Bits Bucket for October 22, 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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Refrigerator Magnet Index:
Puerto Vallarta = $3.00
San Diego = $0.98
In 2007 I stopped buying refrigerator magnets in Mexico because they were all $4.00 - $4.50. The price has dropped, but is till ridiculous. Of course the $.98 magnets you can get in San Diego are all made in China…..but still, who wants to pay $3.00 for a trinket?
Today we will learn more about how Housing prices will not go down further even though 30+ percent of the demand dried up due to flippers and infestors no longer buying because flip profits are gone.
Today we will learn more about how 2011 prices will be the floor because if investors invent a time machine and go back in time they will be able to buy at 2011 prices.
Buying would actually make sense for me at 2011 prices…tried to do that in 2011 but it was virtually impossible to compete w/ 100% cash flippers and speculators and I gave up after a year. In the meantime local prices are up about 60% and buying makes no sense at all currently….may try again if prices drop to 2011 levels but am wondering if there will be a second wave of flipper/specuvestor locusts if that comes to pass…do not want to waste my time and have my offers ignored again, that was NOT fun.
Given the fact that prices were inflated 225% in 2011, why would it “actually make sense”?
I paid $4.50 for a fridge magnet at the North Padre Island Seashore this summer. I think part of the proceeds went to conservation. It has a picture of baby turtles on it.
Funny cuz even though it is a national seashore/park, you can still drive on the beach there.
They need a few squashed birds every now and then to cull the feathered population.
What do you expect from Texas?
What is that funny? Jellystone Park has roads, so does the Grand Canyon. It’s not Texas A&M.
refrigerator magnets
I hate those things, equal to “baby on board” or child bragging signs on vehicles. At least they are in YOUR home and not in public.
(I love Carlin’s monologue on this stuff.)
I like the big flat refrigerator magnets, the ones that are brown plastic on the back, the free ones. The best one is the recycle week calendar the trash company sends every year.
I use them to hold fly tying hooks in one spot on the workbench.
San Jose, CA Sale Prices Plunge 12% QoQ As Defaulted Inventory Hits Market
http://www.zillow.com/san-jose-ca-95125/home-values/
“Vote all you want. The secret government won’t change
The voters who put Barack Obama in office expected some big changes. From the NSA’s warrantless wiretapping to Guantanamo Bay to the Patriot Act, candidate Obama was a defender of civil liberties and privacy, promising a dramatically different approach from his predecessor.
But six years into his administration, the Obama version of national security looks almost indistinguishable from the one he inherited. Guantanamo Bay remains open. The NSA has, if anything, become more aggressive in monitoring Americans. Drone strikes have escalated. Most recently it was reported that the same president who won a Nobel Prize in part for promoting nuclear disarmament is spending up to $1 trillion modernizing and revitalizing America’s nuclear weapons.
Why did the face in the Oval Office change but the policies remain the same? Critics tend to focus on Obama himself, a leader who perhaps has shifted with politics to take a harder line. But Tufts University political scientist Michael J. Glennon has a more pessimistic answer: Obama couldn’t have changed policies much even if he tried.”
http://www.bostonglobe.com/ideas/2014/10/18/vote-all-you-want-the-secret-government-won-change/jVSkXrENQlu8vNcBfMn9sL/story.html?p1=Article_Trending_Most_Viewed
While I agree that voting does not matter, this article seems like it is just written to give Obama an out and excuse Dem failures to change anything. Oh, he couldn’t change anything even if he wanted to. Bunk. He’s gonna show what he can do with the strike of a pen in about 2 weeks when he legalizes 20 million after the election.
That’s the problem, he doesn’t want to. That is why voting does not work.
I too am upset that nothing changed and we are stuck with the BUSH/CHENEY errors.
At least they took a shot at health insurance reform. TO bad the Insurance Companies are more powerful than our politicians.
Avocado
I ripen you quicker by putting a very green banana in a closed cloth bag in the pantry with you. The ethylene gas from a banana ripening, speeds up the ripening process of the avo.
Obama = Bush.
This was obvious four years ago.
or the “do nothing” congress made sure O = B. I think the GOP has filibustered over 500 bills. They wont even debate the war in Syria.
At least O cut spending.
