Prices Have Little To Do With Supply And Demand
A weekend topic starting with the Post Bulletin. “Long-term U.S. mortgage rates climbed for the fifth straight week amid investors’ growing concern about inflation. Mortgage giant Freddie Mac said Thursday the average rate on 30-year, fixed-rate mortgages shot up to 4.32 percent this week, up from 4.22 percent last week and the highest since December 2016. A year ago, it stood at 4.17 percent. The rate on 15-year, fixed-rate loans, popular among homeowners who refinance, rose to 3.77 percent from 3.68 percent last week and the highest since May 2011. It was 3.39 percent a year ago. The rate on five-year adjustable rate mortgages rose to 3.57 percent this week from 3.53 percent last week and the highest since April 2011. It was 3.21 percent a year ago.”
‘Will higher rates break housing-market momentum? It’s too early to tell for sure,’ said Len Kiefer, a Freddie Mac economist. He noted that applications to buy homes are still up 8 percent from a year ago.”
From Lew Sichelman. “It’s the age-old chicken-or-egg story of the housing market: Should you buy that home now, while interest rates are still fairly low? Or wait for rising prices to moderate? Of course, there are many factors that will go into your decision. But here’s one you probably haven’t considered, and it has real ‘buy now’ implications: Mortgage payments zoomed last year and are likely to rise even higher this year, continuing a trend that has persisted for the past six years.”
“CoreLogic has been tracking mortgage payments for the past generation, says that while home prices may be up 6 percent through August of last year, the average mortgage payment went up 10.1 percent during the corresponding period. And for 2018, the typical home loan payment is likely to rise by more than 11 percent. That’s a good bit more than most of us have been seeing in yearly raises, if we get them at all.”
“CoreLogic’s ‘typical mortgage payment’ (TMP) is a mortgage rate-adjusted monthly payment based on each month’s median home sale price in the United States. Of the four components of a mortgage payment — often compartmentalized as PITI, for principal, interest, taxes and insurance — the TMP measures only the principal and interest payments. It assumes a 20 percent down payment, the amount necessary to avoid having to pay for private mortgage insurance (PMI), and a 30-year, fixed-rate loan. Of course, many homebuyers put less than 20 percent down and must purchase PMI, which can add several hundred dollars more to their monthly house payment.”
“The typical mortgage payment was higher than today’s TMP before the Great Recession, which stands to reason, as home prices climbed to unsustainable highs before the markets crashed in 2008. Back in June 2006, before things started to go south, the typical monthly payment was $1,250. That fell to a low of $546 in February 2012, and has risen steadily since then to $816 as of August of last year. That comes to about a 50 percent increase over five years, or about 10 percent a year.”
“Of course, in 2006, the average mortgage rate was a lot higher: 6.7 percent, compared to 3.9 percent last August.”
From Realty Biz News. “Thanks to changes in mortgage rules, realtors in the GTA have to be more creative when it comes to making a sale.Numbers show that home sales in the area have fallen 22 per cent over the last year. Industry experts have been pointing the finger at high interest rates and the new, tighter mortgage rules that came into effect on January 1st this year.”
“‘It’s still a buyers’ market in the GTA,’ notes Larry Weltman of AccessEasyFunds, a real estate commission advance company based in Ontario. ‘Let’s look at a GTA home that a year ago was selling for $1.4million, for example. Today that will likely go for $1.05 million. Let’s assume a buyer is putting 25% down, so they will carry a mortgage now of $787,500. Most of these secondary mortgages are for a one year term or less. So, at 8% per year, the buyer is paying in one year 4% extra on the mortgage or $31,496. This in turn means that effectively the property cost is an extra $31,496.’ Weltman adds, ‘This is not significant given that the buyer could close in a buyer’s market that is heavily discounted. They can then look in a year’s time to refinance with a traditional bank mortgage, and will hopefully be in a much better situation with more time to process.’”
“On the other hand, he stresses that realtors should not put a buyer client into a high interest secondary mortgage who cannot afford to carry this mortgage and has no chance of refinancing within the one year.”
From Vitaliy Katsenelson. “The Federal Reserve’s changing of the guard — the end of the Janet Yellen’s tenure and the beginning of the Jerome Powell era — has me remembering what it was like to grow up in the former Soviet Union. In the command-and-control economy of the Soviet Union, the prices of goods often had little to do with supply and demand but were instead typically used as a political tool. This in part is why the Soviet economy failed — to make good decisions you need good data, and if price carries no data, it is hard to make good business decisions.”
“Over the past decade the global economy has started to resemble one, as well-meaning economists running central banks have been setting the price for the most important commodity in the world: money. Interest rates are the price of money, and the daily decisions of billions of people and their corporations and governments should determine them. Like the price of sugar in Soviet Russia, interest rates today have little to do with supply and demand (and thus have zero signaling value).”
“The consequences of well-meaning (but not all-knowing) economists setting the cost of money are widespread, from the inflation of asset prices to encouraging companies to spend on projects they shouldn’t. But we really don’t know the second-, third-, and fourth derivatives of the consequences that command-control interest rates will bring. We know that most likely every market participant was forced to take on more risk in recent years, but we don’t know how much more because we don’t know the price of money.”
“Quantitative easing: these two seemingly harmless words have mutated the DNA of the global economy.”
“Americans have a healthy distrust of their politicians. Unfortunately, we don’t share the same distrust for economists and central bankers. It’s hard to say exactly why. Maybe we are in awe of their Ph.D.s. Or maybe it’s because they sound really smart and at the same time make us feel dumber than a toaster when they use big terms like ‘aggregate demand.’ For whatever reason, we think they possess foresight and the powers of Marvel superheroes.”
“Just as the well-meaning economists of the Soviet Union didn’t know the correct price of sugar, nor do the good-intentioned economists of our global central banks know where interest rates should be. Even more important, they can’t predict the consequences of their actions.”
‘Let’s look at a GTA home that a year ago was selling for $1.4million, for example. Today that will likely go for $1.05 million.’
Easy come, easy go, eh Larry?
That’s -25%.
On my percentage decline list, most declines in that range so far are either ultra-lux (like London/Manhattan $5mil+), new development (San Diego SFR for example) or oil patch. But his example is none of those.
“new development (San Diego SFR for example)”
How do you measure price declines on something that was ridiculously overpriced when it first came on the market? Is it a matter of figuring out how much those who bought at the initial price lose when later buyers get the discounted price?
For my list I don’t do any calculations, I just take the decline as reported and note the context as much as possible. Individually there might be wild outliers from a wishing price reduction (especially from single sales, which I delineate) but hopefully it evens out to a somewhat accurate whole.
Anyway, the fact that a wish price has been reduced may be of interest on its own, showing a shift in attitude/hope. Especially in new development, maybe some people actually paid the crazy wish price last year and have indeed lost bigly by a recent reduction (like that Toronto/Whitby story last week). And the developer’s business model may have relied on that wish price to pencil out.
So it can be relevant. And who’s to say what is an unreasonable wish price in the midst of a bubble? All it takes is one buyer to turn a wish price into a real comp.
+1
was anyone else surprised the dollar actually went up and oil down during this wall street hissy fit?
It seems like powell was tested on his first day of the job.
The dollar is perceived as a safe investment when things get rocky (like war or massive sell-offs of global stock markets).
Oil went down because US frackers are booming at $60 oil. The USA is even EXPORTING oil to the middle east now.
What about cryptocurrency?
We are still a net importer of oil … but that could change
Where is AlbuquerqueDan when you need a rig count update?
US Crude Oil Production Hit a New Record
By Gordon Kristopher Feb 8, 2018 | 5:31 AM
Weekly US crude oil production
The EIA estimates that US crude oil production increased by 332,000 bpd (barrels per day) to a record high of 10,251,000 bpd on January 26–February 2, 2018. Production increased by 1,273,000 bpd or 14.2% year-over-year.
