September 30, 2010 – Pushing on a String Up Close and Ugly


2) Pushing on a String Up Close and Ugly. With many economists arguing that Quantitative Easing II amounts to nothing more than pushing on a string, I'll show you what it looks like up close and ugly. The online real estate firm,, has analyzed the results of tens of thousands of recent mortgage applications, with sobering results (click here for their site).

Ben Bernanke can cut interest rates all he likes, but can't raise personal credit scores, and that is a big problem. Some one third of Americans now have credit scores under 620 and are unable to obtain loans under any circumstances. Of the 47% who have good scores over 720, less than half are getting loans at the lowest interest rates. This is important because a mere 20 point improvement in scores leads to a $6,400 drop in the cost of an average conventional loan over its 30 year life.

This won't change until banks return to risk accumulation mode, which is at least five years off. I never miss an opportunity to pile abuse on the residential real estate market, as I believe that for demographic and other reasons it will be dead money for another decade (click here for 'The Hard Truth About Residential Real Estate'). This is just another nail in the coffin.


Not Looking Like a Great Short Term Investment