February 9, 2018

In The Throes Of A Real Estate Glut

It’s Friday desk clearing time for this blogger. “The number of people packing up and moving out of the Bay Area just hit its highest level in more than a decade. Joint Venture Silicon Valley’s own study of the out-migration says workers are moving due to a number of factors. But topping the list is the high cost of housing. Carole Dabak spent 40 years living in San Jose and now she’s part of the mass exodus that is showing no signs of slowing down. She plans to sell her home for about $1 million, buy a much larger place near Nashville for less than half that and retire. ‘I loved it here when I first got here. I really loved it here. But it’s just not the same,’ Dabak said.”

“Analytics.Miami launches the first annual State of the Market report for Miami condos and a special report tracking Miami condo inventory. The findings are dire. Owners serious about selling are accepting 20% - 30% discounts off of their asking prices. Most neighborhoods have 100+ months of condo inventory at price points past $3M. To put this in perspective, In December 2017, Miami’s prestigious South of 5th neighborhood had 128 active condo listings past $3M and only one sale. In the previous month, there were zero sales past $3M, leaving the neighborhood with 128 months of condo inventory past $3M.”

“The inventory situation is almost twice as bad as it was during the last crash, and 2017 closed off with a record high number of active listings.”

“While it would be highly inaccurate to say that housing is getting more affordable, it’s not wrong to point out that housing prices—namely detached housing prices—have dropped quite a bit month-over-month in Mississauga and surrounding areas. Zoocasa says that average prices for all categories (meaning detached, semi-detached, town and condo home types) declined by six per cent from $675,656 in December 2017 to $631,672 in January 2018. Year-over-year, prices are down by nine per cent from $700,369 in January 2017 to $631,672 in January 2018.”

“‘It’s important not to let year-over-year figures skew how we look at market conditions. We know that sales are down from 2017’s abnormally high first quarter levels,’ says Lauren Haw, Zoocasa CEO. ‘Sales are in-line with the the hot 2016 market - when we saw headlines about the ‘continuous overheating’ market, when the average home price in Mississauga was $545,174 in January 2016 versus $631,672 now.’”

“A retired couple’s ‘nest egg’ flat has become a ‘noose around their neck’ due to nothing more than its method of construction. Jimmy and Ruth Hill purchased the three-bedroom council premises back in 2005. The aim was always to sell it on, however, and last year they attempted to do just that. To their horror they discovered the block of flats is classed as a non-traditional construction, mainstream banks and money lenders were not prepared to give potential buyers loans – despite the fact the Halifax gave the Hills a mortgage for it back in 2005.”

“The flat currently has an asking price of £55,000, but one firm the couple contacted in their desperation only offered them £20,000 to take it off their hands. Jimmy (65) said: ‘We have spent a lot of money and effort on this flat and that was soul destroying to get an offer like that for something we have worked so hard on.’”

“Housing prices slid again during the first month of the new year, sliding 2.2 percent in January on a national average. Real estate brokers’ association Eiendom Norge called it the weakest January in 10 years. Sales and prices often pick up after the Christmas holidays, but not this year. Average prices were down, fully 9.4 percent in the Oslo area, from last January.”

“Home sales and housing starts by Swedish property developers tumbled at the end of 2017 amid the biggest drop in prices since 2008. After years of booming prices, fueled by a shortage of housing and low interest rates, Swedish home prices dropped 7.8 percent in the three months through December after an increase in construction pushed supply too high at a time when households started becoming more pessimistic about the outlook for the market. High-end apartments in Stockholm have been particularly hard hit.”

“All over Nairobi, bright red - To Let signs are draped alongside gleaming new skyscrapers laying evidence to a city in the throes of a real estate glut. This is leading to significant losses and at the same time eroding the overall values of the prime assets raising questions on whether the property crash Kenyans have been warned about severally in the past is finally nigh. ‘What you will see is prices flattening and rents reducing over time as some developers might panic,’ said Sakina Hassanali at Hass Consult.”

“Sales of apartments in Jakarta are showing signs of bottoming out, Jones Lang LaSalle reported. In total, developers in Jakarta sold 4,610 apartments last year, down from 5,450 units in 2016 and far below the heyday of 2014 when 17,000 apartments were sold in just a year. Developers built 13,000 new apartments last year, bringing up the total number of apartments in the capital city to 138,000 by the end of 2017, but around 37 percent of those have remained unsold.”

“Condominium prices will fall this year as more than a dozen large projects come online, adding thousands of new units to a market beginning to show signs of oversupply, according to CBRE Cambodia. Ann Sothida, director of CBRE Cambodia, said condominium prices remained stable in 2017 despite the doubling of supply, but with a surge of new units expected in the coming months prices for affordable and mid-range condominiums could start to weaken. Sear Rithy, chairman of WorldBridge Land said it was too soon to say whether condo prices and rentals will fall in 2018. ‘Most condos are purchased by Chinese investors, which has little relevance on the [state of the] local market,’ he said.”

“Japanese real estate financing retreated 5.2% in 2017, the first drop in six years, with banks slowing lending for apartment construction amid higher vacancy rates. The boom in construction financing had been driven by 2015 changes to Japan’s inheritance tax law. But ‘the spike in apartment construction for tax purposes isn’t backed by demand,’ noted Yasunari Ueno of Mizuho Securities.”

“A rapid-fire release of apartments across pockets of Sydney has seen suburbs in the city’s west and south west bear the biggest brunt of price declines. Over the three months to December, prices in Canterbury Bankstown fell 4.4 per cent. The price of apartments over the quarter also declined in Sydney’s south west (3.7 per cent), south (2.1 per cent) and west (1.9 per cent), according to the latest Domain House Price Report.”

“‘Canterbury Bankstown has been hardest hit. It’s seen three quarters of consecutive decline’ said Dr Powell. ‘The majority of apartment markets across the Sydney regions have recorded a quarterly decline,’ said Domain Group data scientist Nicola Powell. ‘It signifies that the days of double digit annual growth that it had back in 2015, which was astounding, are long gone.’”




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150 Comments »

Comment by Senior Housing Analyst
2018-02-09 09:25:04

Bethesda, MD Housing Prices Crater 10% YOY On Skyrocketing Housing Inventory In DC Area

https://www.movoto.com/bethesda-md/market-trends/

 
Comment by Ben Jones
2018-02-09 09:26:36

‘The inventory situation is almost twice as bad as it was during the last crash, and 2017 closed off with a record high number of active listings’

And the price per square foot is something like 60% higher than “the last crash”. I guess we should just call that TLC, as the reference is bound to come up pretty often.

But you know, of all places - Miami does it again?

Comment by alphonso bedoya
2018-02-09 09:45:49

Of course, Miami. And we should be given an award for what is still slated to be built. When Trump wanted to build the “wall” who did he call? Jorge Perez of the Reliance Group ; Coke and now China flight money.
Fortunately, the ocean will extinguish this fire within one hundred years.

Comment by BlueSkye
2018-02-09 11:28:53

That’s when High Rises will be quite handy. New Venice.

 
Comment by snake charmer
2018-02-09 13:26:55

“Most neighborhoods have 100+ months of condo inventory at price points past $3M. To put this in perspective, In December 2017, Miami’s prestigious South of 5th neighborhood had 128 active condo listings past $3M and only one sale. In the previous month, there were zero sales past $3M, leaving the neighborhood with 128 months of condo inventory past $3M.”

My favorite was the “branded” condo buildings, giving them names like Porsche and Fendi.

