The Massive Leverage Will Flow Over
A report from the Australian. “When three similar global city real estate markets start showing the same patterns, it’s highly likely you are seeing a major trend emerging. The three major markets showing the same nervous trends are Vancouver, Sydney and Melbourne. And what is happening in the real estate market is being duplicated in other areas of the economies of Australia and North America. What we are seeing in the three markets (Vancouver, Sydney, Melbourne) is a reduction in Chinese buying and reluctance by the non-Chinese locals to buy at the high prices. Melbourne prices dropped 0.5 per cent last week to sit 1.8 per cent lower than a month earlier. Prices in Sydney fell by 0.1 per cent, a seventh straight weekly decline that left prices in the NSW capital 1.3 per cent down over a month.”
From Domain News. “Foreign property investors are shifting their focus away from Victoria after several government policy changes which experts say could lead to a slowdown in the economy. Many China-based businesses that only sold Australian properties have already closed, while some are diversifying their businesses by selling other countries’ real estate. The removal of the Victorian stamp duty concession for off-the-plan investors was introduced against a backdrop of Australian banks tightening lending rules and the Chinese government limiting the amount of money moving offshore.”
“AMP Capital chief economist Shane Oliver said it appeared building approvals for new apartments in Victoria had already peaked, which would be a dampener on the Victorian economy. ‘Hopefully other parts of the economy will fill the gap [such as tourism, higher education and infrastructure projects]; it was never going to be the case that housing was going to keep us going forever,’ he said.”
From ABC News. “In a surprise move, Australia’s booming property market has made one asset manager worried enough to shut down his multi-million-dollar fund and hand back all the money to his investors. Philip Parker, the chairman and chief investment officer of Altair Asset Management, had written to investors explaining that he was returning their funds at an ‘overvalued and dangerous time in this cycle.’”
“‘In the last six to eight months, the investment committee of Altair have felt, to varying degrees, that the property market was heading into bubble territory,’ he told the ABC in an exclusive radio interview on Business PM. ‘The massive leverage that you’re seeing in terms of people’s exposure to property will then flow over to other liquid assets. Secondly, I felt China property and debt issues will become a major factor later in the year.’”
From Bloomberg. “Australian house prices fell in May for the first time in 17 months, in an early sign lending restrictions are starting to damp demand. The monthly decline comes after regulators tightened lending curbs amid fears of a housing bubble, and the nation’s banks raised interest rates — especially for interest-only loans which are popular with property investors seeking to take advantage of tax breaks.”
“‘The market has lost momentum, particularly in Sydney and Melbourne where affordability constraints are more evident and investors have comprised a larger proportion of housing demand,’ CoreLogic’s head of research Tim Lawless said.”
From Perth Now. “Perth’s property market has taken another hit as signs grow runaway prices in Sydney and Melbourne have finally come to an end. CoreLogic reported over the past year values for houses in Perth have fallen by 4.2 per cent, the second worst market in the country behind Darwin where prices have tumbled by 8.8 per cent. Nationally, unit prices edged down by 2.6 per cent led by a 3.8 per cent fall in Melbourne. There have been concerns of an over-build of units, particularly in parts of Brisbane and Melbourne, driven by investors looking for capital gains.”
“‘It appears that housing activity has eased which is attributable to a range of factors including affordability constraints, tighter credit policies, rising mortgage rates and a downturn in consumer sentiment towards housing,’ said CoreLogic head of research Tim Lawless. ‘Considering we are yet to see the full effect of the recent round of macroprudential measures flow through, there is a high possibility that investor activity, and consequently housing demand, will slow further during 2017.’”
From The New Daily. “The latest building approval numbers may herald the beginning of the end of the construction boom that the Australian economy is so reliant on, according to experts. Data released by the Australian Bureau of Statistics on Tuesday showed that buildings approvals fell by 17.2 per cent between April 2016 and April 2017, based on seasonally adjusted figures.”
“The Melbourne and Brisbane apartment markets are widely thought to be oversupplied. About 5000 new apartments are expected to be completed and up for sale in Melbourne this year alone. BIS Economics found 50 per cent of new apartments bought and sold in the last five years sold at a loss. The Reserve Bank sounded the alarm earlier this year about deteriorating market conditions after investment declined in late 2016. The central bank warned that increased supply and lower population growth had already depressed rents and apartment prices in Perth and Brisbane.”
The Courier Mail. “Another Brisbane construction company has gone under in the latest sign the downturn in the city’s apartment market is deepening, and a damning prediction from an industry insider says many more companies will soon fall. Liquidators were called in to wind up Nathan-based CMF Projects this week, leaving scores of subcontractors in the lurch and at least two incomplete projects around Brisbane.”
“Subcontractors Alliance spokesman Les Williams said he expected at least one construction company to collapse every month as the market unravelled. Mr Williams said that since Christmas creditors, including subbies, had lost an estimated $100 million, as building companies went under.”
From Reuters on China. “The banker at the other end of the phone line was furious, recalled Shanghai lawyer Wang Chaoyu. A pile of steel pledged as collateral for a loan of almost $3 million from his bank, China CITIC, had vanished from a warehouse on the outskirts of the city. Just several months earlier, in mid-2013, Wang and the banker had visited the warehouse and verified that the steel was there. ‘The first time I went, I saw the steel,’ recalled Wang, an attorney at Beijing DHH Law Firm, which represents the Shanghai branch of CITIC. ‘Afterwards, the banker got in contact with me and said, ‘The pledged assets are no longer there.’”
“it is indicative of a much wider problem that could endanger the health of China’s financial system – fraudulent or ‘ghost’ collateral. When bank auditors in China go looking, they too often find that collateral recorded on the books simply isn’t there. In some cases, collateral that has been pledged simply doesn’t exist. In others, it disappears as borrowers in financial distress sell the assets. There are also instances in which the same collateral has been pledged to multiple lenders. One lawyer said he discovered that the same pile of steel was used to secure loans from 10 different lenders.”