“candidate Obama was a defender of civil liberties and privacy”
No, he wasn’t. This also was obvious, but 6-7 years ago. All one had to do was examine Obama’s voting record (and, in many cases, lack thereof) as an Illinois senator. Alas, few were interested in examining his record. “Hope and Change” and “I Hate Bush” was the rule of the day.
NO ONE from the Neocon-Progressive Party is a defender of civil liberties and privacy.
They are not interested in either. Imperialism - both domestic and international - is their intent, whether militaristic or “global community”, i.e. environmental and economic fascism/socialism, among others.
And MacBeth:
As you noted: ““candidate Obama was a defender of civil liberties and privacy”
No, he wasn’t. This also was obvious, but 6-7 years ago. All one had to do was examine Obama’s voting record (and, in many cases, lack thereof) as an Illinois senator. Alas, few were interested in examining his record. “Hope and Change” and “I Hate Bush” was the rule of the day.”
My response is thus:
Minor correction…..You have to look at his voting record as a state rep - not as a Senator - he was a Senator from ILLANNOY in D.C.
Deal is with Hussein O is that while a state rep - he voted present on all but I think it was 2 bills in the state house. In other words a vote of non-commitment on many bills - 90+ while there - and this continues to play out but at a much more elevated office than before. He has not changed and does not act until forced to do so by a public that is just FED UP with his antics.
You have to live in ILLANNOY to truly understand the petrie dish that Obola was cultured and marinated in. Living in the swamp that is this state (as I have the last 30 years) things have gone from bad to much worse - represented by the fact that currently 3 of the last 5 govs have or are serving time in the federal pen. Blogo being the latest.
Further, both state houses are a democrat super-majority led by Mad Again and Cull er ton hacks who have created a 120 billion dollar unfunded entitlement program (mostly pension obligations) and nothing - mark my words - nothing will change in the upcoming election.
Witness the gov campaign:
Rauner - the ’supposed republican’ candidate is just slinging the sh*t at Quinn and vice versa - there is no policy outline - no thought as to how to emerge from this mess of 20 + years, no idea where we go from here. Just platitudes with no substance or meaning - playing to the low info crowd. And who shows up for this circus in the last three days in order supporting Quinn? Obola, Clinton and today plugs Biden.
Rauner’s wife is a life long democ rat - both are friends of Mayor Rahm. Rauner is nothing more a democ-rat in repub clothing - most here hate Quinn and yet don’t trust Rauner at all. Most including me don’t see any light at the end of the tunnel here. Some are even talking that Chicago is on the same path as Detroit- the debt is so huge there is no way out. Chicago currently runs a 200 mil + deficit every year. Used to be 600 mil.
The folks who can afford to do so are moving out of the city and out of the state entirely. 1 person is leaving the state, net, every ten minutes. And this has been going on for a long while.
I say all this because the foul odor of ILLANNOY politics now wafts across the broader landscape of America. America is now getting a taste (foul as it is) of what we have been living with here in ILLANNOY for so many years now.
There’s the elected government, which is a power center.
There’s also the shadow government, consisting of lobbyists, top bureaucrats and big donors, which is also a power center.
The elected government changes a little bit each election (but not much). The shadow government stays relatively unchanged.
It’s the interaction of the shadow government with the elected government which drives policy, ISTM.
London mansion sales dropped 20% last month.
http://www.businessinsider.com/high-end-london-sales-drop-20-2014-10
Is it safe to assume the stock market is now on a permanently high plateau compared to where it was during last week’s Ebola panic?
If Megabank, Inc is discussing this prospect, is it safe to assume it’s already underway?
The Tell
What would it take to trigger the ‘Fed put’?
Published: Oct 22, 2014 8:07 a.m. ET
Eyes turn to Fed as faith in ‘Draghi put’ fades: BofA Merrill Lynch
Shutterstock/KAZLOVA IRYNA
Still on standby?
By William Watts
Reporter
NEW YORK (MarketWatch) — Janet Yellen runs the Federal Reserve now, but that doesn’t mean that notions about what used to be known as the “Bernanke put,” named after her predecessor, Ben Bernanke, have expired.
So far, there’s been little talk of a “Yellen put,” but the U.S. Federal Reserve still remains ready to bail out the markets if things get hairy, Bank of America Merrill Lynch analysts say.
