRRRGGGHHH!

    • Toddy
      December 3, 2015 at 11:39 pm

      Because joe 6-pack has no effin clue what’s going in and keeps those schmucks in office. “uhh, I gues I’m gonna keep voting for that guy on TV who looks like he’s a decent fella”.

      There should be a license to vote, like you need a license to drive.

  6. walter map
    December 1, 2015 at 8:15 am

    TPTB have created periods of inflation and deflation, bubbles and busts and numerous engineered crises in order to confiscate and consolidate the wealth of the world for decades. They control governments, arrange for wars, knock over uncooperative countries, and subjugate populations to expand their wealth and power over the planet.

    They’re just about finished, which means nearly everybody is just about finished.

  7. Petunia
    December 1, 2015 at 8:15 am

    The mortgage crisis educated those who lost their homes about how the system really works. Buying is only renting with more overhead, but a more stable payment. Those who are buying these days know they may have to walk away at some point, but they survived it before, and now know how to navigate the system. Everybody is in on the joke now.

    I think the next big fiasco will come out of the big corporate owners. They are now requiring renters to pay by money order, bank check, etc. There are also many complaints about these companies adding nonsense charges to the rents and extorting renters. Renters are claiming they never get deposits refunded. This can only mean that these companies are having renters defaulting on the rent and/or their expenses are really high. If I owned any of the paper on any of these deals I would be worried.

    • Toddy
      December 3, 2015 at 11:45 pm

      Good point. I was thinking: maybe get a mortgage from one of the really bizarre lenders, and after they go belly-up, I just stop making payments. It might take years before anyone figures out the paperwork and sends me a notice of default.

      Last time around, many sun prime borrowers ended up literally with free houses, because the title was locked up somewhere in a bankruptcy, and nobody had any idea who actually gets to collect on the debt. Then they did some “amnesty”.

  8. California Woman
    December 1, 2015 at 9:03 am

    If you look at it from the angle of the global bankers trying to get everyone in the most debt, then pulling the rug when debt is the highest the planet has ever experienced, then controlling the debtors, then it all makes sense.

  9. c smith
    December 1, 2015 at 9:04 am

    So with the taxpayers backstopping 64% of these loans, the bailout is explicit, transparent and obvious, versus hidden for years before the collapse last time. IOW, we have a mortgage market rebuilding risk at a rapid rate, while the regulators work to make certain banks can’t be bailed out next time. Also, the problem is nowhere near as large this time around. In 2007, $1.5 trillion out of $11 trillion in mortgages either failed or needed to be written down, most of them on the balance sheets of the banks (which is why they were bailed out). Nowhere near as big a problem today, and the banks are not involved at all.

  10. Spencer
    December 1, 2015 at 9:51 am

    …”But the money, like last time, may not be there.”…

    No problem, solved!

    https://www.cdw.com/shop/products/Lexmark-X952dte-45-ppm-Color-Multi-Function-Laser-Printer

  11. Paulo
    December 1, 2015 at 9:57 am

    Dan said: “Whoever lends the money for a home, must keep the contract in house …….”

    Wow, just like it used to be. Of course, there goes the myth of how many buy homes. That would probably chop home ownership by one third.

    The only answer is to own your home and property outright, pure and simple. If you can only afford a lot with a trailer, then so be it….don’t go for the vinyl monster. As an aside, these days there are what is often called ‘tiny homes’. There is even a tv show about them. I just want to say, as a carpenter for the last 35 years they are a monumental rip off. They are a high-priced/over-priced yuppie joke.

    Buy something older and put in some sweat equity, and then sell it. Do it again and pretty soon you own your house outright. If you do it in a location where property taxes are reasonable, and local Govt expenses are realistic, the future is bright. If you don’t live in such a place, then think about relocation.

    There is a myth renters like to say about home ownership, and that is you never really own your home because of taxes. Well, who do you think pays the taxes on rentals? It is built into the rental rate and the renter pays.

    People simply have to start living within their means. For working folks, (and most of us work for a living in one way or another), having ‘it all’ takes a lifetime. I see many many young people today (sorry for sounding like Trump….”I see hundreds of people, hundreds”…ha ha) who think they should have incredible oppulance in their first home!!! I always wonder why they think this way? I suppose it is advertising, credit, and the willingness to be in debt. Plus, a system that not only allows it, it encourages it.

    Nuts.

    regards

    • Toddy
      December 3, 2015 at 11:51 pm

      But you ought to recognize that materials and manufacturing are much cheaper now. You can buy a household’s worth of stuff for much less today. A 4×8 OSB panel can be had for $8.- and modern plumbing systems made with PVC hose costs nothing to install vs. a copper installation.