“With the mainland facing its slowest growth in over a quarter of a century, defaults are mounting as borrowers struggle to repay their loans. The danger of fraudulent collateral in this situation, say economists, is that it exacerbates the problem of bad debt for China’s banks, increasing the risk of financial turmoil. A Reuters review of dozens of court cases involving collateralized loans and interviews with lawyers, regulators and 30 bankers in China reveal that fraudulent collateral – in the form of buildings, private apartments, copper and steel – is haunting loans across a wide swath of business and industry.”
“Fraudulent collateral is ‘a huge issue,’ said Violet Ho, senior managing director and co-head of Greater China Investigations and Disputes Practice at Kroll, which conducts corporate investigations on the mainland. ‘Often you also see that the paperwork around collateral may be dodgy, and the bank loan officer knows, the intermediary knows, and the goods owner knows – so it’s essentially a Ponzi scheme.’”
“In a report last September, Fitch Ratings estimated that it would cost as much as $2.1 trillion to clean up China’s bad debt – almost a fifth of annual Chinese economic output. Fitch Ratings has mentioned ‘wildly misleading’ property valuations as one reason why high collateral coverage may not protect banks. Another is a sudden fall in property prices. According to Fitch’s Grace Wu, over 60 percent of financing in China uses property as collateral in some way. More than three years since lawyer Wang Chaoyu took the phone call from the incensed CITIC banker about the missing collateral from Hanning Iron and Steel, the lender is still trying to get back some of its money. CITIC is now trying to sell several apartments that were put up as part of the security for the ill-fated loan.”
The Reuters article is worth reading in full.
‘The three major markets showing the same nervous trends are Vancouver, Sydney and Melbourne. And what is happening in the real estate market is being duplicated in other areas of the economies of Australia and North America.’
The biggest risk has been a simultaneous collapse of the many bubbles. I read somewhere that April’s highest sale in Miami Beach was $2.3 million. Recently it was reported there was a 19 year inventory of over $5 million condos. If you don’t have a single sale of over $5 million, I guess the months inventory is infinite.
Agree, the Reuters article is a must-read piece, as it suggests the scale and scope of the endemic fraud in the Chinese financial system poses serious risks not only to China but could also have cascading effects on the global financial system.
The “rehypothecation” of pledged collateral, mainly warehouses full of copper sheeting and iron ore, was documented at least as far back as 2014 (Google it). Multiple loans were taken out against the same pledged collateral, with banks none the wiser. Now, however, copper is trending lower while iron ore has plunged in value, meaning that warehoused collateral, even if it’s only pledged to a single lender, has lost considerable value. And if that collateral was pledged multiple times over to multiple lenders?
Oh dear….
“Multiple loans were taken out against the same pledged collateral, with banks none the wiser.”
I guess so long as nobody ever has to collect any collateral, this can work just fine.
“… with banks none the wiser.”
You guys are a bunch of fools.
They are innocent victims, not fools.
I’d offer Violet Ho any kind of loan she wanted….she gets my covfefe boiling.
“They are innocent victims, not fools.”
Bankers and lawyers are innocent victims, not fools.
Got it.
Ah, but there’s the rub. Bank officials who were only concerned with making loans so they could hit their numbers and collect their bonuses had no real incentive to verify that pledged collateral was all there and accounted for. Now, as the value of that collateral keeps dropping and the scale of the “ghost collateral” problem is becoming impossible to ignore, Chinese lenders are going to be as nervous as a six-year-old at the Neverland Ranch.
I smell fear…and a crow buffet.
“Bank officials who were only concerned with making loans so they could hit their numbers and collect their bonuses had no real incentive to verify that pledged collateral was all there and accounted for.”
And there it is.
Here’s a revealing snippet of the article I’d like to present to you hopelessly ignorant pukes …
“Often you also see that the paperwork around collateral may be dodgy, and the bank loan officer knows, the intermediary knows, and the goods owner knows – so it’s essentially a Ponzi scheme.”
If the collateral doesn’t even physically exist, then how can anyone possibly be harmed by a drop in the unit price?
Some putative victims are complicit in the fraud:
“If the collateral doesn’t even physically exist, then how can anyone possibly be harmed by a drop in the unit price?”
Say, Professor, just what is it that you are a professor of?
In a normal world, the drop in price would trigger the loan being called in.
In the world of stocks a margin call would be generated.
Evidently I profess beardom in a world that overflows with bull.
And if the same collateral is used over and over again for multiple loans, then banks are going to massively underestimate their loan losses in a market with declining collateral value.
In the US as home prices fell, lenders on those loans increased loan loss reserves, and reduced the credit they were willing to offer to new borrowers.
If instead the lenders were defrauded in a different way, thinking that they had good collateral, when in fact, they were sharing it with multiple other lenders, they will not increase loan loss reserves as much as they should, and they will lend money for longer to similar borrowers (getting themselves in even deeper).
This scheme provides an illusion of safety for the lenders, and that prolongs the fraudulent lending in an environment with falling prices.
“Evidently I profess beardom in a world that overflows with bull.”
WTF? Today I hold the Prof in high esteem. Best. comment. of the day.
It’s a bit amusing to read the article. The Chinese people I know never trust the paperwork and assume it’s all BS. They only really trust family.
The writer of the article seems to have the point of view that the accounting is something that can normally be trusted. I never got that vibe there.
When one has the (nearly) bottomless checkbook of the central bank as an asset, accounting rules do become much more creative and flexible.
“…collateral was pledged multiple times over to multiple lenders.”
I’ve seen something like this before. It was called a … wait… it’s on the tip of my tongue… Oh, yes! I remember! It’s called fraud!
Regards,
Roidy
Google:
What is the difference between hypothecation and pledge?
Pledge is used when the LENDER (pledgee) takes actual possession of assets (i.e. certificates, goods ). … Hypothecation is used for creating charge against the security of movable assets, but here the possession of the security remains with the BORROWER itself.
