February 18, 2018

Chosen Option: A Generational Reckoning

A weekend topic starting with Western Farm Press. “Aggressively accommodative global governments and central banks have an agenda to extend the business cycle and to maintain global economic momentum at all costs. These actions likely will create market bubbles or excessive movements in financial asset classes like equities or stocks, fixed income or bonds, cash equivalents or money market instruments, real estate, commodities, and fine arts. Also likely are currency market distortions, expanding debt burdens and deficits through borrowing or simply money printing.”

“Globally, governments and central banks in 2017 found their fiscal, monetary, trade and regulatory policies at a crossroads, simplistically stated as: Option Not Chosen: They could allow markets globally to correct with hopes of managing a U.S. and global recession. Managing a U.S. and global recession even today would likely have a low probability of success for an array of social, economic and political reasons. So not choosing this option, as far as the near term is concerned, is very appropriate, but longer term, that is another issue.”

“Chosen Option: They could globally financially engineer an extended country-by- country growth cycle through accommodative government and central bank intervention policy activities.”

From the Progressive Farmer. “Craig Dobbins, an ag economist at Purdue, can show the trend line of land values in Indiana from 1910 through 2015. If the natural trend line were followed through 2020, the average per-acre price would be $5,396. Instead, the actual average Indiana land price now is $7,150. The implication is that land values could fall back another 24% if the trend line were to hold.”

“In the Purdue survey, 39% of respondents said they believed farmland values would rise during the next five years — but only by a total of 7%. What optimism there is for farmland values within the ag sector doesn’t spill over into the financial sector. Numerous commentators have suggested that the farmland ‘bubble’ is bursting. They cite weakening commodity and land values, as well as upticks in farm debt levels.”

“In the Federal Reserve Bank’s 10th District, including Kansas, Missouri, Nebraska and Oklahoma, 15% of bankers reported they denied more than 10% of applications for operating loans in 2016. The year before, only 5% of bankers reported they denied operating loan applications at that rate. In Indiana, farmland values were down about 9% from 2015 to 2016.”

From the New Food Economy. “America’s dairy farmers are getting a refund. So hopes Senator Kirsten Gillibrand of New York, who introduced a Senate bill to return millions of dollars from a disappointing federal insurance program. Known as the Dairy Premium Reform Act of 2018, her bill would refund leftover premiums to farmers who’d paid to cover their losses under a federal margin protection program. Currently, those leftover premiums go to the Treasury. But under Gillibrand’s plan, they would be mailed back to farmers in the form of a one-time check.”

“But Gillibrand’s bill is really a response to a larger issue. When the last farm bill was first passed, dairy prices, which are set by the federal government, were sky-high. New York was on its way to becoming the ‘yogurt capital of the world.’ The price bubble burst, however, and now milk is as cheap as it’s been in decades.”

“So while her constituents could certainly use some money back, Gillibrand’s bill is not a long-term solution to what’s emerging as a national problem, or generational reckoning, for dairy farmers. What Gillibrand’s pushing for is something like a stopgap or band-aid, until a more robust dairy ’safety net’ can be implemented, as part of the next farm bill later this year. So far, that’s looking like a billion-dollar cash infusion to dairy farmers, even though, in the midst of an oversupply, Americans don’t need any more milk.”

From Undercurrent News. “Chinese shrimp importers are sitting on product they cannot sell, according to an importer source based in the country. The source, who buys shrimp and then imports it to China through Vietnam, said this has led importers to renege on ‘many orders,’ forfeiting deposits. ‘Current prices are very low. It’s not possible to sell before Chinese New Year,’ he told Undercurrent News. ‘Though they’ve paid a deposit for the order, say for example 10%, due to the falling price they don’t want any container or their money back,’ he said. He added that after Chinese New Year, prices ‘will definitely crash.’”

“The comments correspond with a shrimp panel discussion in at the Global Seafood Market Conference held in Miami in January. At the show the panel said China ‘has high-priced stocked inventory for Chinese New Year. The market is in chaos [in China] because everybody wants shrimp but fear they are paying too much.’”

“China, from being one of the world’s largest exporters, is now a net importer of shrimp, industry sources say. Chinese consumers are willing to pay a premium for live shrimp, a second source with a Chinese processor based in Zhanjiang, Guangdong told Undercurrent. He said he expects prices to continue to rise at least until Chinese New Year and potentially thereafter. ‘Supply does not meet demand,’ he said.”

“Prices are being driven by the seasonal drop in production; the holiday season; a poor harvest; and Chinese inflation, according to Landy Chow, general manager of Siam Canadian China. ‘Last year in my city [Zhanjiang], an apartment cost CNY 8,000 [per square meter]. This year CNY 12,000 per square meter. That means [a] 40-50% [increase] in one year. I think such drastic increases will soon cause wider inflation especially food price inflation,’ he told Undercurrent.”

From the Tribune Star. “While farmland values are projected to decline this year, Indiana remains in the top five states in per acre value, according to a national agricultural landowner services company. Vigo County farmer Brad Burbrink said he’s not surprised land values are forecast to drop again this year. ‘I think farmland values will continue to go down,’ Burbink said, ‘but in no way shape or form compared to the 1980s,’ when thousands of farmers filed for bankruptcy after falling behind on high-interest land and equipment loans.”

“‘I think land values will have to come down some more because the farm economy is kinda stagnant right now, but there is not the fear that the bottom of the market will fall out,’ Burbink said. ‘From a grain farmer standpoint, we have a lot of inventory, not only in the United States, but worldwide, which is causing commodity markets to be depressed.’”

“High-quality Indiana farmland peaked at $9,765 per acre in 2014, according to the Purdue Agricultural Economics Report — 2018 Agricultural Outlook, while average farmland peaked at $7,976 per acre in 2014. The Purdue report lists 2017 high-quality land values at $8,529 and average land value at $6,928 per acre last year.”

The Marshall Independent. “While farmers struggle with dropping commodity prices, they are also facing agriculture land rent rates that are not coming down as quite as quickly. Paul Lanoue, dean of agriculture and business at Minnesota West Community and Technical College: ‘In recent years, there has been a major change in land ownership with a transition to the next generation who view the land and rent obtained for it more as an investment opportunity along with a belief that the renter got a good deal in 2010-2012,’ he said. ‘The current reality is that with crop prices drastically reduced from prior levels, profitability is near non-existent for many farms.’”

From the Farm Journal. “The cash rent line on your budget likely has been a point of relief for the past few years. As margins tightened, many landowners agreed to lower cash rents. For 2018, that trend is expected to continue—but don’t expect a big drop. Landowners are still willing to negotiate their rental agreements, but the focus on dropping prices might ease, according to Pro Farmer’s 2017 LandOwner Cash Rent and Land Values Survey.”

“These drops are helpful, but they likely won’t be enough for farmers to be in the black on cash-rented ground, says Gary Schnitkey, ag economist at the University of Illinois. In Illinois, state-average cash rents peaked in 2014 at $234, according to USDA. In 2017, the average was $218, a drop of nearly 7%. Statewide average cash rents will likely drop $5 to $10 per acre in 2018, Schnitkey says. This is because Illinois farmers face reduced net farm incomes and continued negative returns on cash-rented farmland.”

