June 30, 2018

They Bought At The Top Of The Market

A weekend topic on related bubbles starting with Sparefoot. “A report released recently by Yardi Matrix shows that as of April 30, 2018, Nashville, TN, had more self-storage facilities in the construction or planning stage as a share of existing supply — 27 percent — than any other major U.S. market. Next was Portland, OR (25 percent), followed by Boston, MA (23 percent), Denver, CO (21 percent), Raleigh-Durham, NC (17 percent), and Charlotte, NC (17 percent). The Raleigh-Durham market witnessed a 12 percent year-over-year drop in April 2018 in average rents for a 10×10 climate-controlled unit and a 7 percent drop for a 10×10 non-climate-controlled unit.”

“Meanwhile, Denver posted 7 percent declines in both categories. Across the board, the four major Texas markets saw average 10×10 rents fall anywhere from 4 percent to 8 percent. ‘It’s pretty clear that we are toward the tail end of the development cycle,’ said David Dent, senior analyst at Yardi Matrix. ‘We’re at peak supply levels.’”

From The Villager in New York. “Bleecker St.’s stretch through the West Village continues to be plagued by retail vacancies. Some blocks sport as many as seven empty storefronts total and several in a row. Yet local real-estate experts say that commercial rents on the street have actually dropped dramatically — by more than 50 percent, according to some estimates. Adelaide Polsinelli, senior managing director at Eastern Consolidated noted that there may still be financial difficulties for those who bought in at the height of Bleecker St.’s rates.”

“‘Anyone who bought their property on Bleecker, or in the area, from 2014, 2015, they bought at the height,’ she said. ‘So there has to be a real serious conversation with their financing, their lenders, their investors, what the expectation is going to be. Because anyone who bought with the expectation that rents were rising and they bought at the top of the market is going have a serious problem.’”

From Bisnow on New York. “In the first three months of 2018, Manhattan retail rents slumped almost 20% year over year to hit $653 per SF, according to figures from CBRE. Barely anywhere was left unscathed, with rents declining in almost all of Manhattan’s retail corridors. Landlords and retailers are trying to make sense of a market where retail rents have skyrocketed in the city over the last several years. Colliers International Vice Chairman Brad Mendelson agreed the luxury market is quiet. ‘When rents peak out, tenants pull out,’ he said.”

“C&W Senior Director Alan Napack is marketing a 2K SF retail space, vacant for more than a year now, in Brooklyn’s Park Slope. The landlord had previously had a certain type of tenant in mind, but now says they will take a chance on a less-established operator. ‘Everyone is looking for a national tenant, [but landlords] are now more opening their minds,’ Napack said. ‘Some of them will even take less of [a] security deposit, basically to get their business.’”

“But not all landlords have that option. ‘Some landlords are overleveraged but just can’t make that adjustment,’ said Lee & Associates Executive Managing Director Richard Kave.”

From Successful Farming. “As farmers face the fifth year of a downturn, prices remain mired below the cost of production. ‘It’s a liquidity crisis, but solvency is solid,’ says Michael Langemeier, associate director, Purdue University’s Center for Commercial Agriculture in West Lafayette, Indiana. ‘Many producers are using noncurrent assets like land to infuse liquidity. For others, low liquidity and high solvency leave them very little room to maneuver. Indiana cash rents are flat to 5% lower than 2017.’”

“At the Kansas Ag Mediation Service, Dave Kehler says, ‘Producers do whatever it takes to keep farming. The average Kansas operation can sustain itself, but it can’t handle family living or outside expenses. Banks can encourage farmers to analyze their operations while they still have equity. We’re having some success. Sometimes it’s helping with a dignified exit plan.’ He adds, ‘Farmers need to take a hard look at cash flow and budgets – not just keep doing what they’ve been doing and expect it to be different.’”

From Farm Equipment. “To better understand the manufacturer-dairy farmer relationship, H&S Mfg. Co. President Craig Harthoorn and Product Marketing Manager Ron Zygarlicke sat down with Daryl Sternweis and Heather Heiman (D&B Sternweis Farms) along with Josh Heiman (Heiman Holsteins). The group, all based in Marshfield, Wis. discusses tight budgets, hiring mishaps and rising environmental standards.”

“Daryl Sternweis: ‘In our farm’s situation, we’re almost put into survival mode. Where the prices are, you’d love to go and buy that new piece of equipment, but you’re just pulling the reigns knowing you can’t. You try to get what milk you can out of the cows, and in a way, we’re almost our own worst enemies. We try to increase our milk production because you still need that income, but when the milk price drops, we have to produce even more milk.’”

“Josh Heiman: ‘You’re always looking at input costs. It doesn’t matter if it’s feeds or crops. How can we knock off 12 cents on each cow per day to make that profit margin just a little higher? But with no profit margin, the question becomes, ‘How can we lose less money in a day?’”

From CBS News. “‘Think about trying to live today on the income you had 15 years ago.’ That’s how agriculture expert Chris Hurt describes the plight facing U.S. farmers today. Since 2013, farm income has been dropping steadily, according to the U.S. Department of Agriculture. This year, the average farm’s income is projected to be 35 percent below its 2013 level.”

