Bits Bucket for August 12, 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.
About Me
Name:Ben Jones
Location:Northern Arizona, United States
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Year Over Year Housing Demand Plunging In 55 Of 58 Counties In California
http://www.zillow.com/local-info/CA-home-value/r_9/#metric=mt%3D30%26dt%3D1%26tp%3D6%26rt%3D4%26r%3D9%26el%3D0
Housing’s ‘Shadow Inventory’ Still Haunts Banks
http://news.yahoo.com/housings-shadow-inventory-still-haunts-banks-152949909.html
note: Inventory has grown 6% since this article was published
“Household Formation Is Cratering”
http://realmoney.thestreet.com/articles/08/21/2013/household-formation-cratering
The collapse in household formation is accelerating.
not a peep in that article about the $1.2 trillion (and growing) student loan debt
Or the slide in salaries over the last several years -
http://www.breitbart.com/Big-Government/2014/08/11/U-S-Wages-Down-23-Since-2008
“Every Indicator Of Housing Market Activity And Prices We Know Is Slowing Or Falling Outright”
http://www.star-telegram.com/2014/05/27/5850363/dfw-home-prices-reach-new-high.html
“The Housing Crater: Phase II Underway”
http://www.elliottwave.com/images/freeupdates/image/Housingcrater.jpg
Phase II, dead cat bounce, resumption of the housing recovery*.
*The traditional definition of a housing recovery is falling housing prices to dramatically lower and more affordable levels.
So, it’s the second inning now?
Smith was wrong in 2006. He underestimated the momentum behind the sucker’s rally in the biggest housing mania in history. He underestimated Fed intervention and White House madness.
http://www.oftwominds.com/blog-photos/bubble-decline2.gif
Where we are headed has not changed.
http://www.world-exposed.com/wp-content/uploads/2014/07/5295587996_3c82714272.jpg
WSJ: “Housing Inventory Remains Spacious”
http://blogs.wsj.com/economics/2013/11/06/vital-signs-housing-inventory-remains-spacious/
If they can manipulate markets and get them going up they know people will pile in chasing gains.
they want to create a sense that your missing out on something if you dont get in.
Can you fight the urge?
Better than you and your fellow debt donkeys!
district of crater:
http://www.washingtonpost.com/blogs/where-we-live/wp/2014/08/11/d-c-regions-housing-market-struggling-to-gain-momentum/
Who is this?
http://i.dailymail.co.uk/i/pix/2013/03/22/article-2297416-18DA9636000005DC-229_634×416.jpg
That is NYChick. Remember her? She had a condo in Moscow. Every time I would warn her about the impending RE crash in Russia, she would get all tweaked. She claimed to be a blonde with blue eyes and long legs, but I met her in Vegas. She was mousy and not thin.
She gets her Crater Taters from the Moscow factory.
when debt zombies attack:
‘wall street is starting to return to the financial innovation that helped extend the debt rally seven years ago before exacerbating the worst financial crisis since the great depression. the instruments are springing back to life as investors seek new ways to boost return that are being suppressed by central bank stimulus.’
http://www.bloomberg.com/news/2014-08-12/swaps-reincarnate-boosting-debt-bets-in-new-era-credit-markets.html
LULZ at the fact that they didn’t put the word “innovation” in quotes. Sounds like the folks at Bloomberg are all in and advertising as opposed to telling a cautionary tale.
The only reason the bad debt shenanigans work is because taxpayers guarantee the debt in some way.
It’s quite marvelous really, taxpayers subsidizing the enslavement of their fellow citizens. With profits going to Wall Street and being funneled back to DC.
All with the acquiescence of the voters who have no idea what’s being done to them.
marketwatch - when stock and real-estate bubbles collide
‘we may now be in the third biggest stock bubble in u.s. history. u.s. stocks are now about 80% overvalued on certain key long-term measures … this time may be different though. if the stock bubble bursts, the exit strategy is most probably not going to be reinvesting in real estate … the real-estate market isn’t recovering at the pace expected. many of the millennial generation, burdened by their heavy student debts, cannot even afford renting apartments on their own, let alone invest in the still overheated real estate.’
My friends mother recently sold her house in an older working class neighborhood of the Detroit suburbs for $47,000. It’s in a fairy stable area, but the house was showing signs of age, just like the tens of thousands of other houses that were built in the fifties (still built better than a McMansion, though). It was bought by an investment company, probably to turn it into a rental. Three other offers fell through because the banks wouldn’t approve the loans. 10 other people looked at the house but made no offers. Say what you want about investment companies, but when the first time buyers don’t want the house, it’s nice when someone offers to pay cash AND bring the house up to code.
Nothing like throwing good money after bad. At $47k, it’s fair to say they overpaid substantially.
they should just give it away
Why give it away? It might be worth something. If it’s in good condition, figure it’s worth 65% of construction costs. With construction costs roughly $55/sq ft(lot, labor, materials and profit), that old house might be worth $35/sq ft… if there is a buyer for it. Get prices down to realistic levels and I’m sure there would be plenty of buyers…. but not at current asking prices.