“‘Reductions of this size are not large enough to cause cash-rented farmland to be profitable,’ he says. ‘However, declines in cash rents resulting in profitability are projected to be long and protracted. As long as corn prices remain below $4 per bushel, there will be downward pressures on cash rents.’”

“‘Farmers buy 70% to 80% of all farmland,’ says Steve Bruere, president of Peoples Company in Clive, Iowa. ‘But when margins are tighter, bankers get nervous. If farmers’ margins get tighter, they will become less dominant buyers, and other buyers won’t pay as high of prices.’”

“For the next few months, Jim Farrell, president of Farmers National Company in Omaha, Neb., expects land values to remain stable. ‘But longer term, I feel that land values have not hit the bottom yet. We will still see more down movement in certain markets.’ Increasing interest rates and an uptick in farmland for sale could send land values lower. ‘The slow farm economy could push more land on the market,’ Farrell says. ‘Any increase in land on the market will likely pressure values at this point.’”

RSS feed


Comment by 2banana
2018-02-18 07:23:03

Farmland Partners Inc. (FPI) is at 5 year lows.


Farmland Partners Inc., a real estate company, owns and seeks to acquire farmland located in agricultural markets in North America. Its farms are used to grow primary crops, such as corn, soybeans, wheat, rice, and cotton. The company’s farms are also used to grow specialty crops, including almond, citrus, blueberries, vegetables, and edible beans. As of December 31, 2016, it owned farms with an aggregate of approximately 142,223 acres in Alabama, Arkansas, California, Colorado, Florida, Georgia, Illinois, Kansas, Louisiana, Michigan, Mississippi, Nebraska, North Carolina, South Carolina, Texas, and Virginia. Farmland Partners Inc. also provides loans to third-party farmers for working capital requirements and operational farming activities, farming infrastructure projects, and for other farming and agricultural real estate related purposes.

Comment by 2banana
2018-02-18 07:32:32


It pays a 6.4% dividend - for now.

“However, analysts expect business conditions to deteriorate and estimate that a drop in FPI’s AFFO over the next year will cause its payout ratio to rise to 129%. This would be an unsustainably high payout ratio and may put the dividend at risk.”

Comment by cactus
Comment by rms
2018-02-18 15:57:17

A great read. Thanks!

Comment by oxide
2018-02-18 13:23:51

The company’s farms “used to grow” actual food like blueberries and veggies. Now they grow “corn, soybeans, wheat, rice, and cotton.”

Top 5 subsidized crops: corn, cotton, wheat, rice, soybeans. Co-inkydink? I think not…

Comment by BlackSwandive
2018-02-18 16:46:20

Corporate welfare at its finest.

Comment by Professor 🐻
2018-02-18 16:54:41

…and its most entrenched…

(Comments wont nest below this level)
Comment by BlueSkye
2018-02-18 19:59:37

Repealing the Ethanol Mandate is long overdue. Oil consumption would drop. Oil prices would have downward pressure. Fuel consumption (gallons per mile) would drop. Food prices would drop. Environmental concerns would be relieved, no matter what your idea of global warming is. The EPA recommends this. Congress people with conflicts of interest don’t.

Comment by redmondjp
2018-02-20 10:58:29

Monsanto approves of this comment.

(Comments wont nest below this level)
Comment by 2banana
2018-02-18 07:29:27

Every market the government touches - it destroys.

Higher Education


Loan Shark Nation: Forcing Our Kids To Choose Between Student Loans And Everything Else
ZeroHedge - 02/17/2018 - 16:45

A college degree is now so expensive that for most students it requires massive borrowing. But the starting salary in most fields has risen so slowly that growing numbers of indebted grads can’t reduce – let alone pay off – their loans. From today’s Wall Street Journal:

A study released Friday by the Brookings Institution finds that most borrowers who left school owing at least $50,000 in student loans in 2010 had failed to pay down any of their debt four years later. Instead, their balances had on average risen by 5% as interest accrued on their debt.

As of 2014 there were about 5 million borrowers with such large loan balances, out of 40 million Americans total with student debt. Large-balance borrowers represented 17% of student borrowers leaving college or grad school in 2014, up from 2% of all borrowers in 1990 after adjusting for inflation. Large-balance borrowers now owe 58% of the nation’s $1.4 trillion in outstanding student debt.

Overall across the U.S., one-third of borrowers who left grad school in 2009 hadn’t paid down any of their debt after five years, compared to just over half of undergraduate students who hadn’t, federal data show.

Now, a 25-year-old with massive student debt probably doesn’t qualify for a mortgage. But they might be able to get a car loan, which partially explains why auto loans are rising right along with student loans. A car is necessary to get to work, and borrowing is the only way to get a car if a big piece of your income is going towards student loan interest.

Comment by Ben Jones
2018-02-18 07:42:09

From the New Food Economy article:

‘That’s thought to be in part because of a years-long milk surplus from excessively productive dairy operations—which expanded during that boom—as well as wavering international demand. Last year, Canada introduced a pricing plan that incentivized its cheese processors to use Canadian milk. That almost wiped out dozens of dairy farmers in Wisconsin, but also dropped the hammer on farmers in New York, whose exports have dwindled. Over the past year, in response to those depressed prices, milk buyers across the country have been dropping contracts.’

‘That’s taken an emotional toll nationwide. You may have read our coverage of the recent uptick in agricultural worker suicides. This month, Massachusetts dairy co-op Agri-Mark even sent its New York members phone numbers for suicide hotlines and mental health information along with the latest market forecast.’

In the news we see hyper reports on what people say or do that might offend or slight this group or that. Yet we have governments and central banks causing all sorts of mayhem and the media never says boo. When have you heard Yellen or Bernanke called out for an increase in suicides?

Comment by Mr. Banker
2018-02-18 08:04:01

“This month, Massachusetts dairy co-op Agri-Mark even sent its New York members phone numbers for suicide hotlines and mental health information along with the latest market forecast.”

This is stunning.

Comment by BlackSwandive
2018-02-18 09:04:22

It’s all due to the same thing - DEBT. Until there’s an honest conversation about the ramifications of high prices in every asset class, durable good, education, medical procedure, etc., and the enormous debt loads which are the root cause, and also a requirement to fund them, there can be no solutions.

Comment by BlackSwandive
2018-02-18 09:15:01

Also - what do all of the high profile retail bankruptcies over the past several years have in common? Hundreds of millions of dollars in unrepayable debts in every case, oftentimes approaching a billion dollars. The extension of credit and the resultant crushing debt burdens are a terrible, terrible thing for any economy.

(Comments wont nest below this level)
Comment by Mr. Banker
2018-02-18 09:20:06

“It’s all due to the same thing - DEBT.”

Yeah, well you’re half right. It’s all due to the same thing - DEBT AND STUPIDITY.

There, fixed it for you.

Warren Buffett once touched upon this when he said …

“When you combine ignorance and leverage, you get some pretty interesting results.”

(Comments wont nest below this level)
Comment by rms
2018-02-18 16:18:32

“It’s all due to the same thing - DEBT.”

You can thank Ronald “Mommy?!” Reagan for deregulated credit.