Actual financial puts give the holder the right but not the obligation to sell the underlying security at a set price, known as the strike price. Puts named after central bankers are figurative.
They’re shorthand for the idea the Fed will rush in to rescue tanking markets, a notion denied by Alan Greenspan and Bernanke, but reinforced by the Fed’s aggressive actions following big market declines, most recently, during the 2008 crisis.
The BofA Merrill analysts, in a Tuesday note, say recent market volatility shows that investors are now losing faith in what traders had dubbed the “Draghi put,” named after European Central Bank President Mario Draghi.
Investors are growing less certain the ECB will step in with a program of full-fledged quantitative easing of its own stave off deflationary pressures in the eurozone.
“If this ECB option turns out to be worthless, the key question becomes how much protection does the Fed provide? In other words, approximately how big can an equity correction become before the Fed steps in again?” they write.
…
Investors are growing less certain the ECB will step in with a program of full-fledged quantitative easing of its own stave off deflationary pressures in the eurozone ??
Things are not bad enough yet….Not much civil unrest….
Civil unrest doesn’t affect the prospects of QE. More like banker discontent.
More like banker discontent ??
More like Merkel discontent…There maybe 10 countries in the euro that are in recession…Russia has likely entered one and it will only get worse with oil in the 80’s…Russia cannot service its debt without $100. per barrel…
If things get ugly in one or more of those countries, just watch Merkel capitulate and turn Draghi loose…
Mark Hulbert
Opinion: The stock market stands on firm footing — for now
Published: Oct 22, 2014 6:00 a.m. ET
Contrarian analysis suggests investors will push against a wall of worry
By Mark Hulbert
Columnist
CHAPEL HILL, N.C. (MarketWatch) — Investors’ optimism is rising at a slower pace than the stock market is.
And that’s bullish from a contrarian point of view, since it suggests that there is a fairly strong so-called wall of worry for the equity market to climb during the next couple of weeks.
Consider the average recommended equity exposure among a subset of Nasdaq-oriented market timers tracked by the Hulbert Financial Digest (as measured by the Hulbert Nasdaq Newsletter Sentiment Index, or HNNSI). Since the Nasdaq market responds especially quickly to changes in retail investors’ mood, and because those timers themselves are quick to shift their recommended exposure levels, the HNNSI is our most sensitive barometer of investor sentiment.
…
This past week, the rage was that the “stock market is In dangerous straits.”
This week, the stock market is “on firm footing”, for now.
Which is it?
Perhaps both. Perhaps neither. Rinse and repeat. Lots of so-called economists and journalists make their living this way. A shameful thing, propagandizing the public.
’stock market is In dangerous straits’
Firm footing considering stocks were up the most in one day for the year yesterday. The Dow falls 200 points and it’s a freak out. It goes up 200 points and all’s well. It works the same with houses. Not that long ago, it wasn’t this way.
No, it wasn’t.
It’s this way now because (1) there’s money in it, (2) there’s political gain in it, (3) in general, people are becoming increasingly irrational.
My guess is that the irrationality stems from the internet and social media and much as anything else.
Information, data and multi-tasking devices do not substitute for rational thought.
The key element, IMO, is time. It’s been longer than most can recall that the US had a real economy. One where we didn’t get up every morning to see how our wall street casino bets were doing. Or checking the internet to see how much our house has appreciated so we can “feel good” and go buy some more stuff made in China.
I’ve mentioned before that when I was a kid, stocks weren’t something that most people had an interest in. (Almost no one had credit cards either). And what the house was worth sure as heck didn’t influence spending. Oh, but the incentives. Tax deductions for house loans and taxes. Tax exemptions for buying stocks. Tax punishment for dividend payments. How much interest income has been stolen from savers by the central bank now? A trillion? Two? Gamble, damn you, gamble! And if you win, spend! Spend more than you won (on paper), because if you don’t, we’ll all be eating gruel.
+1
This obsession with the stock market has really picked up since the invention of 401Ks 30ish years ago.
I remember staying with my grandmother during the summer as a child. She listened to the local noon-hour news (a full hour of actual hard news, imagine that) on the small-town AM radio station, and they didn’t get to the stock market and other financial news until the bottom of the hour (12:35 IIRC). And they NEVER attempted to explain WHY the market did this or that.
