The Housing Bubble

http://www.realtor.com/home-finance/buyers-basics/

Boulder, CO Sale Prices Crater 6% YoY

http://www.zillow.com/co-80301/home-values/

You may be missing an important structural change on the demand side (I base this comment on all the electric vehicles that have recently appeared on the road…)

A couple of thoughts…

Global demand for oil is dropping because the real estate boom/ economic expansion miracle is rolling over. It takes a barrel of oil to build a few ft2 of housing. Stop building and the demand for oil collapses. The Saudis are not lowering the price of oil on purpose. Oil right now is a proxy for credit expansion and it is going down because of that.

The fracker’s stated cost of production is a fabrication based on bogus proven reserve figures published to bring in investment money. The money will not be paid back because the wells deplete at an amazing rate. It’s a Ponzi that would soon peter out even if oil stayed at $100. Soon to be gone the way of the solar cell mania and the windmill fraud.

What is likely to “stay” for quite a while is decline. The price of oil and houses and everything used for construction has tripled in the past few years. It won’t just stay up when the building stops. There is overcapacity in just about everything and when prices stop rising, just about everything will be on panic sale, not because I am paranoid, but because it was a credit mania.

Gas can go well below $3, but it may still be unaffordable because we can’t or won’t borrow more to buy it and the overpriced houses built with it.

I wasn’t clear. I know why world oil is dropping to $80/barrel. Less demand, no action from OPEC, and evidently Libya is mostly back up and running. But North Dakota light sweet crude is selling for $66/barrel, not 80, and I don’t know why.

Heren’s another chart showing the prices for the different crudes (look at the little table in the right column): http://hotlineprinting.com/oph/index.html

Blue, about gas prices… if $3/gallon gas is below break even, enough to shut down wells, then isn’t $3, maybe $2.50?, something of a floor for prices? If prices fall below that, then they would (theoretically) simply shut down the wells and sell no gas at all.

“What this says to me is that $3/gallon gas is here to stay.”

Fine, but that means many, many companies will be going out of business to limit supply. Do you think they are going to willingly do that? I think they will compete instead.

Oil whipsawed more than $5 per barrel today, between $79.78 and $84.88. Looks to be trying to finish up more than $1 per barrel.

Never been a better time to own Treasurys.

Market Pulse
All 30 Dow stocks falling premarket
By Tomi Kilgore
Published: Oct 16, 2014 8:09 a.m. ET

NEW YORK (MarketWatch) — All 30 Dow industrials components are selling off in premarket trade Thursday, with 29 of those stocks losing at least 1%. The biggest decliner is Goldman Sachs’ stock (GS, -2.65%) which is slumping 2.4% despite reporting better-than-expected third-quarter results, followed by Visa shares (V, -2.10%) which are shedding 2.1%. The best performer is UnitedHealth’st stock (UNH, -0.80%) which is down just 0.5% after the company beat third-quarter expectations. Meanwhile, Dow futures were recently down 147 points, or 0.9%.
…

A ten percent correction has been overdue for 2 years at least. At this time the futures indicate the S&P today will be 9.5% off of its peak in September, 2019.26. I’d consider a 1615 level as a time to crank up the stock screeners. A 1413 level is when you load up on individual stocks.

As for stock index funds, keep dollar cost averaging. Ihope this is the big plunge that will make 2015 stock purchases pay off for my retirement/downsizing in 2026.

Here is some news to cheer the bulls!

Market Pulse
Fed’s Bullard says QE3 could last longer than October
Published: Oct 16, 2014 10:33 a.m. ET
By Greg Robb
Senior economics reporter

WASHINGTON (MarketWatch) - The Federal Reserve should consider extending its bond-buying program beyond October to see how the U.S. economic outlook evolves, said James Bullard, the president of the St. Louis Fed, on Thursday. At the moment, the Fed is buying $15 billion in securities each month. The U.S. central bank has said it expects to end its QE3 program at the end of October, but Bullard noted that the plan was always data-dependent. Bullard said the Fed cannot “abide” the drop in inflation expectations seen in the Treasury Inflation-Protected Securities. “Maybe this is a juncture where we want to invoke this clause that it is data-dependent,” Bullard said in an interview with Bloomberg News.
…

no longer ebola free here in region viii, we’ve got the ebola plane parked at the airport. this after travelling from cleveland to dallas, to cleveland, to fort lauderdale, to cleveland, to atlanta, and back to cleveland on october 13-14, then flown without passengers to denver.

