Bits Bucket for May 15, 2013
Post off-topic ideas, links, and Craigslist finds here.
The Housing Bubble
Examining the home price boom and its effect on owners, lenders, regulators, realtors and the economy as a whole.
About Me
Name:Ben Jones
Location:Northern Arizona, United States
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If you take on mortgage debt at current massively inflated housing prices, you’ll enslave yourself for the rest of your life.
“Debt is bondage.” ~ Suze Orman, May 11, 2013
median household incomes down 10 percent in the last several years
youth un/underemployment at record levels
1 trillion student loan elephant in the room
so who’s gonna buy all these overpriced debt shacks?
Foreign investors, of course! Your children will never be able to afford a house, but that’s America.
Yeah, that’s the ticket. You know all those low-cost countries that provide slave labor and don’t mind if the slaves get killed in fires or building collapses? It will be THOSE countries that also provide multitudes of peeps with so much wealth that they will outbid Americans on their own houses. Then the Americans will, of course, continue to buy the slave-made goods that produce so many uber-rich slaves, at the expense of the destitute Americans
“median household incomes down 10 percent in the last several years”
That’s not even close to being true.
2011 $48,152
2010 $47,425
2009 $47,915
2008 $48,395
2007 $48,332
2006 $46,348
2005 $44,565
2004 $42,653
2003 $41,690
2002 $40,772
2001 $40,610
2000 $40,418
http://www.washingtonpost.com/blogs/wonkblog/files/2013/03/median-income.png
Slithers:
Where did you get your numbers? That chart from the WA Post looks different.
That’s an Index. What I provided is actual data.
Slithers:
Where did you get the data?
Uncle Fed, here is the methodology behind the HII–if you look at their graph, it is exactly what the WA Post shows.
http://www.sentierresearch.com/HouseholdIncomeIndex.html
It is not only seasonally adjusted, but appears to also be inflation adjusted as well.
Flat nominal incomes for 5 years with inflation at 2%=real wages falling by 10%.
Both of you can be right, but you need to understand the data you quote.
“The median household income estimate for the same quarter, on year apart (YOY) have also been adjusted for changes in consumer prices. The medians for both quarters are presented in terms of the average of the monthly CPI-U’s for the most recent quarter.”
Thank you. That’s what I was looking for. I think the inflation-adjusted numbers are more useful from an overall economic standpoint. However, rents and house prices usually adjust with inflation.
However, you have to ask yourself how different groups are doing…how are the more highly educated folks in their 30’s doing (more likely to be owners)? How about recent grads and dropouts (screwed)?
For this reason, I think as we work through the next part of this cycle, we could see home prices rise, as those doing better flee rentals, and rents fall, as poor household income growth takes its toll…unless of course doubling up becomes more common, in which case we will see rising vacancies given the massive new multi-family construction going on.
Somebody around San Diego must be snapping them up.
HOME PRICES IN COUNTY HIT FIVE-YEAR HIGH: $400K
Median paid for home in April up 21 percent over 2012 level
By Lily Leung
12:01 a.m. May 15, 2013 Updated
4:21 p.m. May 14, 2013
San Diego County home prices have hit the highest level in five years, as distressed sales continue to fall and mortgage rates are still near record lows.
The median price of a home sold in April rose to $400,000, up 21 percent from the same time a year ago, reported San Diego-based real estate monitor DataQuick on Tuesday. Last month’s median price matched the median in April 2008. The all-time peak was $517,500 in November 2005. Sales rose 7 percent from a year ago to 3,792.
The county has seen double-digit annual increases for the past eight months, prompting some concerns of a lead-up to another housing bubble.
Michael Lea, a real estate economist at San Diego State University, believes those fears are overblown. Continued hikes in home prices are due largely to a shift from a distressed market, which brought consumers heavily discounted deals, to a more traditional market. Short sales — deals that let borrowers sell their homes for less than what they owe — are also declining.
Properties that were lost to foreclosure in the past year and resold in April made up 10 percent of total home resales, the lowest share in six years, DataQuick numbers show. They peaked at 55 percent in January 2009. The median price at that time was $280,000.
“The market has seen a significant decline in the number of lower-priced transactions, in part because foreclosures and short sales are petering out,” Lea said.
As the supply of lower-priced homes dwindles, more San Diego homebuyers are moving up in price range. That also has caused the countywide median price to shoot up.
…
That’s a silly talk.
May a house be upon you….
A pox on all your houses.
A chicken in every pox.
May the payments rise up to meet you.
May the payments rise up to meet you.
That’s a good one. Or “may your home value rise up to meet what you paid for it”.
LOL, Skye.
Forgiving College Debt Won’t Help Students
Published: Tuesday, 14 May 2013 | 12:00 PM ET
By: Peter Morici, Professor at the University of Maryland
College is too expensive, graduates can’t find decent jobs and pay off their loans, and students, parents and educators all share in the blame. Now, President Barack Obama’s is proposing a plan that would forgive more student loan debt — but that will only make a bad situation worse.
More than half of recent graduates are working as waiters, taxi drivers or some other occupation that does not require a college education. The number in minimum wage jobs has doubled since 2007.
President Obama is rational, too. Parents, students and former students all vote. Instead of radically refocusing national policy to expand vocational education in high schools and community colleges, he promises to increase the percentage of Americans with four-year diplomas.
His proposed “Pay as You Earn,” which came late last year, would forgive billions in student debt with federal dollars. Borrowers in the program would make payments equal to 10 percent of their monthly income, after rent and basic living expenses, and after 20-years of on-time payments would be forgiven of all debt—regardless of how much they had borrowed.
What the program fails to account for is that debt forgiveness simply encourages young people and parents to make poor choices, including borrowing too much. It will also embolden colleges to keep pushing up tuition—things the nation can’t afford. It certainly won’t help graduates find jobs.
http://www.cnbc.com/id/100734929 - -
Can you say “permanent Democrat supermajority?”
The free sh*t army will remember who Santa is when they shuffle to the polls.
Forward!
If only we had Romney to “fix sick companies” (that are showing record profit$ now, btw), that would be much better.
‘fix sick companies’ that are showing record profit$ now’
I guess you’re referring to Fannie and Freddie. So let’s see, keep bankrupt mega-corporations alive so the bad loans can be put on the back of taxpayers. Guarantee their bonds so they can continue borrow billions at artificially low rates. Make loans so dumb they have a virtual monopoly in the lending “market”. Allow the central bank to run wild with trillions of printed money, creating a housing bubble.
Give that to me and I’ll show a profit too, for a while. Or as Jim Rogers said, give me a trillion dollars and I’ll show you a good time.
Oh, and BTW, mentioning Romney only works for so long. Eventually you have to accept responsibility for your actions.
Give that to me and I’ll show a profit too ??
Exactly Ben….Look at Apple…They have 180 billion dollars in the bank…They finally caved in to share holder demands and announced a 60 Billion dollar dividend…But, instead of cashing in a few CD’s, they borrowed the entire 60 billion by floating some cooperate bonds…Why ?? Because the rates are so fricken low that it makes no sense to use your reserve cash..They will just pay the bonds off through their current cash flow…They are saving the cash for the vulture fund or as a “huge” insurance policy against a significant downturn that may take out some of the competitors…RIM comes to mind…
Tea Billy is referring to companies holding on to record amounts of cash, while not hiring any of these degreed workers who are burdened with all the debt.
They are saving the cash for the vulture fund or as a “huge” insurance policy against a significant downturn that may take out some of the competitors…RIM comes to mind…
While I might do the same in their situation, isn’t that really the root of our problem? I realize the Fed is trying to create inflation to keep people from hoarding dollars but aren’t there other things we could do to get them to spend that money on something…anything? We need it to be in circulation…
scdave,
I forgot the best part. These companies back loans, right? So what do they do when a loan goes bad? Wait a year or two, pretending to “work it out”, then refinance it so they don’t have to show a loss.
‘As the Obama administration had revised HARP policies late in 2011, last year was an especially good year for HARP loans, as 1.1 million borrowers took advantage of the relaxed terms. This represented a figure equal to the number of borrowers who had refinanced through HARP in its first three years put together.’
‘The relaxed terms opened HARP up to borrowers with loan-to-value (LTV) ratios of 125 or greater, as these deeply underwater borrowers previously weren’t able to qualify under the old HARP guidelines. For 2012, the Federal Housing Finance Agency’s statistics show 228,141 HARP borrowers being deeply underwater, or having LTVs that exceed 125.’
‘This year, the percentage of borrowers with LTVs over 125 seems to be increasing, as 25 percent of all HARP borrowers were deeply underwater in January 2013.’
‘The HARP program has been extended to December 31, 2015, which gives borrowers from Tennessee (or from anywhere else in the U.S.) two and a half more years to avail of the program.’
Perhaps there’s not enough productive work to do to justify hiring people.
Perhaps they can make big profits without workers.
Perhaps IT and robotics have engineered tens of millions right out of their jobs. Soon, they will have engineered themselves out of a job. It’s already happening.
Home-based manufacturing might end up doing the same. Does not bode well for home/auto parts manufacturers and down the road, perhaps for installers of such products as well.
And guess what? Fully functional plastic guns now can be made at home!
Fine…so we as a nation need people to invent new things that everyone will want and that the production of will employ people. What do we need to do to encourage that? Resolving health care seems like the issue that would be most helpful in that area to me…but I’m open to all ideas.
I don’t think it makes sense to just say well…there’s just not enough work to do. That means we have human capital to spare, let’s figure out how to use it.
‘The relaxed terms opened HARP up to borrowers with loan-to-value (LTV) ratios of 125 or greater, as these deeply underwater borrowers previously weren’t able to qualify under the old HARP guidelines. For 2012, the Federal Housing Finance Agency’s statistics show 228,141 HARP borrowers being deeply underwater, or having LTVs that exceed 125.’
Bernanke Goes to Hollywood – Relax
Oh oh
Wee-ell-now!
