Is The World On The Eve Of A Major Financial Downturn? (KME, FXA, XLYS, RZV, IWM, EWD, EWA, EPP, FAA, FXE, USO, CU, GAZ, EIRL, FXY, GLD)

The Janna Herron Associated Press article entitled GMAC Stops Some Evictions, Foreclosed Home Sales relates: In a deposition taken in December, GMAC employee Jeffrey Stephan said he signed 10,000 affidavits or similar documents a month without personally verifying who the mortgage holder was. That means many foreclosures could have taken place based on false documentation. Stephan could not be located for comment.

“That’s hundreds of thousands of cases,” said Ice Legal PA attorney Christopher Immel who took the deposition. “And there are other people at other places who sign these kinds of documents as well.”

GMAC did not address how many homeowners would be affected by its suspension of evictions and foreclosure sales. It expects the issues to be resolved within a few weeks or, at latest, by year-end. The company didn’t respond to questions beyond its statement.

The issue of documenting who holds the mortgage is not unique to GMAC. Judges and lawyers nationwide are taking a second look at foreclosure affidavits. Many mortgages have been sliced up and sold to many investors as securities and that makes it harder to determine who is the ultimate mortgage holder.

In August, a judge in Duval County, Fla., ruled that JPMorgan Chase could not foreclose upon two homeowners because Fannie Mae carried the mortgage on its books and JPMorgan Chase only serviced the loan. JPMorgan Chase had identified itself as the owner of the loan. Similar cases across the country are pending.”

I conclude that GMAC has stopped foreclosing because the mortgage was securitized by Wall Street, that is, it was bundled and resold.

And then that paperwork was probably divided and sold.

So the legal issue arises as to who actually owns the mortgage; and can one produce paperwork to document that mortgage ownership; and thus be able to proceed on with foreclosure.

I’m not at all sympathetic to Wall Street Bankers. Rather I’m sympathetic to the “underdog”.

Is it right for the person living in the home to be foreclosed on, if the person taking action can’t produce legal ownership? You know the rule of law is: “if you sell something that is not yours, you go to the state or federal pen.”  

If I were a judge in a foreclosure proceeding, I would be concerned that the documents presented by GMAC were fake documents.

So we have more of a situation where people are living payment free in houses.

Today, Mortgage Bankers, traded by the ETF, (NYSE:KME) is trading at 39.85, which is below support of 40 going back to May 2009. It is likely to fall lower this week, as I believe that the FOMC will not provide any hope to Wall Street Traders.

Get Ready For Investment Shock And Awe

Tomorrow, September 21, 2010 the currency traders are likely to sell the Euro, the Swedish Krona and the Australian Dollar in response to the FOMC meeting.

Today, September 20, 2010, the currency traders went long the the Australian Dollar, (NYSE:FXA), and the Swedish Krona, (NYSE;FXS), in front on the US Federal Reserve Meeting, causing stocks to rise.

The currency sensitive and thus financially sensitive stocks and ETFs rose the most, this included the Small Cap Consumer Discretionary, (NYSE:XLYS), Small Cap Value, (NYSE:RZV), the Russell 2000  (NYSE:IWM), Nasdaq Community Banks, (NYSE:QABA), Europe, (NYSE:FEZ), and Sweden, (NYSE:EWD), Australia, (NYSE:EWA), and Asia excluding Japan, (NYSE:EPP).

The (NYSE:FAA) ETF, the investors weather vane, which rises immediately prior to stock down turns, rose significantly. The higher Euro, (NYSE:FXE), called Oil, (NYSE:USO), higher. Whereas Natural Gas, (NYSE:GAZ), failed, falling almost 4%.  The copper miners ETF, (NYSE:CU), manifested a massive lollipop hanging man candlestick, indicating a reversal is at hand. Ireland, (NYSE:EIRL), fell 1%, indicating that the way forward is down on European sovereign debt and banking issues.

Today, September 20, 2010 was simply a green shoot rally in a Bear Market that started September 17, 2010, as currency traders unleashed a global currency war by selling the Euro, (NYSE:FXE), in response to the Bank of Japan intervening in the currency markets on September 15, 2010, and selling Yen, (NYSE:FXY), to stop the rise of its currency; this caused the Yen to fall to its 20 day moving average, which in turn terminated long carry trade investing.  