“Longtime farm advocates see parallels between today’s situation and the farm crisis of the 1980s, when many U.S. farmers struggled economically. ‘The farm crisis was so bad, there was a terrible outbreak of suicide and depression,’ said Jennifer Fahy, communications director with Farm Aid, a group founded in 1985 that advocates for farmers. Today, she said, ‘I think it’s actually worse.’”

From Senior Housing News. “Eric Mendelsohn, CEO of National Health Investors, is a self-professed ‘contrarian investor’ who is bullish on skilled nursing while others view this as a beleaguered sector. He recently sat down with Senior Housing News. Q: ‘Oversupply has been an ongoing concern in senior housing, do you see the situation getting better any time soon? I’ve been hearing that the tide should start to turn around mid-2019?’”

“Mendelsohn: ‘I think we’re starting to see it already. We’re getting lots of calls from developers who have been turned down by banks, and that’s an early indicator. When banks turn off the spigot of money, then developers start looking for secondary sources, either more equity or a REIT or a pension fund, who may not be as savvy as a bank and as regulated as a bank. So, that call volume tells me, and my conversations with other banks tells me, that things are slowing down. So I definitely think by the end of this year we should see a slowdown in construction. All the new product that’s coming on in the next 12 months will probably be the last hurrah.’”

“Q: ‘Do you see opportunities for NHI to acquire distressed properties, where occupancy has suffered due to all the new competition? ‘”

“A: ‘As a REIT, we need to be careful. I love distress as much as the next investor, but we have to be mindful that we have to pay a dividend, so buying a failed development is tricky. We did exactly that in New Hampshire earlier this year, with a loan. So, we have a first mortgage, we’re getting current payments on it, and the property is filling up according to our predictions. But that’s what you’ll likely see more of, more developments that are built, that are half full, with lackluster performance, that can be purchased at a deep discount.’”




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84 Comments »

Comment by Ben Jones
2018-06-30 08:22:51

‘that’s what you’ll likely see more of, more developments that are built, that are half full, with lackluster performance, that can be purchased at a deep discount.’

And you heard about this in the MSM how many times? Never?

Comment by Mafia Blocks
2018-06-30 10:33:05

Not to mention all the empty dark residential towers in every major US city.

 
 
Comment by Apartment 401
2018-06-30 08:35:42

Realtors are liars.

 
Comment by Ben Jones
2018-06-30 08:41:03

‘Final results from the 2018 Nebraska Farm Real Estate Survey show a fourth consecutive year of declining Nebraska agricultural land values. The statewide average value dropped 4 percent to $2,720 per acre. This is an 18 percent reduction since land values peaked in 2014.’

‘Survey participants identified crop prices and property tax levels as significantly contributing to the drop in land values.’

Comment by Mafia Blocks
2018-06-30 11:36:50

And still grossly overpriced at $2700 an acre. At least prices are falling though.

Comment by Professor Bear
2018-06-30 12:00:44

You would think they would fall faster, given the incentives for speculators to dump their HODLings when prices start to fall.

 
 
 
Comment by Ben Jones
2018-06-30 08:46:34

‘The following is from David Oppedahl of the Federal Reserve Bank of Chicago.’

‘For 2018, average annual cash rents to lease farmland were down 5 percent in Illinois, 3 percent in Indiana, 6 percent in Iowa, 3 percent in Michigan and 7 percent in Wisconsin. After being adjusted for inflation using the PCEPI, district cash rental rates were down 7 percent from 2017. Even so, an Iowa banker shared that land rental rates are status quo to slightly lower, but demand limits a reduction in rent per acre. There seemed to be enough farmers willing to take on more acres to plant, such that cash rents did not fall as much as they would have otherwise. Meanwhile, other farmers quietly ended their rental contracts, even defaulting on payments to landowners in some cases.’

‘After five years of falling cash rents, the districts index of real cash rental rates was cut by a third, the largest such decline since the 1980s. Furthermore, the change in the index of inflation-adjusted farmland cash rental rates underperformed the change in the index of inflation-adjusted agricultural land values for the ninth consecutive year. The results show that 2018s real cash rental rates were 26 percent below their level in 1981, while real farmland values were still 67 percent above their 1981 level. Hence, the implication is that relatively stronger demand to own farmland than to lease it has kept farmland values from falling as much as the earnings potential of farmland (represented by cash rental rates).’

‘In March 2018, corn and soybean prices were about the same as a year ago, according to data from the U.S. Department of Agriculture. However, the five-year drops in real corn and soybean prices were 54 percent and 37 percent, respectively. Since these price decreases would have resulted in greater declines in crop revenues than observed in cash rents over the past five years (all else being equal), farm operations needed productivity gains through higher yields and cost-cutting measures in order to preserve working capital and maximize cash flows.’

Comment by In Colorado
2018-06-30 11:06:59

FWIW, in years past I could get 10-12 ears of corn for $1 about this time of the year. Now it’s like 5 for $1

Comment by Ben Jones
2018-06-30 11:12:42

How much profit was in either?