…
Vitaliy Katsenelson said:
>>The consequences of well-meaning (but not all-knowing) economists setting the cost of money are widespread, from the inflation of asset prices to encouraging companies to spend on projects they shouldn’t.
I don’t believe for a second that the FRB FOMC voting members do not know the consequences of their actions. They know what will happen. But they are highly skilled in coaching their decisions in terms of concerns about unemployment and inflation, while in reality the only thing they care about is banker profits and wealth transfer. Having those skills is how you get a job with the FRB. And the FRB board members are NOT typically “PhD economists”. They are Wall St insiders. Exception applies when FRB needs technocratic cover for their misdeeds.
‘Unfortunately, we don’t share the same distrust for economists and central bankers. It’s hard to say exactly why.’
How about a fawning globalist media, who work in “elite” as many times as they can? My favorite example along these lines is the Chinese dictator. When have you ever seen a media photo of him where his hair isn’t perfectly combed? When his suit and shoes aren’t impeccably shiny and new? Do you think that’s a coincidence? It’s the same for anyone the media wants to hold up to be worshiped. Remember how they used to call Mr Magoo “Maestro”? He’s a bumbling idiot.
IMO calling Greenspan Maestro served two purposes:
Purpose Number One: Greenspan (as with many high achievers) NEEDS recognition, LIVES for recognition, recognition is what drives him, has always driven him. Remove recognition from his life and you will be left with an empty shell of a person; This is the reason the world will never stop hearing from him, retired or not. This need of his for recognition allows him to be easily handled by the PTB, hence he is placed to head the Fed.
Purpose Number Two: The general public NEEDS a Maestro at the head of the Fed, NEEDS to think that a Maestro is pulling the strings and that everyone is safe because of that. So - presto! - a Maestro is anointed and the public remains happy and secure.
Plato warns of the people’s protector who, once having tasted blood, turns into a wolf and a tyrant (340s BC).
Remember when those guys used to look like the “crazy fat kid” in NoKo?
It’s the same for anyone the media wants to hold up to be worshiped.
It’s the same thing in any other standard “cult”. The elite of the elite is idolized this way. Dissension is ignored or condemned. Outsiders are ridiculed. Central tenets of the cult are NEVER a laughing matter. What laughter there is, is directed towards those not backing the cult’s agenda, and is always hostile / sarcastic, never really funny.
“Of course, in 2006, the average mortgage rate was a lot higher: 6.7 percent, compared to 3.9 percent last August.”
That was way back when nobody saw Quantitative Easing coming.
home prices climbed to unsustainable highs before the markets crashed in 2008…
Yet Lew advises buying at today’s unsustainable price, because How Much a Month.
Buy after the unsustainable price crashes. If you’ve got a 20% downpayment now, you’ll have a 50% downpayment then or better.
Of course, you’ll need a job. Anyone remember people getting 2 years of unemployment after the previous crash? And that they applied for SSDI when that ran out?
Being that this crash will probably be worse than the previous one, hang onto your cash. This is going to be the Really Great Recession.
peter schiff has been getting pounded so much lately on his stand on trade deficits, that he’s starting to slightly back peddle. he doesn’t yet understand that he just opened the door to more criticism of his stance, and it can’t be closed again.
now for the first time ever, he’s saying that back in the 1950s trade deficits were a good thing. but now according to his new convoluted logic, they’re a bad thing. it would take too long to explain his reasoning here, so you’ll have to listen to the podcast if you want to hear his explanation.
given what he claimed, i’d have one question for peter.. ‘if trade deficits were ‘good’ back then.. were trade surplusses likewise bad?’ because according to him, trade surplusses make us richer. that must always be good, right?
https://www.youtube.com/watch?v=uJ87Yj2s5B4&t=1s
The Trade Deficit by itself does not tell the whole balance sheet story. It doesn’t inform who is making the profits and where that money lands.
In my personal example of trade deficit last year, I imported $10 worth of art to Canada (cost to make) and sold it for $100. I brought the $100 home to the USA. The $10 is in the trade deficit line but the $100 was more important.
The $10 is in the trade deficit line but the $100 was more important.
correct on both counts. $10 was/is the line and $100 is more important. but still, the 10 dollars is what should be counted. you added value by working to sell it. you added your labor, even if it was only reselling. at the point of actual trade, it is even. value for value. it can even be argued that there would be ’surplus’ in terms of value on both sides if no one interfered with the trade.
“I imported $10 worth of art to Canada (cost to make) and sold it for $100. I brought the $100 home to the USA.”
My head hurts. How can you be in both Canada and the US at the same time? Do you mean you “exported” to Canada?
Sorry! I live on the border. I took it over with me and sold it while I was helping my GF run her table at a craft fair. The Canadian Customs agent sure considered it an import.
Instead of thinking of a simple dichotomy of good vs bad regarding trade deficits/surpluses, I tend to think of it in terms of cui bono? The mercantilism view that wealth is created by creating surpluses and eschewing deficits is certainly outdated. In order to analyze the societal benefit of deficits or surpluses, you have to look at a more granular level. There are winners and losers everywhere. If the Chinese government wants to effectively suppress the value of its currency in order make their exports more competitive (and thus increase exports), I view this as essentially the micro theft of the labor of its citizens. The benefit of production is being transferred from it’s citizens to the state at some level. Of course, there is probably an argument that the state intervention has helped China move up the value chain quicker so that instead of manufacturing cheap junk for sale at Walmart, they are now moving towards higher value-add goods (Haier as an example for household appliances and all-electric vehicles for autos).
Right now we have a schizophrenic view of deficits coming from the DJT administration. Mnuchin is talking out both sides of his mouth by wanting a weaker dollar (no, a stronger one) because they only way to increase exports is push down the dollar. This will of course increase the costs of imports for US consumers to some degree.
To sum it up, are deficits good or bad? What is happening to wages across the entire populace. To what end is the money being funneled to (investment or consumption)? The answer depends on lots of other factors. No easy answer to be had here.
Mnuchin is talking out both sides of his mouth by wanting a weaker dollar (no, a stronger one) because they only way to increase exports is push down the dollar.
or if the dollar had more value, the producers could simply lower their prices. the materials they make products from would also be cheaper to buy with a stronger dollar. this intervening in the economy does nothing but cause painful distortions.
“The consequences of well-meaning (but not all-knowing) economists
–) Bullsh!t. Well meaning? Only to their 1%er friends and those close to the money spigot.
“But we really don’t know the second-, third-, and fourth derivatives of the consequences that command-control interest rates will bring.
–) Of course we do. Asset prices skyrocket. Those close to the spigot reap huge profits. The average joe on Main Street gets crushed.
‘well-meaning’
Have you ever heard someone that was characterized as “elite” disavow the term? “Elitist” used to be derogatory. Now these sleaze-bags wallow in it.
They like the term “elite” because it flatters them. Most are really just mid-level bureaucrats elevated far above their skill level and intelligence by the permanent regulatory state.
It seems as though elite has once again taken on a pejorative connotation. I think this coincides with the wave of populist politicians riding popularity across western democracies.
Nevertheless, I am hopeful that my basketball team would make “the elite eight” in this year’s tourney.
Certainly some scrutiny and skepticism is warranted in any endeavor. But I worry that the pendulum has started to swing too far in the other direction (see Dunning-Kruger effect).
Same word, different meaning. An elite sports class is an earned achievement, and laudable. In the globalist political order, elite indicates a group of self-appointed, unaccountable, often meritless technocrats who have seized unchecked power from the electorate, whom they look down on as an underclass.
I think “technocrat” is far more accurate a term than either “elite” or “establishment.” But everyone uses elite, so…
But everyone uses elite…
however “oligarch” works for me.
I prefer gov sleazebags. It’s far more accurate.