Today, we get barely a minute of national news at the top of the hour which may include a snippet about the market and WHY it did this or that, followed by something about Justin Bieber . . .
Low-information voters, indeed! We are what we eat.
Your comments here match what I was thinking almost exactly. The interest in the stock market rose as defined-benefit pensions were replaced by the 401k. (This is a development which is going to end up being disastrous for many people.)
I also remember an annoying local radio station that my mother used to listen to. The news that came on late in the afternoon included one sentence about the stock market stating what happened to the DJIA that day. That news often included the sound of a teletype machine as a sound effect.
Various news outlets added the NASDAQ results to their daily brief mention of the stock market during the dot com bubble of the 1990s. I thought that they lose interest in the NASDAQ after that bubble burst, but that didn’t happen.
Even though news stories about the stock market have greatly increased over the past few decades, I still think that most people don’t really care about the market. Half the country doesn’t own any stock and most Americans who do have money in the stock market have less than $50k invested.
One thing that you have to keep in mind about these articles from marketwatch.com that Whac links to is that there cheap and easy to produce. Commentators access free news and statistics and write columns pontificating about them. The websites that publish them probably do so in the hope that they’ll attract readers with high incomes.
When I bought my first stock, I worked through a stock broker. I checked the price in the newspaper, and saw the dividend once a quarter. Occasionally I checked the price in the newspaper when I thought about it.
Largely though, because there were fewer places for me to look at how it was doing, I looked less–and it was out of my mind more.
Now, I can check the going price for a share of Apple at will. If a home sells near me, it shows up on Zillow (among other places). Before, to find out what a home nearby sold for, you would need to see the sign, and follow-up with a RE broker. I never, ever recall my parents ever talking about home prices near where we lived.
Through technology, people are far more able to be abreast of what is happening in the market…and because it is so easy to be aware of the market, more people choose to do so.
Does that mean they “care” more about the stock and housing markets than before? I think so. Or maybe not. Maybe people cared just as much about what their stock portfolio or house was worth, but since it was more difficult to track, they didn’t.
The best comment I heard about this phenomenon was from Mr. Money Mustache (shocking, I know). In response to an interviewer’s question about how he keeps up with his stock investments, he said that he didn’t watch day to day.
His view was that he owned his investments because he believed in them fundamentally, so the near term fluctuations of value mattered very little to him–reading about them day to day was a waste of his time.
He did however, read a lot of books (including those about the market, etc.). His rationale was that anything that was so important that someone wrote a book about it, it might be worth his time to read and understand it–it could inform future decisions.
“Through technology, people are far more able to be abreast of what is happening in the market…”
It is a great irony. In the time of greatest availability of information and data, we have had the greatest lack of insight in as long as anyone can remember. Manias do not respect factual information. Not even a little bit.
Excellent point.
Information overload.
Outside the Box
Opinion: The Fed is deliberately stealing from savers
Published: Oct 22, 2014 9:11 a.m. ET
Yellen has created the wealth gap by printing money
AFP/Getty Images
By Chris Martenson
Recently Janet Yellen expressed both concern and puzzlement over the rising wealth inequality in America.
I found her speech to be disingenuous and disturbing. Why? Because it is the Fed’s very own policies that are driving the expansion of the wealth gap. Read Yellen’s speech.
Either Yellen thinks we cannot be trusted with the truth (worrisome), or the Fed is clueless as to how its own policies operate (scarier).
The academic name for the Fed’s current policy is financial repression. But a more apt name would be “Throw granny under the bus,” because the program boils down to taking from savers and fixed-income recipients and transferring that purchasing power to other entities.
The cornerstone element of financial repression is negative real interest rates, of which the Federal Reserve is the prime architect and owner.
From the start of the Fed’s post-crisis intervention through 2013, the total cost of these negative real interest rates was over $750 billion just to savers alone. The loss of income to fixed-income investments (such as bonds held in pensions and money markets) was even larger.
It’s actually more appropriate to ask if the Federal Reserve is compatible with values rooted in our nation’s history.
But here’s the rub. That loss of income and purchasing power didn’t just vanish. It was transferred from pocket A to pocket B.
It magically appeared again in record Wall Street banking bonuses, in shrinking government deficits (due to lower than normal interest rates), in rising corporate profits (mainly benefiting the already rich), in record stock buybacks (ditto), and in rising wealth inequality.
