The Housing Bubble

Not to worry. This is merely a shock, not a panic.

Record cash leaves emerging market ETFs on lira drop
More than $7 billion flowed from ETFs investing in developing-nation assets in January, Bloomberg data shows
Lu Wang
Record cash leaves emerging market ETFs on lira drop
Investors accelerated redemptions after data showed Chinese manufacturing contracted and Argentina’s unexpected devaluation of its peso dented confidence in Latin America. Photo: Reuters

New York: Investors are pulling money from exchange-traded funds (ETFs) that track emerging markets at the fastest rate on record, as China’s slowing growth and cuts to central-bank stimulus sink currencies from Turkey to Brazil.

More than $7 billion flowed from ETFs investing in developing-nation assets in January, the most since the securities were created, data compiled by Bloomberg show. The iShares MSCI Emerging Markets ETF has seen its assets shrink by 11%, while the Vanguard FTSE Emerging Markets ETF is poised for the biggest monthly redemption since the fund was started in 2005. The WisdomTree Emerging Markets Local Debt Fund is on track for an eighth straight month of withdrawals.

Investors accelerated redemptions after data showed Chinese manufacturing contracted and Argentina’s unexpected devaluation of its peso dented confidence in Latin America. Surprise rate increases by central banks in Turkey and South Africa failed to boost their currencies, while the US Federal Reserve opted to press on with reductions to its monetary stimulus.

A lot of speculative money has been circulating in the emerging markets and the party seems to be over, at least for now, said Howard Ward, the chief investment officer for growth equity at Rye, New York-based Gamco Investors Inc., which oversees about $40 billion. There is a growing lack of confidence in the economic policies of many emerging markets at a time when growth is slowing and inflation is a real problem.

Cheap money

Emerging economies have benefited from cheap money as three rounds of Fed bond buying pushed capital into their borders in search of higher returns. The central bank began paring the purchases by $10 billion to $75 billion this month and announced on Wednesday plans to reduce the amount by another $10 billion.

The MSCI Emerging Markets Index of equities is off to the worst start to a year since 2008, with about $468 billion erased from stocks this year. Turkey and South Africa followed counterparts from Brazil to India in tightening monetary policy as exchange rates for the lira and the ruble tumbled to record lows.

Withdrawals from the iShares fund and the Vanguard ETF, the largest such products by assets for emerging markets, totalled $1.9 billion on 27 January, the biggest one-day redemption since 2005, data compiled by Bloomberg show. About $58 million has been withdrawn from the WisdomTree debt fund this month, bringing the total redemption since June to $752 million.

A ‘shock’

“Obviously that is a shock, and people are panicking much more than we thought,” Julian Rimmer, a broker at London-based CF Global Trading UK, said in an interview. “And then you realize, maybe this is a crisis.”
…

Time to jump to emerging market shares? Maybe not
Date January 30, 2014 - 4:47PM
Sally Rose

Retail investors attracted by discounted emerging market equity valuations should be wary and instead consider investing in locally listed stocks that are poised to benefit from growth in Asia, wealth management experts say.

After a sharp January sell-off emerging market equities appear to be trading at bargain prices creating buying opportunities for institutional and sophisticated investors.

The MSCI Emerging Market shares Index has declined four months in a row and is down 6.6 per cent over January.

Over the past week equity markets in Argentina, Turkey and India moved lower after central banks in those nations instigated dramatic interest rates rises to stabilise their currencies and rein in inflation worries.

Before the local market opened on Thursday, the United Stated Federal Reserve announced it will continue to reduce its monthly stimulus by $US10 billion per month to $US65 billion per month from February. The Fed’s unprecedented quantitative easing program has been supporting a global economic over the past few years.

Leading financial advisers are currently advising wealthy clients with a risk appetite on the best strategies to increase their exposure to emerging market shares over the coming months, but warn average retail investors to remain cautious.

“Opportunities will arise in emerging markets, potentially during the second half of 2014 calendar year, but we remain cautious at this early stage while equity market and currency market volatility plays out,” Macquarie Private Wealth division director Martin Lakos said.

NAB Private Wealth investment strategist Nick Ryder said emerging market equities look cheap but are still too risky. “Investors need to see how the US Federal Reserve’s tapering plays out over next six months before reconsidering their asset allocation,” he said.

Mercer Investments financial adviser George Mileski agrees emerging markets remain too risky for most retail investors, but said “for those clients with significant surplus income that they can afford to invest in high risk options the current volatility does present some good opportunities”.
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Asia stocks battered by emerging market fears
By Charles Riley @CRrileyCNN
January 30, 2014: 1:28 AM ET
HONG KONG (CNNMoney)
Asia stocks took a sharp dive Thursday as policymakers scrambled to address emerging market problem areas around the world.

Japan’s Nikkei dropped 2.5%, while Hong Kong’s Hang Seng shed 0.5% and Australia ASX All Ordinaries lost 0.8%.

The Shanghai Composite, which often diverges from other Asian markets, advanced 0.6%.

Investors have been rattled in recent weeks by growing fragility in Turkey, India, Brazil, Indonesia and South Africa as the Federal Reserve rolls back the bond-buying program that has supported growth in emerging markets. Weakness in China’s all-important manufacturing sector has only added to worries.

Emerging market currencies have suffered a broad decline, and even drastic efforts to control the situation appear to be falling short.

On Tuesday, Turkey’s central bank increased its key overnight lending rate to 12% from 7.75%.The Turkish lira fell further Wednesday.