(Comments wont nest below this level)
Comment by oxide
2018-02-18 17:19:14

I would clarify that it’s due to debt that has been disconnected from labor. Not so long ago, most debt was manageable with labor. You could go into debt to buy a sofa, a car, or even a house, and be reasonable sure that you could pay it off with labor. But today there’s just not enough labor to pay off all the debt we’re taking out, starting with the government. No wonder student debt is almost fatal. People are expected to actually pay it off with work.

(Comments wont nest below this level)
Comment by Professor 🐻
2018-02-18 19:28:14

“People are expected to actually pay it off with work.”

Apparently defaulting is a rather unattractive option.

Comment by SW
2018-02-18 14:27:59

Looks like milk is back to 2009 prices.


Comment by BlackSwandive
2018-02-18 16:47:47

Certainly not around here. Luckily I don’t drink much of it. Ice cream and cheese prices still through the roof, too.

(Comments wont nest below this level)
Comment by BlueSkye
2018-02-18 20:08:23

When have you heard Yellen or Bernanke called out for an increase in suicides…

It is one thing to walk away from a stupid impulsive McMansion purchase when you realize you’ve had your clock cleaned. It is something else to walk from a family farm. Loss of purpose. Multigenerational tradition. The foundation of civilization and culture screwed sideways.

Comment by alphonso bedoya
2018-02-18 09:48:46

Every market the government touches - it destroys.

Ain’t that the truth. Except after the next fire, hurricane or flood you scream out: “Where’s the gubermint?”
Why can’t you and the little lady section up the oak that fell on your roof, without asking for help? Shit, this ain’t Purrto Reco.
Get that lazy son of yours, who doesn’t qualify for a mortgage, to help ya. He’s shouting ; “You need a Stihl” and you respond back: “Steal what?”
Can I borrow a Marburro cig from you, till payday?

Comment by 2banana
2018-02-18 10:21:23

Spoken like a true liberal.

Can’t do nothing without the government. Nothing.

Personal data point.

A somewhat recent Hurricane put a tree right thru my house.

I got a tree company out the very next day to remove the tree

I put up the tarps

I got the insurance company out to the house for their assessment.

I hired the contractors and got the house repaired.

And then there was the free sh*t army who could NOT even FEED themselves after two days without power…

Comment by alphonso bedoya
2018-02-18 12:44:47

I don’t fault the govt for everything and I’m not a label. I liked Carter’s morality and Goldwater’s ethos.
I was hurt by Hurricane Andrew(1993), but, the govt and insurance back then, came through.
I watched my neighbors, however, GAME their insurance and I knew things would change for future storms. (State Farm cut policies in South Florida and a new insurer, Citizen’s, came into existence.)
For this last storm, they gave people $300 and left.

(Comments wont nest below this level)
Comment by oxide
2018-02-18 13:34:03

To be fair, the government didn’t destroy health insurance for seniors over the age of 65. There was little private health insurance to destroy.

Even the original farm subsidies for corn and wheat were well-placed. After WWII, people were still rather poor and definitely malnourished; they just couldn’t get that many calories. The subsidies created the abundance and healthier population that we saw in the 1950s. Of course, since then the system has been gamed to death, with the rise of prepared foods, the fall of the family farm and everything being stuffed with sugar and nasty vegetable oils (which IMO are the major culprit for obesity).

Comment by alphonso bedoya
2018-02-18 15:03:38


(Comments wont nest below this level)
Comment by In Colorado
2018-02-18 13:01:05

A college degree is now so expensive that for most students it requires massive borrowing.

FWIW, there are still options, like doing the first two years at a cheap JC, then finish at a State U.

The thing is, it’s become a lot more competitive to get into state, so a lot of students turn to 2nd and 3rd tier private schools, who will take anyone, and those schools are expensive.

Now, a 25-year-old with massive student debt probably doesn’t qualify for a mortgage.

Even if they graduated debt free, few can afford what Apt 401 likes to call a “500K starter home”.

Comment by GreenEggsAndSpam
2018-02-18 16:00:14

Third tier schools probably shouldnt even exist. More kids need to get into the trades rather than get a worthless degree at NoNameU while racking up massive debt. Of course it means they and their lame azz helicopter parents will have to face up to the reality that their crotch fruit arent as special as theyve been propagandized to believe, and that much of the success of their parents was a result of a unique time in history where the US was just about the only country left standing.

With less unqualified kids going to college the remaining will have to lower their prices. Those golden handcuff pensions will have to get whittled down.

Otherwise we just keep doing what we’re doing and end up full Weimar.

Comment by BlackSwandive
2018-02-18 17:13:48

I agree with everything except going Weimar. We’re the least smelly in a world that reeks, and will be the last country standing again.

But yeah, going into the trades is a much better decision for both financial and practical purposes. Earning $50k+ a year with no student debt vs. $27K at Starbucks with six figures of debt is a no-brainer.

(Comments wont nest below this level)
Comment by Mafia Blocks
2018-02-18 14:45:54

Housing my good friends.

Herndon, VA Housing Prices Crater 13% YOY


Comment by 2banana
2018-02-18 07:46:01

Q: How do yo make an insane housing bubble inflate even larger?

Q: How do you buy a home you can’t afford?

A: Drum roll for Mr Banker…


Silicon Valley Explores A New Investment: Your Home
Startups backed by deep-pocketed investors are looking at a new way to profit from rising home prices
The Wall Street Journal - Peter Rudegeair and Christina Rexrode - Feb. 18, 2018

Some well-funded startups have an unusual pitch for homeowners strapped for cash: Let’s own this house together.

A handful of companies, including those backed by marquee Silicon Valley names such as Andreessen Horowitz and Mark Zuckerberg’s philanthropic organization, are experimenting with a product that essentially lets them take an ownership position in a house along with the homeowner. The agreements, called shared-equity contracts, provide a new way for investors to get exposure to rising home prices across the U.S.

Shared-equity products are aimed at new buyers who need help with a down payment, or current homeowners looking for an alternative to a cash-out mortgage refinancing or a home-equity loan. The first use has caught the attention of mortgage-finance giant Freddie Mac , which recently agreed to buy loans on properties where one firm, Unison Agreement Corp., contributes to the down payment.

In those cases, home buyers get money for part of their down payment in exchange for pledging some of the home’s future price appreciation. The firms market them as a better alternative to low-down-payment loans, since they can give consumers more buying power without requiring them to take out pricey mortgage insurance

Shared-equity contracts can help home buyers unload some risk of a decline in property values, but they can also end up being expensive if housing prices rise. “The homeowners who are going to do this are the ones who don’t have a lot of choices,” said Allan Weiss, who founded a home-price analytics firm that bears his name.

Ms. Mann, 54, said banks rejected her for loans because her sources of income—including royalties on the sale of books written by her grandfather, Nobel Prize-winning author Thomas Mann —were unpredictable.

After getting funds from Point, Ms. Mann used the money to pay off debt. Home prices were rising in her neighborhood, though, and the longer she waited to pay back Point, the more the firm would make. She decided to exit her contract last month, using money she got refinancing her existing mortgage. Ultimately, she wound up paying Point around $120,000. “They made good money with me,” Ms. Mann said.

High-school biology teacher Sara Shayesteh and her husband, Isaac, used an agreement with Landed to cover about half their down payment for their home in San Mateo, Calif. That followed a discouraging search for homes where they kept getting bested by buyers with bigger down payments.