I’m not a Miami resident myself; last summer was the first time in a decade that I spent any appreciable amount of time in south Florida. The city indeed is doomed in the long term. But until that day, what a time everyone is having.

Comment by Professor 🐻
2018-02-10 06:21:10

“In the previous month, there were zero sales past $3M, leaving the neighborhood with 128 months of condo inventory past $3M.”

128 condoze / 0 sales = 128 months.

The new Realtor™ math is confusing!

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Comment by Professor 🐻
2018-02-09 09:27:39

Isn’t it amazing how a perceived shortage can morph into a glut in a heartbeat when fly-by-night investors cut and run?

Comment by azdude
2018-02-09 10:14:09

“Remember kids, if you’re suffering after a 10% correction of the biggest rally in history, you’re not an investor but a f@cking bagholder.”

 
Comment by ibbots
2018-02-09 11:03:38

There’s no shortage of condo inventory at price points past $3M in Miami. What about inventory of SFR’s at prices people can actually afford?

Comment by Mafia Blocks
2018-02-09 15:27:06

They’ll sell when prices fall to affordable levels. Not a second sooner.

Addison, TX Housing Prices Crater 5% YOY

https://www.movoto.com/addison-tx/market-trends/

 
Comment by Jingle Male
2018-02-09 20:38:24

Miami SFR prices holding steady. Inventory up 5%. Seems to just be the condo market that is crashing now.

https://www.movoto.com/miami-fl/market-trends/

Comment by Ben Jones
2018-02-09 20:46:39

January 8, 2018

From Mansion Global on Florida. “After a slow year in the South Florida property market, dominated by an oversupply of luxury inventory and the retreat of Latin American buyers due to the strong dollar, 2018 represents the perfect time for interested parties to buy a luxury condo in Miami or Fort Lauderdale, experts say. That’s because of what Jay Parker, CEO of Douglas Elliman’s Florida brokerage, called a ‘perfect storm’: softened prices, and developers and sellers willing to offer 10% to 20% price reductions.”

“Ryan Shear, principal for Property Markets Group’s South Florida market, noted that he turned down buyers who wanted a 10% discount not so long ago, but today, he’d take that deal ‘all day long.’ While he hasn’t seen anything close to the 35% discounts of 2009, he said he has regularly seen 20% discounts and other incentives on the table to make a deal.”

“While many buyers are eyeing new developments in South Florida, there are also significant deals to be had when purchasing resale units, where there’s a lot of downward pressure on price, or single-family homes, experts say. For all of these property types, experts note that the best values today can likely be found where there’s the most significant oversupply of inventory to absorb, in places like Sunny Isles Beach and Miami’s downtown Brickell area.

http://thehousingbubbleblog.com/?p=10307

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Comment by Ben Jones
2018-02-09 21:46:14

‘Miami SFR prices holding steady’

‘there are also significant deals to be had when purchasing resale units, where there’s a lot of downward pressure on price, or single-family homes, experts say’

Here’s your crow jingle. Best not to pop off where you don’t know what you are talking about.

 
 
 
 
 
Comment by Ben Jones
2018-02-09 09:29:08

‘now she’s part of the mass exodus that is showing no signs of slowing down. She plans to sell her home for about $1 million, buy a much larger place’

A poster commented yesterday about cashing in on the wealth effect. Good luck, don’t everyone head for the exits at once. Last ones out leave the keys on the counter and don’t take the dishwasher dammit!

Comment by BlackSwandive
2018-02-09 17:58:47

The smart thing is to cash out, rent, then buy it for 55% off in a few years, not relocate to another bubble area and buy high just because prices are lower than where you came from.

 
 
Comment by palmetto
2018-02-09 09:30:02

Not much capitulation around here at the lower end, I hate to tell you.

They’re not gonna give it away.

 
Comment by Professor 🐻
2018-02-09 09:32:24

The DOW is turning negative after starting on an up note earlier. Will economic gravity continue to pull the market down today, or will the PPT step in to make sure this rough week ends on a happy note?

Comment by Big V
2018-02-09 09:36:31

This week can’t end on a happy note. The market has been down for more than a week already. There is no reason to think it will head back up soon. I will be bummed if it ends up next week though. I sold all my stuff on Monday, so I guess I’m a hater now (I mean hatter).

Comment by azdude
2018-02-09 10:15:47

I dare u to BTFD.

 
 
Comment by steadykat
2018-02-09 12:48:14

500 Dow points UP in around 10 minutes +145, Sticksave!

WOA!…wait a minute…..down 30 points.

OOPs………..up 90

From the article above:
“The Council of Mortgage Lenders (CML) warns non-traditional construction dwellings may not hold their value in the medium to long term, and as a result may not represent adequate security for a loan”.

Maybe we should put warnings on the sides of houses like we do with cigarette packages.

Something like “Although housing is a good, well proven investment over the long term, your performance may vary over time”.

Comment by Professor Bear
2018-02-09 13:11:26

“Past performance does not guarantee future results.”

 
 
Comment by Professor Bear
2018-02-09 13:01:50

What a relief it is to see all of the headline Wall Street indexes bubble up into the green just in time for a happy ending to a rough week!

Comment by steadykat
2018-02-09 14:54:01

The Wall Street that I grew up with and traded is dead. We didn’t send anybody to prison in 2008. We bailed them out and they are now richer and more powerful than they were a decade ago. The rigging is now painfully obvious yet no-one seems willing to stop it.

Take away the incentive to work or create. Start/continue the debasement of a Country’s currencies, promote mass immigration so large that it leads to balkanization, add sociopathic financiers and ignorant, dishonest political leaders to destroy what was a vibrant working-class. Run debt levels so high that they can never be repaid. Finally allow the mongrel hoards to literally tear down your Country’s history.

I remember reading books on great empires that over time slowly turned to sht. Even though I was fairly young I couldn’t help but to wonder how such a collapse could occur without the people noticing and stopping their demise while they still had the time.

Well, here we are.

Comment by scdave
2018-02-09 15:48:55

Interesting comments.

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Comment by messagetorudy
2018-02-09 16:36:26

Steadykat, you must be be able to pick up my thoughts from the ether.

Society has morphed like Kafka’s cockroach into a state where large parts of it don’t know how to function in an honest, lawful manner. People are so vested in “the game” continuing as it is that any disruption - even to a better, fairer system - is met with massive resistance. And younger generations know no other way of life. No wonder they choose to eat detergent or set themselves on fire.

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Comment by Big V
2018-02-09 15:48:49

It’ still down for the week alot.

Comment by BlackSwandive
2018-02-09 18:01:17

It’s still at an absolutely eye-popping 24k+.

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Comment by Professor Bear
2018-02-09 20:23:56

Fed’s Dudley: Market drop is ’small potatoes,’ economy still strong, rates going up
- New York Fed President Bill Dudley called the stock market drop “small potatoes” and not an influence on his outlook for growth or policy.
- Markets widely expect the Fed to hike interest rates at its March meeting, and Dudley indicated he feels further increases are likely.
Jeff Cox
Published 1:08 PM ET Thu, 8 Feb 2018
Updated 6:44 PM ET Thu, 8 Feb 2018

 
 
 
 
Comment by Professor 🐻
2018-02-10 01:19:55

Business
Washington may have had a hand in keeping Dow meltdown from being a complete disaster
By John Crudele
February 7, 2018 | 11:01pm
Washington may have had a hand in keeping Dow meltdown from being a complete disaster

Did Washington save the stock market this week?

It’s hard to make the case that anyone helped Wall Street on Monday, given the fact that the Dow Jones industrial average ended with a 1,175- point loss, equal to 4.6 percent — on top of last Friday’s 666-point decline.

