July 4, 2018

Mid-Year Housing Bubble Predictions

The year is half gone and it’s time for your predictions. Six months ago: “Canadian Real Estate tanking. There is no reason your real estate should be worth twice mine when we are just across the border. It’s not like you have much better jobs and lower taxes.”

A reply, “You are absolutely right. And I think its tanking all across Canada, certainly in Toronto and Vancouver. Reason? I am not hearing of a single Chinese buyer at the new housing developments. New sales look like they have hit a wall. Across the border from me the prices have always seemed to be less in the States, but again I agree with you. Our jobs are no better and our homes are comparable. No reason for the difference.”

Another said, “I predict that cybercurrencies in general and bitcoin in particular will end up destroying thousands of people’s financial lives.”

One year ago. “I predict the Fed will walk back rate hike plans and the GSEs will continue to loosen lending standards in order to perpetuate Housing Bubble 2.0 as long as possible. These efforts will come to naught, as Housing Bubble 2.0 dies in 2018 of complications due to morbid obesity.’

And finally, “I always talk about consumption demand versus speculative demand, so I’ll post my opinion within that context: 1) Consumption demand should remain stable. I think it typically is, except when there are population shifts.”

“2) Speculative demand (includes pure speculative plus hybrid consumption-speculative demand): Locally I saw a price surge after the election, from November to say March or April. Like 100-150K surges. I attribute that to expectations after the election that the economy would improve and stocks and real estate would be favored. Also, the GSEs raised conforming loan limits back in late November as well.”

“BUT - there’s the one interesting thing, increasingly hawkish talk from the US and European central bank. Could it be a change in thinking or just a desire to get interest rates up so they have room to drop them in a future recession? Is it just talk?”

“On another note, I’m sure the populist/anti-establishment wave has caught their attention. All the central banks are capable of doing is redistributing wealth by their expert hand, perhaps they feel they’ve gone as far as they can go. Perhaps.”

“My suspicion is prices will plateau during the 2nd half the year, having surged already.”

RSS feed


Comment by Ben Jones
2018-07-01 18:43:01

I usually forward this through July 4th so everybody gets a chance to contibute.

Note to future self. Check out the Culver City article in the post today - July 1st, 2018.

Comment by 2banana
2018-07-01 18:58:25

No blue wave - republicans pick up seats in the house and senate

Interest rates keep slowly rising

QE keeps unwinding

FB in blue states see the hammering of DJT new tax laws

The popping picks up steam

Their will be more political violence - mostly all progressives/liberals conducting the violence

The wall starts to be built

Comment by foobarbaz
2018-07-01 20:08:58

Sounds like heaven. I hope you are right. One final blow to both the socialists and this economic speculative bubble is what this country so desperately needs.

Comment by Albuquerquedan
2018-07-02 06:37:23

Republicans outperform historical average. Lose seats in house and gain in the Senate. Housing market mixed, declining prices in blue areas, small increases in red areas. Slowly rising interest rates. Trump achieves what Obama never achieved despite it being well passed the time for the normal rebound, 3 percent growth for the year

Comment by oxide
2018-07-04 04:31:13

Republicans outperform historical average.

This is more wishful thinking than a prediction. Dems lost in 2016 only because masses of po’d Sanders voters stayed home. They are more mobilized now, but perhaps in the wrong way. Depending on how far left they swing, there may be a different mass of po’d voters staying home: moderates “#walkingaway. So it’s really more of a tossup.

Comment by Professor 🐻
2018-07-04 06:53:34

“Dems lost in 2016 only because masses of po’d Sanders voters stayed home.”

To the predictors’ credit, corrupt Democrat party politics do seem to have a way of biting them in the assets.

(Comments wont nest below this level)
Comment by Albuquerquedan
2018-07-04 06:59:27

Oxide, it is a prediction. It does include the problem Trump has with surburban voters particularly women. But for that problem I would be predicting house gains. Reagan Democrats are coming back, blue collar voters see a reason to vote Republican

(Comments wont nest below this level)
Comment by BlackSwandive
2018-07-05 14:03:34

“Republicans outperform historical average.”

“This is more wishful thinking than a prediction.”

Uh-oh, stormy seas on the love boat!

(Comments wont nest below this level)
Comment by Professor 🐻
2018-07-06 07:48:04

“This is more wishful thinking than a prediction.”

Brings to mind $80/BBL oil by year-end 2015…

Comment by Mortgage Watch
2018-07-01 19:04:59

Hallandale Beach, FL Housing Prices Crater 27% YOY


Comment by CryptoNick
2018-07-01 21:09:30

I predict this idiotic prediction will fail. I guess noone gave this goober the memo that the Fed is taking away the punchbowl. Falling knife assets with zero yield are going to trend towards zero.