The Shayestehs have 10 years to repay Landed, but can choose to do so after one year. They said it feels odd to have an investor own part of their house but are grateful for the arrangement. “We’re trying to live in a crazy area with a market,” said Ms. Shayesteh, 32. “There’s no other way we could have purchased a property that would have met our needs.”

Comment by Mr. Banker
2018-02-18 08:32:32

“Some well-funded startups have an unusual pitch for homeowners strapped for cash: Let’s own this house together.”

Bahahahaha … stop making payments to the bank and you just may learn very quickly just who it is that really “owns” the house.

“Let’s own this house together” really means “Let’s become debt slaves together. Let’s take all the risks and send huge chunks of any rewards to the bank each and every month for decades”.

Comment by MacBeth
2018-02-18 08:42:52

Fools and their money are soon parted.

What does that say about we, the taxpayer?

Comment by oxide
2018-02-18 13:38:35

So who pays if the value drops? I bet some poor law intern wrote the fine print for that.

And if Ms. Mann’s career choice is just sitting and waiting for royalty checks to come in, why is she living in CA? (?) She should have gone Oil City long ago.

Comment by In Colorado
2018-02-18 14:39:11

As awful as it is to live in California these days the locals think it’s still paradise on earth.

“Why would you ever want to leave?”

I wish I had a dollar for every time I heard someone say that.

Comment by GreenEggsAndSpam
2018-02-18 16:02:27

Shylocks gonna shylock. Should anyone be surprised at this point, are are they just too afraid to point out the obvious?

Weimar, people - and all that comes after. History rhyming like Tupac.

(Comments wont nest below this level)
Comment by BlackSwandive
2018-02-18 16:51:14

If you have money, California is hard to beat. It’s an awesome state in many ways. The politics, not so much…

(Comments wont nest below this level)
Comment by Mafia Blocks
2018-02-18 17:34:38

With California being the most impoverished state in the US, ‘awesome’ is a leap.

Comment by redmondjp
2018-02-20 11:09:05

You’re just jealous that you don’t live there, Mortgage Watch.

Comment by Mafia Blocks
2018-05-02 05:47:09

Hello my good friend.

Ashford, WA Housing Prices Crater 27% YOY


Comment by rms
2018-02-18 23:11:49

“She should have gone Oil City long ago.”

There is Oildale just across the Kern river from Bakersfield, CA.

Comment by Apartment 401
2018-02-18 08:56:33

Realtors are liars.

Comment by jeff
2018-02-18 09:08:46

Is Housingdog resting today?

Comment by Housing Dog
2018-02-18 11:02:43

I’m working

Comment by jeff
2018-02-18 13:34:09

“I’m working”

Are you an Amtrak Locomotive Engineer?

(Comments wont nest below this level)
Comment by Apartment 401
2018-02-18 16:38:29
Comment by Mr. Banker
2018-02-18 09:10:16

“‘Reductions of this size are not large enough to cause cash-rented farmland to be profitable,’ he says. ‘However, declines in cash rents resulting in profitability are projected to be long and protracted. As long as corn prices remain below $4 per bushel, there will be downward pressures on cash rents.’”

Here’s a chart of corn prices. Notice the wondeful corn prices of 2011 and 2012 and notice the corn prices of today.

A lesson: What high prices for corn doeth giveth to prices of farm land, low prices for corn doeth taketh away.


Comment by OneAgainstMany
2018-02-18 13:35:15

Americans need to drink more soda! Do you part to support HFCS and high corn prices!

Comment by jeff
2018-02-18 09:25:31

Worth another look.

Comment by rms
2018-02-18 03:55:45

Here’s how the upper 20% get around…

2018 Ford F-350 Limited - Only $82,685

Comment by alphonso bedoya
2018-02-18 10:00:17

This vehicle won’t be on the lot long!

In Miami…one hour tops, after 2am.

Comment by In Colorado
2018-02-18 13:02:36

Does it come with its own refinery?

Comment by jeff
2018-02-18 13:20:37

Payment Calculator
Based on: 60 months and $0 down

Comment by OneAgainstMany
2018-02-18 13:37:54

3x what I pay in rent. Can you sleep in that?

Comment by Prime_Is_Contained
2018-02-19 00:04:05

Wait, where are you located, OAM? I haven’t seen $500 rent since… well, let’s just say it’s been a LONG time.

(Comments wont nest below this level)
Comment by oxide
2018-02-19 05:50:33

I thought it was southern Utah? At random I looked up St. George. The only sub-$500 I saw was to share with 5 other roomies.

Comment by OneAgainstMany
2018-02-19 08:24:46

Yeah, we have a good deal. It’s not a normal rent. Average rent around here is going to be about $900-1000 for a 2b/2b.

Comment by OneAgainstMany
2018-02-19 08:27:27

Having said that, about 45 min north of where we live, you can still find 2b/2b or 2b/1b for around $500:


Comment by BlackSwandive
2018-02-18 16:53:35

That’s the price of a house in most small towns, pre-bubble of course.

Comment by oxide
2018-02-18 17:27:12

You could get a really nice tiny house for $80K. Of course, you’d need another $80K truck to tow the thing around…

Comment by BlackSwandive
2018-02-18 21:42:01

And then the real problem - where are you going to put it?

(Comments wont nest below this level)
Comment by oxide
2018-02-19 05:55:13

They always gloss over that. Usually tiny housers live in a friend’s or mommy’s backyard, or in an RV or trailer park. And they all “work from home,” because tiny homes are discouraged in any area near real jobs. It’s probably not a bad lifestyle choice if you really can buy the $60K house outright, gig from home and live on $25-30K/year. Just don’t plan to retire…

Comment by Professor 🐻
2018-02-18 09:50:31

“These actions likely will create market bubbles or excessive movements in financial asset classes like equities or stocks, fixed income or bonds, cash equivalents or money market instruments, real estate, commodities, and fine arts.”

I am hoping for a guitar bubble, as I bought myself a nice Taylor last year.

Comment by drumminj
2018-02-18 20:43:23

I bought myself a nice Taylor last year

What’d ya get? I have a 410-R that I hardly play, sadly. Love the sound and playability of Taylors though…

Comment by Mafia Blocks
2018-02-18 20:46:02

My buddy gave me a guitar years ago. I did a Pete Townshend maneuver on it.

Comment by Professor 🐻
2018-02-18 22:04:04

414ce. It’s a thing of beauty. I’m priced out of the market forever for a violin of comparable quality, which would easily cost over $100K (see post above about the bubble in collectibles!).

I start my day off with a few arpeggios and finger picking exercises to help regain my chops after many decades away from the guitar.

Comment by drumminj
2018-02-19 08:35:54

414ce. It’s a thing of beauty

Nice! Ironically that’s the guitar I had originally purchased, but then traded for the 410 a year later as I found I preferred the fuller sound of the dreadnought. There was something about the sound of the 414 though that was enchanting.

(Comments wont nest below this level)
Comment by Professor 🐻
2018-02-18 10:06:04

“Chosen Option: They could globally financially engineer an extended country-by- country growth cycle through accommodative government and central bank intervention policy activities.”

Is the extant policy of blowing serial bubbles, then propping them up again when they inevitably collapse, really desirable or sustainable?