A co-worker bought a Detroit area foreclosure roughly 8-yrs ago; it had last sold for nearly $280k, and he got it for $165K. Today, he can’t unload the place, not a single nibble at $135k, and it’s in a better school district too. The only bright spot is that he has been able to rent it high enough to cover his payments.
location, location, location
it was cheap for a reason
“Location” is an old realtor marketing gimmick to get the target to pay far more than the property is worth.
Remember…. labor and materials costs are the same irrespective of location.
your are full of more bs today arent u?
But land prices vary by location. They always have.
Remember…… There is a globe full of land and 95% of it goes undeveloped.
Debt Donkeys tend to settle in close by established cubicle farms.
All land is not equal, and all real estate is local. Until you understand this, you will not understand real estate. Trying to value oceanfront property in Malibu on par with desert scrub in NV is fool’s logic. It’s like trying to say that 10 acres of heavy timber should be $500 per acre just the same as unbuildable wetlands. Your broad brush painting, and one-liners which avoid the truth, are hurting your credibility. I believe, in fact I am CERTAIN, there is a massive bubble in all land in the United States. However, that does not mean that all land should be $x per acre. Each parcel’s value is based upon its merits, ie. natural resource value, local wages, developmental restrictions, neighborhood, etc.
Nonsense.
“All real estate is local” is much like the other fraud driven expression “location”. It’s merely a stealtor tool to get the target off the fundamentals and into discussing non-quantifiable nonsense.
Again…. land is essentially worthless given the fact there is so much of it.
Good farmland is worth something. Possibly close to $1000 per acre as we used to discuss here. Unfortunately, if you propose to build a house on it, you’ve pretty much made it worthless.
“Again…. land is essentially worthless given the fact there is so much of it.”
This is the kind of foolishness I’m talking about.
Don’t u worry about me.
I’m not worried about you, you just seem to have jumped the shark. You’ve resorted to making statements which are completely false. It’s like if I told you your 10 year old truck is only worth $10, then you showed me the blue book value is $15,000 (for argument’s sake), and I said no, it’s only worth $10 you liar. You’ve turned into a caricature of a housing bear, and your credibility has deteriorated as a result.
I have always enjoyed this blog for the factual information shared not only by Ben Jones, but by the many intelligent commenters who bring so much knowledge of different subjects to the table. But your message is now over the top. It’s like you have become so angry about prices and lying Realtors that you’ve resorted to lying yourself. It’s too bad you went down that road.
Sure you’re worried about me; in fact you seem infatuated with me. Now feed your obsession and provide one single statment I’ve made that is a lie. Prove it.
Do you understand the definition of “worried?” Again, I am not “worried” about you, nor am I infatuated. I’m just someone who likes facts, and not opinions passed off as fact. Your constant misrepresentation of current prices is at best, naive, and at worst corrupt.
Just two days ago you asked how much a building lot in Seattle cost, “$5k or $8k?”and I laughed and told you $200k and up in a good neighborhood, as did Prime is Contained, and you followed it up with “$8k tops.” You do this repeatedly, to all people who buy houses, talk about house prices, or even refer to anything about house or land prices. It’s lies, misinformation, nonsense, psychobabble- whatever, but it’s not steeped in reality.
You have a beef with the data. That’s your problem. I know it’s different in Seattle. I’ll say it for you.. It’s different in Seattle.
Now find a single post where I’ve lied.
BTW….. What is a lot worth in Seattle? About $8k. That’s what it’s worth.
GR, did you used to post here under some other name? You pretend to be a long time poster. Just wondering.
I think that $200K lot in Seattle is a bubble piece, not an intrinsic worth, like you could make $20K/yr just using it as a fish ‘n chips location. We see lots of formerly hot or fashionable cities now with building lots that are worth less than $10K. The house I lived in as a small child is worth less than $5K, including the lot.
Why are you so angry about this? What is the supposed “value” of the lot that you are in debt for?
What’s this “worth” thing, anyway. Care to define that?
“GR, did you used to post here under some other name? You pretend to be a long time poster. Just wondering.”
Yes, I’ve been posting here since 2006, so I’m not “pretending” anything.
“I think that $200K lot in Seattle is a bubble piece”
I agree wholeheartedly. However, the fact that people are willing to pay $200k for it RIGHT NOW means it is not “worth” $8k no matter how much HA wants to believe that.
“Why are you so angry about this? What is the supposed “value” of the lot that you are in debt for?”
I’m not angry, I’m just annoyed that he’s resorted to the same sort of spinjive that REALTORS use. Oh, and I have ZERO debt. I do not have a car loan, a mortgage payment, I do not even own a credit card anymore- nada, so quit the strawman stuff.
So what was your previous handle? I’ve posted since 2006 too and your name is not recognizable.
Sure there is the corner of this and that which will command a price when it is in fashion, like in a bubble. Also the sand overlooking the ocean which has a view and was never built upon because it washes out or floods. Or the house in Seattle because all the Chinese grifters are landing. Yet developers are selling desert lots for $200K simply because it is a mania…..
Certain land is never going to be cheap, much to my disappointment, and that of many others. I’d certainly love 5 acres overlooking the ocean. That will never be attainable for me, and I know it, with the reason being that many people far wealthier than I are willing to pay much more for it than I ever could, and that was the case long before I was born, and will continue to be the case long after I am gone. Queue Bruce Hornsby:
“That’s just the way it is, some things will never change.”
