Economics Update

The dollar has flirted with crossing the $1.50:€1.00 for months, and not that it has crossed the barrier, it's continuing to weaken to new lows, with it currently around $1.51:€1.00.

Of course, it doesn't help that Alan Greenspan is suggesting that the Gulf states drop their pegs to the dollar. I guess that he's shorting the dollar or something now that he is "retired".

On the bright side, the falling dollars is attracting overseas investors to US real estate, as it is now cheaper to buy.

In California, we have the California association of realtors reporting that new home sales are down 29.8%, and median price is down 21.9%.

Make no mistake this is a blood bath, and the numbers would be worse if they corrected for home size. The housing market is collapsing from the bottom up.

It will get worse, Fannie Mae has posted a $3.6 billion q4 loss, and I would expect something similar from Freddie, and we are still very early in the collapse of the housing bubble.

We may very see the collapse of Fannie and Freddie in the next 3 or so years.

This may explain why new home sales nation wide are at a 13 year low and why Mortgage application volume is falling off a cliff.

It doesn't help that mortgage rates are no longer following the Fed rates because of inflation fears.

As the big sh^%pile continues to collapse, we are starting to see the inevitable lawsuits, with HSH Nordbank deciding to file suit against UBS, alleging that, "UBS's management of the portfolio has been in breach of its contractual obligations and fiduciary duties and that substitutions were made solely for the benefit of UBS".

We'll be seeing a lot more of this.

Testifying before Congress, Ben Bernanke is expressing concern about both inflation and recession, aka "stagflation", though the Fed is still shoveling money out the door, with another $30 billion auction of cash for garbage.

In the world of more real world finance, where people make money by making things, durable goods orders fall 5.3% last month, but oil is down a bit after getting above $102 a barrel.

It's under $100, for now, on expectation of a recession.