Relax don’t do it
When you want to go to it
Relax don’t do it
Who you gonna loan
Relax don’t do it
Who you gonna loan
Who you gonna loan
But shoot it in the right direction
Make making it your intention-ooh yeah
Live those dreams
Scheme those schemes
Got to hit me
Hit me
Hit me with those loser loans
Loser loan me
Relax
Relax
I’m loaning
I’m loaning-yeah
Relax don’t do it
When you want to go to it
Relax don’t do it
Who you gonna loan?
Relax don’t do it
When you want to suck to it
Relax don’t do it (HARP)
Who you gonna loan
Who you gonna loan
Who you gonna loan
Loan-huh
Frankie Goes to Hollywood - Relax (original version) - YouTube
http://www.youtube.com/watch?v=7WZ33w3B8Hw - 220k - Cached
Jethro….. you are a lyrical maestro.
I don’t think it makes sense to just say well…there’s just not enough work to do. That means we have human capital to spare, let’s figure out how to use it.
Watch out, Carl. You may get called a socialist if you write something like that.
I don’t think it makes sense to just say well…there’s just not enough work to do.
… because then you’ll undermine the argument that these college grads are lazy bums that need to occupy a (now admittedly non-existant) job.
Irony: most of friends that support these types of policies are the same ones that refuse to just split the check evenly at a restaurant because Joe had a couple more beers than they did or sue got dessert when they didn’t.
Aren’t you a CPA? What’s your objection to splitting the check correctly?
He got an extra beer, appetizer for everyone to share (but ate 90%) and a desert of course silly!
jk!!
It’s really tacky not just to do an even split. If you spent more, offer to pick up the tip. Or round up. But pulling out the calculator or even sitting there and adding it up mentally is bizarre. When you’re eating with people you’re not so much consuming the food, you’re enjoying the experience, service, convenience, etc. If you just want food, go to a fast food place and pay separately, problem solved. Or go to Olive Garden or some other place where they’ll split the check for you.
I often get outspent when eating with a group (I don’t eat meat and my wife doesn’t eat red meat or pork). I can’t imagine any reason I’d ever put down less than an equal share unless the disparity was really obvious like someone ordering the steak and lobster.
Michael’s “friends” don’t sound like friends, though. I can’t imagine someone being that anal. My best friend is extremely OCD and detail oriented, also very thrifty. When we go out we’ve never once sat down and crunched numbers. The time together far outweighs him having that extra beer or my ordering an appetizer.
I can only contrast this with what happens with me and my hanging-out buddy.
Sometimes he gets the check. Sometimes I do. Whoever doesn’t pick up the check leaves the tip. When I was laid off, he picked up the check a few extra times. When I started working full time again, I picked it up most of the time.
Really, it’s not that big a deal. Can’t see carrying a grudge over a few lousy Bernanke-bucks.
“Sometimes he gets the check. Sometimes I do. Whoever doesn’t pick up the check leaves the tip. When I was laid off, he picked up the check a few extra times. When I started working full time again, I picked it up most of the time.”
Sounds like you and your buddy are like, well buddies. Also sounds like you both picked a good one. The bad ones don’t hang around for the bad times.
I’m totally fine with playing fast and loose with tabs. But I think you have to adapt to different personalities. I lunch with lots of geeks and they can’t help but track it in their heads. So I make sure to put a little extra effort into tracking it myself so I don’t accidentally underpay. With buddies that don’t care, I don’t care.
Whats wrong with asking for separate checks? Pretty much standard practice here unless you are on a date or with family.
Calculator not handy?
It’s like Obama is a caricature of well intentioned stupidity. First the healthcare mess, now this.
The bankers must be planning on installing a republican president next election.
What makes you think there will be a “next election” ?
Obama = President for LIFE
He wouldn’t last a day if Hillary got wind of the plan. She’d be holding his still-beating heart in her hand before lunch.
the fact that holder didn’t get fired or resign either in obama’s last term or for the love of god…at the beginning of this one…is beyond me.
that alone is enough to convince me obama is just an empty suit.
wasn’t there some past president (grant perhaps?) who’s greatest folly was his extreme loyalty to the friends he appointed to office?
may be more than one.
Obama is a insidiously corrupt empty suit surrounded by a mass of corrupt empty suits.
But most HBBErs here voted for Bammy in 2012. Go figure. Of course, I voted for Gary Johnson, most HBBErs here want to keep the taxpayer money flowing into my wallet. Means more beer for me. Burp.
More than half of recent graduates are working as waiters, taxi drivers or some other occupation that does not require a college education. The number in minimum wage jobs has doubled since 2007.
Been there, done that. Back in the 1980s, in fact.
And what was the long-term effect on the life of Slim? Well, I’m very skeptical of all this talk about college as an investment that pays big dividends down the road.
OTOH, I’m still a big believer in education. But I also believe that it happens in many places. Not just overpriced colleges and universities.
OTOH, I’m still a big believer in education. But I also believe that it happens in many places. Not just overpriced colleges and universities.
—————————————
Agreed, with the caveat that not every college with an expensive sticker price is overpriced.
Would they also adjust the price of a degree, so you pay less to learn about art therapy?
The economy has turned into one giant system of rot where bankers and politicians push people to borrow more money than they can possibly pay back, then appropriate taxpayer funds to the lenders to facilitate some sort of debt forgiveness. Absolutely disgusting.
I am changing my nickname.
Disgusting?
No. Fascism.
“The economy has turned into one giant system of rot where bankers and politicians push people to borrow more money than they can possibly pay back, then appropriate taxpayer funds to the lenders to facilitate some sort of debt forgiveness.”
You only have to connect a few dots to arrive at this conclusion, yet so many avoid discussing it especially if their wife is nearby.
“Big Shadow Inventory Lurks”
http://www.forbes.com/sites/afontevecchia/2013/04/30/home-prices-growing-at-pre-bubble-rates-on-bernanke-boost-but-big-shadow-inventory-lurks/
“CoreLogic data shows the number of foreclosed homes and the size of the shadow inventory is massive.”
With tens of millions of excess empty houses and housing demand fallen to 17 year lows, housing prices remain grossly inflated.
homes are fairly valued.
If that were true you’d back that up with a breakdown.
But the fact housing prices are inflated by 200%+ across the country tells me you won’t back yourself up.
Heres a lot of breakdown from March 20, 2013:
http://www.zillowblog.com/research/2013/03/20/30-major-metros-record-home-value-gains-in-february-as-recovery-becomes-more-widespread/
“2013 continues to do well on the heels of 2012, however we expect home value appreciation to moderate throughout the year, especially in regions where appreciation has been particularly strong. The Zillow Home Value Forecast calls for 3.2% appreciation nationally from February 2013 to February 2014.”
Things are worth what people are willing to pay, this article shows that azdude is correct. Nationwide, prices aren’t booming, but they’re rising.
Crusty The realtor….
That’s not a breakdown of values. Thats a realtor authored debt driven puff piece.
The statement was, “houses are fairly valued”. Not what direction prices are moving.
Ya know…. you seem to read as well as our other realtor in hiding Mr. McAnus aka Mike Viking.
And if your only definition of “fairly valued” is either:
a) $50/sq ft at a profit in all 48 states regardless of location, or
b) Whatever Suze Orman says,
then there’s no further discussion to be had on fair value.
Speaking of Zillow, it says for the past 30 days the value of my house has changed by:
+$17,697
Madness. Keep in mind, the purchase price for my house was only $150k.
As near as I can figure, the reason for the big upswing was that in March, only 1 house near me sold, it was a quick all-cash transaction on a very beat-down house (an old man who had done no maintenance in forever had a stroke and got sent to a long term care home, family had to firesale the house to raise money for that).
Then last month some nicely maintained houses hit the market and sold pretty quickly (prices too high, like $100/sq ft range).
Basically, I don’t trust Zillow at all. The stats for my house are all wrong as well, partly because of upgrades we made, but partly because it’s a 60 yr old house and when it was built it didn’t have AC, finished basement, etc.
It’s simply not enough to know the location of a house and it’s sq ftage, you really need to see inside it, Zillow seems to make apples and oranges comparisons all the time. It might work for new construction but in established neighborhoods it’s completely untrustworthy. Just like a realtard (TM).
I have no problem developing an SOV. I know exactly what the “value” is.
I think it’s you that doesn’t understand so I’ll give you the floor so you can demonstrate your understanding and ability to price a house.
Go.
“I don’t trust Zillow at all.”
Only when it’s convenient for you right? The puff piece posted by Crusty Perkins was an editorial, not a breakdown.
And FYI, Zillow is a data aggregator. Their transaction price and transaction volume data is 100% accurate.
You always cloud your definitions in an attempt to win arguments. What do you mean by “value”, the cost to build new including land, the replacement cost for the home only on existing land, the price based on recent sales, etc?
“Win”? What do I mean by “value”?
I think we’re seeing why your abilities are limited to walking suckers through houses and saying “it’s a great time to buy”.
Post an SOV that gets you to your fantasy price.
“Post an SOV that gets you to your fantasy price.”
You win, I’ll just use yours. $50/sq ft, plus $3,000 for an acre of land, anywhere in the lower 48. This afternoon I’m going out looking for my 2,000 sq ft home on an acre of land in 29681 for $103,000. Wish me luck.
That’s not an SOV my dishonest realtor friend.
Instead of admitting the truth that you really don’t know, you lie.
Only when it’s convenient for you right? The puff piece posted by Crusty Perkins was an editorial, not a breakdown.
—————
I don’t trust Zillow even when it would be convenient. It is an absurd proposition that a house could increase in value by 12% in a month’s time without any big changes in the neighborhood or to the house itself. I laugh at the idea.
“And FYI, Zillow is a data aggregator. Their transaction price and transaction volume data is 100% accurate.”
But their conclusions drawn from that data is not 100% accurate, by their own admission:
http://www.zillow.com/howto/DataCoverageZestimateAccuracy.htm
Then don’t draw conclusions. The data is the data.
Simpleton.
Their “Zestimate” is what people conclude the value is based on the data Zillow has collected.
Who cares about “zestimates” other than you debt-donkeys.
“But the fact housing prices are inflated by 200%+ across the country….”
If that were true you’d back that up with a breakdown.
It’s been posted over and over again. You just don’t like it.
What’s your next excuse?