Comment by Professor Bear
2018-06-30 11:16:44

Before or after farm subsidies?

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Comment by oxide
2018-06-30 12:03:35

Does the government subsidize all corn, or just field corn? Sweet corn has been 5-6/ $1 for a while now, even at the farmers’ market.

 
Comment by In Colorado
2018-06-30 12:29:58

Unless the subsidies have been removed, shouldn’t it still be 12 for $1?

 
Comment by Ben Jones
2018-06-30 13:01:19

That’s a loss leader.

 
Comment by BlackSwandive
2018-06-30 13:25:15

I stopped eating corn after the GMO garbage.

 
Comment by In Colorado
2018-06-30 16:06:46

So why change the loss leader, unless the cost went up?

What I’m saying is that if we are indeed flooded with food, why does its price keep going up?

 
Comment by Ben Jones
2018-06-30 16:28:57

I think you are following something I’m not. I don’t know how much food there is. I do know that prices are in some cases half of what they were when the commodity spike occurred earlier in the decade. (Just where did all those milk-chugging middle class Chinese go anyway?)

But the debt some farmers took on remains. The huge increases in agricultural capacity largely remains. Over 80 million acres of plantable land were carved out in the boom. Many farmers rent the land, but rents haven’t gone down enough so incomes stay down or negative. That’s a whole other story about big money’s rush into farmland a few years ago. I posted dozens of articles on that.

When it comes to corn or something, we are at least 4 years past the peak. These imbalances will or have begun to be worked out. The bigger picture of an industry that is going through this bubble burst is more what I’m interested in.

 
Comment by Mafia Blocks
2018-06-30 17:05:46

“I do know that prices are in some cases half of what they were when the commodity spike occurred earlier in the decade.”

So does everyone else so what do you think is behind the chronic trolling of your blog by the PricePimps?

 
 
 
 
 
Comment by Ben Jones
2018-06-30 08:50:32

‘Local dairy farmers did not get good news this spring. After three years of relatively low milk prices, many were hoping for a better year in 2018.’

“Normally, in the past, it’s been a three-year price cycle,” Winona County Farm Bureau President and dairy farmer Glen Groth said. Ups and downs are normal, but people are still waiting for the next upswing. “Everybody thought they’d see some decent prices in ’17 … Well, that never materialized and hasn’t shown any great signs of promise. So what’s happened is we’re in for a great period of breaking even or losing some money. That’s what’s stressing people out,” Groth stated.’

‘At $17.80 per hundredweight of milk, the 2017 average milk prices in Minnesota were nearly a dollar below the 10-year average of $18.62, according to data from the USDA’s National Agricultural Statistics Services (NASS). Those relatively low prices got substantially worse in the first quarter of 2018, falling to $15.90 and $15.50 in January and February, according to NASS data. The federal base price for class II milk fell to a paltry $13.44 per hundredweight in February — the lowest it has been in the last five years, according to the USDA National Agricultural Marketing Services.’

“You hear a lot of guys talking they need $17 or $18 to break even. Well, if you’re at $14, that’s a lot of money every day a guy could be losing,” Mark Vick said.’

‘Winona County dairy farmers are not alone in feeling the crunch of small or negative profit margins. AMS’ Central U.S. dairy report put it in news-ticker-style language: “Fluid milk contacts are again reporting that more farm closures are looming in the Upper Midwest. Some dairy farmers are set to auction their herds as early as the end of this week. The ripple effect from dairy farms being let go both in the Midwest and Mideast part of the country is expected to be felt far and wide.”

‘Hansen went so far as to compare the crunch dairy farms are experiencing right now to the 1980s farm crisis. Instead of double-digit interest rates forcing farm closures, it is overhead costs, Hansen stated. “I think it’s a whole lot more serious than anyone is willing to admit,” he said.’

Comment by bradley fuller
2018-06-30 10:14:32

America Has a 1.39 Billion-Pound Cheese Surplus. How Did That Happen?
https://mentalfloss.com/article/549724/america-has-139-billion-pound-cheese-surplus-how-did-happen

Comment by Ben Jones
2018-06-30 10:35:40

‘In 2014, dairy farmers started scaling up their operations in response to high demand for powdered milk from China’s growing middle class. When China’s economy started to slow a couple years later, American dairy producers were left with too many cows and too much milk.’

See, it’s not some big mystery.

‘On top of that, the European Union made it more difficult for U.S. cheese producers to do business there.’

Wa? Tariffs make Baby Jeebus cry!

