New Year Predictions
What are your housing bubble predictions for the new year? oo ago. “2013- The long delayed and overdue correction in housing prices to dramatically lower levels in the northeast will resume full force.”
A reply, “Why do you think 2013 will be the year that myriad government interventions to support housing prices will suddenly fail?”
One said, “Not trying to evaluate individual decisions, only looking at the broader market, I continue to believe: 1. Sentiment is more powerful than interest rates; 2. Prices are set on the margin; 3. The highest earning renters have the potential to drive the market–other renters get hosed by higher rents and home prices…ultimately forcing them to double-up, etc. if their salaries are not high enough.”
And another, “1: Price of oil will go down below $80/brl due to dropping demand of US consumers and European consumers + new sources being brought online. 2: US officially enters recession. 3: Gold goes down below $1,500/oz. 4: Canadian real estate begins to crater and Canada bails out its banks. 5: China experiences another Tianamen Square incident as their economy cools.”
A reply, “I disagree with 1 and 3 but agree with the rest. I think that Assad falls and Iraq is destabilized causing higher oil and gold prices.”
One had this, “Bye-bye Mayan doomsday. Hello ‘Fiscal Cliff.’”
And finally, “The US will run out of land.”
Dow tops out at around 17,000 (+.- 500)…we’re already there. Could go down to 12,000-14,000 by the end of 2014.
Recession begins in Q3-Q4 of 2014, and will be announced in 2015.
Housing prices continue their very slow, gradual decent. Prices don’t start seriously declining until ~2017.
Gold bounces between $800 and $1,200/oz., and silver moves between $18.00 and $22.00/oz.
Things are pretty quiet on the international front, with a few sparks in smaller European countries and more calls for ending austerity/ramping up spending.
Basically, a fairly quiet year. Don’t expect anything too big to happen until ~2016-2017, at which point I think a depression will finally be acknowledged.
“Recession begins in Q3-Q4 of 2014, and will be announced in 2015.”
Recovery well underway by Q3 of 2016, just in time for Hilary’s run for the WH.
I’m predicting a full blown, but short lived crash of the stock market.
cool…buy the dips
I dont know anymore..people here are pretty damn smart and your predictions all make logical sense, so why is this still muddling through?
Mauldin said this was he best guess for this decade…but it gets frustrating this molasses, at least its not quicksand…right?
Lots of People are getting money from somewhere, but it hasn’t filtered down to the “people”
Got $10 worth of $4 gas last night and big suv’s still fill up the $100 tank.
Most of the buildings here still have available signs plastered on them so not much is moving in…
And to think over 6000 radio tv people applied for 160 jobs at Al jazeera maybe we should focus on where the bright spots are what skills are needed,and how to get there, find jobs and make money.
Went to the mall yesterday, Williams Sonoma in the mall is closing. Applebys in this area are also closing per the article posted the other day. I think we are dropping again. But I also think that the REIC will do all they can to stop this, as always, and I don’t think this would have been a bad bet in past years.
What I can’t figure out is why the PTB are allowing things like the FHA loan limit drop to happen. I do not think it has anything to do with prudence or the FHA losing money. Those currently in power don’t care a cr@p about that.
Went to the mall yesterday, Williams Sonoma in the mall is closing ??
What Zip ?? How big is the Mall ?? Williams Sonoma is high end…
Williams Sonoma is more end user snob-junk at grossly inflated prices.
How long before WS is out of business entirely?
It is the one in the Chandler Fashion Center in Chandler Az. 85226. It is not particularly upscale for a mall, but not a dirt mall either. A little higher than average, IMO.
Most of the buildings here still have available signs plastered on them so not much is moving in… ??
Retail is in big trouble outside of destination Malls…Class B & C retail sites will continue to fall in value due to lower rents and very difficult & expensive financing terms…Where is the up-side ?? There is none IMO…
Yeah, my shopping center mgmt and marketing career is taking a detour into the medical complex arena. The skills are transferable, and my Acct’g skills (although boring) may be plan C. Although managing a plastic surgery practice is sounding more interesting. (Bring on the discount.)
I like the choo choo (6 train cars) cake pan I bought at Williams Sonoma @ 50% off. But yeah, a place to waste hard earned money.
I stand corrected, the train bake pan has 9 train cars. It’s too cool.
My daughter worked there while doing her Masters…
Thats a nice pivot by-the-way from Shopping Center Management to the Medical Complex arena…The medical side of professional offices are doing quite well here “As Long” as they are next to a hospital…If they are far away, they are doing no better than professional office space which is doing poorly…
scdave
Thanks for the insight about Medical Complex location criteria. U-San Diego/ICSC Mgmt School and years of managing Community Centers (hate the regional mindless shopping centers). I like grocery store anchors.
I figure the 78M Baby Boomers should keep medicine busy. Our neighbors bought an already established caregiver franchise, and it’s not as solid to me as the actual medical arena. Even with Obamacare, you need facilities.
I use to get calls from headhunters. That hasn’t happened this episode, and I need to support us.
Is that you, Awaiting?
How is it going? Enjoying your new place?
And in fact, the northeast did decline and continues to do so. The northeast leads, all else follows.
Evidently, no one wants to live there……so no one is following you.
There is always a delay but everyone follows eventually.
Case in point; Look at this headline.
“Los Angeles Median Housing Prices Down 18% Since May 2013″
http://www.movoto.com/statistics/ca/los-angeles.htm
It took 6 months but Californias largest city went negative in May.
The Fed’s mortgage role will not taper in proportion to The Taper.
U.S. News
Home Prices Back at Peaks in Some Areas
Recovery Remains Uneven as Cities Spared in Bust Soar, but Many Others Struggle
By Nick Timiraos
Dec. 29, 2013 8:08 p.m. ET
Home prices have zipped back into record territory in a handful of American cities, a milestone that comes seven years after the housing bust ravaged the market and the broader economy.
Values are up more than 13% from their 2007 high in Oklahoma City and by more than 6% in the Denver metro area. Prices are back to all-time highs in 10 of the nation’s 50 largest metropolitan areas, according to a Wall Street Journal analysis of…
The Zillow data also reveal the extreme variation—even within a particular metropolitan area—of the housing boom, bust and recovery. Prices are up 40% from their prior highs in Palo Alto, Calif., which is just 50 miles from San Pablo, a working-class suburb north of Oakland. Values there are still 54% below their peak ??
50 miles…Confirms the “Real Estate Values” are a local…Its also a concentration of wealth effect….When Billionaires move into a area the millionaires follow…It spills over into the local economy from schools to retail to philanthropy…
Nonsense.
Housing prices are a function of input costs (land, labor, materials and profit).
…land…
Certain people will pay more to live on those rocks than these rocks.
Housing prices are a function of input costs (land, labor, materials and profit).
Demand has zero effect, you say? Then how do you explain Detroit?
Here’s the complication that HA doesn’t seem to understand.
What developers are willing to pay for land is determined by land residual calculations. The first input to those calculations are home prices, which are based on demand for housing in that particular market.
The developer takes the home value, subtracts a profit margin, and all the NON-land costs to build and sell the home. What remains is the maximum that can theoretically pay for the dirt.
One fungible number is the profit margin…
In a market where it is very easy to find land and get it entitled, there are more potential land sellers than ultimate demand for homes…builders are able to do their calculations with a higher profit margins since there is less competition from builders for any particular parcel of land. One downside to this kind of market is that there is always the potential for too many homes being built, and home prices stagnate and suffer. A builder needs the higher profit margin to protect against this.
In a market where it is difficult to get land entitled for more homes, profit margins get squeezed as there are bidding wars for land with approvals. Builders in part can justify these higher land prices and lower margins because of the belief that there will be limited supply of competition, making it less likely that home prices fall due to oversupply.
There is no “competition” for land. That’s why it’s cheap and essentially worthless.
“When Billionaires move into a area the millionaires follow…It spills over into the local economy from schools to retail to philanthropy…”
And the reverse happens when illegals move in….See San Pablo, CA.
the reverse happens when illegals move in….See San Pablo,CA.
Is this what you mean ??
Hispanic - 16,313 (55.8%)
Asian alone - 4,643 (15.9%)
Black alone - 4,257 (14.6%)
White alone - 3,351 (11.5%)
Two or more races - 389 (1.3%)
American Indian alone - 144 (0.5%)
Other race alone - 87 (0.3%)
Native Hawaiian and Other Pacific Islander alone - 40 (0.1%)
No, not at all. It’s the 11.5% white population that’s to blame.
