Moral Hazard, Easy Money And Cheap Credit
A weekend topic starting with the Star Tribune. “Prices for houses are generally back to where they were during the housing bubble that preceded the financial crisis a decade ago. What’s worse, flipping is back. That is the speculative practice of buying houses hoping to quickly sell for a gain. One report this spring said there hasn’t been this much flipping since 2006 — more or less the frenzied peak of the last housing boom. Neel Kashkari of the Minneapolis Federal Reserve seems oblivious to all this, at least according to critics knocking Kashkari’s recent essay about asset bubbles and what the Fed ought to do about them. Kashkari’s entirely sensible answer: not much.”
“And he made an even better point, that, even if the Fed did have something smart to do, it’s highly unlikely anyone at the Fed managed to correctly spot an asset bubble forming in the first place. As for the U.S. housing bubble alarmists of 2017, there’s far more to proving a case of irrationally overvalued housing prices than pointing out that the Case-Shiller housing price index has climbed above 2006 levels.”
“And it appears Kashkari agrees. ‘I appreciate [you] responding to my essay,’ he responded via Twitter to a blog arguing that spotting bubbles isn’t difficult at all. ‘If so easy to spot bubbles, why tell us? Launch [hedge fund] and short ’em. Make trillions. No? Just talk then.’”
From KCRA in California. “The average Sacramento County home is on the market for just eight days before selling, SAR’s Tony Vicari said. It’s really all about supply and demand, Kellie Swayne of Dunnigan Realtors said. ‘Right now, California’s real estate is hot, hot, hot,’ Swayne said. ‘With so little supply out there we’ve got lots of buyers in the market. We’ve got multiple offers most of the time.’”
“But with prices on the rise, some wonder if Sacramento’s housing bubble could one day crash as it did in 2008. Swayne said conditions are different now because inventories are so low. ‘For right now, there’s no end in sight in Sacramento, and frankly across the state, for relieving of more inventory on the market,’ Swayne said. ‘When that happens maybe we can start talking about a bubble.’”
The Business News Network in Canada. “In the almost 12 months since Finance Minister Bill Morneau announced his working group on housing, Ottawa has made it harder for Canadians to get an insured mortgage through more stringent stress tests. In the meantime, B.C. and Ontario have pulled policy levers – most notably taking aim at foreign investors with a 15 per cent tax.”
“BMO Capital Markets Senior Economist Sal Guatieri says the time for policy tinkering has passed. ‘Time to take out the heavy artillery: higher interest rates,’ Guatieri wrote in a note to clients. ‘The ball is now firmly in the Bank of Canada’s court.’”
The Border Mail in Australia. “It is almost exactly 10 years since the financial world began a wobble that would swing into what we now know as the global financial crisis. Today, the scars of the global financial crisis remain. There have been trillions of dollars in losses. And in a world of subpar economic growth, even optimists are downbeat about whether the economic medicine has been taken.”
“Let’s start with the question of debt. Lord Adair Turner, who chaired the UK Financial Services Authority between 2008 and 2013 and helped redesign global banking, says the world since has not addressed this root cause of the crisis and that means it’s at risk of another one. Lord Turner says the world is suffering from ‘irrational exuberance’ and ‘debt overhang.’”
“‘There’s been no deleveraging,’ Lord Turner says. ‘Once you’ve got too much debt in the economy … it’s incredibly difficult to get rid of it. If you say, ‘I’m going to write it off’, your banks go bankrupt … if you try get rid of it by people paying down that debt … the attempt to pay it back is what drives the economy into recession.’”
“To avoid that, interest rates then fall, and that simply encourages more borrowing, he says.”
“The team at LF Economics - a research firm founded by Lindsay David and Philip Soos - have also been sounding strong warnings of a crash. David says, ‘I don’t believe there is another mortgage market globally where a banking system leveraged their household sector as much as ours is without a systemic collapse.’ He says Australia’s debt profile has a strong resemblance to Ireland’s debt profile in the lead-up to the GFC, whereby public debt levels by global standards were relatively low but household debt is extremely high.”
“‘The mistake we have made in Australia’s is that we essentially copied Ireland’s pre-GFC paper wealth creation model by allowing banks to over-lend and engage in Ponzi finance,’ Mr David says. ‘That is, lending ever-larger amounts of mortgage debt to owner-occupiers and investors to increase leverage and outbid other speculators.’”
From Bloomberg. “The architects of U.S. monetary policy at the Federal Reserve should be happy. They’ve succeeded beyond their own expectations in bringing down the unemployment rate without triggering an outburst of inflation. Stock indexes are near record highs, and interest rates remain low. On June 14, the Federal Open Market Committee voted as expected to raise the federal funds rate a quarter point, to a range of 1 percent to 1.25 percent. It said it expects inflation to rise to its 2 percent target ‘over the medium term.’”
“For Fed Chair Janet Yellen and company, the central mystery continues to be why inflation remains below 2 percent despite unemployment having dropped to just 4.3 percent in May. Those who set interest rates are in the awkward position of not understanding how things got so good—and are therefore confused about what to do next.”
“The risks could simply be hidden. If rates get much higher, borrowers who took on too much debt during the long period of abundant credit may have trouble making payments or refinancing, says Christopher Whalen, chairman of Whalen Global Advisors Inc. He says the Fed should have begun tightening credit several years ago but can’t do so now without triggering a wave of defaults. ‘I think they’re stuck,’ he says. ‘They’ve boxed themselves in.’”
The Real Deal. “In May, commercial real estate mortgage borrowers paid off maturing loans at a slower rate, according to Morningstar Credit Ratings LLC. In 2007, borrowers took out 10-year loans that were repackaged into commercial mortgage backed securities. This partially explains the uptick in the number of unpaid and delinquent loans, the Wall Street Journal reported. About $9.4 billion was unpaid from about 790 loans that came due last month.”
“The real estate market has been preparing to deal with a wall of 10-year maturities, and last month there was an increase in borrowers that either failed to repay their debts or defaulted on monthly payments. ‘It’s all because of the riskier nature of the loans originated 10 years ago,’ Steve Jellinek, a Morningstar vice president told the newspaper. ‘Today, with more conservative lending standards, they can’t get refinancing.’”