But the Dow and other indexes were in complete collapse right before the start of Monday’s final hour of trading. At one point, the Dow, which represents only 30 stocks but is still a widely followed indicator, tumbled to a loss of about 1,600 points.

That’s more than twice as large as the biggest Dow point decline ever.

But then something happened. Someone started arbitrarily and aggressively buying stocks and the decline was halved. Monday will still go down as a Wall Street massacre, but that anonymous superhero buyer or buyers made it a lot less bloody.

Stocks opened sharply lower on Tuesday and then again on Wednesday. But each time aggressive buying by a superhero or heroes changed the outcome, if maybe only temporarily.

Who was the market’s superhero? I’m going to tell you a story and then you decide.

Toward the end of his time in office in 1989, Ronald Reagan created something called the President’s Working Group on Financial Markets. There had been a stock market crash in 1987 and a near-crash in 1989, so everyone was worried.

The Working Group was ostensibly an advisory body that was meant to help regulators and the president understand the markets. The members would write papers, have coffee, confer and come up with solutions.

But some of us thought it was something much more, and the Working Group unofficially became known as the Plunge Protection Team.

 
 
Comment by Big V
2018-02-09 09:33:09

I wonder how big the down will be this time. Any guesses from the HBB peanut gang? Whoever wins has to donate a hundred bucks to Ben’s blog.

Comment by Professor 🐻
2018-02-09 09:41:01

History suggests the correction isn’t near over, as this chart demonstrates
By Ryan Vlastelica
Published: Feb 9, 2018 11:22 a.m. ET

‘There is no hard and fast rule when it comes to corrections, and that’s what can make them so terrifying when you go through one’
Courtesy Everett Collection

Perhaps the biggest question on Wall Street right now is whether the recent pain in the U.S. stock market is over. If history is any indication, the answer is no.

Comment by Big V
2018-02-09 10:13:46

How come no one ever gets terrified during the expansion phase of the bubble cycle?

Comment by azdude
2018-02-09 10:17:26

my guess is another 1000 pts today. The trump gains will be gone next week.

He can start taking claim for the phony recovery.

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Comment by Rental Watch
2018-02-09 10:40:59

The momentum trade is dead.

If people actually look at fundamentals (how much companies earn, reasonable growth rates, etc.), we have a few thousand points more to go (at least) before we get to more reasonable levels…and we always overshoot on the way down (and the way up, for that matter).

 
Comment by azdude
2018-02-09 10:52:39

look at mcdonalds and cat stock prices. give me a break.

people dont even know how to value a company.

my paper napkin company valuation:

(assets - liabilites )+ discounted future earnings

how far do u go into future for earnings? till u need the money or your taking a dirt nap. u choose

grow the earnings at 10% till your desired time frame and then determine the net present vale of those earnings.

 
Comment by Ben Jones
2018-02-09 10:55:18

From the first article:

‘Operators of a San Jose U-Haul business say one of their biggest problems is getting its rental moving vans back because so many are on a one-way ticket out of town.’

No one wants to live there.

 
Comment by azdude
2018-02-09 11:10:53

stockholders of tech companies seem to be the folks doing well in the bay area. housing is grossly overinflated there. Even the KOA campground in rohnert park is like 75 bucks a night.

 
Comment by Rental Watch
2018-02-09 11:17:43

how far do u go into future for earnings? till u need the money or your taking a dirt nap. u choose

grow the earnings at 10% till your desired time frame and then determine the net present vale of those earnings.

That all depends if the company is expected to be around forever…there needs to be a terminal value of the income generating company at the end of your earnings analysis. Also, why growing earnings at 10%? Some should be assumed to grow at 20% for a while…others at 5% forever…that matters.

Also, what discount rate do you use in determining the NPV? ISTR hearing that Buffett uses 6% for high quality companies.

In any event, my point was simply that the stock market was going up because it had been going up…no one was actually doing any math…they were investing based on momentum only…FOMO.

Now that the momentum has been broken, people are selling indiscriminately…some companies are still far overvalued based on their actually earnings, others are fairly valued, and some are undervalued. But, all are going down, down, down.

Once the dust settles, folks will break out their calculator and things will settle out at more reasonable levels.

The real question IMHO, is whether the stock market crash will have follow-on effects that will effect the actual economy. And it’s really too early to say, but dependent on how far down the stock market falls.

 
Comment by azdude
2018-02-09 11:25:27

I was just using an avg of profit growth for companies.

A lot of this current market is not based on fundamentals but central bank intervention. They either take punch bowl away or they have to do it forever.

r we n the rinse cycle of lather rinse repeat?

 
Comment by scdave
2018-02-09 11:36:04

RW….

Over the past week I have seen 112 new multi family listings for sale in California…Anywhere from 6 units to 90 units and everything in between…As I mentioned before, I have seen a significant spike in new commercial listings since the new year began not only in California but in several other states also…

Whats up ?? IMO, tax law changes (I do not call it reform) and interest rates on the rise…Now we have the “tree” being shaken in the stock market…It will be interesting to follow this ver the next few months…

 
Comment by BlueSkye
2018-02-09 11:38:34

What’s the blast radius around NYC?

Easily several hundred miles.

 
Comment by rms
2018-02-09 12:04:59

“No one wants to live there.”

San Jose is not a bad place to live… it just doesn’t pencil-out economically, and it hasn’t for at least twenty years.

The traffic has certainly become an issue, but that’s the case wherever there’s a glut of high density, multi-family housing. The existing roads and traffic control systems were not designed for the increased capacity.

 
Comment by Rental Watch
2018-02-09 13:21:40

Whats up ?? IMO, tax law changes (I do not call it reform) and interest rates on the rise…Now we have the “tree” being shaken in the stock market…It will be interesting to follow this ver the next few months…

So, I haven’t seen the same uptick in listings…but then again, I don’t directly purchase, so I never look. I’ll note a couple of things though:

1. I’ve heard from many sources that 2017 was a year where the bid/ask spread for CRE widened…meaning many listed properties didn’t sell.

2. There was lots of uncertainty with respect to the new tax law (whether it would pass, what it would look like, etc.). In my experience, uncertainty breeds paralysis with respect to large transactions. Now that the uncertainty is gone, it is understandable that more people will try to sell/buy assets.

The combination of these two things makes a burst of activity in the first part of 2018 not entirely unexpected (as people attempt to sell what didn’t sell in 2017 and try to sell in an environment when tax rules are more known).

It will be interesting to see if the bid/ask spread narrows to a point where more sales occur.

My sense is that it will. Many sellers bought post crash, and so have plenty of gains based on their purchase price. If faced with getting 90% of their expected profit vs. being exposed to a volatile market in the hopes of getting 100% of their expected profit, I suspect an increasing number will opt for 90%.

 
Comment by OneAgainstMany
2018-02-09 15:15:26

No one wants to live there.

Another problem related problem: people have too much crap to move.

 
Comment by Mafia Blocks
2018-02-09 17:24:50

Rampant crime, poverty, record high unemployment…. Yep.. California is a real great place.

“California Leads the Nation — In Poverty”

https://www.ocregister.com/2017/09/25/california-leads-the-nation-in-poverty/

 
Comment by Professor Bear
2018-02-09 20:30:38

“my guess is another 1000 pts today.”

PPT sez not.

 
 
 
 
Comment by Professor Bear
2018-02-09 15:37:04

Here is why this time is different (at least compared to other corrections in the 24 years since 1994…).

