Bits Bucket for January 13, 2014
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.
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Name:Ben Jones
Location:Northern Arizona, United States
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One thing I neglected to mention yesterday about my cousin’s house in Shanghai that his employer is renting for him. It was new construction when they moved in, and there seem to be some issues with the construction quality. There’s very little wood and in it, but lots of glass and stone and concrete. I guess wood is extra expensive here. It’s 4 floors. Basement is set up to be maid’s quarters, although they don’t have one living there. Master suite is entire top floor, kids rooms are the next one down, and living area is the main level. Nice but not spectacular, each floor maybe 400-500 square feet…and surrounded by a whole bunch of the exact same thing.
Rental cost $8000/mo. 50k RMB.
That is interesting. Is the kitchen in the basement where they expected the maids to be living, or on the first floor in the family living space?
It’s on the first floor with the family living space.
Rental cost $8000/month…. Are these rates just for foreigner rentals, or is it market rate for anybody?
I can’t reconcile that corporations sent all those jobs to China supposedly because labor is cheaper, and yet thousands of households are making a salary/bennies — $250K? — to support $8000/month in rent (not including the live-in maid). Of course the poor suicide-netters don’t make that kind of buck, but a couple of high-paid managers would cancel out any serf labor savings. I guess the real savings is in the energy costs and avoiding those pesky regulations?
I guess the real savings is in avoiding those pesky regulations?
http://news.bbcimg.co.uk/media/images/65253000/jpg/_65253310_zmiv221o.jpg
Environmental regulations are “business unfriendly”
I wonder if those $8000/month houses come with built in air scrubbers.
Heck, I doubt they even have central heating.
250K doesn’t support 8K/mo in rent. Try about 1/2 that amount.
Do you mean $125K supports $8K in rent, or that $250K supports $4K in rent?
Either way, that is $96K in rent per year that some company is paying for an American employee in China, not including salary on top. How much more would it cost to pay the same employee $96 in the US?
He’s training his replacements. Once that is accomplished he will return to the US, where a layoff notice will be waiting for him.
Do you know for this sure (did Carl tell you), or are you being facetious?
If that’s what’s really happened, I would have told that company to go pound sand. Better to go Oil City and live paycheck to paycheck at Wally World than to breathe in China smog only to be laid off.
Not even a need to go to Oil City Mz. Craterton….. You’re doing the same right in Craterton, DC.
I didn’t mean Carl, I meant his friends in China. And, yes, there is a very good chance that once the “knowledge transfer” is complete that a pink slip could be waiting. Now if the friend is management, then that’s different.
And I’m only speculating. But there are only two reasons to be be there for an extended period. Either you perform the knowledge transfer or you supervise the transfer.
Surely you’ve heard about people training H1-B’s, only to be fired once the training is complete.
Surely you’ve heard about people training H1-B’s, only to be fired once the training is complete.’
yep
Bingo. I see that FAR more often than the mythical “can’t find a US citizen with the required skill set” scenario. We need to add a provision for H1B grants that no US citizen couldn’t come up to speed on your particular technical needs/environment in a reasonable amount of time.
These asshole never finish the sentence: “We can’t find enough tech workers with the skills we need…..at the price we want to pay.
Fückers. End the H1B program NOW!
“These asshole never finish the sentence: “We can’t find enough tech workers with the skills we need…..at the price we want to pay.
Fückers. End the H1B program NOW!”
Why all of sudden the outrage? This has been the MO for uskilled and semi-skilled labor for decades. As it makes its way up the chain of prosperity, all of a sudden it’s a problem?
I’m not sure where you’re getting the “all of a sudden” part from. I’ve been outraged about this for decades as I’ve watched job after job disappear down the hole.
It’s so prevalent as to be cliche’ at this point. Golly gee maybe you think that there would be more technical talent available in the US if it wasn’t such a risky prospect to spend years studying a Tech field only to work under constant threat of outsourcing?
I for one am sick to death of our “leaders” constantly selling us out so that Ellison, Zuckerberg, and Bezos see a few extra points on their share price while the rest of Americans get the Ned Beatty treatment.
You sure got a purrty mouth….
You sure got a purrty mouth….
SQUEEEEEEEEEEEAL!!!!
Just to be clear he is a director level manager at a major corporation on the ladder getting his ticket punched. He’s not training his replacement. It makes perfect sense that they got him that house. He has a wife and three kids there. I just can’t believe what it costs.
I wonder if eliminating the 35% tax on foreign earnings and bringing those profits back to America IF you spend it in America on Americans would work?
No stock buybacks no executive bonuses unless the same percentage bonus applies to janitors and secretaries too.
No buying other companies unless you intend to INCREASE total employment…..does that ever happen?
Or buy a company lay off thousands of workers but bring all you CSR back home. So you will talk to an American not Bangladeshi or Filipino
Can an Ipad be made in kansas?
I wonder if eliminating the 35% tax on foreign earnings and bringing those profits back to America IF you spend it in America on Americans would work?
The zillionaires would never agree to it. They want to be able to bring the money back, tax free with no strings attached. And all they will use it for would be to buy assets and drive up their prices. Invest in businesses that create jobs? Dream on.
I dunno it could work either way Ohbewaana propose it, and could say those evil republicans rich people want the money free to spend it on themselves.
But the repubs can propose it and say lets help our own people first…and probably win everything in 2014.
More likely, they’ll agree to it, and then find some way to cheat around it. They’ll lay off 5000 workers a few weeks before the tax break kicks in, and then re-hire the same 5000 workers for “new” jobs, probably with pay cuts. Or they will keep the jobs only for the required few years and then lay everyone off. Or, they will keep the jobs and then move to another part of the country. Or they will create only the cheapest jobs while the keeping the career jobs overseas. Or, they will stall until they can buy a more “business-friendly” government. Or they will negotiate to a reduced tax and then pass the whole shebang onto customers.
And the entire time, they will moan about taxes and that people need to get off welfare and “get” the “job” which they just eliminated.
More likely, they’ll agree to it, and then find some way to cheat around it.
That is option #2, and most likely they would lobby to make sure those loopholes exist.
Well the bits started off well with Carl’s post on the cost of a rental in Shanghai then morphed right back into the RAL report…17 of the first 23 post from him…Annoying is a gross understatement….
Install the Joshua Tree, amigo. Then, you only see them if you go out of your way to unhide them.
Yep, what I did. I enjoy this blog and the different opinions but it got tiresome to scroll past 30 useless posts/links per day.
No you didn’t. You hang on my every written word.
Install the Joshua Tree, amigo ??
I don’t know how to do that Colorado…Can you walk me through
it ??
every.written.word.
There’s very little wood and in it, but lots of glass and stone and concrete.
Few places outside of the US and Canada build houses out of wood and drywall.
$8000 a month to rent a 1500 sq ft house? Holy Bubble, Batman. What percentage of China’s population even makes $8000 a month? 3-4%?
I’m also guessing that these homes have hard surfaced floors (marble or some other stone) and that they are bone chilling cold in the winter. I saw plenty of houses like that in Mexico City’s nicer nabes. Really nice looking places, but cold as a fridge in the winter.
I’m also guessing that these homes have hard surfaced floors (marble or some other stone) and that they are bone chilling cold in the winter.
Yes…exactly correct.
“NAR is a problem. NAR provides forward guidance. And they do an enormous amount of economic reporting. ALL of which is grotesquely biased and dangerous. David Lereah quietly side-stepped off the scene after he had personally caused billions in aggregate damage to suckered Americans. So the NAR does indeed share a large portion of the blame.”
California Assoc of realtors is the most corrupt out of all NAR proxies.