“50 miles…Confirms the “Real Estate Values” are a local…Its also a concentration of wealth effect….When Billionaires move into a area the millionaires follow…It spills over into the local economy from schools to retail to philanthropy…”
It’s too bad I didn’t realize this beforehand. I thought prices would also collapse in my favorite areas and keep going down. I was wrong and now I’m a renter with little recourse. Prices are still down from the peak, due to rising property taxes, but who knows how long that will last?
I missed the entire stock market bull run. It pays to diversify, so I lost out on increasing my wealth. Let’s see what happens next. I wonder if the stock market is really going to tumble, or if it’s going to the moon, like Zimbabwe stocks after all this “Money creation”, or is it credit creation? Or is it the same thing? Oh well.
Markets
Fed’s Mortgage Role Expands
Central Bank’s Asset Purchases Are Bigger Share of Market as It Begins to Taper
By Nick Timiraos
Dec. 19, 2013 10:37 p.m. ET
The Federal Reserve’s role in the mortgage market has expanded over the past three months and could remain large for now, even as the central bank attempts to shrink its bond-buying program.
The Fed has been buying at least $40 billion in mortgage-backed securities each month, and often much more, along with $45 billion in Treasury bonds. The Fed said on Wednesday that it would reduce its monthly purchases of each type of debt by $5…
Home prices will keep going up in 2014 (or so I’ve been told).
Markets
Barron’s Buzz: Home Prices Set to Climb in 2014
Why U.S. home prices should rise another 5% in 2014. Plus, the best 2014 opportunities will be in Korea, Taiwan and China. Senior editor Jack Hough previews the latest issue of Barron’s Magazine. Photo: Getty Images.
12/27/2013 12:17:54 PM2:11
So far, so good on my prediction from this morning.
Dec. 30, 2013, 1:39 p.m. EST
All-time-high house prices in 10 of top 50 metro areas
By Nick Timiraos
Home prices have zipped back into record territory in a handful of American cities, a milestone that comes seven years after the housing bust ravaged the market and the broader economy.
Values are up more than 13% from their 2007 high in Oklahoma City and by more than 6% in the Denver metro area. Prices are back to all-time highs in 10 of the nation’s 50 largest metropolitan areas, according to a Wall Street Journal analysis of price data from Zillow, an online real-estate information service. Prices are within 5% of their previous peak in San Jose, Calif.; Nashville, Tenn.; and Dallas.
Prices nationally remain below the highs of the past decade, and many of the cities that have seen the biggest gains largely escaped a boom and bust.
Home prices in some parts of the country that did experience a bust have benefited from low supplies of homes for sale and historically low interest rates that have boosted prices — and sparked concerns that prices could again be overvalued.
The figures aren’t adjusted for inflation, but experts say they underscore the uneven nature of the U.S. housing recovery.
“The main story in a lot of these places is that they didn’t have much of a housing recession. It’s much easier to be back at peak levels when you didn’t have a big boom and bust,” said Stan Humphries, chief economist at Zillow.
But in those areas that did experience a downturn, he added, “I’m surprised that we are back to peak levels so quickly.”
…
Keller Williams Elite
Features of this 10-acre property in Oklahoma City, listed for $750,000, include a private pond.
What were the forecasts for home price growth in places like FL, NV, CA, and AZ (among many, many others) in 2008 and 2009 for the year to follow?
Long-term Treasurys will continue to decline as the Fed tapers.
Treasuries Love Affair Endures After First Annual Loss Since ’09
By Daniel Kruger Dec 29, 2013 4:00 PM PT
For all the losses on Treasuries this year, demand for U.S. government debt remains stronger than before the financial crisis.
Investors bid for $5.75 trillion of notes in government auctions in 2013, or 2.87 times the amount sold, data compiled by Bloomberg show. That’s the fourth-highest ratio since the Treasury Department began releasing the data in 1993, surpassed only in the past three years as demand peaked at 3.15 times in 2012. Before the Federal Reserve began its unprecedented stimulus in 2008, the bid-to-cover ratio never topped 2.65.
While Treasuries are poised for the first drop since 2009 as the longest-term bonds suffer the world’s deepest declines, the willingness of foreign central banks, insurers and pensions to finance the largest debtor nation may temper a further jump in U.S. borrowing costs. Yields on the 10-year notes rose last week to the highest since 2011 and forecasts imply the Fed will cut its Treasury purchases by more than 50 percent from $540 billion this year after beginning to taper earlier this month.
“You’ve got a lot of natural buyers, you’ve got a lot of reasons why people want to be in the most liquid market in the world, even absent Fed buying,” Brian Edmonds, the New York-based head of interest-rates trading at Cantor Fitzgerald LP, said in a telephone interview on Dec. 19.
Cantor is one of 21 primary dealers, which are obligated to bid at U.S. government debt auctions.
Buoyed by the Fed’s unprecedented bond buying, record demand for Treasuries in the last four years has financed U.S. government spending and deficits that exceeded $1 trillion, enabling the world’s largest economy to recover from the worst financial crisis since the Great Depression.
…
China’s debt-fueled credit bubble will continue to expand.
Dec. 30, 2013, 5:50 a.m. EST
China local government debt surges to $3 trillion
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BEIJING–China’s local government liabilities jumped to nearly $3 trillion at the end of June, according to a new audit, in a much-anticipated glimpse into the financial health of the world’s No. 2 economy.
The audit released on Monday showed China’s local government liabilities totaled 17.9 trillion yuan ($2.95 trillion) at midyear. China’s last full audit of local-government borrowings estimated liabilities at 10.7 trillion yuan at the end of 2010.
The new tally includes direct debt as well as guarantees and other potential liabilities, according to a report released by the National Audit Office.
…
China’s debt-fueled credit bubble will continue to expand.
How else can Chinese “investors” continue to buy super expensive apartments that will never be occupied?
ft.com > World > Asia-Pacific >
China
Last updated: December 30, 2013 7:36 pm
Fears after key China debt level soars 70%
By Tom Mitchell in Beijing
Li Keqiang, prime minister of China, gestures during his speech to university students that was organised by the Indian Council for World Affairs and the Federation of Indian Chambers and Commerce Industry in New Delhi on May 21 2013
Local government debt levels in China have soared to almost $3tn in less than three years, according to an official audit highlighting one of Beijing’s most daunting challenges as it attempts to sustain economic growth while avoiding a financial crisis.
In a long-awaited report, China’s National Audit Office said local government debts had increased almost 70 per cent to reach Rmb17.9tn ($2.95tn) by the end of June. The NAO, whose last survey put the burden at Rmb10.7tn at the end of 2010, added that government debt levels were generally “under control” but identified “potential risks in some places”.
Monday’s audit, which included contingent liabilities and debt guarantees, was ordered by the State Council in June. Xiang Huaicheng, former finance minister, had previously estimated that local government debts could exceed Rmb20tn.
Chinese officials and analysts have long worried about the amount of debt racked up by local governments, which are not allowed to tap banks directly but establish special purpose vehicles to borrow money for investment projects. Such borrowing, often secured against local land values, helped China achieve impressive rates of growth even in the immediate aftermath of the global financial crisis
There are increasing fears, however, of a hard landing for the economy as Beijing enforces fiscal discipline on local government borrowers. China’s short-term funding costs approached 9 per cent earlier this month, before moderating towards the end of last week.
Speaking at the weekend, Chinese premier Li Keqiang said his government would guarantee “appropriate liquidity” and “reasonable growth in credit” next year. In a recent report to China’s parliament, the State Council predicted a final GDP growth figure of 7.6 per cent for 2013, compared to 7.7 per cent last year and a post-crisis high of 10.4 per cent in 2010.
The NAO’s latest estimate for local government debt is equivalent to a little more than 30 per cent of gross domestic product, compared to 25 per cent of GDP at the end of 2010. “The pace of [local government] debt accumulation in recent years has been too fast and is not sustainable,” said Wang Tao, economist at UBS.
According to Ting Lu, economist at Bank of America Merrill Lynch, China’s total public debt now stands at 53.3 per cent, with corporate debt estimated at 111 per cent.
“The markets and the Chinese government should be alarmed by the rapidly rising leverage,” Mr Lu said in a note. “But we do not believe China is on the brink of a debt crisis, especially if the new leaders can take decisive measures to arrest rising leverage.”
“The number is pretty much in line with expectations,” added Arthur Kroeber at GK Dragonomics. “The starting point in terms of managing it is stopping a new flow of local government debt.”
…
Investors will remain nervous about stocks in 2014, even as they continue to climb their “wall of worry.”