Investing
Stock and bond markets are doing a strange thing that is reminiscent of the 1987 crash
- David Rosenberg says a rise in the 10-year Treasury yield during a stock market drop seldom occurs.
- “This rare occurrence of bond yields rising even as stock markets decline was a feature in 1987 and 1994,” he writes.
Tae Kim | @firstadopter
Published 5 Hours Ago Updated 4 Hours Ago

Comment by Professor Bear
2018-02-09 17:26:52

‘Bond vigilantes’ are saddled up and ready to push rates higher, says economist who coined the term
- There’s reason to be concerned about bond vigilantes, who are no longer under “lock and key” and are free to push yields higher, Ed Yardeni says.
- Yardeni coined the term “bond vigilantes” in the 1980s to refer to investors who sell their holdings in an effort to enforce fiscal discipline.
- People are looking more at the domestic situation and saying, ‘You know what, maybe we need a higher bond yield,’” Yardeni says.
Michelle Fox
Published 4 Hours Ago Updated 2 Hours Ago

 
 
 
Comment by Mr. Banker
2018-02-09 09:46:36

Lol …

Russian nuclear scientists arrested for ‘Bitcoin mining plot’ - http://www.bbc.co.uk/news/world-europe-43003740

 
Comment by Professor 🐻
2018-02-09 09:47:02

Did your FOMO give way to “Oh no”?

Comment by Professor Bear
2018-02-09 11:35:58

Where do you hide when everything is turning red?

Comment by Big V
2018-02-09 11:41:03

In a greenhouse?

 
Comment by azdude
2018-02-09 11:43:29

time to wheel out a FED member for trump?

Comment by Professor Bear
2018-02-09 20:48:42

To his credit, I don’t expect Trump to bat an eye over the correction, while Obama would have been freaking out at this stage and asking Ben Bernanke how to remedy the situation. That’s an advantage of having a FIRE sector guy in the WH.

The Marketwatchers seem a lot more freaked out than FOMC members do.

Fed officials sound almost glib discussing stock-market correction
Published: Feb 9, 2018 3:05 p.m. ET
The problem is that ‘small potatoes’ can quickly become larger
By Greg Robb
Senior economics reporter
Everett Collection
Leslie Nielsen doing his William Dudley impression.

With stocks careening downward over the past week, Federal Reserve officials have tried to remain stoic, with one central banker, New York Fed President William Dudley. describing the drop — as least by mid-day Thursday — as “small potatoes.”

In a similar vein, St. Louis Fed President James Bullard early in the week called the market’s fall “the most predicted selloff of all time.”

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Comment by Professor Bear
2018-02-09 12:19:05

The slope of the graph shown in this article since the recent peak is ominously close to negative infinity.

Buy the dip at the peril of accidentally catching yourself a falling knife.

 
Comment by Professor Bear
2018-02-09 14:32:21

“The worst is yet to come.”

The world loves an optimist!

The worst of the bond rout is yet to come, says Piper Jaffray
Keris Lahiff
Published 4 Hours Ago CNBC.com
Rising rates slam stocks as market volatility rages on
4:25 PM ET Thu, 8 Feb 2018 | 04:31

It all started with bond yields.

Spiking yields spilled over onto the stock market in the past week, first triggering a nearly 666-point drop on the Dow last Friday and then sparking two declines of more than 1,000 points within just 4 days.

The bond rout will continue with yields on the 10-year possibly reaching 3 percent in the near term, according to Craig Johnson, senior technical strategist at Piper Jaffray. That is a level it has not reached since January 2014.

“This is a 36-year reversal in rates,” Johnson told CNBC’s “Trading Nation” on Thursday. Bond yields, which move inversely to prices, have generally been in decline over the past 3 decades, indicating a long-term bull market for bond prices.

“When you reverse that downtrend from down to up you typically get a momentum response and a quick move up. That’s exactly what you’re seeing in the bond market right now,” added Johnson. “You’ve got to be careful in here right now.”

The yield on 10-year Treasurys has risen at a fast clip since the U.S. election in November 2016. Bond yields held at around 1.8 percent prior to the election and have since moved up 100 basis points to hit a 4-year high of 2.86 percent this week.

 
 
Comment by palmetto
2018-02-09 09:49:13

$60,000 shacks going for two and three times the price. Panic buying at the lower end!

Meanwhile a glut of the lugzurhy stuff. Go figure.

Now would be a good time to mention how bigly we’ve been had over the decades. All those “poor” furriners we’ve been told needed aid, individually and as entire populations. The money went out and is coming back, to take what you have left. Ain’t globalism great?

Give! Give til it hurts, comrades! You have it so good and they have it so bad, you selfish members of the American middle class!

I heard this schitt all the time growing up.

Comment by Big V
2018-02-09 10:16:07

That’s because they are nicer people than us. We just don’t deserve it. If we give it all to them, then they will bring peace and wisdom to the world.

Comment by palmetto
2018-02-09 10:28:54

And that’s another thing about globalism: It’s not enuf we have to endure the buttwipe criminal class in our own country, we have to endure the buttwipes of the world! They have opinions! They matter, too!

Comment by Big V
2018-02-09 11:24:24

ikr

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Comment by palmetto
2018-02-09 11:34:35

r

 
 
 
 
 
Comment by 2banana
2018-02-09 09:51:52

Well, that is one kind of solution…

++++++

A plan to house L.A.’s homeless residents could transform parking lots across the city
Doug Smith - Feb 09, 2018 - Los Angeles Times

Plans are already underway to develop housing on large public lots in Venice and Hollywood, while officials review the rest to determine which could support housing.

The idea of converting public parking to housing has been around for decades in L.A. but has gained little traction. In the 1980s, Mayor Tom Bradley proposed leasing rights to developers to build multifamily housing, but there was no follow-up.

The new parking lot review grew out of an urgency to implement Proposition HHH, the $1.2-billion bond measure approved by the voters to help fund the construction of 1,000 permanent supportive housing units each year.

With taxpayer funds now committed, a new obstacle emerged. The scarcity of suitable land in the city’s highly competitive real estate market could add years to the start-up time for new projects.

After sifting through more than 500 prospects, the City Administrative Office has narrowed the field to 129 sites that are potentially large enough and in suitable zones. All but 10 are public parking lots.

Architects will have to design three- to five-story buildings that blend with both the businesses and with adjoining residential neighborhoods.

About two-thirds of the lots are metered and bring revenue to the city.

Parking Lot 731, spanning the Grand Canal, provides 188 spaces in a parking-tight district where bohemian businesses, struggling artists and owners of multimillion-dollar homes mix only two blocks from the beach. It pulls in more than $1 million a year for the city.

Some who attended the neighborhood council meeting expected those talks to be tough.

“There is no warmth for this project right now from this community,” said Lincoln Heights resident and political blogger Scott Johnson.

Comment by messagetorudy
2018-02-09 13:34:41

Leftists are gonna have their hypocrisy exposed yet again as they lose their precious parking spaces to dirtbags that they profess to have so much compassion for. Pass the popcorn, dis goin’ be gud!

 
Comment by In Colorado
2018-02-09 14:29:57

Move the homeless into dead malls and Kmarts. If the buildings fill up, there’s plenty of parking too.

Comment by Anonymous
2018-02-09 15:34:52

There are lots of empty big-box stores all over the country that could be repurposed for this.

 
Comment by rms
2018-02-09 16:16:27

Unfortunately many homeless people are also incorrigible.

 
Comment by messagetorudy
2018-02-09 16:30:17

Not gonna happen - makes too much sense. This is also agenda 21 at work, remove much needed parking in order to force people out of their cars and onto public transportation. Plus the slimey politicians cant get their campaigns funded by developers if the developers arent building lots of new stuff, including rail systems that usually cost 5-10x what was initially budgeted - gotta buy those union votes!