Agreed
“Moorpark, CA Housing Prices Crater 12% YoY; Inventory Skyrockets 150%”
http://www.movoto.com/statistics/ca/moorpark.htm#city=&time=1Y&metric=Median%20List%20Price&type=0
“Simi Valley CA Housing Crumble 16%; Inventory Balloons 188%”
http://www.movoto.com/statistics/ca/simi-valley.htm
Inventory for the pricey stuff must be the majority of the uptick. $550K and below (which is inexpensive in Moorpark, Simi Valley, and Thousand Oaks) isn’t ballooning. Decent sq ft starter homes are $400K and up. That’s what we paid in 1998 for almost 4,000 sq ft with a killer view of mountains and trees from 6 rooms.
In my opinion, CAR has mastered Edward Bernays “Engineering Of Consent” verbatim. That HA and I can agree on.
Price points don’t matter when there is price compression. And there is a whole lot of price compression going on in California.
Your own personal financial disaster doesn’t have any bearing on it.
“Sacramento CA Housing Inventory Explodes 79%; Demand Craters”
http://www.movoto.com/statistics/ca/sacramento.htm
sacramento has a lot of nice areas. rio linda, n highlands, del paso hts, natomas, s. sacramento, oak park, to name a few.
Go make an offer!!!
“So do you really think wages are going to double or triple to meet inflated prices of everything? Of course not. Prices will fall by 50% to meet existing wages as demand continues to collapse.”
Exactly.
Some of us went to college and have real jobs and can afford to buy homes.
Sorry you got passed over for the job at Arby’s, maybe you can sell some plasma.
Amy; You and I worked the window at Arbys!
Another Monday morning in mom’s basement with nowhere to go?
And we have lots of fun in customer basements too!
I fired you because you were lazy. I believe you are still collecting unemployment??
Amy and I’m selling homes now; at least trying to!
“Granite Bay CA Housing Prices Collapse 20% Year Over Year; Inventory Skyrockets 53%”
http://www.movoto.com/statistics/ca/granite-bay.htm
granite bay is where all the cool people live in gated communities. I think eddie murphy had a crib over in los logos and some kings players were shacked up over there too. Folsom lake is their playground but the drought is going to have a lot of boats for sale on craigslist this year.
A guy in my former networking group bought Eddie Murphy’s Ferrarirri. He then came up with a product for the owners after owning it a while and started his own company. Pretty nice guy. I wish him luck.
Ferrari -editing boo boo
“Housing is never an “investment”. Housing is a depreciating asset and a loss, ALWAYS.”
Reality. It’s the way the world is.
You can post a bunch of links to some dumb website that nobody reads, but it will not change the fact that living in a rental will never feel like a real home.
We don’t like your links Mr. Housing Analyst!
California Housing Demand Falls To 4-Year Low
http://www.zillow.com/local-info/CA-home-value/r_9/#metric=mt%3D30%26dt%3D1%26tp%3D6%26rt%3D14%26r%3D9%26el%3D0
Carrington Wealth Management: “Dumb Money Is Buying Housing”
http://www.nakedcapitalism.com/2013/05/so-who-is-the-dumb-money-ruining-the-housing-rental-market.html
Rental Rates Fell 3.4% in SF Bay Area
http://www.zerohedge.com/contributed/2013-06-07/private-equity-and-wall-street-planning-their-exit-rental-business
http://www.sfgate.com/bayarea/article/Human-waste-shuts-down-BART-escalators-3735981.php
Realtor states: “The NAR can no longer be trusted by us.”
“NAR Sales Data Continues to be Wrong”
http://www.therealestatebloggers.com/selling/nar-sales-data-continues-to-be-wrong/
NAR just cannot be trusted…. at all.
“If you sell your house today, you’re going to lose alot of money……
If you sell your house tomorrow, you’re going to lose alot more money….”
I guess you better get selling and do so in a hurry…. Now get a move on!
“If you have to borrow money for 15 or 30 years to pay for it, it’s not ‘affordable’ nor can you afford it.”
BINGO
If you’re still renting after age 25 that’s just failure to launch.
Sure you can afford it! You can trust me and Amy! Honestly!
“failure to launch”
That’s why an apartment is called a “pad”.
“They want you to believe that distorted and massively inflated housing prices are the result of speculation and expect you to believe and repeat it. The truth is that it is price fixing.”
BINGO
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
Don’t Be A Debt Donkey®
What the. HA went from a regular poster, to his “you’re a realtor liar/debt donkey” schtick. Now he’s almost done with another morph, into bolded parrot mode. Honestly, this feels like a diagnosis, and not good.
He thinks that using the “i” and “b” HTML tags makes him look like some kind of authority.
Enslaved for the rest of your life.
People don’t want financial advice from a grown adult who still lives in his mom’s basement.
What time is our basement meeting today?
Is the Housing Bubble back?
The Opinion Pages|Op-Ed Contributor
The Bubble Is Back
By PETER J. WALLISON
JAN. 5, 2014
WASHINGTON — IN November, housing starts were up 23 percent, and there was cheering all around. But the crowd would quiet down if it realized that another housing bubble had begun to grow.
Almost everyone understands that the 2007-8 financial crisis was precipitated by the collapse of a huge housing bubble. The Obama administration’s remedy of choice was the Dodd-Frank Act. It is the most restrictive financial regulation since the Great Depression — but it won’t prevent another housing bubble.
…
Through the 1990s and into the 2000s, the Department of Housing and Urban Development raised the quotas seven times, so that in the 2000s more than 50 percent of all the mortgages Fannie and Freddie acquired had to be made to home buyers who were at or below the median income. To make mortgages affordable for low-income borrowers, Fannie and Freddie reduced the down payments on mortgages they would acquire. By 1994, Fannie was accepting down payments of 3 percent and, by 2000, mortgages with zero-down payments. Although these lenient standards were intended to help low-income and minority borrowers, they couldn’t be confined to those buyers. Even buyers who could afford down payments of 10 to 20 percent were attracted to mortgages with 3 percent or zero down. By 2006, the National Association of Realtors reported that 45 percent of first-time buyers put down no money. The leverage in that case is infinite.
This drove up housing prices. Buying a home became preferable to renting. A low or nonexistent down payment meant that families could borrow more and still remain within the monthly payment they could afford, especially if it was accompanied — as it often was — by an interest-only loan or a 30-year loan that amortized slowly. In effect, then, borrowing was constrained only by appraisals, which were ratcheted upward by the exclusive use of comparables in setting housing values.
Today, the same forces are operating. The Federal Housing Administration is requiring down payments of just 3.5 percent. Fannie and Freddie are requiring a mere 5 percent. According to the American Enterprise Institute’s National Mortgage Risk Index data set for Oct. 2013, about half of those getting mortgages to buy homes — not to refinance — put 5 percent or less down. When anyone suggests that down payments should be raised to the once traditional 10 or 20 percent, the outcry in Congress and from brokers and homebuilders is deafening. They claim that people will not be able to buy homes. What they really mean is that people won’t be able to buy expensive homes. When down payments were 10 to 20 percent before 1992, the homeownership rate was a steady 64 percent — slightly below where it is today — and the housing market was not frothy. People simply bought less expensive homes.
If we expect to prevent the next crisis, we have to prevent the next bubble, and we will never do that without eliminating leverage where it counts: among home buyers.
another bubble bursting will be another excuse to print a bunch more cash to save homeowers who were duped by banks.
Wrong they will claim that printing cash is for the homeowers but it’s really going to the banks. Banks will extract as much flesh from teh homeowers as possible and Uncle Sam will make up the rest.