If it were true. Extremely doubtful.

IMO, with persistence, researchers into harnessing fusion are likely to reach the goal.

———–
Tom McGuire, who heads the project, said he and a small team had been working on fusion energy at Lockheed’s secretive Skunk Works for about four years, but were now going public to find potential partners in industry and government for their work.
———–

MAJOR yellow flag! If this were a real breakthrough, then LM would NOT be “applying for” patents and asking for “potential partners.” LM has plenty enough cash to keep it secret until the patents were granted and the reactor was operational. That way they could keep ALL the profits for themselves.

My guess is that they can do it on the bench top — just enough to attract money — but it won’t scale up. McGuire and his group want to milk enough money to keep their own jobs going for a few years until until… oops, guess it wasn’t a breakthrough after all, sorrrry. By then it will be out of the news. If they can attract a “government” partner, even better. They can milk DOD/DOE for years, and even if DOD/DOE try to cancel the contract, they LM hire J-J-Joe’s old law firm to protest the cancellation and tie it up until they all retire.

[And yes, they will do that. I ran into a similar tactic personally at another company some years ago.]

They should do a huge IPO. It could be bigger than Balibabba! We can all get rich, one more time! Free lunch for everyone! Forever!

While I often times laugh off these things, Lockheed’s Skunk Works has done some pretty amazing things over the years. Doesn’t guarantee success, but they seem to be approaching the problem differently than others. Would be a world changer if they pull it off.

schweet

But will the stupid party take the gloves off and use this to win mid-term elections? NAH!!!!!

They’ve been handed an awesome gift. For example, here in Florida, if Rick Scott really wanted to blow Good Time Charlie Crist right out of the water, he could just conflate Charlie with Obama and all Charlie’s “I Love Barack Obama” rhetoric as it pertains to spreading the Ebola virus. It would work like a bomb. Geez, I’d even go so far as to project Charlie’s image on a background screen of the ebola virus.

“Dr. Michael Savage explained in an interview on Saturday that the U.S has sunk to the level of the Soviet Union in the 1950s, where government-controlled science and a government-controlled press were a way of life.”

He cannot prove any of this because this information was stored on Lois Lerner’s computer. There is not a smidgen of proof that can be found. Even if you could find proof, what difference – at this point, what difference does it make?

You guys do realize that Michael Savage is not even the guy’s real name?

Another phoney getting rich off of the scared ultra-right Bible-thumpers (even though he is a Jewish guy). Go figure.

These are the same people who read and quote the Washington Times and are too dumb to know it is owned and edited by the Moonies church in Korea.

You can fool some of the people all of the time………

Drudge wants a civil war.

Obama *IS* Ebola, he is the Typhoid Mary of Ebola, spreading it everywhere he goes without ever developing symptoms

I read that on the Drudge Report website, and everybody knows you can’t put something on the internet unless it’s true

Actually - obama skipped some fundraising meetings yesterday to try to deal with the Ebola crisis - so this must be starting to get serious.

The government loves a crisis

Shut down flights out of West Africa threat recedes, panic goes away , government loses focus of the people , west Africa falls, Chinese take over etc etc.

China claims it has a drug to cure Ebola ?

A good way to sink an economy - start a pandemic!!!

Consider actually saving the money.

Probably throw it at the rising food prices.

I’ll probably be able to get a pumpkin spice latte every other fill-up or so.

Trulia? They’re a Realtor affiliate.