This news must certainly be fake, as the description bears no resemblance to the robust economic dynamo reported here daily by resident China correspondent Albuquerque Dan:
“With the mainland facing its slowest growth in over a quarter of a century, defaults are mounting as borrowers struggle to repay their loans. The danger of fraudulent collateral in this situation, say economists, is that it exacerbates the problem of bad debt for China’s banks, increasing the risk of financial turmoil.
As growth slows, lenders can expect more nasty surprises, said Xin Qingquan, professor of accounting at Chongqing University. More instances of fake collateral will arise, he said.”
Sadly, the numerous ripostes ABQ Dan could post relying on indisputably accurate and precise data from scrupulously honest Chinese sources to rebut our campaign of malicious slanders disappears into the ether when he tries to post it to the HBB, leaving us sadly misinformed as to the true state of affairs in his beloved China.
See? Fraud.
Of course my Real Estate Professional would just say, “Oh, good. I got a 6%.”
Regards,
Roidy
“Of course my Real Estate Professional would just say, ‘Oh, good. I got a 6%.’”
Which, fraud or not, he gets to keep.
Typically each realtor keeps 1½%.
MM, and the house gets 1.5% each?
DeLeon Realty in the SFBA (famed for one of, if not the first, $100MM sale) just announced that if they are representing both the buyer and seller on a transaction, they will only charge 3% total.
Other brokerage houses must be *#!tting themselves over it.
I met Ken DeLeon years ago at a party (well before he even became a RE broker)…weird dude, but hey, if he can start to blow up the 6% fee for all situations, more power to him.
Yes, that’s my understanding from a relative who was a realtor. The two brokerages each get 3% and the individual realtors get half of that. The brokerages might give 1.75% to a realtor after she reaches a certain number of sales for the year. Usually the 6% is part of the listing agreement. When the brokerages are having a tough time getting business, sellers can sometimes negotiate a 5% fee.
They sure seem to seek out green handshakes don’t they.
Sorry Ben has not been posting a lot of my posts and I refuse to try to show that you are wrong and my best posts are censored, as far as I am concerned the debate is over I won or Ben would not feel the need to censor.
You know what, FU dan. Your days of posting here are done.
Good riddance.
Well, at least he didn’t blame the Russians or “Data Ops” for his missing missives of Mandarin might. So, at least he’s not “with Her”.
China is following the trajectory of Japan, only with less culture. It’s fascinating to watch.
Thank you, Ben!
A lot of my posts - the majority - aren’t posted either. That’s Ben’s prerogative as moderator & host who’s paying the bills for this site and doing the hard work of keeping it up and running. I try to keep my posts timely and relevant, but I’m not going to get butt-hurt when my great gems of wisdom get spiked. Neither should you, Dan.
‘Dead pigs aren’t afraid of boiling water’
They conned the World Bank! Oh the irony.
The World Bank is the brilliant organization that fluffs China’s economic output numbers with Keynesian (yes invented by Keynes) PPP adjustments to make them look like the biggest economy in the world. The Ivy League Spooks at the CIA that Dan imagines just copy and paste.
World Class Con Men, stung by a Chinese grifter.
Keynesian (yes invented by Keynes)
That one smelled of nonsense. It turns out the idea originated centuries before Keynes.
Determination
While the origins of the PPP concept can be traced
back to the Salamanca School in 16th-century Spain,
its modern use as a theory of exchange rate determination
begins with the work of Gustav Cassel
(1918), who proposed PPP as a means of adjusting
pre–World War I exchange rates or parities for countries
intending to return to the gold standard system
after hostilities ended.1 Some adjustment was necessary
because countries that left the gold standard in
1914 experienced significantly different rates of inflation
during and after the war.2
As a theory of exchange rate determination, the simplest
and strongest form of PPP (absolute PPP) is based
on an international multi-good version of the law
of one price (Box 1). Absolute PPP predicts that the
exchange rate should adjust to equate the prices of
national baskets of goods and services between two
countries because of market forces driven by arbitrage.
Under absolute PPP, the exchange rate is simply equal
to the ratio of the domestic to the foreign price of a
given aggregate bundle of commodities, but this
implies that the real exchange rate is constant.3
http://www.bankofcanada.ca/wp-content/uploads/2010/06/lafrance_e.pdf
Well, you’re right. Gustav Cassel put it forward and Keynes argued against it. I confused who was on which side of the argument. I should have checked. I was just overwhelmed by the conning the con man thing.
http://www.economicsdiscussion.net/theories/purchasing-power-parity-theory/purchasing-power-parity-theory-and-foreign-exchange-rate/10862
17,290,000 empty homes in USA right now. Only down from 18,600,000 2 years ago. That’s a lot of empty houses. A lot has changed since then. You can see them using fbibulators on this economy. People are stretched and property taxes only increasing.
https://fred.stlouisfed.org/series/EVACANTUSQ176N
I see houses just rotting away from new to old. Sitting vacant everywhere. If this is a government figure wondering if not much worse than their padded figure
It’s not just a American issue. Worldwide it’s pandemic as many countries have same problem.
Who loses if homes sit empty and rot, especially if central banks bought the paper only to let it rot away on their balance sheet, forever out of sight and mind?
For what it’s worth, Realtor.com says the ADOM in the US is 60 days. It was also reported that the housing market has completely recovered with the average US house at $198k which is what it was in 2007. There is one little problem with this: $198k is actually $233k if you believe the US Inflation Calculator (http://www.usinflationcalculator.com). Even if you don’t believe this, inflation has caused the real dollar to depreciate so that $198k @2007 does no equal $198k@2017.
Of course, my Real Estate Professional would disagree.
Regards,
Roidy
For what it’s worth, unless the ADOM calculation honestly and correctly accounts for homes taken off the market because they wouldn’t sell, then it is a downward-biased estimate. Think of the folks who constantly take their homes off the market and relist. A single datum with very high DOM is supplanted by many false observations with low DOM, pulling down the average.
what closing sheet disclosure is there in say, Chighetto, when they have a 17% re tax increase?