      Then you have the new manufactured homes, like Method Homes etc… This stuff does enable more opulence without higher price, really.

  12. Paulo
    December 1, 2015 at 10:03 am

    Add to comment about tiny homes.

    Upon re-reading above comment I need to clarify.

    Homeowner built tiny homes, such as found in Mother Earth News, are extremely cost effective. You just need a suitable location…allowable location for them. My disparaging comments were for the architechturally designed complicated tiny homes that have so many high priced built-ins to save floor space it actually ends up way more expensive than going into a realistic traditional home.

    thanks

  13. Nick Kelly
    December 1, 2015 at 10:49 am

    FHA insured???
    Jeessus keerist!

    I thought the whole point about the sub-prime guy paying higher interest was to compensate the lender for the mortgage NOT being insured.
    If it is insured why is the sub- guy paying a higher rate?
    In Canada the way it works is this: if you want to put less than 25 % down the mortgage has to be insured. There is virtually only one insurer, the gov. The gov won’t go on the hook for huge bucks.
    The max for Vancouver now is probably not enough for the market, which is a way of saying stay out.

    You can put as little as 5% down but you pay a sliding up to fee to about 3.5 % (haven’t looked recently) that is added to the mort.
    (I flipped one in 6 months once and the gov pocketed a good return.)
    If none of this works, there are other routes- the owner may assist with financing, carry a second etc.
    Then there is brokered private money- not insured but expensive.

    This regime hasn’t stopped prices rising
    I would have thought that Country Wide’s guys would have been
    barred from the industry.
    How many more times is the US going to blow up the financial world?
    Dot.com, LTCM, Lehman, the above, oh, and 1929?

    • Petunia
      December 1, 2015 at 11:10 am

      Firstly, Countrywide was purchased by Bank of America before the mortgages really went bust. Bank of America should have known what they were buying, they are a financial institution. Makes you wonder.

      Secondly, the sub prime meme is a big lie. People didn’t buy homes they couldn’t afford, they lost their incomes, big difference. I lost a house with a fix rate prime loan with 43% equity. When the crisis hit, my husband lost his income and we didn’t realize how long it would last, so we used our savings for two years before they were all gone. I lived in that house I couldn’t afford, according to you, for 10 years. My story is the average case.

      • Nick Kelly
        December 1, 2015 at 4:11 pm

        Excuse me? “according to you (me) “??
        I re-read what I wrote several times to see what could provoke that comment and still haven’t a clue.
        I only know about US subprime what I’ve read.

        I also know some math and yours could indeed be an average case but over tens of millions of mortgages, half could have bought homes they couldn’t afford. That’s the meaning of ‘average’, and one reason it’s not a very good stat.
        I didn’t make up the term NINJA loans- I have to assume some existed.
        If you’ve followed Wolf recently it sounds like more than half the people buying in San Francisco are buying more than they can afford.
        43% is a lot of equity. Sorry it didn’t pan out.
        BTW: the founder and CEO of that computer security software. sounds something like McAffee (but that’s not it) lost a whole s&hit load. He built a mansion-estate I believe that sold for half or less than what he invested.

      • December 1, 2015 at 7:56 pm

        Petunia, “subprime” is a credit rating, nothing more. Depending on who defines it, it’s below a FICO score of 620 or 600.

        So if a borrower had a FICO score of 800 when he took out the mortgage, he wasn’t subprime. If he lost his job during the Financial Crisis and couldn’t make the payments and lost his home, he is still not subprime. He is only a subprime borrower when his FICO score is below 600 or 620.

        Borrowers have a subprime credit rating for a reason. It’s an indication of how well they have managed their credit in the past, how often they were late with a payment, if they had debt go into collection, how much debt they have, etc.

        Subprime borrowers have trouble getting loans. So when they do find a lender willing to work with them, they can’t or don’t shop the terms … they accept whatever they get, and so they tend to get put through the wringer – and thus are even more likely to default. And they have very few options when things curdle – while a “prime” borrower has a lot more options.

        The weakest borrowers pay the most. And thus they’re more at risk in the future. I don’t know if it’s “fair.” But that’s how credit works.

        • Petunia
          December 2, 2015 at 8:53 am

          Wolf, I know exactly what subprime means. My point was that blaming low income owners with bad credit wasn’t the problem. The problem was that these people lost their income in the crisis. As long as people have an income stream they will pay their bills, maybe late, but they will pay.

