Reply #36: The Daily Reckoning Archives--A Lot of Graphic Porn!

[Demeter]

Bill Bonner and co. are entertaining, opinionated, and sometimes informative beyond the usual news articles. their contributions go here.

http://dailyreckoning.com/archives/



















Higher mortgage rates sure won't do much for the high end of the residential real estate market. Homeowners with mortgages of $1 million or more are now defaulting at nearly double the national average.

That 12% figure compares with less than 5% a year ago. Ouch.

In large part, that's a function of the fact that Fannie Mae and Freddie Mac can't buy "jumbo" loans of more than $729,750. In other words, once you reach the high six figures, you don't have Fannie and Freddie propping up the market with artificially low interest rates. So prices can fall more quickly to a more natural level...and high-end homeowners can find themselves way underwater...


...A new law will take effect in February. Like every new law, it disrupts the old laws by which people organized their lives. This one decrees that credit card companies shall henceforth cease the practice known as "universal default."

If a fellow defaults on one credit card, the other credit card companies rightly figure he's likely to do the same to them. So they take precautions, cutting him off from future credit.

But the authorities want people to spend - apparently, even people who can't pay their bills. So, they are outlawing the practice of "universal default."

The term "unintended consequences" was invented for these occasions. As usual, the law produces the exact opposite results from those the politicians wanted. The credit card companies are tightening up on all their accounts, realizing that after the new law goes into effect in February, they will be less able to identify the bad accounts quickly and less able to control their losses.

According to Bloomberg, this threatens $9 billion in holiday season sales...