I agree Lurker. I think the real heart of the matter is whether the technocrats/elites/professionals/globalists are in deed experts and have risen to the top via some meritocratic order, or whether they are simply frauds that are veiling their ignorance in the trappings of competence.
My view is that there are elites in all spheres of human endeavor (entertainment, sports, academia, business, government, etc.) that are indeed the real deal. The problem is that elites are not infallible, so expectations matter quite a big deal. This is important in matters of economics and policy which deal with probabilities and uncertainties. It is inevitable that experts and elites will be wrong. The challenge becomes not to throw the baby out with the bathwater. I think a healthy dose of skepticism is warranted. While blessing anything that comes from the elites is fool-hearty, so too though would be the opposite approach of of labeling all elites as cons as reflexively wrong in all cases. Neither extreme seems an ideal one.
There is a telling scene in the movie, “Enemy at the Gates.” The now popular Russian sniper, Vasily Zaytsev, is invited to the rear to attend a party where the “elites” are enjoying caviar and drink while the lower-class conscripts are being ground-up like hamburger helper by the Germans.
“… the real deal”
True. The consensus around here seems to be that the defining characteristic of “bad elite”/establishment/gov’t sleazebag (lol) is proximity to the government trough. And it is these government-affiliated technocrats that actually crowd out the real high-achievers you mention, which is a great detriment to society in general.
People like to use the rancor over so-called elites as an example of today’s anti-intellectualism, which I think is a misinterpretation. Many of us still appreciate expertise and admire achievement. What we don’t like is a system that grants unaccountable power in over-regulated aspects of life to people who claim to be both intellectually and morally superior by perpetuating the myth that apolotical administration is possible. It’s not.
Well-said Lurker.
From the summary: “Quantitative easing: these two seemingly harmless words have mutated the DNA of the global economy.”
It’s the search for financial alchemy. The ability to turn lead into gold. The ability to create prosperity with a few clicks of a computer mouse. It’s a very seductive thought. Obvious nonsense of course - if there were such a formula, 3rd world countries and communist countries would be prosperous.
I simplify it:
QE: Making bankers whole on their bad bets at the expense of taxpayers and the rest of the population as a whole.
thats it exactly.
Yes!
😁
Housing my good friends. Housing.
Keller, TX Housing Prices Crater 8% YOY On Record High Housing Inventory
https://www.movoto.com/keller-tx/market-trends/
Americans have a healthy distrust of their politicians. Unfortunately, we don’t share the same distrust for economists
the keynesians like reich and krugman have earned distrust, but austrians like friedman have actually helped countries like chile return to prosperity. so we have 2 types of economists in which the media never makes distinctions. autrians have proven to be constructive and keynesians have proven to be destructive. yet the media treats them the same.
autrians have proven to be constructive and keynesians have proven to be destructive. yet the media treats them the same.
From my vantage point, the media treats Austrians like kooks and Keynesians like respected professionals. This is primarily due to the wrong call on inflation from QE.
The Keynesians also tell people what they want to hear (”debt doesn’t matter”, party now because in the “long run we are all dead”, etc). The Austrians are much more severe. This also makes the media gravitate towards the Keynesian side.
IMO both schools have strengths and weaknesses. Wisdom (and luck) is knowing which is right, and when.
IMO both schools have strengths and weaknesses.
you were doing well until the above sentence. i wish you were a little more ’severe’ too.
keynesianism is the main tool of the socialists. it would be much harder for them to implement their agenda without it. i don’t consider it to have any strengths for a free people.
tj, I noticed that you praised the government of Chile. I wonder what you think of their national healthcare system. It is very similar to that of Germany or Singapore. The state takes a big role in setting up the rules and regs of the market, and private providers jockey to deliver services. Contributions are mandatory.
tj, I noticed that you praised the government of Chile.
this is what i posted related to chile. how is praise for the government of chile?
but austrians like friedman have actually helped countries like chile return to prosperity.
pinochet was faced with economic disaster so he asked for economists to help out. the chicago school sent friedman and others to him. he implemented the reforms starting in 1974. chile recovered and started to prosper again.
but it seems that people can’t withstand prosperity, and chile started to return to socialist policies. they are paying the price for it.
Chile’s national health system was modeled after Britain’s health system and implemented in 1950. That model served the country very well and had good quality and cost containment. When Pinochet introduced market-oriented reforms and allowed some individuals to opt into a private system, that is when costs exploded. Private insurance spent up to twice that of public insurance. In time, private insurance has subsided as it was too expensive and it now makes up a minority of the insurance of Chileans.
Chileans are paying the price for market-based policies which have no cost controls and reward clinicians for more tests, more diagnoses, treating more diseases, and having more customers (e.g. sick patients).
Public run health systems have better incentives and control costs much better. Your ideology prevents you from seeing the superiority of a well-managed state healthcare system vs. a private system both in terms of cost and quality. There are many things the private markets do well and should do without state involvement, healthcare is not one of them.
superiority of a well-managed state healthcare system
there’s no such thing. your theory has already been debunked many times. you can post all the numbers and stats you like and i’ll post the rebuttals. on second thought i probably won’t because you’ll just vaguely deny them and we’ll be going round and round for nothing. socialism never works, period. i know you don’t believe it but socialist healthcare is hurting people in various ways. you should see the ‘free’ healthcare in mexico. you wouldn’t believe it.
I’ll bet serious $$ your sorry azz has never actually lived under one of your utopian government run health care systems. Had you done so, you wouldnt paint it as some mythical unicorn that would make everything come up roses if only we adopted its enlightened ways. I’ve had this conversation with so many clowns, and they’ve never even visited the countrys they talk up, much less partaken of their health care system. I have. Every system has its own set of problems; the US system is beyond retarded but there are a myriad of factors, few of which can be addressed by adopting the systems of other countries due to deep cultural differences.
Second point - keynesian economics will never work - it runs counter to human nature and in particular politics. No pol ever wants to take away the punch bowl when times are good. Leftists come up with their theories in an echo chamber devoid of reality and consequently human nature never plays a part in their thinking. Its why whenever they get into power they have to exterminate millions just to try and fit the square peg (humanity) into their round hole (baseless theories). Their emotional and intellectual development is roughly that of a 10 year old.
Prepare for a 10 paragraph lie in response.
I’ll bet serious $$ your sorry azz has never actually lived under one of your utopian government run health care systems.
I have lived in Canada and I work in the US healthcare system as an RN. Brother-in-law is from the UK, and extended family is scattered all over the world. I agree with you that there are problems with other systems. Not all single-payer/state-run health schemes are equal; some are vastly superior than others. But the differences are not cultural, they are institutional, political, and economical. To put it simply: the US pays far more for medical care that bankrupts too many people and which doesn’t even cover everyone in the country.
If you listened to DJT’s state of the union speech, you heard him decry the high prices of prescription drugs (just one of US’s many issues). Well, one reason why prescription drugs are so high in the US is that the biggest purchaser, the US government, is prohibited from using their buying clout to lower prices. The UK’s NHS does actually negotiate and regulate thus they don’t bend over to every pharmaceutical demand. My employer is leading an initiative to stop the prescription drug racket:
http://www.good4utah.com/news/local-news/new-intermountain-healthcare-drug-company-to-provide-affordable-generic-medication/924503822
I was heartened by the joint initiative by Amazon, JP Morgan Chase, and Berkshire Hathaway. But ultimately, healthcare will have to be viewed more as a right rather than a privilege.
you should see the ‘free’ healthcare in mexico. you wouldn’t believe it.
Mexico has bigger problems than their healthcare system. They have drug cartels, violence, and weak institutions. Mexican healthcare has its problems, but do you realize that they have a thriving medical tourism industry?
https://psmag.com/economics/medical-tourism-is-booming-in-mexico
My father has been in hospital in Brazil and in Japan. Both times he received state-of-the-art care at a fraction of the cost of the US. Sample size of one, I know. But the international quality bears out that, overall, quality is high in other developed countries, and cost is far, far cheaper. Mexico is not the first place I’d personally go for medical tourism (I’d go to Europe or Canada first), but it’s it’s comparable to much of what passes in the US.
