I think real estate and treasury bonds are at the heart of the battle enjoined by Jamie Dimon in his comments to Ben Bernanke about the slow economy. Here are some things we think we know:
1. Real Estate must decline in order for banks to lend money on property.
2. QE 3 is not coming soon, so that Bernanke can sell his treasury bonds to scared investors. (Correction: QE3 is possible if lending dries up in the US. If lending dries up we could have QE and fear driving bond sales at the same time. Also German banks could buy bonds as they are being bailed out)
3. Dimon hates the idea of real estate values declining, as it makes his toxic assets more toxic.
4. Bernanke likes real estate values declining, because it gives the opportunity for future securitization and another ponzi bubble.
So, we have to remember that Bernanke and Dimon are both crocodiles. You don’t want to get too close to either one of them. But it seems from the four points above that the split has more to do with timing than anything else. Bernanke wants a decline before the easy money hits again. Dimon is chomping at the bit and wants the easy money rolling ASAP.
But let us not forget, as other articles I have written show, the central banks are in bed with the TBTF banks. It is still one crocodile farm. The cold blooded inhabitants of this farm appear many times to have one goal, to fleece as much money from the real economy as they are able to fleece.
We have to remember that Bernanke is a treasury bond salesman. With QE ending, he needs to sell the bonds. Fear sells bonds. Fear could be coming. But it will be a controlled fear, and it will be ended with a rash of easy money deals available to the masses. Whether the masses take the deals is another question.
How this plays out regarding house buying is hard to tell. It makes more sense to buy a house on the periphery, say in Palm Springs rather than in LA, where prices are still too high, for a long term investment. It still makes no sense to buy a house in Los Angeles when you have the crocodiles growling at each other. Who knows what manipulations may be applied and if the crocs don’t have a crystal ball how do you think you have one?
As long as the crocs are in disarray, it may be necessary to avoid a mortgage and let things decline more. If easy money securitization resumes, with the government guarantees that the crocodiles all want, then get in before houses go too high in price. Get in at the beginning and if you get a mortgage, do not borrow against it if your house appreciates. I repeat, do not take a heloc in the next bubble. Haven’t we learned anything?
Business Insider Emails & Alerts
Site highlights each day to your inbox.