Where are you, roughly? There aren’t many zombie houses in cities with jobs. Are those empty houses vacation houses? Empty condos in a struggling building?
I find them everywhere I go. Two, three, five years abandoned or more. Look at Manhattan: dark towers everywhere, and now foreclosures.
I know of a three or four story vacation house on an island in N. Florida. That house must have been abandoned for 10 years. It looks really nice until you walk up to it. The inside was never finished, and now the outside is really starting to go bad. Concrete block and stucco house that was well-built to last this long with little or no regular maintenance in the salt air and sun environment of Florida. Many of these vacation houses periodically enter foreclosure. Not surprising since there is no profit in the rent, so the owners must make it off of the appreciation over time. It mostly never ends well.
Regards,
Roidy
“The inside was never finished, and now the outside is really starting to go bad. Concrete block and stucco house that was well-built to last this long with little or no regular maintenance in the salt air and sun environment of Florida.”
Yep, the elements and pests in those humid climates.
Empty luxury homes all over my county - newly built in the past 3-4 years, build it and they will come mentality I guess. Oddly enough, rotting 60+ year old shacks that are falling over tend to be inhabited.
Another sign of the local top is that a condo just went up for sale for just over 500K, its a really old development, across the street from the beach but with big assessments at times. Last bubble peak that was the asking price as well, but then they fell over 50%. I can go just down the road to a newer, nicer building and location although a few more steps to the beach and buy for 30K.
Strange times indeed #covfefe
I put an offer in on this place back in 2010 or 2011 I think. Offered $110k or so, the bank was at $140k. It sat on the market until this year when it listed for $208k in an auction style listing.
The bank / HUD sat on that sucker for 5+ years. Chase took it back from the prior occupant through a deed in lieu so they didn’t have to foreclose.
http://www.realtor.com/realestateandhomes-detail/10922-Villa-Haven-Dr_Dallas_TX_75238_M72524-08409
We liked that it had a pool and fireplace, but in retrospect, we woulda been kinda cramped in it and it is a small lot. And the only way to get to the bike path that goes around the lake involves a lot of street top pedaling….that’s risky business in Dallas, no thanks.
Holy mackerel, that’s not too far from me. I’m at Walnut Hill and Midway. I got my 3-1-1 for $173k in 2013 (expensive, but whatever). They’ve started buying all our little box homes and are tearing them down and building $1 million “custom” construction in their places. I could sell mine easily for $300k, just for the lot. Once some of the houses are completed, it’ll be probably $400k for the lot. Which is a nice chance for me to cash out and go somewhere else, but it is insane what the market is here.
The curious aspect of the situation is how we arrived with a system of private ownership where the owner is better off letting his property crumble into desuetude than to sell to the highest value user.
I don’t believe this would happen without the heavy hand of Uncle “Bailout” Sam in the mix.
FWIW, is the local county assessor collecting their taxes?
“Where are you, roughly? There aren’t many zombie houses in cities with jobs.”
Is there a city with more job openings than Seattle? Because there are dilapidated, empty houses galore.
Done? I’ll miss his (non-China) posts. I mean that sincerely.
Oops, that was supposed to post higher up.
Yes, I like dan’s non-China posts as well.
But, the rule here is, don’t slag the blogger. I’ve had some of my posts not posted as well. Like the time I mentioned scdave’s wife’s boyfriend.
How do you know scdave’s wife’s boyfriend?
I’m in the DC metro area.
You have my sympathies.
Interesting, I’m in DC metro too and I don’t have a lot of empty houses in my nabe. I know of one, that’s it.
That’s odd. Everywhere I look theres another empty/ for sale house.
Any thoughts on why investors in Megabank, Inc have turned so glum as of late?
It seems odd to place the blame on DJT.
FINANCIAL TIMES
Goldman Sachs Group
US bank stocks head towards bear market territory
Fading hopes for Trump agenda leave Goldman Sachs 16.5 per cent below March peak
© AFP
5 hours ago
by: Ben McLannahan and Nicole Bullock in New York
Shares in some of the biggest US banks are heading towards bear-market territory, beaten down from their post-election peaks by talk of weak second-quarter trading revenues and fading hopes of a Trump-fuelled stimulus.
Goldman Sachs and Bank of America were among the biggest beneficiaries of the stock rally in the weeks after Donald Trump’s election victory in November, as investors looked forward to a profit-boosting mix of higher interest rates, lower taxes and lighter regulation. The KBW Banks index soared 32 per cent from the eve of the election to March 1, when sector sentiment peaked.
But some of those underpinnings have fallen away since then, as Mr Trump’s early setback over healthcare policy cast doubt over his ability to implement other promised reforms. On Wednesday, the selling pressure was exacerbated by comments from industry executives at a conference in New York, indicating that trading revenues for the second quarter stood little chance of matching a vibrant period a year ago.
Shares in Goldman Sachs dropped 3.3 per cent on the day, bringing the total fall from its closing high on March 3 to 16.5 per cent — within reach of the 20 per cent drop that normally denotes a bear market.
Wells Fargo is off more than 14 per cent since the start of March, while Bank of America and JPMorgan are both down about 12 per cent from their March closing highs and Morgan Stanley has fallen almost 11 per cent.
…
“Sell in March, go away” doesn’t quite have the right ring to it.
Will the Wall Street investment bank correction be contained, or is contagion into other sectors about to ensue?
Will the WS Investment Bank correction be contained? Back in 2007-8 the 50:1 leverage these lunatics had on their investments then guaranteed that a mild 5% correction would be amplified to nearly cause a complete financial sector collapse. What would a correction do this time? Supposedly there are regulations, stress tests, and more robust reserve requirements to prevent 2007-8.