Mexican healthcare has its problems, but do you realize that they have a thriving medical tourism industry?
do you realize that medical tourism isn’t free?
you want really cheap, high-quality healthcare? get both government and insurance out of it.
do you realize that medical tourism isn’t free?
Of course it’s not free, that was not the point. If Americans are going to a so-called socialized medicine country (Mexico) because medical care is cheaper there than what is available in the more free market US (relatively speaking), it just shows that less state intervention in healthcare doesn’t result in lower costs. International patients that I take care of in our hospital are thrilled to see the Grand Canyon, but they are terrified of getting sick here. When they do, they always want to go back to their home country in Europe.
Your point doesn’t make any sense. You can’t simultaneously get the government out of healthcare AND get rid of insurance. If you don’t have a state-run healthcare system, then you absolutely need insurance. Dipping into your HSA (if you have one) for wellness visits and vaccinations is fine, but no one is going to pay out-of-pocket for a stroke, heart attack, hip replacement, or cancer treatment.
You’re entrenched in your position, but it’s not a correct one. Show me a country where your ideal healthcare system is working today (not some fantasy world of 50 to 100 years ago that never existed).
no one is going to pay out-of-pocket for a stroke, heart attack, hip replacement, or cancer treatment. I know of an Amish farmer who paid for his heart transplant with his own cash — and probably a little help from his community. He is probably one in a billion.
If Americans are going to a so-called socialized medicine country (Mexico) because medical care is cheaper there than what is available in the more free market US (relatively speaking), it just shows that less state intervention in healthcare doesn’t result in lower costs.
no, it just shows that mexico has a lower efficiency of labor than the US does.
International patients are terrified of getting sick here.
of course they are. government and insurance have driven medical costs sky high here.
You can’t simultaneously get the government out of healthcare AND get rid of insurance.
oh yee of little faith.
Dipping into your HSA (if you have one) for wellness visits and vaccinations is fine, but no one is going to pay out-of-pocket for a stroke, heart attack, hip replacement, or cancer treatment.
your hsa would go a lot further if government and insurance weren’t driving up medical costs.
You’re entrenched in your position, but it’s not a correct one.
is to..
Show me a country where your ideal healthcare system is working today (not some fantasy world of 50 to 100 years ago that never existed).
just because most countries today have socialized medical care doesn’t mean that it should be that way. it simply means that most people don’t understand that healthcare could be much cheaper and better if it were in a free market.
your hsa would go a lot further if government and insurance weren’t driving up medical costs.
You’ve taken an extremely complex, multifaceted issue and proposed a trite solution. It’s not government and insurance driving up medical costs it’s many issues:
1. Payment mechanism and incentives are market-based (e.g. we pay our providers for doing more stuff, not for having good health outcomes)
2. We are older, sicker, fatter
3. We want new drugs, technologies, and procedures
4. We subsidize insurance purchasing via tax code
5. Poor health literacy
6. Consolidation of providers and hospitals (e.g. lack of competition)
7. Supply demand problems (some licensing laws prohibit lower cost providers–like nurse practitioners–from expanding their scope of practice)
https://khn.org/news/health-care-costs/
Almost all of these issues could be improved with more regulation and movement towards a single-payer system.
If you care to really understand the economics of healthcare, which are fundamentally different from widgets, you will eventually understand that Warren Buffet was right when he described US healthcare costs as “a hungry tapeworm on the American economy.”
Guess what? It’s the government run systems that are containing costs and the private systems that are exploding them. Hurry, run to some pseudo-intellectual source that provides a (false) rejoinder and restores your narrative that government-sponsored healthcare systems are bad and private, free-market ones are wonderful.
https://mffh.org/news/hungry-tapeworm-american-economy/
in honor of your cherry picking one thing to respond to, i’ll do the same.
—–
You’ve taken an extremely complex, multifaceted issue and proposed a trite solution.
no, you’ve taken something relatively simple and made it convoluted and unnecessarily complex. the free market is not a ‘trite’ solution, but it is a simple one. and it’s one that works if given a chance.
This “free market” is an imaginary solution.
“The Keynesians also tell people what they want to hear (”debt doesn’t matter”, party now because in the “long run we are all dead”, etc).”
This is why Keynesians will always draw my support (as will such fine educational policies such as No Child Left Behind 😁).
Back to basics: Dumb ‘em down and profit. If the population wasn’t sufficiently dumbed down then Keynes couldn’t be dumped on them and I may have been forced into getting a real job.
The idea that digging ditches and refilling them somehow represented anything besides a pure waste never appealed to me. Why not give the ditchdiggers the incentive to do something useful for others, rather than glibly standing by while they waste time, effort and energy on unproductive activity?
Digging ditches and refilling them gives people something to do and PAYS them for doing it. Having people sit around all day and do nothing and PAYING them for doing so serves the same purpose. Both does this: It puts money into the economic system.
A wonderful thing, especially if this economic system that is utilized has a banker entrenched in the middle of it.
😁
Payments to ditchdiggers can come into handy in qualifying them to take out loans plus in their never-ending future struggle to repay them.
The idea that digging ditches and refilling them somehow represented anything besides a pure waste never appealed to me.
It’s a way to redistribute purchasing power. Money printing is covert taxation - cutting the pie into 12 slices instead of six. And then giving a few slices to the ditch diggers (or whoever else you think is deserving).
I think Keynes goal here was realized with social safety net transfer payments. The currency wasn’t destroyed because the system is so large today so demand for the currency remained strong.
But, creating long term economic prosperity doesn’t seem possible with deft redistribution of currency. Doesn’t matter how deft.
I said long term in the prior paragraph - Keynes said “in the long run we are all dead.” That’s not quite true - there’s always another generation. Whether one cares about them or not is up to the individual - politicians are worried about the next election, and Keynes observation allows them to indulge their baser instincts without guilt and with intellectual cover. It also gives central bankers the intellectual cover to serve politicians more fully.
It puts money into the economic system.
actually it doesn’t. in order to get that kind of money, they have to first take it from others. no new money was created, so no added money is put into the economic system. just redistributed money.
“in order to get that kind of money, they have to first take it from others.”
Wrong. They can (and do) merely print it up.
economic prosperity doesn’t seem possible with deft redistribution of currency. Doesn’t matter how deft.
you’re correct.. again.
They can (and do) merely print it up.
not the way YOU think they do, mr. bankroid.
“….no new money was created,…”
Someone needs to brush up on his macroeconomics training.
Someone needs to brush up on his macroeconomics training.
go ahead if you want.
“Payments to ditchdiggers can come into handy in qualifying them to take out loans plus in their never-ending future struggle to repay them.”
Ah, now your words are delving deeply into the realm of pure poetry. I especially like this phrase:
“… to take out loans plus in their never-ending future struggle to repay them.”
Music!
Did Keynes even imagine conjuring up fiat out of thin air to stimulate the economy?
Did Keynes even imagine conjuring up fiat out of thin air to stimulate the economy?
i suppose it would depend on when you asked him that question.
this is what he said ten days before he died.
“I find myself more and more relying for a solution of our problems on the invisible hand which I tried to eject from economic thinking twenty years ago.” – John Maynard Keynes, 1946
of course by that time it already was too late because he’d already done tremendous damage.
“That’s not quite true - there’s always another generation. Whether one cares about them or not is up to the individual - politicians are worried about the next election, and Keynes observation allows them to indulge their baser instincts without guilt and with intellectual cover.”
Exactly right.
Group-think and central planning enables people to indulge in their baser instincts. Everywhere in the economy and in society. (”Everyone else is doing it, why shouldn’t I?”)