For instance, what about intergenerational equity? Have the Millennials been collectively thrown under the bus in order to prop up the value of the older generation’s houses?

And what about the incentives that have been created to waste vast amounts of societal resources on useless speculation in luxury apartment development or cryptocurrency? People are wasting their lives on activity with no societal value… Keynesian ditch digging at its worst.

Meanwhile a growing army of homeless people can’t manage to get a job that pays enough to get them onto the bottom rung of the rental market, and live under bridges as a result.

Sum ting wong.

Comment by Professor 🐻
2018-02-18 12:19:15

From the first article Ben posted:

“10-year Treasury Yield: Closing above 3.00 starts the process of considering a 36 year trend reversal, difficult presently to see the 10-year above 3.30 this year, but that certainly can change (Charts 1 to 3).”

I don’t know how one predicts things like rising bond yields. For one, what if the Fed continues to drag it’s feet. Would yields go higher or lower then?

And what if the yield curve inverts, as some times occurs late in the business cycle?

Comment by OneAgainstMany
2018-02-18 13:42:03

For instance, what about intergenerational equity? Have the Millennials been collectively thrown under the bus in order to prop up the value of the older generation’s houses?

This is definitely the case, but it applies to millennials who are buying at these inflated prices. I refuse to be the sucker who buys a boomer’s overpriced house. There could be a reckoning coming, but prices can remain irrational a lot longer than millennials can afford to rent. And children on the way too!

I am beginning to think the only viable solution to popping the bubble is the great Ayn Rand-esque boycott a la Atlas Shrugged. Central banks aren’t going to pop the bubble, and rents keep following housing prices up. So unless people start living in tents, RVs, or cars en masse, Americans are stuck paying increasingly higher prices until the reckoning comes. And it can’t come soon enough in my opinion.

Comment by tj
2018-02-18 14:27:12

So unless people start living in tents, RVs, or cars en masse, Americans are stuck paying increasingly higher prices until the reckoning comes.

the housing bubble is much different than the stock ‘bubble’. the housing bubble will crash on its own because, as HA says, wages can’t rise fast enough to keep up with prices. like trade ‘deficits’, stock ‘bubbles’ could, in theory, be perpetual.

Comment by MacBeth
2018-02-18 17:43:58


Yours is the best post I’ve read thus far this month, tj.

(Comments wont nest below this level)
Comment by Professor 🐻
2018-02-18 15:38:12


Living in cars, working for Amazon: meet America’s new nomads
Jessica Bruder
Rising rents are leading Americans to live in cars and other vehicles, writes Jessica Bruder, the author of Nomadland
Sat 2 Dec 2017 10.42 EST
Last modified on Sat 2 Dec 2017 11.02 EST

Millions of Americans are wrestling with the impossibility of a traditional middle-class existence. In homes across the country, kitchen tables are strewn with unpaid bills. Lights burn late into the night. The same calculations get performed again and again, through exhaustion and sometimes tears.

Wages minus grocery receipts. Minus medical bills. Minus credit card debt. Minus utility fees. Minus student loan and car payments. Minus the biggest expense of all: rent.

In the widening gap between credits and debits hangs a question: which bits of this life are you willing to give up, so you can keep on living?

During three years of research for my book, Nomadland: Surviving America in The Twenty-First Century, I spent time with hundreds of people who had arrived at the same answer. They gave up traditional housing and moved into “wheel estate”: RVs, travel trailers, vans, pickup campers, even a salvaged Prius and other sedans. For many, sacrificing some material comforts had allowed them to survive, while reclaiming a small measure of freedom and autonomy. But that didn’t mean life on the road was easy.

Comment by SandalTanLines
2018-02-18 16:22:32

“So unless people start living in tents, RVs, or cars en masse…”

It may not even take that much. Just imagine what would happen if a whole generation of young people decided, under no circumstances, to go into debt to own things.

Comment by OneAgainstMany
2018-02-18 18:15:18

You mean, to not go into debt to own things?

(Comments wont nest below this level)
Comment by SandalTanLines
2018-02-18 19:44:52

Why yes, that’s what I meant! :)

*”…if a whole generation of young people decided, under no circumstances, to NOT go into debt to own things.”

Comment by OneAgainstMany
2018-02-18 20:37:16

I figured as much! :)

Comment by Professor 🐻
Comment by BlueSkye
2018-02-18 20:25:50

You mean, to not go into debt to own things…

That’s easy. They’d be rich. They would need little and want less. They would accumulate wealth rather than dissipate it. They could help people in need rather than be helpless victims themselves.

(Comments wont nest below this level)
Comment by Mafia Blocks
2018-02-18 20:43:40

DebtDonkeys willfully made themselves helpless. Victims they’re not but in most cases they had little to no fortitude before they willfully disarmed themselves.

Comment by BlackSwandive
2018-02-18 16:56:04

Rents are up over 50% in the past few years in some places. Wages not so much…

Comment by Professor 🐻
2018-02-18 10:12:31

“Americans don’t need any more milk.”

I stopped drinking it over a decade ago when I realized that I am an ursine, and that drinking bovine milk made me ill.

Comment by BlackSwandive
2018-02-18 16:57:41

I’ve cut down greatly.

Comment by In Colorado
2018-02-18 18:11:58

As I have aged, lactose has become an issue. Of course, there are workarounds for that.

Comment by oxide
2018-02-18 18:32:06

Same here. I can have some dairy but there’s a limit, especially for yogurt.

(Comments wont nest below this level)
Comment by Professor 🐻
2018-02-18 10:29:13

Are you HODLing Treasurys as yields retrace to 2010 levels? That’s a lot of retracement!

US 10-year yield jumps to new 4-year high of 2.92% after hot inflation report
- The yield on the 10-year Treasury note jumped to a four-year high of 2.92 percent.
- The Consumer Price Index (CPI) rose 0.5 percent last month against projections of a 0.3 percent increase.
- “I think inflation’s back, at least in a moderate sense,” said Kathy Jones, chief fixed income strategist for the Schwab Center for Financial Research.
Thomas Franck | Alexandra Gibbs
Published 5:08 AM ET Wed, 14 Feb 2018
Updated 3:50 PM ET Wed, 14 Feb 2018
Fed will continue to keep tightening once a quarter: Economist

The yield on the 10-year Treasury note jumped to 2.92 percent, its highest level since January 2014, and slightly above the levels that sparked a stock-market sell-off earlier in the month. The move higher came after the government reported inflation in January rose by more than expected.

The yield has clawed its way from a low of 2.65 percent touched last week in the wake of a stock market plunge that sent investors back into Treasurys temporarily. It first hit a four-year high of 2.902 percent on Monday.

The 7-year note yield hit a high of 2.826 percent, its highest level since April 2011, when it yielded as high as 2.830 percent. Meanwhile, the U.S. 5-year yield added about 10 basis points to a high of 2.639 percent, its highest level since April 2010 when it yielded as high as 2.681 percent.

Comment by BlackSwandive
2018-02-18 16:59:16

When will we see 10% on savings accounts?

Comment by Professor 🐻
2018-02-18 10:36:39

Any thoughts on how long it will take 10-year Treasury yields to reach 3.05 percent? My guess: by February 28. Who wants to be a sitting duck in Treasurys while the Fed goes through its long-announced tightening cycle?