More directly, when the Fed buys financial assets with printed money and — by definition — drives up the price of those assets, it cannot then act mystified why the main owners of financial assets have grown wealthier. Doing so simply insults our intelligence.
With that as background, I found myself struggling to remain calm as I read Yellen’s recent remarks.
…
“The stock market stands on
firm footingthe printing press -for nowforever.”Fixed.
S&P would be 2150 inflation adjusted and 2600 if you add historical net 6% per year since 07
HA
That’s not inflation. Learn the difference.
cpi
Historical net 6 percent a year since 07?
Why pick since 07? Seems oddly unrandom.
Not really. 2007 is when the markets peaked. Extrapolation based off the peak.
It’d be more random to have picked 2004.
since 1900
07 recent peak that people use
Howard Gold’s No-Nonsense Investing
Opinion: The most successful market timers: the Federal Reserve
Published: Oct 22, 2014 6:10 a.m. ET
The St. Louis Fed’s James Bullard is merely the latest official to boost the stock market
By Howard Gold
Columnist
Bloomberg
Things were looking grim last week, especially on Wednesday, when the Dow Jones Industrial Average was at one point down by 460.
The CBOE VIX indicator soared to the mid-20s for the first time in two years. Fear was palpable as investors had a classic panic attack.
But then, like the cavalry in those classic John Ford westerns, the Federal Reserve rode to the rescue.
James Bullard, president of the Federal Reserve Bank of St. Louis, said inflation far below its 2% target could lead the Fed to “go on pause on the taper … and wait until we see how the data shakes out into December.” The Fed is on track to finish “tapering” its extraordinary bond buying, or quantitative easing (QE3), at next week’s meeting.
But, he added: “If the market is right and it’s portending something more serious for the U.S. economy, then the committee would have an option of ramping up QE [in December].”
Boston Fed President Eric Rosengren later said QE3 should end next week, but he could “easily imagine” not raising rates until 2016.
Translation: We’ve got your back. Don’t fight the Fed.
Investors got the message. The S&P 500 Index advanced for three straight days and the VIX fell under 20 again.
Bullard was only the latest Fed official whose words or actions “just happened” to boost the stock market when it was down.
“They are definitely in the market-manipulation business, and nothing has changed,” said James Bianco, president of Bianco Research LLC in Chicago and a longtime student, and critic, of the Fed.
Called the “Greenspan/Bernanke put,” the Fed’s willingness to jump in when stocks fall dates back a quarter-century.
“The put option is back. If the market sells off enough, they will give us QE4,” Bianco told me.
Conspiracy theorists have pinned it on a government “Plunge Protection Team” that wants to keep stocks from crashing at all costs.
But conspiracy or no, consider these actions:
Aug. 31, 2012: In his annual speech in Jackson Hole, Wyo., Fed Chairman Ben S. Bernanke all but announced the third round of QE, extraordinary bond buying of $85 billion a month. The S&P 500, which had languished after a nearly 10% decline, rallied from 1,399 points and hasn’t corrected substantially until now.
Sept. 22, 2011: Following a 19.4% stock sell-off amid a debt crisis in Europe and the U.S., the Fed launched Operation Twist, in which it sold short-term and bought long-term securities to push down long rates. After first slipping, the S&P 500 resumed a multiyear take-off that, with a little help from the Fed, ultimately drove it 80% higher.
Aug. 27, 2010: In another famous Jackson Hole speech, Bernanke vowed the Fed would “do all that it can” and would “provide additional monetary accommodation through unconventional measures if … necessary.” After a 16% correction in the S&P 500, the Fed’s purchase of $600 billion in securities through QE2 would help push stocks 22.8% higher, according to Bianco Research.
Nov. 25, 2008: In the heat of the financial crisis, Bernanke announced the Fed’s first bond-buying program in which it wound up purchasing $1.7 trillion worth of securities. QE helped launch the new bull market and drove the S&P 500 up 50%.
“Three times they put down markers they were going to end QE,” Bianco said. “In all three cases — 20%, 17%, 10% down in the stock market — they reversed.”
…
MarketWatch Partner Center
8 comments
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Sam Waters 22 minutes ago
Formal scheduled QE is ending. The investor class will whine and claim more is needed but the financial crisis which birth’d the need has ended. Corporate profits are flush. Unemployment is down. Banks are healthy. CEO pay soaring. GM is alive and Bin Laden is dead says Joe.