You want a freer, more ethical and moral life experience?
Promote individual liberty. Nothing else promotes it better.
Austrian economics = favors the individual. Increased freedom.
Keynesian economics = favors group think and statism. Decrease of freedom.
BTW, Keynes thought was not an “observation”, it was an excuse.
I tend to agree with Neuromance. The Austrian school and Keynesian school have valuable ideas both and applications that can be appropriate at certain times. I think the Keynesian contribution most relevant is the idea of counter-cyclical monetary and fiscal policy. It is actually pretty instructive because a true Keynesian would probably be advocating for raising interest rates now and withdrawing fiscal stimulus. Instead, we just passed a very large tax increase, increased government spending, and may pass a bigger infrastructure bill this year. Rand Paul was probably right to want to shut the government down. The economy is doing pretty well right now, so we should be tightening.
It is actually pretty instructive because a true Keynesian would probably be advocating for raising interest rates now and withdrawing fiscal stimulus.
even though both are important, fiscal policy is much more important than monetary policy for the economy.
Could be rough going in the next recession, given current expansionary fiscal policy late in the boom phase of the cycle. Looks like more QE will be needed…
Austrian are the outcasts today, but I suspect that in the long run, history will favor them and Keynes is dead.
“If government debt can be permanently sequestered on a central bank’s balance sheet via debt monetization, does government debt matter?”
This has been the big issue with the new federal budget package, and tax package:
• Public money is the way politicians exercise power. Every politician wants more money to spend, but wishes the others would spend less.
• Public money can be spent in an inefficient, central-planning style way, according to political priorities. Public money is used for “public goods” of course too, like transportation infrastructure and clean air/water/food infrastructure.
• The central bank is most assuredly influenced by politicians and lobbyists. Central banks are run by people, not robots.
So - As long as prices are stable, I’d think probably it doesn’t. But - unchecked, it leads to central-planning-esque inefficiency. Money printing is covert taxation, as it extracts purchasing power from the society and is used for whatever priority the printers have - complete with perverse incentives and Reverse-Robin-Hood effects. Completely unchecked, it would lead to the kind of inflation that makes politicians lose their jobs.
I’ve been wondering about political instability around the world, and the rise of populism and nationalism. There certainly are multiple factors from migrant/refugee inflows to economic distress.
But Japan doesn’t seem to have this. They don’t have any refugee inflows. They also have massive central bank intervention. But, here’s the composition of their central bank balance sheet: https://www.boj.or.jp/en/statistics/boj/other/acmai/release/2018/ac180131.htm/ - they have little or no political instability based on the fact their prime minister is set to be the longest serving ever.
Their government debt holdings are 80-plus percent of their balance sheet. They are flat out unrepetentantly printing money to fund their government.
The Federal reserve balance sheet looks like this: https://www.federalreserve.gov/monetarypolicy/bsd-overview-201711.htm - about 56% is government debt, 40% is mortgages.
Bank of England balance sheet composition: I couldn’t really find a clear answer. But from page 22 of this BOE PDF, one can tell they are doing something quite unusual: https://www.bankofengland.co.uk/-/media/boe/files/ccbs/resources/understanding-the-central-bank-balance-sheet.pdf?la=en&hash=0475942A8BE465179CF4CFB4996AF44CDACB1662
European central bank balance sheet composition: https://www.ecb.europa.eu/pub/annual/balance/html/index.en.html
The point of this little exercise is to get some clues about how the biggest economic entities on earth will behave going forward.
My opinion of what the central bankers are thinking is that injecting money into the financial sector and suppressing interest rates to encourage individual and corporate debt does not “work” - while it makes the financial sector quite wealthy, it likely also breeds political instability and populism because it doesn’t bring prosperity to the rest of the economy.
In fact, there’s all this talk about how Bernanke skillfully avoided another Great Depression, but I suspect that’s more due to social safety nets and vastly higher productivity today allowing people stay fed, clothed and housed while the underlying employment dislocation and economic stress still continued with little change.
Bernanke gave a speech at the Fed on the occasion of Milton Friedman’s 90th birthday (2002), saying the Great Depression was the Fed’s fault and thus the Fed wouldn’t do it again. But in 2011, there was an update: http://www.businessinsider.com/bernanke-is-skeptical-about-monetary-policy-again-2011-9
BUT - if central banks can monetize government debt, a la Japan, while containing inflation - that could be the next area of experimentation.
• Japan has zero percent interest rates but they also have had zero inflation for a long time. So people’s wealth stays stable.
• The US has non-trivial inflation (google MIT’s “billion prices project”) and close to zero percent interest rates. So this transfers wealth to debtors.
The bizarre policy of thinking that making people poorer via inflation will entice them to spend more is very curious.
Of course, a heavily centrally planned economy would lead to long term stagnation but in the right-now, politicians would love this policy because they would get more money to spend. And the vast majority of politician’s priorities is not long term but the upcoming election.
Some points to ponder.
The bizarre policy of thinking that making people poorer via inflation will entice them to spend more is very curious.
One of the more interesting contrarian articles I came across was in Bloomberg from last year:
https://www.bloomberg.com/news/articles/2017-06-06/are-low-interest-rates-bad-for-growth
“Fed actions may be having little effect, or even effects opposite to those the Fed intends,” Charles Calomiris, an economist at Columbia Business School, wrote in an article in the winter issue of the libertarian Cato Journal called “The Microeconomic Perils of Monetary Policy Experiments.”
“The concept that central banks might inadvertently make matters worse starts from an uncontroversial principle: Banks make money on the difference—the margin—between how much they must pay to attract deposits and how much they can earn by lending them out. Problems arise when central banks lower interest rates toward zero or even below, because the banks’ profit margins get compressed. The rate that banks are able to earn on their loans is pushed down by the central bank’s action. But they can’t lower how much they pay for deposits by an equal amount. That would require them to pay less than zero for deposits, which depositors won’t stand for. People would rather keep their cash under the mattress than pay to keep it in a bank.”
“When interest rates are ultralow, banks’ profit margins on loans are so small that they have no real incentive to take on the risks of lending. Instead they put their money into safe assets such as Treasury bills, which yield almost as much as loans would. That suppresses the volume of loans, especially the ones that banks retain on their books such as commercial and industrial loans.”
This view of monetary policy sort of says that low interest rates have not only failed to stoke the 2% inflation target the Fed has wanted, they have inadvertently kept it at bay by reducing the willingness of banks to put money into circulation via lending. This is kind of weird because the normal course of killing inflation is to raise interest rates, so one would assume that doing the opposite would serve to stoke inflation. But perhaps it doesn’t work when it approaches the lower bound. Paradoxically, when savers and retirees can no longer get reasonable return from safe assets, they may be even more reluctant to spend and save more to compensate for the lack of “risk-free return”.
I think the million dollar question is what inflation is going to look like in 2018-2019. Everything sort of hinges on that question because interest rates are paramount to companies financing costs and, by extension, their profitability. It also will drive where the housing market goes.
This is kind of weird because the normal course of killing inflation is to raise interest rates, so one would assume that doing the opposite would serve to stoke inflation.
They treat inflation as all one phenomenon. They treat DEflation as all one phenomenon. But extreme deflation can provoke a different social response than mild deflation; and mild deflation can provoke a different response than stable; mild inflation could provoke a different response than extreme inflation. Central bankers have kind of a schizophrenic view of the economy. They predict outcomes based on how people with a high level view would react, e.g. central bankers and primary dealers; but they don’t really seem to try to understand how the common man, the most common unit of the economy, views economic phenomena.
Central bankers = let them eat cake, in smaller and smaller packages. What inflation? Nothing to see here…
There are some extraordinary efforts to prop up shi!tcoin. Remarkably, it rallied from $5,900 to over $9,000, trading around $8,400 right now.