So why cherrypick worthless dirt that’s getting pimped when you know it’s not worth a fraction of the asking price?
Let’s revist your accusation. What lie?
I don’t even pay attention to asking prices, I am talking about SOLD prices. Would you be surprised to hear that less than an acre of dirt just sold for $4,500,000? But it’s only “worth $8k” right? Don’t get me wrong, I think the price is STUPID high, but that’s what is going on right now. I am watching all of this with my eyes wide open.
Why are you pretending to be a poster from 2006? You are a poster from 2014. Do you “own” a $200K lot or are you just not affording the mania?
“Why are you pretending to be a poster from 2006? You are a poster from 2014. Do you “own” a $200K lot or are you just not affording the mania?”
I’m not pretending, and I do not “own” a lot. Did I not already tell you this, Blue Sky? Why are you going strawman on me?
GR has been a poster here for a long time. I can tell by the email address.
I am as big of a real estate bear as anyone, I’m just reporting what is going on right now in this area. While I want to see prices crater as much as anyone, I’m not one to resort to lies to try to portray things differently than they are. There is a massive land bubble going on right now, and properties are selling for insane prices. I think it’s the same bubble, and it never was allowed to deflate.
OK, I’m sorry. I get thrown off by people changing their names and then won’t say.
And what is going on “right now in this area” is collapsing demand.
“Resort to lies”? Why would you? And who said you were lying? Uninformed about worth? Likely.
‘the four-bedroom house that ilia nielsen-dembe purchased in west denver earlier this year wasn’t her top choice. the first-time buyer had to settle on a home in a neighborhood with a high crime rate after losing out on bids for five properties in more desirable areas.
‘i definitely sacrificed in terms of location,’ said nielsen-dembe, 33, who lives with her husband and two daughters in the house she bought in april for $184,500. ‘i had to cross streets that were not ideal in order to get a house.’
http://mobile.bloomberg.com/news/2014-08-12/first-time-buyers-shut-out-of-expanding-u-s-home-supply.html
‘had to settle?’
lolz, enjoy your new neighborhood full of gangbangers that you just ‘had to settle’ to buy in
‘had to settle?’
Hey, she’s a trooper; won’t say no.
The squad is on the record, over a year ago, when we predicted that Social Justice™ would be achieved by looting Foot Locker
“Ten to 15 cars with nearly 30 people pulled up, broke into the store and stole multiple pairs of shoes. The suspects also attempted to rob a nearby Radio Shack but were scared off by a security guard. The looting at the Shoe Carnival in Bamberger is miles away from Ferguson, Missouri in North St Louis County.”
http://www.thegatewaypundit.com/2014/08/looting-spreads-shoe-carnival-in-south-st-louis-city-hit-overnight/
See also:
http://www.infowars.com/ferguson-is-a-perfect-example-of-how-quickly-the-streets-of-america-can-descend-into-chaos/
Got 7.62×39?
LOL, I’d love to see a sneaker company come out with an athletic shoe with the slogan sewn on the side of the shoe “Justice for ________________”.
Article for j-j-j-joe
http://m.bizjournals.com/denver/news/2014/08/11/walkable-cities-mean-lower-obesity-and-disease.html?page=all&r=full
If you like your clown-car commute, obesity and disease, you can keep your clown-car commute, obesity and disease
The privilege of watching war:
http://www.zerohedge.com/news/2014-08-12/privilege-watching-war
Excerpt:
“As Americans, and Westerners, we are gifted with the option to not partake directly in war, but play the casual observer. It’s a privilege; and not at all like the class privilege egalitarians are constantly harping about. To see explosions go off in foreign lands, destroying homes, mutilating children, killing family members, is a jarring sight. But as long as it’s a pixelated image on a computer screen, it fails to have the same heart-wrenching effect as if it were occurring just a few feet away. It fails to invoke the emotional intensity that is the most potent weapon in battle. It fails to show the emotional impetus that is behind vindictive combat.
How lucky we are to be far removed from the cries of a mother whose child was collateral damage in an air strike. How lucky we are to not have our brothers and sisters disintegrated before our eyes. How lucky we are to not have our parents taken from us by stray bullets. How lucky are we not to have a generation of orphans, angry over the death of their mothers and fathers and wishing to exact revenge.
The new Vice News documentary on the growing Islamic State in Syria provides a candid but eerie look into the internal deliberations of West-hating Muslim fanatics. These aren’t ordinary folks happy with careers and raising families. They live for jihad. They feed children propaganda on why American and European infidels must die. What’s discomforting about this mindset is that it’s not completely unjustifiable. At one point during the mini-series, a pious man dedicated to the cause of the Islamic State declares, “we are going to invade you as you invaded us. We will capture your women as you captured our women. We will orphan your children as you orphaned our children.”
Can it really be denied that a century of meddling in the Middle East hasn’t created this sentiment of seething vengefulness? Who are we, as Americans and citizens of militarily-dominant countries, to sit back and ignore this type of anger, when under the same circumstances, we would feel the same way? Such unfettered rage demands reflection: how blessed we are to not live in such a maddening state. And how fortunate we are to have an ocean of distance between us and pit of despair known as the Middle East.”