Bitcoin will reach $50,000 by end of year, says founder of bitcoin exchange
- BitMEX Co-founder Arthur Hayes remains bullish on bitcoin despite the recent declines below $6,000.
- He says cryptocurrencies, which are known to be volatile, have moved in price before.
- Bitcoin will be priced around $50,000 by the end of the year, Hayes predicts.
Kellie Ell | @KellieAutumnEll
Published 5 Hours Ago


Comment by CryptoNick
2018-07-01 22:34:10

“I predict that cybercurrencies in general and bitcoin in particular will end up destroying thousands of people’s financial lives.”

Good call.

Bitcoin Bloodbath Nears Dot-Com Levels as Many Tokens Go to Zero
By Adam Haigh and Eric Lam
June 29, 2018, 7:45 PM PDT
Largest cryptocurrency falls to lowest level since November
Intensifying regulatory scrutiny, exchange hacks hurt demand

Bitcoin’s meteoric rise last year had many observers calling it one of the biggest speculative manias in history. The cryptocurrency’s 2018 crash may help cement its place in the bubble record books.

Down about 70 percent from its December high after sliding for a fourth straight day on Friday, Bitcoin is getting ever-closer to matching the Nasdaq Composite Index’s 78 percent peak-to-trough plunge after the U.S. dot-com bubble burst. Hundreds of other virtual coins have all but gone to zero — following the same path as Pets.com and other red-hot initial public offerings that flamed out in the early 2000s.


Comment by CryptoNick
2018-07-02 11:40:00

‘Wolf of Wall Street’ Jordan Belfort on bitcoin: ‘Get out if you don’t want to lose all of your money’
Ali Montag | @Ali_Montag
2 Hours Ago


Comment by foobarbaz
2018-07-01 21:21:25

Here is my prediction. Both Trump’s so called trade war, and the Fed accelerating interest rate hikes at the same time is no coincidence. I believe Trump is trying to force the Feds hand at keeping interest rates lower, or even reversing direction, so US housing and stocks can continue on climbing higher. The fed will give in, stalling and even possibly making cuts to interest rates, including slowing or stopping the offloading of the Fed’s balance sheet, just like Trump wants. The pressure will come from emerging markets crashing combined with trade war pains. Trump will also propose and pass a second tax break. All of this will keep the stock market and housing market inflated and growing into his re-election. Basically Trump wants the same easy money accommodations given to Oblamer by the fed during his term, and Trump is willing to play hard ball to get it. It was essentially a free ticket for Oblamer, so why wouldn’t Trump want the same thing.

Comment by Professor 🐻
2018-07-01 21:37:32

“The fed will give in, stalling and even possibly making cuts to interest rates, including slowing or stopping the offloading of the Fed’s balance sheet, just like Trump wants.”

Do you have any supporting evidence, or is this just a wildass conjecture?

Comment by foobarbaz
2018-07-02 10:17:20

It is all for show Professor. It has been print or die for the last 10 years. The fed is just trying maintain the illusion of neutrality and bring a little control to the irrational exuberance that we have seen over the last couple of years. Trump wants to go full blast, his trade war is a way to corner the Fed and get them to put go full bore once again. Some 175 basis point increase over the last 4 years along with the partial balance sheet offload, from what was essentially zero (ZIRP), has barely slowed the inflating bubble. But if the Fed keeps course it will start to put a dent into the things by the end of next year if not sooner. Trump and his people are looking at this as political risk. What better way to force the Feds hand then to cause havoc in foreign economies with the threat of it spilling over into the US. Trump gets to claim another political promise kept (unfair trade), and force the Fed to run the printing presses at full speed.

Comment by Obama Goons
2018-07-02 11:23:56

Did President Trump tell you this when you met with him last week?

(Comments wont nest below this level)
Comment by Professor 🐻
2018-07-02 20:54:44

The thing which you may have missed is that the Fed chair and other FOMC members don’t work for the President. It’s not like Trump can waltz in and say, “You’re fired!” if he doesn’t like what Jerome Powell does.

(Comments wont nest below this level)
Comment by foobarbaz
2018-07-03 07:12:39

@Professor I didn’t miss anything. In fact my prediction is partially based on the premise the President has very little control over the CB. You need to reread my post.

Comment by Professor 🐻
2018-07-03 08:19:38

“…his trade war is a way to corner the Fed and get them to put go full bore once again. … What better way to force the Feds hand then to cause havoc in foreign economies with the threat of it spilling over into the US. Trump gets to claim another political promise kept (unfair trade), and force the Fed to run the printing presses at full speed.”

I’ve reread your post. It sure does seem predicated on the presumption that the President can force the Fed into prematurely ending its normalization plans.