No issue with the concept that houses are inflated by 200%+, just like to see where that comes from. How do you calculate what the prices should be? Is it based on rents, or inflation adjustment based on some particular date, or something else? I’d really appreciate if you could share this info.
And the answer is the same no matter how many times you ask the same question.
Al:
It’s based on rents. House prices are not yet inflated by 200% across the country, but they are starting to be quite overpriced in some places.
Really? We develop estimates for bidding based on “rents”? LOL
You don’t know what you’re talking about.
HA,
You’re talking about that $50 or $60 per square foot thing? That’s not what sets prices. Prices are set by what people are willing to pay, not input costs. You might as well claim that rents are determined by the owner’s costs.
Like I said, You don’t know what you’re talking about.
Uncle Fed…
Rents are a decent measure for estimating what houses will sell for, but I think even the traditional calculations might not be reliable currently. With supressed interest rates and increased investor pressence, higher price to rent ratios seem to be the norm. With the yields on everything else being low, why would rental returns be any different. Especially when people can use those same low interest rates to buy. As long as the Fed keeps up their manipulations, we can’t rely on traditional measures.
Having said all of the above, I believe that houses are overpriced in most, if not all areas, but the real question is by how much.
If houses were “fairly valued”, demand wouldn’t be at 17 year lows. But they’re not.
See how that works?
And I suppose if I asked for your source on the 17 year lows for demand, you’ll just tell me you’ve posted it many times without indicating when or where.
Let’s say that demand is at 17 year lows, but what about supply. Sure there’s lots of unoccupied houses, but they’re not for sale right now. You can’t accurately estimate price using just demand; you need supply and demand both do it.
Our customers hire us because we build it for half the cost of leasing or buying. It is what it is.
You said you don’t build houses. You said you build bridges.
Hey Al:
Think of it this way. People are buying investments that are heavily risk-laden, in order to receive “competitive” returns. But they aren’t just buying the returns. They are also buying the risk. The risk will (unequivocally) be realized by those who gambled poorly.
When the risk of the current stock market is realized, used-stock prices will drop. Then, will everyone continue to rush in for negative rental returns? It is nothing but speculation, which does not statistically pan out for a large population.
Uncle Fed…
If you’re saying the risk doesn’t warrant the return, be it stocks or houses, I’m with you. Heavy on cash right now personally (and I know there are risks there too.)
I guess my point is that people are willing to take more risk and less return on housing investment because the alternatives suck just as much. The average mom and pop that aren’t good at evaluating investments will tend to shy away from the seemingly incomprehensible stock market and go with what they know, houses. Many of those people won’t even be able to figure out that the cash flow is minimal or negative.
I don’t believe we’ve seen the lows in the housing market that we’re going to see, but there is a lot of upward pressure right now. Few of the factors that are causing the upward pressure makes sense, but is none the less having an effect.
You name it AlWog….. we build it.
First, AlWog, not likely. Check my past posts and you’ll see I’m most certainly not an investor.
Second, you’re claiming to work for a company that builds everything. Yah. Even though you recently denied building houses. Perhaps you should make some notes of what you say so you can keep your story straight.
Looky here AlWog……
You’re claiming we don’t build houses, not me. Yah. Liar.
And Yah….. we build everything.
Perhaps you should worry less about us and more about your ongoing misrepresentations about housing. Yah.
“homes are fairly valued”
News flash: There is an epic housing bubble. We are just on the heels of the largest credit expanison in history. The contraction has only just started and we have bought a bounce with a few Trillion more $. The correction isn’t over, it is out there waiting for us.
The “value” of homes is a spectacular disaster waiting to happen.
The correction isn’t over, it is out there waiting for us.
This. And every day we keep feeding it, and it keeps getting stronger.
1:27 of this will do. Forward!
And good luck to those of you who are left if they make their dream happen.
People Petition to Confiscate Guns From Tea Party Supporters and …
http://www.youtube.com/watch?v=2diNojgJF9c - 246k - Cached - Similar pages
Apr 8, 2013…
They don’t need to take away the guns. According to Representative Diana DeGette, once all the existing magazines are used up then there won’t be any bullets left.
Useful idiots abound.
It remains astonishing (and yet, it isn’t astonishing in the least) the extent to which people will cede their personal freedom in support of their ideological cause.
Many in this country now sense we’re in semi-dangerous waters.
The executive branch of government is acting in manners far astride from securing personal liberty for all individuals.
It will only stop when the common man/woman understands that ethics and morals trumps law.
Without ethics and morals, law is willfully circumvented and corrupted, as we’re seeing today in the executive branch in particular.
Maybe in 20-30 years, the next rebellious Boomer-like generation will view morals and ethics as the radical idea of their times. The way we handle things today, there’s no reason to believe that ethics and morals would be anything but.
How old are you, MacBeth?
What did you pay for your debt-dump, Junkie?
Why do you ask?
How old are you, MacBeth?
In the coming years people will just ask……
How old are your student loans?
Then, student loan years will replace dog years.
How old is your dog?
He will be $350k in March.
He is still pretty active for $350k.
I retired my student loans the old fashion way. I repaid them.
commie.
“I retired my student loans the old fashion way. I repaid them.”
Did it kill your dog?
Morals and ethics have always been a radical threat to any government.
They could just take away their Rascal scooters, thereby confining the teabillies to their own property.
With the stock market hitting new records almost every day, is there anyone left who is still sitting on the sidelines these days?
Cash out your bank account, mortgage your home, do whatever it takes to get a piece of the action, folks!
they are desperate to suck you in the game. It is sad that the FED enables wall street to steal peoples money under the idea of investing.
ignorance is no excuse. if you invest in something that you have no knowledge in, that’s called gambling and it’s completely voluntary. i’m pretty sure at some point we all have been sucked in by greed. i have (hence, my name). then the pendulum swings and one becomes very conservative in regards to risk. so it goes. i do however, resent putting the taxpayer (me) on the hook for someone else’s decision to go into large amounts of debt.
You were put on the hook for someone else’s decision to lend large amounts of money.
I think Fed will taper off its 45billion a month purchases soon by like 10 billion per month and may completely stop this QE by the end of this year. That would bring some sanity to Stocks, price of Gold and commodities.
“Prices of 30-year bonds fell 1 point to yield 3.19 percent, from 3.12 percent late on Monday.”
Why not simply report that the 30-year Treasury bond lost 1.3% of its value since yesterday and 6.9% over the past two weeks? Why mystify readers with the cryptic language of yields, when stock gains or losses are reported as percentage changes in the price?
TREASURIES-Bond prices fall as stocks draw buyers
Tue May 14, 2013 4:24pm EDT
* Dow & S&P climb to new highs, banks rally
* Fed buys $3.31 bln in longer-dated Treasuries
* Producer, consumer price indices due later in week
By Ellen Freilich
NEW YORK, May 14 (Reuters) - Prices of U.S. Treasuries fell
on Tuesday, lifting benchmark yields to seven week highs as
investors instead directed money into riskier assets such as
stocks.
Key U.S. stock indexes rose to new highs, lead by large-cap
bank stocks, damping demand for safe-haven U.S. debt.
“It’s all about equities,” said Dimitri Delis, interest-rate
strategist at BMO Capital Markets in Chicago. The attitude among
investors is “let’s go buy risky assets, the Fed has our back.”
Prices of 10-year notes slid 12/32 to yield 1.97
percent, up from 1.91 percent late on Monday.
Prices of 30-year bonds fell 1 point to yield
3.19 percent, from 3.12 percent late on Monday.
Michael Lorizio, senior fixed-income trader at Boston-based
John Hancock Asset Management, said it was “somewhat surprising”
that yields had reached those levels “because 1.85 percent on
the 10-year yield and 3.05 percent on 30-year yields both seemed
like spots where we would see significant buying interest.”
With the U.S. Federal Reserve engaged in a massive easing
program, at least for now, some investors are looking for higher
returns than they can get in the safe-haven U.S. Treasury
market. Thus, cash they might have put to work in bonds is going
into stocks.
But a “great rotation” of money from bonds directly into
stocks is less discernible, analysts said, and money going into
stocks is more likely to be coming from cash on the sidelines.
“There is still $2.6 trillion sitting in money market mutual
funds which is very elevated,” noted Wesley Sparks, head of U.S.
fixed income at Schroder Investment Management in New York.
Speculation has swirled recently about when the Fed could
slow or even stop its $85 billion per month buying of Treasuries
and mortgage-backed securities.
…
Is the stock market these days in more of a bubble or a freight train?
7 gut checks before the stock market’s opening bell
May 15, 2013, 7:00 AM
By Shawn Langlois
Good morning.
Some 1,527 days and counting into this bull market, and breakouts are everywhere you look these days. I’m not talking about the one that just celebrated its 37th anniversary, either.
Rather, the Wilshire 5000 has broken through dual resistance. An incredible 90% of stocks on the S&P 500 have broken well above their 50-day moving averages. Home prices, for what it’s worth, are breaking away from lumber prices. And, of course, heavily-shorted stocks, like Netflix and Tesla, have been breaking the backs of bears for a while.
“Once again, just nothing is standing in the way of this freight train. Shorts might as well go to Vegas and bet it all against the Miami Heat. At least they would get a free drink out of it,” writes 361 Capital’s Blaine Rollins.
Even Greece is breaking out after a Fitch upgrade. What to make of all these upside breakouts? Cam Hui, blogger and portfolio manager, says “it’s OK to get long, but don’t forget to look over your shoulder and maintain a tight risk control profile.”
…
Professor:
Can you remind me what happens to runaway freight trains again? I can’t remember.
It’s ugly when there is a bridge out up ahead.
ft dot com
Markets Insight
May 15, 2013 9:56 am
Markets Insight: Central banks will keep equities afloat
By Michael Heise
Financial markets have become even more dependent on monetary policy, writes Michael Heise
Four months ago, I argued in this column that financial markets were running ahead of a turn for the better . Today they are still in bullish mood. But they are not buoyed by encouraging data – which are still rare – but by the realisation that expansionary monetary policy is set to rule the roost for a while yet.