In addition to Turkey, India and South Africa have raised rates this week to stabilize shaky currencies. The Argentinian peso has been in free fall since Argentina’s government moved to devalue the currency last week.
…

Markets
Emerging Markets Selloff Spreads
Turkey, South Africa Currencies Experience Fresh Declines
By Nicole Hong and Prabha Natarajan
Jan. 29, 2014 9:55 a.m. ET

Turkey’s central bank increased its key interest rate Tuesday in an effort to support the lira. The lira on Wednesday fell against the dollar. A currency-exchange business advertises foreign-exchange rates to passersby in Istanbul. Associated Press

Worries about emerging markets rattled investors anew, causing fresh declines in the currencies of Turkey and South Africa and pushing the U.S. stock market lower.

The Dow Jones Industrial Average recently shed 1% to 15770. Gold futures, meanwhile, rose 1.3% to $1,266.40.

The declines were fueled by concerns that efforts by emerging-market central banks to tighten monetary policy won’t be enough to protect their economies against an exit of investor money.

South Africa’s central bank raised its key interest rate Wednesday by 50 basis points to 5.5%, which sparked a brief rally in the South African rand that quickly reversed. South Africa’s decision follows rate increases in Turkey and India on Tuesday. Turkey was particularly aggressive, raising its benchmark one-week lending rate for banks to 10% from 4.5%.

Although higher rates are supposed to entice investors to continue investing in emerging-market currencies, analysts said the toll the higher interest rates may take on the economic growth of those nations may be too high.

“It doesn’t look like investors care if local rates are going up,” said Adam Myers, senior currency strategist at Crédit Agricole. “They just want to get out of emerging markets.”
…

In retrospect, it appears that BRICs can be shat.

More emerging market jitters
Midnight run
Jan 29th 2014, 9:16 by P.F. | MUMBAI

“MONEY no longer had any value in Istanbul,” laments a character in a tale by Orhan Pamuk, the Nobel-prize-winning Turkish novelist. The story is set in the 16th century. But the Turks have not stopped worrying about their money. Hence the latest act in the emerging markets drama. At an emergency meeting in Ankara at midnight late on Tuesday, January 28th, Turkey’s central bank abandoned its policy and jacked interest rates through the roof. The lira had fallen 16% against the dollar since the start of December, making it among the world’s worst-hit currencies, along with those of Argentina and South Africa.

On Monday, January 27th, the boss of Brazil’s central bank, Alexandre Tombini, predicted that the “vacuum cleaner” of rising interest rates in the rich world would force emerging economies to follow suit. A few hours before the Turkish move the Reserve Bank of India (RBI) unexpectedly raised interest rates. By January 29th South Africa had joined the gang, boosting its policy rate. After several years of easy money and booming growth, the emerging world is in struggling. Countries that have been complacent are being picked off one-by-one by markets, even as they scramble to defend themselves.

High on the complacency roster is Turkey. A corruption scandal has engulfed Recep Tayyip Erdogan, the prime minister, who came to power in the aftermath of the last big financial crisis in 2001. The central bank has also pursued a fiddly approach to monetary policy, with multiple benchmark rates. The end result has been very loose policy. Its one-week repo rate (the closest thing it has to a policy rate) stood at 4.5%, and its average lending rate was about 7%. Both were below the inflation rate of 7.4%. Lax policy stokes too much demand, sucking in imports and widening the current-account gap. It also means the real returns investors get are too low to persuade them to own liras.

Many believe that Mr Erdogan, who is prone to attacking the “interest-rate lobby”, has bullied the central bank, which is not fully independent. It had tried to defend the currency by intervening in the foreign-exchange markets—it has blown about $10 billion in the last two months, or about a fifth of its net foreign reserves. As its ammunition runs dangerously low, it has switched weapons. At the midnight meeting it more than doubled the one-week repo rate, to 10%. Its average lending rate could head into the teens.

The RBI’s change of stance is more dignified, but one still hears echoes of Turkey. Its decision to raise its main policy rate from 7.75% to 8% has been presented by Raghuram Rajan, its new boss, as part of a new plan to shift the RBI towards an orthodox inflation-targeting regime, away from the current ad hoc approach. But the rout in financial markets has no doubt played a role too. By most yardsticks Indian rates are still too low—consumer-price inflation is running at 10%. India has managed to control its gaping current-account deficit in the past few months. But it is still vulnerable.

That broad point—that policy is too lax—is true across much of the emerging world. Until it raised rates from 5% to 5.5% on 29th January, South Africa’s policy rate was below inflation. Indonesia is in the same boat, although its inflation jumped after a welcome cut in fuel subsidies. The currency depreciations of the past two months could push up local prices further, widening the gap. Mr Tombini’s prediction, of a wave of interest rate rises across the emerging world, looks right. America’s Federal Reserve is expected to normalise policy very gradually—at its meeting today, January 29th, it is forecast to make only modest cuts to the pace of its bond purchases. But quantitative easing is still an experiment; no one knows how it will end. If the Fed moves faster, emerging economies will have only an instant to adjust from their reclining position to a sprint.
…

Emerging markets
Black Wednesday in Ankara?
Jan 29th 2014, 15:59 by Buttonwood

THE rot has not been stopped. Last week, it seemed as if the Turkish authorities were in denial. Inflation was too high, the current account deficit was too wide but the central bank failed to push up interest rates; the lira was sinking. But the bank acted decisively last night, pushing the rate on 7-day repos to 10% (from a theoretical 5.25%) and overnight rates by more than four percentage points. The initial reaction was positive, with the lira rebounding and Asian equity markets moving higher.