Comment by Professor 🐻
2018-07-01 22:03:19

Perhaps they won’t go through with balance sheet unwind plans, after all the cheap talk?

The Fed has taken the first step toward an early exit from its balance sheet reduction
- The Federal Reserve increased the rates it pays on reserves by 0.2 percentage points Wednesday, in a move aimed at controlling the rise of its benchmark interest rate.
- Depending on how financial conditions evolve, the move could signal an early end to the central bank’s attempt at reducing the size of the bond holdings on its balance sheet.
- In turn, that also could mean fewer interest rate hikes ahead.
Jeff Cox | @JeffCoxCNBCcom
Published 1:07 PM ET Thu, 14 June 2018 Updated 2:08 PM ET Thu, 14 June 2018 CNBC.com

Comment by BlackSwandive
2018-07-02 13:16:02

Gee, what a surprise - a few chintzy little token rate hikes and they’re about finished. I’d say it’s time to load up on hard assets, but there’s nothing that’s not in a bubble.

Comment by drumminj
2018-07-02 14:59:01

I’d say it’s time to load up on hard assets, but there’s nothing that’s not in a bubble.

Gold’s taken a beating lately…you think it’s in a bubble?

(Comments wont nest below this level)
Comment by In Colorado
2018-07-02 20:06:26

Like I’ve said before, I a sinking feeling that they’re just taking a breather before blowing an even bigger bubble.

(Comments wont nest below this level)
Comment by butters
2018-07-03 05:15:32

Yep. Bright mam.

Comment by butters
2018-07-03 05:17:38

I think you are correct foobar. It’s all show.

And yes the fed works for us government and vice-versa.

Comment by Professor 🐻
2018-07-01 21:35:39

I predict that retirement liabilities will decrease and elderly people will once again begin to earn interest on their savings, as the Fed’s policy of stealing interest from savers and handing it over to high-risk financial gamblers is winding down.

Even my octogenarian parents are trying to figure out how to earn interest on their savings once again.

Fed hikes push saving account rates to 5-year highs
Jun 19, 2018 5:30 AM EDT Money
By Ken Tumin / MoneyWatch

When the Federal Reserve raised its target range for the benchmark federal funds rate by a quarter of a percentage point last week, it marked the seventh rate hike since December 2015. And finally, after 30 months of gradual Fed rate hikes, consumers are finally seeing a beneficial impact.

This isn’t good news for everyone, especially borrowers, who will have to contend with rising rates on everything from credit cards to auto loans. But it bodes very well for savers.

Deposit rates have historically been slow to respond to the Fed rate hikes, but in the last year, significant increases have been seen in all categories of deposit accounts. In particular, the average savings account yield from 6,905 banks and credit unions has reached a level not seen since 2013 — 0.216 percent as of June 2018.

This recent uptick in savings yields has been a long time coming. In the last five years, the lowest average yield for savings accounts occurred in December 2016, the same month that the Fed raised the target federal funds rate for the second time since it began normalizing rates in 2015.

Then 2016 proved to be a major disappointment for savers who had hoped the Fed rate hike of December 2015 would be the first of several in 2016 and that it would soon lead to climbing deposit rates. Banks were quick to raise credit card and loan rates, but they were slow to raise deposit rates.

Comment by oxide
2018-07-04 05:24:54

Assuming the elderly have any savings to begin with. Sure, there are plenty of boomers who did okay. But there are plenty other who lost a job, had to take early SS, lucky-ducky POCs, who have no savings at all.

Comment by Mr. Banker
2018-07-01 22:39:38

The federal deficient will be reversed and the federal budget will begin to show a surplus.

The political Left and the political Right will reconcile and will begin to sincerely listen to each other’s points of view and once again Peace and Harmony will ring throughout the land.

Universities will begin to lower their costs for tuition.

Reported news will become balanced and beacons of Truth.

Arizona Ben will move to the San Francisco Bay Area and will express to us all deep regrets that he had not done so sooner.

Comment by Professor 🐻
2018-07-01 23:47:58

Large quantities of money will be dropped out of helicopters and targeted to land in the backyards of all worthy American homeowners.

A debt jubilee will be announced to eliminate all outstanding student loan, auto loan, mortgage loan, and credit card debt.

Climate change will warm up the atmosphere to the point where more water vapor is retained in formerly dry regions. As a consequence, California will become a lush tropical paradise. Coupled with the full legalization of marijuana, this development will result in the renaming of the Golden State to the Green State.

Pigs will fly.

Beggars will ride.

Comment by taxpayers
2018-07-02 04:35:29

a friend said is failing daughter will now get a 2nd masters in fine arts !
that should be illegal

Comment by Mr. Banker
2018-07-02 07:41:00

“that should be illegal”

Or at the least be profitable.