Peter Wallison is at the American Enterprise Institute, so of course he’s going to blame everyone else except his banker buddies. NYT readers called him out in the comment section.
In addition, Wallison is being very clever here. He has focused exclusively on down payment as a way to decrease housing prices. This allows two things to happen:
1. House prices will drop while keeping interest rates low. This allows his banker buddies to continue to make money on cheap leverage.
2. House prices will drop but the cash requirement will still shut J6P out of the market. This will allow his Blackstone buddies to buy cheaper houses, at those low interest rates, and rent out to J6P.
This will allow his Blackstone buddies to buy cheaper houses, at those low interest rates, and rent out to J6P.”
I know a flipper who tells me Blackstone isn’t buying right now, he thinks they got burned too many times.
He says they run hot and cold with their Auction buying.
No, they aren’t buying right now, but that’s precisely WHY they want high down payments. High down payments shut out ONLY J6P. When prices fall, Blackstone can start buying but J6P won’t have the cash. Even if prices don’t fall, high down payments help Blackstone because existing J6P renters are stuck with the BS LL for years.
Hbb has said that Blackstone wants to buy all the land and make everyone into renters so they can sell RBS. Wallison confirms this when he slips up and says that high down payments are good for eliminating leverage where it counts: among home buyers. i.e., Take away the J6P’s leverage, but let the banks keep theirs.
Housing
Fannie and Freddie’s New Boss Could Reshape Mortgage Finance
By Jody Shenn and Clea Benson
January 09, 2014
Mel Watt hadn’t even been sworn in as the head of the Federal Housing Finance Agency when at 9 p.m. on the Friday before Christmas he e-mailed reporters from his personal account saying he would put on hold planned increases in fees Fannie Mae (FNMA) and Freddie Mac (FMCC) charge for insuring mortgage securities. With a three-sentence message, he signaled a break from his predecessor and hinted at how he’ll shape the future of the two firms that guarantee about 60 percent of new U.S. mortgages.
…
Mortgage bond investors are already girding for Watt to expand the Home Affordable Refinance Program (HARP), which allows a homeowner with little or no home equity to refinance, potentially damaging the value of their investments. Bank of America (BAC) analysts have said he may loosen the program’s criteria for eligibility, extending the cutoff date to include loans made after mid-2009.
Consumer advocates support broadening HARP and also want Watt to revisit the idea of allowing Fannie and Freddie to reduce the loan balances of delinquent homeowners—which DeMarco studied and rejected because of concerns that it would add to the two mortgage companies’ costs. Some of Watt’s room to maneuver may be limited by forces outside his control. Rising interest rates are reducing the pool of borrowers who could reap savings from refinancing even with expanded qualification rules. Also, climbing home prices may dampen the urgency of reducing borrowers’ principal.
Watt’s December e-mail pleased mortgage bankers and others in the housing industry who had complained that the hikes that were to go into effect in March and April were too steep and too sudden. The move appears to run counter to DeMarco’s efforts to curb Fannie and Freddie’s role in the housing market by creating incentives for other firms to compete for the business. Peter Wallison, a senior fellow at the American Enterprise Institute, says he’s not surprised by Watt’s decision. “That is certainly along the lines of what I expect Mel to do,” says Wallison, a frequent critic of government housing policies, “to follow the guidance he’s getting from people on the left and government-housing complex about what FHFA should be doing.”
Good for gov and banker, bad for people
peyton threw me about 10k of equity yesterday
and he’ll be throwing me another 50k after we win the souper bowl
now go buy a bunch of papa johns pizzas.
Don’t be jealous cus your team sucks.
Papa John’s online orders are half price the day after the Broncos win.
my team rocks. now put a topping on it!!!!
peyton just lifted all home prices in denver metro by 5% this weekend. Dude is a rockstar.
And unlike the “rockstar” Timmy Tebow, Peyton does not appear to be asking for help from God, at least not publicly.
And unlike the “rockstar” Timmy Tebow, Peyton does not appear to be asking for help from God, at least not publicly.
After the Chargers woke up in the 4th quarter I was wondering if maybe Peyton might be praying for the game to end before it was too late. It was starting to look like the Baltimore game all over again, with defeat snatched from the jaws of victory.
Respect the equity.
I’ll be celebrating our victory with Cheese Sticks™ topped with bacon and banana peppers.
Cheesesticks? … so much for going Paleo.
On a side note, I couldn’t even call up a Papa John’s menu without entering my address (for them to sell to some other company?). I had to put in 1600 PA Avenue just to get nutritional info.
On a side note, I couldn’t even call up a Papa John’s menu without entering my address (for them to sell to some other company?).
Hey, getting Peyton to endorse their yucky pizzas isn’t free, you know?
These commercials remind me of a Simpson’s episode where Krusty is filming a Krusty Burger commercial. He takes a bite from one of his burgers and as soon as the cameras stops rolling he spits it out.
“These commercials remind me of a Simpson’s episode where Krusty is filming a Krusty Burger commercial. He takes a bite from one of his burgers and as soon as the cameras stops rolling he spits it out.”
I knew Krusty The Realtor was familiar.
In Colorado, I agree. I’m surprised P-Man owns PJ franchises. His performance in the commercials, such as they are, appear to be phoned in, and I can’t imagine the highly athletic P-Man eating this stuff himself.
His best commercial by far was his wig-and-’stache act in a Sprint commercial from 2006.
equity never tasted this delicious.
and for all of you whose teams are loosers, enjoy the ramen tonight!
I’m surprised P-Man owns PJ franchises.
I’ll bet he got them for free. And I wouldn’t be surprised if Broncos fans buy his gross pizza by the truckload, just because they’re his stores.
if you want to throw like peyton, eat papa john’s pizza
it is delicious and nutritious, and today, is 50% off for all online orders
cheese sticks ™ for dinner tonight, all this equity is making me hungry
Sorry, hoss. You won’t be getting any equity from the Superbowl… I will, after NE kicks Colorado’s butt.
And he shouldn’t be getting any Cheesesticks either. Bread — or any wheat — is at the top of the Paleo no-no list.
If I ate that pizza, I might throw like Peyton. Up.
oxide
You’ll appreciate Dr Mercola MD’s interview with Dr. Thomas Seyfield of Boston College on brain cancer cells and success with low carb/no carb diets. Also, check out Dr D’Agostino’s talk w/ Mercola on childhood epilepsy and the ketone diet management success, no drugs and seizure free. Charlie Foundation is an amazing website as well. Food is thy medicine! Otto Warburg seems to have been right. (1931 Nobel Prize in Medicine)
I love this stuff. Fascinating!
Updated January 12, 2014 7:00 PM
Are Big Banks Out of Control?
United States attorney Preet Bharara explained charges against JPMorgan Chase in the Madoff Ponzi scheme last week.
Andrew Burton/Getty Images
In March 2009, JPMorgan Chase’s “compliance function” sent a letter asking the bank’s manager for its Bernie Madoff account to certify that Madoff was complying with all laws and regulations. But Madoff had been arrested three months earlier in the all-time biggest Ponzi scheme.
That clueless letter is one indication of how the bank had turned a blind eye to the Madoff fraud for years. The deferred prosecution agreement and $2 billion in penalties that resulted, were among several scandals, in which Chase paid $20 billion in fines and other giant banks have been penalized billions for money laundering, mortgage fraud and other transgressions.
Does the lack of compliance show that some banks have gotten too big to manage properly?
to have a shot at the american dream you have to succumb to the banks ripping you off with interest. We dont need a middle man.