How’s that investigation into Tether going?
its a big club and u aint in it!
How much money do you think is being exchanged behind the scenes from the “Crypto Magnates” to authorities to try to legitimize the whole scam?
dude I am not an expert on this cryto market. What bothers me about them is that they arent backed by anything. So any joe blow can create a crypto, hype it, unload it , then watch it crater.
When one of these cryptos becomes backed by something it might be become legitimate.
That’s why it is so important for Wall Street to hurry up and develop more cryptocurrency options. It’s turtles all the way down from there.
That’s why it is so important for Wall Street to hurry up and develop more cryptocurrency options.
says the guy who just hours ago learned the difference between bitcoin and stocks.
No thanks to your esoteric explanation.
No thanks to your esoteric explanation.
never the less, you’re making progress. you should be proud.
Since Wall Street went to the expense of developing and rolling out Bitcoin options recently, it wouldn’t make much sense to let Bitcoin go the way of Beanie Babies anytime soon. It would make a lot more sense for Market-savvy strong hands to place long and short option bets, then roil the thin market up and down in order make rain in perpetuity at the expense of the weak hand HODLers. Pretty much the same as with the stock market, though Bitcoin is far easier to roil since the market is small, and more likely to go to zero thanks to growing thousands of near-identical rival cryptocurrencies.
Why didn’t someone think of developing Beanie Baby options back in the day?
It was obvious when Marketwatch added the “Crypto” ticker to the front page that Wall St. was ballz deep into this scam.
Which makes me think that there are lots more shoes to drop as all the leveraged bets that preceded the $500 billion Bitcoin bust are unwound…
MarketWatch is a laughably poor source of “financial news”.
Take a look at a pair of their histrionic, fan-the-flames headlines of this past week.
1. “Remember when the head of the world’s largest hedge fund said you’d ‘feel pretty stupid’ holding cash? How’d that work out? ”
2. “What technical analysts say about the stock-market collapse after the Dow, S&P 500 fall into correction.”
Irresponsible writing at the very least.
Reading MarketWatch headlines is little different than reading the forced news feeds I receive thru Cox Communications every time I log on, which invariably spew the latest from The Washington Post, The Hill, CNBC, etc.
“Take a look at a pair of their histrionic, fan-the-flames headlines…”
It’s hard to argue against their effectiveness. Pretty much every bubble asset that could have deflated, did.
I completely agree on Marketwatch. It’s sheeple food. That being said, I firmly believe in “keep your friends close, your enemies closer.” I always pay attention to what the phonies are yammering on about.
If the hysterically histrionic headlines on Marketwatch help drive market efficiency by driving air out of bubbles, then we owe them a collective debt of gratitude.
They’ll bet on anything. Doesn’t mean they have a dog in the race.
Don’t Expect the Crypto-Futures Revolution to Stop at Bitcoin
By Annie Massa
January 17, 2018, 1:47 PM PST
- Cboe is exploring contracts on other cryptocurrencies
- Bitcoin-based ETFs still in limbo, waiting for SEC approval
Cboe Global Markets Inc. is exploring futures on other cryptocurrencies after becoming the first U.S. exchange to offer Bitcoin contracts last month.
“You look at the entire crypto space and you look at what other products have the liquidity and the notional size, a derivative makes sense,” Chris Concannon, Cboe’s president and chief operating officer, said at a press briefing in New York on Wednesday. Cboe won’t make a move, however, until its futures exchange upgrades its core trading software with the technology it acquired with Bats Global Markets last year, he added.
The exchange has first thrown its weight behind another kind of product, Bitcoin exchange-traded funds, which so far remain in limbo. Tyler and Cameron Winklevoss, co-founders of one of the largest Bitcoin exchanges, Gemini, proposed an ETF based on the digital currency, which would be listed on one of Cboe’s equity exchanges. The U.S. Securities and Exchange Commission rejected the bid in March, but the decision is being appealed.
…
“You look at the entire crypto space and you look at what other products have the liquidity and the notional size, a derivative makes sense,” Chris Concannon, Cboe’s president and chief operating officer, said at a press briefing in New York on Wednesday.”
Sweet geezuz - crypto derivatives. What could ever go wrong? Good lord it’s getting deep…
“Why didn’t someone think of developing Beanie Baby options back in the day?”
Interesting question. If the Beanie Baby insanity emerged today maybe there would be options. Maybe.
Ran across this trivia (from Wikipedia) …
“Beanie Babies began to emerge as popular collectibles in late 1995, and became a hot toy.[7] The company’s strategy of deliberate scarcity, producing each new design in limited quantity, restricting individual store shipments to limited numbers of each design and regularly retiring designs, created a huge secondary market for the toys and increased their popularity and value as a collectible.[2]
“Ty systematically retired various designs, and many people assumed that all “retired” designs would rise in value the way that early retirees had. The craze lasted through 1999 and slowly declined after the Ty company announced that they would no longer be making Beanie Babies and made a bear called “The End”.[8] Some time after the original announcement that the company would stop production, Ty asked the public to vote on whether the product should continue; fans and collectors voted “overwhelmingly” to keep the toys on the market.[2]
“At its height of popularity people would flip Beanies at as much as ten-fold on eBay.[9] Indeed, at the height, Beanies made up 10% of eBay’s sales.[10] Some collectors insured their purchases for a price in the thousands.[9]
“Warner was keenly aware that the Beanie Babies bubble could burst and eventually started forcing retailers receiving the latest Beanies to also stock other products lines by his company. None of these lines did as well as Beanie Babies although they kept the company alive after the fad ended and eventually some became successful in their own right.[9]“
If only those options had been invented, the Beanie Baby sitting atop my file cabinet gathering dust might instead be worth a fortune today.
Heaven forbid.
Short-sightedness….and who could take delivery.
Bitcoin needs now a Marlburro hombre.
Castle Rock, CO Housing Prices Crater 7% YOY On Weakening Denver Economy
https://www.movoto.com/castle-rock-co/market-trends/
“Amid budget crunch, Oklahoma pulls up red carpet offered to wind industry, now considering new taxes.”
Wasting money and energy to be PC can get expensive.
https://www.usnews.com/news/business/articles/2018-02-10/oklahoma-pulling-up-red-carpet-offered-to-wind-industry
There is a lesson here beyond the economic viability of renewables: taxings things that can’t move (property and windmills) is a surer way to shore up the public coffers than taxing things that are mobile (like people and companies).
taxings things that can’t move (property and windmills) is a surer way to shore up the public coffers
that just means that people would buy less property and fewer windmills.
Exactly, that which you tax you get less of, that which you subsidize you get more of.
In the case of property, I would be in favor of increasing property taxes fairly substantially on undeveloped land. I see no compelling public interest served by just sitting on land. Often this land hoarding makes it difficult for new entrants (builders and developers) to build real estate. In my perfect world, I’d also favor a progressive property tax.
With regards to windmills, it seems like they have been a pretty good economic bet for the midwest states that have implemented them. I was in eastern Canada and I couldn’t help but notice how much wind power they had on Prince Edward Island. Every government needs taxes and it may very well be that the time has come to tax windmills, but I would tread lightly when assessing taxes on renewable sources because they contribute to an important public good: clean air.
So remind me again why income is so heavily taxed, especially on the productive Middle Class?
To refine my point, as long as we have a printing press technology, why not use it to tax everyone proportionally, and scrap the marginal income tax entirely? It seems like many benefits to the real economy could result, including higher nominal wages and much stronger individual incentives to work and produce something of value.
In the case of property, I would be in favor of increasing property taxes fairly substantially on undeveloped land.
so you’re for government coercion.
I see no compelling public interest served by just sitting on land.
what about the interest of the individual?
In my perfect world, I’d also favor a progressive property tax.
yes, i know. you’re the consummate progressive. you want to crack the whip on the populace.