Comment by taxpayers
2018-07-02 04:32:57

up 3% in 22151 as orange man spends big

Comment by Albuquerquedan
2018-07-02 06:50:43

Yet deficits are less when Obama achieved 1.8 per cent growth with a slack labor market

Comment by Professor 🐻
2018-07-02 07:50:55

You can run the economy above the speed limit for a while before it crashes…

Comment by Albuquerquedan
2018-07-02 08:03:33

Good policies raise the speed limit, it is just like improving a road.

Comment by Professor 🐻
2018-07-02 23:25:51

Are you saying that, in your humble opinion, putting the pedal to the metal with deficit spending stimulus at the point when unemployment is at or near a record low level is a good policy? Please explain why if you think this is the case.

(Comments wont nest below this level)
Comment by Albuquerquedan
2018-07-03 06:48:52

Two words: Massive underemployment. Thanks Obama for continuing the globalist tradition of creating jobs that need to be subsidized by the taxpayers: Obamacare, EIC and food stamps. With some proper investment due to tax changes we can get jobs that higher wages and actually pay net taxes.

Comment by Professor 🐻
2018-07-03 08:21:30

Ok… I hope it works.

Comment by oxide
2018-07-04 05:32:26

All those multinationals swore on a stack of Atlas Shrugged paperbacks that they would create jobs if they got their tax cuts. Now it’s time for them to pony up. But of course, now they’ve shifted to fighting tariffs and they still want the illegals and their food stamp/Medicare employees. B*st*rds.

What Trump and Congress should have done is simply double the revenue deduction for corporate taxes. i.e. if you pay someone $100K in salary/bennies, that’s $200K you don’t have to pay taxes on. Hire more people, pay less tax. (Taken to its logical conclusion, you could look create so many jobs that you look like a non-profit and pay no taxes at all.) This also avoids corporate tricks like laying people off and re-hiring them to look like you created a new job.

Comment by Professor 🐻
2018-07-04 06:57:15

“This also avoids corporate tricks like laying people off and re-hiring them to look like you created a new job.”

That sounds just like the used home sellers’ trick to understate days on the market by cancelling a listing then relisting it.

Comment by tresho
2018-07-04 10:38:11

That sounds just like the used home sellers’ trick… For every regulation there will be a newer and more cunning plan to get around it. Such things will never cease.

Comment by oxide
2018-07-02 06:42:52

Relations between Trump, NK, and Putin will stabilize. In response, oil prices will remain $70-90/bbl. American frackers will use the prices to start getting out of debt.

Amazon will choose its location for a second HQ. End result: 5000 jobs instead of the promised 50,000.

Between Trump’s tariffs and the price of oil, the stock market will undergo a medium correction in the fall 2018, which will be mitigated by ppt/stealth QE.

Several dozen private colleges will go out of business, as the Millenial hump has finally passed through the college python and Gen Z just says no to high debts for useless degrees. Community colleges and two-year state schools for the trades will thrive. Developers of luxury student housing will lose their shirts.

Housing in Canada and Australia will finally crash bigly. Investors will rush for the exits and try to invest in American real estate, keeping American real estate high.

Maryland housing will continue to rise steadily with the pace of inflation; Northern VA housing will rise steadily with slightly higher than the pace of inflation.

Nothing will be done in San Francisco, except that the city will start collecting bodies in addition to needles and waste.

Comment by Professor 🐻
2018-07-02 08:15:58

“Several dozen private colleges will go out of business, as the Millenial hump has finally passed through the college python and Gen Z just says no to high debts for useless degrees. Community colleges and two-year state schools for the trades will thrive. Developers of luxury student housing will lose their shirts.”

The colleges that survive the coming shakeout will be those which master and successfully market online degree programs.

Comment by aNYCdj
2018-07-03 06:40:19

I will agree there Prof. a HS degree should mean something again. like being able to read the NY Times aloud before getting that piece of paper.

I would love to see the end to remedial courses to get into college for recent HS “graduates” that would force more people to go into the trades

also get off the dang phone and talk to each other.Communication and people skills in English must be a part of the new plan for all people even POC.

Comment by oxide
2018-07-04 05:34:12

IIRC, the fed gov restricted Pell grants for remedial courses. I hope they continue with this. There should be no college loans at all for remedial courses.

(Comments wont nest below this level)
Comment by Mortgage Watch
2018-07-02 07:14:34

Tampa, FL Housing Prices Crater 15% YOY


Comment by Jingle Male
2018-07-03 01:22:41

Well, well, HA has a prediction….or a predicament!

Prices up 13%
Listings down 10%
Days on Market 53

I predict anyone selling a house in Tampa will sell it in less than 2 nonthsand be very happy!!