And if it were true, why is housing demand falling in Dallas and falling housing prices showing up there?

The Ebola can’t be good for the Dallas RE market, even if it does wipe right off granite countertops.

kreighder

It’s a FAITH-BASED hospital! Dude, Bible thumpers don’t even believe in science. How can they be expected to run a hospital? They pray to God and ask him to fax them a diagnosis?

Yes. Dodd-Frank IS a disaster.

The Democrats in control had two choices:

1. Tackle each item on their regulatory wish list one at a time (QRM, Volcker Rule, etc.). This would have required public debate, and resolving the details up front. The upside of this is that the backroom dealings would have been minimized, and the rules might actually help. The downside of this path was that they might have only been able to address a few of the major problems head on (perhaps only QRM, Volcker, and maybe orderly dissolution); or

2. Put together a massive FRAMEWORK, with details to be worked out later, so they could include everything they could possibly imagine in the bill. The upside (for Democrats) is that they could get their regulatory fingers into every aspect of capital markets for which they previously had no political “cover”. The downside is that by leaving the details to be written later, it opened up the possibility to backroom dealings that effectively de-fang the legislation.

In case #1, we get more focused, and effective regulation.

In case #2, we get broad, but much more ineffective regulation.

No surprise, they went with #2.

Just to review:

Original intent: Create a mortgage standard–such that if a loan didn’t meet the standard, lenders would need to retain at least 5% of the mortgage on their books (require them to eat what they kill for riskier mortgages). This would keep lenders honest (they couldn’t sell crap into the markets without taking a 5% bite for themselves).

Original direction of the rule: 20% down payment would be required for loans to meet the standard.

Midpoint in discussions: 5% down payment

Likely end result: No down payment required

If Dodd Frank wanted a down payment requirement as part of the QRM standard, then they should have proposed it, debated it, discussed it, and included it in the law.

It wouldn’t have been complicated…it would have just been politically uncomfortable.

Gonna be a lot of fun when all of those airline employees decide that, on top of dealing with all of Joe Q Public’s bull$##t, it just isn’t worth it to take home $15/hour.

Especially when they find out that, as boot-strapping US Americans, they are going to get stuck with the bills (costs of quarantine, no insurance or low copays)

The unintended/(and supposedly) unforseen consequences could go exponential on this one.

Dangerous virus vs. Corner-cutting society.

And you believe it in spite of the fact everyone is broke and neck deep in debt.

Recycled pasta? That’s disgusting.

“and releases glucose that then causes the familiar blood sugar surge.”

Should that read, “and release glucose that then causes the familiar blood sugar surge.”?

Seeing as how most restaurants nuke the food you get, does this mean I won’t get fat eating pasta from Applebee’s or the Olive Garden?

Game on!

Is that the same reason that frozen then re-heated potato-leek soup is way more gaseous? Inquiring minds want to know.

“$15-20 bucks a month saved on gas.”

20% of a monthly cell phone bill. Whoooopeeee!

same high level of attention and care

I guess that it wasn’t high enough.

Volckerized Wall Street Dumping Bonds With Rest of Herd
By Lisa Abramowicz Oct 16, 2014 2:14 PM PT

Oct. 16 (Bloomberg) — Bloomberg “Money Clip” Host Adam Johnson reports on market volatility. (Source: Bloomberg)

Corporate bond values are swinging the most in more than a year and here’s one reason why: Wall Street’s biggest banks are following the crowd and selling, too.

Take junk bonds, which have lost 2 percent in the past month. Dealers, which traditionally used their own money to take bonds off clients desperate to sell during sinking markets, sold about $2 billion of the securities during the period, according to data compiled by Trace, the bond-price reporting system of the Financial Industry Regulatory Authority.

Banks have cut debt holdings in the face of higher capital requirements and curbs of proprietary trading under the U.S. Dodd-Frank Act’s Volcker Rule. Their lack of desire to take risks has had the unintended consequence of exacerbating price swings amid the rout now, said Jon Breuer, a credit trader at Peridiem Global Investors LLC in Los Angeles, California.