 
Comment by In Colorado
2018-06-30 12:27:50

I wonder what percentage of that surplus is actually “cheese” and not the over processed cr@p known as “cheese food”

Comment by Mafia Blocks
2018-06-30 14:50:52

I stopped eating over procesed cheese after I discovered Cheetos

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Comment by oxide
2018-06-30 16:52:28
 
 
 
Comment by GreenEggsAndSpam
2018-06-30 15:32:10

I was gonna say - I’ll take it, but then I figured even I, self professed cheese lover, could not consume all of that. So I came up with another idea - let them get a bit moldy (more about this later), aggregate them into a number of spheres, large but not too large so they can fit in a falcon 9. We dump those mofos in space over how ever many launches it takes where they can catch space junk in their cheesy goodness, and then eventually they group together to form a moon of sorts. Remember the mold part? Yeah, so it would be green and then we’d actually have a moon made out of green cheese. Other bonus is that if it gets big enough (hey, 1.39 billyun pounds of cheese in my best Carl Sagan voice + the metric butt load of space junk has to add up) it will act like a legit moon and consequently create more waves, meaning more surf. There is no downside to this! Who’s with me?

I’m fixin’ to tweet this to Elon Musk later today.

Comment by Professor Bear
2018-06-30 18:46:43

Once the moon is formed, President Gingrich can populate it as the 51st state.

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Comment by OneAgainstMany
2018-07-01 08:05:55

Isn’t Puerto Rico going to be the 51st state? Or maybe it was California being broken up into thirds that will give us state 51 and 52.

 
 
 
 
 
Comment by Ben Jones
2018-06-30 08:52:42

‘Bankers in the 10th district report the fifth straight year of lower farm income. Credit conditions for the area’s farmers continue to diminish, but at a slower pace than previous quarters, report Cortney Cowley, economist and Ty Kreitman, assistant economist.’

“Cash-flow shortages continued to limit the availability of working capital, and financing needs continued to rise,” the economists say. “Bankers have responded to ongoing cash-flow concerns by restructuring debt, increasing or maintaining collateral requirements or—in some cases—denying loans.”

‘In the first quarter, 8% of farm loan requests were denied due to cash-flow shortages. Farmers’ working capital continues to deplete, while carryover debt levels have increased. “We are seeing some customers selling assets, such as farmland, to cover debts.” —Nebraska lender.’

Comment by Mr. Banker
2018-06-30 08:59:57

“Bankers have responded to ongoing cash-flow concerns by restructuring debt …”

A term that, at root, means “sticking it to them” …

“… increasing or maintaining collateral requirements…”

Sticking it to them …

“… or—in some cases—denying loans.”

😁

 
 
Comment by Ben Jones
2018-06-30 08:59:18

‘The cumulative drop in average rental rates statewide since 2013 is 17.8% from their peak of $270 per acre. That percentage decline is comparable to the 15.9% decrease in average Iowa land values during this same time frame.’

‘Corn and soybean average cash prices received in Iowa peaked in August 2012 at $7.90 and $16.80 per bushel, respectively. In March 2018, corn and soybean cash prices were $3.40 and $9.60 per bushel, respectively. That’s an accumulated decline of 57% and 43% from those peak values.’

New readers may need to know I have been following the farmland/crops bubble for many years. These peaks they keep referring to were part of the commodity boom that followed the global QE explosion.

Comment by Mr. Banker
2018-06-30 09:04:09

I remember it as a time when it was predicted that the world was going to run out of food.

Only a nation of dummies could have bought into such nonsense.

Comment by aNYCdj
2018-06-30 09:24:03

and to think how many millions of acres of farmland are being paid not to grow anything.

The US has a 1.39 billion-pound surplus of cheese. Let’s try to visualize that.

https://www.vox.com/science-and-health/2018/6/28/17515188/us-cheese-surplus-billion-pounds

Comment by Ben Jones
2018-06-30 09:55:52

‘You might ask yourself: Why the massive cheese stockpile? There’s a larger story here: US dairy producers have been overproducing milk. When there’s a milk surplus, it gets turned into cheese, which can be stored for longer periods before spoiling. The Post notes milk and cheese surpluses tend to peak during the summer months, when dairy demand is down. Additionally, cows — which are more efficient milk producers than ever before, thanks to selective breeding — generate the most milk in the springtime.’

‘This trend isn’t new: As Brad Plumer reported in 2016, the American dairy industry has been overproducing for years.’

‘Further reading: The Washington Post’s report: “America’s cheese stockpile just hit an all-time high”. Back in 2016, the cheese surplus only weighed 1.2 billion pounds.’

OK, so how does this happen? QE creates commodity spike (China pours 100 years of concrete in 3, etc). Markets respond by bringing on more resources: land, cows, almond trees, whatever. Oversupply results and crater. We’ve seen it in grains, meat, fish, oil, iron ore, you name it.

QE is deflationary. Deflation combined with debt means serious problems. A lot of these farmers went into debt when things were flying high. At exactly the worst time, just like the Seattle apartment guys.

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Comment by Ben Jones
2018-06-30 10:08:19

The commodity thing isn’t exactly like say retail, but there are similarities:

‘We’re at peak supply levels.’

‘local real-estate experts say that commercial rents on the street have actually dropped dramatically — by more than 50 percent, according to some estimates.’

‘Anyone who bought their property on Bleecker, or in the area, from 2014, 2015, they bought at the height…So there has to be a real serious conversation with their financing, their lenders, their investors, what the expectation is going to be. Because anyone who bought with the expectation that rents were rising and they bought at the top of the market is going have a serious problem.’