I’m confident that there will be another crisis at some point, and I’m also sure that a mild to moderate correction will not hurt too much this time. What worries me is the non-prosecution agreements, the still dark-markets, and high-frequency trading.
I read on CNBC - yes, I know- in a 2013 article about dark markets. The dark market trading participants were said to have had a “better experience”, and this is what I don’t like. Anytime and anywhere an investment bank or equivalent says something like that, it means there was a potential for fraud that was found and exploited. Enter the non-prosecution agreement.
Regards,
Roidy
Once share prices are well along the inexorable downhill slide into bear market territory seems a little late to warn.
These Trump-driven stocks could be your worst bet for June
By Barbara Kollmeyer
Published: June 1, 2017 8:53 a.m. ET
Critical information for the U.S. trading day
AFP/Getty Images
Watching for action.
As stocks kick off the summer, there’s a plea out there for some action — even some gloom.
“We open the page on the month of June, and I, for one, hope we can break this malaise in markets, with either an upside break or at least a reasonable pullback in global equities to attract new money and fresh life into the markets,” says IG’s Chris Weston.
A small selloff would be “nice,” Daniel Morris, senior investment strategist at BNP, told Bloomberg. He says it’s just tough to find stock bargains, given the market has them priced to perfection.
That brings us to our call of the day, which says if you’re plotting out a June strategy, then avoid financials like the plague. That lack of action in markets has been especially hard on banks, whose ability to generate fees falls when markets aren’t coughing up excitement.
The Financial Select Sector SPDR Fund has, on average, lost 3.4% in June over the past 10 years, according to Rocky White, senior quantitative analyst at Schaeffer’s Investment Research. It has been positive just 20% of the month over that time.
Financial stocks were initially a big beneficiary of the so-called Trump trade, but have lost steam as his economic-stimulus plans look like they may not get pushed through easily. It was Bank of America and JPM who hinted at a slump in trading in the second quarter.
According to Schaeffer’s, there’s not much likelihood of financials seeing any gains this month. They note that short sellers — those banking on further falls — have been bailing on bearish positions lately, “meaning there’s little in the way of sideline cash available to help fuel potential rallies.”
In other words, no chance of a short squeeze to boost XLF.
…
Attract new money and fresh life…
Good point. Who is investing in the stock market these days? Rich folks with money are buying effing floating airboxes in some foreign city. The baby boomers are pulling out of stocks as they retire. Millenials are paying student loans. Not sure about Gen X… a lot of Gen X appears to be immigrants and lucky duckies. And companies have engineered prices so well that households can make ends meet, but with little left over.
“And companies have engineered prices so well that households can make ends meet, but with little left over.”
That’s the New Normal.
Period.
“And companies have engineered prices so well that households can make ends meet, but with little left over.”
You’d think the rest of the business community would have something to say about their customer’s lack of disposable income.
There is no point in a hyena complaining about the other hyena’s behavior. All you can do is try to get in there first.
Tallahassee, Fl housing market is said to be “red hot”, and it appears that this is so. I’m not sure why. Nothing around Tally is showing much if any increase in sales or values. If one ignores Jascksonville, the only place in N. Florida that is moving is Tally. It may be the unemployment rate which is 4.6% at the moment, but that has been falling for quite some time. I’m not discounting that real estate itself may be driving this. Any input would be appreciated.
Regards,
Roidy
“If one ignores Jacksonville,”
Impossible.
“The three major markets showing the same nervous trends are Vancouver, Sydney and Melbourne. And what is happening in the real estate market is being duplicated in other areas of the economies of Australia and North America. What we are seeing in the three markets (Vancouver, Sydney, Melbourne) is a reduction in Chinese buying and reluctance by the non-Chinese locals to buy at the high prices.”
It sounds like those Chinese investors got stucco, just like the Japanese real estate investors did three decades ago.
Oh, I know! I know!
“What was Japan, Inc.?”
Regards,
Roidy
‘As growth slows, lenders can expect more nasty surprises, said Xin Qingquan, professor of accounting at Chongqing University. More instances of fake collateral will arise, he said.’
This is what scares me about China. Every time I turn around another report about fraud and corruption. I don’t think China will be the miracle growth story that takes over the Western economies like we’ve been told.
Chinese regulators and enforcers are even more captured and ineffectual than their US counterparts, if such a thing is possible. Their feeble efforts to rein in the shadow banking sector and “combat” endemic scams are too little, too late.
http://www.scmp.com/business/money/markets-investing/article/2096553/shanghai-tightens-grip-online-lenders-scams
These are not “nasty surprises”. We were reading about the Pig Farmers and their multiple loans on bars of copper right here years ago. The China government vowed to clean things up.
“…he was returning their funds at an ‘overvalued and dangerous time in this cycle.’”
This guy is depriving his investors of a once-in-a-lifetime opportunity to capture the largest capital gains on record.
No, he is forcing them to realize the capital gains now while they still can.
Speaking of China and ghosts, what is to become of China’s myriad ghost cities? Are they destined to be eventually revealed as just another form of fraudulent or ‘ghost’ collateral?
New satellite images show inside China’s ghost cities
Gus Lubin
Mar. 3, 2017, 10:25 AM
China still has a startling number of vacant real-estate developments, judging from new satellite analysis by DigitalGlobe and Business Insider.
Chinese ghost cities have made headlines for nearly a decade, with huge new real-estate developments sitting mostly empty for years. Some see them as a sign China is heading for a real-estate crash. Others see them as just the typical style of urban expansion for a giant state-run economy.
While some ghost cities are reportedly filling in, the problem isn’t going away. A recent Baidu study of phone data gave clear evidence of 50 cities with areas of high vacancy. And just this fall China’s richest man called Chinese real estate “the biggest bubble in history.”
We looked inside some ghost cities with the latest in satellite technology, including time-lapse images, to show what’s making progress and what isn’t. See the highlights below.