But the initial reaction was short-lived and the Turkish lira is now lower than it was before the move. My mind is inevitably drawn back to Black Wednesday (September 16, 1992), when the British authorities raised rates by five percentage points in a matter of hours in a doomed effort to keep the pound within the Exchange Rate Mechanism. I was in a bank dealing room when the second rate rise was announced and was a bit surprised to see equity markets rally; the explanation from dealers was that the policy was so self-evidently bad for the economy that it would never be sustained. Their cynicism was right; by the end of the day, the rate rise was cancelled and Britain dropped out of the ERM. The reputation of the then Conservative government did not recover but the economy did; some dubbed the day “White Wednesday” in consequence.
…

Silver lining: U.S. markets, especially housing, are fully decoupled from EMs. So this little EM kerfuffle will quickly die down, and U.S. homeowners will be able to continue tapping into their accumulated home equity gains without fail.

ft dot com
Last updated: January 29, 2014 7:55 pm
Sell-off in EM currencies continues
By Jonathan Wheatley and Delphine Strauss
South African Rand Notes And Coins©Bloomberg

The sell-off in emerging market currencies intensified on Wednesday despite a string of surprise rate rises by central banks as investors warned policy makers would need to take tougher action to restore confidence.

The rally that followed the dramatic midnight rate hikes by Turkey’s central bank fizzled out as analysts said monetary policy had not been tightened as much as initially thought. South Africa’s central bank also shocked markets by raising rates – but the rand continued to plunge after policy makers presented it as a one-off move that would not change its overall stance on inflation.

Turkey’s lira swung sharply and ended the day at TL2.2445 to the dollar, little changed from the level it reached before the rate rise. The South African rand fell around 2 per cent to R11.29 against the dollar in volatile trade, despite the 50 basis point increase in the central bank’s base rate to 5.5 per cent.

Investors signalled they wanted to see more aggressive and sustained action from central banks before they regained their appetite for emerging markets assets. Despite concerns over the impact of a Chinese slowdown while the US Federal Reserve is scaling back its stimulus, real interest rates remain negative in many emerging markets.

“It is possible that investors fear that the emerging markets central banks have fired their last shot, and will be unable to follow through with more tightening,” wrote Steve Englander, strategist at Citibank. “However much the Fed insists that other countries are not its table, the evidence of the last two days is that the Fed is the only waiter in the room.”
…

ft dot com
January 16, 2014 6:31 pm
Storms gather over emerging markets
Fear of taper turmoil should lead to structural reforms

Since the financial crisis, emerging markets have enjoyed some indirect benefit from the sluggish recovery of the developed world. The unprecedented stimulus unleashed by the largest central banks has depressed yields on safe assets, pushing investors to search for higher rates in ever more exotic locations. Between 2010 and 2013, private capital inflows to developing countries jumped to about 6 per cent of their combined gross domestic product.

This bonanza of funds is likely to slow down this year. The decision by the US Federal Reserve to taper its $85bn-a-month asset purchases will push up interest rates in the rich world, leading asset managers in the City of London and on Wall Street to rebalance their portfolios towards securities that are closer to home. While the prolonged monetary largesse by the European Central Bank and the Bank of Japan will reduce this exodus, companies and governments in emerging markets are expected to face higher borrowing costs. When the Fed threatened to begin unwinding quantitative easing last May, spreads on sovereign bonds of the likes of India and Brazil rose by 80 basis points in four months.

The key question for policy makers in low- and middle-income countries is just how sudden the “great reversal” will be. A report by the World Bank out this week offers ground for optimism. The World Bank predicts that the transition to higher interest rates in the rich world is likely to be smooth. Between 2013 and 2016, the slowdown in capital inflows to all emerging markets is predicted to amount to a mere 0.6 per cent of their combined national income. Indeed, the relatively quiet market reaction to the December taper seems to vindicate this optimism.
…

ft dot com
Global Market Overview
Last updated: January 29, 2014 9:31 pm
Wall St falls amid EM currency concerns
By Dave Shellock

Wednesday 21:15 GMT. A fresh wave of turbulence swept through global markets as participants digested further efforts by emerging market central banks to stem currency losses and the Federal Reserve’s decision to continue scaling back its stimulus programme.

The US central bank said it would reduce its monthly asset purchases by another $10bn to $65bn, split evenly between Treasury bonds and mortgage-backed securities, as had been widely expected.

The Fed made no reference to recent market turmoil, which has seen global equities slide amid intensifying pressure on EM currencies.

“That isn’t really a surprise,” said Paul Ashworth at Capital Economics. “Even after the drop back over the past couple of weeks, the S&P 500 stock index is still up by more than 25 per cent over the past 12 months.

“The US has even benefited from the increase in safe haven flows, which has pushed the 10-year Treasury yield down to a three-month low.”
…

Bonds Rally as Focus Shifts to Emerging Markets
Published January 29, 2014
Reuters

U.S. Treasuries prices rose on Wednesday, with benchmark yields hitting two-month lows after the U.S. Federal Reserve’s expected decision to trim its asset purchases as investors retrained their focus on weakness in emerging market economies.

The Fed announced a further $10 billion cut in its monthly bond purchases in a statement after its two-day policy meeting, reducing its monthly bond-buying to $65 billion per month starting in February.

“The FOMC decision to taper came in as expected, so investors returned to the recent focus, which is the risk-off move,” said Dion Chu, Treasury trader at Jefferies & Co. In New York.

In December, the Fed shrank its monthly purchases of Treasuries and mortgage-backed securities by $10 billion to $75 billion.

Weakness in emerging markets returned to investors’ minds after the Fed statement, driving safe-haven bids for Treasuries. Turkey’s interest rate hike during a midnight policy meeting to defend its battered lira currency did little to calm fears.

“I would be very hesitant to say that the worries in the emerging market economies have now dissipated,” said Heather Loomis, West Coast director of fixed income at JP Morgan Private Bank in San Francisco.

Treasuries prices rose earlier in the day after investors sold riskier emerging market assets and bought safe-haven bonds in anticipation of a further Fed pullback.