Dec. 29, 2013, 1:23 p.m. EST
Record run for stocks has investors nervous about 2014
Week ahead: ISM, consumer confidence, housing data
By William L. Watts, MarketWatch
NEW YORK (MarketWatch) — Perhaps you don’t believe in magical elves, flying reindeer or the bull market, but there was no denying the reality of the Santa Claus rally in 2013.
Stocks are set to end the year on a high note, but investors are nervous about what the new year will bring.
“There are clear expectations the market is going to rally and will continue to do that through the end of the year. There is also an institutional imperative at the end of the year to be fully invested,” said Brad McMillan, chief investment officer at Commonwealth Financial Network in Waltham, Mass.
…
Dec. 27, 2013, 11:23 a.m. EST
Time to take some profits
By L.A. Little
If there was a word to describe the U.S. equity markets right now it would have to be determined.
A couple weeks ago there was a reasonably major breakdown starting to take place in Europe with France in particular. It had the potential to disrupt our equity market advance near term and potentially derail those outrageous targets we considered back in the middle of November. Not to worry though, as the Federal Reserve did its thing on Dec. 18 and all was right again. That started the melt higher and the meltdown in France faded away.
Just the past few days witnessed another short term liquidity crisis in China. It didn’t go anywhere though, as the central bank there did what central banks everywhere do — they just flooded the system with liquidity.
…
Exactly!
Cash is king. And precious metals. In ranking of unpopularity, precious metals is the least popular asset, cash / T- bills is second least, I am not sure where bonds fit, and stocks and real estate are both very popular.
Hmm…five years of a bull market. What contrary asset could I put my money into?
But if you have had huge gains why be even more greedy?
Five year bull markets are rare. Back-to-back five year bull markets even more rare. So it’s a great time to look at your assets and see where you have gone to the top of the cycle. Or near top.
I was lucky and have $183,000 unrealized gains in a company stock still. $35,000 invested. That is over 500% unrealized gain. All invested 2009 and later. Even if I invested $350 and with $1,830 unrealized gains it would be the asset I would take the gain on first. It’s the percent gain that I look for to sell. It’s not the amount of gain.
It’s better to be a year early and sell before the crash…than a day late and sell after the crash.
It’s better to be a year early and sell before the crash…than a day late and sell after the crash.
EXACTLY. I’ll take 20% gains off the table all day long before I wait and risk all for another 20% which goes back to your first statement;
But if you have had huge gains why be even more greedy?
Prediction: More and more people will wake up to the fact that a high flying stock market is doing nothing for them, and grumblings from the serfs get louder as they realize the PTB are screwing them six days to Sunday, and there are no jobs or extended UE bennies. Something wicked this way comes, something “nobody saw coming.”
Well the people who have a lot of unrealized gains are certainly going to make the stock market do something for themselves when they realize and move to cash!
2013’S REMARKABLE STOCK MARKET SURGE POINTS TO CAUTION FOR 2014
By Dan McSwain
12:01 a.m. Jan. 1, 2014
If you were invested in U.S. stocks in 2013, last night was truly an occasion to uncork the good bubbly.
In a triumph for the little guy, investors in low-cost index funds had one of their best years ever, soundly thumping more complex and expensive portfolios filled with hedge funds, commodities, emerging-market securities and other diversification strategies.
The Dow Jones industrial average was up nearly 27 percent, closing the best year for the index since 1995.
Broader measures did even better: The S&P 500 index of large corporations was up nearly 30 percent while the Russell 2000 index of small companies gained a whopping 37 percent.
The performance vindicated experts, ranging from super-investor Warren Buffett to Vanguard founder John Bogle, who argue that most investors are better off with cheap index funds holding stocks in American companies.
Alternative investments, which generate higher fees on Wall Street, did poorly. The MSCI Emerging Markets index lost 4.4 percent, while gold futures tumbled 28 percent and the DJ UBS Commodity index slumped 9.5 percent.
At this point, it’s easy to imagine that 2014 will be less kind to stocks.
The S&P 500 now looks expensive, according to a measurement developed by economist Robert Shiller, the Nobel laureate who correctly identified the stock and housing bubbles of 1999 and 2005.
Using the average of company earnings over 10 years, stock prices were 25.4 times earnings in December, according to Shiller’s ratio. That’s well below peaks reached in 1929 and 2000. But it’s close to the level of 27 reached before the downturn in 2007, and research suggests that returns lag in the years after the ratio is much above its historical average of 16.
Yet investors may struggle to find compelling alternatives to U.S. stocks.
Bond markets, the traditional alternative, last year ended a 30-year winning streak. Plans announced by the Federal Reserve to raise interest rates are poised to further depress bond values, which move in the opposite direction of rates.
…
I ran the numbers on the Dow Jones tonight. Looks like it grew with reinvested dividends at about 5% annually since the beginning of 2000. I am not going to beat around the bush. Get your money out now from the market if you have big gains in your IRA the past 5 years or so and dollar cost average back in on major dips.
We’ve had 14 years to test-run internet and increased production and bond market bull runs and all that. Not a sage at all, but if 5% annually is the rewards, guess what, do you think it is going to be a heck of a lot better the next 14?
boring prediction, but yoy declines in real estate this year. There was value to be found in certain markets late 2012 and early 2013, but as witnessed by recent reports, the smart investors are out. It was amazing how much of the market this year was all cash purchases and investors. And yes, mortgage rates are going up.
Poof.
PoofCRATERRRRRR!.Main Street will continue to struggle as Wall Street prospers royally.
Dec. 30, 2013, 7:01 a.m. EST
This is why the economy is failing
Opinion: Small business owners are overregulated and denigrated
By Wayne Allyn Root
I’m an S.O.B. — son of a butcher. My dad, the blue-collar butcher, used to always say, “I’d love to hate rich people, but no poor person has ever given me a job.”
If only politicians understood those words.
…
So the only people who buy meat are the rich? I would have thought that a butcher’s clientele would mostly be middle class folks and not the rich, who have been doing their best to convert middle class families into poor ones.
Quite right. Never forget the importance of the krill!
I suspect that the butcher’s boss wasn’t exactly a millionaire either.
That’s saying is pure nonsense. Most of my bosses weren’t rich. And most customers (who are the ultimate “job creators”) aren’t rich, either.
It depends on how you define rich. When you start defining rich as people that make more than $250,000 per year, I think you will find most job creation is created by the rich.
As long as the government and central bank continue their magical thinking about the goodness of debt for the society (if they are at all), then any recovery will continue to be anemic.
“As long as the government and central bank continue their magical thinking about the goodness of debt for the society (if they are at all), then any recovery will continue to be anemic.”
Without real job creation programs - -
I so totally agree with you.
“Game Over for Real Estate: Time to Short US Housing Market”
http://www.nomadiccapitalpartners.com/short-us-housing-market/
Excellent research. Here’s what we know;
- Housing prices are grossly inflated and resumed falling
-There are 20-30 million excess, empty defaulted housing units
-Immigration is flat to negative
-US population growth rate is at the lowest level in recorded history
-80 Baby boomers with one foot in the grave and the other on a banana peel will leave 40 MILLION additional excess empty housing units
Wow
I was the one that disagreed with oil dropping to $80 but I thought gold would hold up. The level of manipulation surprised even me. However, I predict for very similar reasons that I said last year, that both oil and gold will be up. Oil very slightly from here but gold to about 1450. Assad has a 50/50 chance of leaving office this year. If it happens it will probably be a negotiated settlement. Iraq has become even more unstable this year as predicted but it has not impacted oil production sufficiently to move the needle but I think that may occur this year.
Yeah. Oil and gold are the two items that are “managed” behind the curtains… no transparency. I wouldn’t wager a penny on either.
Oil and gold are the two items that are “managed” behind the curtains… no transparency. I wouldn’t wager a penny on either.
+infinity. The more managed/manipulated a given market, the more I refuse to participate in it.
It reminds me of the joke about predicting. You can predict what is going to happen or when something is going to happen, just don’t try to predict both.
Apparently, this appeared shortly after the Iraqi prediction was made by me. This is very close to outright civil war:
http://www.nytimes.com/2013/12/31/world/middleeast/iraq.html?ref=world
I posted this in bits but it belongs here since it is a prediction for the year:
Every 1% increase in the interest rate as I said yesterday will raise the budget deficit 170 billion dollars. We cannot even cut the deficit 60 billion dollars without people forecasting doom. We have backed ourselves into a corner following Krugman type policies. If inflation picks up and I am in the camp of it is when and not if, the country will face a choice, other default on the debt or allow the debt to be inflated away. The first option is very deflationary and the second option will lead to extreme inflation. The one chance to avoid these bad options was a Simpson/Bowles grand compromise but the time for that has passed. This is probably the year we will have to choose.