Indeed, recent highs on many stock markets seem out of sync with the current weak economic indicators. A clear pick-up in the economy is evident neither in Europe nor in the world economy. Many institutions are now forecasting 2013 world GDP growth of only 2.5 per cent or less. In the eurozone average growth is likely to be negative. But financial markets remain unfazed, taking this as more evidence that monetary accommodation is here to stay for the foreseeable future.
Confirmation was recently provided by the European Central Bank, with its 25 basis points cut to a record low of 0.5 per cent. The move was prompted by the ongoing weakness in the economy and by sliding inflation.
In the current environment, and with transmission channels still impaired, the overall impact of the ECB move on eurozone growth will remain muted.
The ECB’s decision came on the heels of the recent announcement by the Bank of Japan that it plans to double the monetary base by the end of 2014. If in future the Japanese central bank is going to be gobbling up some two-thirds of government bond issues, close to zero interest rates on Japanese government bonds are practically guaranteed. Given the size of the Japanese market, this will also push down global yields.
However, the flood of liquidity and the low interest rates, which central banks hope will help resuscitate lending demand and unblock dysfunctional monetary transmission channels, are having ambivalent effects.
On the one hand, monetary accommodation is facilitating funding of high debt levels for public or private borrowers and enhancing the attractiveness of even modestly profitable investment projects. On the other, it is severely eroding the income flow for all savers. The alternative is to resort to higher-yielding but more risky investment forms. Shares are the beneficiary; their charm has risen considerably despite the economic uncertainties.
There is a general fear on markets that excessive liquidity supply may at some point spawn asset bubbles without fuelling inflation in goods prices. But with a view to equity markets, only lonely voices already see evidence of a bubble. Indeed, some fundamental factors argue for equities.
…
“Only the lonely would short a stock.”
The people piling into the market now are going to get absolutely crucified. Even the bulls are calling bullshit. There’s now more talk than ever that QE needs to start winding down.
Get a PIEeeeeeeeeece. Come on dude. Dude, everyone’s doing it. u gotta get a pieeeeeece.
“Everyones doing” what?
Everyone is buying stocks and houses, so they can have their pieces. Can’t you see piece when it hits you in the face? Just look at those prices, whooooo-wee! Anything that valuable is something you must have. Just don’t ever sell it. Otherwise, you will live in a van down by the river. You wouldn’t want that, would you? WOULD YOU?
Everyone? Really? With housing demand at 17 year lows, “everyone” is buying houses?
Is anyone as amazed as I am at how fully the U.S. economy has decoupled from the depressed Eurozone economy? Our stock and housing markets go up steadily, even as the Eurozone economy sinks ever further into the abyss.
Euro Zone Economy Shrinks; Recession Returns in France
By DAVID JOLLY
Published: May 15, 2013
PARIS — The euro zone economy shrank more than expected in the first three months of 2013, official data showed Wednesday, marking a sixth consecutive quarter of decline as France returned to recession for the first time since 2009 and Germany marked time.
The 17-nation euro zone contracted by 0.2 percent from the last three months of 2012, Eurostat, the statistical agency of the European Union, reported from Luxembourg, less than the 0.6 percent decline recorded in the fourth quarter, but more than economists’ expectations of a 0.1 percent fall.
The economy of the overall European Union, made up of 27 nations, shrank by 0.1 percent.
Germany, with the largest economy in Europe, was almost stagnant in the first quarter, managing growth of just 0.1 percent from the prior three months, when it shrank by 0.7 percent, the Federal Statistics Office reported in Wiesbaden.
France, the second-largest economy in Europe, contracted for a second consecutive quarter, meeting the common definition of a recession. The economy shrank by 0.2 percent, the same decline as in the fourth quarter of 2012.
…
More good news here for the U.S. economy:
Latest News
U.S. producer price index falls 0.7% in April
8:30a
Wholesale energy costs sink 2.5% last month
Falling prices, especially falling housing prices, is bullish optimism and good for the economy.
Today’s not a POMO day….this news should up the stocks even higher.
Is anyone as amazed as I am at how fully the U.S. economy has decoupled from the depressed Eurozone economy?
I remember it wasn’t that long ago that it was the other way around.
The stock market and real estate are nothing more than a rigged casino.
The problem is, it’s virtually impossible to stay out of either.
Everyone needs a roof over their head (if you are lucky enough to live in a place where renting is half the price of owning, then more power to you) and anyone with half a brain has money set aside for retirement and/or a pension, which is most likely invested in the stock market.
My mother lost a big chunk of her retirement savings when the market crashed after the last dot com crash in 2001, and she has what I think is a ridiculous amount of money now in a friggin’ savings account. Too scared to invest it anywhere and won’t listen to anybody.
There’s a big difference between money that you save and money that you invest. Savings sounds like what Mom (described above) has. She doesn’t want to risk that money, and she probably has good reasons for feeling that way.
Investment money is, by nature, risky money. You can lose some or all of it.
“Virtually impossible”
Never a day passes without your debt junkie thinking coming out.
Is it that difficult to conceal?
“rigged casino….”
So, you are in debt and gambling with money you don’t have and your mother won’t take your investment advice.
She knows you better than you know yourself.
Yeah, the apt. she bought in Manhattan for 150K will now sell for 1.2 million.
An apartment on West End Ave - depreciating asset, huh?
Do you mean that you are advising your mother to invest in Real Estate now and to leverage up those investments? What kind of advice are you giving your mother that she is not following?
Some would argue having your money in the bank is a risk itself
It did play out that way in Cyprus.
Maybe having all your money in “money” is a risk as well.
Diversify baby. If it all goes down at once, then get ready to go canibal.
“…get ready to go cannibal.”
It’s happened before in American history.
Culture
Cannibalism at Jamestown: Listening to the Bones
By Alice ParkMay 03, 2013
She was thrown out, or at least her head was, with the remains of other animals — dogs, horses, squirrels — and other debris that the colonists discarded during the winter of 1609–10.
There are no records of the young girl’s life, no diaries that record the perilous journey — likely through an ocean hurricane — from her native England to the shores of Virginia. There are no town ledgers that make note of her family, where she lived or how she spent her days.
There are only her bones, which in the hands of forensic archaeologists, are speaking volumes on her behalf.
Discovered deep in a cellar where trash was collected, two-thirds of her skull and a fragment of her right leg show the strongest scientific evidence yet that after she died, she may have been a victim of cannibalism.
…
“My mother lost a big chunk of her retirement savings when the market crashed after the last dot com crash in 2001, and she has what I think is a ridiculous amount of money now in a friggin’ savings account. Too scared to invest it anywhere and won’t listen to anybody.”
Had she kept dollar cost average over the past 10-11 years since the .com crash, she would have quite well. Crashes come and go every few years. It’s the nature of investing. People who get hurt by crashes are the ones who panic and sell at the bottom.
Including dividends, S&P500 has averaged a little over 5% a year since 2002. Not spectacular, but a lot better than what money in a savings account has returned.
Here’s the difference:
$100,000 at 5% a year for 10 years = $163K
$100,000 at 1% a year (which is probably what a savings account has paid on average during that time) = $110K
Plus interest is taxed at the highest marginal rate while dividends/capitals gains are taxed at 1/2 the rate.
Keeping money in cash is a dumb move.
And dumping cash into a depreciating asset like a house is an even dumber move.
“And dumping cash into a depreciating asset like a house is an even dumber move.”
If you keep saying so…..
Refute it.
Oh, so your mom has done just about as well as the stock market, then?
So long as the home builders are doing well and both stocks and housing are rallying, why does the rest of the U.S. economy even matter?
Production Falls as U.S. Feels Pull of Global Weakness: Economy
By Shobhana Chandra - May 15, 2013 9:26 AM PT
Industrial production declined in April by the most in eight months, indicating American manufacturers will provide little support for an economy beset by weaker global markets and federal budget cuts.
The larger-than-forecast 0.5 percent decrease in output at factories, mines and utilities followed a revised 0.3 percent gain that was weaker than first reported, Federal Reserve figures showed today in Washington. An increase in homebuilder optimism indicated housing remains the economy’s bright spot.
A European recession that extended to a record sixth quarter and slower growth in China are curbing sales for U.S. companies such as Deere & Co. A second straight decrease in factory production combined with limited inflation show Fed policy makers have room to maintain record monetary stimulus as they try to bolster the expansion.
“The economy is just not picking up steam,” said Scott Brown, chief economist at Raymond James & Associates Inc. in St. Petersburg, Florida, who projected a 0.4 percent drop in industrial production. “The weakness in the rest of the world doesn’t help. The Fed will keep trying to prime the pump.”
…
It is entirely possible we are on a seesaw.
With the deficit shrinking much faster than expected and unemployment dropping closer and closer to the magic 6.5 percent threshold, is there a chance the Fed will exit QE3 “earlier than expected”?
Wouldn’t that pop Housing Bubble 2.0?
Yes, Fed will taper off soon. Look at Gold prices. They already know free money is going away. Bond bubble may burst by 2014.
I wonder how the spread of debt over the 1, 5, 10, 20 year yield curve will affect the market? Remember when a inverted yield curve used to forecast the direction of the economy?
Definition of ‘Inverted Yield Curve’
An interest rate environment in which long-term debt instruments have a lower yield than short-term debt instruments of the same credit quality. This type of yield curve is the rarest of the three main curve types and is considered to be a predictor of economic recession.
When Did the Treasury Yield Curve Invert?
The Treasury yield curve inverted before the recessions of 2000, 1991, and 1981. The yield curve also forecast the 2008 financial crisis two years earlier. On July 17 2006, the yield curve inverted when the 10-year note yielded 5.06%, less than the 3-month bill at 5.11%. This was a few weeks after the Federal Reserve raised the Fed funds rate to 5.75%. The Fed was trying to cool off the housing market, which was in an asset bubble. Obviously, investors thought this was a step in the wrong direction, and the yield curve inverted.
Unfortunately, economists ignored the warning. They thought that as long as long-term yields were low it would provide enough liquidity in the economy to prevent a recession. They were wrong.