“Nearly 18 percent of commercial mortgage securities loans that reached maturity in the past 12 months were delinquent. From June 2015 to April 2016, the average was about 10 percent.”
From the Independent Institute by Alvaro Vargas Llosa. “Moral hazard, easy money and cheap credit have never produced good results. History is littered with examples of financial disaster brought about by monetary manipulation originating in central banks and then spreading to other parts of the system. One would think that the 2007/08 credit crisis, whose effects have not quite withered away, would teach politicians, central bankers, corporations and consumers something about the causes of credit crunches and meltdowns.”
“Think again. The world’s four largest central banks have pumped more than $9 trillion into the system since the last financial crisis and brought about a world of absurdly low and even negative interest rates. The incentives generated by these policies and their effects—moral hazard, easy money, cheap credit—will lead, at some point, to the bursting of new bubbles.”
“However, those consumer credit markets are the ones already signaling distress, so we better pay some attention. These symptoms point to risks not dissimilar in nature to what was happening before the housing-related financial meltdown. Banks are beginning to reduce outstanding corporate lending for the first time since that crisis, a very significant reversing of the trend. Standard and Poor’s downgraded 1,088 companies in the United States last year, and analysts are predicting a wave of junk-debt defaults, perhaps encompassing one in every four high-yield debt issuing companies.”
“One can never tell exactly when a bubble will burst or which corner of the financial system will be the epicenter of the earthquake. But if and when these looming bubbles explode, the main culprit will be the irresponsible policies that were supposed to prevent future bubbles and that created the perfect storm of moral hazard, easy money, and cheap credit once again.”
‘I appreciate [you] responding to my essay,’ he responded via Twitter to a blog arguing that spotting bubbles isn’t difficult at all. ‘If so easy to spot bubbles, why tell us? Launch [hedge fund] and short ’em. Make trillions. No? Just talk then.’
This is similar to the attitude he took in the original essay, where he talked about cranks and stopped clocks. This sort of thing is basically done to shut down debate. It’s also reflective of the elitist nature we’ve seen become common with these types. Most people can’t start a hedge fund. A great number of us are paying more for shelter than we ever have.
This isn’t some sort of personal sand box you people are running at the central bank. This is the housing market and we all have a right to be concerned about your actions or lack thereof.
BTW, most of these links are worth reading in full, but especially the Border Mail piece has lots of data and quotes you might want to read. The web site is kinda janky though.
done to shut down debate…
“raising short-term interest rates, that’s a little like using a jackhammer to pop the balloons after a birthday party.”
Along these lines, what exactly is lowering interest rates to inflate the “party balloons” like?
It really is impossible to debate at such a level of raw stupidity.
The semblance of “raw stupidity” is a highly effective defense mechanism.
Consider who uses it: economists, politicians, little kids.
‘Along these lines, what exactly is lowering interest rates to inflate the “party balloons” like?’
In the case at hand, they filled the party balloons with hydrogen.
Watch out for when they light the candles on the birthday cake…
“And it appears Kashkari agrees. ‘I appreciate [you] responding to my essay,’ he responded via Twitter to a blog arguing that spotting bubbles isn’t difficult at all. ‘If so easy to spot bubbles, why tell us? Launch [hedge fund] and short ’em. Make trillions. No? Just talk then.’”
F**k you again, Kashkari. If fundamentals mattered everyone with half a brain would be shorting the Fed’s asset bubbles and Ponzi markets, but with Yellen the Felon and her Goldmanite handlers prepared to flood these rigged, broken, manipulated “markets” with trillions in financial crack cocaine, shorting bubbles is too dangerous. Which you and your fellow grifters at the Fed know full well. We will not have honest markets or sound money until every last one of you criminals has been locked up in a federal pound-me-in-the-a$$ prison.
Kashkari is using the logical fallacy of the false dilemma (presenting the choices as binary). If you are sure it’s a bubble, start a hedge fund and short housing.
Well, timing a housing collapse is difficult when real interest rates are manipulated by the delicate geniuses at the Fed. Shorting, I have painfully learned, is all about timing and when interest rates are rigged by a cabal of of fools suffering from the Dunning-Kruger effect, timing becomes impossible.
Wow…I was thinking the same thing. That’s exactly what people used to try to do until “your people” foamed the runway with their blood, Kashkari.
‘If so easy to spot bubbles, why tell us? Launch [hedge fund] and short ’em. Make trillions. No? Just talk then.’
So they can watch prices skyrocketing due to speculative activity, yet need metaphysical certainty before stopping their fanning of the flames? Right. Yet, then they are willing to spend trillions themselves in novel interventions which may or may not “work” for which they do not need metaphysical certainty.
===============================================
Andrew Huszar: Confessions of a Quantitative Easer
We went on a bond-buying spree that was supposed to help Main Street. Instead, it was a feast for Wall Street.
By Andrew Huszar
Nov. 11, 2013 7:00 p.m. ET
I can only say: I’m sorry, America. As a former Federal Reserve official, I was responsible for executing the centerpiece program of the Fed’s first plunge into the bond-buying experiment known as quantitative easing. The central bank continues to spin QE as a tool for helping Main Street. But I’ve come to recognize the program for what it really is: the greatest backdoor Wall Street bailout of all time.
http://online.wsj.com/news/articles/SB10001424052702303763804579183680751473884
===============================================
Oh, and dealing with Kashkari’s challenge directly: While we might see prices rising due to speculative activity, we don’t know when it will end. It’s a roller coaster going up and we can’t see where the top is, just how far we’ve come.
Additionally, we can’t get executives of the Federal Reserve, the largest indivisible economic entity on the planet, on the phone to let us know what the behemoth is planning to do next.
We can’t see the industries the deep speculative tendrils the Wall Street conglomerates are embedded in, and thus would require bailouts.
Here’s a rough rule of thumb: If prices rose dramatically, then start falling with equal vigor and then it requires a bailout to keep prices from falling further, it safe to say it was a bubble.
Also, no one’s asking for supernatural foresight from the central bank, any more than we do from any other government agency, or human for that matter.
However, if the central bank sees prices quickly rising due to speculative activity, it would probably make sense to stop engaging in activities contributing to those price rises.
And… I don’t think it’s in the central bank’s mandate to identify and pop bubbles in every industry. Coincident to that, I also don’t think it’s in the central bank’s mandate to fan price increases either.
