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Foreclosures surge 181%, Market has worst start since 1942. Nasdaq worst month since 2008
Posted on 5/2/22 at 12:22 pm
Posted on 5/2/22 at 12:22 pm
Highest rates of U.S. inflation in more than 40 years
When the Federal Open Market Committee (FOMC) convenes for its next meeting on May 4-5, it will find itself stuck between a very large rock and a very hard place.
I believe 2 things are possible:
1- If they go through with 50 basis points, the market and thus the value of stocks will drop. All things mentioned above will worsen rapidly.
2- If they change to a lower amount (because they have to raise it) I believe the market will react positively to that news. It will also keep the direction of pulling back inflation.
Not sure which they will do, but it's not a decision that will be easy.
As Forbes put it:
LINK
When the Federal Open Market Committee (FOMC) convenes for its next meeting on May 4-5, it will find itself stuck between a very large rock and a very hard place.
I believe 2 things are possible:
1- If they go through with 50 basis points, the market and thus the value of stocks will drop. All things mentioned above will worsen rapidly.
2- If they change to a lower amount (because they have to raise it) I believe the market will react positively to that news. It will also keep the direction of pulling back inflation.
Not sure which they will do, but it's not a decision that will be easy.
As Forbes put it:
quote:
Back to the rock and the hard place—a higher fed funds rate means higher borrowing costs throughout the U.S. economy, even as elevated inflation keeps eating into the purchasing power of the U.S. consumer. The worry is that these two forces will slow the economy to the point where it lumbers into a recession.
“The Fed has painted themselves into a corner,” said Steve Sosnick, chief strategist at Interactive Brokers. “It can be hard to deflate a balloon in an orderly manner without it popping.
LINK
9
Posted on 5/2/22 at 12:24 pm to Jjdoc
This is not going to end well.
08 will look like nothing compared to this
08 will look like nothing compared to this
Posted on 5/2/22 at 12:30 pm to I Bleed Garnet
The thing is, it's hard to tell what's going to happen and that instability makes preparing (not even investing for money) very difficult.
Posted on 5/2/22 at 12:31 pm to I Bleed Garnet
Now for the rest of the story:
Marketwatch
quote:
While those numbers seem grim, pros say the reality isn’t as bad as it looks: Though active foreclosures are up year-over-year, the number of loans in active foreclosure is still way below historic norms. On average, prior to the pandemic, the country saw about 30,000 to 40,000 foreclosure starts per month. But the foreclosure moratoria that were put in place as part of the CARES Act in response to COVID-19 drove all of that normal activity to a halt.
As for foreclosure filings, Rick Sharga, executive vice president of market intelligence at ATTOM, says that though “foreclosure activity increased significantly in the first quarter of 2022 … that doesn’t indicate a sudden weakness in the housing market, or the U.S. economy. Mortgage servicers are essentially ‘catching up’ on processing foreclosures on loans that were already in default or more than 120 days delinquent prior to the pandemic. Many of these loans are fairly old – issued prior to 2009.” And he adds: “We’re not expecting to see a huge wave of foreclosure activity anytime soon … Even with the dramatic increase in Q1 foreclosure activity, we’re still running at about 50% of the normal level.”
Marketwatch
Posted on 5/2/22 at 12:35 pm to Jjdoc
We should have took more on the chin in 2020. I understand Trump was trying to get reelected, but printing so much cash to prop up every industry was going to hurt longterm.
Posted on 5/2/22 at 12:35 pm to SlowFlowPro
quote:
The thing is, it's hard to tell what's going to happen and that instability makes preparing (not even investing for money) very difficult.
yep.
Posted on 5/2/22 at 12:42 pm to Diseasefreeforall
quote:
Now for the rest of the story:
That's not telling the rest of the story.
The rest of the story is that as with any recession, unemployment goes up. That means more foreclosures. In general, a recession typically causes real estate values to decrease because there is a lower demand for homes or investment properties.
Posted on 5/2/22 at 12:44 pm to AUCE05
Feds had the numbers in March of last year. They knew this was coming and somehow failed to act.
Either they did not act intentionally or they are very incompetent at their jobs and need replacing.
There is no in between with that.
Either they did not act intentionally or they are very incompetent at their jobs and need replacing.
There is no in between with that.
Posted on 5/2/22 at 12:47 pm to Jjdoc
quote:
2- If they change to a lower amount (because they have to raise it) I believe the market will react positively to that news. It will also keep the direction of pulling back inflation.
Do you think the market has priced this in already?
All the smart people know interest rates must go up in order to combat inflation.
If the pull back the raise to say 25 basis points... it's going to signal that the economy is in real trouble... it's sick and it's not able to stomach the medicine needed to fix the problem.
When the cure is as bad or worse than the sickness... it's a hell of a problem.
So the question is... has the bloodbath of late recognized this... or is there another bloodbath coming when it is recognized in the future?
quote:
“The Fed has painted themselves into a corner,”
Yup, we have been saying that for several years now. They aren't alone... two presidential administrations and a lot of Congressmen share blame here for pushing "grow at all costs, damn the later impacts" strategy.
quote:
It can be hard to deflate a balloon in an orderly manner without it popping.
Especially since they have never been able to do this... even with a lot more tools than they have currently.
Posted on 5/2/22 at 12:47 pm to Diseasefreeforall
quote:
Many of these loans are fairly old – issued prior to 2009
How do you get foreclosed on a 10+ year old mortgage in a seller's market? In most these cases it's probably financial irresponsibility or terrible circumstances rather than broader market trends.
Posted on 5/2/22 at 12:50 pm to Jjdoc
quote:
Either they did not act intentionally or they are very incompetent at their jobs and need replacing.