CRE prices in New York doubled from 2014 to 2016. What do you do with such pricey space? Go luxury of course! And now stores and shops can’t possibly stay in business at the rents these fancy digs need. Sound familiar?

Now, Janet warned the CRE people about a bubble around 2016. But that’s all she did. Not credit changes, no QE changes, no rate changes.

Yellen Warns
Prices High for
Stocks, Commercial Real
Estate
Bloomberg - Feb 5, 2018

MSN.com - May 6, 2015
Yellen fears bubble as stock market sees sharp decline - New York Post
https://nypost.com/2018/02/…/yellen-fears-bubble-as-stock-market-sees-sharp-decline/

Feb 5, 2018 - Yellen didn’t say the B-word — bubble — but with investors on edge, maybe … She warned that it would be a “grave mistake” to roll back the …
Yellen Says Prices `High’ for Stocks, Commercial Real Estate …
https://www.bloomberg.com/…/yellen-calls-prices-high-for-stocks-commercial-real-est...

Feb 4, 2018 - Outgoing Federal Reserve Chair Janet Yellen said U.S. stocks and commercial … prices are elevated but stopped short of saying those markets are in a bubble. … Yellen Warns Prices High for Stocks, Commercial Real Estate.
“Disappointed” Yellen Warns Investors “Be Careful”, But “Don’t Label It …
https://www.zerohedge.com/…/janet-yellen-admits-she-was-disappointed-not-serve-sec...

Feb 3, 2018 - “I don’t want to label what we’re seeing as a bubble…[investors] should be careful and I would say diversified in their investments.”
Yellen cites ‘potential dangers’ in U.S. stock valuations | Reuters
https://www.reuters.com/…fed-yellen/yellen-cites-potential-dangers-in-u-s-stock-valua...

May 6, 2015 - Fed’s Yellen says equity valuations high, warns of ‘potential dangers’ … not see any bubbles forming at the moment, and she described risks to …
Yellen Warns Of Private Equity Bubble - Business Insider
http://www.businessinsider.com/yellen-warns-of-private-equity-bubble-2013-1

Jan 18, 2013 - FED TRANSCRIPTS FROM 2007: Janet Yellen Warns The FOMC About … to the committee a story about the bubble brewing in private equity, …

Apr 9, 2018 - Janet Yellen Warns Of ‘Debt Crisis’, Blasts Trump Tax Cuts In Op-Ed … about a debt crisis published in the Washington Post and written by Janet Yellen, …. as anyone in human history to create humanity’s hugest debt bubble.
Grading Janet Yellen’s social media bubble call - CNBC.com
https://www.cnbc.com/2014/08/…/grading-janet-yellens-social-media-bubble-call.html

Aug 12, 2014 - Yellen warns on social media, biotech valuations 1:57 PM ET Fri, 8 Aug … is growing fast enough in general that bubble talk can be misplaced, …

 
Comment by Professor Bear
2018-06-30 11:30:39

“Outgoing Federal Reserve Chair Janet Yellen said U.S. stocks and commercial … prices are elevated but stopped short of saying those markets are in a bubble. … Yellen Warns Prices High for Stocks, Commercial Real Estate.”

It almost seems as though she was trying to provide political cover for Chairman Powell’s punchbowl removal operations.

 
 
 
Comment by Professor Bear
2018-06-30 11:20:53

The world was also going to run out of oil back then…right up until oil prices collapsed.

Comment by Albuquerquedan
2018-06-30 13:38:15

We have run out of cheap oil that is why Brent is just barely under $80 a barrel.

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Comment by Mafia Blocks
2018-06-30 14:14:09

“The world was also going to run out of oil back then…right up until oil prices collapsed.”

And here we are with a globe full of oil and oil inventory at all time record highs.

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Comment by Albuquerquedan
2018-06-30 15:37:46

We are at record demand but far from record inventory. The latter has been falling like a rock for the last year

 
Comment by Mafia Blocks
2018-06-30 16:18:41

Incorrect. Demand is falling with a surplus of oil like everything else including housing.

 
Comment by oxide
2018-06-30 16:56:33

I thought oil crashed because the Chinese decided to stop building, crashing demand. Have the Chinese started building again? If not, where did all this demand come from? Did we enter peak cheap-oil or something? Should I stock up on canned peas and AKs?

 
Comment by Albuquerquedan
2018-06-30 18:19:57

Oil crashed as I said almost four years ago because the Saudis and Obama tried to run the same play that Reagan used to cause the collapse of the Soviet Union. However, Obama failed for the reasons I stated four years ago, neither shale nor the Saudis could flood the market long enough to collapse Russia. The Saudis have made their piece with Putin and world demand has continued to rise the entire time and their is no way to meet it without higher prices.

 
Comment by Albuquerquedan
2018-06-30 18:26:04

As you see we will be pushing a 100 million barrels a day demand next year and only 98.5 million barrel supply.