“When is what is good for banks and Wall Street bad for Main Street?”
A list and discussion of 23 bubbles during the past 400 years:
https://scholar.princeton.edu/sites/default/files/markus/files/bubbles_centralbanks_historical_0.pdf
A worthwhile read with some interesting observations (25 pages of text, 65 pages total, including footnotes and tables, after the first 25 pages).
“‘If so easy to spot bubbles, why tell us? Launch [hedge fund] and short ’em. Make trillions. No? Just talk then.’”
The markets can remain irrational longer that an investor can remain solvent.
It would maybe make sense to short these things in a rational world but that is not the type of world we live in. There a lot of dummies out there - an entire planet filled with them - and these dummies are the ones who, for one reason or another, are able to get hold of enormous gobs of money and are willing to throw these gobs into … into whatever. And these dummies and these gobs set the prices; The dumber the dummies and the greater the gobs the greater the prices.
Buffett said something about combining ignorance and borrowed money can produce some interesting results, and … here we are.
If it is the combination of dumbness and gobs of money that produce bubble prices and since there is no shortage of dummies the only regulating that can be done in these bubble creations is the regulating of the gobs of money.
The valve is in the hands of the lenders, the providers of the gobs of money.
It’s an upside down world where dummies with fistfulls of dumb borrowed money are made to look like financial geniuses when they snap up bubble assets in a perpetually rising market.
In a rational world the price of an item and the value of an item would remain separate and thus the item could now and then become overpriced and underpriced and a clever person could make some money by buying when the item is underpriced and selling when the item is overpriced.
But in an irrational world the price of an item and the value of the item are the same; one - the price - is a measurement of the other - the value.
If you do not believe this is true regarding houses then take a look at how the values of houses are measured; If this measurement is not by price then please tell me what this measurement is.
Go to Zillow and look up the price, the value that Zillow says your house is worth and ask yourself the question ” How does Zillow determine this price, this value?” If your answer is “By the price of the comps” then you are right on target.
And who is it that sets the prices of the comps (and at the same time sets the Zillow-value of your house)? Is it not a group of strangers?
what has caused the problem may , indeed , be the fact that the appraisers were unable to withstand the demands of their clients to set prices at the asking price so the lenders could lend their money to the buyers.
that appears to be an unsolvable problem for the appraisers.
I worked for the state of California and never felt the pressure to meet listing prices as the State would take the loss if the loans went bad.
During the 1960’s we would at times, in our small office in Bakersfield , have 5-10 repossessions a month, when the loans were in the less than $15,000 and some at $8,500. with payments of $50 per month.
But , then again, I am an old man now, and may not understand the world today. LO
From earlier this week, a repost of a post from our own Carl Morris:
Comment by Carl Morris
2017-06-13 11:41:53
Yeah, but it’s like Darwinism. If what kills you allows you to live well and have children first, then people seem to just adapt and accept the risk as just part of life even if it horrifies everyone else. We are creating a subculture that just accepts the risk as the only way they can have the life they want, and when their number is up, so be it. Nobody could have seen it coming.
Carl could not have been more accurate here. Much of the hoi polloi now is without options. There is little reason to play by conventional rules, as few of the traditional routes to financial stability / success are still viable.
A 40-year dismissal of ethics and morality have led us here.
Easy money, easy credit and the “everyone else is doing it, so why shouldn’t I?” mantra prevails.
As does the notion that “if it’s legal, it means it’s okay.”
That’s wrong-headed thinking, and the real core issue of the problems we face today. Ethics and morals have and always will supersede law. Always.
It is a lack of societal and personal morals and ethics which cause ANY economic system to fail. It’s why all socialist, fascist and communist systems are destined to fail. Always.
Cacti used to post here about The Fourth Turning. Think and say what you will (I have my own opinions), but a generation of people (Generation X) grew up in a world wherein having to “accept the risk” was a requirement as children.
If true, then why? If true, then why was Gen X put in that position? What was the causation?
How could it have been prevented?
Why is Gen X never discussed? Is it strictly due to their lower numbers? Why would that make a difference?
Importantly, the options were purposefully taken away from the hoi polloi, by those who claim both moral and intellectual superiority.
Wrong on both counts.
“It seems, then, we are forced to believe in a real Right and Wrong. People may be sometimes mistaken about them, just as people sometimes get their sums wrong; but they are not a matter of mere taste and opinion any more than the multiplication table.”
“It is a lack of societal and personal morals and ethics which cause ANY economic system to fail. It’s why all socialist, fascist and communist systems are destined to fail. Always.”
You forgot to add capitalism here and I don’t understand why since it’s so blatantly true.
The Ayn Rand view of capitalism proclaims that selfishness is a virtue, which is contrary to the most popular ethical systems.
It takes true altruism to take someone else’s wealth and assets by coercive force and redistribute it to parasites who vote themselves entitlements the productive will have to pay for.
You must have intended to post that remark somewhere else on this page, since it’s not irrelevant to what I wrote.
Selfishness — a virtue? Ayn Rand chose this book’s provocative title because she was on a mission to overcome centuries of demonization. “In popular usage,” Rand writes, “the word ‘selfishness’ is a synonym of evil; the image it conjures is of a murderous brute who tramples over piles of corpses to achieve his own ends . . . and pursues nothing but the gratification of the mindless whims of any immediate moment.
“Yet the exact meaning and dictionary definition of the word ‘selfishness’ is: concern with one’s own interests.
“This concept does not include a moral evaluation; it does not tell us whether concern with one’s own interests is good or evil; nor does it tell us what constitutes man’s actual interests. It is the task of ethics to answer such questions.”
I did.
See the word “ANY” in there?
Note that what we have in the United States right now is not capitalism. It’s socialism.
It’s definitely capitalism. Just because the masters of the universe have managed to buy the electorate so that they’re bailed out from their gambling escapades doesn’t equate to socialism; it’s just the end game of how capitalism ultimately works. BTW, I did notice you used the word any but I do believe it’s possible to have a fair economic system. Kind of like we had in the 50s. Of course there was a 90% max tax rate and capital gains (unearned income) were not taxed at half the rate most of us working chumps have to endure.