“Every 1% increase in the interest rate as I said yesterday will raise the budget deficit 170 billion dollars.”
Interest rates globally will be affected by global events, not by only 25% of the world economy anymore.
Fed counterfeiting has encouraged this massive impending change.
Yes this has the Fed in the bind. They want to put Democrats in the office of Presidents. So they cannot increase the deficit by their actions - put the blame on Congress for increasing spending. not the blame on the Fed.
Let the thugs have that problem. The American public have the numbers. And the impatience. The politicals are going to be sweating more. That’s why they vote themselves more perks to justify the stress they go through by botching the economy.
I betcha all of them, Democrat and Republican, have huge chunks of their wealth diversified into different nations. Maybe villas in Belize, Chile, or whatever. Congressional reps and Senators are mostly communists here in America but by golly personally Austrian economic fans abroad. I betcha that include Nutzi Pelosi.
‘Every 1% increase in the interest rate as I said yesterday will raise the budget deficit 170 billion dollars. ‘
I thought the 1% increase only affects new bonds issued. The whole debt, bonds that add up to $17 trillion, is not being refinanced is it? Is it the new issued ones the get the 1% delta rate? OK, years down the road, turnover and new issues will increase the deficit, but we don’t jump 170 billion annually right out of the gate do we?
AB,
The $170 billion comes from 1% of $17 Trillion deficit - the amount owed to the creditors because of the spending caused by the retarded voters who voted for their retarded representatives -
Technically, for every 1% increase in interest it’s $172 billion owed as of this post:
http://www.brillig.com/debt_clock/
OK, years down the road, turnover and new issues will increase the deficit, but we don’t jump 170 billion annually right out of the gate do we?
You are correct; $170B is 1% of the $17T debt, so only the portion that actually rolls over will be paying interest at a higher rate. Some of it doesn’t roll over for a LONG time.
If the US Treasury had any sense, it would be issuing ALOT (sic) of the 30yr bonds while interest rates are at historic lows, rather than issuing shorter-term notes/bills.
“…it would be issuing ALOT (sic) of the 30yr bonds while interest rates are at historic lows,…”
Unless the Fed bought up Treasurys a lot faster, this would result in an even quicker correction upward in long-term Treasury bond yields. And the one that played out from May 2, 2013 through last week was plenty quick.
Unless the Fed bought up Treasurys a lot faster, this would result in an even quicker correction upward in long-term Treasury bond yields.
Since the Fed seems able and willing to mop up a remarkable amount, the Treasury should have been engaging in this mix-shift for the past six years–ever since rates tanked. If it had been done over a longer period of time, any effect on rates would have been muted, and the Fed had helped compensate for it in their purchase mix (what choice would they have?), the long-term solvency of the USGovt would have been significantly improved. Why NOT take lock in lifetime-low rates for 30yrs??
It’s “manipulation” when the price drops, but “fundamentals” when the price rises, according to gold bugs.
GDP growth 2.5% Q1 and Q2, 3.5% Q3 and Q4
Housing appreciates 7% nationally
S&P500 breaks 2000 around May, end year at 2250
Housing is already inflated yet prices are falling. You believe prices are going to magically stop falling and even more magically go up?
Slithers, Slithers, Slithers……
Dec. 28, 2013, 8:27 a.m. EST
These 10 bubbles will pop in new ‘Lost Decade’
Opinion: It’s the pope and Hillary vs. ‘old guys’ and climate-change deniers
By Paul B. Farrell, MarketWatch
SAN LUIS OBISPO, Calif. (MarketWatch) — Wall Street says the last “Lost Decade,” which actually started in 2000, just ended. Sorry, but a new Lost Decade is already on the clock, and the clock is ticking. It’ll run from 2014 through the 2024 presidential election and probably longer. Worse, it’ll be marked by 10 hot bubbles that never exploded in the last Lost Decade. They’re still growing. And guaranteed to explode in America’s face.
The last Lost Decade? We first spoke of Wall Street’s fake inflation-adjusted records back in a 2010 column, lamenting how Main Street’s 95 million investors had seen Wall Street, in losing trillions, squander “over 20% of your money,” adjusted for inflation, in the dot-com crash, a 33-month recession and the credit crash of 2008. Piling on trillions in new debt for future taxpayers, “Wall Street,” we said then, “will do it again.”
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Wait, another lost decade? If the whole decade is going to be lost again then isn’t it the lost Score, as in four score and seven…
I’ll try again:
1. Politically, it will be a race to create the “message” for midterms, and campaigning will begin in February. Messages will be simple. For the GOP, “Big Government is bad…see Obamacare”, for the Dems, it will be “the GOP hates you (minimum wage and unemployment benefits being cut off)”. The GOP gains some seats in the Senate, but not a majority, and keeps the House.
2. Housing starts rise to 1.4MM by year-end 2014.
3. Secondary housing markets in CA will rise considerably in 2014 (over 20% again in inland markets–Riverside, San Bernardino, Stockton, etc.), but coastal markets that have already gone up to peak (or close to it) will have MUCH more tempered growth than in 2013 (single digits).
4. The taper will still be happening by the end of 2014…the Fed will still be buying bonds, but many fewer per month…perhaps less than $25B.
5. The job market will appear stronger than today, with steadily lower unemployment on the back of weak job growth (200k per month), and demographic effects. Wage growth will begin to pick up by the end of 2014 (which will be the excuse to finally finish the taper in early 2015).
6. The stock market will end 2014 higher than it began, but perhaps not by much (<10%).
7. The 10-year treasury will continue to go higher in 2014, but not over 4%. Despite plenty of screaming to the contrary, the effect on housing markets will be negligible.
8. 2014 will be a year of surprise (why do things seem so good?), 2015 will be a year of complacency (things will always be this good!), 2016 will be a year of pain.
2. Why would housing start rise with 25 million excess empty houses in the US?
3. With resale housing prices already priced 250% above long term trend, housing prices have no place to go but down. This is why prices are currently falling.
The GOP gains some seats in the Senate, but not a majority, and keeps the House.
I agree with that and said it about two months ago. I think the GOP not only keeps the house it gains a few seats. I do think that a 50/50 split is possible in the Senate which would make for really interesting times.
Some predictions:
Per census figures, fewer people will be employed in 12 months than are employed right now. Needless to say fake reported unemployment figures will drop.
Average median real inflation adjusted household income will continue to decline.
As has been the case for several years, fake inflation rate will be less than GDP growth which will be less than real inflation rate.
Bank interest paid to individuals on deposits will remain approx 0%, while interest paid to banks by individuals will remain at 29.99% credit card rate etc.
I think an over/under on how many bank branches will close would be interesting. I’d take over at 2000 but not by much. The count was 2300 in 2012. They’re simply running out of businesses to close!
Most here feel that housing prices nationally will fall this year (which I agree with, but feel it will probably only be on the order of a few percent). The real question is, what about US equities? Typically, diminishing demand/prices for real estate is a primary catalyst for a stock market selloff. Interesting that while there are signs that the economy is improving, my personal belief is that despite 50+ record highs in the DOW this year, the economy is in a much more precarious situation than it was in 2007…government debt is far higher now, pension obligations are even more onerous, jobs are still fewer and overwhelmingly lower paid. But don’t tell the stock market about it. Most people I know that have substantial amounts of money in stocks are very smug about their intelligence and financial situation (the very same people screaming about their “201(k) in 2009). They’ve already forgotten about that. The situation at the current time reminds me so much of 1999. Except now the government will do anything to keep the stock market artificially high. Somehow I doubt in the end they will be successful. But who knows how long that will be.
Most people I know that have substantial amounts of money in stocks are very smug about their intelligence and financial situation (the very same people screaming about their “201(k) in 2009).
It’s different this time. That, and the marketing departments at the NAR/CNBC/MSM are GREAT at their jobs.
You have to ignore the noise coming out of Washington, and ask the question “how long will the game keep going?”
Eventually, wages will have to rise (causing profits to fall) or sales will have to drop (causing profits to fall), and the stock market is priced for suckers. But if everyone is going to be allowed to run up their credit cards again, the market might limp along for another year.
Not only are the inflating housing prices screwing younger generations, but they will put the financial sector in a better position to foreclose and kick people out and get their money back (or better). Expect this to become a big issue of prices keep rising.
financial sector in a better position to foreclose and kick people out and get their money back (or better). Expect this to become a big issue of prices keep rising ??