 
Comment by Albuquerquedan
 
 
Comment by Mafia Blocks
2018-06-30 17:03:20

Housing

Addison, TX Housing Prices Crater 15% YOY

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

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Comment by Apartment 401
2018-06-30 09:12:23
Comment by In Colorado
2018-06-30 12:35:25

Millenials are resorting to all sorts of begging.

Take youtube. If you have an interest in a topic, there will no doubt be a plethora of video bloggers on the subject. And most of them have something called a “Patreon account” where you can send them donations, and they will be quick to remind you to donate.

Comment by MGSpiffy
2018-06-30 15:18:17

To be honest, “we” in our constant drive for more and more efficiency - don’t need all the people we have to keeps things running*.

With more people than jobs, especially those that compensate better, those that have them are quite protective of them. Especially in a society setup to pretty much require having one in order to have anything more than the lowest level of government support. (As well as the general ‘winner take all’ economic structure we have)

So the young ‘johnny-come-lately’s face even tougher situations and it’s no surprise they rush in trying anything that worked for someone, no matter how silly it may make them look.

* we may actually have more people than we need, but that’s not how the ruling elite see it - they see the need for continuous growth to keep funding the poniz promises already made by the state.

Comment by In Colorado
2018-06-30 16:05:32

With more people than jobs, especially those that compensate better, those that have them are quite protective of them.

Other than trying to make yourself indispensable, I don’t see how one can “protect” a job. And even then there is no guarantee, as global forces can wash away your “indispensable” job in a flash. Sure, keeping your skills sharp can helps, but that isn’t always easy as you sometimes have to guess what those skills need to be. Guess wrong and you can still find yourself applying for SSDI after your unemployment runs out.

Anywho, I can see why so many people are turning to the gig economy and are relying on unorthodox sources of income.

If someone had told me 10 years ago that people would be using their private cars as illegal taxis to make ends meet, I would have dismissed it. I would have found even stranger that people would rely on their youtube channels to generate income.

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Comment by Apartment 401
2018-06-30 09:20:43

MartketWatch reluctantly reports “We’re probably at peak housing”

https://www.marketwatch.com/story/were-probably-at-peak-housing-heres-what-that-means-2018-06-27

No “pent-up demand” for $500,000 starter homes happening here

Comment by jeff
2018-06-30 12:00:47

You should ask Andrea Riquier out on a date.

 
 
Comment by Ben Jones
2018-06-30 09:23:08

‘Across the board, the four major Texas markets saw average 10×10 rents fall anywhere from 4 percent to 8 percent. ‘It’s pretty clear that we are toward the tail end of the development cycle,’ said David Dent, senior analyst at Yardi Matrix. ‘We’re at peak supply levels.’

Hotel bubble:

http://www.hospitalitynet.org/news/4082501.html

http://www.nrn.com/finance/restaurant-oversupply-worsens

http://www.rstreet.org/2017/07/24/is-the-real-estate-double-bubble-back/

NYC’s bubble popped two years ago, same with Miami Beach. Seattle landlords are losing million$ every single day. Farm suicides spiraling up.

And yesterday when I walked by a bank of TV screens: three national news groups were breathlessly breaking the story that some guy you never heard of had prank called the President on Air-force One.

I can’t do anything other than to continue to point out what seems important to me. But one has to wonder what the heck is going on with the media.

Comment by In Colorado
2018-06-30 11:13:51

I signed up for a 7 day trial with Sling TV to watch a World Cup game that wasn’t being broadcast over the air on Fox or Telemundo. After watching the game I looked at programming lineup and ended up cancelling the trial before the 7 days were up.

I definitely wonder what the heck is going on with the media. I also recently cancelled a trial subscription to the Denver Post, which seemed to be obsessed with Denver’s Pride Fest and nothing else.

There is little doubt in my mind that the sole purpose for these outlets is to push the Narrative.

Comment by Albuquerquedan
2018-06-30 15:39:56

You are right

 
Comment by Albuquerquedan
2018-06-30 15:44:08

I think the media should sponsor a gay pride parade in one of the Muslim countries which were the target of Trump’s travel ban. Then, they might understand the wisdom of his policy.

Comment by oxide
2018-06-30 17:00:47

The travel ban is actually a Catholic ban (Venezuela) but that seems to have been conveniently forgotten. No march and protest, no word from the Pope.

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Comment by rms
2018-06-30 17:41:51

“…obsessed with Denver’s Pride Fest…”

Admittedly experiencing LGBT fatigue… show me some merit.

 
 
 
Comment by aNYCdj
2018-06-30 09:30:36

whoa…..Do you have inedible ingredients and by products?

Why pay money to throw product away? You would be surprised where we can place inedible food ingredients or by-products! We have alternatives for such products in a variety of different non-food industries.

https://ingexchange.com/ingredient-recycling/

 
Comment by Mortgage Watch
2018-06-30 09:30:47

Mount Vista, WA Housing Prices Crater 21% YOY

https://www.zillow.com/mount-vista-wa/home-values/

*Select price from dropdown menu on first chart

Comment by redmondjp
2018-07-01 22:18:39

99 out of 100 residents in WA have no idea where this place is, HA. Good job digging deep in the data!