The yield curve stayed inverted until June 2007. Throughout the summer, it flip-flopped back and forth, between an inverted and flat yield curve. By September 2007, the Fed finally became concerned, and lowered the Fed funds rate to 4.75%. This was a 1/2 point, which was a big drop and was meant to send a signal to the markets that the Fed would act aggressively to add liquidity. The Fed continued to lower the rate ten times until it reached zero by the end of 2008. The yield curve was no longer inverted, but it was too late. The economy had entered the worst recession since the Great Depression. Word to the wise - never ignore an inverted yield curve.
US Budget Deficit Shrinks Far Faster Than Expected
Published: Wednesday, 15 May 2013 | 3:20 AM ET
By: Annie Lowrey
The Capitol Building in Washington D.C. on January 20, 2013 in preparation for President Barack Obama’s Inauguration.
Since the recession ended four years ago, the federal budget deficit has topped $1 trillion every year. But now the government’s annual deficit is shrinking far faster than anyone in Washington expected, and perhaps even faster than many economists think is advisable for the health of the economy.
That is the thrust of a new report released Tuesday by the nonpartisan Congressional Budget Office, estimating that the deficit for this fiscal year, which ends on Sept. 30, will fall to about $642 billion, or 4 percent of the nation’s annual economic output, about $200 billion lower than the agency estimated just three months ago.
The agency forecast that the deficit, which topped 10 percent of gross domestic product in 2009, could shrink to as little as 2.1 percent of gross domestic product by 2015 — a level that most analysts say would be easily sustainable over the long run — before beginning to climb gradually through the rest of the decade.
“Revenues have been strong as the economy has outperformed a bit,” said Joel Prakken, a founder of Macroeconomic Advisers, a forecasting firm based in St. Louis.
Over all, the figures demonstrate how the economic recovery has begun to refill the government’s coffers. At the same time, Washington, despite its political paralysis, has proved remarkably successful at slashing the deficit through a variety of tax increases and cuts in domestic and military programs.
Perhaps too successful. Given that the economy continues to perform well below its potential and that unemployment has so far failed to fall below 7.5 percent, many economists are cautioning that the deficit is coming down too fast, too soon.
“It’s good news for the budget deficit and bad news for the jobs deficit,” said Jared Bernstein of the Center on Budget and Policy Priorities, a left-of-center research group in Washington. “I’m more worried about the latter.”
…
200 billion less than estimated 3 months ago. LOL. Everything is gamed. This is the lube.
Impeach Obama now before it get’s worse!
President Biden will save us all!
Just goes to show how useless long term economic projections are. It’s laughable to hear people talk about 10 year projections when CBO can’t even accurately predict what will happen in 3 months. And this isn’t a knock on the CBO. It’s just impossible to predict accurately.
And also James Pethokoukis (one of my favorite writers) had a piece about 2-3 weeks ago saying there’s a chance of a balanced budget in 2015.
It’s a good thing we elected a fiscally conservative Republican to the White House …
That’s bunk. You may not be able to predict down to the penny but c’mon you can’t be 200 billion off. That’s like 25 percent off. If they can’t do better than this, we should fire everyone as entirely useless.
Given the orientation of the polarized deficit reduction rhetoric from the two sides of the political aisle, does it seem puzzling how deficits always seem to grow when a Republican sits in the WH and only shrink when a Democrat is in office?
Go figure…
POLITICS
Updated May 15, 2013, 7:52 a.m. ET
Deficit Is Shrinking Quickly
By DAMIAN PALETTA
WASHINGTON—A rapidly shrinking federal budget deficit is upending bipartisan talks to reach a federal budget deal, illustrating the conundrum Washington faces with an improving near-term fiscal outlook but continued longer-term pressures tied to aging baby boomers.
The Congressional Budget Office said Tuesday the federal deficit is expected to shrink to $642 billion in the fiscal year ending Sept. 30, narrowing from the agency’s estimate of $845 billion three months ago and sharply lower than last year’s $1.087 trillion shortfall.
The agency attributed the drastic shift to higher-than-expected individual and corporate tax payments, due in part to growth and higher rates that kicked in at the beginning of the year, and large dividend payments that mortgage-finance companies Fannie Mae (FNMA +20.83%) and Freddie Mac (FMCC +20.87%) plan to make to the government this year.
After four straight years of $1 trillion deficits, the country’s fiscal picture is changing. A slowly recovering economy, cuts in government spending driven by periodic budget clashes, and higher taxes have narrowed the gap between what the government brings in and what it spends.
These developments have virtually halted deficit-reduction talks because politicians suddenly find they have breathing room before the next deadline requiring negotiations between political parties locked in disagreement over vastly different budget priorities.
“You can hear the air fizzing out now,” said Steve Bell, a Republican and senior director at the Bipartisan Policy Center who has called for Congress to reach a budget deal. “They are just overly tired of the same fight, tearing the same scab off the same wound.”
For example, lawmakers now won’t face a decision over whether to raise the nation’s borrowing limit until October or November, the CBO said Tuesday—much later than the summer deadline that was projected several months ago.
The Treasury Department this week is expected to give its own estimate. Many Republicans have said they planned to use the debt-limit deadline as leverage to force new spending cuts and other budget changes.
…
There are a few senior Feds in my office retiring soon. And they will be replaced by hiring more government contractors.
Feds drool, contractors rule!
And the best part about it? Contractors earn 3x their counterparts on the inside.
Contracting gov work…. it’s a beautiful thing.
3x sounds a bit excessive. But the rate at which the contracting companies bill Uncle Sugar far exceeds the labor costs of actual Fed employees.
And the Grover Norquist fetishist, shrink the government types have nothing to say about it.
It’s in the number of billable hours, not the multiplier.
Chuck Hagel announced 11 sequester days for the Feds yesterday.
One of the Feds in my office was b*tching about the financial hardship from this but she goes up to Blackhawk with her husband to gamble every weekend. She says she has a “system” to win at the slots.
I noticed that too, whack.
Does anyone have an explanation for why Fannie Mae and Freddie Mac coincidentally both saw a 20%+ increase in their share prices yesterday?
I’ve 2000 FNMA shares I purchased in 2006 @$40 a piece before I knew of this blog. They crashed to almost pennies and I lost 80K. I’m glad I can get $2K back now.
The way RE bubble is being inflated, I wouldn’t be surprised if it goes to double digits in the next 5-6 months.
Mel Watt is Ideal Choice to Lead FHFA
15 May 2013
By Charlene Crowell, NNPA Columnist
President Obama recently nominated Melvin (Mel) Watt, a long-time North Carolina Congressman, to direct the Federal Housing Finance Agency (FHFA). While major news media reported on the development, few mentioned exactly what the new job would entail or the significance of an African-American potentially leading a key financial office.
At a news conference announcing the nomination, President Obama said, “Mel understands as well as anybody what caused the housing crisis. He knows what it’s going to take to help responsible homeowners fully recover. And he’s committed to helping folks just like his mom – Americans who work really hard, play by the rules day in and day out to provide for their families.”
…
And yet it’s understood that DeMarco is being replaced entirely because the Administration wants to offer cramdowns, thereby screwing other people who also played by the rules.
Ms. Crowell, I don’t want to know about Mel Watt’s race. I want to know what these FB’s are going to give up in exchange for their cramdown.
Votes?
What is Obama running for?
‘What is Obama running for?’ asked a secret service agent looking out a window, as Wrong Way Barack disappears over the horizon.
Where’s our Debt-Donkeys and Dumb-Money dopes today?
Patience, my friend. It’s early out.
Where’s our Debt-Donkeys and Dumb-Money dopes today?
Patience, my friend. It’s early out.
Holy cannolli posting under 2 different names and having a conversation with yourself is surely the height of insanity.
You really are that clueless huh?
To resume and complete yesterdays lesson, how many sq ft is the shack you bought?
Passed out on the couch watching HGTV with a bloody needle of mortgage debt dope still stuck in their tracked out arm and a string of drool from their slack jawed mouth down to their chest?
lmmao!
Portland Maine Prices Cratering
http://picpaste.com/pics/08ddc2adda75af9f826dfd2da4e67656.1368623756.png
http://finance.yahoo.com/news/producer-prices-post-biggest-drop-123359206.html
‘Producer prices recorded their largest drop in three years in April as gas and food costs tumbled, pointing to weak inflation pressures that should give the Federal Reserve latitude to keep monetary policy very accommodative.’
See how that works? Fed fails to create inflation, actually causes deflation, is free to continue.
And when they succeed in reflating the price of everything, what happens? Another collapse to levels lower than the previous collapse resulting in millions more debt-junkies ever deeper in debt. The next and impending collapse will be stunning.
This is bad. Really bad.
It will need to be because nothing less than a clueX4 is ever going to change anything.
The only thing “tumbling” is wages.
The future belongs to Lucky Ducky.
that should give the Federal Reserve latitude to keep monetary policy very accommodative
And there you have it. Even though our own eyeballs contradict the official inflation numbers, QE3 isn’t going away anytime soon.
Then I think you’re in for the surprise of your life. I’d love to be there to see the look on your face when rates begin to skyrocket and lending gets real tight.
If you look at US energy consumption since the peak in 2007 you will see a drop in every metric; electric, gasoline, coal. The cumulative drop is across both households and business. Only two ways for that to happen, we are either more efficient or we have lowered our standard of living.
* Net carbon production is up but we export it.
I thought using less energy was a good thing, so liberals told me repeatedly. Now we are using less energy and it’s a bad thing. You people are really confusing.
And yes there has been a dramatic increase in efficiency, especially cars. In 2007 SUVs were still king. Today, it’s the 35 MPG car and the hybrid that is king.
Every year the efficiency of building materials improves as well. A house built today is significantly more efficient than one built even 5 years ago. Same with office buildings, apartments, warehouses, you name it.
And demographics have something to do with it too. Young people don’t drive as much as their counterparts did in prior generations. There was a NYT article about this a few days ago essentially saying youngens don’t even get their licenses anymore since taking the bus is now cool as opposed to 10/20 years ago when only pariahs took the bus.
I thought using less energy was a good thing
It is. The question is why are we consuming less energy. Is it because we are more efficient? Or is it because we are poorer? (or some combination?)