Part of the articles rationale doesn’t add up when you include lunatics from Australia teaching their kids to sever heads and gloat about it on Twitter. This australian born citizen was never subject to the travails of the middle eastern life. After prison life in Ausie, he instead chose to load up the family and head to Syria/Iraq to join in the burning man fanatical orgy with ISIL. I think people simply make up their mind to choose the dark side when they feel life has handed them a bowl of lemons.
Palmetto,
Other than 9-11 attacks we have been blessed to be remotely watching these Islamic fanatics as they wage war on the world. But will this continue? Even now the southern border is being used to infiltrate jihad fighters and nobody knows where/when they’ll attack.
Yes, our attacks have generated some of this sentiment, but their religion encourages them to act the way that they do. They even kill fellow Muslims if they aren’t in agreement on dogma.
What’s next, pay-per-view wars?
Reminds me of Maxine Waters getting her panties in a bunch over new-age companies alerting their WASP subscribers to a live police pursuit of some disenfranchised negro trying to outrun a helicopter with a FLIR thermal imaging tracking system.
‘The Federal Housing Administration plans to tap $1.7 billion in taxpayer money at the end of the month to cover its losses — a first for an agency that has been self-sustaining since its 1934 creation.’
‘The FHA has played a pivotal role in propping up the housing market by backing low-
down-payment loans for borrowers after the mortgage market unraveled and other lending sources dried up. It accounts for nearly 20 percent of all home-purchase mortgages.’
‘The development is likely to reignite debate about the government’s participation in the housing market. The administration said it recognizes that the FHA is playing an outsize role and needs to retrench modestly. But some lawmakers want to shrink its footprint more dramatically. Rep. Jeb Hensarling (R-Tex.), chairman of the House Financial Services Committee, has called the agency the “nation’s largest subprime lender,” saying that it is backing poor-quality loans.’
“FHA’s new borrowers are not FHA’s problem,” said Jim Parrott, a former housing adviser in the Obama White House. “If anything, FHA lending is too tight, not too loose. If you tighten further and shut down the pipeline when FHA still commands a big presence in the market, you threaten the housing recovery and do a world of damage to FHA’s finances.”
“FHA’s new borrowers are not FHA’s problem,” said Jim Parrott, a former housing adviser in the Obama White House. “If anything, FHA lending is too tight, not too loose. If you tighten further and shut down the pipeline when FHA still commands a big presence in the market, you threaten the housing recovery and do a world of damage to FHA’s finances.”
Jeebus Crikes.
Yeah, no kidding. Scary.
“If anything, FHA lending is too tight, not too loose. If you tighten further and shut down the pipeline when FHA still commands a big presence in the market, you threaten the housing recovery and do a world of damage to FHA’s finances.”
This was never about borrowers, it’s about trying to make whole the reckless gamblers who lent the money to the debt junkies and made a killing in the process; it’s about salvaging a fraudulent, corrupt system which needs to fail in order to give rise to a more sustainable model. But we’ve seen that the pols, pigmen, etc. have no interest in changing the model. They will just change the rules until they get theirs, society be damned.
Too tight? Aren’t they almost going down to checking
for a pulse already? 4 percent down should not be restrictive.
This quote is as close to:
“it’s a Ponzi, and our only viable option is to just keep it going”
as I’ve ever heard some well connected individual say.
Love the last name, “Parrott”
Mo credik!
Just print some more money and call it even.
People didn’t do anything when the banks got their bailout, it was business as usual. Some people have to work for their currency while others get it handed to them. U make bad bets, they fail and u are rewarded.
What it seems to really boil down to is fairness. People want to be on an even playing field. It seems like some people are getting free currency because they are well connected. Bankers are above everyone else. How close are you to the printing press?
We have got this system now where the currency creators get to pick and choose who gets what.Easy come easy go. I think the smart people who created the early system could see how things could develop if the currency didn’t have any controls.
Right now it just seems like there is an endless currency supply to make the problems go away.
What would the effect really be if they printed a bunch of money to make FHA solvent?Its just paper anyway. U know nothing would happen.
Good day peeps!
Happy reading - the comments section below the article are worth a couple of minutes of your time as well. Seems the liberal front running of the Fed and its ilk of clapping seals is starting to falter.
http://www.ft.com/intl/cms/s/0/8ebe21da-2173-11e4-a958-00144feabdc0.html#axzz3ACNzrsWJ
Conservatives have nothing to do with banks; you’re right.
Anyone retarded enough to fall for the false “liberal-conservative” paradigm is a sheep. You’re either in the .1% that is robbing the country blind, or you’re not. If you vote for the likes of Obama, McCain, Romney, or any other corporate statist, regardless of their meaningless party affiliation - both parties are adjuncts of the .1% - you are bending over for the .1% and faciliating your own buggering.
The business model of the future, USA version: Safe haven for the worldwide oligarch/bloodsucker class.
Or is it “the more things change, the more they stay the same?
http://tinyurl.comlbpnj9u
Read a few books about the collapse of the Nationalist Chinese government in 1949. The USAF’s primary mission seemed to be flying all of the Nationalist bigwigs (with their stolen gold/loot and concubines) to Formosa/Taiwan.