Comment by Professor 🐻
2018-02-18 23:50:53

Tell us what you think: Where could rising yields do the most damage?
- Rising bond yields contributed to a violent sell-off in the stock market earlier this month.
- The concern among investors is that the Federal Reserve might start increasing interest rates much faster than what the market anticipates and may do it for a longer period.
- Last Thursday, U.S. government bond yields rose amid new economic data that provided further evidence of inflation pressure.
Saheli Roy Choudhury
Published 34 Mins Ago

Movements in the bond market earlier this month contributed to acorrection in the stock market as investors feared that the Federal Reserve might raise interest rates faster than expected.

Since then, stocks have recovered some ground, but there are still concerns about what rising bond yields could mean for interest rates — bond yields usually rise when the market expects the future inflation rate to increase.

The idea is that if the Fed thinks inflation is rising too fast, it might start increasing interest rates much faster than what the market anticipates and may do it for a longer period. As a result, that could drive dollars away from stocks and push up borrowing costs for companies and investors.

That is because years of very low interest rates made risky assets like stocks more appealing to investors. Meanwhile, rising inflation could also eat into profit margins.

Higher inflation could also potentially halt the U.S. government’s plan to stimulate growth in various parts of the economy.

Last Thursday, U.S. government bond yields rose amid new economic data that provided further evidence of inflation pressure.

For this week’s Trader Poll, tell us where rising bond yields could do the most damage.

Comment by Professor 🐻
2018-02-18 10:41:09

Here’s where Credit Suisse sees the risk of a bear market for bonds
- A major trigger of last week’s market sell-off was the steady but unrelenting climb in U.S. Treasury yields.
- Credit Suisse’s Global Head of Technical Analysis believes the surpassing of 3.05 percent on the 10-year U.S. Treasury yield could signal a bond bear market.
- Many experts hold that no specific level necessarily means a bear market, and that judgement is subjective.
Natasha Turak | @NatashaTurak
Published 11:01 AM ET Tue, 13 Feb 2018 Updated 1:48 PM ET Tue, 13 Feb 2018 CNBC.com

A major trigger of last week’s market sell-off was the steady but unrelenting climb in U.S. Treasury yields, which sparked fears of higher borrowing costs, impending interest rate rises and generally bad news for most equity traders.

But the bond bear market is not yet upon us, says Credit Suisse’s Global Head of Technical Analysis David Sneddon, who believes the tipping point could be when the 10-year U.S. Treasury yield surpasses 3.05 percent.

Comment by Professor 🐻
2018-02-18 10:57:38

Have prices surged and supply dwindled in your local housing market?

Comment by Professor 🐻
2018-02-18 11:25:18

There’s never been a worse time to buy… except for maybe in 2006.

Inventory for home buyers across US at 20-year low
In this Thursday, March 30, 2017 photo, Kathleen Mulcahy sits in her recently sold one-bedroom condo, on which she received nearly two dozen offers and sold for more than $100,00 over her asking price, in Seattle’s Belltown neighborhood. (Elaine Thompson/AP)
By Alex Veiga
The Associated Press
April 10, 2017 - 2:12 am

Anyone eager to buy a home this spring probably has reasons to feel good. The job market is solid. Average pay is rising. And mortgage rates, even after edging up of late, are still near historic lows.

And then there’s the bad news: Just try to find a house.

The national supply of homes for sale hasn’t been this thin in nearly 20 years. And over the past year, the steepest drop in supply has occurred among homes that are typically most affordable for first-time buyers and in markets where prices have risen sharply.

In markets like San Diego, Boston and Seattle, competition for a dwindling supply has escalated along with pressure to offer more money and accept less favorable terms.

“Sellers will have the edge again this year,” said Ralph McLaughlin, chief economist for Trulia, a real estate data provider. “Homebuyers are really going to be scraping the bottom of the barrel as far as housing choice is concerned.”

Comment by Professor 🐻
2018-02-18 11:33:10

Water, water everywhere nor any drop to drink.

US home construction tumbled 8.2 percent in December
The Associated Press
Published: Jan 18th, 2018 - 8:54am (EST)
Updated: Jan 18th, 2018 - 8:54am (EST)

WASHINGTON (AP) — Groundbreakings on new homes fell 8.2 percent in December, with builders ending 2017 by slowing down their construction of single-family houses.

The Commerce Department said Thursday that the monthly decline put U.S. housing starts at a seasonally adjusted annual rate of 1.19 million units. Almost all of the decrease came from builders beginning work on fewer single-family houses, a reversal from the robust gains reported in October and November.

The pullback is taking place even with prospective buyers competing for a dwindling pool of homes for sale, which has caused prices to surge faster than wage growth. The hot housing market is being fueled by a strengthening job market. The unemployment rate is holding steady at a 17 year-low of 4.1 percent, and mortgage rates have hovered at attractive levels in recent weeks.

For all of 2017, housing starts have risen 2.4 percent. Single-family house construction drove the entire annual increase, while the building of apartment complexes plunged last year as more renters appear to be seeking properties to buy. The slight gains in construction have been unable to fully offset the drastic fall over the past year in the number of existing homes put up for sale.

Housing starts in December fell in the Northeast, Midwest, South and West.

Comment by palmetto
2018-02-18 14:07:22

“Have prices surged and supply dwindled in your local housing market?”

I’m following two markets here in Fla, the one where I’m living and the one I left behind. In the old nabe, I’m seeing a surge in inventory and a surge in prices. The lower end is about up to where it was at the peak of bubble 1.0., from what I can see.

In the market where I’m living now, I’m seeing a small surge in inventory, but lower prices. Whereas two weeks ago, even a week ago, prices were high. Now they’re starting to drop.

People do tend to put their homes on the market during “the season” here in Florida, so that accounts for the surge in both inventory and prices. However, now that the season only has about six weeks left to go, there is a slight whiff of desperation.

Anyone who has a house under contract heading into closing is keeping their fingers crossed with some anxiety. There’s a general feeling that, going forward, prices may no longer be this good.

This is all anecdotal of course.

Comment by Professor 🐻
2018-02-18 16:09:25

That first article I posted was from last April. Given the signs the Fed may finally begin pulling the trigger on rate hikes instead of firing endless rounds of blanks, I am guessing that 2017 may prove to have been the peak year of inventory squeeze. So long as homeowners are seeing prices increase at bubblelicious double-digit rates of annual appreciation, there is a strong incentive to postpone a sale. Once prices start to level off or fall, the inventory squeeze could quickly morph into a glut, as there will be few buyers until prices fall back in line with incomes. No investor wants to HODL a falling knife.

Comment by oxide
2018-02-18 18:23:39

Tons of supply in the MD burbs of DC, but next to nothing under $325K or so. Here’s what a sub-$300K looks like:


It appears to “need work.”

Comment by palmetto
2018-02-18 20:43:55

The back of that is truly hideous. The same house in Roanoke would be less than $50,000.

(Comments wont nest below this level)
Comment by oxide
2018-02-19 06:03:24

The back of the house is an amateur screened-in porch or addition. The illegals fancy themselves to be Norm Abram and slap up some cheap stuff from Home Depot, to make a room which they rent to an entire family. Of course all the limousine libs who love them their open borders don’t live in the same neighborhoods. You should see the trash they produce.