The US economy is not socialism. Just because the masters of this capitalistic system have managed to buy every branch of government so that they’re bailed out from their gambling losses doesn’t equate to “socialism”. It’s merely the end game of how capitalism operates in the real world. You often mention Darwinism in your posts. And I think that’s an excellent reference to how it plays out. The strongest, most cunning, ambitious, ruthless and ultimately immoral and unethical will be allowed to gobble up every asset they can until ultimately they own it all Which is why mankind created socialism in the first place; to try and prevent that from happening.
I disagree.
We now live in a country where “wealth” is printed, not produced. That’s not capitalism.
We now live in a country where government decides which rules are followed and which are not. What parts of The Constitution remain salient, and which do not. The People be damned.
We now live in a country where individuals are forced to pay for someone else’s healthcare via federal edict.
We now live in a country where the media largely toils on behalf of the government, not the people.
We now live in a country where “group” ethics and norms run roughshod over the rights of individuals and over individual liberty. Now, your beliefs and behaviors better align with the group you supposedly belong to - or else.
We now live in a country that’s increasingly classist, and segregated by income - a hallmark of socialism.
Shall I continue?
Mark,
A question: Why is the “wealth” in the USA pooling largely in certain cities/regions on both coasts?
How do people living in those cities and regions tend to vote? Do you think there might be any “stacking of the deck” going on by those living there?
You might be new here.
I have long stated that the geographic spread of money is a vital indicator of what is really going on in a given country or region. I believe that the location of money is more important than who has it. Even more so now, in this age of money printing run amok.
So, Mark, how do you explain wealth in our country pooling in places dominated by people who are progressives? Who favor socialistic policies?
Yep, no amount of laws can reign in a society that has no moral or ethical underpinning. Passing more laws doesnt help as we can see. I’m gen X and I work with most Y/Millenials and have to explain to them all the time why there is so much fail in society and how it didnt used to be this way. They read an article from the local fishwrap and I easily refute key points with facts that they know to be true but did not occur to them because critical thinking is not and has not been emphasized for at least a generation, although some of the youtube philosophers seem to have developed decent followings which is encouraging. Of course (((youtube))) then takes great efforts to demon(it)ize them. Wonder why?
Green Eggs -
It’s interesting, isn’t it?
I, too, have many Millennials and Homelanders (or whatever Gen Y will eventually be called) ask frequent questions about how and why things are the way they are.
They are well aware that things are “different now”.
Generation X will be the last generation to remember the way things used to be - before unchecked largesse, political correctness and funny money dominated the landscape. Before 24/7 instant communications stymied face-to-face communication and accountability.
Gen-X remembers.
Your personal importance to society will grow increasingly vital as you continue to age. Millennials and Gen Y will very much need the experience, wisdom and judgement that only you and your peers will be able to provide.
“The more corrupt the state, the more numerous the laws.”
– Tacitus
Dumb question of the day: Why do short options have expiration dates, but you can go infinitely long by buying and holding the underlying?
Apples and oranges.
Short options = apples. Holding the underlying = oranges.
One can buy long options and he can buy short options.
One can buy long on the underlying as well as sell short on the underlying.
Options, either long options or short options, have expiration dates. The underlying stock doesn’t.
The underlying is a long option +a short option, both issued at the money and infinitely-lived.
I.e. apples and a basket of apples.
So cre loan. Default has almost doubled in 2 years?
Ouch
Can someone give me the 10 year rate on Yellen 400😂 month draining program
“Neel Kashkari of the Minneapolis Federal Reserve seems oblivious…”
If this was even remotely true.
DJT would not have won the election.
++++
“The architects of U.S. monetary policy at the Federal Reserve should be happy. They’ve succeeded beyond their own expectations in bringing down the unemployment rate without triggering an outburst of inflation.
The unemployment rate, how is it determined?
Such a simple question, no way the answer could be all that complicated.
Oh, wait!
https://www.bls.gov/cps/cps_htgm.htm
Mr. Banker - you can quote government stats all you want.
And then this happens…
What a night.
+++++
Trump in huge upset becomes first Republican to win Pa. since 1988
November 9, 2016 - Candy Woodall - BillyPenn.com
Donald Trump won Pennsylvania on his path to the presidency, becoming the first Republican to win the state since 1988.
The last Republican presidential nominee to win Pennsylvania, George H.W. Bush, didn’t support Trump in this election and said he wouldn’t vote for him.
Trump was the populist nearly 3 million Pennsylvanians believed could make America great again, bring back coal and steel, and “drain the swamp.”
He attracted large crowds throughout dozens of stops across the state, including a record 13,000 in Giant Center on Friday.
There he promised a win in Pennsylvania, and he was right.
And Trump’s opponent was whom?
A snippet of an article:
“‘How could you say you are going to put a lot of coal miners out of jobs, and then come in here and tell us how you’re going to be our friend?’ unemployed coal worker Bo Copely asked Clinton at a campaign event on May 2.”
http://www.politifact.com/truth-o-meter/article/2016/may/10/context-hillary-clintons-comments-about-coal-jobs/
If this statement was true:
““The architects of U.S. monetary policy at the Federal Reserve should be happy. They’ve succeeded beyond their own expectations in bringing down the unemployment rate without triggering an outburst of inflation.”
Then Hillary! would have won. Easily.
All those coal miners and steel workers would have gotten excellent jobs in adjacent fields or would have been retrained for excellent jobs in new technology fields.
But that never happened. All they had were obama Walmart and Starbucks jobs.
And PS - The coal industry (today) is minuscule in PA. But the working class saw the democrat sellout everywhere.
And Trump’s opponent was whom?
She was the “official” candidate, who was supported by:
SJWs and snowflakes
Feminists
The media
The education industrial complex
The free sh!t army
The globalists and the multinationals
The banks and Wall St.
The medical industrial complex
Almost all foreign governments
Perverts
And pretty much the entire deep state.
And even though she lost fair and square those mentioned above are doing everything they can to obstruct President Trump and have him removed from office.
Trump’s orders may not save coal industry
By Ryan Maye Handy, Houston Chronicle and James Osborne
March 28, 2017 Updated: March 29, 2017 8:35am
President Donald Trump signed executive orders on Tuesday that begin the process of rolling back the climate regulations adopted by his predecessor, but he may be too late to help a coal industry damaged by economic trends and growing support among citizens and businesses for cleaner forms of energy, analysts said.