…
Far out. The pictures remind me of playing real time strategy games, Command and Conquer, C&C Red Alert, Earth 2150 etc.
Keep the factories pumping out units. Gather up natural resources before your opponent does.
That’s funny…I hadn’t thought of it like Starcraft before.
It is human nature, when unaccustomed to wealth and then suddenly having the ability to buy stuff, the money gets pissed away on ridiculous things until it is all gone. Nouveau riche
The modern version of this is a credit line.
IMO a perfect world is a world where no dollar escapes.
Submariners talk of two types of vessels that go to sea: Submarines and targets.
Bankers talk of two types of people who inhabit the planet: Bankers and debt slaves.
We are not quite there yet but because of the captured educational system and the captured media we are well on our way to getting there.
Nice.
You have been warned: Abandon all hope, ye who enter here.
Marc Faber—aka Dr. Doom—warns that in financial markets ‘there is a bubble in everything’
Published: June 1, 2017 2:31 a.m. ET
Faber: Some day Tesla, Amazon and Netflix will fall 10%
By Sue Chang
Markets reporter
Bloomberg News
Marc Faber, managing director of Marc Faber Ltd., warns that U.S. stocks are looking a lot like they did in 1999.
Famed investor Marc Faber, known as Dr. Doom for his gloomy views, believes the U.S. markets are in the midst of a gigantic bubble and when the day of reckoning comes, investors will likely lose half of their money.
“There is a bubble in everything. Nothing in asset price is very low,” said Faber during an interview on CNBC Wednesday.
His grim prognosis shouldn’t come as a surprise to anyone who has been paying attention to permabear Faber over the years. Still, the fact that his latest warning comes on the heels of a historic rally that has propelled stocks to records lends some urgency to his grim outlook.
“We are somewhere between 1999 to 2000,” he said, referring to the tech bubble and its subsequent collapse.
“One day this bubble will end,” said Faber. When that happens, people will lose 50% of their assets.
…
This is shaping up to be a real doozy of a credit bust.
Bubble, bubble, Canada’s housing market poses trouble, IMF says
Published: May 31, 2017 3:54 p.m. ET
Home prices up 28% annually in Toronto
Shutterstock
A correction in Canada’s frothy housing market could impair bank balance sheets, warns IMF.
By Andrea Riquier
Imbalances in Canada’s housing market have increased to a degree that could pose a “significant” risk to the outlook for the broader economy, the International Monetary Fund said Wednesday.
“Households are highly indebted and housing affordability, particularly in Vancouver and Toronto, has become a social issue with many first-time buyers priced out of the markets,” the IMF’s report said.
Home prices have soared in Toronto as an alternative destination since Vancouver authorities imposed a tax on foreign buyers of real estate to try to contain out-of-control pricing there. As of March, Toronto was seeing annual price appreciation of about 28%.
That backdrop is having an impact on the financial system: Moody’s Investors Service downgraded the credit ratings of Canada’s six big banks earlier this month, noting high household leverage and elevated home prices.
Household debt rose to 167.3% of disposable income in the last quarter of 2016. As Canadian consumers have become more leveraged, the IMF and other agencies are on watch.
…
‘a huge issue,’ said VELVet Ho,
pocket listings w silly asking prices in my hood. Zillow must be trying to get $ out of realtors because many are not listed
Can the green handshakes expand any further than they already have?
ADP Data on Business Hiring Gain Shows Solid U.S. Job Market
by Sho Chandra
June 01, 2017 5:15 AM Updated on June 01, 2017 5:27 AM
Companies adding more workers to U.S. payrolls in May than forecast indicates the job market is powering ahead, data from the ADP Research Institute in Roseland, New Jersey, showed Thursday.
Highlights of ADP Report (May)
•Private payrolls rose by 253k (est. 180k) after revised 174k gain in April
•Goods-producing industries, which include manufacturers and builders, increased headcounts by 48k after 6k
•Service providers boosted payrolls by 205k, the most since November, after 167k
Key Takeaway
Businesses continue to hire workers in addition to retaining existing employees, indicating sustained job-market progress that helps explain why Federal Reserve policy makers are projected to raise interest rates when they meet later this month. The ADP report may help bolster economists’ forecasts for the private payrolls tally in the May jobs report due from the Labor Department on Friday.
https://www.bloomberg.com/news/articles/2017-06-01/adp-says-companies-in-u-s-added-253-000-employees-in-may
ill bet 200K of those jobs are uber, security guards, lawn mowers, home health aides,
I’ve seen some “summer help wanted” signs around.
Don’t get too excited. It would appear that the mosey to part time and lower pay jobs continues, while “not in the labor force” soars.
“Job creation fell sharply in May with just 138,000 new positions…”
“In addition to the weak May numbers, previous months also saw significant downward revisions. March’s weak 79,000 got sliced down to 50,000, while the April number declined to 174,000 from 211,000. Taken together, job growth has averaged just 121,000 over the past three months.”
“Job creation skewed toward lower-wage professions. Full-time jobs tumbled 367,000 for the month, while part-time positions rose by 133,000.
“The unemployment rate decline was due primarily to a fall in the labor force participation rate.”
http://www.cnbc.com/2017/06/02/nonfarm-payrolls-may-2017.html
https://www.bloomberg.com/news/articles/2017-06-01/u-s-homes-are-finally-getting-smaller
This is interesting…in the past, it took recessions to push median home sizes lower. This time, it is happening in the absence of such an economic event…this strongly implies to me that builders are changing what they are building in order to hit more affordable price points.
However, there are also other possible explanations…they are building fewer homes in the exurbs (where they can easily obtain large tracts of land), more high density homes, etc.
It implies something different to me. At least in my area, people have reach their commuting limit, so there is not much reason to build significant amounts of new McMansions. And so, smaller urban infill, and condos are controlling the size of new builds.
Price point is only part of the argument. The larger condos in the city can cost as much as a McMansion in the exurbs. But there is an explosion of townhomes.