Mortgage And U.S. Treasury Forecast Shows Another Dramatic Downward Twist
Jan. 13, 2014 1:25 AM ET | Includes: BOND, NUV, REM, TBT, TLT
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. (More…)
This week’s implied forecast from Kamakura Corporation shows another dramatic twist in the implied forward Treasury bill curve. The forward rate forecast from Kamakura Corporation shows projected 10 year U.S. Treasury yields down 0.03% to 0.15% from last week while fixed rate mortgage yields are down by as much as 0.08%. Mortgage yields, determined by the Monday through Wednesday weekly survey of the Federal Home Loan Mortgage Corporation, lag Treasury movements simply because of the 3-day yield calculation used in the Primary Mortgage Market Survey ®.
– The 10 year U.S. Treasury yield is projected to rise from 2.97% at Thursday’s close (down 0.03% from last week) to 3.421% (down 0.06% from last week) in one year.
– The 10 year U.S. Treasury yield in ten years is forecast to reach 4.613%, 12 basis points lower than last week.
– The 15 year fixed rate mortgage rate is forecast to rise from the effective yield of 3.41% on Thursday (unchanged from last week) to 3.918% (down 0.003% from last week) in one year and 5.71% in 10 years, down 0.039% from last week.
…
Are U.S. stocks overvalued?
Goldman’s Kostin: Stocks are starting to look overvalued
January 13, 2014, 8:55 AM
Equity investors take heed: One prominent strategist thinks the S&P 500 index’s valuation is “lofty by almost any measure”.
David Kostin of Goldman Sachs writes that the current price-to-earnings multiple on the S&P 500 SPX is about as high as it can get under these current conditions, both as measured by the aggregate index (15.9 times) and the median stock (16.8 times).
After a surge higher in stocks in 2013, Kostin doesn’t see the ratio widening to 17 or 18 times, as “many investors expect”. Rather, a continued rally in stocks will hinge on profit growth.
…
time for goldman to go short and get some panic going. do they think they can actually move the market with their BS?
All we need is a catalyst and this market will see all the speculators sh@tting in their pants running for the exits.
There are very few people short that usually put a floor under the market.
maybe not with their BS but they can with their proprietary software (See court case a few years ago) and bags of money loaned to them at 0% interest.
“Are U.S. stocks overvalued?”
Not as much this afternoon as they were this morning.
Stock market live blog: Worst drop since Sept. 20 for Dow industrials
January 13, 2014, 10:09 AM
We’re covering the stock market live on Monday. You can read a wrap of pre-market actions here and after the open, a compact rundown of the stock market in Market Snapshot.
Also take a gander at the final version of our traditional stocks column, which says equities fell Monday on concerns about Friday’s jobs report and fresh taper comments.
I have full faith in janet yellen to do the right thing.
Bloomberg News
Stocks Lose Allure With Highest Valuation to Bonds Since ’11 (3)
By Callie Bost and Whitney Kisling January 13, 2014
New York Stock Exchange
Pedestrians walk through the snow past the New York Stock Exchange (NYSE) in New York on Jan. 3, 2014. Stocks fell the first three days of January, the longest stretch to start a year since 2005. Photographer: Jin Lee/Bloomberg
Rising Treasury yields and the biggest equity market rally in 16 years are leading one measure of stock valuations to the most bearish level since 2011.
Profits as a percentage of the Standard & Poor’s 500 Index’s price, known as the earnings yield, totaled 5.76 percent last week, compared with the 2.86 percent payout on 10-year Treasuries, according to data compiled by Bloomberg. At 2.9 percentage points, the gap, which narrows as equities get more expensive relative to debt, is the smallest since March 2011.
The last time spreads between bond and earnings yields were this compressed, the S&P 500 posted its biggest retreat of the bull market, falling 19 percent between April and October 2011. The index hasn’t lost 10 percent since then. Wall Street strategists have forecast the weakest share advance in almost a decade for 2014, as a reduction in Federal Reserve bond purchases pushes up Treasury yields from 1.75 percent at the end of 2012.
“We are due for a correction,” said Peter Sorrentino, who helps manage about $14.8 billion at Huntington Asset Advisors in Cincinnati and is buying options to protect against a decline in the stock market. “It’s not a question of if, but how bad.”
Stocks fell the first three days of January, the longest stretch to start a year since 2005. The S&P 500 has lost 0.3 percent so far in 2014 through last week, compared with a 0.7 percent gain for government notes, data compiled by Bank of America Merrill Lynch and Bloomberg show. Yields on 10-year Treasuries will rise more than 0.55 percentage point by the end of the year, reaching 3.43 percent, according to the average of 64 economists surveyed by Bloomberg. The S&P 500 fell 1.3 percent to 1,819.20 at 4 p.m. New York time today.
…
“The last time spreads between bond and earnings yields were this compressed, the S&P 500 posted its biggest retreat of the bull market, falling 19 percent between April and October 2011. The index hasn’t lost 10 percent since then. Wall Street strategists have forecast the weakest share advance in almost a decade for 2014, as a reduction in Federal Reserve bond purchases pushes up Treasury yields from 1.75 percent at the end of 2012.”
Interesting the bovine brains overlooked this detail, no?
Remind me again why anyone knowingly invests with these sharks.
Dinner with Goldman Sachs cost him $34 million
A tycoon accuses the banking giant of sweet-talking him into a losing currency trade
In April 2013, Oei says, Goldman Sachs bankers in Asia persuaded him to enter into a trade betting that the Brazilian real would rise against the Japanese yen.
Oei says the bank misled him about the trade, failed to disclose the full terms or seek confirmation before making it, and gave him the worst possible price. When he sought to unwind it on the next trading day, they tried to hit him with an $8 million wind-up charge. And as the dispute dragged on for several weeks, the losses spiraled to $34 million.
He believes that Goldman was secretly betting against him in the trade by going long on the real and shorting the yen. That kind of behavior has been associated with Goldman already, in the case of former trader “Fabulous” Fabrice Tourre, who helped the bank make money betting against its clients during the financial crisis.
http://www.marketwatch.com/story/dinner-with-goldman-sachs-cost-him-34-million-2014-01-13?siteid=yhoof2
“Oei”
When Oei gets to court he’ll find a Goldman replicant presiding.
Fat and Furious. The gift that keeps on giving.
http://www.vanityfair.com/online/daily/2014/01/chris-christie-sandy-commercial
The housing liars are enraged….. The tinfoil hate is seething.
Typical housing liar or debt-donkey running from reality.
http://i296.photobucket.com/albums/mm197/saihukaru/Gif%20Funny/dapdaunhanh.gif
My latest article:
http://www.marketwatch.com/story/how-to-sell-an-inherited-home-2014-01-13
“There’s the emotional aspect of getting a loved one’s home ready for sale — which likely includes clearing out his or her belongings and depersonalizing the rooms.”
These were some of Jeffrey Dahmer’s belongings and the rooms needed a lot of depersonalizing.
Multiple locks and an alarm system installed on inner(!) and outer doors
The Kitchen
The refrigerator, containing a head, facing upward from a cardboard box on the bottom shelf, blood drippings and condiments
The freezer portion of this refrigerator contained three plastic bags: two each contained a heart and the other contained a portion of muscle.
A floor-standing freezer, containing three additional heads, a bag containing a torso, and a bag containing internal organs
The Hallway Closet
Formaldehyde, ether, and chloroform - Dahmer used the formaldehyde to preserve various body parts. He attempted to use the ether to drug his victims, but found that it was not as effective as sleeping pills.
Two bleached skulls
An aluminum kettle, containing two hands and one set of male genitalia
The Bedroom
Bloodstains on the walls
A bed, with bloodstained mattress and pillowcase
A large knife - this was the knife used to attack Tracy Edwards and likely the knife used to cut Ernest Miller’s throat.