Comment by Mortgage Watch
2018-02-18 11:06:26

Tarrytown, NY Housing Prices Crater 5% YOY


Comment by Saltwater Catfish
2018-02-18 11:43:02

The CIC doth protest too much, methinks.

Comment by Professor 🐻
2018-02-18 16:24:54

I am quite impressed with the sea change from 2004, when posters on the Housing Bubble Blog were ridiculed for even suggesting the mere possibility of asset bubbles existing, through 2018, when even Sir Alan Greenspan openly acknowledges the problem.

Ladies and gentlemen, this is significant progress towards ending the Housing Bubble.

Comment by Professor 🐻
2018-02-18 16:26:26

David Rosenberg: Fed taking on role of ’serial bubble blower’
- David Rosenberg, chief economist and strategist at Gluskin Sheff, warns that the Fed may be continuing to inflate a bubble in stocks.
- The observation came the same day as stocks set still new records as the ninth anniversary of the bull market approaches in March.
Jeff Cox | @JeffCoxCNBCcom
Published 2:39 PM ET Thu, 11 Jan 2018 Updated 10:39 AM ET Fri, 12 Jan 2018 CNBC.com
New way of thinking about inflation from the Fed

The latest leg of the bull market in stocks could have a familiar impetus — a Federal Reserve unlikely to rock the boat, particularly while many of its members are still learning the vagaries of central banking.

With Jerome Powell about to take over as chairman and most of the seven-member Fed board of governors to be new appointees, the tendency will be toward safe decisions and away from anything likely to unsettle Wall Street, said David Rosenberg, chief economist and strategist at Gluskin Sheff.

“The bull market continues unabated and is taking on a speculative tone in the process,” Rosenberg said in his daily note to clients Thursday.

Those observations came the same day as stocks set still new records as the ninth anniversary of the current bull market approaches in two months. Major indexes posted gains better than 0.5 percent in afternoon trading.

In his note, Rosenberg wondered whether the Fed will “remain a serial bubble blower.”

The criticism is familiar: Through low interest rates and trillions of dollars in bond buying, the Fed has created a credit bubble of low-cost cash coursing through the economy and, more particularly, risk assets like stocks and corporate bonds.

Though the Fed has been in a slow rate-hiking pace since December 2015 — the December 2017 increase was the fifth in the current cycle — its benchmark funds rate remains targeted at just 1.25 percent to 1.5 percent.

Rosenberg said the latest run-up in stocks may be due to a market that believes the new Fed, with Powell at the helm, won’t be in a hurry to raise rates. A hawkish central bank has been near the top of most Wall Street strategists’ lists of what could go wrong in 2018.

“The elephant in the living room remains the central banks,” Rosenberg wrote. “The prevailing view is that balance sheet tapering will be mild and that Jerome Powell will prove to be a dove. This may well be the most important psychological driver for the market — that a new and inexperienced Fed will not take the punchbowl away in the coming year.”

Comment by Professor 🐻
2018-02-18 16:29:39

Business #​Economy
Oct 31, 2017 @ 08:00 AM
How The Greenspan And Bernanke Fed Created Bubbles
Steve Hanke, Contributor

The Federal Reserve has a long history of creating aggregate demand bubbles in the United States. This was true during the era of Alan Greenspan and Ben Bernanke. In the ramp up to the Lehman Brothers bankruptcy in September 2008, the Fed not only created a classic aggregate demand bubble, but also facilitated the spawning of many market-specific bubbles in the housing, equity, and commodity markets. True to form, Fed officials have steadfastly denied any culpability for creating the bubbles that so spectacularly burst during the Panic of 2008-09.

If all that is not enough, Fed officials, as well as members of the U.S. Congress, have embraced the idea that stronger, more heavily capitalized banks are necessary to protect taxpayers from future financial storms. This embrace, which is reflected in the Bank for International Settlements’ capital requirements regime and the Dodd-Frank Act, represents yet another great pro-cyclical monetary policy error. In its stampede to make banks “safer,” the establishment created a policy-induced doom loop that has greatly slowed the recovery from the Great Recession. Indeed, new bank regulations have suppressed the money supply, broadly measured, and economic activity. This has rendered banks less “safe.”

Just what is an aggregate demand bubble? This type of bubble is created when the Fed’s laxity allows aggregate demand to grow too rapidly. Specifically, an aggregate demand bubble occurs when nominal final sales to U.S. purchasers (GDP – exports + imports – the change in inventories) exceeds a trend rate of nominal growth consistent with “moderate” inflation by a significant amount.

Comment by Professor 🐻
2018-02-18 16:33:33

Greenspan was the chief bubble deniar back in 2004.

Former Fed Chair Alan Greenspan Sees Bubbles in Stocks and Bonds
By Jeanna Smialek
January 31, 2018, 12:23 PM PST
- The bond bubble will be the critical one, Greenspan says
- Notes that the U.S. is working toward higher interest rates

“The bond market bubble will eventually be the critical issue,” Greenspan tells Bloomberg Television.

The man who made the term “irrational exuberance” famous says investors are at it again.

“There are two bubbles: We have a stock market bubble, and we have a bond market bubble,” Alan Greenspan, 91, said Wednesday on Bloomberg Television with Tom Keene and Scarlet Fu. Greenspan, who led the Federal Reserve from 1987 until 2006, memorably used the phrase to describe asset values during the 1990’s dot-com bubble.

Greenspan’s comments come as stock indexes remain near record highs, despite selling off in recent days, and as the yields on government notes and bonds hover not far from historic lows. Interest rates are expected to move up in coming years as the Fed continues with a campaign to gradually tighten monetary policy.

“At the end of the day, the bond market bubble will eventually be the critical issue, but for the short term it’s not too bad,” Greenspan said. “But we’re working, obviously, toward a major increase in long-term interest rates, and that has a very important impact, as you know, on the whole structure of the economy.”

Comment by Professor 🐻
2018-02-18 16:37:50

Why the Stock Bubble Will Burst Quickly: Yale’s Shiller
By Mark Kolakowski | January 24, 2018 — 6:00 AM EST

A sudden and steep stock market correction can come at any time, and without any warning or obvious cause, according to Robert Shiller, Yale University economics professor and Nobel Laureate, in remarks on CNBC. While many investors wonder what will trigger a correction of 10% or more, if not a full-fledged bear market decline of at least 20%, Shiller told CNBC, “it doesn’t need a trigger, it’s the dynamics of bubbles inherently makes them come to an end eventually.”

Shiller also told CNBC that the long bull market in the U.S. is part of a “world story…that’s driving markets up at this time.” Thus, just as an upbeat global economic picture has been a major factor sending U.S. stocks upward, negative news from anywhere around the planet could trigger a crisis of confidence among U.S. investors. (For more, see also: 5 Global Risks That Could Hammer Stocks in 2018.)

Frenzied Buying

Since its previous bear market low, reached in intraday trading on March 6, 2009, the S&P 500 Index (SPX) has more than quadrupled in value, gaining 326%. Over the last three years, since the close on January 23, 2015, the increase has been 38%.