These trends - particularly low natural gas prices and cheaper renewable energy - and state policies aimed at reducing greenhouse gases could bring the country close to the goals set by President Barack Obama’s Clean Power Plan, even if the rules that sought to cut carbon dioxide emissions are undone by Trump.
More than 30 states have adopted policies to encourage the development of wind, solar and other renewable technologies. Renewable energy is expected to account for 20 percent of U.S. power production by 2025. Less costly, cleaner burning natural gas continues to supplant coal among power producers.
“The marginal cost of gas for producers and getting it to market costs so much less than coal,” said Ed Hirs, an energy economist at the University of Houston, who noted that natural gas prices are expected to drop. “It’s enough to put coal out of business.”
http://www.houstonchronicle.com/business/article/As-Trump-moves-to-cut-rules-will-the-market-11034717.php
My point.
IMO voters did not vote for Trump as much as they voted against Hillary.
My point as well to anyone who will listen. Which is nobody.
“The architects of U.S. monetary policy at the Federal Reserve should be happy. They’ve succeeded beyond their own expectations in bringing down the unemployment rate without triggering an outburst of inflation.”
Apparently a lot of printing press money gets diverted to fund a never ending propaganda barrage.
Trump was the populist nearly 3 million Pennsylvanians believed could make America great again ??
And nearly 3 million Pennsylvanians believed that he was a ethically and morally challenged buffoon and he is now demonstrating that they were right;
Donald Trump won Pennsylvania by 44,292 votes out of more than six million cast, a margin of 0.7%.
I think you missed the headline…
“Trump in huge upset becomes first Republican to win Pa. since 1988″
Bitter bitter man
No, he didn’t miss the headline. He just thinks that it should have been a little longer.
It was long enough to enrage him.
I don’t see any rage in what he wrote, just some facts. The rage you see daily is most often from Trump fans.
I am not enraged Mr. Trumpet…I am laughing….
I….don’t think you were laughing, as in HaHaHa I was only joking. No, you’re pissed off. So, you hate Trump and disliking my comment about your mental state you call me Trump. Should we address you as Hillary, or some derivative?
The YouTube videos of caterwauling Screech supporters on election night never fail to produce great merriment.
You need some distraction to help you forget your disappointments.
MightyMike is still autistically screeching, as are most of his fellow Dems
Like Rain Man when he didn’t get his eight fish sticks.
screeching ??
Screeching or squealing. What’s the difference ? A; none and there is a ton of squealing coming from the Commander right now. LOL
scdave is clearly high up on the autism spectrum as well… sad!
When you have no argument, just go for the ad hominem attack. Though I don’t what’s so cool about calling someone autistic. Someone mentioned that’s popular in some dark corners of the internet.
“And nearly 3 million Pennsylvanians believed that he was a ethically and morally challenged buffoon and he is now demonstrating that they were right;”
“I don’t see any rage in what he wrote,”
Of course you don’t Mighty.
Speaking of rent free, what is the under/over on you and sc mentioning Trump in one day?
“Moral hazard, easy money and cheap credit have never produced good results. History is littered with examples of financial disaster brought about by monetary manipulation originating in central banks and then spreading to other parts of the system. One would think that the 2007/08 credit crisis, whose effects have not quite withered away, would teach politicians, central bankers, corporations and consumers something about the causes of credit crunches and meltdowns.”
Key lessons learned:
1. It is far better to have ginormous bubbles inflating on your watch than imploding.
2. Apply extraordinary accommodation over a sufficiently protracted period to ensure that any future implosion occurs on your successor’s watch.
And, historically speaking, the end result of easy money and cheap credit is:
Bankruptcy
Ruin
Misery
A wholesale change of your system of government
War
“And, historically speaking, the end result of easy money and cheap credit is:
Bankruptcy
Ruin
Misery
A wholesale change of your system of government
War”
Ah, but well before you get these rather nasty and unpleasant things you get to enjoy all the gifts presented to you by …
(slow drum roll)
… prosperity.
It may turn out (and probably will turn out) that this prosperity is borrowed (as is the money that financed this prosperity is borrowed) but, hey, this is a problem to think about in some latter day (and if it is some future generation that has to do this thinking then so much the better).
Party on, Garth.
Prosperity is what politicians and central bankers strive to achieve during their own time in office.
Penury is what their successors can expect to endure in case the illusion of prosperity gets out of hand.
The gaping pension holes are becoming harder and harder to hide as CEOs chase after “shareholder value” at the expense of the long-term viability of once-great companies.
https://www.bloomberg.com/news/articles/2017-06-16/ge-s-31-billion-hangover-immelt-leaves-behind-big-unfunded-tab
GE:
Massive bailout under obama.
Huge obama donor and supporter.
History will not repeat under DJT.
San Francisco Bay area sheds jobs and workers.
http://wolfstreet.com/2017/06/17/san-francisco-bay-area-sheds-jobs-workers/
Don’t get me wrong. The Bay Area isn’t “collapsing” at this point.
Commercial real estate is hanging on by its teeth to sky-high prices, though apartment rents have dropped from their peak.
But there are a surprising number of shuttered retail shops and restaurants, including some favorites. Landlords have become too greedy, and when they jack up rents at lease renewal time, the equation no longer works for the business. This doesn’t mean business is bad. It means commercial rents are too high. This has been duplicated in the office sector. There is still demand, but a number of companies, including Charles Schwab, are sending jobs to cheaper states.
It’s morally collapsed already I am afraid. I don’t see any difference between WS and SV anymore. Sure the SV folks here pretend that they are innovating and will improve peoples lives and all that nonsense. On thing rules and that is money. Nothing else matters.
SV folks here pretend that they are innovating and will improve peoples lives and all that nonsense ??
The thing that is nonsense about your statemet is the statement itself.
“sending jobs to cheaper states.”
I figured that had to happen at some point. I mean really, how could an industry practically built on mobile devices and connectedness still require that people live in physical proximity? These startups should be the very definition of telework. Thousands of starry-eyed Millenials employees should be video Skyping from their Tiny Houses in a field somewhere, not co-living in dorms and hopscotching needles in the Tenderloin.