That’s been the business model since at least 2008. The oligarchs are just getting more brazen in their larceny, since the sheeple continue their grazing.
WAGES IN U.S. DOWN 23 PERCENT SINCE 2008, REPORT SHOWS
A loss of $93 billion in wages
by CLIFF PINCKARD | CLEVELAND.COM | AUGUST 12, 2014
While 8.7 million jobs have been regained since the 2008 recession, they are paying much less, by an average of 23 percent, according to a report released Monday by the United States Conference of Mayors.
The report comes as debate continues about income inequality in the United States.
“While the economy is picking up steam, income inequality and wage gaps are an alarming trend that must be addressed,” said Conference of Mayors President Kevin Johnson, the mayor of Sacramento, Calif., in a news release. “We cannot put our heads in the sand on these issues.”
The annual wage in sectors where jobs were lost, particularly in manufacturing and construction, during the recession was $61,637, but the average wage of new jobs through the second quarter of 2014 is $47,131, the report shows.
It represents a loss of $93 billion in wages, according to the report. (Go below to see the full report. Mobile users can see it here.)
The losses in construction and manufacturing were replaced by jobs in hospitality, health-care and administrative support.
If the Prez was a Republican, this news would lead every network and every news show.
Instead we’ll get to hear about how wonderful Hillary is.
If the Prez was a Republican, this news (declining wages) would lead every network and every news show.
Maybe that’s because of actual partisan policy instead of media bias. Is it mostly Democratic or Republican economic policy that greatly favors the rich?
What policies has Obama/Congress enacted that caused wages to be down 23% since 2008?
What policies could Obama/Congress have enacted to keep wages from falling 23%?
Dodd Frank
Enormously large and incomprehensible, and has NOT been fully enacted, and has slowed the investment of capital.
I’m not saying that NOT enacting it would have kept wages from falling, but they would have fallen a lot less had this law NOT been passed (or the law had been much smaller, faster to be enacted, and more understadable).
Investment of capital is necessary to create jobs.
Do you think it was a good idea to pass a 2,000 page law that laid the groundwork (but no specifics) for 100,000 pages of rules and regulations to be enacted over the next 5-10 years that affect every corner of capital markets just after a massive financial crisis?
On the bright side, the Workforce Innovation and Opportunity Act was just passed with significant bipartisan support. This was patterned off of New Hampshire’s law that essentially subsidizes the salaries of employees who need training. Supposedly a very large percentage of the folks that were part of the program are still working (ie. “evil” business is NOT taking advantage of the system).
Too bad it took 6 years after the crash to work on something like this…I read about the NH program years ago.
Investment of capital is necessary to create jobs.
In general, that’s a tired bumper sticker slogan that’s proven not to work for the middle-class. Demand creates way more jobs than supply. Our 34 year experiment in SupplySide failed the middle class.
Even Romney’s old company Bain came out with a report AFTER the 2012 election almost saying it’s rich clients had more capital than Bain knew what to do with.
Dodd Frank…. has slowed the investment of capital.
What has really slowed the investment of capital is lack of demand caused by too much capital in too few hands. Romney’s old company Bain&Co said about as much in this “Too Much Capital” report.
“What does a world that is structurally awash in capital look like—and what will it mean for businesses and investors? The most immediate effect has been to paralyze, confuse and distort investment decisions.”
A world awash in money
November 14, 2012
http://www.bain.com/publications/articles/a-world-awash-in-money.aspx
…….We discovered that the relationship between the financial economy and the underlying real economy has reached a decisive turning point. The rate of growth of world output of goods and services has seen an extended slowdown over recent decades, while the volume of global financial assets has expanded at a rapid pace. By 2010, global capital had swollen to some $600 trillion, tripling over the past two decades. Today, total financial assets are nearly 10 times the value of the global output of all goods and services. (For a description of the relationship between financial assets broadly defined and the real economy, see below, “What do we mean by ‘capital’?”)
Our analysis leads us to conclude that for the balance of the decade, markets will generally continue to grapple with an environment of capital superabundance. Even with moderating financial growth in developed markets, the fundamental forces that inflated the global balance sheet since the 1980s—financial innovation, high-speed computing and reliance on leverage—are still in place.
I have an idea. Rather than throw out phrases like “supply side” that really never come up in the everyday life of an investment professional and how about you defend Dodd Frank?
Can you do it? Can you defend substantially all of its content and the rules it has created, the timing of the law’s passage, its implementation, and its beneficial effects on the economy?
Please be specific.
There are lots of recent stories about where job growth comes from. Everyone likes to tout job growth coming from small business, but specifically, jobs are mostly created by small, but rapidly growing businesses (a small subset of small business).
How does demand create jobs without capital available to expand business to meet that demand?
If capital is not needed to grow businesses (and create jobs), why did Uber (a poster child of a company with a popular product that is trying to meet massive demand) just take on another round of equity? What about Airbnb (who also just raised more money)? What about countless other start-up companies that prove their product, and then raise rounds B, C, D, E, etc.? If demand is the only thing that matters, why the necessity for round after round of capital investment?
How are new products and services invented (where it is not even known whether there is demand) without people willing to take risk with new capital?