It may be part of the overall friggen plan…
The U.S. home sales rate will reach a permanently high plateau.
Home Sales Barely Budge, Indicating Stability in Sales
By THE ASSOCIATED PRESS
Published: December 30, 2013
WASHINGTON — The number of Americans who signed contracts to buy existing homes in November was nearly unchanged from October, suggesting sales are stabilizing after several months of declines.
The National Association of Realtors said on Monday that its seasonally adjusted index for pending home sales ticked up to 101.7 from 101.5 in October. The October figure was revised lower from an initial reading of 102.1.
Higher mortgage rates and strong price gains over the last two years have slowed sales. The pending home sales index had fallen for five straight months before November. Completed sales of existing homes fell for three straight months, the association said earlier this month.
There is generally a one- to two-month lag from a signed contract to a completed sale.
The average interest rate on a 30-year mortgage edged higher to 4.48 percent last week, from 4.47 percent the previous week. Mortgage rates jumped about 1.25 percentage points from May through September, peaking at 4.6 percent, after the Federal Reserve’s chairman, Ben S. Bernanke, indicated in the spring that the Fed would start to scale back its economic stimulus program before the end of the year.
Earlier this month, the Fed announced it would reduce its $85 billion in monthly purchases of Treasury and mortgage-backed securities by $10 billion a month starting in January. The bond purchases are intended to hold down longer-term interest rates and encourage more borrowing and spending.
Robert Kavcic, an economist at BMO Capital Markets, said that recent housing market indicators had been mixed. Applications for mortgages to purchase homes fell to a nearly two-year low last week, he said.
Still, Mr. Kavcic said, “We continue to believe that the U.S. housing market will absorb the upward move in mortgage rates and push higher in 2014, helped by still-attractive affordability, better job growth and improved confidence in the recovery.”
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Gold naysayers will continue to naysay, but at the end of the day the price will not fall much below production costs, due in part to the shriveling of trade.
2013-32 = 1981. Wow!
REFILE-PRECIOUS-
Gold slips, set for biggest annual loss in 32 years
Mon Dec 30, 2013 10:09am EST
* Gold under pressure from firm equities
* SPDR gold holdings fall 3 tonnes on Friday
* Nov. China imports from Hong Kong down 42 pct
By Clara Denina
LONDON, Dec 30 (Reuters) - Gold fell in thin holiday trade on Monday, heading for its biggest annual loss in more than three decades at nearly 30 percent, as rising appetite for risk and the prospect of a global recovery tarnished its allure.
European stocks hovered around five-year highs after two weeks of strong gains, following from a six-year peak in Japanese shares.
“What’s currently driving investors is the idea that commodities are out of fashion and equities are in demand,” Quantitative Commodity Research owner Peter Fertig said.
“And, with low inflation pressures, there is still some downside risk for gold as long as the stock market remain relatively robust.”
…
“And, with low inflation pressures, there is still some downside risk for gold as long as the stock market remain relatively robust.”
Relatively robust? That is like saying World War II was a minor, regional skirmish. The stock market is on fire…up nearly threefold in four years. I don’t think there is anything relative about it.
The stock market is on fire…up nearly threefold in four years. I don’t think there is anything relative about it.
Almost enough to lead one to believe that the economy is on fire—except for the minor detail that it is not.
Hmmm… T’is a conundrum.
I agree. Safe prediction. I say spot price of gold will be no less than $1000 in 2014. The bottom in the price of gold may have already been seen. But the bottom will be before Decemmber 31 2014.
Of course this is in proportion to its other rare friends, silver, platinum, palladium, and Rhodium.
Knock on wood for my health (doctors make me ill but I continue to have intense swim workouts and work on the pullups, and run once or twice a week and eat a heart healty diet) - I am otherwise thinking a personal finance good year for me as I shift more out of staffing and into precious metals. I don’t intend to sell the shares I bought in 2009 in winter near rock bottom price until the next market cycle. It was the buy of a lifetime.
Dan, what’s the most pullups you’ve ever done at once?
Bill, i’m sorry i keep mixing you guys up.
I not a into pull ups but I start everyday by doing 75 pushups.
do you do them at once or spread out in sets? in any case 75 is a lot, especially after about 40 years old.
our gym test in high school gave a hundred points (which was max) for 45 push ups. i did the 45 and have never tried to do more. i used to do 300 sit ups in 3 sets everyday to get the 6 pack abs.
congrats on still doing so many push ups everyday. that’s real dedication.
No kidding that’s alot. I’d need a bag of Cheetos between every set of 10 to regain my energy level.
haha! don’t forget the ripple to rehydrate!
I had to back off the pushups big time in November! My pullups caused me to pull a muscle or joint in my right elbow. And I hear it pop.
I can do chest machines with weights and it is no problem. So I think what I need to do is build up the tissue in my joint to protect me when I get back to pushups.
A few months ago I was doing sets of 50 to 60 every ten minutes to get to a total of 400. Then I got back to the 100 pushups program to work up to do 100 consecutive. I got to week six and was doing 73 on the pushups test.
Then the pullups deal. The odd thing is that I can still do pullups and improve on them. Smart thing to do is go to machines for awhile to stabilize the joints.
It sux getting older (54 years old). At least I can do well in swimming.
TJ, somewhere between 13 and 15. Ever.
I quit pullups for fifteen years or so and just started again a month ago. Could not even do 3! Now I’m up to 6.
BTW I saw a YouTube video of a guy who says he can do 20. Well when you see him, it’s sad. He cheats and uses his legs to power himself up. I don’t call it a pullup unless you keep your legs and hips stationary and use your arms and back only.
Bill, thanks i was really curious.
back when i was a senior in high school we all had to take a gym test that included pullups. i did 23 back then. it was 3rd best in the school. i never thought much about it then because i was really interested in weight lifting. i should have just got a bar and kept up with the pullups. but i didn’t, so i’ll never know how many i could have done if i’d have kept training with them. i never did another pullup after high school.
strange the things one thinks about when you’re older. that’s why i was curious about you. you kept doing them all these years. you know and i don’t.
ah well.. the weights and hand grips were great fun too. it was fun to push the limits with those..
btw, we couldn’t cheat at anything because the gym teacher watched every pullup. the pushups had to be military style, but 45 is pretty easy for high school seniors. about half the class could do 45.
I was not strong at pushups until recently - like age 53!
i wonder why that is?
Oh that one is easily answerable. I just was not into pushups in my younger days. 20 years ago I could barely do 52 in two minutes. That was the most I ever did and those were with “pushup bars.” Never dreamed back 34 years ago that I would be as fit as I am today. I guess I was expecting some science fiction deal where we just get rejuvenated. Like characters in Robert A Heinlein’s 60s and 70s novels.
“I was not strong at pushups until recently - like age 53!”
That’s inspirational, and in line with one of my New Year’s resolutions, which is to get into better shape in 2014.
Exercise and Mediterranean Diet rulz. Go for low carbs unless you are doing 6 or more workouts a week of high intensity interval training, sprinting, etc. Otherwise if you are really doing 6 intense workouts a week you need normal carbs (whole wheat pasta, whole grains) to help provide energy.
Gold may have dropped a lot, but it is very sticky at $1200/oz.
And in contrast to Y2K, 2013 was very, very good for stocks. Should we expect more of the same in 2014?
Bulletin Gold ends the year down 28%, first annual loss since 2000 »
Dec. 31, 2013, 12:24 p.m. EST
Gold set to end year with nearly 30% loss
By Saumya Vaishampayan, MarketWatch
NEW YORK (MarketWatch) — Gold futures inched higher Tuesday, barely denting the metal’s first annual loss since 2000.
Gold for February delivery (GCG4 -0.13%) gained $1.30 or 0.1%, to trade at $1,205.10 an ounce on the New York Mercantile Exchange.
Gold futures have plummeted 28% for most active contracts in 2013, a year marked by expectations — and the final December announcement — that the Federal Reserve would begin to pare back on its monetary stimulus. The Fed is set to reduce its monthly bond purchases to $75 billion in January from $85 billion. Those purchases, which could come to an end by late 2014, have helped support gold prices.
The woes in the metals market similarly manifested themselves in silver. For the year, silver futures measured by the continuous contract have plunged nearly 36%. This year’s losses for gold and silver futures are the worst since at least 1984, when FactSet began tracking data.
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How long until stocks follow gold into the toilet?