A Polaroid camera - Dahmer used a Polaroid camera to take pictures of nearly every one of his victims when both alive and dead.
A metal filing cabinet, containing three painted skulls, a complete skeleton, 74 polaroid photographs of Dahmer’s victims, and two paper bags, containing a dried scalp and another set of male genitalia - Dahmer painted most of his trophy skulls with a granite colored enamel spray paint. Dahmer hoped that if anyone saw the skulls, they would appear to be fake.
A box with a styrofoam lid, containing two skulls
A 57-gallon plastic drum filled with acid, containing three torsos in various stages of decomposition - Dahmer used this drum to store and dissolve body parts
Miscellaneous Items
Jug of Clorox bleach - used to bleach bones and skulls
Odorsorb and incense sticks - decomposing flesh created a stench in Dahmer’s apartment so bad that neighbors often complained.
Four boxes of muriatic acid - Dahmer had purchased these at Ace Hardware just days before his arrest. He used the acid to dissolve portions of dismembered corpses.
Six boxes of Soilex - Dahmer used a Soilex/water mixture to boil bones. After being boiled in the solution, flesh would wash off of the bones.
Identification cards of several of Dahmer’s victims
A 3/8″ drill, a 1/16″ drill bit, and a hypodermic needle - Dahmer drilled holes into several of his victim’s heads and injected acid in at attempt to create zombies.
A claw hammer
A handsaw - Dahmer used this saw to dismember his victims.
Pornographic videos, including Cocktales, Chippendales Tall Dark and Handsome, Rock Hard, Hard Men II, Hard Men III, Peep Show, and Tropical Heat Wave
Non-pornographic videos, including The Exorcist II, Return of the Jedi, a lecture on evolution, and an episode of The Cosby Show.
A King James Version bible
Hello HBBers.
Long time no see. I pop in now and again but haven’t seen too much new in the posts. As many of y’all know, I hung out here pretty regularly for quite a few years, biding my time and hoping to time the market.
Almost 1.5 years since we bought, and things in San Francisco getting crazier all the while. Evictions left and right, protests, many of my friends leaving the city because of the cost of housing.
Meanwhile, we love our house and with the money we didn’t spend on rent we were able to put in a hot tub, which is the best cure for insomnia and the kind of thing I always wanted when I was a renter.
Renting is great for some folks in many places, but nowadays every renter in this city is freaking out.
I was just in SF this morning and saw a fair number of cranes building new housing. Do you think this housing coming on line will calm things down at all?
Yes, the buildings are going up fast and furious. Cranes everywhere.
But many of these are high end luxury housing (rents=3K + for 1 bedrooms or 1 million + to buy) so it’s hard to say how that really helps for “affordable housing”, except for the hopeful trickle down.
The number of new units (rental AND to own) that have been built is tens of thousands less than the increase in the population.
I’ve been following these stories pretty closely - it’s out and out class warfare taking place what with people blocking google buses and protesting evictions.
Here’s one of the better articles I’ve read that sums it up:
The San Francisco Exodus from the Atlantic (Oct 2013)
http://www.theatlanticcities.com/housing/2013/10/san-francisco-exodus/7205/
In a nutshell:
- Over the past two decades, San Francisco has produced an average of 1,500 new housing units per year.
- Here are the population stats:
1990 - 723,959
2000 - 776,733
2010 - 805,235
Second densest city after NYC but there’s no way to build enough housing fast enough.
Another tech crash AND a major shaker might thin out the population a bit, although the latter might make an even bigger housing shortage.
The trickle down is what I’m thinking about.
One of the big reasons there is class warfare is that people are getting kicked out of rent controlled apartments in order so the landlord can sell for ridiculously high sales prices.
If the new condos take the price pressures off a bit, so that the attraction for landlords to convert goes down (it ain’t cheap, and it ain’t risk-free), then fewer people get kicked out.
By the way, great article about the problem with slow-growth proponents…if a place is so attractive that lots of people want to live there, slowing development will do nothing but raise prices above where they would be if the market were left to its own devices.
sfhomowner
So happy to hear from you and rejoice in your homeownership happiness. Say, we’ll swap our “addict” for your hot tub. It sounds perfect. Never get pool envy. What a pita.
16 months for us since the coe. Home Sweet Home. (warts and all)
What are your losses to date? $100k? 200k?
Bailing Out Health Insurers and Helping Obamacare
8:01 AM, Jan 13, 2014 • By JEFFREY H. ANDERSON
Robert Laszewski—a prominent consultant to health insurance companies—recently wrote in a remarkably candid blog post that, while Obamacare is almost certain to cause insurance costs to skyrocket even higher than it already has, “insurers won’t be losing a lot of sleep over it.” How can this be? Because insurance companies won’t bear the cost of their own losses—at least not more than about a quarter of them. The other three-quarters will be borne by American taxpayers.
For some reason, President Obama hasn’t talked about this particular feature of his signature legislation. Indeed, it’s bad enough that Obamacare is projected by the Congressional Budget Office to funnel $1,071,000,000,000.00 (that’s $1.071 trillion) over the next decade (2014 to 2023) from American taxpayers, through Washington, to health insurance companies. It’s even worse that Obamacare is trying to coerce Americans into buying those same insurers’ product (although there are escape routes). It’s almost unbelievable that it will also subsidize those same insurers’ losses.
http://www.weeklystandard.com/blogs/bailing-out-health-insurers-and-helping-obamacare_774167.html - -
One of the contractors I use for various projects on my multifamily just got involved in ACN. Now he is trying to convince me to com in under him, or barring that, switch my utilities over to ACN. Bottom line is it’s a multi-level marketing scheme that is basically an account reseller… in other words, a scam.
He had a bunch of projects going, including some new construction, but he is in a lull right now and he just bought a fixer/upper house. He’s probably stressing the mortgage during a slow period and is desperately searching for some extra income. I feel bad, as this guy probably dropped $500 to join ACN and from what I’ve heard, most of the “independent business associates” that sign up don’t make any ROI (of course not, it’s the people upstream making money on the sign up fees).
Sign of the times I guess. Housing is slowing. The economy is slowing. People are getting desperate and the unscrupulous are feeding off that…
Northeastern.
While it’s true many don’t get their ROI, if you learn the system, follow the training and make the presentations you may discover that it’s not a scam. You have to follow the program.
I know several young couples that have put in the work, gone full time in less than two years and who’re probably on their way to financial independence.
For me it’s a dream of going independent and maybe finding a way to “hit a home run”. If not I should be able to supplement my retirement and maybe allow it to happen sooner.
BH
Some 12,000 real estate agents in Florida responded to a “call to action”
Short-sale tax relief extended by a year
By John Hielscher
Published: Wednesday, January 2, 2013 at 1:33 p.m.
Last Modified: Wednesday, January 2, 2013 at 1:33 p.m.
Page 1 of 3
Sarasota real estate attorney Nancy Cason juggled a half-dozen short sales during Christmas week, hustling to beat a year-end deadline so homeowners could receive a substantial tax break.
“It was mass chaos last week,” Cason said. “A short sale is four times the work of a normal closing, so this was nothing short of a frenzy.”
Though threatened by the fiscal cliff, the popular tax deduction on forgiven mortgage debt was extended for another year in the tax deal Congress passed late Tuesday night. That is good news for Southwest Florida, where short sales — a transaction in which lenders allow a home to sell for less than the value of the mortgage — have played a key role in the recovery of the region’s real estate market. They accounted for a third of all residential deals in Sarasota and Manatee counties during the third quarter, according to analyst RealtyTrac Inc.