The bottom line is that capital investment is needed to create the new products and services that people would like to buy. When good products are created, people buy them in greater and greater numbers–and that demand allows the business to grow.
Once you’ve created the product that people demand (risking capital to get there):
Growth without capital investment = slow growth
Growth WITH capital investment = the potential for much more rapid growth
What people don’t seem to grasp is that the job market is incredibly dynamic. The JOLTS report came out the other day…4.8 million people were hired in the month, and 4.5 million people left their job (separations). The NET is job creation. To add 100k more jobs in the month, you need only to increase hiring by a small percentage.
If you don’t think Dodd Frank has impacted investment in new potential products and expanding businesses by even a small amount, then you really haven’t been paying attention.
Last example–the story of Juice Club. They had a good idea, and good product, but were having problem finding the capital to grow (franchising wasn’t working, couldn’t obtain an SBA loan). Luckily one of their early stores was located in Town & Country in Palo Alto (I used to get smoothies there when it was still known as Juice Club). A venture capitalist saw the line out the door and did some research into the business, and called one of the founders–and that ultimately led to several $10’s of millions of capital investment to grow the business. Jamba Juice was born. Without that particular VC making that phone call, and getting money raised for the business, would Jamba Juice exist today?
BTW, in a funny way, your Bain comment is precisely on point. Dodd Frank places more barriers up for investment companies to operate with third party capital.
George Soros returned all of his third party investors’ money so he wouldn’t need to comply with Dodd Frank. He wasn’t alone. So his rich clients, who previously were perfectly happy to have Soros invest their capital, got their money back (without asking for it), and needed to find another way to invest it.
The capital is there…Dodd Frank created regulatory barriers that impact its flow into the economy.
capital investment is needed to create the new products and services that people would like to buy.
Obviously. And the world is awash in capital. Just in too few hands to create demand.
Rather than throw out phrases like “supply side” that really never come up in the everyday life of an investment professional and …..
The affects of 34 years of SupplySide is a huge factor in the everyday life of an investment professional because of the lack of demand it has caused.
how about you defend Dodd Frank?
Financial people complain about any regulation but Dodd Frank has benefits for society and even to financial companies if they’re smart enough get with the program.
Financial Institutions Are Seeing Some of the Benefits of Dodd-Frank
…. A Stronger Competitive Position
While companies acknowledged the costs of complying with Dodd-Frank, they are also now beginning to see potential benefits from the new law. Nearly two-thirds (64%) of respondents believe the Act will strengthen their competitive position and a strong majority believe Dodd-Frank will lead to greater profitability over the lifetime of the program. Capital markets firms are particularly optimistic, with 44% of respondents saying that Dodd-Frank will “significantly strengthen” their competitive position.
…..Dodd-Frank does present significant challenges to financial institutions, but it also offers potential benefits in terms of increased profitability, a stronger competitive position and better risk management. Firms that have not established a comprehensive program for dealing with Dodd-Frank may wish to review the current state of play and accelerate efforts to achieve both regulatory compliance and broader strategic goals.
http://businessfinancemag.com/corporate-finance/financial-institutions-are-seeing-some-benefits-dodd-frank?page=1
Rio,
Have you noticed that US Government revenues have been hitting record highs?
How did they get there if it’s not related to the velocity of money?
Taxes have been jacked up for the last few years, taking money out of the pockets of those that produce and giving it to the people that aren’t productive. That includes the bloated bureaucracies of all levels of government.
Regulations on every aspect of our life makes it more difficult and more costly to do anything.
Rio, can you really be that dense?
taking money out of the pockets of those that produce and giving it to the people that aren’t productive
Blackhawk can you really be that unoriginal?
Again:
What policies has Obama/Congress enacted that caused wages to be down 23% since 2008?
What policies could Obama/Congress have enacted to keep wages from falling 23%?
Taxes have been jacked up for the last few years, taking money out of the pockets of those that produce and giving it to the people that aren’t productive.
Yea, taxes are killing the “producers” who are mostly rent-seekers and heirs. Taxes for the rich are almost at historical lows and their income, control and wealth are at historical highs. The .01% “Producers”? More like economic, rent seeking economic bloodsuckers.
The One Percent Are Literally Rich Beyond Measure
….Economist Gabriel Zucman had initially estimated that the top 0.1 percent, who have at least $20 million in net wealth, held 21.5 percent of all wealth in the United States in 2012, but after estimating what is hidden in offshore tax havens, that number is more like 23.5 percent.
Survey data is also faulty because the sample sizes are so small. The Federal Reserve’s Survey of Consumer Finances found that the one percent held 34 percent of wealth in 2010, but that’s more like 35 to 37 percent, according to a new paper.
http://thinkprogress.org/economy/2014/08/08/3469059/income-inequality-measure/
This is the second day in a row that this article has been posted on this board, yet Dark Bird is mad because he thinks negativity should be overrepresented during Democrat Presidencies.
And yet housing prices go up, up, up…go figure!
R.I.P. Robin Williams
THE REAL REASON FOR NEW U.S. AND FRENCH MILITARY INVOLVEMENT IN IRAQ
Why are the U.S. and France deploying military force in Iraq now?
by WASHINGTON’S BLOG | AUGUST 12, 2014
Why is Obama now re-committing the U.S. military to Iraq? Why is France strongly backing military action?