“It implies something different to me. ”
Me too. It means they’re trying to charge the same price for a smaller house that takes less material and goes up faster.
And stupid pukes will pay these higher prices, and they will do this because they are stupid pukes.
Hey, Mr. Banky, looks like the godfather, Mr. Blanky is pretty pissed with POTUS right now.
http://www.zerohedge.com/news/2017-06-01/his-first-ever-tweet-lloyd-blankfein-slams-trumps-climate-decision
BwahahahahahaHAH! Blanky’s first ever tweet, no less. What, no Paris Accord?
I always knew this climate change thingy was nothing more than a racket to line the pockets of Goldman Sachs. And right there’s the confirmation.
Well, Blanky, I guess you’ll have to be satisfied with the continuing rape of Venezuela.
Say, who’s uglier? Blanky or Soreass? Geez, that’s a tough one there.
Can you imagine natty ice dude right now?
phew, that blankfein is one butt-uggleeeeeeeee piece of goods.
LOL, Ben, I was just thinking how awesome a compilation of snowflake climate change meltdown videos would be.
But, in the place of videos, there’s this:
https://news.grabien.com/story-10-dumbest-reactions-trump-quitting-paris-climate-accord
It’s just a bad deal. Let’s assume one accepts the science and the conclusions. If it’s this big life threatening deal, why is China off the hook until 2020? India can build hundreds of coal plants? If this was really about reducing pollution, no one in their right mind would put that in.
And isn’t it funny that no one EVER seems to mention the role of wars and military actions on the environment? At least, not in the MSM. All those bombs, those munitions, those tanks, the ships and planes to-ing and fro-ing in their missions of death and destruction.
Now there’s a “climate accord” I could get behind. Massive sanctions (er, uh, carbon penalties) on war, munitions manufacturers and military actions, planet-wide. I might even be tempted to let Goldman Sachs have a piece of that action.
Correction: 2030:
“When you look at what happened in Paris, at the Paris agreement and Paris accord, China and India weren’t required to take any steps toward reduction of carbon di-oxide (CO2) until the year 2030,” Pruitt said.
http://www.hindustantimes.com/world-news/paris-climate-pact-bad-deal-for-us-india-and-china-benefitted-from-agreement-trump-admin/story-EmuQlfUvIauMXlpEMELsFI.html
As far as the military, I recall the Pentagon was bragging about how a $40,000 insulated tent was going to save energy in Iraq.
“Hey, Mr. Banky, looks like the godfather, Mr. Blanky is pretty pissed with POTUS right now.”
Not to worry, there’s a new scam around every corner and a new sucker born every minute.
Patience.
Pssssssssst … Uber. Go for the gold and go all-in.
Another pssssssst … American Homes 4 Rent.
The P/E is a minus 177.27.
BTFD.
The British press is apoplectic over the possibility that we might ditch the Paris accords, while they all drive their hyper polluting German diesel cars in bumper to bumper traffic in London (lots of Priuses too). For the life of me I can’t imagine why anyone would want to drive here. Parking spaces are next to impossible to find and getting anywhere looks like a chore. Our taxi ride from the airport wasn’t bad, but the driver said that was because we arrived Sunday morning.
“Climate accord”
““The beginning of wisdom is to call things by their proper name.”
Confucious
It seems like the MSM is so utterly shocked that a national leader would act independently of 200 other countries that they have foregone any rationale discussion of whether the climate agreement truly serves US interests.
Our newest project is the apartment building and ground floor retail on Colorado Blvd between 9th and 11th Avenues, this is the former site of the University of Colorado Medical School that relocated to the new campus in Aurora:
http://www.picpaste.com/20170601_074658.jpg
This is the only piece of the medical school remaining, spanning across 10th Avenue:
http://www.picpaste.com/20170601_091403.jpg
Saunders Construction is the general contractor. When this site is completely built out it will be thousands of overpriced rental units that most Denver residents can’t afford…
There are only so many bro-grammers in Denver. All the other young and hip things earn much, much less.
Will be interesting to see what rents did in May.
http://wolfstreet.com/2017/06/01/rents-deflate-in-the-hottest-us-cities-soar-in-cheaper-cities/
May was cruel to Home Capital, though the flight of deposits seems to have stabilized, for now.
http://www.homecapital.com/press_releases/2017/HCG%20Liquidity%20Update%20June%201%202017.pdf
It’s getting more expensive for Chinese corporations to take on massive levels of debt to finance their expansion (and enrich their embezzlers and money launderers).
http://www.scmp.com/business/banking-finance/article/2096535/chinese-companies-hit-credit-squeeze-corporate-debt-costs
It’s probably tougher as people figure out the the collateral could be really important.
Why Uber Is A Scam - Math Explains
https://www.youtube.com/watch?v=fgQPj90OrQE
And then there’s these geniuses. Where would all these f**ked companies be without the Fed’s limitless cheap credit and captured, see-no-evil regulators and enforcers?
http://www.zerohedge.com/news/2017-06-01/restoration-hardware-implodes-after-terrible-guidance-bizarre-disclosures
I’ve been trying to explain that to people. It’s the pizza driver model. Except they don’t let them use beater cars like the pizza drivers, who probably do make a little money if they choose the right beater.
Basically it’s just a way to get short term thinkers to sell you their car a mile at a time and work for free. They think they’re getting paid for working when actually they are just getting paid for wearing out their car.
Last week when we arrived in London, I had a driver arranged to pick us up at Heathrow (one of those guys holding a name sign where passengers arrive) and drive us to the hotel. He was a Sikh and had a nice Benz. He told us that the car was his and the the ride company (12 Transfers) hired him for the gig. Our cost was about 40 pounds, which I had prepaid. Plus we gave him a 5 pound tip, no idea of how much 12 Transfers gave him.