 
 
Comment by Professor Bear
2018-02-09 20:51:18

I predict lots of very sh!tty LA parking lots in the future if this project gains traction.

 
 
Comment by Ben Jones
2018-02-09 09:53:55

‘developers in Jakarta sold 4,610 apartments last year, down from 5,450 units in 2016 and far below the heyday of 2014…Developers built 13,000 new apartments last year, bringing up the total number of apartments in the capital city to 138,000 by the end of 2017, but around 37 percent of those have remained unsold’

My calculator says 51,000 unsold, or an 11 year supply at current rate of sales. Of course they are still building three times what they are selling so it’s a moving target.

Comment by Mafia Blocks
2018-02-09 11:29:11

Donk and I are thinking of eloping to Jakarta

Comment by Big V
2018-02-09 12:09:18

That is so cute. You two could have the cutest smart-asses for babies.

Comment by Mafia Blocks
2018-02-09 12:33:50

Will get them loaded up on debt before they’re even walking. They’ll be model DebtDonkeys.

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Comment by Big V
2018-02-09 13:36:07
 
 
 
Comment by messagetorudy
2018-02-09 13:31:24

I mentioned over a year ago a guy I used to work with retired in Jakarta. Built a fancy mansion, got sick multiple times a year there (because its a s-thole!) and after a few years came back to the US - couldnt handle the bugs he and his wife kept catching. Sold it to some mafia type who took a different route/car everytime he came to look at the place and paid with a briefcase filled with cash.

 
 
 
Comment by Ben Jones
2018-02-09 09:57:33

‘average prices for all categories (meaning detached, semi-detached, town and condo home types) declined by six per cent from $675,656 in December 2017 to $631,672 in January 2018. Year-over-year, prices are down by nine per cent from $700,369 in January 2017 to $631,672 in January 2018.’

“‘It’s important not to let year-over-year figures skew how we look at market conditions. We know that sales are down from 2017’s abnormally high first quarter levels,’ says Lauren Haw, Zoocasa CEO. ‘Sales are in-line with the the hot 2016 market - when we saw headlines about the ‘continuous overheating’ market, when the average home price in Mississauga was $545,174 in January 2016 versus $631,672 now.’”

Lauren is good at the silver lining thing. “Hey, compared to January 2016, you’re still up little soldier!” The skeptic might say to go from 545k pesos to 700k IN ONE YEAR is a wee bit unsustainable, but what do I know?

Comment by Big V
2018-02-09 10:21:26

Soon the message will morph into “Well you can’t sell now; you’re already down”.

Comment by Big V
Comment by Puggs
2018-02-09 11:58:15

Should have sold at 26,000 Sucka’s!!

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Comment by palmetto
2018-02-09 12:42:52

Yep! That guy who says “Too late to sell, too early to buy”.

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Comment by Sean
2018-02-09 11:09:08

Read the quote again. She says “Don’t use year over year figures” and in the next breath says “We are inline with 2016s hot market”

These fools can’t even keep their lies straight!

 
 
Comment by Mr. Banker
Comment by OneAgainstMany
2018-02-09 15:24:35

Wow, that brought back memories of Montreal winters, thanks for sharing Mr. Banker. BMO and I were friends way back then. I think a lot of Montrealais became good friends with BMO since the salt tends to eat through the bottom of their cars every 7 years or so during those brutal winters.

 
 
Comment by azdude
2018-02-09 11:46:15

I wonder if the FED is gonna try to use disgruntled stock holders to bid up treasuries and keep yields down?

Comment by cactus
2018-02-09 12:03:06

Bond vigilantes finally arriving on the scene ?

 
Comment by Professor Bear
2018-02-09 21:07:21

If so, it’s not working very well…so far this year, it’s been up, up and away!

Date 30 yr
1/2/2018 2.81
1/3/2018 2.78
1/4/2018 2.79
1/5/2018 2.81
1/8/2018 2.81
1/9/2018 2.88
1/10/2018 2.88
1/11/2018 2.91
1/12/2018 2.85
1/16/2018 2.83
1/17/2018 2.84
1/18/2018 2.90
1/19/2018 2.91
1/22/2018 2.93
1/23/2018 2.90
1/24/2018 2.93
1/25/2018 2.89
1/26/2018 2.91
1/29/2018 2.94
1/30/2018 2.98
1/31/2018 2.95
2/1/2018 3.01
2/2/2018 3.08
2/5/2018 3.04
2/6/2018 3.06
2/7/2018 3.12
2/8/2018 3.14
2/9/2018 3.165

Comment by Ben Jones
2018-02-09 21:10:35

Go back to the summer of 2016.

Comment by Professor Bear
2018-02-09 21:52:58

Wow!

07/08/16 2.11

And even as late as December 2017…

2017-12-14 2.71

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Comment by Professor Bear
2018-02-09 22:11:20

Interesting facts:

1) A Thirty-year Treasury bond loses about 20% of its market value when yields increase from 2.11% to 3.165%.

2) The MSM ignores bond market crashes, but hypes stock market crashes to the max.

3) In the long run, stock and long-term Treasury prices are positively correlated.

 
Comment by Professor 🐻
2018-02-09 23:24:28

One more:

4) Unlike the vagaries of stock price determination, the price of a bond is a deterministic function of the coupon, par, term and current yield rate.

 
 
 
 
 
Comment by ja
2018-02-09 11:58:01

I was in college during the Great Recession, but I certainly remember the phrase “real estate only goes up.” Looks like history is doomed to repeat itself…..again.

Housing Sentiment Hits All-Time High

Fannie Mae has released the latest installment of its monthly Home Purchase Sentiment Index (HPSI), with the Index rising 3.7 points in January 2018 to hit an all-time survey high of 89.5. The HPSI is also up 6.8 points year-over-year.

“HPSI rebounded from last month’s dip to a new survey high in January, in large part due to the spike in consumers’ net expectations that home prices will increase over the next year,” said Doug Duncan, SVP and Chief Economist at Fannie Mae. “Results may continue to fluctuate over the coming months as consumers sort out the implications of the newly passed tax legislation on their household finances. Over the past year, continued home price growth has helped spur a sizable increase in the net share of consumers who say it’s a good time to sell a home but also a modest weakening in the net share who say it is a good time to buy. At the start of 2018, it is still too early to determine the overall effect of the new tax legislation on housing, and we will need to see whether positive impacts on both housing demand and supply materialize in the coming months.”

The Home Purchase Sentiment Index (HPSI) culls data from Fannie Mae’s National Housing Survey (NHS), compiling a single score that “reflects consumers’ current views and forward-looking expectations of housing market conditions.” The survey questions ask consumers “whether they think that it is a good or bad time to buy or to sell a house, what direction they expect home prices and mortgage interest rates to move, how concerned they are about losing their jobs, and whether their incomes are higher than they were a year earlier.”

Breaking the HPSI results down further, the net share of Americans who said it was a good time to purchase a house rose to 27 percent, a 3 percent increase that overcome a dropoff in sentiment from the month prior. The net share of respondents who said they believed it was a good time to sell their home also rose, up 4 percent to 38 percent.

Looking further down the road, the net share of respondents who believe that home prices will rise jumped up 8 percentage points to 52 percent in January, hitting a new survey high. The net percentage who said mortgage rates will decrease within the next 12 months rose 2 percentage points, but that still left it at -50 percent.