Investor class must adjust. Stocks will be more volatile and PE’s will be lower. FF ZIRP must rise to at least core rate of annual inflation. Keep in mind interest rate NEVER fell as much for middle class as it did for the banks. The FED will still have investor class backs. They will now inject POMO and REPO on a as required basis to support issuance of government debt, and to backstop market panic so QE on an informal basis will not end. This is the way it used to be.
You can watch at : http://www.newyorkfed.org/markets/openmarket.html and the activities are usually posted before the market even opens.
Michael Wilson 11 minutes ago
@Sam Waters The debt crisis has in fact not ended. It has only continues to grow. It’s just that with low rates - no one is paying attention right now. The debt bubble continues to expand; all one need to examine is the debt to GDP levels of Japan, Greece, or Italy for example.
James Sun 1 hour ago
FED should be investigated by SEC
Andrez Smith 1 hour ago
Great article. The speculator class is a protected species. It will be QE forever.
Marcus Polychronopoulos 1 hour ago
@Andrez Smith
Indeed, you are correct. Now they know how to create fish, they will continue to fill their plates without having to ever see a fishing pole.
Θα πάθουν για να μάθουν…
…
Is the Last Great Bubble bursting?
Published: Oct 21, 2014 12:14 p.m. ET
By Michael A. Gayed
I believe that the Last Great Bubble is bursting — faith in central banks to solve all problems.
I have said this before and it is worth repeating. Twenty years ago, I’m fairly sure people said “don’t fight the Bank of Japan.” Two months ago, you could have said “don’t fight the European Central Bank.” Now, with the Federal Reserve ending quantitative easing as worldwide economic data falters, it appears the time to “fight the Fed” has come.
I have waited a long time personally for this environment, given that I have largely stood alone on the deflation-pulse thesis for the better part of a year and a half, and have been very public about failed reflation. The pushback was always that I was wrong, that markets were fine, and that equity gains proved it.
Narrative always follows price, and everyone loves buy-and-hold at the top. Markets desynched from reality, as our own ATAC Inflation Rotation Fund had difficulty gaining traction following the taper tantrum of May 2013. Conditions have changed, and the historical relationships we use for our risk trigger to rotate between Treasurys and equities are normalizing back to historical cause and effect. The small sample everyone seemingly looked at is now being proven to be the wrong anchor to evaluate strategies and asset-class behavior.
I know people are blaming this on Ebola and Europe, but I think what’s happening is severely underappreciated. This is not a traditional “correction” because inflation expectations have collapsed alongside yields, in the context of trillions of dollars of stimulus. Mario Draghi put tremendous confidence in markets when he said he would do “whatever it takes” to save the euro, and now bond yields in Spain and Italy are diverging from U.S. Treasurys and German bunds. Something fundamental has changed in the market’s perception.
So, what happens if my belief is right that the Last Great Bubble is bursting? It likely means a significant reset could soon occur unless reflation hope kicks in with gusto. Hard to imagine.
Take a look below at the price ratio of the iShares Barclays TIPS Bond Fund relative to the Pimco 7-15 Year U.S. Treasury Index ETF TENZ, As a reminder, a rising price ratio means the numerator/TENZ is outperforming (up more/down less) the denominator/TENZ. Notice the collapse?
…
What would it exactly take for people to stand up and take note of the fed’s actions. Apparently 80B per month can just be blinked at. What about 1 Trillion per month? 5 Trillion? At what point do people say “No, you should not have this power to rob me”? At what point do people stop using federal reserve currency?
How much did you lose in the market today?
Thank you for yesterday’s discussion, guys! From yesterday… I’ve written some replies.
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Comment by Blue Skye
2014-10-21 15:19:19
You won’t see telecommuting from where you live, because it works in the other direction. LOL, you can’t telecommute from Watkins Glen to wherever. She knows I’ve been doing this for years, but “you can’t”.
Any rent can be carried if we can put groceries on a credit card?
We are in the biggest bubble in history and a 2011 rollback does not resolve it. Not even close.