I’ve been teleworking for 16 years. It only works if you really enjoy what you do. Maybe these people don’t.
What You’re Missing When You Work From Home
A thousand tiny cues each day transform individual workers into a functional company.
By Megan McArdle
https://www.bloomberg.com/view/articles/2017-05-31/what-you-re-missing-when-you-work-from-home
Promotion
What I learned at my last job is that I’m much more productive when I work where my customer is rather than where my boss is.
👍🏻
An article from a couple of years ago …
“Abbott continues Texas tradition of taking California jobs.”
http://www.breitbart.com/texas/2015/05/15/abbott-continues-texas-tradition-of-taking-california-jobs/
Single payer hc will turn that around
Texas…
http://picpaste.com/leatherface.jpg
The only downside is that you have to live in a sh!thole like Dallas or Houston.
sending jobs to cheaper states ?
What that really means is cheaper labor. I need to pay you 75K a year in SV but I only need to pay you 40K a year in podunk Kansas.
Multiply both of those by two for highly productive tech workers, but yes.
Multiply both of those by two for highly productive tech workers, but yes ??
Or even X 3. It’s hard to get the “highly productive” to move to wherever state particularly if the job market is such that they do not need to leave. That’s why I said $75K. Those employees have less options and in some ways want to move to lower cost housing even if they make less money.
Hopscotching’ bahhhhh:
Hopscotching needles, LOL! Tell ‘em its acupuncture and charge them for it. Never mind the Hep/Hiv, they can use that to move to the head of the victim/martyr class.
Another factor that is contributing to Bay Area small business closures are the exorbitant residential rents and housing prices…many people that could afford to get out for dining and drinking a few nights a week no longer can when housing takes a large percentage of their take home pay. Have seen this locally in the north bay, many local spots that were bustling a few years ago after work now are quiet and several have shuttered recently.
Wonder how many of them have 1% loans at 8x income…
+++++
Restaurant die-off is first course of California’s $15 minimum wage
The Fresno Bee | June 13, 2017 | Jeremy Bagott
In a pair of affluent coastal California counties, the canary in the mineshaft has gotten splayed, spatchcocked and plated over a bed of unintended consequences, garnished with sprigs of locally sourced economic distortion and non-GMO, “What the heck were they thinking?”
The result of one early experiment in a citywide $15 minimum wage is an ominous sign for the state’s poorer inland counties as the statewide wage floor creeps toward the mark.
Consider San Francisco, an early adopter of the $15 wage. It’s now experiencing a restaurant die-off, minting jobless hash-slingers, cashiers, busboys, scullery engineers and line cooks as they get pink-slipped in increasing numbers. And the wage there hasn’t yet hit $15.
As the East Bay Times reported in January, at least 60 restaurants around the Bay Area had closed since September alone.
at least 60 restaurants around the Bay Area had closed since September alone
“At least” is probably correct. The Bay Area is made up of nine counties and has a population of 7½ million. There probably over 100 restaurants close every month and another 100 new ones that open.
FWIW, 60 restaurants isn’t much for a large metropolis like the bay area. That said, it’s not a good trend, and could get much, much worse.
Expect to see more and more automation in kitchens, especially at fast food joints.
Most of the “automation” I’ve seen is not really automating. It’s just making the customer do the work. The prime example is the self-scanner at the supermarket. The customer is doing what the checker and bagger used to do. In my travels I’ve seen some in-store UPS lockers. Go to a kiosk, punch in the number, locker opens. And whoomp, an entire UPS store of overhead and employees, gone.
For fast food, I predict the automation will start at the ordering and pay counter — or a pre-paid app. It’s still probably cheapest to get humans to build the burgers and assemble the orders.
Another problem is reduced opening hours. Restaurants that used to be open all day long are now operating with ludicrously restricted hours because they can’t afford to have waiters on all day. Lunch 11:30-2. Reopen for dinner at 6-10. So they miss out on the bonus afternoon customers while still having to pay kitchen staff as they prep for dinner.
Free hc will cure that
Why not a $71 min wage
What do you call a state that spends 100% of all tax revenue on:
State pensions
State salaries
Free medical
And has NOTHING left for what you think a state should spend money on:
Roads
Snow removal
Bridge building
Parks
Utilities
Safety
Crime prevention
Natural disaster help
Education
Parks
Museums
Business compliance
Environmental enforcement
etc.
A democrat utopia.
Lord help you if you own a house or business there.
++++
Official warns Illinois finances in ‘massive crisis mode’
By SARA BURNETT - Associated Press - 6/17/2017
CHICAGO (AP) — The Illinois official responsible for paying the state’s bills is warning that new court orders mean her office must pay out more each month than Illinois receives in revenue.
Comptroller Susana Mendoza must prioritize what gets paid as Illinois nears its third year without a state budget.
A mix of state law, court orders and pressure from credit rating agencies requires some items be paid first. Those include debt and pension payments, state worker paychecks and some school funding.
Mendoza says a recent court order regarding money owed for Medicaid bills means mandated payments will eat up 100 percent of Illinois’ monthly revenue.
There would be no money left for so-called “discretionary” spending - a category that in Illinois includes school buses, domestic violence shelters and some ambulance services.
But the union goons get their retire in you 50s” pensions
Gen x 65+
Millennial work till 70
“Once the money’s gone, the money’s gone, and I can’t print it,” Mendoza said”
I don’t see what the problem is, Susana. Why can’t you print it? Everyone else does. Go right ahead. Just slap Obama’s puss on one side and his patootie on the other and you’re good to go. Problem solved!
And screw the courts. Just go ahead and do what you need to do. The courts are a joke anyway. What’re they gonna do if you flout them? Arrest Chicago?
This is a brilliant idea. It would be so entertaining to watch play out. “You can’t print your own money!” “Why not? You are!” “Umm…”
The real question is if anyone would accept Illinois bucks as payment. Would you build a new stretch of highway and accept them as payment?
They can always issue bonds, but they’d have to sweeten the deal to entice investors. Otherwise the fed would have to buy them.
Our great vets!
http://www.zerohedge.com/news/2017-06-16/us-navy-destroyer-collides-merchant-vessel-japan
Er, uh, wrong story. Oh, OK. Our great vets!
http://www.zerohedge.com/news/2017-06-17/4-us-troops-shot-afghanistans-3rd-insider-attack-year
No? Ok.