The deduction, which had been set to expire on Dec. 31, has saved some of the region’s struggling homeowners thousands of dollars over the past five years.
Because of the looming expiration, short sellers had rushed to close deals before missing out.
“It’s going to help a lot of people who were scrambling,” Roger Piro, the newly installed president of the Sarasota Association of Realtors, said of the extension. “There are many short sales and foreclosures that need to work their way through the system locally.”
Under the 2007 law, homeowners do not have to pay federal income taxes on mortgage debt forgiven by lenders on short sales, foreclosures or loan modifications.
Such debt relief was previously taxed as income. But if the Mortgage Forgiveness Debt Relief Act had gone over the cliff, homeowners would again be paying taxes on the amount written off after a short sale or on the reduced principal of a loan.
“Short sales would have come to a screeching halt, and that is counterproductive to getting the economy and real estate back up and going,” Cason said.
“It’s a major victory, especially for those who are in the process of buying right now,” said John Seebree, senior vice president of public policy at Florida Realtors. “If you had a contract on a property and it didn’t close by Dec. 31, and suddenly everything changed, that would be in a difficult position to be in.”
Piro recently handled a $450,000 short sale in which the canceled debt totaled $50,000. Not a large amount as those sales often go, he said, but the seller might have balked if he had to pay taxes on it.
“It still could deter people from wanting to go down that road,” he said.
Cason said she has handled short sales in which the seller’s forgiven debt was as high as $1 million.
“Values have gone down 40 or 50 percent, and it doesn’t matter if the house is worth a couple million or a couple hundred thousand, they are still affected by the decline in the market,” she said.
Some 12,000 real estate agents in Florida responded to a “call to action” from their trade group, contacting their congressional representatives and urging them to extend the tax deduction, Seebree said.
“That was our largest response,” he said. “This was such a critical issue that we pulled out all the stops.”
The National Association of Realtors estimated the tax savings from the exemption topped $1 billion in 2011.
http://www.heraldtribune.com/article/20130102/ARTICLE/130109955 - 82k -
http://www.reuters.com/article/2014/01/13/us-usa-healthcare-idUSBREA0C1GM20140113?feedType=RSS&feedName=topNews&utm_source=dlvr.it&utm_medium=twitter&dlvrit=992637
The real question should be about the make-up of that 24% (what percent have pre-existing conditions, what percent are getting a subsidy, etc.).
My guess is that the 24% is skewed toward unhealthy and those getting subsidized insurance, as compared to the whole population of uninsured younger folks.
A River of American Money Flows to D.C.
Main St. Agenda
by Jeffrey H. Anderson
from The Weekly Standard,
September 23, 2013
The question at the core of most of today’s debates in American politics is whether all people have an unalienable right to keep the fruits of their own labor—as the Founders believed and the Declaration of Independence (properly understood) asserts—or whether the government should funnel vast sums of money to the nation’s capital and then magnanimously redistribute it back to the tributaries. Well, the stats are in, and it seems that neither of these two notions is really being fulfilled. To be sure, Americans’ money is flowing to the nation’s capital. But it’s not flowing back.
Indeed, the metropolitan area of Washington, D.C., a city with little identifiable industrial output, dominates the Census Bureau’s newly updated list of America’s wealthiest counties. Here are some highlights from that list:
Based on the median family income in 2012, the wealthiest county in America—by far—is Arlington Co., Va., located just across the Potomac River from D.C. In fact, Arlington’s median family income ($137,216) is more than $10,000 higher than that of any other county in the United States.
The county with the 2nd-highest median family income ($127,192) is Loudoun Co., Va., also located in the D.C. metro area (according to the White House Office of Management and Budget’s list of metropolitan areas). The 3rd-highest tally ($125,162) belongs to Howard Co., Md., which technically isn’t part of the D.C. metro area but is located between D.C. and Baltimore and is home to many people who commute to D.C. The 4th-highest tally ($124,831) belongs to Fairfax Co., Va., yet another county located in the D.C. metro area.
In other words, in a nation that ranges from the Pacific to the Atlantic and boasts such grand and affluent cities as New York, San Francisco, Los Angeles, Chicago, Dallas, San Diego, Boston, and Seattle (among others), the four wealthiest counties in the land are all within commuting distance of the capital.
In the fifth spot, the New York metro area finally makes the list, as that position is held by Hunterdon Co., N.J. ($123,454). California finally makes the list in the sixth spot, which is held by Marin Co. ($115,513), located just across the Golden Gate from San Francisco. The seventh spot, however, is filled by Montgomery Co., Md. ($113,588), which borders D.C.
Thus, the D.C. metro area (population: 6 million) claims 4 of the top 7 spots, while the nation’s 380 other metro areas (total population: 308 million) combine to claim just 3. Is this what President Obama means by “fairness”?
Looking just a bit further down the list, there are only 26 counties where the median family income is over $100,000. Texas, Florida, and Illinois are among the 40 states that do not have a single $100,000 county. California has only 2. But the states bordering D.C.—Virginia and Maryland—have 7 and 4, respectively; and not one of those is in southern Virginia or northern Maryland.
Below are the metro areas that, based on median family income, have the most $100,000 counties.
Metro areas with the most $100,000 counties:
1. Washington, D.C., 9
2. New York, N.Y., 7
3. (tie) Baltimore, Md., 2 (both centered within 40 miles of D.C.)
3. (tie) Boston, Mass., 2
5. (tie) Bridgeport, Conn.; Denver, Colo.; Nashville, Tenn.; Philadelphia, Pa.; San Francisco, Calif.; San Jose, Calif., 1
Note that the metro areas of Chicago, San Diego, Seattle, Miami, Dallas, Houston, and even Los Angeles don’t include a single $100,000 county among them, while the D.C. metro area has 9. Note also that New York’s metro area (population: 20 million) is more than three times the size of D.C.’s, yet the former has fewer $100,000 counties than the latter.
The eye-opening affluence of D.C.’s surrounding areas might make one wonder whether all of that city’s wealth has merely moved out of the city proper. Alas, this clearly hasn’t been the case. In addition to D.C.’s extraordinarily affluent suburbs, the median family income in the city itself ($82,268) is higher than the median family income in 46 of the 50 states.
The seemingly inescapable conclusion is that a great deal of Americans’ hard-earned money is flowing to the nation’s capital and simply staying there. Decades of efforts to centralize and consolidate money and power in D.C. have, not surprisingly, made D.C. an unparalleled center of money and power.
About 175 years ago, Alexis de Tocqueville, referring to the unfortunate mindset of so many of “the ambitious and capable” in our society, wrote, “It is a waste of one’s time to want to prove to them that extreme centralization can be harmful to the state, since they centralize for themselves.”
The stats suggest he was right.
Goldilocks year?
http://www.marketwatch.com/story/gold-extends-recent-gains-as-data-mounts-2014-01-13
Nyuk Nyuk Nyuk! This one was posted early this morning before today’s runup:
http://finance.yahoo.com/blogs/breakout/here-s-why-gold-s-drop-isn-t-done-yet-215654437.html
LOLZ
Junior miners ETF up 5.5% today (GDXJ)
Big sister ETF up 2.91% today (GDX)
Gold itself? Meh!
All aboard the train to safety! Choo Choo!
mining, Treasuries, municipal bonds. Loaded all up!
It was a good day to be long flight-to-quality assets.
Otherwise not such a good day…
As nice as deliberately turning down your furnace and staying under a warm blanket and having a sleeping cap to protect the chill on your head. Then oatmeal and coffee after a good early morning workout…safe assets.