Among the many indicators that raise fears among conservative investors today is the growing popularity of momentum investing, in which the hottest, most expensive stocks are being chased regardless of fundamentals, sending their valuations up to yet more dizzying heights. Those with long memories will recall that the dotcom bubble of the late 1990s grew as a result of a similar mindset among investors. Indeed, another parallel between the dotcom bubble and today is the crowding of investors into richly-priced tech stocks. (For more, see also: Why Stock Investors Play the Risky ‘Momentum’ Game.)

‘Nasty Surprise’

While stock prices have been buoyed by robust corporate earnings reports and forecasts, analysts at Paris-based Societe Generale SA have sounded their own word of warning, Bloomberg reports. Looking at the S&P 500 minus financial and energy stocks, they find that the growth rate in operating cash flow has been declining steadily since 2013, dropping to a projected 0% in 2018. In concert with a flattening yield curve, which normally signals an upcoming recession, this deterioration of cash flow means that the “equity markets could be in for a nasty surprise,” as Bloomberg quotes from the SocGen report.

Comment by Professor 🐻
2018-02-18 16:41:37

February 06, 2018 - 03:45 PM EST
Circumstances around Yellen’s departure akin to Greenspan’s
By Stephen Stanley, opinion contributor
The views expressed by contributors are their own and not the view of The Hill

Janet Yellen’s tenure as Federal Reserve Chair ended Friday, and Jay Powell was sworn in as Fed Chairman Monday. Powell’s first day will long be remembered as the day when the stock market plunged by over 4 percent, throwing a scare into investors.

This should certainly serve as a wake-up call at a time when the economy and financial markets seemed to be on cruise control.

It also provides a little different tone to the narrative of Yellen’s time as Fed chair. Yellen presided over four years during which the economy improved and asset prices appreciated sharply.

As a result, she has been widely praised as successfully navigating the economy through potentially rough waters as the Fed finally began to normalize monetary policy after seven years of zero rates and several rounds of asset purchases.

However, it is far too soon to render a verdict or put a grade on Yellen’s tenure. Of course, the Federal Reserve can go a long way toward ensuring a favorable economic environment for a while simply by running an extremely easy monetary policy for an extended period.

The chickens will eventually come home to roost, but it often takes years for them to complete the journey. In Yellen’s case, it remains to be seen whether she did a good job as Fed chair or not.

Comment by azdude
2018-02-18 19:03:21

did u know the romans could by a fine toga for an oz of gold?

Comment by Professor 🐻
2018-02-18 16:53:25

A Crisis Is Coming
All the ingredients are in place for a catastrophic economic and financial market crisis.
By Desmond Lachman, Opinion Contributor
Feb. 14, 2018, at 7:00 a.m.

My long career as a macro-economist both at the IMF and on Wall Street has taught me that it is very well to make bold macro-economic calls as long as you do not specify a time period within which those calls will occur. However, there are occasions, such as today, when the overwhelming evidence suggests that a major economic event will occur within a relatively short time period. On those occasions it is very difficult to resist making a time-sensitive bold economic call.

So here goes. By this time next year, we will have had another 2008-2009 style global economic and financial market crisis. And we will do so despite Janet Yellen’s recent reassurances that we would not have another such crisis within her lifetime.

There are two basic reasons to fear another full-blown global economic crisis soon: The first is that we have in place all the ingredients for such a crisis. The second is that due to major economic policy mistakes by both the Federal Reserve and the U.S. administration, the U.S. economy is in danger of soon overheating, which will bring inflation in its wake. That in turn is all too likely to lead to rising interest rates, which could very well be the trigger that bursts the all too many asset price bubbles around the world.

Comment by azdude
2018-02-18 18:44:14

when bondholders want their principal back it will be a madoff moment.

Comment by Professor 🐻
2018-02-18 19:31:30

That’s one of the reasons why central bankers have a printing press technology.

(Comments wont nest below this level)
Comment by Professor 🐻
2018-02-18 19:35:35

Owning a fiat currency printing press means never having to say you’re sorry about the inability to make good on your debts.

Comment by azdude
2018-02-18 19:45:32

haircut or inflation? those r your two options.

Comment by Professor 🐻
2018-02-18 20:09:40

Would you consider printing the money to make good on debt obligations while issuing new debt to fund current financial needs to be inflationary?

Because that’s what is happening.

Comment by azdude
2018-02-19 05:48:05

Holders of debt will be forced to take less than what is owed, haircut, or be paid off by the printing press.In the latter case their dollars will not have a lot less purchasing power so it may be better to take the haircut. I guess it may come down to how much the haircut will be?

Yes the FED’s buying of bonds is inflationary but it seems that a lot of the inflation has stayed in financial assets because the money never made it to the minions.

Printing money transfers real wealth.

Comment by Professor 🐻
2018-02-18 20:17:00

There seems to be universal consensus on the presence of massive asset bubbles, but great confusion regarding how they will unwind.

Opinion: The heightened danger of the next recession
By Martin Feldstein
Published: Jan 26, 2018 1:35 p.m. ET
The Fed won’t be able to stimulate demand, so it’ll be up to Congress
The Federal Reserve may not be able to cut rates enough to stimulate demand in the next recession.

CAMBRIDGE, Mass. (Project Syndicate) — The United States’ economy is roaring ahead, and above-trend GDP growth looks set to continue in 2018 and 2019. Although the expansion is in its ninth year, there is no sign of an imminent slump.

The greatest risk to the economic expansion is the fragility of the financial sector. A decade of excessively low interest rates has pushed asset prices to extreme heights. The real yield on 10-year Treasury bonds TMUBMUSD10Y, +0.00% is approximately zero. The price-earnings ratio of the S&P 500 share index SPX, +0.04% is about 70% above its historic average.

If these and other asset prices reverted to their historic benchmarks, investors would suffer losses in excess of $10 trillion, leading to declines in consumer spending and business investment.

Comment by Professor 🐻
2018-02-18 22:11:57

The mathematics of “70% overvalued” may be confusing to non-math geeks. Trend reversion would merely entail a drop of 41% (0.7/1.7 as a percentage), not 70%. Unless there was overshooting to the downside, that is…

Comment by azdude
2018-02-19 05:51:00

u can paper over risk for awhile but it never goes away.

It has been interesting watching the rich enrich themselves shuffling stocks back and forth to each other. Painting the tape has a whole new meaning. It works until it doesnt as was the case with XIV.

(Comments wont nest below this level)
Comment by rms
2018-02-19 00:37:52

“If these and other asset prices reverted to their historic benchmarks, investors would suffer losses in excess of $10 trillion, leading to declines in consumer spending and business investment.”

Could this be good for the environment?

Comment by Professor 🐻
2018-02-19 10:22:10

Don’t know about that…have you been around many homeless camps?

(Comments wont nest below this level)
Comment by Mortgage Watch
2018-02-18 18:51:23

Delray Beach, FL 33446 Housing Prices Crater 11% YOY


*Select price from dropdown menu on first chart

Comment by azdude
2018-02-18 19:20:50

crocodile tears for homeowners?

Comment by CorporateShill
2018-02-19 05:25:44

How about East of the 95?

Comment by Mafia Blocks
2018-02-19 05:50:41

If prices are above production cost ($50square foot) less depreciation, draw your own conclusion.

Name (required)
E-mail (required - never shown publicly)
Your Comment (smaller size | larger size)
You may use <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong> in your comment.

Trackback responses to this post