We need to send more troops. That’s a good war.
Yeah, keep sending those troops. And let the bankers, the tech titans, the unelected bureaucrats, the Saudis, the Clintons, the Chinese, Israel, Soros, Bezos, etc. thank them for their service, because they’ve done really well for them.
Oh, I forgot the defense contractors. And their shareholders. They should be doing some service-thanking, too.
Who was it Comey worked for? Oh, right, Lockheed Martin. Wonder if Jimmy boy has thanked anyone for their service lately, because it earned him millions.
Oh, I forgot ??
Yeah. You also left out Bush. Why ?
It was a slip. Bush and his merry band, too. Gimme a break. There’s just too many to remember.
Hey Palmy, maybe the tin-foil hat folks can track the amount of war with retirements. That’s how many companies (and gov) shrink: they don’t lay people off, they just keep the project going until most of the people retire and they simply don’t hire replacements.
Look for the amount of war to dwindle as the staff of these companies dwindle. That would be proof that MIC is driving war.
Problem is that the millenial generation is larger than boomers (supposedly, I believe marketing chumps rolled together Y’s and Millenials in order to sell them crap) so companies can justify moar war in order to feed moar people.
From Wikipedia …
“Iran Air Flight 655 was an Iran Air passenger flight from Tehran to Dubai. On 3 July 1988, the aircraft operating on this route was shot down by the United States Navy guided missile cruiser USS Vincennes under the command of William C. Rogers III. The incident took place in Iranian airspace, over Iran’s territorial waters in the Persian Gulf, and on the flight’s usual flight path. The aircraft, an Airbus A300 B2-203, was destroyed by SM-2MR surface-to-air missiles fired from Vincennes. All 290 people on board died. The cruiser Vincennes had entered Iranian territorial waters after one of its helicopters drew warning fire from Iranian speedboats operating within Iranian territorial limits.
“According to the United States government, the crew incorrectly identified the Iranian Airbus A300 as an attacking F-14A Tomcat fighter, a plane made in the United States and operated at that time by only two forces worldwide, the United States Navy and the Islamic Republic of Iran Air Force. While the Iranian F-14s had been supplied by manufacturer Grumman in an air-to-air configuration only in the 1970s, the crew of Vincennes had been briefed when entering the region that the Iranian F-14s carried unguided bombs as well as Maverick missiles and unguided rockets. The Vincennes crew made ten attempts to contact the crew of the flight on military and civilian radio frequencies, but received no response. The International Civil Aviation Organization said that the flight crew should have been monitoring the civilian frequency.”
“The architects of U.S. monetary policy at the Federal Reserve should be happy. They’ve succeeded beyond their own expectations in bringing down the unemployment rate without triggering an outburst of inflation.”
Who writes this shi-ite anyway? Oh, Bloomturd.
http://www.zerohedge.com/news/2017-06-17/us-general-wants-20000-additional-ground-troops-sent-afghanistan
http://original.antiwar.com/justin/2017/06/01/havent-we-had-enough-of-afghanistan/
“The original rationale for the invasion – the presence of Osama bin Laden – is long since gone…
“The justification for continuing the Afghan war, you’ll recall, was that we couldn’t allow any ‘safe havens’ where the terrorists could plan and carry out attacks on the US and Western Europe….
“The reality is that terrorist plots are more likely to be hatched in Western Europe and right here in the United States than in the Afghan wilds. …
“When the truth is considered ‘anti-American,’” write Raimondo, “then we know we’re in trouble.”
A snippet of information frof, Wikipedia …
“Afghanistan’s opium poppy production goes into more than 90% of heroin worldwide.[1] Afghanistan has been the world’s greatest illicit opium producer, ahead of Burma (Myanmar), the “Golden Triangle”, and Latin America since 1992, excluding the year 2001.[2] Afghanistan is the main producer of opium in the “Golden Crescent”. Opium production in Afghanistan has been on the rise since U.S. occupation started in 2001.[3] Based on UNODC data, opium poppy cultivation was more in each of the growing seasons in the periods between 2004 and 2007 than in any one year during Taliban rule. More land is now used for opium in Afghanistan than is used for coca cultivation in Latin America. In 2007, 93% of the non-pharmaceutical-grade opiates on the world market originated in Afghanistan.[4] This amounts to an export value of about $4 billion, with a quarter being earned by opium farmers and the rest going to district officials, insurgents, warlords, and drug traffickers.[5] In the seven years (1994–2000) prior to a Taliban opium ban, the Afghan farmers’ share of gross income from opium was divided among 200,000 families.[6] In addition to opiates, Afghanistan is also the largest producer of cannabis (mostly as hashish) in the world.[7][8] In 2004, a fatwa was issued by Muslim clerics claiming that opium production is contrary to the sharia law and that opium producers would face punishments in accordance with the sharia.[9]”
FWIW.
More information about Afghanistan and opium and heroin and such.
Oh, and there’s a chart!
http://opiophilia.blogspot.com/2013/12/opium-production-in-afghanistan.html
What’s that saying?
“Ask yourself this question about what drives wars and such:
“Who benefits?”
1. The Military Industrial Complex
2. Politicians in office who wish to avoid personal scrutiny
3. Politicians in office who wish to increase their dictatorial power
I’m cranky and in an anti-war kind of mood today.
What an interesting statement. It implies that if you were in good mood you would be pro-war.
What an interesting statement. It implies that you are subject to Mighty Mike contagion.
That wouldn’t be it. My statements are always based on facts and logic.
Right. Set a heading for the nearest star base Spock.
“My statements are always based on facts and logic.”
Vin Scully for one, who you said was wrong about his statement below would disagree and with good reason Mighty.
https://www.youtube.com/watch?v=sg5ugD_vgx4
Another bubble for the lemmings to pile into! Heckova job, central bankers!
http://www.zerohedge.com/news/2017-06-17/litecoin-explodes-higher-after-flood-chinese-korean-buying
Sacramento…..my favorite market:
“The average Sacramento County home is on the market for just eight days before selling, SAR’s Tony Vicari said. It’s really all about supply and demand, Kellie Swayne of Dunnigan Realtors said. ‘Right now, California’s real estate is hot, hot, hot,’ Swayne said. ‘With so little supply out there we’ve got lots of buyers in the market. We’ve got multiple offers most of the time.’”