Comment by Mafia Blocks
2018-07-03 03:28:05


Porter Ranch, CA Housing Prices Crater 10% YOY


*Select price from dopdown menu on first chart

Comment by oxide
2018-07-02 08:05:15

The results of the 2018 mid-terms depends on turnout. Turnout depends on what happens this summer. If Mueller can only indict Trump’s outer circle and not Trump himself, Dems will despondent. They will also likely continue on their quest to eat their own, competing to be the most virtuous. In that case, Dems will get only low turnout and will gain a few seats but not enough to flip Congress. On the other hand, if Mueller finds some concrete dirt on Trump, Dems with energize and likely re-unite. They will almost certainly flip the House and the Senate is a toss-up.

If the Dems take Congress, Trump will get serious about the veto pen.

Comment by Mafia Blocks
2018-07-02 08:14:53


Duxbury, MA Housing Prices Crater 15% YOY


Comment by Albuquerquedan
2018-07-02 08:16:39

This is the latest polls on Trump, at a similar time period Obama was down 17 to 20% in the index which then resulted in red wave. The more the Democrats advocate open borders the worse it is getting for them, I cannot guarantee they will stay stupid to November but they are doing a great job now:

Monday, July 02, 2018
The Rasmussen Reports daily Presidential Tracking Poll for Monday shows that 48% of Likely U.S. Voters approve of President Trump’s job performance. Fifty-one percent (51%) disapprove.

The latest figures include 35% who Strongly Approve of the way Trump is performing and 40% who Strongly Disapprove. This gives him a Presidential Approval Index rating of -5. (See trends).

Comment by MacBeth
2018-07-04 04:31:16

They will also likely continue on their quest to eat their own, competing to be the most virtuous.”

Boy, is that ever true! Play your cards right, oxide, and you find yourself in a better position than you might have imagined.

Big Government = Titanic

Comment by Sean
2018-07-02 11:05:20

More housing supply comes on the market. Boomers realize they are broke and need that influx of cash, but prices will stay the same or dip slightly. Not gonna give it away.

People will scramble at the end of the year to prepare for filing their taxes under the new code. What’s deductible, what’s not? Many clickbait articles with bad info will pop up.

Mueller wraps up his investigation. Trump not indicted but many people in his campaign will be. Ds and Rs continue to argue, each will claim victory in November. Lather, rinse, repeat.

Amazon HQ2 is announced - it’s Newark N.J.

Tesla delivers more Model 3s, fan boys like them but the lack of quality shows. Many people cancel orders and stock continues to drop.

Yankees win 2018 World Series.

Comment by That guy
2018-07-02 11:26:05

Love the blog and topics, but the comment section is tiring at times. All economies and governments are fluid in history. I believe now is a time for a Gaulist type political movement with a heavy focus a dirigisme economy. We need a vision for American growth that has yet to materialize hence the gaulist approach.

No major changes in 2018 as it will be Q1 2019 before we realize the recession has arrived.

Comment by rms
2018-07-02 15:53:47

“…dirigisme economy.”

Now there’s a good Jeopardy question. :)

Comment by BlackSwandive
2018-07-02 13:17:04

I predict people will continue loading up on debt throughout the rest of the year.

Comment by rms
2018-07-02 15:58:30

“I predict people will continue loading up on debt throughout the rest of the year.”

+1 And Stormy (these tits don’t quit) Daniels will be suing somebody.

Comment by Neuromance
2018-07-02 17:49:54

The Fed’s very gradual tightening, plus mortgage rates creeping up is the big story. If the other central banks tighten or at least stop the “stimulus”, that would compound the story.

My opinion is there’s a gold rush mentality in real estate and there’s a lot of speculative demand. Eventually, the prices will flatten (for non-anecdotal data, I look at Case Shiller) and perhaps a year after that, we’ll start seeing some consistent declines. We reached peak debt years ago, there was no beautiful deleveraging for households. Interest rates are low but creeping up so while households can take on some more debt I don’t think it’ll be a rapid and large amount like before the first bubble peak. Speculators aren’t in for the long haul. Especially those with the ultra low downpayment loans, looking for a flip.

Comment by Mortgage Watch
2018-07-02 18:44:51

Arcadia, CA Housing Prices Crater 19% YOY


Comment by Professor 🐻
2018-07-02 20:05:50

I predict that a Chinese think tank will warn of impending financial panic in China.

Comment by Professor 🐻
2018-07-02 20:50:09

Nailed it!

Asia Unhedged
Real-time intel on what moves markets
China ‘very likely to see financial panic,’ warns Beijing think tank
Study by government-backed group sheds light on concern about effects of trade tensions
By Asia Times staff
June 27, 2018 10:59 PM (UTC+8)

While US stocks continue, on most days, to shrug off headlines about escalating trade wars between America and just about all of its trading partners, the same cannot be said about equities in China.