Comment by Mafia Blocks
2018-07-02 07:30:26

Housing

Laie, Hawaii Housing Prices Crater 24% YOY

https://www.movoto.com/laie-hi/market-trends/

 
 
 
Comment by Professor Bear
2018-06-30 11:28:30

“Bleecker St.’s stretch through the West Village continues to be plagued by retail vacancies. Some blocks sport as many as seven empty storefronts total and several in a row. Yet local real-estate experts say that commercial rents on the street have actually dropped dramatically — by more than 50 percent, according to some estimates. Adelaide Polsinelli, senior managing director at Eastern Consolidated noted that there may still be financial difficulties for those who bought in at the height of Bleecker St.’s rates.”

A fifty percent rent decline in an American city? Unpossible!

That reminds me: My inlaws visited last week. FIL is an attorney who has done a fair amount of CRE investing over the span of his career. I pointed out to him that the ‘For Lease’ signs in front of every commercial office complex in our area were reminiscent of a similar situation during the 2007-2009 financial collapse. I haven’t done any sleuthing to figure out whether the apparently massive commercial real estate inventory glut has translated into falling rents.

Comment by Ol'Bubba
2018-06-30 12:09:16

This is a little stale, and the 2Q figures will be released in late July:

CHICAGO, IL, April 25, 2018 – The National Council of Real Estate Investment Fiduciaries (NCREIF) has released first quarter 2018 results for the NCREIF Property Index (NPI). The NPI reflects investment performance for 7,553 commercial properties, totaling $567 billion of market value. The returns are detailed in the attached Snapshot Report.

While the quarterly NPI total return remains modest, returns for the first quarter of 2018 were slightly higher than the first quarter of 2017. The total return was 1.70% in the first quarter, down slightly from 1.80% last quarter. For the current and previous three quarters, the total return was just slightly over 7% - a slight improvement over the four quarters of 2017. This is an unleveraged return for what is primarily “core” real estate held by institutional investors throughout the US.

The average quarterly return over the past five years was 2.43% or 10.08% annualized. Although the current quarter’s return of 1.70% or 6.98% annualized is down from the torrid pace during the previous 5 years, the downward drop in returns that we witnessed for several years stopped at the beginning of 2017 and returns have held remarkably steady since then.

https://www.ncreif.org/news/npi-1q2018/

Comment by Professor Bear
2018-06-30 12:14:55

No mention there of any growing glut…just happy talk about the high returns as viewed through the rear view mirror.

 
 
 
Comment by Professor Bear
2018-06-30 11:58:13

We have some friends who acquired their household wealth by running a mom-and-pop self-storage business. They have done quite well, judging from their new home we recently visited; the backyard is evidently large enough to accommodate a sizable wedding reception. It was somewhat disconcerting to see coyotes eyeing us from across the empty lot next door, and also interesting to feel like we were somewhere out in the middle of eastern Nevada, when actually in the heart of North County San Diego, where there supposedly is a shortage of buildable land.

Based on what I have been reading about the widespread glut of storage facilities, I certainly hope they diversified their accumulated wealth, aside from purchasing a brand new home in a pricey area (Crosby Estates) just as the commercial and residential real estate cycle is turning. Correlation due to poor diversification will sink you at times like these.

PS If anyone understands the reference to “depleted consumer surplus” in the article posted below, please elaborate! :-)

A Negative Inflection Point For Self-Storage REITs
Jun. 22, 2018 9:58 AM ET
Dane Bowler
Value, hedge fund analyst, REITs, long/short equity
2nd Market Capital
(6,097 followers)
Summary

Self-storage REITS have enjoyed impressive rental rate growth for much of their history.

We see this changing due to underlying fundamental factors.

The slower growth going forward suggests the 20X+ FFO multiples at which these stocks trade is too high.

In addition to the near-term headwinds caused by heavy supply, we see a troubling secular shift toward lower growth rates caused by a depleted consumer surplus. This slow growth outlook is at odds with the lofty multiples at which these stocks currently trade and we see material downward revisions to self-storage REIT multiples going forward. Let us begin with the data and then move on to the reasoning behind it.

Lofty valuations

Self-storage REITs have performed quite well over the past 52 weeks with substantial gains compared to a REIT index that is down about 4% (price change).

Comment by Professor Bear
2018-06-30 12:06:21

“depleted consumer surplus”

Never mind…my brain just got woked. What this means is that the number of potential additional customers whose need for storage justifies the rental cost is dwindling.

There is a similar problem in owner-occupied residential real estate at the late stage of the cycle, particularly at the luxury end of the quality spectrum, as the number of unhoused households who need and can afford to buy another luxury home at bubblelicious prices tends to dry up as prices keep increasing at double-digit rates. Eventually those who bought for speculative reasons rather than need catch on to the fact that prices have stopped going up at double-digit rates, and suddenly the perceived shortage morphs into a glut of homes for sale.

Comment by oxide
2018-06-30 17:16:31

Minimalism is really catching on. Not that we all need to live in a Tiny House, but people are least decluttering enough to not need a storage unit.