“There just isn’t the appetite and ability to warehouse the risk anymore,” he wrote in an e-mail. “Everyone is afraid to catch the falling knife.”

High-yield bonds have lost 1.1 percent this month, following a 2.1 percent decline in September. That was the worst monthly performance since June 2013 for the $1.3 trillion market that’s ballooned 82 percent since 2007, according to the Bank of America Merrill Lynch U.S. high-yield index.
…

Markets 10/15/2014 @ 7:12PM
In Stormy Markets Some Flee To Safety, Others Grab Shopping Carts
(AP Photo/Richard Drew)

Investors can be forgiven for having flashbacks Wednesday night, after a trading day that was as violent as any in recent memory.

The Dow Jones industrial average lost as many as 460 points at its lows of the day and finished down 1.1. The S&P 500 lost 0.8% for the day, while the flight away from stocks and into the perceived safety of U.S. bonds dropped the 10-year Treasury yield as low as 1.85% at one point before rising back to 2.12%.

The day’s market action felt like waves crashing on a beach, as selling pressure built up before the opening bell, ebbed through the morning and then came back to drive stocks to afternoon lows. The VIX, an options-based volatility gauge, climbed as high as the 31 mark; it was below 15 less than two weeks ago.

Wednesday’s violent rolling selloffs did not come completely without warning.

“In recent weeks, the market has transitioned to the most hostile risk/return profile we identify,” Hussman Funds’ John Hussman wrote in his weekly commentary this week, “the pairing of overvalued, overbought, overbullish conditions with deterioration in market internals and price cointegration…across a wide range of stocks, sectors and security types.”
…

Economy
Growth Fears Grip a Divided Europe
Greece, Portugal Bear Brunt in Echo of Eurozone Debt Crisis; Merkel Unyielding
By Marcus Walker and Charles Forelle
Updated Oct. 16, 2014 7:13 p.m. ET

The Bank of Greece headquarters in Athens on Thursday. The yield on Greece’s 10-year bonds has risen to nearly 9%. Agence France-Presse/Getty Images

BERLIN—Echoes of the debt crisis reverberated across the eurozone Thursday amid mounting concern about the region’s stalled economic recovery and gridlock in the political system called upon to fix it.

Stocks and government bonds fell hardest Thursday in the most fragile and fiscally precarious countries, Greece and Portugal. But the problems include the bloc’s biggest economies.

Even in powerhouse Germany, which escaped the 2010-12 debt crisis relatively unscathed, the government this week slashed its growth forecasts for this year and next, while a measure of economic confidence fell into negative territory for the first time in nearly two years.

If the European market turmoil continues, it could test eurozone leaders’ belief that they have shored up their currency union with new rules on budgets, banks and bailouts.

European government officials have been “deluding” themselves that the crisis was over and the eurozone would recover, said Charles Wyplosz, professor of international economics at the Graduate Institute Geneva.

Now global growth is weakening and exports aren’t enough to pull Europe out of trouble, but governments continue to debate austerity budgets while the European Central Bank has proved “impotent” at stimulating growth, he said.

“What we see now is the revelation that the situation in the eurozone is very precarious,” he said. “We are sitting on a powder keg.”

Stock markets slid across the eurozone except in Germany, which eked out a small gain. U.S. stocks recovered from early losses to end the day mixed.
…

Opinion
Global Markets Catch the Chinese Flu
The ill effects of Beijing’s borrowing and spending binge are rippling through the world economy
By Ruchir Sharma
Oct. 16, 2014 7:43 p.m. ET

It has become almost politically correct to blame the latest global growth scare on the usual suspects, Japan and Europe, and to suggest that if only those skinflint Germans would spend more, all would be better. After all, the American economy is relatively resilient, so who else is there to blame? To the extent anyone brings up China, people seem to whisper its name politely, not mentioning how Beijing’s borrowing and spending binge threatens the world.