The Shanghai Composite officially entered a bear market on Tuesday, after falling more than 20% below a two-year high reached earlier in the year. The benchmark fell another 1.29% on Wednesday. Stocks in New York, meanwhile, are continuing up for the second day in a row, following news that the Trump administration will not slap harsh investment restrictions on China.

Comment by Professor 🐻
2018-07-02 23:20:27

Why are Chinese stick market investors so anxious?

The Financial Times
China stocks and renminbi fall as anxiety persists
Traders cite central bank support for currency as state media criticise ‘irrational overreaction’
an hour ago

Comment by Professor 🐻
2018-07-02 23:21:34

Stock market…my Freudian slip is showing.

(Comments wont nest below this level)
Comment by Professor 🐻
2018-07-03 04:31:58

Is keeping investors in the dark about an incipient financial panic an effective means to forestall it?

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

– U.S. President Herbert Hoover on Oct. 25, 1929

Jul 3 2018 at 3:36 PM
Updated 1 hr ago
China moves again to curb market panic
The Shanghai Composite Index fell another 1 per cent in late morning trade on Tuesday, bringing total losses for the year to more than 16 per cent. AP
by Michael Smith

Beijing has ramped up efforts to curb panic selling after China’s stockmarket hit new two-year lows on growing concern about US trade tariffs, a slowing economy, a weaker currency and the risk of the country’s unregulated debt spiralling out of control.

Policy changes such as the central government’s move to switch off low-interest loans for shanty town redevelopment has undermined confidence in China’s $US7 trillion equity market just as the first wave of US President Donald Trump’s proposed tariffs on Chinese goods comes into effect.

While China’s army of elderly retail shareholders have not shifted into panic mode yet, investors have started to ignore constant assurances in state-run media that the world’s second-largest economy is on a stable footing.

After slipping another 1 per cent in early trade, the Shanghai Composite Index closed up 0.4 per cent on Tuesday, leaving total losses for the year at around 15 per cent. This means the country’s largest stockmarket is trading lower than it was during the 2015 crash, and is one of the worst performing markets in the world this year. The Shenzhen Stock Exchange also dropped more than 1 per cent at one stage on Tuesday before closing flat, while Hong Kong’s Hang Seng Index pared back an almost 3 per cent decline to close down 1.4 per cent.

Economists are divided over whether the market is overreacting to the rhetoric surrounding US-China trade tensions in advance of the introduction on Friday of US tariffs on $US34 billion worth of exports from China, or whether it is in response to genuine concerns about China’s ability to manage debt and the country’s huge shadow banking market.

“It is a vicious cycle,” said Zhang Qi, an analyst at Heitong Securities.

“Because the market has been weak a long time it drives down confidence.

“There are also other reasons: the [renminbi] exchange rate falling, and people are worried about the trade war with the United States.”

He said the lower Chinese currency was driving down bank and property shares, while trade war fears were dampening retail spending. Pharmaceuticals, biotech, telecommunications and aviation stocks had outperformed the rest of the market.

A leaked censorship document issued to China’s state-controlled media by the government indicated Beijing was preparing to step up efforts to contain any panic by telling newspapers and broadcasters to play down the severity of any downturn.

Comment by Professor 🐻
2018-07-03 04:54:22

Mark Mobius: Trump will win the trade fight with China — and here’s how to play it
By Victor Reklaitis
Published: July 3, 2018 7:09 a.m. ET
Critical information for the U.S. trading day
“I agree with him completely,” Mobius says, referring to Trump’s stance on the trade gap with China.

With markets closing early today and not opening at all tomorrow, the big bears just might take a break from growling about the many headwinds that stocks are facing.

This one in California was just spotted relaxing in a hot tub and sipping a margarita.

But as the bears like to point out when they’re not chilling, this Independence Day sees the U.S. government locked in a worrisome trade fight with the country that’s aiming to become the world’s No. 1.

So will the U.S. beat China in this battle? Yes, says storied investor Mark Mobius for our call of the day.

“I think at the end of the day, the U.S. is going to win this one, because the U.S. is the biggest importer in the world, and China needs the U.S.,” he told CNBC in an interview late yesterday.

Comment by Professor Bear
2018-07-03 21:37:47

Nothing to see here, folks. Move along, please.

China Set for Record Defaults, and Downgrades Tip More Pain
Bloomberg News
July 2, 2018, 2:00 PM PDT
Updated on July 2, 2018, 8:53 PM PDT
Total so far this year is approaching full tally for 2016
Regulators still seen intervening in case of systemic risk

Comment by Albuquerquedan
2018-07-03 06:59:54

Article is saying what many on this board have been saying. The U.S. can win the war, it just needs the courage to fight it, Obama as a globalist actually wanted to reduce our dominance and he succeeded.