A reduction in the Fed’s bond-buying removes support from emerging market assets, which have benefited from investors’ greater risk appetite in the face of low U.S. interest rates.

Treasury prices also rose despite incoming supply. The U.S. Treasury Department debuted $15 billion in two-year floating-rate notes to strong demand on Wednesday, and will sell $35 billion in five-year notes and $29 billion in seven-year debt on Thursday.

Benchmark 10-year Treasury notes were last up 17/32 in price to yield 2.69 percent. The yield hit a session low of 2.66 percent, the lowest in over two months. Bond yields move inversely to their prices.

The 30-year Treasury bond was last up 26/32 in price to yield 3.63 percent. The yield touched a session low of 3.61 percent, its lowest since late October.
…

The Opinion Pages|Editorial
Argentina on the Brink
By THE EDITORIAL BOARD
JAN. 28, 2014

More than a decade after it defaulted on its foreign debts, Argentina is again facing a financial crisis caused largely by misguided government policies.

The administration of President Cristina Fernández de Kirchner recently devalued the peso and relaxed some capital controls in an effort to preserve the country’s dwindling foreign reserves. The government is hoping that these steps will ease some of the pressure on the currency, which does not float freely against the dollar. But Argentina needs to do a lot more to address inflation and other underlying economic problems that have led investors and ordinary citizens to bet against the peso.

In the years after its painful default in 2002, which wiped out the savings of millions of people, Argentina enjoyed a fast-growing economy thanks in part to the booming world demand for soybeans and other commodities the country exports. But Mrs. Kirchner squandered the recovery in recent years by increasing spending on wasteful subsidies and financing the government partly by printing pesos. As a result, inflation has shot up; independent economists estimate that consumer prices jumped 28 percent last year. The official inflation rate was only 10.9 percent but few economists or the International Monetary Fund find that data credible.
…

Investing
1/29/2014 @ 2:28PM
How Argentina’s Currency Crisis Will Hurt Brazil

On January 22, the Argentina peso, already one of the weakest currencies on the planet, went from 6 to one to the dollar to over 7 to one the next day. It’s now 8.01 to the dollar as foreign reserves dwindle, and another commodity-led economy struggles in Latin America.

The country’s rainy day fund, the ubiquitous foreign cash reserves held by nearly every foreign nation, has declined by 20% in the last month and now stand at around $34 billion. Compare that to their rival Brazil’s foreign currency reserves, which are well over $300 billion. Argentina’s Central Bank has less foreign reserves today than it had six years ago. If the Central Bank needs to tap into those reserves to save its ever-weakening peso, then Buenos Aires could be faced without enough cash on hand to service its debts or import oil. This is not a good time, again, for the Argentines.

Brazilian businesses can’t be all that happy. The two countries might be cultural rivals, but when it comes to the economy, they’re partners. They are the biggest players in the Mercosul trade bloc. But without Argentina, Mercosul is basically Brazil. Brazil suffers when Argentina is struggling.
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As China’s Economy Slows, the Pain Hits Home
By KEITH BRADSHER
JAN. 29, 2014
Steel coils at a market in Hainan Province. Growth in steel production has stalled. China Daily, via Reuters

HONG KONG — Piles of unsold coal line rural roads in north-central China. Some iron ore mines near Beijing are operating at a fraction of capacity. Chinese farm products are even increasingly scorned by the Chinese consumer.

While China remains nearly self-sufficient in all these categories, it is importing more from other emerging markets. Economists and investors around the world have been fretting in recent days about the effects on smaller emerging markets if China’s economic slowdown worsens. Those concerns have driven down share prices and currencies from Jakarta to Istanbul to Buenos Aires, although emerging markets staged a partial recovery on Wednesday. They helped to prod the central banks of Turkey and India to raise benchmark interest rates unexpectedly on Tuesday.
…

I wonder why there are so many articles these days that seem to frantically call for me to chill out about the stock market. In a panicky tone, the authors of these articles exhort me not to panic. The plaintive entreaty to remain calm is very …calming?

UPDATE 3-Deadly U.S. ice storm turns Atlanta into parking lot, strands thousands
Thu Jan 30, 2014 5:13am IST
(Adds comments from Atlanta residents, stranded drivers)
By David Beasley

Jan 29 (Reuters) - A rare ice storm turned Atlanta into a slippery mess on Wednesday, stranding thousands for hours on frozen roadways and raising questions about how city leaders prepared for and handled the cold snap that slammed the U.S. South.

The storm, which has killed at least seven people, on Tuesday swept over a region of about 60 million largely unaccustomed to ice and snow - stretching from Texas through Georgia and into the Carolinas - and forecasts called for more freezing weather on Thursday.

Atlanta Mayor Kasim Reed came under fire for his response to a storm that trapped hundreds of children in schools overnight, some without provisions, and created traffic jams stretching for miles on roads coated with two inches of snow.

“Folks are angry with the mayor of Atlanta, with the governor,” said Flavia DiCesare, 54, who spent the night in her office at Cox Enterprises in Atlanta, about 30 miles from home.

The mayor said schools, businesses and government offices were partly to blame for sending all the workers home just as the storm was rolling in.

“During the day, we have a million to 1.2 million people in this city and all those people were out in very bad weather. It hampered our ability to get our equipment on the ground and to prepare our roads for that,” Reed told a news conference.

“The error - and we have shared responsibility for the error - the error was letting everybody out at once,” he said.
…

Wank-A-Bubble™, the backyard skier and troll was Smithers, who lives near Spokane, WA.

Eddie was in Atlanta, and as far as I know, they are not the same person.

Was slithers really banned? I picture him drooling at his keyboard, rationalizing his RE consumption, and crying.