Sounds good smithers, but you are totally making it up. Must be blinded by the big city lights.
“Sounds good smithers, but you are totally making it up. Must be blinded by the big city lights.”
No, I’m using common sense and facts. People are buying fewer SUVs and more fuel efficient cars. FACT
Young people are driving less and using more public transportation. FACT (unless you think NYT made that all up)
Construction is much more energy efficient today than in 2007. FACT
Less energy use is due to more efficiencies and a structural demographic change. FACT
FACTORS.
All together not nearly explaining the drop in energy consumption. Consider that house construction is lower now than at any time since 1960 according to Census.
More FACTS;
The average age of a car in America reached an all-time high this year of 10.8 years.
Most people on food stamps ever.
Oil prices up 30% since 2007.
Youth unemployment at historic highs (US Facing Worst Youth Employment Rates in Developed World)
http://www.newsmax.com/Newsfront/youth-employment-crisis-us/2013/05/06/id/502965
Looking at these facts I would side with Colorado in that there are two forces at work here. The vast majority of Americans are slowly slipping into poverty while the rich are buying Tesla $100k electric cars with massive subsidies funded by tax payers.
“Oil prices up 30% since 2007.”
But down 20% since 2008.
“Oil prices up 30% since 2007.”
But down 20% since 2008.
You are cherry-picking. I paid 31 cents a gallon for gas at this time 40 years ago, yesterday I paid $3.48.
Smithers, Look no farther than the the CEO of ConocoPhillips who make the absurd claim that there is “no doubting the role of humans in warming the planet”
http://fuelfix.com/blog/2013/05/15/no-doubts-on-need-to-act-on-climate-change/
He goes on to comment;
…as we think about this and try to tackle this issue as a global community, it needs to be tackled on a global scale and it needs to be industry blind.
A global community response? The only global response I have seen in the last ten years is central bankers printing money.
That’s been the global response to everything.
See how that works? Fed fails to create inflation, actually causes deflation, is free to continue.”
For some crazy reason all the easy money flows to the Rich and doesn’t spread around to the poor.
Stated income loans are back but you have to prove you have assets ( are rich )
Keep your assets and borrow more = leverage up
can’t do that at a payday store
“Why pay these massively inflated prices for a depreciating house? You’re getting ripped off if you do. Rent for half the monthly cost and buy a house later, after prices crater for 65% less.”
Japan’s Vacant And Abandoned Houses: Visions of Detroit
zerohedge - 05/14/2013
Unlike Detroit, which will run out of cash next month, Japan prints its own money, so bankruptcy in the Detroit sense is not in the cards. But they do have two things in common: depopulation and a ballooning stock of abandoned houses. For Japan, it’s an issue that even the most prodigious and reckless money-printing binge cannot resolve.
These decrepit buildings dot neighborhoods in surprising places. There was one just down the street from our apartment building near the South Korean embassy in Azabu-Juban, Tokyo. Not a cheap neighborhood. It was a diminutive wooden building, turned black with age and soot. In places there was rusted sheet-metal siding. The roof was made of rust-perforated corrugated iron. The tiny garden had morphed into a thicket of weeds.
The Ministry of Internal Affairs and Communications surveys vacant houses every five years, splitting them into two categories: houses that could be rented, sold, or used as secondary houses; and abandoned houses. Over the fifteen years from 1993 to 2008, according to the most recent survey, total vacant houses ballooned by 72% to 7.57 million. They made up 13.1% of all houses nationwide, the highest proportion ever. Vacant but still usable houses increased by 63% to 4.88 million. And abandoned houses jumped by 91% to 2.68 million.
It’s not just in small towns suffering from depopulation, as the young migrate to urban centers. Over the decade through 2008, the number of abandoned houses in Tokyo jumped 60% to 190,000; and in Osaka 70% to 180,000! That was in 2008, before the financial crisis slammed into the housing market. Since then, the abandoned-house phenomenon has gotten worse.
It has gotten so bad that the Land Ministry has changed its stance on unoccupied houses: before, it would only allow local governments to tear them down in areas of depopulation. As of this month, it will allow all municipalities to tear them down anywhere, but warned that they might get sued by the owner if they razed a house under administrative subrogation. And to motivate owners to tear down their house, the central government and municipalities will cover 80% of the costs!
The abandoned-house phenomenon illustrates how the real economy gnaws relentlessly on Japan. It has nothing to do with interest rates, liquidity, and the value of the yen: there simply aren’t enough people to fill any of the 7.57 million vacant homes. Next year, there will be even fewer people. And more vacant homes.
I think we are turning Japanese. I really think so.
So why are people in Japan cramming into smaller and smaller spaces?
http://www.psfk.com/2013/03/tokyo-coffin-apartments.html
“Brampton realtor charged with stealing from home”
http://www.torontosun.com/2013/05/14/brampton-realtor-shalinder-kapoor-charged-with-stealing-from-listed-homes
“Boca Realtor Charged With Theft”
http://bocanewsnow.com/2013/02/19/boca-realtor-charged-with-theft/
So because one person who is in profession X commits a crime, all members of X are criminals. OK.
http://pahomepage.com/election-details?nxd_id=274822
“Kingston, Luzerne County- A former Luzerne County doctor is now charged with theft. David Rigle of Kingston was arrested Thursday accused of ripping off a Hazleton attorney of about $6,500. The lawyer says he paid Rigle the money to prepare medical malpractice reports for two of his clients. Investigators say those reports were never completed.”
Therefore, all doctors are thieves. Case closed.
I’d say there are alot more liar/lawyers that are thieves than doctors.
Wouldn’t you Mr. Slithers?
2nd Protects a militia’s and an individual’s right to bear arms
4th Prohibits unreasonable searches and seizures and sets out requirements for search warrants based on probable cause
6th Protects the right to a fair and speedy public trial by jury, including the rights to be notified of the accusations, to confront the accuser, to obtain witnesses and to retain counsel
8th Prohibits excessive fines and excessive bail, as well as cruel and unusual punishment
Two! Four! Six! Eight!
Amendments that are out of date!
Gooooooooooooooooo New World Order!
With 10 hangin’ on by a thread
10th Limits the powers of the federal government to those delegated to it by the Constitution
And 16 going strong and becoming more creative every day (for the middle class anyway)
16th Allows the federal government to collect income tax
The Chris Dorner manhunt was the first trial balloon.
The city-wide shutdown of metro Boston and door to door searches in Watertown was the second trial balloon. And how did the sheeple respond to this? By dancing in the streets chanting USA! USA!
its too late. “they” are winning.
“its too late. “they” are winning.”
“It ain’t over ’til it’s over”
Yogi Berra
It’s over and the fat lady has sung.
Janet has sung?
Rights have been violated?
USA! USA! USA!
Holder: Potential civil rights violations at IRS
STEPHEN OHLEMACHER, AP
2 hours ago
WASHINGTON (AP) — The FBI’s criminal investigation of the Internal Revenue Service could include potential civil rights violations, false statements and potential violations of the Hatch Act, which prohibits federal employees from engaging in some partisan political activities, Attorney General Eric Holder said Wednesday.
Holder, testifying to the House Judiciary Committee, was asked what criminal charges could be pursued against IRS employees or officials. Holder announced on Tuesday that the Justice Department was the investigating the IRS after the agency acknowledged that agents had singled out conservative groups for extra scrutiny when they applied for tax-exempt status.
“Smarter than the average bear.”
Yogi Bear
The Chris Dorner manhunt was the first trial balloon.
The city-wide shutdown of metro Boston and door to door searches in Watertown was the second trial balloon
You forgot those executive orders that Obama issued after the Newtown, CT thing. What happened to the outrage about that?
If Obama does it, it’s OK. And if you say otherwise your are a racist RethugliKKKan.
“You forgot those executive orders that Obama issued after the Newtown, CT thing.”
Well, it was a Green Screen tradgedy.
Why are realtors so hostile toward any notion of affordable housing?
More work for same or less pay. Why get commission off of 10 widgets @$100,000 when 5 widgets @$200,000 does the trick.
Secretly they are lazy. Very lazy.
Q: Why is the US Government so hostile toward any notion of affordable housing, affordable health care and affordable higher education?
A: Free Sh*t Army voters…
The free shit army wants higher prices. Brilliant.
You’re an embarrassment to conservatives everywhere.
Obama bit my sister.
Is she a b!tch?
You really have no idea how government works - do you?
The free shit army wants higher prices. Brilliant.
I can’t see the black helicopters, and I’m not getting radio signals beamed into my brain from CIA satellites, so no.
At this point banana, when housing falls to affordable prices, very few hand to mouthers will have the means to afford anything significant.
very few hand to mouthers will have the means to afford anything significant.
Let me tell you brother…… they are everywhere. Everywhere. Debt Donkeys with jobs, Debt Donkeys with no job, Debt Donkeys earning >$500k on a W-2 and Debt Donkeys flippin’ burgers and slingin’ hash.
There’s a herd of Debt Donkeys out there. Don’t join the herd.
They want to believe that they are valuable people, helping valuable people. Realistic house prices would make that hard to swallow.
Why are realtors so hostile toward any notion of affordable housing?”
Deflation stops the flow of money toxic to all who depend on commissions and taxes
1:44p
BREAKING
AG Holder: Banks are not too big to jail
They are, however, too wealthy.
Linked from Google News, the law school bubble is popping:
http://www.pbs.org/newshour/rundown/2013/05/headed-to-law-school-lower-your-expectations.html
Thank Melquisedec* on his brontasaurus, it’s good to see people talking about this. I feel like any LS with a 3-digit ranking needs to be shut down as a degree mill. If you can’t get a 160 LSAT there are plenty of things you can do with your life that are more socially valuable and yet do not require 3 years of your time and 100k+ of your money.
* I need to sidebar with AQDan to establish what the culturally-correct spelling of this name should be.
I believe the accepted English spelling is ‘Melchizedek’
My favorite take on law school.
http://www.youtube.com/watch?v=nMvARy0lBLE
Anyone else notice that Bull Connor and Strom Thurmond (I mean Dio and NickPapagiorgio) both disappeared at the same time a few months ago? Anyone else still doubt they were the same person? If so, I have a few bridges to sell you…
Nice nickname.