Comment by Professor 🐻
2018-07-03 08:10:04

Do you believe trade is a zero-sum game, where one side always wins and the other side loses?

Comment by Professor 🐻
2018-07-04 01:00:28

Fitch warns President Trump’s trade fight could cost the world $2 trillion in global trade
By Sue Chang
Published: July 3, 2018 2:25 p.m. ET
Global trade skirmish could shave 0.5 percentage point off U.S. growth

Comment by Hi-Z
2018-07-04 09:12:30

I don’t give a darn about “costing the world”.
I am only interested in the long term effects on the USA economy and jobs.

(Comments wont nest below this level)
Comment by Professor 🐻
2018-07-04 10:20:25

In case you haven’t noticed, the U.S. is part of “the world.”

Comment by tresho
2018-07-04 10:39:36

shave 0.5 percentage point off U.S. growth
What is this imaginary “growth”?

Comment by jeff
2018-07-04 11:21:23

“In case you haven’t noticed, the U.S. is part of “the world.”

The Cleveland Browns are part of the NFL and the San Diego Padres are part of MLB but somebody’s gotta win or they wouldn’t have the Super Bowl and the World Series every year.

Comment by Professor 🐻
2018-07-04 11:45:01

If a players’ strike shut down the NFL, then NFL fans would lose across the board, as would the players and the team owners.

Not all games are zero sum. The prisoner’s dilemma game can easily result in everyone’s loss.

Comment by Albuquerquedan
2018-07-04 12:45:04

Countries with large surpluses lose far more than countries with large deficits. The globalists do not want to give Trump a win but eventually rationality will take over and China and the EU will cut their losses and agree on something closer to fair trade.

Comment by jeff
2018-07-04 14:36:52

“but eventually rationality will take over and China and the EU will cut their losses and agree on something closer to fair trade.”

Sounds like the way they settle a players’ strike in sports where some teams are the Cleveland Browns and some teams are the New England Patriots.

Comment by technovelist
2018-07-04 17:06:38

The only way to win a trade war is to convince the other side to cut trade barriers, and then you do the same.

That is what I believe Trump is up to.

Comment by Professor 🐻
2018-07-04 18:18:13

Trump has made the first move by throwing up trade barriers, or at least threatening to do so. If other countries retaliate in kind rather than cutting barriers in response, I’m not sure how this works out for the greater good. I realize this is a simplification, but it seems like there are significant downside risks. Hopefully the asymmetric losses AlbqDan cited will drive a favorable resolution.

Comment by Mortgage Watch
Comment by BlackSwandive
2018-07-03 22:37:10

Where’s the fall? It’s at $74.65.

Comment by In Colorado
2018-07-04 09:10:27

I seem to recall that a regular poster here claimed that it would drop to $10 by now.

Comment by Albuquerquedan
2018-07-04 10:55:36

We sure could use that Libya production right now. I said at the time the Libya intervention was one of the worse decisions ever made, right up there with Carter supporting the removal of the Shah. We removed a leader that had voluntarily given up his nuclear program and was helping us against Islamic fanatics across the middle east. By doing so, we fanned the Syrian war and the rise of Isis. We encouraged North Korea and Iran to speed up there nuclear programs to avoid regime change. Yet somehow this decision never gets mentioned in the MSM when either oil prices or the Iran and North Korean nuclear programs are discussed:


(Comments wont nest below this level)
Comment by Sketch
2018-07-03 23:41:31

US Home Listing prices will continue to rise, albeit at a slower pace through the year. In parallel, the inventory of homes for sale begins to increase with a decrease in home sales through the summer and end of 2018. Because of this, home prices will begin to inch their way down in 2019 before entering the “correction” terrority (to use a market term) by 2020.

Apartments, in most areas, are in hyper supply. A few cities (I.e. Oklahoma, Portland, Denver, etc) will enter recession mode by end of this year, with more cities to follow in 2019 as more supply comes online. This will be a factor for lower home sales and pricing mentioned above.

I believe Another US economic rescission btwn now and 2020 will push house pricing from a correction to full on recession.

Mr. Banker will continue to bring home the bacon.

Mortgage watch and Mafia Blocks will continue to find more craters than Mercury’s surface.

Ben continues to work hard on the blog, and we all thank him for his efforts.

Comment by Professor 🐻
2018-07-04 00:52:41

I predict the mystery will continue of why bankers are paid so well for whatever it is that they contribute.

The Financial Times
John Gapper
It is a mystery why bankers earn so much
M&A advisers are paid millions for making boards of directors feel comfortable
4 hours ago

Comment by Mortgage Watch
2018-07-04 06:51:02

Bellevue, WA Rents Crater 14% YOY


Select price from dropdown menu on rent chart

Comment by drumminj
2018-07-04 08:11:28

Soo..house prices are up 15.8% with a prediction of another 9% over next 12 months. Not much of a crater there!

