The Age Of Government Economic Administration Commenced The First Week Of September 2010, With The Fannie Mae Policy Announcement Of Loss Mitigation And The Ecofin Announcement Of An EU Financial Supervision Framework Agreement

The Age Of Government Economic Administration Commenced The First Week Of September 2010, With The Fannie Mae Policy Announcement Of Loss Mitigation And The Ecofin Announcement Of An EU Financial Supervision Framework Agreement

I … Fannie Mae’s announced policy of loss mitigation imperils the banking industry’s shadow inventory of homes and the squatters entitlement of payment free living: its policy will compel banks to transform from lending and mortgage servicing into property leasing.

IrvineRenter in article Government Expedites Foreclosures, Threatens Banking Cartel writes: “The end of the banking cartel is being signaled by coordinated efforts at a variety of governmental agencies to expedite the foreclosure liquidation.”

IrvineRenter relates: “One of the barriers to liquidation is the write downs required by “solvent” banks (we all know most of them are not solvent). A huge problem within the GSE portfolios is that the services of delinquent loans are intentionally delaying foreclosure when the parent bank holds the second mortgage.The GSEs are going to start charging servicers who fail to properly follow their loss mitigation procedures” as related in Al Yoon Reuters article Fannie Mae Gets Tougher On Mortgage Servicers.

IrvineRenter states: “These comments are aimed directly at the practice of avoiding foreclosure on properties that have second mortgages on the servicer’s books. That is the primary reason a servicer fails to foreclose and dispose in a timely manner.”

IrvineRenter relates: “If the GSEs are not forced to back down from this policy due to pressure from lenders, this change in policy and incentives will signal the end of the banking cartel because this will push product on the market whether or not the market is capable of absorbing it. That will push prices down.“

My belief is that the GSE loss mitigation policy will push prices down and extinguish bank capital as short selling and credit default swaps will quickly and progressively pressure the capital of banks downward, because they have a legitimate claim that the banks will now be taking losses on foreclosed properties that are pushed out of shadow inventory.

The GSE announced policy of loss mitigation and loan management is the antithesis of FASB 157; it will effectively extinguish banks and transform them into property leasing organizations.

Furthermore in addition falling bank, KBE, prices, I expect PowerShares Real Estate, PSR, and Residential Real Estate, REZ, to fall. I believe there is a time to be invested in the Proshares 200% inverse, SRS, and Direxion 300%, DRV, inverse ETFs, that being when volatility picks up such as now.

The GSEs loss mitigation policy announcement, documents that we have passed from the age of entitlement to mark property at manager’s best estimate, to the age of administrative announcement where property is marked at market. And, we have passed from the age of entitlement to living payment free, to the age of austerity.

In this new age of Government Administration, Government Administrators, that is Government Ministers, announce economic, banking, lending, housing, and investment policy; and the people and businesses follow …. “there is the new matrix” … “we ain’t in Kansas no more” …. On September 1, 2010, we passed from the era of GSE provided entitlement into the new era of GSE loss mitigation. The “age of government economic administration” commenced September 1, 2010, in the US, with the Fannie Mae policy announcement of loss mitigation.

On September 10, 2010, I wrote that the FX currency traders took both the major currencies, DBV, and the developing currencies, CEW, higher against the Yen, rallying the European Financial, EUFN, and the banks, KBE, but stocks manifested bearish. And the world stocks, ACWI, and the S&P failed to rally significantly, and closed manifesting a lollipop hanging man candlestick. We are likely to see a significant fall in stock value of banks, which will compel banks to transform from lending and mortgage servicing into property leasing, that is REO renting.

It is striking that the Fannie Mae policy announcement came forth on the very day after peak credit was achieve, that being August 31, 2010, when Bonds, BND, closed at 82.66.

September 1, 2010 marked the transition from “the age of neoliberal Milton Friedman and Alan Greenspan based credit liquidity” to “the age of the end of credit”. September 1, 2010, also marked ”the end of entitlements” and “the beginning of world-wide austerity”.

The 30-10 yield curve,$TYX:$TNX, began to flatten on August 11, 2010, reversing a trend that goes back to early 2000. This signals risk aversion to sovereign debt. The flattening of the yield curve came as a result of the Federal Reserve Chairman’s announcement of August 10, 2010 of the purchase of mortgage-backed securities. Then on August 27, 2010, the Federal Reserve Chairman stated the possibility of an even larger purchase of debt.