As far as general economic concerns, fewer Americans expressed concerns about losing their jobs—the net share who said they were not concerned about the prospect rose by 5 percentage points to 73 percent. Finally, the net share of respondents who said their household income had significantly increased over the past 12 months remained flat at 16 percent month-over-month.

 
Comment by Apartment 401
2018-02-09 12:38:54

Salon wets the bed on no more free sh*t for immigrant FSA:

https://www.salon.com/2018/02/09/trump-wants-to-deport-immigrants-who-use-public-benefits/

Comment by palmetto
2018-02-09 13:08:52

How about no more free sh*t for the media? You KNOW the MSM is heavily government subsidized. “Advertiser supported”? BWAHAHAHA!
My patootie. It’s advertiser supported, all right. Except the “advertisers” are gobmint entities. Look how Newsweak just went down for overcharging a gobmint advertiser based on phony numbers. Even Salon gets a taste. Probably from NGOs, which get their money from GOs anyway.

Those fricken sorry excuses for journalists get their pay from dark money that the CIA and other “intel” agencies make off their crappy shakedown and drug operations.

Crikes. I’d almost rather have the Mafia in charge than the FBI and DOJ.

Comment by Karen
2018-02-09 14:02:38

How about all the domestic charities who receive govt money - I think half of Catholic Charities’ funding is from the federal government.

And all the social media and “tech” companies who receive funding through the investment arm of the US intelligence apparatus.

 
 
 
Comment by palmetto
2018-02-09 13:12:49

Mnuchin’s in the basement trying to fat-finger everything into the green. Go, Stevie!

I really think Powell wants to let some air out, so Stevie should relax and not try to prolong the agony.

Comment by Big V
2018-02-09 13:52:26

Do you remember what the National Health Service said to do if you see a suspected Fat Finger victim?

Comment by palmetto
2018-02-09 15:17:17

I see fat fingers. If you see something, say something.

Comment by Big V
2018-02-09 15:55:49

“Run, Hide, Tell!”

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Comment by Professor 🐻
2018-02-09 18:37:48

How can you tell what is driving stock prices?

Comment by Professor 🐻
2018-02-10 06:33:28

9 February 2018
Is the Stock Market Rigged?
By Dr. Paul Craig Roberts and Dave Kranzler

On February 6, I (PCR) asked if the Plunge Protection Team had stepped in and prevented a stock market correction by purchasing equity index futures. Sure enough, the daily exchange volume chart shows an increase in futures activity on February 2 with sharp increases on Feb. 5th and 6th. Those are the days when the stock market averages were experiencing large point drops. So, ask yourself, would you purchase equity futures while experiencing cumulative stock market drops? One can understand shorting a dropping market, but not buying futures.

Unless this is what happened. Seeing the beginning of a correction, the Plunge Protection Team placed a futures bid just below the existing price. Traders saw the bid, recognized that the government was intervening to support the market, and the bid was front-run with the hedge fund algorithms automatically picking up the action.

Who but the Federal Reserve with its unlimited ability to create money would take the risk of buying futures in the face of a falling market. Moreover, such an infusion of money into the market does not show up in the money supply figures.

 
 
Comment by Professor 🐻
2018-02-09 18:54:46

Prolonged agony also provides an extended opportunity for special people to offload on the newly-employed proles.

 
Comment by Professor Bear
2018-02-09 21:15:57

The fundamental business of the country, that is, production and distribution of commodities, is on a sound and prosperous basis.

– President Herbert Hoover on Oct. 25, 1929

 
 
Comment by Senior Housing Analyst
2018-02-09 15:23:02

Carmel Valley, CA Housing Prices Crater 13% YOY

https://www.movoto.com/carmel-valley-ca/market-trends/

 
Comment by azdude
2018-02-09 15:48:59

I was one of the XIV victims.

Comment by BlueSkye
2018-02-09 18:32:27

Nah, you’re a victim of your own debt debauchery. At least you had some cases of cheap wine.

 
Comment by Professor 🐻
2018-02-09 18:39:07

You’re pulling our legs, right?

 
 
Comment by azdude
2018-02-09 16:42:40

the FEd needs a new script.

 
Comment by jeff
2018-02-09 18:39:39

I was talking to a guy today who had a, well for the sake of the blog we will call her a Youngish Lady move out on him after a year or so and leave him with some pretty substantial financial damage.

On the way home I was thinking to myself, where have you heard that story before?

Then I remembered…

https://www.youtube.com/watch?v=ujTTjt5VkZM

Comment by Professor 🐻
 
Comment by azdude
2018-02-10 06:50:13

what are you going to crow about today?

 
 
Comment by Professor Bear
2018-02-09 20:38:22

It turns out the U.S. stock market is presently in one of its most overvalued positions in history.

Where should one invest at such points?

02.09.2018
United States
About That Stock Panic
By Doug Henwood

The stock market’s panicked reaction to signs of wage growth shows just how weak the economy is — and how much it caters to the wealthy.

Stock markets, after stabilizing momentarily, returned yesterday to what the press likes to call “turmoil.” What does it all mean?

Comment by azdude
2018-02-10 07:18:54

“If you’re buying bonds now, learn two phrases… “hold to maturity” and “capital loss”

The FED will let their bonds mature and then the treasury has to give them the principal back. They will have to sell bonds to someone else to raise capital to pay for that.

In the meantime its a matter of managing the portfolio so they dont suffer any capital losses. That means low interest rates until their bonds mature.

Comment by Prime_Is_Contained
2018-02-10 11:27:53

That means low interest rates until their bonds mature.

There is no capital loss just because interest rates go up; that loss only occurs if the SELL bonds, which they have already indicated that they will not do.

Comment by Professor 🐻
2018-02-10 13:02:31

Right. How can you lose money on bonds if you created the money used to purchase them from thin air, only to bury them on your balance sheet forever?

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Comment by Professor 🐻
2018-02-10 06:39:40

La plunge protection team débarque en force à Wall Street mais se prend un « contre » de -2% en une demi-heure
Rédigé le 6 février 2018 par Philippe Béchade
| Toutes les analyses

Voilà, cela n’a pris qu’une minute. Juste le temps pour le Dow Jones de perdre -567 points à 23 778. La PPT ou plunge protection team a été envoyée à la rescousse en mode no limit pour racheter massivement le marché et écraser la volatilité. Le tout pour le compte – et avec l’argent – de la Fed et sur injonction de Wall Street.

L’effet est spectaculaire puisque le VIX se retrouve divisé par 2 (de 50,3 à 25). Le Dow Jones reprend +2% (à 24 712 points), soit +1 000 points sur ses plus-bas du jour. Mais il reperdait 500 points dans le quart d’heure suivant. Voilà un « contre » brutal qui trahit la détermination des opérateurs contraints de réduire leur exposition sur les actions.

 
Comment by Professor 🐻
2018-02-10 06:46:48

Is there a way to know if the Fed is pumping in 💰 to prop up stock prices?

Comment by Professor 🐻
2018-02-10 06:51:23

The Finance 202:
Powell’s problem: Will new Fed chair try to save stock market?
By Tory Newmyer
February 9, 2018
THE TICKER
President Trump and Federal Reserve Chairman Jerome Powell. (Andrew Harrer/Bloomberg)

Other than that, Mr. Powell, how was your first week?

The stock market officially slipped into correction territory on the new Fed chairman’s fourth day on the job, with the Dow Jones industrial average plunging 1,032.89 points or 4.1 percent Thursday and the S&P 500 losing 100.66 points to close down 3.8 percent. Investors have taken equities on a roller-coaster ride since a jobs report Friday showed wage growth accelerating at its fastest since 2009 — and the Dow has now given back all its gains since Nov. 28.