And rent is only down 5% from the peak there — from $3700/month - $3500/month. More of a regular fluctuation than anything else HA

Comment by Mafia Blocks
2018-07-04 09:01:58


Portland, OR Housing Prices Crater 14% YOY


Comment by txchick57
2018-07-04 10:38:25

Wow. Just Wow. Is this MAGA headquarters?

I turned in my Republican card months ago. I can barely stand to look at news with this maniac in the WH. I fervently hope for a huge blue wave to take over control of both houses of Congress so he can be neutered before he’s tossed out in 2010.

Comment by Albuquerquedan
2018-07-04 11:11:53

You sound like you supported the treasonous Bush family. Sorry America is more than an idea, it is a country and countries need real borders. You can not be loyal to the NAU and the constitution. We have the first president in thirty years that is taken his pledge to the constitution seriously.

Comment by Albuquerquedan
2018-07-04 11:17:10

link about the W treason:


Comment by Professor 🐻
2018-07-04 11:50:48

“Is this MAGA headquarters?”

I see it strangely analogous to UC Berkeley’s campus community. The campus has a reputation as a hotbed of left wing radicalism. The conservatives are there on the campus as well. It’s just that they aren’t constantly screaming for attention, so they are harder to notice.

Comment by Neuromance
2018-07-04 15:43:33

Just for reference:

1) Case Shiller, from the St. Louis Fed: https://fred.stlouisfed.org/series/CSUSHPINSA

2) History of the 2008 financial crisis, from the Harvard Law School Forum on Corporate Governance and Financial Regulation: https://corpgov.law.harvard.edu/2010/11/20/the-financial-panic-of-2008-and-financial-regulatory-reform/

The takeaway: IMO, due to the high level of speculative demand, it did not take a protracted period of price stabilization before the speculative demand fled the RE market in 2007, leading to price declines and ultimately the bailout of Fannie and Freddie in September 2008, and the rest of the dominoes falling.

I think there is a high level of speculative demand now. However, we know that last time around, and perhaps this time around if the ruling paradigm has not changed, that the Fed and government will step in to halt price slides. The question is, how does that dynamic impact a stabilization in RE prices and the subsequent effect on speculative demand?

Comment by Professor 🐻
2018-07-05 06:45:36

I predict that we won’t run out of doomsayers any time soon.

Brace for a lost decade for U.S. stocks, warn Morningstar strategists
By Victor Reklaitis
Published: July 5, 2018 8:46 a.m. ET
Critical information for the U.S. trading day
Getty Images
The longer-term outlook isn’t that great for U.S. stocks, according to Morningstar’s London team.

It’s time to put away the grill and fireworks and instead focus on the Fed minutes that will hit during afternoon trading.

If the smoke signals from Jay Powell & Co. aren’t stirring enough, we’ve also got Washington and Beijing’s dueling tariff packages that are getting closer to taking effect. And there’s Friday’s jobs report.

Beyond the near-term economic headlines, strategists at Morningstar say the longer-term outlook isn’t that great for U.S. stocks, providing our call of the day.

“Our expectation at the moment is that you won’t have any real return from U.S. equities over the next 10 years,” said Morningstar’s Dan Kemp at a company event Wednesday in London. In the chart he shared below, the black line is pretty close to zero for American stocks.

Comment by Patrick
2018-07-05 09:35:42

The year-over-year sales comparisons of home sales and home prices never mention that credit loosened significantly in July 2017 that allows monthly mortgage payments to equal 50% of gross income (not 50% of take home pay). In the 90s the DTI was closer to 30%. In late 2017 and continuing into 2018, 1/5 homes sold has a DTI of 50%.

On top of that, downpayment requirements were taken down below 3% and things things like “seller concessions” count as a down payment - meaning if a seller lowers the price by 3%, that qualifies as a down payment.

Of course, all of these conventional mortgages are backed by tax payers. To make the problem worse in January of 2018 the government increased conventional loan limits by 7%.

As long as the realtors/homebuilders lobby can continue to get the government to subsidize their business, the bubble will continue. But just like in Canada and Australia, once the government reverses via tightening credit then the whole thing falls apart.

In the remaining of 2018, credit will continue to tighten and once we start lapping the DTI increase a, the year-over-year comparisons should slow some, but we won’t lap the conventional loan limit increase until January.

The NAR will continue to try to blame tight inventory to justify another bump in conventional mortgage limits which I’m sure they will get in January of 2019. That will just inflate the bubble more as the % of purchasers with DTI at 50% will increase.

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