Dec. 31, 2013, 4:46 p.m. EST
Stocks ends 2013 with bang; Dow up most since ‘95
By William L. Watts, MarketWatch
NEW YORK (MarketWatch) —The Dow Jones Industrial Average and the S&P 500 rang out 2013 with record closes Tuesday, ensuring blue chips posted the biggest annual gain in 18 years.
In the end, the Federal Reserve’s decision earlier this month to begin scaling back the size of its monthly bond purchases was the “gift that kept giving” as Wall Street capped a historically strong rally with big gains in December, said J.J. Kinahan, chief derivatives strategist at TD Ameritrade in Chicago.
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All your predictions will be wrong. That will not stop making another round of wrong predictions for 2015.
Your prediction will clearly be wrong.
Macro economic fundamentals indicate gradualism is occurring. Gradualism in everything. That includes the stock market. It will correct at some point in 2014 but finish the year up by single digit percentage.
2014 Homeland Security will be everywhere.. making sure we are safe
The Obama care implosion will continue.
1. Individual mandates have been repealed for so many special interests that it will be very difficult to enforce this on anyone.
2. Without the mandates the risk pool will consist of too many old, sick and unhealthy people so rates will rise sharply.
3. Democratic Congressmen and women will change their mind about the law, will start supporting repeal and will try to blame the Republicans. Open hostility will occur from their own constituents.
4. Around July 4th, 4 months before the midterms, Congress will repeal most of the ACA because the Democrats polling numbers will be so bad. Also because so many Presidential fits have been announced no one will really know what the law says any longer.
5. Towards the end of the year, Medicare and Medicaid will be expanded to allow coverage for all of the uninsured people.
6. Many people will suffer from major sicknesses or illnesses while they were unemployed. Anger for the government will rise and trust will dwindle.
7. Midterm elections will result in a massive, record breaking sweep for the Republicans who will go on to disappoint everyone.
For the United States, my prediction is that, unfortunately, there will be no change from current trends — we will have more empire, more surveillance and other intrusive uses of technology, more idiot reality television, more gadgets, more expensive healthcare and higher education, more sports. More redistribution of wealth upwards as a consequence of QE and ZIRP. More anodyne pronoucements from the Fed, which will perceive itself as having more mandates, and more stupid sideshows from our feckless Congress. More destruction of the middle class. More indebted young people living at home. Many of these problems discredit independent thought and democratic political institutions, but they will be ignored because the Dow, and housing prices, will continue to rise, albeit more slowly than in 2013. We’re just not good enough to do any better.
Internationally, I think that separatist movements, fueled by economic distress, will gain strength. It’s just a matter of time before Catalonia tries to secede from Spain, Greece leaves the euro, and similar acts, or attempted acts, of disaggregation occur. I also think that something of global economic or political consequence will happen in Asia, because China, India, and Pakistan are incredibly unstable, far beyond any fantasy that the U.S. might have of controlling or even influencing events.
I am of the doom philosophy. Not that humanity is doomed, but that our current way of living is doomed. When it happens, it will be good in some ways and bad in others. But I don’t think it happens next year.
greece leaving the euro would be good for greece and the euro, since it’s putting pressure on the euro, and it would for greece to make needed reforms.
disaggregation will be good to the extent it happens.
It would be a bad move for Germany, the euro could implode or even worse increase in value as the weaker members left.
The market can stay irrational longer than I can stay sane.
The US will notice that their financial guidance is being less and less observed which will nudge interest rates higher.
Housing is under pressure from interest rates, adequate good jobs, retiring boomers, and general oversupply. It is doubtful the real gamblers will continue to play with it.
The Fed chairman will be sanctioned for counterfeiting.
U.S. home prices will rise at a slower rate than they did in 2013.
Erin Carlyle, Forbes Staff
Real estate: luxury homes and the people behind the big deals.
Business|12/31/2013 @ 11:40AM |2,894 views
U.S. October Home Prices Rise At Highest Rate Since Feb. 2006, S&P/Case-Shiller Says
For the second month in a row, U.S. home prices rose at their fastest rate since February 2006, the highest point in the housing bubble, data released today from the S&P/Case-Shiller Home Price Indices shows. However, the economic data collectively suggests that the housing recovery is slowing down.
Single-family homes in the 20 major metro areas tracked by the indices collectively rose 13.6% (not seasonally adjusted) year-over-year, the 17th straight month of price increases and a 0.2% gain (not seasonally adjusted) over September’s numbers. However, the pace of the price increases appear to be slowing down: 18 cities posted lower monthly rates in October than in September. September’s growth rates, in turn, were slower than August’s in all markets but one.
“Home prices increased again in October,” says David M. Blitzer, Chairman of the Index Committee at S&P Dow Jones Indices. “However, monthly numbers show we are living on borrowed time and the boom is fading.”
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“Erin Carlyle”
She has a high-maintenance sounding name.
Home price increases slow in October, key gauge says
By Andrew Khouri
December 31, 2013, 7:05 a.m.
Home-price gains in the nation’s largest cities slowed in October, although they continued to show strong annual increases, according to a leading gauge.
The S&P/Case-Shiller index of 20 large U.S. metropolitan areas, released Tuesday, rose 0.2% from September, below economists’ expectation of a 0.7% gain. Prices rose 0.7% in September.
Prices were 13.6% higher than October 2012 — the largest gain since February 2006.
But there was a cooling trend for the month: Eighteen cities saw price gains decelerate compared with a month earlier. In half of those, including San Francisco and Seattle, prices fell.
“Home prices increased again in October,” David M. Blitzer, chairman of the index committee at S&P Dow Jones Indices, said in a statement. “However, monthly numbers show we are living on borrowed time and the boom is fading.”
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Chicago home prices jump by biggest margin since 1988
December 31, 2013|By Mary Ellen Podmolik | Tribune reporter
Chicago-area home prices rose 10.9 percent in October from a year ago, the best showing for the local market since December 1988, according to a widely watched housing price index released Tuesday.
The S&P/Case-Shiller home price index also showed though, that compared with September, home prices in October fell 0.5 percent, following a month-over-month gain of 0.3 percent from August to September. The monthly decline ended a seven-month run in which local home prices rose compared to the previous month.
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Home Prices in 20 U.S. Cities Climb by Most in Seven Years
By Michelle Jamrisko
Dec 31, 2013 6:20 AM PT
Related
U.S. Housing Recovery Has `Ways to Go,’ Kolko Says
U.S. Home Ownership Rate to Decline, Rosner Says
Home prices in 20 U.S. cities rose in October from a year ago by the most in more than seven years, signaling the real-estate rebound will keep bolstering household wealth in 2014.
The S&P/Case-Shiller index of property prices in 20 cities climbed 13.6 percent from October 2012, the biggest 12-month gain since February 2006, after a 13.3 percent increase in the year ended in September, a report from the group showed today in New York. The median projection of 22 economists surveyed by Bloomberg called for a 13.5 percent advance.
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Let me restate that: The pace of U.S. housing improvement is set to slow going forward.
House Prices Rise Again, but the Pace Could Slow
Chuck Burton/Associated Press
Many economists expect price increases to moderate next year, with higher prices and higher mortgage costs making homes less affordable.
By ANNIE LOWREY
Published: December 31, 2013
WASHINGTON — It was a great year for the stock market. And it was also a pretty good year for many people’s biggest investment: their homes.
In 2013’s last glimpse at the housing market, figures released on Tuesday showed that home prices in major metro areas kept rising in October. Year-over-year, prices were up 13.6 percent, the biggest gain in more than seven years.
After plummeting during the housing bust, prices have increased steadily since the spring of 2012. Prices in 20 major American metro areas increased a modest 0.2 percent between September and October, without seasonal adjustment, evidence that the quick rebound in prices is slowing, according to the closely watched S&P/Case-Shiller data. Higher mortgage rates might continue to slow the pace of improvement going forward, analysts say.
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My recollection is foggy, but I believe the San Diego pre-2008 housing collapse peak median sale price was around $517K. By contrast, today’s median sale price of $415K is over $100K lower (nearly 20%), even before considering inflation.
HOME PRICES UP, BUT RATE OF INCREASE HAS SLOWED
County’s 0.3 percent rise more like normal market
By Jonathan Horn
12:01 a.m. Jan. 1, 2014
…
David Blitzer, chairman of the index committee at S&P Dow Jones, said in a statement that he expects the annual increases to decline, as the market, according to most forecasts, returns to single-digit annual price gains.
“Monthly numbers show we are living on borrowed time, and the boom is fading,” he said.
Interest rates are also expected to tick up in 2014.