Obama says it’s to protect minorities. That’s nothing new. Obama is the fourth president in a row to bomb Iraq … while claiming it is for humanitarian purposes.
But the architects of the Iraq War (the one which started in 2003) themselves admitted it was about oil.
But what about now? Why are the U.S. and France deploying military force in Iraq now?
Well, ISIS captured some key oil fields in the Kurdish region of Iraq on August 3rd.
Mere days later, the U.S. started bombing ISIS.
And the strikes were targeted in protecting oil resources. As International Business Times notes:
Pentagon Press Secretary Rear Admiral John Kirby tweeted: “US military aircraft conduct strike on Isil [Islamic State] artillery. Artillery was used against Kurdish forces defending Erbil, near US personnel.”
Two F-18 fighters dropped laser-guided 500-pound bombs on the mobile artillery target. Militants of the Islamic State were using artillery that has been abandoned by the Iraqi army when it fled to shell Kurdish forces defending the regional capital of Kurdistan.
US airstrikes were very small and very targeted and the Peshmerga Kurdistan forces are waiting for more strikes by the US fighter jets, according to reports.
It should be noted, initially, that months of murder, mayhem and brutality by ISIS on Christians and other minorities didn’t cause the U.S. or France to intervene militarily for “humanitarian” reasons.
And notice that the airstrikes were very targeted on protecting Erbil … the regional capital of Kurdistan.
The U.S. and France have never lifted a finger to protect the Kurds. Indeed, the U.S. has actively betrayed the Kurds and let them be slaughtered. For example, during the Gulf War, the U.S. called on the Kurds to rise up against Saddam (implying that he would protect them), but then let Saddam slaughter the Kurds en masse.
So why are the U.S. and France moving now to protect Erbil?
Because Erbil has now become a major oil center. The Kurdish government estimates that the region is the world’s 9th largest oil producer.
Oil companies from around the world operate in Kurdistan, including (major oil companies are indicated in bold, U.S. and French oil companies in italics):
USA
Exxon Mobil
Chevron
Aspect Energy
Marathon Oil Corporation
Hillwood International Energy
Hunt Oil
Prime Oil
Murphy Oil
Hess Corporation
HKN Energy
Viking International
France
Canada
Forbes and Manhattan
Western Zagros Resources
Talisman Energy Inc
NIKO Resources
Ground Star
Shamaran
South Korea
Korea National Oil Company (KNOC)
Turkey
Genel Energy
Petoil
Dogan
Britain
Gulf Keystone Petroleum
Sterling Energy
Heritage Oil
Anglo-French
Perenco
UAE
TAQA
Dana Petroleum
Austria
OMV
China
China acquired a significant presence in Iraqi Kurdistan after Sinopec Group bought Addax Petroleum in 2009.
Hungary
MOL
India
Reliance Industries
Papua New Guinea
Oil Search
Russia
Norbest
Gazprom Neft
Norway
DNO
Iraq
Oil Search (Iraq) Limited
Kar Group
Qaiwan Group
Spain
Repsol
Independent
AFREN
Yup … with Chevron, Exxon, Marathon, Hess and Total operating major facilities in Erbil, the latest Iraq war is also about oil … as confirmed by the New Yorker, New Republic and Vox.
For those who don’t believe that Iraqi oil is driving foreign policy, take a look at what Brookings wrote in June:
It should be obvious that a key consideration for the United States arising from [the seizure of huge swaths of Iraq by ISIS] is its potential to affect Iraqi oil production.
***
Any significant disruption of current Iraqi oil production or long-term diminution in its expected growth could have major repercussions for the U.S. economy.
Kurdistan also possesses approximately 89% of all Iraqi natural gas reserves. And so the West – including France – is eager to protect Kurdish hydrocarbons from falling into the hands of ISIS.
Everyone in America likes to drive and eat, no? Then what is so hard to understand this is about oil.
What is so hard to understand this is about controlling those who sell oil and making sure they sell it for U.S. dollars.
“By 2002, Saddam had fully converted to a petroeuro – in essence, dumping the dollar.”
The Petrodollar Wars: The Iraq-Petrodollar Connection
by Jerry Robinson
I have entitled this piece, The Petrodollar Wars. This article will focus specifically on the 2003 Iraq war. A follow-up article will detail the Petrodollar connection to the Afghanistan war, the Libyan war, and now, the build up to a war with Syria and Iran.
The Iraq-Petrodollar Connection
So why Iraq? Why the rush to war with a country who so obviously had no connection with the events of 9/11?
After all, many other nations around the world have confirmed stockpiles of dangerous weapons. So why did the United States specifically target Iraq so soon after the Afghanistan invasion of 2001?
Did the U.S. have had some other motivation for seeking international support to invade Iraq?
William R. Clark was among those who questioned the status quo answers and Washington’s stated motives regarding the invasion of Iraq. In his book, Petrodollar Warfare, Clark claims that the 2003 U.S.-led invasion of Iraq was not based upon “violence or terrorism, but something very different, yet not altogether surprising – declining economic power and depleting hydrocarbons.”