Sounds like a great time to be a seller over the next couple of years. I just put one house on the market today. I’ll let you know how it goes.
Please do.
I just put one house on the market today. I’ll let you know how it goes.
So Jingle… I totally get that timeline and goals can change—but if I remember correctly, you had said when you were first buying these houses that they were your long-term plan.
What was your holding period for the one you are hoping to unload?
It will be super-interesting to see if other investors and speculators begin to see the echo-bubble-peak approach, and start to unload with similar timing… Or maybe not. Time will tell.
I purchased the house in 2009. It had good cash flow (5-6%) for 7 years, but this year, the repairs and maintenance used up 90% of the free cash flow.
We are ready to retire and thinking about moving to San Diego in 2019. One of my main rules about owning real estate is that it be within close proximity. Thus we are liquidating over the next two years. We will pay over $250,000 in capital gains tax and depreciation recapture, but it’s one of those problems that is good to have.
FEDERAL RESERVE
Janet Yellen Is Her Own Best Successor
Trump should reappoint her to lead the Federal Reserve.
By Narayana Kocherlakota
June 16, 2017, 4:00 AM MST
President Donald Trump has reportedly begun the process of deciding who will lead the U.S. Federal Reserve after Janet Yellen’s term ends early next year. If he wants the best outcome for the economy, he can’t do better than Janet Yellen.
Let’s consider Yellen’s track record. She has been chair of the Board of Governors and the policy-making Federal Open Market Committee since February 2014, which means she leads the central bank’s efforts to promote maximum employment and price stability. During this period, net job creation of more than 200,000 jobs a month has brought the unemployment rate down from 6.6 percent to 4.3 percent, more than a percentage point lower than what the Fed saw as the sustainable long-run rate in March 2014. Meanwhile, core inflation been consistently well below the Fed’s 2 percent target: As of April, it stood at just 1.5 percent.
In short, Yellen’s policies have contributed to a surprisingly strong labor market recovery, yet also been sufficiently cautious to keep inflation below target. Some would see this as an all-around success, though the Fed’s caution does have a downside: Markets appear to believe that the central bank is unwilling or unable to hit its inflation target with consistency. Prices of Treasury bonds suggest that investors expect the Fed’s preferred measure of inflation to remain well under 2 percent five to 10 years from now. If it persists, this loss of credibility means that the Fed will have less ammunition to fight the next recession.
https://www.bloomberg.com/view/articles/2017-06-16/janet-yellen-is-her-own-best-successor
“The Federal Reserve has created distortions across the spectrum of asset classes which is frankly beyond belief, worse than has ever been witnessed in the history of finance. What this means is when the yield curve inverts this time, we will experience a meltdown magnitudes greater then the 2008 crash.
“The irony is just like last time, the general public has no idea of what is coming and they are just as complacent as well.”
https://steemit.com/money/@marketreport/100-proof-that-a-massive-economic-meltdown-is-closer-than-you-think-by-gregory-mannarino
It should read…..strong labor market in Mickey mouse jobs….
I have a feeling that we are seriously headed for another calamity. Interest rates are creeping up, we have instability, conflicts and terrorism on the rise all over the world, and major political issues right here in our own government. My plan is to unload properties now while the market is still somewhat hot, and brace for an impending major crisis.
Sounds like you are on the right track. In a race for the exits, first out wins, especially if he tiptoes out the door so as to avoid getting trampled by a panicked mob.
It’s never a bad time to unload properties, if you think of them as a “load.”
“Nobody ever lost money taking a profit.” —Bernard Baruch
I had the same feeling in 2016 about a peak and sold 1/2 my stocks at $17,500 and the other 1/2 at $18,500.
The Dow is now over $21,000…..20% higher.
MarketWatch
Opinion
Stay away from bitcoin — it’s complete garbage
By Brett Arends
Published: June 17, 2017 12:06 p.m. ET
What are its real-life uses? Online gambling and money laundering
If you’ve ever wondered what “cryptocurrencies” such as bitcoin, litecoin and ethereum are for, ask one of their legion of techie-libertarian fans.
And it’s dollars to dogecoins (yet another one) that the conversation will go something like this:
You: So what’s the purpose of bitcoin?
Fan: The technology is absolutely amazing!
You: Yes, but what’s it for?
Fan: Really, the “blockchain” technology is a total masterpiece, way ahead of its time!
You: Yes, yes, I understand that. But what is it actually for?
Fan: You don’t understand! It’s a completely decentralized money system! Totally revolutionary!
You: Honestly, does it have a purpose? Any purpose at all?
Fan: It’s the wave of the future!
And on it will go.
…
Meanwhile, platinum is 10X more rare than gold, has a far higher and growing industrial usage, and the main sources of supply - Russia and South Africa - leave a great deal to be desired from a geopolitical risk standpoint. And yet an ounce of platinum is selling for about $200 less than an oz of gold.
Hmm…scam crypto-currencies backed by nothing or physical precious metals that are going to be a moon shot when central bank asset bubbles and Ponzi markets start imploding under the weight of their own massive debt, fraud, and mark-to-fantasy valuations. Tough call….
Now that China is clamping down more, whichever is safest and easiest to leave China with could be an important factor.
MarketWatch
Bitcoin is suddenly on pace to have its worst week since 2015
By Mark DeCambre
Published: June 16, 2017 11:29 a.m. ET
Bitcoin tumbled 19% at its lows Thursday and has lost about $10 billion in market value since June 12
After surging briefly to an all-time high of $3,000, bitcoin has been undergoing a dazzling reversal of late, with the digital currency on track to post its worst weekly decline in more than two years.
Bitcoin (BTCUSD, -5.65%) has dropped 18.5% over the past week to a value of $2,317, which would mark its steepest weekly decline since Jan. 16, 2015, according to WSJ Market Data Group. Thursday’s more-than-15% drop would represent its largest one-day plunge since Jan. 14, 2015.
…
I hope Sweet William’s white-coated friend at that special hospital they hauled him off to after he popped his cork on Election Day has given him some of that special hot chocolate that turns those peaks and valleys into gently rolling hills.