How can Uber keep up this burn rate?
http://www.zerohedge.com/news/2017-06-01/uber-burned-through-almost-much-money-nasa-last-quarter
http://money.cnn.com/2017/06/01/technology/business/uber-losses-investors/index.html
Do any of you pukes with short memories remember …
(drum roll)
Theranos?
https://arstechnica.com/science/2017/05/theranos-directors-trusted-elizabeth-holmes-more-than-their-own-eyes/
Another excellent way to turn a large fortune into a small one.
A snippet …
“When former US Secretary of State George Shultz underwent a Theranos blood test, it involved a standard vein draw—not the company’s proprietary finger prick blood collection. Though at the time Theranos claimed to only use its proprietary testing, the discrepancy didn’t bother Shultz, then a member of the company’s board of directors. In fact, according to newly unsealed court documents reported by The Wall Street Journal, he continued to believe that the company could and did use its own technology for all blood testing.”
A nation of dummies run by dummies.
“While it was packed with illustrious, powerful government figures, such as former Senators Bill Frist and Sam Nunn as well as former Secretary of State Henry Kissinger, it seemed oddly ill-equipped to help oversee a blood testing company.”
Like a feral cat’s kittens that are covered in fleas… draining the lifeblood before they can get on their feet.
A nation of dummies …
“The ride-hailing startup said Wednesday it lost $708 million in the first three months of the year. The financial data was paired with Uber announcing its search for a chief financial officer.
“To many readers, the loss is nothing short of staggering. But for Uber’s investors, it’s actually something to be applauded.
“Jason Calacanis, an early Uber investor, congratulated the company on Twitter for continuing to grow its sales while cutting its loss from $991 million in the previous quarter.
“‘The trend is good,’ says Bradley Tusk, a political consultant and investor in Uber. “Revenue up. Losses down, even though they keep investing heavily around the world.”
“Call it the current Silicon Valley mindset. Losing billions of dollars each year isn’t necessarily a bad thing, if the company is thought to have lots of potential for sales growth and can show some modest progress in curbing its losses over time.”
Expert Redistribution.
When you hear the term “bailout” or “stimulus”, you should think Expert Redistribution. As in “Our expert redistribution will lead to more beneficial social outcomes than what the market has decided.”
Sounds familiar.
I’m worried.
Not as worried as Australian FBs are right now, or should be.
(FBs, for the benefit of newbies, means “F**ked Borrower.” Those who bought at the peak of Australia’s housing bubble are well and truly buggered.)
https://www.bloomberg.com/news/articles/2017-05-31/australia-home-prices-fall-in-may-as-lending-curbs-start-to-bite
“Those who bought at the peak of Australia’s housing bubble are well and truly buggered.”
Some of the best sex I’ve ever had.
The Vancouver and Toronto insanity has gone on beyond all logical limits.
http://www.businessinsider.com/80-of-vancouvers-rental-listings-gone-in-less-than-10-days-2017-6
China has a “bold plan” for tackling its non-performing loan problem. I’m guessing the plan doesn’t actually involve paying off that growing mountain of bad debt.
http://www.scmp.com/business/article/2096568/china-has-bold-plan-tackle-bad-bank-loans-and-its-first-deadline-closer-you
http://nomadcapitalist.com/2015/11/04/my-review-of-realtyshares-another-bad-us-investment/
My review of RealtyShares – Another bad US investment
Turns out having an “iconic” status with correspondingly high rents causes renters to rent elsewhere.
http://www.cnbc.com/2017/06/02/chinas-tallest-skyscraper-is-facing-rental-woes-reflecting-wider-issues-in-the-market.html
Interesting. I got to watch the top part of it get built from my far away hotel every day, and have since gone to the top of it just to check out the view.
The thing to understand about the Pudong (east side) area (that whole side of the river that was a swamp and farmland up until recently) is that it’s not just that building. Most of the businesses over there were “encouraged” to move there by the government, who is determined to create the next Manhattan/Hong Kong financial district there. To an extent they have succeeded…but it still hasn’t reached critical mass yet, IMO, as shown by the difficulty filling the building. Most of what’s there wouldn’t be there still if not for the coercion.
MarketWatch dot com
U.S. jobs growth slows to 138,000 in May
By Jeffry Bartash
Published: June 2, 2017 8:56 a.m. ET
Slower pace of hiring in U.S. reflects tightest labor market in years
Jobs growth slowed in May.
WASHINGTON (MarketWatch) — The U.S. added a modest 138,000 new jobs in May and hiring earlier in the spring was weaker than initially reported, adding to evidence that the tightest labor market in years is making it harder for companies to fill open jobs.
Economists surveyed by MarketWatch had forecast a 185,000 increase in nonfarm jobs.
…
Bad news is good news. BTFD.
Mr Market expects labor economist Janet Yellen to back away from interest rate normalization plans for fear of upending job gains.
MarketWatch dot com
Stock market hits records after jobs report
By Barbara Kollmeyer and Anora Mahmudova
Published: June 2, 2017 9:46 a.m. ET
Nonfarm payrolls show 138,000 jobs added in May
Luke Sharrett/Bloomberg
138,000 jobs added in May, unemployment falls to 4.3%
U.S. stock-market indexes hit intraday records in early Friday trade, though gains were limited after a weaker-than-expected May jobs report that undermined confidence in the economy.
…
We need McCain to start an actual nuclear war. Think of the stock market rally. It would be the most glorious thing ever.
http://www.zerohedge.com/news/2017-06-01/auto-bloodbath-lowest-domestic-auto-sales-three-years-despite-record-inventories-and
Auto Bloodbath: Lowest Domestic Auto Sales In Three Years Despite Record Inventories And Incentives
the HECK with any auto bloodbath; I’m standing way back from Ben’s Friday desk-clearing . . . when all the whiskey bottles, cigars, hooker G-strings & bras get brushed off as Nurse Ratchet / white coat staff hose down the room!
SD Housing Bubble 2.0 confirmation:
http://picpaste.com/pics/IMG_20170602_085745705-ksjxtbyY.1496419411.jpg