House of Paine

to spike or not to spike

  that will be the question
passed 
by green grosser
     to the next fed chair


but the story is really 2D .......


why?


cause 

   credit is 2D

  a  rates  dimension
and 
a standards dimension 

ie two questions


how   cheap 

but   also 
how  easy 


----------------------------------------


the how  easy bit
 has already 
        been decided

going ahead
        we  will not see
                  easy household credit 


nope NOPE NOOOOOOPE


green will send out 
the dark horsemen
like in 89
if necessary
to cut  the funds 
            now  still streaming  
               into household credit pools 

by raising standards
the flow of funds will slow
and if there's still
any 
 house bubble left

it will end .......
 

----------------------------

cutting credit flows

is childs play really

one way

just up the credit worthy  standard
that will throw chunks of the existing 
portfolio
in the doubtful category

which
(and heres the money play)
         hits the bottom line 
because the loans so re rated
must be reserved against
up to dollar for dollar

thats a direct reduction of profits 


now  
of course its all  just book  keeping
for now 
no ones actually defaulted yet 

its 
 all  paper but hey 
  where in 
         pure schein  territory here 
whats on paper 
       is the reality 


so maybe
the auto de fe 
will be fun

maybe 
 some   small piggy finance companies
  and
dirt ball
   banker heads will roll.....

---------------------------

and heres the further good news

there's no bubble related reason 
to rate spike uz


 a rate pop
is an optional 
 further cruelty

it'll of course
not only hurt
new buyers
 but more importantly
  all  armers out there
as well as 

and other desperate chancers

with short term  zero zero 
obligations
on their 
house loans 
or 
their   equity lines


why maybe not ?


cause 
if the vamps
 pull off
too much  of a drain 
it will whack  consumer lspending
so bad
we'll recess
  in late 06
or
   early 07 


just in time 
for a donkey come back 
in election year '08

  like in '92 


hence  sole reliance 
on 
a slow  silent 
regulator type
 strangler approach
looks like the better option


how done?

set new household loan  volume 
targets 

  at say

 XY % of the last three year average

run volume backwards at a faster rate 

say

3/1

as  

  credit FLOW constrictionsgo

lamb gentle 

will it be done?

 or will we get another 89

a ham fisted 
 sudden bottle neck 

 -----------------------------------------

 behind door number one 

         a gradual taper 

 a slowly applied slim trimmer 
  
   a   gentle squeeze play 
   
door number two 
 
 a savage cinching wind braker 

which will it be ????

check back  here in 
  ohhh
    maybe  
  4 months or so

after the first of the year

just as greenstain departs
 for 
 the dance floors  
          of st petersburg florida 


but 
whatever u do  
  don't wait a year

cause in a year 
   every one will
             know the answer 

and thats way too late