Pretty pigs and falling rates. What next?

Rates did not rise.

At the end of last year, with the 10-Year Treasury yield bouncing between 3.7% and 3.9%, experts agreed it was an artificial low created by the Federal Reserve purchases of long term Treasuries.

Anticipating the selling-off of this large horde, Bank of America, Merrill, Goldman Sachs, J P Morgan and Morgan Stanley were forecasting rate increases, by now to the 4.25% to 5.5% range.

The 10-year Treasury is currently trading in the low 3% range.

What happened?

P-ortugal, I-reland, G-reece, S-pain?

The Euro sovereign debt crises and the lack of anywhere else besides gold as a store of value, makes the dollar the best of the bad.

What next?

This will not last. If you can get a loan, lock in these low rates for as long as possible.

Easy Money, Hard Truths - NY Times

Great opinion piece in the New York Times from David Einhorn, who begins with the question... are you worried that we are passing our debt on to future generations? And follows with the "reassurance" the recession has created budgetary stress sufficient to bring about the crisis much sooner then that...

"If we don’t change direction, how long can we travel down this path without having a crisis? The answer lies in two critical issues. First, how long will the capital markets continue to finance government borrowings... and second, to what extent can obligations that are not financed through traditional fiscal means be satisfied... by the printing of money?"

http://www.nytimes.com/2010/05/27/opinion/27einhorn.html?hp#

Good reading.

The San Francisco Bay Area Economic Engine

Just like the weather, a local economy is driven as much by micro-climate swings as it is by seasons and global climate changes. The SF bay area is especially influenced by its local economy, which can move in polar opposite directions to the economy of the rest of the country.

Here's my assessment from 2009, I'll be publishing the 2010 assessment here soon:

http://www.e-newmark.com/e-newmark/newsletters/BA_Economic_engine-update-Fall09.pdf

Stamping out AAA ratings?

It's been three years since the securitized debt plane began its crashing descent. Crash investigations continue with the hope that findings will prevent future failures. Last week the Fiscal Crisis Inquiry Commission, chaired by Phil Angelides focused on the credit rating agencies.
Rating agencies may not have been the root cause of our financial crash, but Angelides points out they did play a fundamental role in accelerating the securitization and therefore the origination of products that were highly deficient... such a low teaser rates, negative amortization and an epidemic of mortgage fraud. Warren Buffet points out the entire American public was caught up in the belief that housing prices could not fall dramatically, what he calls a mass-delusion.
If there's a lesson to be learned it's don't believe everything you read on a label, take a good look inside the package.

Phil Angelides to Moody's "did you ever feel like Lucy on the assembly line?" Great video of the hearing if you have a few hours to spare... http://www.c-spanvideo.org/program/293839-2

Concrete lessons from Haiti and Chile

It's not hard to spot the risky buildings. Is it time to provide full disclosure of seismic risks similar to what we do today with other environmental risks?

The concrete coalition is a group to which I am lending my support. Their cause could save many lives. Here's an extract from their website, check it out...

http://www.concretecoalition.org/

The potential safety problems posed by some concrete buildings constructed in the U.S. west coast prior to the 1970’s are generally well known among structural engineers and building officials practicing in seismically active areas. Public policy makers are somewhat less aware and the general public is not informed adequately of the potential risks.

These buildings are widespread. They were a prevalent construction type in the western U.S. prior to enforcement of codes for ductile concrete in the mid-1970s. The exposure to life and property loss in a major earthquake is immense. Many nonductile concrete buildings have high occupancies, including residential, commercial, and critical services. Severe damage can lead to critical loss of building contents and risk of ruin for business occupants and partial or complete collapse can result in large numbers of casualties.

The Concrete Coalition will generate a concerted effort to advocate the identification of these dangerous concrete buildings and the development of sensible solutions to reduce risks associated with these buildings.