Asian shares dive as Fed cut sparks emerging market fears
(AFP) – 26 minutes ago

Hong Kong — Asian markets slumped on Thursday, extending a global rout on renewed fears about emerging economies after the US Federal Reserve pressed ahead with its stimulus reduction and central banks in Turkey and South Africa jacked up interest rates.

The dollar and euro sank against the yen as dealers scurried into safer investments after the Fed decision, while Asian sentiment took a further blow from data showing Chinese manufacturing contracted in January.

Tokyo dived 3.33 percent by the break, Sydney shed 1.00 percent, Hong Kong fell 1.42 percent and Shanghai lost 0.20 percent. Singapore was down by 1.02 percent, Manila by 1.37 percent and Jakarta 1.15 percent.

Taipei and Seoul were closed for public holidays.

Wall Street sank on Wednesday after the Fed said it would reduce its bond-buying programme by $10 billion a month to $65 billion, citing a pick-up in the US economy. The move followed a similar announcement in December.

Investors took flight after the announcement, which stoked fears of huge capital flows from emerging markets that have benefited from the Fed’s cheap money policies, as dealers look for safer investments back home.

In New York the Dow dived 1.15 percent, the S&P 500 fell 1.01 percent and the Nasdaq shed 1.14 percent. London, Frankfurt and Paris were all down too ahead of the Fed announcement.

Global equity and forex markets have been in turmoil since the end of last week after a plunge in the Argentine peso sparked fresh worries about developing economies.

Anxiety about economic growth has been exacerbated by preliminary data from HSBC indicating manufacturing activity in China — the world’s second-biggest economy — had contracted in January.

On Thursday the banking group confirmed that its purchasing managers’ index for China had fallen to 49.5 this month, the lowest figure since July.

Sharp rate hikes by Turkey and South Africa on Wednesday failed to stem heavy losses in their currencies as developing economies around the world battle against foreign traders repatriating their cash.

Russia, Brazil and Argentina also faced further drops in their units, despite the International Monetary Fund stressing there was not a general panic and that each faces specific challenges.

Despite the global jitters, Fed policymakers made no mention of emerging markets, leaving investors with little comfort, analysts said.

“The market was discouraged by the fact that they did not refer to emerging economies,” said Hirokazu Kabeya, senior strategist at Daiwa Securities.

Investors are “wary that authorities may be a bit too optimistic… They could have said something like they would be ‘watching the situation closely’,” Kabeya added.

“With that, the market atmosphere would be very different now.”
…

Emerging markets sway under weight of Fed tapering
The World Today
By business reporter Pat McGrath
Updated 1 hour 51 minutes ago
Janet Yellen announced as Fed chair Photo: Economists expect Janet Yellen to keep winding back the Fed’s stimulus program over 2014. (AFP: Jewel Samad)

As the US Fed met overnight to decide the next step for its economic stimulus, another central bank on the other side of the world was preparing for the impact.

South Africa’s currency, the rand, has been battered in recent days, as have currencies of other emerging economies including Turkey, Argentina and Russia.

The South African Reserve Bank governor Gill Marcus summarised the situation at a press conference in Pretoria.

“The expectation of tapering by the Fed since May 2013 resulted in significant outflows from emerging economies, domestic bond and equity markets, putting pressure on exchange rates and long term bond yields, particularly in those countries with sizeable current account deficits,” he observed.

In other words, much of the cheap money pumped into the system through the Fed’s quantitative easing found its way to emerging economies where demand for credit is high.

Cutting back the stimulus is not only causing that cheap cash to dry up, but it is also sending what is left back to the United States where the economic outlook is improving.

Now South Africa’s central bank has joined Turkey in acting aggressively to fight off the impact of the capital flight by raising interest rates for the first time in six years.

“Exchange rate pressures are expected to intensify as markets adjust to the new pattern of global capital flows,” Mr Marcus said.

“In the light of these circumstances, and taking account of policy trade-offs, the NPC has decided to increase the repo rate by 50 basis points to 5.5 per cent per annum as of the 30th of January, 2014.”

It is hoped the higher interest rates will make South Africa a more attractive place to invest and, in the process, help push the rand higher.

“We will continue to monitor developments closely and will not hesitate to act as required in keeping with our mandate,” he concluded.

The Fed was widely expected to cut its monthly bond purchasing program by $US10 billion to $US65 billion at the meeting overnight, but financial markets nevertheless had a strong reaction.
…

Something tells me that media conjecture about Janet Yellen’s status as a taper dove is already over.

My middle name is Equity.

A wiser an once said get the heck out of the IE, it is a sad state. All the bad things about SoCal without much else. I recall going to one of the nicer reservoir parks in Yucaipa, a nice little man made lake with a soft beach slope for the little ones. Physically very nice and Yucaipa isn’t exactly downtown Riverside. Anyway after about an hour the crowd starts showing up. Many Sureno “13″ tattoos covering the crowd who seemed to have been let in for free. Within an hour not worth being there or going back. Too crowded and too crowded with sketch.

See that is a post from someone who actually isn’t a troll and has some real world experience.

A tip for debt donkey trolls: Specificity is the soul of credibility.

An even wiser man said, “Even with a paid off property that brings in income, there are taxes, insurance, repair bills, HOA and Mello Roos that need to be paid. And negative appreciation still brings loss of net worth.”

If we wanted to do something to help people, we should allow some kind of deduction for paying extra on your mortgage (instead of the MID). As a homeowner, let me tell you, the thought of paying extra on the house when my effective rate is something like 2.25% (3.5% interest rate) is pretty hard to financially justify.

We should encourage people to get out of debt, not into it (or maintain it).

So, do you take away depreciation for commercial buildings?

Apartment buildings?