I blame IKEA for starting it all. Unlike, for example, ornate antique furniture, IKEA does NOT look good with clutter on it.

Comment by aNYCdj
2018-07-01 05:45:55

OX, not so much minimalism but digitalism brings on decluttering, gone are the big bookcases filled with…books cd’s videos etc gone are the 50″ projection tv’s you cant even give away today, how about big huge executive style desks that used to hold your 2-3 TUBE type computer monitors, and 2-3 full size HP/compaq desktops? just about everyone i know could easily downside 1 bedroom worth of stuff without any problems but they still want to keep their stuff and rent a storage room

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Comment by Mafia Blocks
2018-07-01 07:19:32

“minimalism but digitalism”

… and craterism.

San Diego, CA (north park) Housing Prices Crater 8% YOY

https://www.zillow.com/north-park-san-diego-ca/home-values/

*Select price from dropdown menu on first chart

 
Comment by OneAgainstMany
2018-07-01 09:14:38

I blame IKEA for starting it all. Unlike, for example, ornate antique furniture, IKEA does NOT look good with clutter on it.

Yeah, but a lot of those IKEA display rooms in our local store and pictures online are chocked full of clutter as a design choice.

To wit:

https://www.google.com/search?q=ikea&source=lnms&tbm=isch&sa=X&ved=0ahUKEwj7lsjppf7bAhUrCTQIHY2uC20Q_AUIDSgE&biw=1366&bih=635#imgdii=VgEU1A05kDTe2M:&imgrc=tIMVqPZ8-nasIM:

 
Comment by aNYCdj
2018-07-01 13:13:08

exactly bookcases filled with stuff put a loft bed on top of a bookcase, clutter everywhere

http://500iso.com/bookcase-room-dividers-ikea/bookshelf-room-dividers-divider-shelves-bookcase-comfy-ikea-and-12/

 
 
 
 
Comment by rms
2018-06-30 17:37:34

“…disconcerting to see coyotes eyeing us…”

There are weapons to deal with coyotes, but they’re not legal in CA.
https://www.youtube.com/watch?v=6YPS00lU7rQ

Comment by Mr. Banker
2018-06-30 18:24:41

The hunter was using an MKIII infra-red night vision scope. Check out the price …

http://nvdevices.com/products/thermal/weapon-mounted/ir-hunter-mk-iii-thermal-weapon-sight/

Comment by rms
2018-06-30 18:51:31

The typical HK-417 (auto/3-rd burst, semi) with day scope, a thermal night scope, OSS sound suppressor, spare magazines, tools and a pelican case is roughly $20k these days.

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Comment by Professor Bear
2018-06-30 18:57:52

Wow…the coyotes have no hope.

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Comment by rms
2018-06-30 19:20:15

“Wow…the coyotes have no hope.”

It’s not a easy as it looks. You have to be down-wind of them otherwise they can hear and smell you long before you can spot them.

 
 
 
 
 
Comment by Professor Bear
2018-06-30 12:10:24

Stocks are not the only risk asset that have recently endured a hammering.

And I note the increasing frequency of financial events not seen “since the financial crisis.”

The Financial Times
Corporate bonds
US corporate bonds post second quarter of losses
Investment-grade debt had not had consecutive negative quarters since financial crisis

Comment by Mr. Banker
2018-06-30 15:33:56

Rising interest rates will tend to do that.

Comment by Professor Bear
2018-06-30 18:58:54

Rising rates also tend to separate lower-quality debt from higher-quality. The long-term Treasury fund I bought earlier this year has gone up.

 
 
 
Comment by Mortgage Watch
2018-06-30 12:18:09

Arlington, VA Housing Prices Crater 14% YOY

https://www.movoto.com/arlington-va/market-trends/

 
Comment by jeff
2018-06-30 19:36:58

Scrolling down 5 photos and looking at the Democratic Socialists of America protesting with their “Medicare for all” sign I can only picture one thing, all the mothers of these Democratic Socialists of America at home cleaning their rooms and folding their underwear.

The Democratic Socialists of America show their muscle in New York congressional upset

Yahoo News
Hunter Walker and Christopher Wilson,Yahoo News•
June 29, 2018

https://www.yahoo.com/news/democratic-socialists-america-show-muscle-new-york-congressional-upset-211526095.html

Comment by Ben Jones
2018-06-30 21:13:36

For A Few Dollars More - The Danish National Symphony Orchestra

https://www.youtube.com/watch?v=DT1NJwEi6nw

Comment by CryptoNick
2018-07-01 00:16:42

That’s a fascinating recording. Reminds me of the diversification of my own musical activities beyond classical into other genres. The cool thing is that classical training is good background for many other styles.

 
 
 
Comment by Mortgage Watch
2018-07-01 05:24:40

“Trade Tensions Hit Stocks, While Oil Craters On Supply Fears”

http://www.kitco.com/news/2018-06-15/Trade-tensions-hit-stocks-while-oil-craters-on-supply-fears.html

 
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