Spring has sprung, and with it the trees and flowers and beautiful landscaping of the Raytheon campus (this is suburbia, they have a campus, not a tower). We like to walk around there on our lunch.
Lockheed Martin even has their own street named after themselves here in the neighborhood. A just reward for a true Job Creator©
It’s been six months, 300 points and 21% since the S&P 500 (^GSPC) began its ascent into record territory. The astounding, unbending rise has left countless casualties in its wake, especially those who have waited, and waited and waited for the better entry point that never came.
“It’s extremely difficult to time this market,” says Simon Baker, founder of Baker Ave Asset Management, in the attached video. “This is one of the most unliked rallies ever. The market continues to hit new highs and people are just getting more and more frustrated.”
His advice: Stop waiting and get fully invested in stocks.
“Scared money does not make money. You need to be in equities at this stage,” he says. “When the Fed, ECB and Japanese are throwing money into the market you need to be long U.S. equities.”
A large part of his resolve comes from the fact that too many people are currently waiting for a correction. In fact, Baker says half of the audience at a recent high net worth conference he was speaking at admitted they were waiting for a 5% correction.
Of course, there is one class of investor that is fully enjoying and participating in the day-to-day climb –the passive (or index fund) investor. But the risk here, history would suggest, is that at some point people will inevitably get scared out of the market and then have to face the ”when to get back in” question themselves.
“It’s extremely difficult to time this market,” says Simon Baker, founder of Baker Ave Asset Management, in the attached video. “This is one of the most unliked rallies ever. The market continues to hit new highs and people are just getting more and more frustrated.”
His advice: Stop waiting and get fully invested in stocks.
Why am I reminded of the late 1990s tech bubble?
Why wouldn’t you be?
The current market levels are a thin skin over an enormous pocket of air. As we have seen, all it takes is a negative, fake tweet, and the air comes out really quickly.
Imagine what a real negative tweet would do.
They will “get scared out of the market”? That’s so silly. Whenever a person sells or doesn’t buy, then they must be scared. It couldn’t possibly be that the asking price for the product is too damn high.
Central-bank methadone is still bad for capital markets: BlackRock
May 15, 2013, 1:06 PM
BlackRock’s chief fixed-income strategist has found an unlikely analogy for central bank intervention in the capital markets: methadone.
Jeffrey Rosenberg, in his May fixed-income strategy outlook, educated us in the ways of global central banks, and in the process, taught us about the underbelly of drug rehabilitation. If the global credit crisis is heroin, he posits, central bank easing policies are methadone replacement. (For those unfamiliar, that is a heroin addiction treatment that involves giving the addict a less harmful drug in its place.)
If it’s good enough for drug addicts, it’s good enough for markets, right? Though methadone might not be as bad as heroin, it still leads to unhealthy behavior, Rosenberg says. And that’s where the capital markets are right now: addicted to central bank liquidity to the point where they’re pricing securities based on potential changes to easing policies. (Read more about how quantitative easing disconnects assets from their values.)
That was on full display when the Bank of Japan’s announcement of monetary easing in April instantaneously caused French 10-year government bond yields to drop 12 basis points, Rosenberg says. French bonds are a favorite foreign investment for Japanese investors because of their relatively high return for their low credit risk. And once the BoJ policy created capital markets anticipation of Japanese investment flow into France, prices shot up as investors sought to front-run the potential rally.
…
Silver down 87 cents per ounce today. I’m wondering if I should buy soon.
Don’t buy until the miners cut production. That will at least put in a bottom in the price. I listened to T. Boone Pickens yesterday say the oil drillers will stop drilling at $80 a barrel as that is now their break-even price. Really? They loose money if oil falls below $80? I thought the new drilling technologies were so much more efficient.
They loose money if oil falls below $80? I thought the new drilling technologies were so much more efficient.
The technologies are more efficient, but also more expensive. The oil drillers apparently have better things to do with their money than drill for oil wholesaling for less than $80/barrel.
So much for those private equity investors buying up rentals. They’re rushing to cash out.
They are selling stock in the rental pools, they are not going to be selling the homes.
If anything this makes it less likely that they will be flooding the market by reselling what they bought, as is often surmised on the HBB.
This:
‘They are selling stock in the rental pools’
does not equal this:
‘they are not going to be selling the homes’
Check out the financials for Silver Bay Realty Trust Corp. These guys, and those like them, might be the shortest lived REIT’s in history.
You are correct. Nor does:
‘They are selling stock in the rental pools’
equal
‘they are going to be selling the homes’
Paying for the IPO, and taking that risk is an awfully expensive way to exit, when they could just put the homes on the market over a period of time.
I know a guy working for American Homes 4 Rent (founder of Public Storage’s home rental business). They are supposedly going to be filing their S-1 in the next month or two. My understanding is that they are interested in building a rental business, in the same way they created institutional ownership of storage.
I’ve looked at SilverBay…I love their line item “Advisory management fee - affiliates” for $2.8MM in the last quarter alone, over a third of the gross rents. Property management for $2.4MM…again, about a third of revenue, not the 6-8% that I’ve seen by outsourcing to local property management.
Seems like they are milking the cow dry, unless these costs end up being temporary–however, the affiliate fee renews annually and is equal to 1.5% of the market cap annually…a gigantic number. Property management includes expense reimbursements and acquisition and renovation fees, also of big numbers.
These arrangements, if left in place over a long period of time, will suck the company dry. Hard to say whether they are intended to only be in place during the aggregation of the portfolio, or permanently.
If you just look at a more traditional FFO Calc (taking property management to 10% of revenues, and cutting out the affiliate advisory fee), you get a positive number–ie. the real estate generates cash flow.
Needless to say, I’m not a buyer of SilverBay…too many mouths being fed currently, with no indication that they will stop being fed anytime soon.
These arrangements, if left in place over a long period of time, will suck the company dry.
Substitute ‘country’ for ‘company’, and you have one of the major themes of this HBB.
You can rationalize all you want, but lots of flippers still are going to cash out near term, and the long-term buy and hold buyers are going to get buried (again).
Flippers have been cashing out all along the way–and it still hasn’t been enough to keep the numbers of homes listed very high.
Canton Used Car Shoppers Can Pay 99 Dollars Down
At ABC MotorCredit, Canton used car shoppers can drive off the lot in a used vehicle for as little as $99 down. With an extensive selection of quality used cars, the used car dealer will provide credit that’ll give car seekers easy-to-manage payments.
…….
If you’re a Canton used car shopper and have credit problems, ABC MotorCredit can get you approved for a car in their wide inventory. With a friendly, knowledgeable and experienced staff, the used car dealer believes in focusing on your future and not letting poor credit history haunt you when it comes to finding a used car, truck or SUV.
It’s the only way almost anyone can sell cars these days because very few people actually have a big down payment and can afford a 20K+ car.
Same with 6 year payments. I remember when you could pay off new car in 3 years and nobody with anything but great credit was even able to buy a new car.
It never ends does it? The constant call to buy now pay later. It’s amazing how confused some retailers get when you say you just want to buy it and have no interest talking to their credit department. And this has been going on for a long time now. It must be almost 2 decades ago I heard on the news that Sears made more money from their credit department than from retail.
I am going to teach my kids to save and then buy, if you need it.
These used car places have been around for a long time. They count on some percentage of their buyers defaulting so they can resell the car over and over. Interest is often rolled into the price of the car, so it doesn’t look like usury.
They finance people who can’t get a bank loan and sometimes provide weekly payment plans. Their lower priced cars are often high mileage.
My cubicle neighbor is freaking out because she wants to buy a house, but her husband can’t sell his old condo in a different city. They also had to pay a huge tax bill because they took a bunch of government cheese on the condo.
SHE IS FREAKING OUT!
Drama queens. Gotta love ‘em.
Bring her a block of Swiss.
Cubicle monkey home buying decision
What, are these guys checking briefcases under conference tables now too?
‘VERY FRIGHTENING’: PROMINENT CATHOLIC PROF. CLAIMS IRS AUDITED HER AFTER SPEAKING OUT AGAINST OBAMA AND DEMANDED TO KNOW WHO WAS PAYING HER
Wednesday, May 15, 2013 9:59
Noted professor and sociologist Dr. Anne Hendershott claims IRS may have targeted her with a 2010 audit
IRS demanded to know which groups paid her and “what their politics were”
Hendershott believes her articles critical of President Barack Obama’s policies and George Soros’ funding of liberal Catholic groups may have spawned the IRS audit
Audit was emotionally and financially expensive and scared the professor into silence
So when the agent explained that she would need to come alone and in person to discuss her “business” activity in July of 2010, the professor was perplexed.
“[The IRS agent] didn’t even let me decide when it would be good for me … He didn’t want my husband to come,” she said of the meeting, which was held at an IRS office in New Haven, Connecticut.
“Every question had to do with bank deposits we made. Every single question,” she said. “What is this money? And I didn’t know a lot of it. We had to go to our bank and get deposits back. We had to get records showing where the money came from.”
continue article at The Ulsterman Report:
http://theulstermanreport.com/2013/05/15/prominent-catholic-silenced-by-obama-irs-attacks/
‘Very Frightening’: Prominent Catholic Prof. Claims IRS Audited …
http://forums.catholic.com/showthread.php?t=787124 - - Cached - Similar pages
4 hours ago
I’m so excited for next year when the IRS starts collecting health data on everyone. It will be awesome.
So let me get this straight. Putting these people on a terrorist watch list and putting their pictures on training targets marked No More Hesitation was no big deal, but the IRS auditing them raises anger that crosses party lines?
Posted: 5:47 a.m. Tuesday, May 14, 2013
IRS scandal growing; Anger crossing party lines
http://www.wsoctv.com/news/news/irs-scandal-growing-anger-crossing-party-lines/nXqg2/ - 84k - Cached - Similar pages
1 day ago
One of the things that makes this country great is the regular and consistent violence-free transition of power and authorized and directed by the people.
Misusing government power in an effort to keep the people that you like in power (by restricting the rights of the opponent’s supporters) is what you expect to happen in a banana republic, not the United States of America.