The same argument applies. Apartment buildings are depreciated over what, 29 years? Commercial buildings over 39 years? Clearly they last longer than that.

Want to have real fun? Start monkeying with component depreciation (where if you track the cost of specific components of a property, you can depreciate over even shorter periods of time).

How about taking away the magic of the 1031 exchange (which allows you to depreciate a building to $0, then sell, and trade all the money to another property without paying any tax–on gain or depreciation recapture)?

The tax code is ripe with this kind of stuff…we don’t need nibbling at the edges (impacting one type of real estate), we need wholesale tax reform.

Do you want to get rid of the depreciation deduction for all capital assets that are used in small businesses, or just single family houses? Why do you think that that particular type of business should be treated so differently than other businesses, rather than, say, just fixing the method used to allocate the value between the land and the structure?

Why do you hate renters?

“That would cause prices of houses to decline, less debt, less lucre for the FIRE shmucks.”

Ergo housing would become more affordable, young families would find themselves able to relocate and lay down roots where their best opportunities are found, and the seeds for a new long-term upswing in American prosperity would be planted.

Great plan!

“The IRS never questions…” Clearly, you’ve never been audited.

I can’t stand it when the social engineers get wet dreams about how to manipulate people with the tax code.

Level the playing field and kill off social engineers. Abolish all taxes.

The depreciation on your taxes is a deduction of the expense to actually buy the house. It’s not the deterioration of the house. If I paid $100k to get a house, then I haven’t actually made a profit until I collect $100k in rent, plus the carrying costs.

how long will one of you shanties provide shelter before it is condemned?

A car typically reaches the end of it usable life @ 200k miles these days. I have a car with 170k on it. I know once it gets to 200k I will be lucky to get 500.00 for it. It is a 2000 yr model. didnt buy it new but based on our price new the car was probably 25000.00 including interest on loan. Based on my mileage it would probably last till 2015. So the lifespan of the car is technically 15 years in this case. Take the 25k purchase price and subtract the 500 residual value at 200k miles and you have 24500. 24500/15 year lifespan is 1633.00/ year or 136.00/ month of depreciation. Then you can add all the other stuff such as insurance, maintenance, registration etc. I can imagine all of it comes up to 250-300/ month.

For all intensive purposes how long will a house last before it is unusable? It has to be a lot longer than 30 yrs for things to pencil out according to you, correct?

Another reason why living in a neighborhood with a high walk score is better.

See also below article written by real journalists that discusses the development of Atlanta’s transit infrastructure.

Clown car driving is for loosers.

Haven’t read the article yet, but it was interesting to hear both the mayor of Atlanta and the governor of Georgia blame the weather services for not enough advance warning, when there was plenty of warning. Really. You can’t make this stuff up.

Personal responsibility? Bah! We don’t need no stinkin’ personal responsibility.

It was fun watching the video clip of Jim Cantore giving a knee to the groin of a heckler, without missing a beat in his reporting.

Just read the article. Summed up: white flight, not enough transit. Yawn.

You need to believe in globalization and to be properly indoctrinated to ignore your oath of loyalty to the constitution. The identified schools create “citizens of the world” and treat nationalism as a vice not a virtue.

Bring Hillary on. I can’t believe they are being so foolish.

22 months before is just too soon. 22 months before Nov 2008, Obama hadn’t even announced yet… and he was a very early announcer. This year I suspect we’ll see lots of unknown governors who “look Presidential.”

Hitlary don’t affect me. I have movable hidable wealth.

I think Jeb Bush will run. He is more electable than Christie.

Voters have told pollsters that they view Republicans as being generally indifferent to middle-class interests.”

Exactly, and how does passing amnesty show that they care about middle-class interests? The Republican party does not need to run a Christy, it needs to run someone like Reagan that can convince people that he or she cares about the middle-class. The PTB have convinced many people both within and outside the Republican party that the problem is that they need to run a more “moderate” candidate but that is not the problem, they need to run someone not controlled by the banks and neither Romney or McCain could convince people of that for obvious reasons.

And that plan must include no debt.

We saw this piece linked from the Infowars website.

Why would real journalists be reading that, you wonder?

Because we need to effectively counter that in any way possible. Although we are 99% Democrats, we are 110% statists and badge lickers. When was the last time NPR reported something remotely critical of King Obama? The New York Times, Washington Post, NPR, MSNBC will shape the narrative. One of these days, Infowars’ Alex Jones will be walking across a parking lot to his car and take a bullet in the back of the head. Same fate for Glenn Greenwald, he has betrayed real journalism.

He can’t be black with a Venus statue. Cro-black men had BEYONCE statues.

“LOL, I didn’t realize Blackstone had already securitized its rental properties and sold the bonds off.”

Securitizing your future investment losses and selling the securities to greater fools is financial innovation at its best!

Nice article, Joey. But… who’s the last bagholder, ultimate fool, buyer of last resort etc? Can’t imagine Fannie/Freddie or FHA getting involved…

Princeton University historian Sean Wilentz

There you go!

In the Soviet Union history was very fluid, and people would be edited out of pictures because they have fallen out of favor. This historian would fit in under that system, his interpretations of history seem to be driven by political expediency. I cannot see how Snowden’s revelations are that different from the Pentagon Papers and that release was celebrated among the left.

Sure, lots of people despise the liberal state, or the conservative state, or the new world order, blah blah blah. However, that does not excuse the behavior of would-be tyrants who IGNORE the Constitution, which is the law of the land.

Now you can grow your own Peyton in a test tube! Or better yet, improve on him! Make him 8 feet tall and capable of throwing 100 yard passes!

Of course, the linebackers will now be 10 feet tall.

Souper Bowl, baby!