The Federal Reserve announced last month that it would begin to reduce its program to buy $85 billion per month of mortgage- and Treasury-backed securities by $10 billion. The program, called quantitative easing, puts downward pressure on long-term interest rates, such as mortgages.
“The key economic question facing housing is the Fed’s future course to scale back quantitative easing and how this will affect mortgage rates,” Blitzer said.
In October, the average 30-year-fixed mortgage rate climbed to 4.28 percent, Freddie Mac reports. That’s up from the 2013 bottom of 3.35 percent in early May. As of Thursday, the average 30-year-fixed rate was 4.48 percent.
Las Vegas had the highest year-over-year gain on the October index, at 27.1 percent. San Francisco was second with a 24.6 percent jump, while Los Angeles was third at 22.1 percent.
DataQuick, another home-price monitor, reported that the median price in San Diego County in October was $412,750. In November, the median price rose to $415,000.
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Easiest prediction ever: Long-term U.S. bonds will continue to tank as the QE3 taper takes effect.
Bill Gross dethroned is half the story in bond funds
Published: Friday, 8 Nov 2013 | 1:05 PM ET
By: Eric Rosenbaum | CNBC.com
Long lie the bond king, Bill Gross of Pimco, dethroned this past week as manager of the world’s largest mutual fund. Gross’s Total Return Fund finally lost the fund industry asset crown to Vanguard’s Total Stock Market Index Fund.
It’s a nice data point, but in and of itself, it doesn’t tell you much. The truth is, the asset flip-flop between the Pimco and Vanguard fund was a data point in the making for months—a fund fait accompli. The Pimco Total Return Fund had six consecutive months of outflows leading up to “regime change” in mutual funds, so Gross’s slip offers investors little insight into how to make sense of the shifting investment landscape.
Here are a few important themes that underlie this week’s watershed event in the mutual fund industry.
Don’t shoot the messenger
Bill Gross is as synonymous with bond funds as Jack Bogle is with fund fees and Steven Cohen is now with fund misdeeds—and Gross did notably get the interest-rate call wrong in a way he had not for decades before—but the asset outflows from Pimco Total Return are really just another way of stating the obvious in fixed-income: Investors ran scared from interest rates once the taper talk began, and even with the taper talk put off, they are still running, and investors don’t want any exposure to duration in bonds.
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Bonds
The bullish case for bonds: Pimco exec Crescenzi
Published: Thursday, 26 Dec 2013 | 7:54 AM ET
By: Jeff Morganteen | Producer, CNBC.com
Tony Crescenzi, PIMCO, shares his outlook on fixed income, as the yield on 10-year Treasurys continue to climb.
Longer-term bonds rates are normalizing as the U.S. Federal Reserve scales down its asset purchases, but the central bank’s policies should still anchor shorter-term bonds well into the second half of 2015, Pimco’s Tony Crescenzi told CNBC on Thursday.
“The Fed is losing its grip on longer rates,” Crescenzi said on “Squawk Box.” “Short rates it controls, and it will control them until a rate hike is near, and that’s somewhere in 2015—probably the latter half given what the Fed told us.”
Crescenzi, a portfolio manager and executive vice president at Pimco, said investors have had time to prepare for rising rates in longer-term bonds because the Fed telegraphed its decision to taper its massive bond-buying program in May 2013 before actually reducing its purchases last week.
Fed policies should help contain 10-year Treasury yields under 4 percent and mainly between a range from 2.75 to 3.25 range next year, “simply because the economy has momentum that people are banking on.”
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Markets
Pimco Bets Inflation-Protected Securities Will Rally in 2014
Mihir Worah Sees Mutual Fund Outflows Stabilizing, Believes Inflation Will Climb in 2014
By Min Zeng
Dec. 20, 2013 1:03 p.m. ET
U.S. money manager Pacific Investment Management Co. is betting that Treasury inflation-protected securities will rally in 2014 after this year’s sharp selloff.
Mihir Worah, head of Pimco’s inflation bond portfolio, said in an interview Friday that he expects TIPS to post a total return of 4%-5% next year.
TIPS have posted a loss of 8.5% this year through Thursday, according to Barclays. The bonds, which allow investors to hedge against inflation, are on pace to log their biggest calendar-year loss since the U.S. government started selling them in 1997.
Demand for TIPS waned as data showed U.S. inflation wasn’t rising despite improvement in economic growth and employment. On the back of economic strength the Federal Reserve said Wednesday it will dial back its $85 billion monthly bond-buying monetary stimulus next month, which has sent U.S. Treasury bond yields higher from historic lows.
“I think TIPS have been oversold relative to [economic] fundamentals and should regain some value next year,” Mr. Worah said.
Newport Beach, Calif.-based Pimco, a unit of German financial services firm Allianz ALV.XE -0.34% SE, has about $2 trillion assets under management. Mr. Worah runs Pimco’s flagship TIPS fund—the $16.8 billion Pimco Real Return Fund, which is the world’s second-largest TIPS bond fund by assets.
Investors have pulled money out of the TIPS market at a record pace this year, a reversal after buying up the debt in the previous four years. TIPS funds overall have suffered a net outflow every month in 2013 and total redemptions have reached $32.7 billion through Dec. 18, according to fund tracker Lipper.
The Pimco Real Return Fund has suffered net outflows of $6.9 billion this year through the end of November, according to fund tracker Morningstar. The fund has posted a loss of 8.8% this year through Thursday, compared with a loss of 8.5% on the Barclays U.S. TIPS index, according to Morningstar.
“Much of this outflow from mutual funds has been met by strong inflows from foreign central banks,” said Mr. Worah. “For next year, I expect mutual fund outflows to stabilize.”
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A Prediction Of A Correction Of all Asset Classes
The 10 year US bond closed regular session trading with a 3% yield, ultimately settling at 3.02% for the day. It’s ironic and fitting that the last weekly close for 2013 sits right above the line the Federal Reserve and Treasury were so concerned about all year. The Fed is terrified of rates moving up too quickly. But even a moderated stair-step pattern higher over the course of 2014 will cause considerable risk to large stock market corrections and a total reversal of the housing market. Bottom-line: tapering games will show just how clearly the Fed is seeing it’s control over the bond market diminish, and all other asset classes will respond in turn. Next year is shaping up to be a year of considerable volatility in virtually all asset classes.
http://www.silverdoctors.com/pm-fund-manager/#more-36711
“A Prediction Of A Correction Of all Asset Classes”
Doesn’t this suggest going long the numéraire asset class (cash)?
Cracks Forming In Housing Bubble II (But This Time It’s Different)
This is the insanity of the current housing bubble. It’s different from the insanity of the last housing bubble only in its details. And buyers, just like last time, are hitting a wall. Similar data has been pouring in for months. Repressed interest rates and the newly printed money chasing after assets, any assets, have distorted prices. And now that rates are rising, the prices have moved out of reach, And now the HANGOVER IS STARTING TO SET IN.
http://www.testosteronepit.com/home/2013/12/31/cracks-forming-in-housing-bubble-ii-but-this-time-its-differ.html
“HANGOVER IS STARTING TO SET IN”
Nothing here a little hair-of-the-dog can’t fix.
Inside the Mind of Bernanke: Are Savers Losers?
Apr 06 2011
Written By: The WealthCycles Staff
In the financial world, saving is the equivalent of watching paint dry—where stocks, bonds, foreign exchange, and commodities are the glamorous movers and shakers of the economic world, saving is just-plain stodgy and slow-moving.
Economists view savings as one of the many factors that drive economies. The equation is simple enough: the more people save, the more funds there are to invest in factories, technology, computers, and new ideas. These are things that drive an economy and make it grow faster.
For Economists, the main difference between savings and investments is how much risk they entail. An example of what an economist would consider savings, with no risk, is if you took your cash and stashed it under your mattress. While an investment, like a bond, entails more risk. But as we at WealthCycles.com have pointed out ad nauseum, if you are stashing your cash away, you are taking on the enormous risk of losing wealth by way of inflation. The bottom line is that you are taking on risk whether you save or invest. Both savings and investment are good for an economy, it’s just no one focuses on savings. This is because, frankly, its boring. But, this leads us to the question, is it possible to have too much of a good thing? Could you save or invest too much?
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The “hair of the dog” hangover cure is to drink a little more the morning after a night of heavy drinking. But studies have proven that “hair of the dog” only prolongs and worsens the real hangover—which is a scary thought sometimes. What should be scary to some is that the creation of fiat currency was one of the primary causes of the Financial Crisis, yet central banks have tried to remedy their economy’s problems with a “hair of the dog”- type remedy by simply creating more currency.