Thank you, US and A, for plowing your bubble bucks into my county:
http://www.tampabay.com/news/business/tourism/pinellas-tourism-enjoys-another-8212-and-new-8212-record-month-in-march/2121115
http://money.cnn.com/2013/05/15/real_estate/home-appraisals/index.html
Low rates from the Fed? Check.
Fannie/Freddie (via the US Government) guaranteeing safety to investors in MBS–even if the Fed wasn’t buying the debt? Check.
President encouraging lenders to provide debt to less-than-stellar-credit borrowers? Check.
And now…
Appraisers valuing homes at higher and higher prices to allow the financing proceed in a rising market? Check.
Are there any barriers left to a rebubble?
Housing demand at 17 year lows? CHECK
Household formation at multi decade lows? CHECK
Grossly inflated housing prices? CHECK
Housing fraud and corruption? CHECK
Falling demand at peak of season? CHECK
I found an article on this for tomorrows post. The appraiser said he had to take into account the buying frenzy in approving loans over comps. I nearly fell out of my chair when I read that. BTW, I’m getting zero down loan offers in the mail. It’s gonna be a disaster.
So if I had to point to one single firewall that prevents housing fraud it used to be the appraisers. Now there is no stopping this madness I guess.
See, I don’t think that at all, I think the firewall should be cash coming out of the buyer’s pocket. The appraiser should be close to irrelevant in the process with a high enough down payment, and requirement for the buyer to come up with any cash that the lender won’t provide.
0%-3.5% down with a rubber-stamp appraisal for debt, which is provided to irresponsible borrowers (low FICOs) and artificially suppressed interest rates with a federal repayment guarantee to the public pension funds (and other investors) who buy the debt is a nightmarish joke.
I like the way it works in the commercial world much better. If the appraiser comes up with a value that is less than the purchase price, the lender shrinks their loan amount, and the buyer simply decides to come up with more cash and close, or not.
But those are circumstances where the down payments are 25-50%, not 0-20%, and the buyers accept the fact that they are big boys and should rely upon their own homework with respect to whether they think the price is a good one–the appraisal is a piece of paper for the loan officer to put in the file so they won’t get fired if there is a default, not the gating document to whether a sale occurs, as it seems to be in the residential world.
I become more and more fearful of a housing rebubble and recrash whenever I see articles like this one.
BTW-you know how I’ve said we bought residential land post crash? It’s articles like this one that causes us to think we should GTFO sooner rather than later.
Just got my lease renewal… WHEW. Same everything.
Rent always goes up.
Los Angeles Rental Rates Falling
http://picpaste.com/pics/30372e7288a9a070b2480f58cb7131ac.1368667282.png
Got epic policy failure?
ft dot com
Last updated: May 15, 2013 7:32 pm
Eurozone sets bleak record of longest term in recession
By Michael Steen in Frankfurt
Pedestrians walk through the Grand Place and past Brussels City Hall in Brussels, Belgium on May 13 2013. Euro-area data this week will probably reveal economic scars of the sovereign debt crisis confirming that the region is now suffering the longest recession since the single currency’s creation.©Bloomberg
Hopes for a eurozone recovery suffered a blow on Wednesday as the recession afflicting the 17-nation bloc became the longest since the single currency was born at the turn of the century. This latest dismal record came after unemployment hit 12.1 per cent, its highest level.
France fell back into a recession, Italian output continued to contract and even Germany, the strongest and biggest eurozone economy, only managed a weak swing back to growth. The gloom in the eurozone was offset by a sunnier forecast for the UK, where Sir Mervyn King, governor of the Bank of England, said recovery was in sight.
By contrast, the eurozone data is likely to add to pressure on the European Central Bank to take further action after cutting interest rates this month, and to revise down its economic forecasts predicting a recovery later in the year. It will also fuel the debate on whether front-loaded austerity has held back the currency union.
…
So long as the stock and housing markets keep ascending at a rapid pace, the U.S. has nothing to worry about.
Industrial Production in U.S. Falls by Most in Eight Months
Shobhana Chandra, ©2013 Bloomberg News
Published 7:10 am, Wednesday, May 15, 2013
(Updates with stock futures in fifth paragraph.)
May 15 (Bloomberg) — Industrial production declined in April by the most in eight months, reflecting broad-based cutbacks in U.S. manufacturing that show factories will provide little support for the economy.
Output at factories, mines and utilities fell a more-than- forecast 0.5 percent after a revised 0.3 percent gain in the prior month that was weaker than previously reported, a report from the Federal Reserve showed today in Washington. The median forecast in a Bloomberg survey called for a 0.2 percent decline. Manufacturing, which makes up 75 percent of total production, unexpectedly fell 0.4 percent, the third drop in four months.
Business investment is cooling at the same time the economy is projected to slow this quarter as across-the-board federal budget cuts take hold. Faster gains in employment and a pickup in overseas markets are needed to drive demand, which would help to spur orders and inventory building and keep assembly lines running at American factories.
“Manufacturing activity could be fairly tepid over the next few months,” Millan Mulraine, an economist for TD Securities USA LLC in New York, said before the report. “We could see a downward adjustment to output. Companies are limiting orders. Overall demand has weakened relative to the first quarter.”
…
Buy stocks today…lose your shirt tomorrow.
Try not to catch yourself buying stocks on an all-time high, just before markets shake off the latest wave of irrational exuberance and return to their senses.
May 15, 2013, 1:53 p.m. EDT
Don’t be fooled by market euphoria
Commentary: Falling world inflation isn’t cause for celebration
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By Michael Casey
Apart from a few pariah economies — Sudan, Venezuela, or Argentina — you’ll be hard pressed to find a genuine, double-digit inflation problem anywhere in the world these days.
Even Hungary, which seems to live permanently on the verge of a currency crisis, registered a mere 1.7% annual gain in its April consumer price index. Similarly low numbers are everywhere — including in the U.S., Europe and all other developed nations.
A giant wave of disinflation is hitting the world. That might sound like a good thing, but signs suggest it’s a less-than-benign phenomenon. In this case, falling prices are driven more by recessionary forces than by any improvement in output. It’s a lack-of-demand problem, not a positive supply shock. The culprits: complacent policymakers.
The recession in the euro zone stretched into the first quarter of this year, demonstrating that a recovery remains more elusive than many expected.
To be sure, there are a few positive factors at play. The fracking revolution in the U.S., for example, is driving down energy prices, which is lowering manufacturing costs and providing consumers with more discretionary income. But for the most part, sliding commodity prices, one of the big drivers of falling inflation gauges, stem from weak demand in China and Europe.
Even the upbeat signals in the U.S. — a modestly improving jobs market, rebounding home prices and a phenomenal stock market rally — are merely a distraction from the harsh fact that the world’s largest economy is still averaging just 2% growth. That’s not enough to offset China’s downturn from 10%-plus rates two years ago to a 7-to-7.5% trajectory or the euro zone’s return to outright recession. Those two regions account for 25% of the world economy.
Paul Sheard, chief global economist at Standard & Poor’s in New York, sees the data as an indictment against governments, which are acting under the mistaken belief that the financial crisis is now behind us. “Policymakers have taken their eyes off the ball, given the still-precarious situation of the developed world economies,” he said.
…
A closely-watched pot never boils over.
May 15, 2013, 11:15 a.m. EDT
Will ending Fed stimulus hurt housing?
How higher mortgage rates could chill real estate’s rebound
By Quentin Fottrell
The Federal Reserve needs to tread carefully when it winds down its $85-billion-a-month bond-buying program, experts say, to avoid trampling the green shoots of the country’s fragile housing market.
Jon Hilsenrath explains the thinking behind the Federal Reserve’s plan to wind down its economic stimulus program, and how the issue is likely to be tackled by chairman Ben Bernanke’s successor. Photo: Getty
Federal Reserve officials said last week that they plan to reduce the amount of bonds they buy, basing their purchases on their confidence about jobs and inflation. Although no date has been given, officials are reportedly working on clarifying the strategy so financial markets don’t have an overreaction to any moves. The Fed’s stimulus pushed mortgage rates to record lows, experts say, which has helped fuel the housing market recovery. “The housing market is no different from the bond market and equity market,” says Mark Grant, managing director at Southwest Securities in Dallas. “It’s artificially inflated.”
No matter how the Federal Reserve reduces its bond-buying program, it’s likely to have an impact on housing, analysts say. “If it just pulls out, it will be a catastrophe,” Grant says. Current policy favors borrowers, he says, while penalizing those who save and invest.
A gradual withdrawal of Federal Reserve funds will also throw a spanner in the current refinancing boom, others say. Historically low mortgage rates — 3.5% for a 30-year fixed rate versus 6.1% in 2008 before the Fed began buying back mortgage-backed securities — have led to a strong increase in refinancing in recent years with some homeowners refinancing more than once to lock in lower monthly mortgage repayments. “If the Fed cuts back on actions that have kept mortgage rates low, the main effect of higher rates would be a drop in refinancing activity,” says Jed Kolko, chief economist at real estate listing site Trulia.
To be sure, some say an early housing recovery will weather a phasing out of QE3, the Fed’s economic stimulus also known as quantitative easing. The housing affordability index is still near record highs of 200, according to the National Association of Realtors. That is, the average household has 200% of the qualifying income needed to purchase the median-priced home, financed with a 30-year fixed-rate mortgage. “Even if mortgages rates rose gradually back up to 5% to 6% over the next five years, they would still be lower than any time between 1970 and 2000,” says Mark J. Perry, a professor of finance and business economics at the University of Michigan-Flint. “When the Fed does start allowing rates to rise, it would be so gradual that people would adjust to the new environment.”
…
A closely-watched pot never boils over.
In my youth, I amused myself by deliberately watching pots closely until they boiled over. Great fun & a good way to immunize yourself for getting addicted to Kollective Kool-aid.
Is the Fed’s desperate attempt to suppress precious metals prices (to prop up Bernanke’s monopoly-money FRNs) doomed?
http://www.paulcraigroberts.org/2013/05/13/gangster-state-america-paul-craig-roberts/