They wanted to drop more money into the economy. These are not unintelligent people... they knew the long term consequences.
I believe they thought they needed to get through today and would worry about tomorrow, tomorrow.
Well, tomorrow is here.
And remember... none if this happens if all COVID restrictions are lifted by June 2020 (I can understand and appreciate the initial scare... but by June 2020 we had a decent idea of how to handle this).
Posted on 5/2/22 at 12:52 pm to Diseasefreeforall
quote:
Mortgage servicers are essentially ‘catching up’ on processing foreclosures on loans that were already in default or more than 120 days delinquent prior to the pandemic.
It's early. They still need to deal with all the COVID moratoriums.
A lot of those are going to end up in foreclosure because the borrower won't be able to afford the workout.
Plus... we are about to find out in the next 12-18 months how many people refinanced into an ARM last 2-3 years.
I think we are a year or more away from any major foreclosure explosion... but it's coming.
Posted on 5/2/22 at 12:57 pm to LSUFanHouston
quote:
Do you think the market has priced this in already?
I don't. My reason for that is that last week we had a pop on the day that the GDP was announced and it was negative 1.4%.
Why would that pop? Because investors felt that it would slow the FEDs rate increases. There was no other news. It was a nasty week for major stocks etc. The thought on it is that when rates are raised, the real GDP drops and since it's -1.4% it would force the FOMC to pull back the 50 base to a lesser degree.
quote:
All the smart people know interest rates must go up in order to combat inflation.
If the pull back the raise to say 25 basis points... it's going to signal that the economy is in real trouble... it's sick and it's not able to stomach the medicine needed to fix the problem.
We are in massive trouble.
Posted on 5/2/22 at 12:59 pm to Jjdoc
Posted on 5/2/22 at 1:02 pm to LSUFanHouston
quote:
A lot of those are going to end up in foreclosure because the borrower won't be able to afford the workout.
It will raise their payments!
quote:
Plus... we are about to find out in the next 12-18 months how many people refinanced into an ARM last 2-3 years.
I think we are a year or more away from any major foreclosure explosion... but it's coming.
In a recession, home prices drop. Think about all those people who just purchased a home at an all time high!
Now, with recession comes jobs losses.
YES.. you are right. It's going to get worse.
Posted on 5/2/22 at 1:17 pm to Jjdoc
The market is fundamentally reliant on 2 things primarily-
1. Interest rates and 2. Company earnings.
Interest rates- they’re rising. They’re at a level that is creating interest from the boomers who need stability. A year ago they couldn’t get anything close to what they can get now so money is flowing toward safer investments.
Earnings- they’ve been mixed bag but it’s a perverted comparison to last year.
Otherwise, a few things additionally to consider-
-trade is opening up somewhat and that’s good. Asia could put a crimp on it though.
-We have November elections coming so there’ll be some games played.
-China and other Asian areas closing down with Covid.
-The rate of inflation increase has shown signs of slowing down. The question is how long it starts to decline. That could be a while.
-Gdp will suffer. It already has. People are starting to buy cheaper necessities, travel cheaper, and cut back on luxury items.
Consequently, I am not a buyer of stocks . Not necessarily a seller either. I lay in wait
1. Interest rates and 2. Company earnings.
Interest rates- they’re rising. They’re at a level that is creating interest from the boomers who need stability. A year ago they couldn’t get anything close to what they can get now so money is flowing toward safer investments.
Earnings- they’ve been mixed bag but it’s a perverted comparison to last year.
Otherwise, a few things additionally to consider-
-trade is opening up somewhat and that’s good. Asia could put a crimp on it though.
-We have November elections coming so there’ll be some games played.
-China and other Asian areas closing down with Covid.
-The rate of inflation increase has shown signs of slowing down. The question is how long it starts to decline. That could be a while.
-Gdp will suffer. It already has. People are starting to buy cheaper necessities, travel cheaper, and cut back on luxury items.
Consequently, I am not a buyer of stocks . Not necessarily a seller either. I lay in wait
This post was edited on 5/2/22 at 2:03 pm
Posted on 5/2/22 at 1:30 pm to SlidellCajun
quote:
SlidellCajun
Not a bad take at all.
quote:
Consequently, I am not a buyer of stocks .
I'm raising cash and buy some now. I'm buy calls ITM way out too. Some in 2024. By raising WAY more cash than spending.
Posted on 5/2/22 at 1:58 pm to Jjdoc
I'll continue to DCA into the market as I have for the past year+...but these signs all point to a rough 2022.
This set of circumstances is exactly why I don't have the psychological fortitude to invest it all as a lump sum. It's painful already but I can at least stick with this systematic approach. Granted, inflation is making this a tougher pill to swallow.
This set of circumstances is exactly why I don't have the psychological fortitude to invest it all as a lump sum. It's painful already but I can at least stick with this systematic approach. Granted, inflation is making this a tougher pill to swallow.
Posted on 5/2/22 at 2:02 pm to Jjdoc
quote:
In a recession, home prices drop. Think about all those people who just purchased a home at an all time high!
You also get higher interest rates. You can have the same exact payment at a cheaper purchase price with higher interest rate as you would a more expensive purchase price at a lower interest rate. In the end all that matters is the interest rate for you buying power not the home price. Not that home price is irrelevant but the rate matter more.
Posted on 5/2/22 at 2:08 pm to ronricks
quote:
You also get higher interest rates. You can have the same exact payment at a cheaper purchase price with higher interest rate as you would a more expensive purchase price at a lower interest rate. In the end all that matters is the interest rate for you buying power not the home price. Not that home price is irrelevant but the rate matter more.
Well... if people got ARMs and the ARMs adjust upward it's going to make the payment rise.
The key is going to be how much of the last few years were fixed rate... hopefully most of it was.
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