Interesting. However, judging from what we see on reality shows people have been devolving for generations so it is going to take a lot of work just to undo the damage.

Did it really get $10B worth of IPand patents out of the deal? I’ve always been under the impression that the real mobile IP belongs to Qualcomm.

Not to mention that the bulk of that excess shadow inventory is being held in fewer and fewer locations (primarily judicial foreclosure states). If there is going to be an impact from the release of that inventory, it will likely be concentrated in those places.

Median Sold Price of Existing Single-Family Homes

S.F. Bay Area

Dec. 2013 $666,890

Nov. 2013 $700,980

http://www.car.org/newsstand/newsreleases/2014releases/dec2013sales

I’ve been posting numerous articles about SF / Bay Area rental rates and home prices in your absence, the pace of increases has been truly incalculable for a non bubble coast dweller.

Any impact from the Google buses in your neighborhood?

Good to ’see’ you, SFH. Be prepared for HA to flame you for buying (because renting is always cheaper, facts be damned!). Hope life is treating you well.

“some reptile here defend this”

Smithers would have, had he not been banned.

Wonder if he still reads the blog, maybe Ben has logs of his IP address.

It is interesting because SLC is the most liberal city in Utah. It is a democratic stronghold. In the magazine Sunset, a district in SLC was just named as one of the best places to live in the West, Flagstaff also made the list. Sugarhouse the district in SLC, was cited for its diversity including being gay friendly. BTW, it is a sanctuary city with a substantial population of illegals.

“If you like your lunches - you can keep your lunches!”

Why do “reptiles”, your derogatory term for Republicans I assume, have to defend this? It’s obviously an improper response to families with unpaid lunch bills.

A much more appropriate response would have been to exclude those children from receiving school lunch the following day, once the school manager knew who had unpaid bills…

Unless of course, you’re arguing for free lunches. Did your parents not teach you there is no free lunch?

“the meals were taken and thrown away because of outstanding balances on their accounts”
——————————————————————————-

This event has a funny smell to it; almost as if it was planned and/or staged?

Why allow the children to collect the lunches only to have them snatched back and thrown away?

Really?

What is the name of the person who made that decision?

I smell a rat.

more bs today? when are you going to get a job? your shanties cant sell out here in the west.

you just keeping fighting the trend and losing money constantly. you simply cnt figure this game out can you?

then=than for grammar police.

The United States was founded on protectionism.

Here’s the missing point which fierce advocates for one side or another ignore: Every policy has costs and benefits.

• Free trade has costs and benefits.
• Free trade with protectionists has costs and benefits.
• Inflation has costs and benefits.
• Deflation has costs and benefits.

Individuals are virtually never going to advocate for things which are against their own interests.

Does Italy have any drones?

Jeff, I am pretty sure if you’re not already holed up in your house with an arsenal, nobody is going to give a flying frick if you do.

Do you sit around and pet your guns?

And Blackstones vacancy rate for SFR’s is 50%+.

Relevance RentalPimp….. relevance.

Markets Live: Window dressers arrive
January 31, 2014 - 12:50PM
Jens Meyer, Patrick Commins

Local stocks are moving higher, as Asian market post gains and Wall Street rallied overnight, with David Jones jumping after news the retailer rejected a bid from Myer.

3:03pm: Self-managed super funds and global oil giants are just some of the potential investors licking their lips at the prospect of Shell’s high-profile petrol station properties being put on the market, a move that could also bring back more independent, family run petrol businesses.

Shell gave the clearest sign yet overnight that it wants to reduce its exposure to the Australian petrol station scene, when it said it was; “considering its options for divestment, subject to achieving satisfactory commercial terms for these positions”.

While the likes of Glencore, the world’s biggest commodities trader, are likely to play in Shell’s global asset sell-off, history shows that there can be opportunities for the little guys to grab some of the crumbs.

Colin Long from the Service Station Association points to the events of 2010, when 7-Eleven bought most of Mobil’s 295 Australian petrol stations.

‘‘When they bought the Mobil sites, 7-Eleven did discard some, so there could be opportunities for independent people to buy up if that happens again,’’ he said.

‘‘They offered a couple of sites to the operators and a couple of our members were able to buy some Mobil sites from 7–Eleven when they didn’t want them.

‘‘The sites are too valuable and in very good locations, so they are not going to disappear off the face of the earth’’.
…
However, the reality is, given ongoing EM nerves, a sub-50 print for the PMI tomorrow will be again lumped into a “China is slowing” risk-off panic, and the Monday open will be busy with the trifecta of (1) AUD underperforms (currently $US0.88); (2) Asia-Pac equities slide; and (3) Australian government bonds rally.”

PMI under 50 means contraction. Got it yet?

Commenter
Allan
Location
Prahran
Date and time
January 31, 2014, 2:44PM

Markets
Investors Look Toward Safer Options as Ground Shifts
By Tom Lauricella, Katie Martin and Tommy Stubbington
Updated Jan. 29, 2014 10:37 p.m. ET

Just one month into 2014, investors from Illinois to Istanbul are finding the tide going out fast for stocks and other riskier investments.

The excitement over the Super Bowl is coming in sharp contrast to the fear in the market. U.S. stocks are rebounding this morning, but the selling pressure is hitting in waves across the globe. Tom Lauricella reports on MoneyBeat.

After years of unprecedented monetary stimulus propping up the world’s financial markets, investors are now confronting the reality of an end to the Federal Reserve’s bond-buying program, which, as expected, the central bank reduced by another $10 billion on Wednesday.

The Fed’s moves are exacerbating the currency declines faced by a number of emerging-market countries already struggling with domestic economic and political woes of their own making. Several emerging-market central banks in recent days have tried—and failed—to stem slides in their currencies.