Read This, Spike That | MONDAY, JANUARY 13, 2014
What the Future Holds for Stocks and Gold
By JOHN KIMELMAN | MORE ARTICLES BY AUTHOR
As indexes suffered a big one-day drop Monday, several articles discuss the changing character of this market.
On another down day for stocks, it’s clear that the mood of 2014’s stock market is quite different than 2013’s.
Several articles in recent days seem to have anticipated Monday’s 179-point drop in the Dow Jones Industrial Average, a 1.09% decline which represents the largest one-day percentage drop in the index since last September.
The Dow, after generating a 26.5% return last year, is down almost 2% in the new year.
A Fortune article by veteran writer Shawn Tully points to a “dim future for stock prices.”
His argument is simple but powerful. Share-price growth in the past two years have far exceeded earnings growth, which in turn has pushed up price-to-earnings valuations to unsustainable levels.
“The explosion in prices relative to earnings has driven the S&P price-to-earnings ratio from 14.5 to 18.9,” wrote Tully. “The average P/E since 1928 stands at 16, which means that investors’ enthusiasm for stocks has transformed a bargain into a relative extravagance signaling danger ahead.
Added Tully, “Even the bravest bulls wouldn’t argue prices will continue to far outpace the earnings that must eventually justify those prices.”
…
“Since 2011, I have been a very dormant gold trader. Why? Because the price and technical indicators topped out and confirmed a massive consolidation or bear market was in motion,” Vermeulen writes. “With gold and gold stocks about to start a new bull market, it is time to get back to trading gold and gold stocks.”
A small position in junior miners can go a long way up from here. I like my amount of shares in GDXJ but will buy more GDX - Large miners. And will be buying far more physical bullion this spring! (”clink…clink…clink…clink - how many ounces was that? - don’t matter, just keep stacking)
Jokes about killing Californians totally kill it at a Texas rally
January 13, 2014, 9:04 PM
You know what makes for a fantastic icebreaker at a party in Texas? Jokes about killing Californians in their cars. “You need to open fire on these vehicles immediately. Immediately. Not with 9 millimeters or AR rounds, you need to put mortars on those things, you cannot take any chances.” Get it?
That pearl came from conservative blogger and regular Fox News guest Bill Whittle, and it drew some hearty laughter from the crowd at a rally for Sen. Ted Cruz over the weekend. The only things missing from his performance at this self-described “celebration of freedom and liberty” were a few spittoons and some celebratory gun fire.
Whittle was talking about how Californians are all descending upon Texas in droves looking for work. “They will change it and mess it up,” he said (h/t Raw Story). “Don’t let that happen. Just, just start shooting.”
…
Whew!
The secret is to have Arizona plate (singular because it is only required on the back). That helped my sister to move to Oregon without getting “pinstriped.”
Californians do not hate people from other states being here (why? You and I know it is because Californians want the revenue).
Nadya Suleman, the woman famously known as “Octomom,” was charged Monday with welfare fraud after failing to report nearly $30,000 in earnings, the Los Angeles County District Attorney’s Office said.
http://www.cbsnews.com/news/octomom-nadya-suleman-charged-with-welfare-fraud/
Japanese stocks tumble as yen hits four-week high
By Dominic Lau
TOKYO Tue Jan 14, 2014 12:46am EST
A man walks against strong wind and rain in front of a stock quotation board outside a brokerage in Tokyo October 2, 2013.
REUTERS-Toru Hanai
A pedestrian holding an umbrella walks past an electronic board displaying graphs of the recenent movement of Japan’s Nikkei average outside a brokerage in Tokyo December 19, 2013. REUTERS-Yuya Shino
A pedestrian walks past an electronic board displaying various countries’ share prices outside a brokerage in Tokyo December 19, 2013. REUTERS-Yuya Shino
(Reuters) - Asian shares came under pressure on Tuesday, with Japanese stocks tumbling more than 2 percent as the yen hit a four-week high against the dollar after last week’s surprisingly weak jobs report raised concerns about the U.S. growth outlook.
Tokyo’s Nikkei benchmark shed 2.1 percent, hitting a one-month low as investors there caught up to the fallout from the nonfarm payroll report following Monday’s public holiday in Japan.
The Nikkei, like Wall Street, has got off to a slow start to the year after a stellar 2013, with a 57 percent jump.
“Given the extent of positions in the market and continued softness in U.S. yields this week, USD/JPY could continue to test lower near-term,” analysts at BNP Paribas wrote in a note, adding they expected to see buying interest ahead of 101.50.
While the weak U.S. jobs report raised doubts about how quickly the Federal Reserve would scale back its stimulus, it also stoked concerns about the pace of recovery in the world’s largest economy.
The announcement of a $13.6 billion deal by Japan’s Suntory Holdings Ltd to buy U.S. spirits company Beam Inc may offer some support to the dollar versus the yen.
Dollar/yen was one of the strongest-performing major currency pairs last year, and many hedge funds have been betting the trend will continue as the Federal Reserve cuts back its huge bond-buying program while the Bank of Japan remains committed to providing stimulus.
Japanese investors were likely to seek higher returns overseas as the yield differential between U.S. government bonds and Japanese government debt widened, further boosting the yen weakness if their investments were not hedged.
“The gradual widening in the rate differential between the U.S. and Japan should also encourage Japanese investors to invest in foreign bonds,” Nomura Securities said in a note.
“The expected gradual rise in global yields, while Japanese yields are expected to remain relatively low thanks to the BOJ’s JGB investment, should also influence foreign investment in the Japanese market.”
YIELD DIFFERENTIAL
Yields on 10-year Japanese government bonds eased 3 basis points to 0.665 percent, a near one-month low, while those on benchmark U.S. bonds were traded at 2.841 percent.
…
Stocks, no longer cheap, hit the skids
Adam Shell, USA TODAY 9:05 p.m. EST January 13, 2014
(Photo: Paul Giamou / Aurora Photos)
NEW YORK — Goldman Sachs reminded Wall Street that stocks aren’t cheap anymore. Despite the fact that information wasn’t exactly a newsflash, investors reacted badly to the suggestion that stocks may be a tad expensive.
It may be just a coincidence, but the Dow Jones industrial average suffered a drop of nearly 180 points on Monday, its biggest point drop since late September, on the same day the banking giant said its historical research shows the broad U.S. stock market’s current valuation is “lofty by almost any measure.”
Goldman said the market is trading “close to fair value” and that further gains in the stock market will likely be driven by the “trajectory of corporate profits,” not further expansion of the price-to-earnings ratio. Currently, the S&P 500 is trading at 15.9 times it expected earnings over the next 12 months.
The white-shoe bank refuted bulls’ hope that P-E multiples would expand to 17 or 18 times earnings, fueling another double-digit year of gains for stocks.
Goldman questioned the notion that the long-term average P-E of 15 makes further expansion doable. They say it’s not probable. Goldman noted that the current P-E is higher than its 5- , 10- and 35-year average.
More alarming: Goldman said the only time the forward 12-month P-E was 17 or more since 1976 was during the “1997-2000 tech bubble and a brief four-month period in 2003-04.” The takeaway: “P-E expansion will be difficult to achieve.”
…
Jan. 14, 2014, 12:02 a.m. EST
How the Fed saved Singapore
Commentary: Recent action gives country time to weather property bubble
By J.J. Zhang
A worker assembles a God of Fortune statue Sunday as part of Chinese New Year decorations along the skyline of Singapore.
SINGAPORE (MarketWatch) — The Fed may have saved Singapore. Or at least postponed the apocalypse.
It’s been no secret Singapore property prices have climbed dramatically recently, jumping almost 100% in the last four years. The median private condominium now sells for well over 1 million Singapore dollars, approximately $800,000 for a 1,000 square-foot property.