          The crisis had nothing to do with them specifically. The real problem was that Wall St. sold paper for income streams, in the future, that didn’t and wouldn’t exist. When the rest of the morons realized it, they stop trading it. That is what caused the crisis.

          I wish you would write an article and explain what the average life of a mortgage was back then and how much paper was sold against it. It would educate a lot of people, even financial ones.

    • d'Cynic
      December 2, 2015 at 4:47 pm

      From the latest Canadian Housing and Mortgage Corp. regulation:
      Government-backed mortgage insurance is now available only for homes with a purchase price of less than $1 million. Borrowers buying homes at or above this amount will need a down payment of at least 20 per cent if their financing is from a federally-regulated financial institution.

      Not enough to buy a shack in Vancouver, but plenty of money to loose when the market crashes. But no one could have possibly seen it coming so we must rescue the innocent victims. Luckily, there are still some prudent people left to screw. /s

      And Vancouver is now proudly a global city – at least in terms housing prices.

      • Toddy
        December 4, 2015 at 12:00 am

        VNcouver blows me away. How come? In Bay Area, I get it, there are a bazillion jobs right now, but why is Vancouver so overvalued?

        • Peepot
          December 4, 2015 at 3:22 am

          Massive influx of buyers from mainland China

        • Nick Kelly
          December 4, 2015 at 3:42 pm

          Check out Sydney, Australia. It makes Vancouver look cheap. For a million Aus-_about 700, 000 US you get a really nasty townhouse about 12 feet wide. When you sit on your front patio or veranda you are well within smelling distance of your garbage cans which could almost reach out and touch.
          This is my bet for the steepest crash among many.
          The banks are fifty percent of the stock market, a way bigger percent than the UK even though Aus is not exactly a hub of world finance. The banks are stuffed with Aus mortgages and developer loans , kind of like Ireland before their crash.
          The main export, iron ore has gone from almost US 200
          (which sent the already high prices into hyper-drive) to 40 and falling.
          So you have a banking bubble built on a real estate bubble built on a mining bubble.

        • Peepot
          December 4, 2015 at 3:46 pm

          There is a big influx of Chinese money into major cities around the world driving prices up.

          I moved to New Zealand in anticipation of the explosion that is coming and live on the south island.

          I keep an eye on Auckland property prices and they have also blasted off.

          Global property bubble.

          Check out Hong Kong — also a product of massive Chinese buying:

          http://www.globalpropertyguide.com/template/assets/graph_images/86_graph2.jpg

  14. Cae
    December 1, 2015 at 11:21 am

    No one has a gun put to their head to take out a mortgage. From what I am seeing , much of the country still has a rather stagnant real estate market and qualifying for a mortgage in the last 5 years has been pretty tough. There are 50 states in the union and most are not doing so well. The hot markets are seeming bubllish, but the rest are not. Corrections are likely, collapse, not so much.

    • economicminor
      December 1, 2015 at 1:52 pm

      If the entire economy does another big tank like many are expecting and predicting then it won’t really matter where you live, we all will be affected. Right now we only have about half the potential workforce actually working. What will it be like if the economy does collapse? Just think of the damage to those with pension. All this debt is held by someone and those someones are not only PE or Hedge Funds. Not many can even imagine what a real deflationary cycle could look like in this overly leveraged environment. When only 30% of our country’s workforce is working and the big institutions are going BK right and left, it will take years to sort it all out and put the US back together. Even though we have everything we need except common sense and rationality we also have such a divisive country that riots and revolution could easily be an outcome if we aren’t smarter and more compassionate that we currently appear..

  15. Paulo
    December 1, 2015 at 1:34 pm

    About 30 years ago I was listening in on a conversation between ‘Art, the barge loader” and a tugboat deckhand. Now bargeloaders make extremely good money. They are flown in to remote logging sites and load the barges with those bundles of logs you see headed to market. They are skilled and work very fast at any hour because every hour the tug/barge is tied up costs the comapy thousands of dollars. Barges are used to haul logs when they have to be transported on the open ocean, as opposed to in booms in more sheltered waters. The deckhand had just bought a house and the payements would be $1200/month. In today’s dollars it might be $2500/month. Art told him he was nuts.

    The deckhand asked why? He then commented, “I make excellent money, the payment is nothing to me. I can afford it”.

    Art, being 20 years older than the deckhand said, “It isn’t what you can afford to pay when you are working, it’s what you can afford when you are not working”.

    I filed that one away and lived by it. I figured if I was ever out of work the only payment I could afford was $0.00, + food, heat, lights, and taxes”. Art was right.

