Monthly Archives: January 2015

Housing Market Update 2015

ForSaleBy almost all accounts the last large down turn in the economy (2007 -2009), commonly referred to today as the Great Recession, was caused by cheap and unlimited amounts of money for people who wanted to buy a house, and excessive borrowing by Wall Street. We won’t spend any time today looking at how Wall Street might have changed over the last 6 years; instead this piece reviews the current condition of the US housing market.

Flash back a moment to 2007 and recall the state of the housing market. The amount of money available to help consumers buy a new home seemed limitless. It was no problem if you didn’t have money for a down payment. You didn’t even have to prove you had an income. The era created the “no document loans” and the “no verification of income loan application”. If you could sign a loan application it seemed you could get a loan. In my former career I can even remember seeing securities that were backed by loans where the “loan to the value” of the houses was 125%. Imagine a borrower with a home worth $100,000 and the lender providing a $125,000 mortgage. The insanity continued until yet another bubble was created, leading to the inevitable burst, and a massive crash in the real estate market.

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The Swiss Get “Fed Up”

Swiss franc banknotes

Swiss franc banknotes

We all know the expression “fed up” as meaning someone who is unwilling to put up with something any longer. This past Thursday it was the Swiss National Bank, the Swiss equivalent of our Federal Reserve, which showed it was totally fed up with its own policy on the relationship between the Swiss franc and the euro. The consequences were dramatic for markets across the world, but especially for foreign exchange.

Switzerland is not part of the European Union and continues to be strongly committed to its independence and neutrality. However three years ago Swiss National Bank (“SNB”) decided to cap the value of the Swiss franc against the euro. This decision was taken in the middle of the ongoing financials crisis, and was a mechanism to stop the rise in the value of the Swiss franc. At that time the Swiss franc was seen as a safe haven by many nervous investors. As a result the value of the currency had been rising steadily, thus making life difficult for Swiss businesses trying to sell their increasingly expensive goods abroad.

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