When the U.S. sneezes, the world catches a cold, an old saying goes. But now it’s China’s health that matters most. In 1998, when the world expected the Asian financial crisis to cause trouble world-wide, the trouble never came. Emerging Asia, including China, contributed little to global growth at the time, and the U.S. economy was accelerating. That was enough to prevent the Asian crisis from slowing global growth, which held steady at around 2.5% in 1998.

China has since replaced the U.S. as the main engine of the global economy. Its contribution has more than tripled to 34% of global growth this decade from 10% in the 1990s. The U.S. contribution has fallen to 17% from 32% in the 1990s, and the European contribution dropped to 8% from 23%. Europe may be a weak link in global growth, but that is beside the point, unless there is an outright crisis there. Europe’s contribution is roughly where China’s was in the 1990s, and it no longer matters as much.

China, however, is sending a deflationary chill around the world. Factory-gate prices in China have fallen every month for the last 31 months and GDP growth has slowed to 7% from 10% in 2010, according to official estimates. This is rippling across other emerging markets, which have seen their average growth fall to 4% from about 7% in 2010. Most of that decline can be attributed to the slowdown in China.

China is transmitting its cold through several channels. Over the past 15 years, China has become a critical trading partner for many nations, emerging and developed. So falling Chinese demand is now having a viral effect, driving down prices for basic commodities from steel to soybeans. The growth rate in Chinese demand for oil has plummeted to nearly zero this year, down from 12% in 2010. This is arguably the main reason why oil prices are down 20% from their summer peaks. The same is true for other commodities like steel and iron ore: Commodity economies like Brazil and Russia are already in or near recession.

China’s slowdown is also sharpening Europe’s polarized debate about how to revive growth that is no longer fully within European control. Indeed there are signs—including healthy retail sales—that domestic growth in Europe is not weakening much further. In the U.S., the biggest impact is on headline consumer-price inflation, which may drop to 1% by the end of this year, and inflation expectations are falling accordingly.

Many global markets are showing symptoms of China flu. The economies most exposed to China are also showing the sharpest fall in their currencies relative to the dollar. Global companies most dependent on sales in China are getting hit hard, which is why stocks in the energy and materials sector have seen some of the sharpest falls. On the other hand, among the best performing global stocks are those in defensive sectors like utilities or food, the kind of staples people still need in hard times.

It isn’t clear what comes next, but China looks likely to slow further. The market accepts the official estimate, which puts growth above 7%, but the official consensus has been well behind the China slowdown since it began four years ago. The sharp fall in Chinese demand for everything from oil to electric power, coupled with the recent end of the property market boom that drove growth in the last decade, suggests that the actual GDP growth may already be below 7%. Thanks to China’s rapid debt buildup, the next step is almost certainly another step down.
…

News
US Fed stimulus hint sees markets go topsy-turvy
Tweet Share Share Share
by Julian Harris
October 17, 2014, 1:51am

INVESTORS throughout the world endured another rollercoaster ride yesterday, as the price of assets was jolted around amid volatile trading.

The FTSE 100 initially jumped out of bed, gaining 70 points at the open. Yet the previous day’s hangover soon kicked in and the blue chip index slumped to 6,072 points – its lowest level since June 2013.

For much of the day, equities and other risky assets were hit by a continued selloff, while safe havens gained. But in later trading the tide turned again, after doveish comments from a US Federal Reserve official boosting hopes of more stimulus to come.

St Louis Federal Reserve Bank president James Bullard said that the Fed might want to keep up its bond buying stimulus for now given a drop in inflation expectations. The Fed has been on track incrementally to reduce the programme – known as quantitative easing (QE). However, recent comments have hinted that the process of tapering could be stopped or even reversed.

“Bullard’s statement suggests a deep anxiety at the heart of the US central bank with respect to the slowdown in global growth and perhaps the strength of the US dollar,” said Michael Hewson, chief markets analyst at CMC Markets.
…