Every government needs taxes and it may very well be that the time has come to tax windmills, but I would tread lightly when assessing taxes on renewable sources because they contribute to an important public good: clean air.
in your perfect world everyone must pay tribute. notice how you don’t even care if it’s necessary or not. it’s just about squeezing the most out of us through the government. and literally everyone must pay so it looks ‘fair’. seems the schools have indoctrinated you well.
So remind me again why income is so heavily taxed, especially on the productive Middle Class?
Romney said 47% pay no income tax at all. Another 20% pay must pay very little.
It seems like many benefits to the real economy could result, including higher nominal wages and much stronger individual incentives to work and produce something of value.
I would definitely lower the income tax at the lower end. I would lower taxes on wage income and increase taxes on investment income. Fundamentally, I think that the optimal balance of taxation is such that labor should be taxed at a lower rate than capital. Lots of good economic data I’ve seen seems to corroborate that.
tj, let’s not do this dance today. Yes, we need taxes. Yes, we need a government. No, not every tax is a coercive, socialist plot destined to snuff out individual liberty. Land is fundamentally different than stuff in that it is a economic positional good. The more beanie babies I collect doesn’t impinge on your ability to collect beanie babies. Land is different though because it imposes external costs due to hoarding and scarcity (yes, I know land is abundant, but not near where employment opportunities are). My consumption of developable land impacts someone else’s ability to develop that same land.
“So remind me again why income is so heavily taxed, especially on the productive Middle Class?”
The Debt Monger
https://ibb.co/m9zFt7
Hey Rich, are you sure that’s what Romney said? Maybe you should check that and get back to us.
I would….I would…
You’re not talking about what you would do for your fellows in society, but what you would do to your subjects as the director.
Not as a dictator, it would be democratic. When I say “I would”, I am implying that I would love for all democratically elected representatives to get on board, make hard choices, and realize that these policy decisions are best for the overall society, even if it is not great for some special interest. This is the same “I would” that would push legislators to curtail military spending (not expand it), even if this meant that some congressman/congresswoman would lose some military base in their district. It’s the same I would that would get rid of MID. Implicit is that these statements is that it would be through the regular representative democratic process, and only through this process.
Your opinion and a dollar will get you a cup of coffee my good friend.
Andover, MA Housing Prices Crater 13% YOY
https://www.movoto.com/andover-ma/market-trends/
no need to check, well reported at the time
The problem with that is you drive down the price and the demand, which is foolishly shortsighted.
Loveland, CO. prices up 5%
https://www.movoto.com/loveland-co/market-trends/
Berthoud, CO. prices up 14%
https://www.movoto.com/berthoud-co/market-trends/
Broomfield, CO. prices up 3%
https://www.movoto.com/broomfield-co/market-trends/
Longmont, CO. prices up 9%
Even in stinky Greeley prices are up, 14%
https://www.movoto.com/greeley-co/market-trends/
It’s easy when you cherry pick.
This message sponsored by the National Association of Realtors.
Realtors are liars. Right?
Of interest, according to Moveto there are 335 houses for sale in Loveland. After the 2008 crash there were well over 1000 for sale. Back then you could buy a pretty nice, newish 3000 sqft house for 275000. Now that gets you a dated, 40-50 year old split level of half the size.
Dumb ‘em down, and profit. A good read from Wolfstreet …
https://wolfstreet.com/2018/02/09/what-the-headlines-about-tesla-snap-and-twitter-earnings-should-have-said/
It is interesting how SpaceX can be so successful while Tesla isn’t, until you think about it.
SpaceX competes with inefficient, legacy launch firms like Arianespace, United Launch Alliance and Roscomos. But the car biz is a lot more efficient and competitive and Musk is learning that GM, Ford, Nissan and other established makers can also make electric cars and unlike Tesla they know how to run factories and supply chains. It’s one thing to hand craft a small number of expensive cars for richies and quite another to mass produce cheaper cars for everyone else.
any of you geniuses want to take a guess at where the line of sand has been drawn on the DOW that would enable a FED lifeline to trump?
You might look at the March 2009 bottom in the Dow compared to the preceding peak as an indication. It seems like it was 50% down or so before QE was employed, by my vague recollection.
My hunch is that stealth intervention will be discretely employed during any similar selloff events to last week’s as the punchbowl removal operation proceeds, in order to avoid a disorderly market adjustment process without the political headaches of publicly announced bailouts.
It’s quite interesting to watch the stock and bond prices move recently. Stocks go down, bonds go up (yields down); bonds go down (yields up), stocks go up. It’s like watching water (money) sloshing from side to side. Recently, both have been doing down. If both start going up again, that’ll be a hint of central bank intervention.
It’ll depend on what happens next week. If the DOW continues to crater I could see the money spigot reopening soon.
20k? so u r saying its rigged?
Isn’t everything rigged these days?
Housing my friends…..
Grants Pass, OR Housing Prices Crater 5% YOY
https://www.movoto.com/grants-pass-or/market-trends/
San Diego, CA 92129 Housing Prices Crater 13% YOY On Record Low Housing Demand
https://www.zillow.com/san-diego-ca-92129/home-values/
*Select price from drop-down menu on first chart
After a week of savagery, what’s really to blame for the stock market’s shattered calm?
By Mark DeCambre
Published: Feb 10, 2018 1:20 p.m. ET
Jim Cramer blames it on ‘complete morons’
Everett Collection/MarketWatch
Who killed the market’s cheery mood?
Irrational exuberance has been exorcised from Wall Street, for now. A raucous week ended with the stock market having booked its most brutal decline in about two years.
To recap, the Dow posted two 1,000-point drops during the week’s five trading sessions, something it has never done in its history, and has notched three percentage declines of at least 2% in six sessions after having gone more than 100 sessions without a single decline of more than 1%. Add to that the fact that a product that gauge’s volatility on Wall Street, the Cboe Volatility Index VIX, (-13.15%), saw on Monday its largest percentage rise in its roughly quarter-of-a-century history, obliterating a period of eerily persistent placidity in the market. By Thursday, the S&P 500 and the Dow had slipped into correction territory, typically defined as a retreat of at least 10% from a recent peak.
Downturns in the market are normal, but what has gripped investors over the past several sessions was abrupt, stunning and savage.
So: What happened? CNBC’s Jim Cramer, no stranger to expounding vociferously on market moves, blamed the collapse on what he described as a “group of complete morons” trading leveraged volatility products and thus “blowing up” everything.
…
people out to destroy trump?
A more likely explanation is Wall Street testing out the new Fed chairman’s pain threshold for market interventions…as you yourself suggested.
“Downturns in the market are normal, but what has gripped investors over the past several sessions was abrupt, stunning and savage.”
When investors get “bent-over” it’s stunning and savage, but when main street’s Joe Sixpack has to take one for the team it’s called it globalism.
Any thoughts on how the aftermath of last week’s volatility temblors will play out?
The Financial Times
Market Volatility
The unstoppable rise of trading market volatility
Concern mounts that this week’s reaction is merely the first instalment of a bigger shock
Traders in Chicago signal offers in the options pit. A sharp increase in volatility hit traders in Vix options © FT montage; Getty Images
Joe Rennison and Robin Wigglesworth in New York and Miles Johnson in London yesterday
When the Chicago Board Options Exchange sat down with Goldman Sachs traders in 2003, it would prove to be one of the most profitable meetings in the exchange’s history.
It set in motion the creation of a wave of financial products built around the concept of trading volatility in markets. The appeal of betting on whether equity markets will remain calm has sharpened in recent years as historic bond-buying programmes by central banks have repressed volatility across equities and debt.
Now, as robust economic growth convinces central banks to reduce their support for asset prices, the sheer scale of the volatility-trading ecosystem that has ballooned is worrying some investors and analysts who believe that this week’s turmoil is merely the first instalment of a shock for global markets.