The slide presents a stiff challenge to Jay Powell just as he seeks to get his feet under him in the role of the world’s most powerful economist. He was elevated by a president who is fixated on a roaring stock market as a reflection of his prowess. Now Powell needs to prove he’s his own man — carefully. He can’t be seen knuckling under the whims of the White House, or Wall Street, by easing up on the central bank’s plan for raising interest rates. Yet he has to make sure he does so without adding extra drama to a newly roiled market.

A key question for investors this week as stocks have tumbled has centered on whether Powell would ride to their rescue if prices keep collapsing.

The maneuver even has a name, the Fed put, pioneered by then-Fed chair Alan Greenspan in the jaws of the 1987 financial crisis. And some market watchers appear to be taking it for granted that Powell will string up a net beneath falling stocks if conditions get much uglier. Or as Marko Kolanovic, J.P. Morgan’s global head of derivatives and quantitative strategies, put it to CNBC, the new Fed chair, “vetted by the current administration that uses the stock market as a scorecard, is highly unlikely to do anything to derail markets and the economic cycle.”

Comment by azdude
2018-02-10 07:09:06

this is a grizzly bear market!

 
Comment by rms
2018-02-10 10:13:17

“In the fictional universe of Star Trek, the Prime Directive is a guiding principle of the United Federation of Planets prohibiting the protagonists from interfering with the internal development of alien civilizations.”

Do we need something similar to protect free markets?

 
 
Comment by Professor 🐻
2018-02-10 07:00:55

Here is a useful tidbit for all you market timers out there:

…the market has demonstrated a historical tendency to test new Fed chairs. “The Dow tends to slide more than 15 percent on average within the first six months of new Fed leadership,” LPL Financial senior market strategist Ryan Detrick writes. This chart (and older version of which I included in Tuesday’s note) lays out the record:

I’m henceforth on hibernation from the stock market. Kindly wake me up in six months.

Comment by azdude
2018-02-10 07:07:45

where is trumps lifeline? Did he piss somebody off?

REal estate is one of the rare assets you can actually use as it goes up in value.

With stocks you just hope someone will pay more for them than you did.

Comment by Professor 🐻
2018-02-10 07:38:23

There’s little difference between stocks and Bitcoin regarding their investment properties.

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Comment by tj
2018-02-10 08:01:55

There’s little difference between stocks and Bitcoin regarding their investment properties.

stocks can pay dividends.

 
Comment by tj
2018-02-10 08:12:23

There’s little difference between stocks and Bitcoin regarding their investment properties.

also, bitcoin can only grow in price, not in value. stocks are able to grow in value.

 
Comment by Professor 🐻
2018-02-10 08:19:01

Why should an investor solely interested in making bubble gains care about esoteric distinctions between “price” and “value”? If the price goes up, sell. If it goes down, HODL.

 
Comment by tj
2018-02-10 08:25:13

Why should an investor solely interested in making bubble gains care about esoteric distinctions between “price” and “value”?

because the esoteric will eventually become known to the majority and the stock price will reflect that growing knowledge.

 
Comment by Professor 🐻
2018-02-10 09:49:06

Unless stock market investors are a bunch of dummies, they will anticipate growth in the company, dividends, etc. in the price they are willing to pay, making that esoteric knowledge of value useless to any individual investor. You might as well gamble on cryptocurrency.

 
Comment by tj
2018-02-10 10:44:37

Unless stock market investors are a bunch of dummies

the majority of them are. but the original question was about whether there was much distinction between stocks and bitcoin. i pointed out dividends and value. but this is starting to go down the rabbit hole, so i’m done with it.

 
Comment by Professor 🐻
2018-02-10 10:58:43

One further point:

The fundamentals which should in principle determine a stock’s value may have limited effect in a market floating on a sea of easy money and buoyed by ultralow interest rates.

The consequence is stock market behavior more like Bitcoin’s, with the prices of both heavily influenced by the buffeting forces of monetary policy intervention…

 
Comment by Professor 🐻
2018-02-10 11:00:39

Well good on you for getting in the last word to bolster your esoteric distinction without a difference.

 
Comment by OneAgainstMany
2018-02-10 12:13:42

Bitcoin and stocks may seem similar in an era of liquidity, but it should be obvious that they are fundamentally different. Stocks are shares of ownership in companies that have real assets, real profits, and can, as pointed out, pay real dividends. They can produce growth through innovation and incremental increases in productivity. Bitcoin is a speculative asset which is unproven as either a store of wealth (too volatile), a method of payment (too energy intensive and costly), and lacking in privacy (the blockchain keeps records of every transaction indefinitely).

 
Comment by Professor Bear
2018-02-10 12:38:07

Thanks, OneAgainst, for providing a coherent explanation of the difference between stocks and Bitcoin where tj’s fell short.

Maybe his rage prevents him from communicating clearly?

 
Comment by tj
2018-02-10 13:35:34

Thanks, OneAgainst, for providing a coherent explanation of the difference between stocks and Bitcoin where tj’s fell short.

thanks for finally admitting you didn’t know the difference between bitcoins and stocks. seems like oam knew the difference right away. and he said essentially the same thing i did except he explained it in a more complete way so you could connect the dots.

says a lot that you didn’t know the difference between bitcoin and stocks.

 
Comment by OneAgainstMany
2018-02-10 14:21:36

Thanks Professor. I appreciate your insight, and I also appreciate tj’s too. With regards to BitCoin and stocks, I have held stocks in my retirement portfolio at times, although I would be unable to muster the courage (idiocy?) to buy at current levels. With regards to BitCoin, there is no price at which I would imagine putting it in my portfolio, at least not in its current form.

My best guess is that a major stock market crash could lead to 50% losses for someone who bought at top and sold at bottom. But I think that same sort of correction wipes out BitCoin completely. In that sense, I agree with Goldman Sach’s head of investment research: Prepare for most cryptocurrencies to go to zero.

 
Comment by Professor 🐻
2018-02-10 15:04:49

“this is starting to go down the rabbit hole, so i’m done with it.”

Indeed.

 
Comment by tj
2018-02-10 15:16:22

Indeed.

Comment by tj
2018-02-10 10:44:37
Unless stock market investors are a bunch of dummies

the majority of them are. but the original question was about whether there was much distinction between stocks and bitcoin. i pointed out dividends and value. but this is starting to go down the rabbit hole, so i’m done with it.

Comment by Professor 🐻
2018-02-10 10:58:43
One further point:

The fundamentals which should in principle determine a stock’s value may have limited effect in a market floating on a sea of easy money and buoyed by ultralow interest rates.

The consequence is stock market behavior more like Bitcoin’s, with the prices of both heavily influenced by the buffeting forces of monetary policy intervention…

Comment by Professor 🐻
2018-02-10 11:00:39
Well good on you for getting in the last word

——-

notice the time line hypcrite. you accused me putting in the last word while at the time were comically putting in the real last word. i didn’t get involved again until oam posted and you smugly thanked him for explaining what i had already told you.

people of your mindset always accuse others of what you, yourself are doing. and you never see the hypocrisy, hypocrite.

 
Comment by Professor 🐻
2018-02-10 18:20:17

Who unlocked the door to tj’s rage cage?

 
 
 
 
 
Comment by Senior Housing Analyst
2018-02-10 07:15:55

Miami, FL 33125 Housing Prices Crater 7% YOY As Housing Correction Emerges In Major Cities

https://www.zillow.com/miami-fl-33125/home-values/

*Select price from dropdown menu on first chart

 
Comment by Professor 🐻
2018-02-10 07:17:58

How long will it take for spillover from recent bond, and current stock, market turmoil to show up in residential real estate sales and price statistics?