The Bank of Japan in selling Yen has “commenced competitive currency devaluation”; and thus started a more aggressive from of debt deflation than that of April 26, 2010 which accompanied the European Sovereign Debt crisis exploding on the worlds financial markets: translated into plain English, this means stocks are going to fall fast and hard!  

One should sell stocks short or invest in gold at this time; for the former I suggest that one visit my ChartList of Stocks and ETFs to sell short for a debt deflationary bear market; for the latter, i suggest that one visit the local coin store.

I ask … Will a Financial And Credit Regulator Arise As Credit Runs Dry?

I believe that soon, out of a liquidity evaporation and a liquidity crisis, stemming from a fast fall in bond and/or stock values, that here in the US, a Financial Regulator will be announced who will oversee lending and credit, as well as money market and brokerage accounts.

This person will be what I call a credit boss or credit seignior who funds economic operations with an emphasis on seeing that the strategic needs of the country are met and that monies for food stamps keeps flowing. I believe the government will become the first, last and only provider of liquidity and money.

I believe that here in the US, the Financial Regulator will exercise Discretionary Governance, and announce a Home Leasing/Renting Program administered by the banks on their REO properties and those of Freddie Mac, Fannie Mae and the US Federal Reserve. Mortgage lending and securitization of loans will cease, and leasing of homes will be a public private partnership cooperative endeavor. Companies that have created and serviced mortgage-backed securities, such as Anworth Mortgage Asset Corporation, ANH, and Annaly Capital Management, NLY, will quickly disappear from the economic landscape, as mortgage bond funds such as Goldman Sachs Mortgage Bonds, GSUAX, tumble in value.

And I envision that in Europe, with a fall in the EUR/JPY from 112, there will be stock deflation, with the European Shares, FEZ, falling below 36, and European Financials, EUFN, falling below 22.50. Then a liquidity crisis will emerge, where there will not be enough buyers for sellers of stocks as well as bonds, causing small business failures, and banks to become sorely decapitalized, resulting in the president of the ECB arising to be an “Eurozone Credit Seignior” and provider of liquidity to Europe.

While many write that Ms Warren has been appointed as a lapdog, I believe that Ms. Warren, is more likely to turn out to be the top dog, that is the Seignior, meaning top dog who takes a cut, and be called upon in time of crisis, to assume the role of Financial Regulator overseeing investment, banking, lending, credit, seigniorage and house leasing as her many articles would apparently qualify her for such a role.

Gold is Sovereign Wealth

Gold, (NYSE:GLD), traded up today. The rise of gold has been established as it as the sovereign currency and best means of preserving wealth. Over time as people see traditional wealth in currencies, stocks and bonds falling lower, they will rush to buy gold and its price will be maintained. Gold will become more expensive in the world’s currencies: its price certainly did inflate inflate in terms of yen this last week. I find it interesting that its price jumped immediately before the Bank of Japan’s announcement.

In Today’s News

EuroIntelligence reports  ECB bails out Irish bonds, after a report warning about the downgrade of Irish covered bonds; FT Alphaville explains in detail that the problem is due to the liquidity of the commercial assets backing those bonds; the Greek troika agrees to postpone the stress test for Greek banks – in line with the European policy never to test a bank that stands a chance of failing a test; Jean Quatremer has an intriguing report about a telephone call with Pierre Lellouche, the French European minister, just ahead of Sarkozy’s fateful press conference; Wolfgang Munchau says the real problem with the state of the European Union is not that fact of its decline, but the manner; The French do not appreciate Nicolas Sarkozy’s populist outbursts; Angelo Baglioni says the problem with Basel III is not the effect on the economy, but the likelihood of another financial crisis; Simon Johnson and Peter Boone, meanwhile, come out in favour of what they call a Trichet bond.

Written By Richard K. Gorton From Economic Review Journal

ABOUT: I am not an investment professional. I do not engage in stock or currency trading. I am a blogger and investor who believes debt deflation has created an investment demand for gold, and that gold bullion is the sole means of wealth preservation.  The chart of gold, $GOLD, reveals that with the onset of the European sovereign debt crisis in April 2010, gold has morphed from a base metal commodity to a currency, in fact the world’s sovereign currency.

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