The traders at Goldman Sachs pitched to executives at the Chicago-based Cboe a futures contract based on the exchange’s Vix volatility index, a measure of expected market volatility based on options written on the S&P 500 that was first introduced in 1993.
Given its tendency to rise when stock markets rapidly fall, the index was quickly given the moniker of Wall Street’s “fear index”, a name that even inspired a thriller by Robert Harris, and has minted Cboe a fortune.
Sandy Rattray, now chief investment officer at London-based Man Group, was one of the Goldman traders who, with his then colleague Devesh Shah, helped devise a complex formula that synthesised thousands of different options trades into a single tradable number for the futures contract.
The development of Vix futures has opened the door to an array of exchange traded funds (ETFs) and notes (ETNs) that allow institutional and retail investors to buy and sell equity volatility.
Such an outcome appals Mr Rattray. “We modelled what an ETF would look like, talked to a large ETF provider, and we looked at what performance would look like,” he says. “The performance was so poor we concluded we shouldn’t show a product like that to investors.”
For some such products, their demise on Monday came quickly. In a matter of hours on Monday as the level of Vix — having slumbered below its long-term average of 20 for months — rocketed to briefly touch 50 and the S&P 500 endured its biggest one-day drop since 2011.
…
what is the strike price for the FED put to be activated for DJT? do they let him sweat some bullets so they let him know is pulling the strings?
“The traders at Goldman Sachs pitched to executives at the Chicago-based CBOE a futures contract…”
Indeed and perhaps Professor there is a chance you do not understand that this DJIA ten percent decline originated with the FED whispering to Goldman, the market-maker, that a pause would be greatly appreciated knowing that margin accounts were now busting their corsets, curds and waves.
You don’t understand the game, Sir. Ten percent isn’t “a plunge.”
There is no “little investor” around anymore. There’s only CALPERS losing money with astonishing impressive speed. Too big to succeed.
Two years from now you’ll realize BTC & Kumpany was the least of your problems. (I just bought a seasonal pass to the BigTop.)
You bring to mind a great line from the musical we are attending tonight, Guys and Dolls:
“One of these days in your travels, a guy is going to show you a brand-new deck of cards on which the seal is not yet broken. Then this guy is going to offer to bet you that he can make the jack of spades jump out of this brand-new deck of cards and squirt cider in your ear. But, son, do not accept this bet, because as sure as you stand there, you’re going to wind up with an ear full of cider.”
You pile up enough tomorrows, and you’ll find you’ve collected nothing but a lot of empty yesterdays.
My only thought is, “who is willing to finance the US government at 30-yr bonds at 3.1%?” Last week I opened up a 5-year CD at a local bank yielding 2.75%. According to depositaccounts.com, this is the highest 5-year CD in the country. And, this particular bank offers a one-time rate bump. Anyway, this is just extra cash I had lying around not doing anything important, so no real risk in my mind to fund this CD. But I can’t imagine anyone being willing to lock up money for 6 times longer than my CD given the unknown about inflation. Oh yeah, I forgot to add that the bank allows for early redemption of the CD. The penalty is 180 days of interest.
Sometimes I play this game in my mind where I say, “That house is listed for X dollars. But what would I be willing to really buy it for?” Quite often the price is literally 1/2 of the current market value. This is sort of a gut check reality that I do to keep my sanity in an environment that often seems untethered from reality. I do the same mental experiment with stocks and bonds (e.g. “What would the P/E need to be at or the earnings growth need to be at for me to wade into the stock market? “What would yields need to be at for me to consider buying debt?). The delta between current price/yield and what I would be willing to consider is still very high. That makes me think we are still in the everything bubble. I welcome more volatility insofar as we get more rational prices in bonds, stocks, and real estate.
Last week I opened up a 5-year CD at a local bank yielding 2.75%
Interesting, my credit union only offers 1.39% on a 5 year CD. I also checked First Tech CU. They offer 2%
State Bank of Southern Utah is what is offering 2.75% on 5 year. You have to be Utah resident. But just as I checked this, it looks like Mountain America Credit Union has upped their 5 year term deposit to 3%, so I should have gone there. Next ladder will be to MACU.
Nationwide, the next best deal is Goldman Sach’s 2.5% on 5-year. They are probably using these deposits to fund Marcus loans.
“who is willing to finance the US government at 30-yr bonds at 3.1%?
There are shorter term instruments available, though they pay even less. And, unlike a CD, you can resell a bond you own, though you might have to sell it at a loss.
The real question is how will central banks react to rising interest rates. Rising rates means that governments around the globe will have to pay more to issue new bonds and to rollover existing maturing debt, which they can ill afford to do.
I steer clear of bond funds because I don’t want to deal with selling due to fund outflows. Almost all of my cash holdings are FDIC CD holdings. About 5 years back Pentagon Federal Credit Union had a Black Friday CD sale and I loaded up on 3.1% CD’s (I purchased 5 year and 7 year terms). That has been the best place for me to park cash while I twiddle my thumbs and wait (hope) for a correction to normality.
Rising rates means that governments around the globe will have to pay more to issue new bonds and to rollover existing maturing debt, which they can ill afford to do.
If something can’t happen, then it won’t, right? This makes me think that rates won’t normalize and we’ll be in this perpetually inflated bubble of stagnation for a while, or at least until bond vigilantes force a change or demographics changes force a budget reckoning (with healthcare and social security spending set to spike due to baby boomers).
rates won’t normalize and we’ll be in this perpetually inflated bubble of stagnation for a while
That’s what I am betting on. If I make it to age 90, I will re-assess the situation.
can’t imagine anyone being willing to lock up money for 6 times longer than my CD given the unknown about inflation.
Someone is buying the 30 year Treasury paper whenever it goes on sale. I will admit the fact that this has been happening for years with absurdly low interest rates makes no sense.
It’s been frequently pointed out that this is a natural investment for Asian nations sitting on piles of dollars we paid for their exports to us.
Boo!
The markets deliver a shock to complacent investors
Out of a clear blue economic sky, volatility returns and may linger
Print edition | Finance and economics
Feb 8th 2018
EVERY good horror-film director knows the secret of the “jump scare”. Just when the hero or heroine feels safe, the monster appears from nowhere to startle them. The latest stockmarket shock could have been directed by Alfred Hitchcock. The sharp falls that took place on February 2nd and 5th followed a long period where the only direction for share prices appeared to be upwards.
In fact the American market had risen so far, so fast that the decline only took share prices back to where they were at the start of the year (see chart). And although a 1,175-point fall in the Dow Jones Industrial Average on February 5th was the biggest ever in absolute terms, it was still smallish beer in proportionate terms, at just 4.6%. The 508-point fall in the Dow in October 1987 knocked nearly 23% off the market.
…
Denver, CO 80211 Housing Prices Crater 10% YOY As Housing Demand Plummets To Record Low
https://www.zillow.com/denver-co-80211/home-values/
*Select price from dropdown menu on first chart
can u get us a rig count crowman?
Tangerine Led Zeppelin
https://www.youtube.com/watch?v=_0Auvlsv860
Too odd not to post:
Missouri: a fake HOA filed real liens.
Article also mentioned: “The filing of fake liens and other documents has become a big problem in Missouri. The owners of a $4 million mansion in St. Louis had to go to court to prevent a woman they accused of filing a fake quit claim deed from taking possession of their home.”
The ramifications of this story are amazing. I wonder how many second homes will be sold this way going forward.
You go away for two months and when you return someone else is living in your house.
This Boulder CO item was making news back in 2007. The state changed their laws re: adverse possession due to this. I am sure there are many other booby traps in state laws that can be manipulated by legal predators:
Yet another scam I just learned about today: something like a man-in-the-middle attack on the process of wiring money to a bank to close on a real estate purchase:
The scammers are apparently able to access in real time names & exact payments amounts involved in these transactions.