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Be prepared: Wall Street adviser recommends guns, ammo for protection in collapes
David John Marotta, a Wall Street expert and financial advisor and Forbes contributor, said in a note to investors, “Firearms are the last item on the list, but they are on the list. There are some terrible people in this world. And you are safer when your trusted neighbors have firearms.”
http://washingtonexaminer.com/be-prepared-wall-street-advisor-recommends-guns-ammo-for-protection-in-collapse/article/2541205
New Year’s 2014 prediction: By 2024, the Housing Bubble will clearly have ended, and the housing market news will be too boring for any who currently read and post here to pay attention any longer.
And by then, Ben Jones will have written and published his book to compile the chronology of the Housing Bubble saga as documented on the HBB.
The Trends to Watch For in 2014
http://www.peakprosperity.com/blog/84092/trends-watch-2014
My predictions:
1. I will not buy a house
2. 2014 will feel a lot like 2013, which felt a lot like 2006 to me.
Any word from X-Gs or Allena? I hope they are both well.
Enjoy your life as a young, carefree renter, and maintain a portfolio of diversified savings. Given intervention and a resurgent housing mania, purchase opportunities in the U.S. housing market currently look as bad as ever. But this mania will eventually end like all those which preceded it, at which point you may find yourself surprised by how low U.S. housing prices have fallen.
However, you may also find yourself reluctant to buy, given that the sentiment at that point may be so negative that anyone who ventures to purchase a home is regarded as a bit loopy. (This is how our California neighbors viewed us when we bought a place back in 1996.)
The other thing that may make you reluctant to buy is fear, amplified by the warnings of other people you know who lost a load of money due to owning real estate during a mania. Nobody will know how much further housing prices will have to fall at the next logical entry point.
But trust me: It will be well worth the wait in case you are a long-term net worth builder rather than a how-much-a-month Joe6Pack Ownership Society wannabe.
Who would have thought the mere suggestion of a QE3 taper would result in both U.S. bonds and gold getting severely hammered while the U.S. stock market kept always going up?
‘Safe’ Investments Like Gold Were Hit Hard in 2013
NEW YORK December 31, 2013 (AP)
By STEVE ROTHWELL AP Markets Writer
Associated Press
Being safe left some investors sorry in 2013.
That’s because some financial assets that are considered safe and steady lost money.
After three decades of steady gains, bonds had a bad year. Prices for Treasurys and other kinds of bonds slumped as the U.S. economy improved, investors’ nerves steadied and the Federal Reserve prepared to pull back on its huge bond-buying program.
Gold was another investment that went from haven to headache. The price of gold gained steadily for more than a decade, driven by concerns about the health of the U.S. economy and rising inflation. The metal plunged in 2013 as the U.S. maintained its recovery and inflation was nowhere in sight.
Keeping money in a bank account was another safety-first strategy that worked when the stock market was plunging in 2008, but not since then. With the Standard and Poor’s 500 index soaring 29.6 percent in 2013 — or 31.9 percent including dividends — returns from a savings account looked meager.
Here’s a look at how some of the supposedly safe assets have performed.
TREASURYS AND OTHER KINDS OF BONDS
From 1981 through 2012, demand for Treasurys rose and their yields, which move in the opposite direction, fell. The yield on the 10-year Treasury note bottomed at a record low of 1.39 percent in July of 2012, when the European debt crisis intensified and people rushed to buy U.S. government debt securities.
In the 1980s, investors bought Treasurys as inflation eased and interest rates fell. That made higher-yielding Treasurys already in the market more attractive. Investors also bought Treasurys during the financial crisis in 2007. Treasurys are considered among the safest financial assets because they are backed by the U.S. government, which, at least in theory, should always be able to repay its debts.
Bonds also rose as the Fed began purchasing Treasurys in response to the financial crisis and the recession to keep interest rates low to boost the economy. The central bank has been purchasing $85 billion worth of Treasurys and mortgage-backed securities each month.
The U.S. economy now appears to be gaining steam and the Fed, the biggest buyer of Treasurys, plans to start reducing its purchases in January. The yield on the 10-year Treasury note climbed from 1.76 percent to as high as 3.04 percent in 2013 as investors sold bonds in anticipation of the Fed’s pullback.
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Dec. 31, 2013, 5:35 p.m. EST
Gold’s prospects in 2014 look tarnished
Commentary: Gold prices fell 28% in 2013 and 2014 may be another year of loss
By Myra P. Saefong, MarketWatch
Bloomberg
Gold futures prices fell 28% in 2013, their first yearly loss in 13 years.
The story was originally published on Dec. 20. It has been updated to reflect year-end data.
SAN FRANCISCO (MarketWatch) — The year 2013 put an end to a dozen years of annual gold gains, and the metal’s prospects for recovery in 2014 don’t look great.
Gold futures prices lost 28% in 2013, the first yearly loss since 2000 and the largest annual loss for gold futures since at least 1984, according to FactSet data tracking the most active contracts.
It’s a tough reversal for investors who hung onto the precious metal in hopes the forces that increased gold prices by seven times by its peak in 2011 from late 2000 — the popularity of gold-backed exchange-traded funds, rising global wealth and worries about inflation — would stoke demand for the natural resource for decades to come.
“Gold has lost its luster as an investment vehicle in 2013,” said Jeffrey Wright, managing director at H.C. Wainwright.
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Did they predict the drop in 2013? Before it happened, that is?
If not, I think we can safely ignore their prediction for next year.
Financial collapse bagholder identification process will continue in 2014.
90% pension payouts are crazy. Why am I unsurprised to learn they are also standard in California?
EddieTard Maths: An increase from 2% to 3% is small, and hence no problemo.
Op-Ed
When it comes to pensions, California is no Detroit
The Golden State’s troubles are solvable if unions and conservatives each give a bit.
By John D.R. Clark
December 29, 2013
California Public Employees Retirement System Board member, Controller John Chiang, looks over some papers during a meeting in Sacramento in 2011. In California, it is not possible for local agencies to defer or reduce their required contributions to CalPERS. (Associated Press )
The Detroit bankruptcy court judge’s ruling that employee pensions are “on the table” for potential reductions has spurred yet another round of acrimonious debate between those on the right who blame public-sector pensions for virtually all of government’s fiscal problems and employee unions that deny there’s a problem at all.
Neither side is right.
Most of the pension funds in extreme crisis (including those in Illinois, Kansas, Detroit and Chicago) got that way not because of the pension system itself but rather because elected officials failed to make the annual required contributions needed to keep funds solvent. Skipping these payments was politically expedient during the Great Recession, but the unpaid bills compounded quickly.
The amounts now owed to some of the worst-funded plans, like Detroit’s, are beyond the realistic ability of their sponsoring governments to pay. This, of course, infuriates union members who note, accurately, that if the bills had been paid on time, the crisis wouldn’t exist, at least in its present proportions.
California has a different problem. Here, it is not possible for local agencies to defer or reduce their required contributions to the California Public Employees Retirement System, or CalPERS. California’s pension problems have much more to do with pension enhancements. This was a major factor, but far from the sole cause, of bankruptcies in Vallejo, Stockton and San Bernardino.
Before pension formulas were increased in 1999, the typical police and fire employee accrued 2% for each year of service as long as the employee retired at 50 or later. A person who started as a firefighter or police officer at 20, say, could retire at 50 with 60% of his or her pay. The post-1999 enhanced formula adopted by most jurisdictions statewide was 3% for each year worked if they retired at 50 or later. This meant that those same 30 years were now worth 90% of salary, a 50% jump.
On average, cities and counties in California pay about 35% of every police and fire salary dollar as the employer contribution to CalPERS. Employees themselves contribute an additional 8% to 12%. This is why California’s pension system is not in a crisis, despite what the anti-union critics say. Our local governments and their employees are making contributions totaling 40% to 50% of salary to keep the state’s pension system solvent.
But it’s easy to see why governments are having a hard time shouldering the financial burden. That burden has been made harder by CalPERS’ decision to slowly ratchet back its investment return and other assumptions to more conservative positions. This will further improve CalPERS’ financial situation (which is already pretty good), but employer rates will also rise. The total contributions of employer and employee may one day hit nearly 60% of a salary.
This is the part of the problem that unions have been loath to recognize.
More than 40% of the pension contribution made by cities and counties for police and fire employees is attributable to the increase from pension enhancements, which raised the payout after 30 years of employment from 60% to 90%. For a medium-sized suburb with 100 sworn police officers and 50 sworn firefighters earning an average base pay of $80,000 annually, the difference between the old pension formula and the new amounts to $1.8 million a year.
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