There are a number of reasons for the rapidly appreciating market including a high influx of foreigners — especially the rich from mainland China — lack of available land, relatively high incomes and a cultural preference for owning land.
However, rising prices has the Singapore government worried. While Singapore has the largest percentage of millionaires in the world — almost one in every six households as measured by disposable private wealth — many are not well off enough to afford the new normal in housing.
About 80% or more of Singaporeans live in government-developed housing lovingly called HDBs after the Housing & Development Board, which oversees it, and the median gross monthly income as of 2012 was only $2,400, comparable to the U.S. individual median monthly income of approximately $2,350.
The rapid rise in property prices had several effects, one of which predictably was a rise in property as an investment or as a speculative tool. But with such high prices, many buyers borrowed unprecedented amounts of money to finance these purchases. In a rising property market, these bets paid off handsomely, similar to what happened in the U.S. during the heady days of the now burst property bubble.
To cool off the market frothiness, the Singapore government instituted rule after rule after rule to stop the price appreciation. These measures included stamp duties — essentially a house-buying tax — of 18% for foreigners, monthly mortgage payments that can’t exceed 30% of monthly incomes, and minimum 20% down payments for buyers or 40% if the mortgage will be held past 65 years retirement age. Those down payments are not inconsequential considering that translates to 400,000 Singapore dollars on hand for a million-dollar home.
These measures have finally succeeded in cooling off the market as private property prices have leveled and started to drop, over 2% in the last few months. However as many people in the U.S. experienced, drops in prices create their own set of problems — underwater mortgages and suffocating levels of debt. This is an issue for many Singaporean’s retirement planning as a common practice is to cash out their government-sponsored retirement plan to buy a home.
…
Got recoupled tumbling equities?
I’m just waking up from my holiday hibernation. What’s going on, fellas?
ft dot com
Global Market Overview
January 14, 2014 3:44 am
Slide in US equities unnerves Asia
By Patrick McGee in Hong Kong
Tuesday 03:00 GMT. Wall Street’s steepest decline since November reverberated through Asia, with Japanese stocks leading the way downward.
In Tokyo the Nikkei 225 average was down 2.1 per cent, on pace for its biggest drop since October 25, as Japanese markets reopened after Monday’s public holiday.
Hong Kong’s Hang Seng slid 0.5 per cent, South Korea’s Kospi Composite fell 0.3 per cent and the Shanghai Composite slipped 0.1 per cent.
There was no clear catalyst driving the global sell-off. The S&P 500 fell by 1.3 per cent in New York as traders digested Friday’s weak US jobs report, which has caused some investors to question valuations and the 2014 outlook.
The CBOE Vix index of implied US equity volatility – known as Wall Street’s “fear gauge” – rose 11 per cent.
“Worries ahead of fourth quarter earnings releases and perhaps concerns about the economy in the wake of the disappointing US December jobs report weighed on US equities overnight,” wrote Crédit Agricole in a note to clients.
Japan’s market is particularly vulnerable because in risk-averse sessions investors turn to the yen, pushing up its value and dragging down export stocks.
The yen gained 1.1 per cent overnight to 103 per US dollar, a three-week high, but reversed course on Tuesday, weakening 0.4 per cent after Japan recorded its largest monthly current account gap on record.
The November figures showed the current account gap was Y593bn, or more than four times larger than the Y128bn deficit a month earlier.
As a broad measure of a country’s trade with the rest of the world, the large current account deficit indicates exports are not surging in spite of efforts to revitalise Japan’s economy.
The yen weakened by a fifth against the dollar last year, driving up the cost of imports. Purchases from overseas are likely to keep rising in early 2014, ahead of a planned increase in national consumption tax in April from 5 per cent to 8 per cent.
Analysts at Daiwa Securities said Japan’s trade deficit was likely to help push the yen toward 108 per dollar over the next few months, especially because market participants anticipate further stimulus efforts from the Bank of Japan.
“We think the yen will remain weak over the long term, reflecting Japan’s ongoing trade deficit,” Daiwa analysts wrote to clients. “In contrast, the US has narrowed its trade deficit on the back of the shale gas revolution, indicating a strong dollar versus the yen over the long term.”
Meanwhile, aversion to risk helped the Japanese government bond market. The benchmark 10-year JGB yield dropped 3 basis points to 0.67 per cent, its lowest since December 19.
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Asia Markets live blog: a running account of regional stocks and other news
January 13, 2014, 6:45 PM
Reuters
Welcome to the Asia Markets live blog! We’ll be offering readers a running account of what the region’s stock markets and other asset classes are doing, as well as what it means for the global financial picture.
10:13 pm
Nikkei Average takes a beating
by Mike Kitchen
Japan’s Nikkei Average returns from a three-day weekend to end 3.1% lower — its worst loss pointwise since August, according to Dow Jones Newswires. The reasons are various, as noted in the early posts on this blog.
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ft dot com
Last updated: January 14, 2014 4:54 am
US Congress agrees $1tn spending deal
By Robin Harding in Washington
The US Congress has agreed a broad spending deal for the first time since 2009, but it has left the International Monetary Fund in disarray by refusing to fund its latest capital increase.
The $1.012tn package lays out how the US will spend the budget agreed after tense negotiations in December. It means an update to US spending priorities after years of “continuing resolutions” that keep the government open but cannot reallocate funds.
A full appropriations bill marks another step in the return to regular budgeting in Washington and will prevent another government shutdown by funding the government until September.
But cuts to many spending programmes – and the refusal to ratify quota reform at the IMF – show how a tight budget will restrict President Barack Obama’s room to manoeuvre for the rest of his term.
“We are pleased to have come to a fair, bipartisan agreement on funding the government for 2014,” said the Democratic and Republican leaders of the House and Senate appropriations committees in a joint statement on Monday evening.
“Although our differences were many and our deadline short, we were able to a draft a solid piece of legislation that meets the guidelines of the Ryan-Murray deal, keeps the government open, and eliminates the uncertainty and economic instability of stopgap governing.”
The deal matches the spending levels agreed by Republican congressman Paul Ryan and Democratic senator Patty Murray last December but reverses a politically toxic cut to cost-of-living increases in the pensions of disabled military veterans.
But Republicans in the House refused Mr Obama’s pleas to pass the IMF’s 2010 quota reform. There is now no obvious way to do so until next year’s appropriations process and the reform cannot go into effect until the US ratifies it.
It leaves governance of the IMF in limbo with European countries still massively over-represented and no way to increase the voting power of developing countries. That threatens the IMF’s legitimacy and gives foreign countries a diplomatic stick with which to beat the US Treasury.
IMF managing director Christine Lagarde expressed disappointment that the reform was not agreed.
“The world is evolving, and we are fully committed to helping our membership finalise what it agreed in 2010 is needed to ensure that the Fund keeps pace with global change and helps meet emerging challenges,” said Ms Lagarde. “We understand that the US administration will continue to work on securing the necessary legislative authorisation, and we are hopeful that this will happen”.
The 2010 reform would double the IMF’s quota – in effect its equity capital – to $720bn; shift six percentage points of total quota to developing countries; and move two of the 24 IMF directorships from European to developing countries. Existing loans to the IMF would become permanent capital so the US does not have to commit new money.
Another quota reform is supposed to be agreed this year but there is less chance of that when the last one has not been implemented.
Elsewhere, the spending bill shows the difficult choices caused by tight caps on spending. Military personnel get a 1 per cent pay increase but the defence R&D budget is cut by $6.9bn from 2013 to $63bn this year. There is a small absolute cut for physical sciences in the National Science Foundation but the National Institutes of Health won a $1bn increase to $29.9bn.
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