  16. ERG
    December 1, 2015 at 6:57 pm

    While I sympathize with the idea that things are getting worse, where I differ could be in the way in which I see it getting worse. One hundred years ago, the poverty-stricken had a real chance of starving to death. These days, being poverty-stricken means you only have one flat-screen TV in your house.

    Various sectors may go up and down, but we’ve been bouncing between the thin layer between barely measureable growth with a lot of fudging of data and no growth at all. Never underestimate the power of mediocrity; and that goes double for the economy. There is plenty of pre-existing institutional inertia with a strong tendency to keep things right where they are now.

    • Nick Kelly
      December 2, 2015 at 11:27 am

      Agree. A lot of people I know who have rent-assisted places, vehicles, free medical etc. complain that Canada (and I guess you guys) should look after the poor here (them) before wasting money on Africa.
      I have to point out to them that being poor in lots of places means no shoes. I’m in my 60’s and although I was never poor as a kid, I’ve met guys my age who didn’t always have shoes as a kid.
      Another thing, although not poor, take out food was VERY rare and sit down in a restaurant where we were waited on (by a guy!) happened once, when the old man won it in a contest.
      All the above mentioned poor people I know order pizza every second day.

      BTW: was reading about Jack the Ripper the other day- one of his victims has just pawned her coat for booze. That was quite common around 1900. Clothes were hand made, even the cloth some times, and were valuable.
      Imagine trying to pawn an ordinary shirt today!

    • d'Cynic
      December 2, 2015 at 5:03 pm

      While I agree that we are nowhere compared to hundred years ago.During the intervening time we climbed ever higher, only to have a lot deeper to fall (Daedalus and Icarus).
      BTW, I regularly see people queuing for food bank while they probably all have TVs and smart phones.

  17. Roddy6667
    December 2, 2015 at 12:39 am

    I wonder if these four Countrywide execs use the spray tan like Mozilo.

    • BradK
      December 2, 2015 at 12:55 pm

      That’s not spray tan, it’s a Teflon coating to protect against indictment. And it is highly effective.

  18. BradK
    December 2, 2015 at 1:10 pm

    One thing that is very, very different this time ’round is personal income growth. At least during the last housing bubble rodeo most middle class Americans were holding steady jobs with good pay and good prospects for wage growth. Yet things still collapsed.

    Now we have the lowest labor participation rate in two generations. Many of those that are working are in part time (sometimes multiple) jobs with significantly lower wages and near zero wage growth. Add to that spiraling education and health care costs, never mind housing.

    Thanks largely to the “death by a thousand paper cuts” effect of globalization, the American middle class has been gutted, stuffed, and hung on the wall as trophy of conquest by tax-dodging multinationals and the banking cartels. Aided and abetted by a government “of the people, by the people, and for the people.”

    When this falls down — and it will — things will be far worse off for the average American while those who once again were the cause will walk away enriched from it.

    And there will be nothing left in which to build an illusory “recovery” facade upon.

  19. Boris
    December 3, 2015 at 3:37 pm

    Wolf –
    Try writing a positive piece for a change. You know, act positive and things will turn out positive. Dude, you are, like, such a downer.

    • December 3, 2015 at 4:06 pm

      That’s what you get after 7 years of central banks’ inflating mega asset bubbles around the globe. This is the most treacherous investment environment I have experienced in my life, and I traded through the 1987 crash. There are not a lot of places left to hide.

      I don’t hype asset bubbles or inflated stocks or bonds. I leave that to others. I try to show what’s going on. I turned totally bearish on US markets 1.5 years ago, and I’m sticking to my guns until I see reason to turn bullish. And then I’ll write about that :-)

      • Toddy
        December 4, 2015 at 12:06 am

        Oh boy. Gonna be a long wait, I’m afraid.

    • Peepot
      December 3, 2015 at 8:53 pm

      Positive?

      Where are the positives when the only think between us and a cataclysmic collapse is central bank interventions.

      When the stats we get are half-truths or outright lies.

      What you are asking is for a doctor to find something positive to tell a patient riddled with diabetes, cancer, AIDS, high blood pressure, and gout…

      Death of the patient is a certainty — likewise collapse of the global economy.

      There are no positives. None. Zero.

      • Boris
        December 3, 2015 at 11:22 pm

        You are correct, Peepot. I was being tongue-in-cheek. Trying to inject a little humor into a very sorry and troubling situation.

        • December 4, 2015 at 2:22 am

          I didn’t catch the humor either. Thanks for pointing it out. I guess I’m kinda slow today. Now I can see it.

        • Peepot
          December 4, 2015 at 2:27 am

          Sorry missed that as well.

          Although it did give me the opportunity to trot out the diseased patient analogy :)

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