Comment by Professor 🐻
2018-02-10 07:21:27

The Daily Prophet:
Want Real Concern? Check Out the Bond Market
Connecting the dots in global markets.
By Robert Burgess
February 6, 2018, 1:30 PM PST
Reacting very well.
Photographer: Saul Loeb/AFP/Getty Images

After a one-day reprieve, investors are back to hating bonds. U.S. Treasuries of all maturities fell Tuesday, pushing yields higher, as few saw the need to keep buying the ultimate haven asset as equities regained their footing after Monday’s nasty slide. But that just brings up a new set of worries for markets.

At around 2.79 percent, the yield on the benchmark 10-year Treasury has risen steadily from last year’s low of 2.04 percent in early September. That means the cost to borrow is going up for the government, companies and consumers. It’s especially concerning for the government, which is forecast to at least double its debt sales this year to more than $1 trillion, which would be the most since 2010, to make up for the lost revenue from the tax cuts. Oh — and the Federal Reserve is pulling back from its bond purchases. And inflation is picking up. This week is a critical test of demand, with the Treasury selling $66 billion in three-, 10- and 30-year securities. The auctions started Tuesday with the sale of $26 billion of three-year notes, an increase from the $24 billion that the Treasury has sought for that maturity in monthly auctions going back to the start of 2015. It didn’t go so well, as yields reached their highs of the day after strategists characterized the results as “soft.”

Comment by azdude
2018-02-10 07:31:54

I highly suggest u study the structure of the FEDs treasuries on the balance sheet.

By structure I mean maturity lengths? How many more years will it take till those treasuries mature? Is it 5 years, 10 years? That is how long interest rates need to remain low for them not to lose money.

And then they might have to add to the balance sheet with more QE.

If stocks plunge then people will rush to bonds pushing down yields.

Comment by Professor 🐻
2018-02-10 07:50:33

What does it mean for the monopoly owner of the fiat money printing press to “lose money”? In some sense, isn’t that balance sheet just for show? Where is its real impact??

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Comment by azdude
2018-02-10 07:58:25

well to make it look legal the losses have to be accounted for somewhere. Or just throw in the towel and print whatever u need to prop up asset prices and keep no record of it.

 
Comment by Professor 🐻
2018-02-10 08:24:22

At least one of the articles I posted this morning suggests that monies used to prop up the stock market are “off balance sheet.” I frankly have no idea how an outsider to the Fed could empirically test this.

 
 
 
 
Comment by Professor 🐻
2018-02-10 07:32:55

The Financial Times
The Big Read
Market Volatility
The end of an era for market tranquility
Wall Street suffered its worst week in years as investors grasped that the era of cheap money is set to disappear
Nicole Bullock, Eric Platt and Alexandra Scaggs yesterday

For more than a decade, Mike Schmanske made a living trading “volatility” — betting on the size and speed of moves in the US stock market. After 2014, the market was calm for so long that he spent much of his time sailing a Swan yacht. He got his adrenalin flowing in a different way: on his first trip from Bermuda to Newport, Rhode Island, he raced a hurricane back to port and made it with 12 hours to spare.

Now, a new bout of turbulence is pulling him back to Wall Street. A sharp outbreak of volatility has written more than $5tn off the value of global stocks in less than two weeks and Mr Schmanske is talking to his old trading buddies about getting back into the market.

“This is the most calls I’ve taken in years,” says Mr Schmanske*, a pioneer of some of the first volatility trading products while at Barclays and now a consultant. “Things were slow. I was literally on a boat a few weeks back.”

The catalyst for the volatility surge came at 8:30am last Friday when the US government employment report showed a surprisingly strong rise in wages, prompting bond yields to shoot upwards and the price of those bonds to fall. Within hours, the losses in the $14tn Treasury market had spread to stocks, setting the stage for Wall Street’s worst week in two years.** By Thursday, US equities had entered what is known as a correction — a fall of at least 10 per cent. Many investors who had piled into esoteric instruments that enable them to bet on continued calm in the market had been wiped out.

Comment by Professor 🐻
2018-02-10 08:04:37

The article is long but worth the time to read it if you have access.

Here’s a surprise for those who believed computer algorithms rule today’s markets. Who knew computers had Ameritrade accounts and suffered FUD?

From the FT:


Monday morning in the US added a new source of uncertainty with the swearing in of Jay Powell as the chairman of the Federal Reserve, bringing a relatively little-known face to lead the central bank. For much of the day, Wall Street avoided serious losses. Then, a big drop seemed to come out of nowhere. About an hour before the closing bell, the Dow slumped more than 800 points in 10 minutes.

“The adrenalin kicks in,” says Mr Cheslock. “Everyone gets sharper. The complacency is long gone.”

Customers rushed to log into their accounts at Vanguard, TD Ameritrade, T Rowe Price and Charles Schwab, straining websites. Some were unable to place orders.

“As the volatility picks up and the indices plummet the rumours start to swell,” says Michael Arone, chief investment strategist at State Street Global Advisors. “Folks are wondering the classic Warren Buffett line about when the tide goes out, you see who is not wearing swimming trunks.”

 
 
 
Comment by azdude
2018-02-10 07:39:00

We are in this Goldilocks period right now. Inflation isn’t a problem. Growth is good, everything is pretty good with a big jolt of stimulation coming from changes in tax laws. If you’re holding cash, you’re going to feel pretty stupid.” ray dalio

Comment by Professor 🐻
2018-02-10 08:13:28

Even mild bear markets can be dangerous to your financial health.

Markets
Bill Gross fares worst among go-anywhere bond managers in rout
It’s unclear why Bill Gross’ Janus Henderson Global Unconstrained Bond Fund posted such a steep loss Monday.
By Bloomberg · February 7, 2018 2:04 pm · Updated 2:15 pm

Bill Gross was having a good 2018, until he wasn’t.

Mr. Gross’ $2.2 billion Janus Henderson Global Unconstrained Bond Fund fell 0.83% as markets plunged Monday — its biggest drop since Dec. 30, 2016, and the worst one-day performance in Morningstar’s non-traditional bond category among 64 funds with at least $20 million in assets. The swing reversed the fund’s year-to-date total return to a loss of 0.4% from a gain of 0.4%.

His one-day loss pales against the 4.6% — and record 1,175-point — nosedive for the Dow Jones industrial average. Mr. Gross’ fund regained about 0.1% on Tuesday while the Dow rallied.

Still, Monday’s drop was a blow to Mr. Gross, who last month pronounced the onset of a mild bond bear market and has touted his positive returns compared with more traditional fixed-income portfolios.

It’s unclear why Mr. Gross’ fund posted such a steep loss on Monday. The legendary money manager didn’t reply to emails requesting comment. A Janus Henderson spokesman didn’t immediately provide a comment.

 
 
Comment by Mafia Blocks
2018-02-10 07:53:03

Neptune Beach, FL Housing Prices Crater 12% YOY As National Housing Glut Expands

https://www.movoto.com/neptune-beach-fl/market-trends/

Comment by Professor 🐻
2018-02-10 08:27:50

“…As National Housing Glut Expands”

I can’t wait for MSM reporting on this development. It’s going to be a crow banquet for some of the HBB regulars.

Comment by Mafia Blocks
2018-02-10 08:43:19

The guy running the banquet hall says he’s never been busier.

 
 
 
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