As investors flee those markets, they also have moved out of U.S. stocks, which are seen as more risky than some other assets. The Dow Jones Industrial Average sank for the sixth out of seven sessions, losing 1.2% to 15738.79. The blue-chip index has fallen 5% since hitting a record high at the close of 2013.

At the same time, the U.S. bond market has surprised many investors by staging a strong rally. Fueled in part by investors seeking the relative safety of U.S. government bonds, the yield on the 10-year U.S. Treasury note, which declines as prices rise, dropped below 2.7% for the first time since November.

Asian markets slid in early trading Thursday, with Japan down 3%. Australia fell 1.8%, Hong Kong was down 1.4% and South Korea dropped 1.3%.

Many investors remain bullish on the prospects for U.S. stocks, thanks to the relative health of U.S. companies.

Some even argue that the long-simmering troubles in emerging markets will draw global investors to U.S. stocks.
Currency Watch

Investors are keeping a close eye on five emerging-market currencies in the wake of a recent market rout.

But the landscape seems to have shifted from one where unprecedented central-bank stimulus enabled markets to steamroll past issues that might have otherwise spooked investors.

Now, investors are facing markets that appear at greater risk of hitting potholes.

“There were a lot of rose-colored glasses in the market,” said Michael Fredericks, portfolio manager of BlackRock Inc.’s $6 billion Multi-Asset Income Fund.

Many investors had come into 2014 expecting an easy year for U.S. stocks, Mr. Fredericks said. While sentiment doesn’t appear to be turning bearish, “what we’re seeing now is some questioning of that confidence.”
…
In the Markets
Fed Sticks to Script on Paring Bond Buys
As Currencies Fall, Leaders Cast Blame Abroad
As Stocks Decline, Optimists Hold Line
U.S. Stocks Drop as Investors Retreat From Risk
Heard on the Street: Emerging Markets Fight the Fed
Commentary: Fed Erred in Ignoring Emerging Markets
Russia Prepared to Let Ruble Slide
Hungary Hints at Further Rate Cuts
Some U.S. Financial Advisers Keep Emerging-Market Faith
South Africa Raises Key Rate

Every asset price crash has a silver lining for someone.

The bond market short-squeeze is making it cheaper to get a mortgage
January 30, 2014, 1:27 PM

Bonds have staged an incredible rally this month, pushing Treasury prices higher. Yields on the benchmark 10-year note 10_YEAR are down from over 3% at the beginning of the year, to 2.7% on Thursday. As yields fall this month, you may have noticed it’s getting cheaper to take out a mortgage.

But a good portion of the bond rally can be explained by the way investors positioned their holdings going into 2014, and a resulting short-squeeze as they unwind their positions.

As we rang in the new year, investors celebrated by betting that rates would continue to rise — a sentiment shared by nearly everyone, from Wall Street traders to your grandmother. Investors get short if they think rates are going to rise, and the CFTC Commitments of Traders report showed that investor net positioning was among its most short in recent years at the end of 2013.
…

With no more 30% drop in stock index values per year…ever.

And I also have a bridge to sell.

3:14 pm Jan 27, 2014
Markets
Janet Yellen Inherits ‘Another Nice Mess’
By Paul Vigna

Currencies from South Africa to Turkey to the Ukraine to Argentina are plunging, roiling not just investors but the lives of millions of people. U.S. stock markets just had their worst week in a couple of years. Ben Bernanke, the architect of the Federal Reserve’s unprecedented stimulus program, is stepping down at the end of the month.

It’s a delicate moment. Stepping into it is Janet Yellen, who takes over the Fed’s big seat and already is getting her a first test: Will the Fed buckle on the tapering while overseas markets are nose diving? It is the key question this week.

“As Janet Yellen takes over the helm of the global economy this week, she could be tempted to quote Oliver Hardy at ‘Stan’ Bernanke,” Societe Generale forex strategist Kit Juckes wrote to clients, referencing the classic line “this is another nice mess you’ve gotten me into” from old Laurel and Hardy films. ”The FOMC’s first decision under new management will be whether to press ahead with a further reduction in the pace of bond-buying amid emerging market turmoil,” he said.

Her task is certainly more complicated than trying to impersonate Colonel Wilburforce Buckshot and his butler: unwind a $3-trillion plus stimulus program (over the course of years), while continuing to support the U.S. economy. Oh, and figure out just how badly that reversal will rack markets overseas – even though the markets aren’t the Fed’s responsibility in the first place. This week’s FOMC meeting tomorrow and Wednesday — the last over which Mr. Bernanke will preside — will be, as they all are really, keenly watched.

“Market confidence crises don’t often just blow over quickly on their own without policy action. Absent help from the Fed, and in the run-up to the Chinese New Year, any respite will probably be temporary,” Mr. Juckes wrote.

To be sure, the fate of the South African rand or Turkish lira is not the Fed’s responsibility. This situation played out to a lesser extent last summer, when the Fed’s initial hints about tapering drove investors out of emerging market currencies. The Indian rupee, the hardest hit, plummeted 20% in a matter of weeks. Investors can’t just expect the hot money to prop things up if the Fed is draining liquidity. But they also just can’t expect the Fed to buckle under market pressure.

“”This [tapering] is a new risk on the horizon and really needs to be watched,” Christine Lagarde, the managing director of the IMF, said at Davos over the weekend.

If the Fed acts as expected, it’s “unlikely to be enough to reassure investors unless the FOMC sends a clear signal that it sees the turmoil in [emerging markets] and asset markets as a risk to the U.S. recovery,” said Steven Englander, managing director and global head of G10 FX strategy at CitiFX. “Despite last week’s EM turmoil, investors’ big fear is a further policy-induced tightening of liquidity.”
…