The Fed Chairman’s announcement of purchase of mortgage-backed securities caused the bond rally in US Treasuries, TLT, and Zeroes, ZROZ, HIgh Grade Corporate Bonds, LQD, that began April 6, 2010, to fail September 1, 2010, sending bond prices lower and interest rates higher as traders saw the announced purchase of mortgage-backed securities as a monetization of debt.

The safe haven rally in debt, and the low-interest rates available to corporations, that began with the onset of the European Sovereign Debt Crisis is over, repeat over and done, through and finished. Investors see Mr Bernanke’s plans as monetization of debt; and have gone short US Treasuries, especially the longer out ones such as ZROZ.

Those who bought the 300% inverse of the 30 Year US Government Bond, TMV, on August 31, 2010, have seen a 18.6% return. Those who bought the 200% inverse of the 30 Year US Government Bond, TBT, on August 31, 2010, have seen a 11.2% return.

One can view debt ETFs BND, TLT, ZROZ, MUB, JNK, LQD, EMB, CMF via a Finviz screener and portfolio. The ZROZ, being the furthest out on the yield curve, saw the greatest loss of value this week falling 2.16%.

Stockcharts.com shows the 30 10 Yield curve, $TYX:$TNX, fell this week and month.

And Stockcharts.com reports that the interest Rate On The 30 Year US Government Bond, $TYX, rose 2.4% this week; and the Interest Rate On The US 10 Year Note, $TNX, rose 3.3% .

It’s my belief that Fannie Mae held a policy of loss mitigation in abeyance, in order to support economic stimulus and US Treasury Debt as long as possible. I believe that Fannie Mae headed up the FASB 157 banking and real estate cartel that supported bank capital and real estate values in prime neighborhoods, allowing payment free living and stabilized real estate values. But seeing peaking credit and a falling yield curve, driving Government Debt down, reasoned that the season of “pretend and extend” and “stimulate and spend” was over, and announced that it is now the season to collect monies from delinquent mortgages, by actively engaging in policy of foreclosing.

II … The announcement by the EU Finance Leaders of an EU Financial Supervision Framework Agreement, created a federalized Eurozone, that goes far beyond the use of a common currency by a number of countries. The EU Financial Supervision Framework Agreement, is a government and economic coup, which effectively waives national sovereignty.

Ever since the European sovereign debt crisis arose, the principle of sovereign nation states has progressively fallen by the wayside. Europeans are no longer citizens residing in sovereign nation states, rather they are residents of a region of global governance. It’s as Italian Economy Minister said: “This will be a huge devolution of powers from national governments to Brussels”. On September 7, 2010, a region of global government was created; it is one of ten called for by the Club of Rome in 1974.

The “age of government economic administration” commenced in Europe on September 7, 2010, with the EU Finance Ministers announcement of the EU Financial Supervision Framework.

III … I see the five terrifically adverse economic waves:
1) the flattening 30-10 US sovereign debt yield curve, $TYX:$TNX;
2) the downward moving yen carry trades such as the EUR/JPY, seen in FXE:FXY, and DBV:FXY, and CEW:FXY;
3) rising credit default swaps as reported by EconomicPolicy Journal and others;
4) Tiho’s report that the Peripheral European, PIIGS, bonds over German bonds have widened, since the August Federal Open Market Committee meeting;
5) an Elliott Wave 3 of 3 of 3 down wave, ready to be unleashed in both world stocks, ACWI, and the S&P, SPY.

To preserve wealth, I am invested in gold, $GOLD, bullion. For those interested in short selling, I provide a list of stocks and ETFs to sell short for a debt deflationary bear market which includes EWA, KBE, EUFN , ITB, EIRL ,GDXJ, LVS, EWW , PGX, PMR , IWN, XSD, XLYS, EWP, EWD, JJT, HHH, TAN, REZ, NNI, LCAPA, EXPD, PPD, CMG, KME, BZ, PXN, N, DE, FDN, FIO, PSR, BRF, and can be seen in this Finviz Screener for one’s download into a trial portfolio.

IV … Symbols used in this report SPY, Government Economic Administration, Government Edict, Government Policy, Government Regulation. Financial Regulation, GSE Loss Mitigation, Fannie Mae, FASB 157, Banking Cartel,

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