Clark’s work was heavily influenced by another author named F. William Engdahl and his book, The Century of War: Anglo-American Oil Politics and the New World Order.
According to research conducted by both Clark and Engdahl, the U.S.-led invasion of Iraq was not exclusively motivated by Iraq’s connection to the terrorist groups who masterminded the 9/11 attacks. Nor was it out of a concern for the safety of the American public or out of sympathy for the Iraqi people and their lack of freedom or democracy.
Instead, Clark and Engdahl both claimed that the U.S.-led invasion was inspired predominantly by Iraq’s public defiance of the petrodollar system.
According to page 28 of Clark’s book:
“On September 24, 2000, Saddam Hussein allegedly “emerged from a meeting of his government and proclaimed that Iraq would soon transition its oil export transactions to the euro currency.”
Not long after this meeting, Saddam Hussein began preparing to make the switch from pricing his country’s oil exports in greenbacks to euros. As renegade and newsworthy this action was on the part of Iraq, it was sparsely reported in the corporate-controlled media.
Clark comments on the limited media coverage on page 31 of his book:
“CNN ran a very short article on its website on October 30, 2000, but after this one-day news cycle, the issue of Iraq’s switch to a petroeuro essentially disappeared from all five of the corporate-owned media outlets.”
By 2002, Saddam had fully converted to a petroeuro – in essence, dumping the dollar.
On March 19, 2003, George W. Bush announced the commencement of a full scale invasion of Iraq.
According to Clark and Engdahl, Saddam’s bold threat to the petrodollar system had invited the full force and fury of the U.S. military onto his front lawn.
ftmdaily.com/preparing-for-the-collapse-of-the-petrodollar-system-part-3/ - 130k -
Yes, oil is a very good investment now and nothing close to the bubble it will someday have to be.
Hey! The NY Post is reading the HBB and stole my line from yesterday.
Comment by RioAmericanInBrasil
2014-08-11 10:22:54
“SungWoo Lee:
The baseball feelgood story of the summer.”
Korean Royals fan’s trip is the feel-good baseball story of the year
http://nypost.com/2014/08/12/korean-royals-fans-trip-is-the-feel-good-baseball-story-of-the-year/
When SungWoo Lee — perhaps the most unlikely Royals superfan on the planet — signed up to make the trip from Seoul, South Korea, to Kansas City to see his beloved baseball team in person for the first time, he never expected this.
This is an outpouring of Midwestern hospitality, an entire sports community that has embraced Lee with customized welcome gifts, barbecue tailgate feasts in his honor, and guest privileges at Kauffman Stadium that culminated with Lee throwing out the ceremonial first pitch on Monday night.
And this is a majestic eight-game winning streak — coinciding almost perfectly with Lee’s arrival in the United States — that has improbably vaulted the sadsack Royals, who haven’t made the playoffs since 1985, to first place in the American League Central.
…It’s just a credit to this whole community, this whole town,” Lee said, according to the Kansas City Star. “It’s just been this giant hug from this town. It’s been viral and insane.”
The whole fan base — even the team — seems enlivened by Lee’s unbridled optimism and devotion. He is scheduled to end his 10-day sojourn Thursday and return to Korea, but at this rate, the Royals may not let Lee leave.
‘Bunker to hide from immigration office?
“@Iammrroberson: @Koreanfan_KC I think we are going to have to find you a place to stay through Oct”—
SungWoo Lee (@Koreanfan_KC) August 12, 2014’
“The dude is just diehard, and he never has a bad word to say about us, even when we were at our lowest of our low, and I was just really happy and honored to meet him,” said Royals lefty Danny Duffy.
Lee traces his fandom back to the early 1990s, a pre-broadband era when he kept up with the Royals from snippets of highlights on CNN.
No way, those guys are sneakers.
Region VIII checking in.
Everyone Must Check In
Nobody leaves.
http://www.youtube.com/watch?v=0qSvRarzQgY - 127k -
Rise of militarized police forces finally starting to stir some angst.
http://www.businessinsider.com/police-militarization-ferguson-2014-8
Yup.
http://www.picpaste.com/going-viral-O0Srtixy.jpg
I advanced my position in sdrl today and it feels very good.
31
Japan’s GDP is collapsing and that could effect China’s housing market which could bring the long awaited next recession.
I know it is bad of me to suggest it, but could a soured real estate investment have played a role in Robin Williams’ untimely demise?
…
In an interview with Parade last year, Mr. Williams said as much, telling an interviewer that he had decided to do “The Crazy Ones,” his first steady TV job in 30 years, because of the paycheck. Mr. Williams’s salary for the show was reportedly between $150,000 and $200,000 an episode, which for a season of 22 episodes could have paid more than $4 million.
“There are bills to pay,” Mr. Williams told Parade, adding that he had recently re-listed his Napa ranch for $29.9 million because “I just can’t afford it.” (The ranch, initially listed in 2012 for $35 million, is still for sale.)
…
I’d think it was more the manic withdrawal that addicts feel when they’re trying to come down from cocaine.
“The ranch, initially listed in 2012 for $35 million, is still for sale.”
The ranch likely has property taxes the ordinary person can’t fathom.
phony scandals