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Blue, your work-at-home is an exception. At least in DC, even the most generous WAH policy requires one day/week in the office, and Feds require three. Not enough to leave the metro area. For a young person trying to move up the career or social ladder, WAH is foolhardy. For a couple, BOTH spouses would have to get — and maintain — work-at-home. For the rest, they are just asking to be outsourced. Yes, there are workarounds, but these are too few to break the market.
I didn’t say that “any” rent can be carried. Stop putting words in my mouth. I said specifically that 2006 rents could NOT be carried, but that rents commensurate with 2011 prices are being carried. Renters will shack up and use credit for other things. If they do not, their stuff will be on the sidewalk. Or they will be eventually forced to move into lower, older, and more distant housing.
Yeah, so we’re up for a credit contraction. But we’ve been up for a credit contraction for, what, well gosh, almost as long as I was paying rent. And as rent was rising, I would have been going a little deeper into the hole each year. That’s not exactly “living within my means,” is it? By the time prices would have crashed, even a frugal oxide would have had no money left to buy anything. And that’s assuming that banks actually released the inventory (they wouldn’t) and Goldman Sachs didn’t buy up the inventory for cheap in backroom deals (they would).
——————-
HA:
Live or die, the [American Home for Rent] model is flawed. Besides, they’ve already announced they’re exiting.
Because 2011 resale housing prices were still 225% higher than long term trend and 2x construction costs(lot, labor, materials and profit)
Test [the comps] yourself. Put your house on the market at the inflated price you paid and see if you get a contract. You won’t.
——————
If I could accumulate toxic RBS wastepaper and unload it on Goldman Sachs, I would exit too. And then celebrate heartily. Not seeing any flaws here. And of course they are exiting. Prices are now too high for the model to pencil. If/when prices fall, the model will pencil again, and they’ll start up again.
2x construction costs … Test it yourself. Why don’t you start your own contruction company, sell houses for 1.5 costs, undercut the entire industry, make it up on volume, and use a bit of profit to buy up a couple Cheetos factories on the way home.
Is this a suitable test: in the past year or so, four properties on my block have sold. All sale prices (not list) were at or above current Zestimate, and all were higher than the 2011 Zestimate. Two of the sales were about the same size, and sold for 8.5% more than the 2012 price of my house. The other two sales were 5% less than my price, but one house is substantially smaller and the other is a little smaller and in dicey condition.
————–
Prof Bear:
Nope. The price depends on both supply and demand.
————–
Yes, and in areas where the jobs are, housing is in serious demand. Builders are dusting off their old developments and building again. Urban, suburban, and even outer suburban infill is exploding, and it’s selling.
And could you tell me which chapter in those “freshman econ textbooks” covers campaign contributions, too-big-to-fail, mark-to-fantasy, shadow inventory, unmovable commodities, discount windows, QEIII, and foreign buyers?
You must have stayed up all night typing this. Next time also include a TL;DR.
For example,
TL;DR: HEE haw
lolz. My word you’re desperate.
Let’s revisit your assertions from yesterday shall we?
You said;
Both produce demand for houses and that can produce a bubble.
There is no demand. Demand is at 20 year lows and falling. Not “where the jobs are”, not “in your town”.
why would house prices fall lower than they were in 2011?
Because 2011 resale housing prices were still 225% higher than long term trend and 2x construction costs(lot, labor, materials and profit)
^address this. Don’t run.
It only takes one comp to set the prices for the block.
Hypothetical. What comps? Prove it.
Millions of excess houses are useless if they are not located near jobs.
They are near jobs so whats your point?
Now you’ve comingled more false assertions today and run from those you made yesterday.Go ahead and respond to yesterdays and then we’ll address today one by one.
It’s impossible for house prices to fall lower then 2011 if that’s when Oxide went into a great deal of debt for a long time in order to pay property taxes, upkeep, repairs, on a house/houses forever.
“Yes, and in areas where the jobs are, housing is in serious demand.”
Again, you cannot seriously discuss price without considering both supply and demand. It would be like suggesting that more sodium causes salt, without considering chlorine availability.
Capital Gazette
Tide of foreclosed homes on the rise again
With state protection ended, bank-owned homes a growing nuisance and economic drag
Abandoned furniture sits in the carport of a home on the 2000 block of Allis Street in Edgewater. Nearby residents say the residence is an eyesore, degrading the value of their community. The home is owned by a bank after one of the many foreclosures in the state.
By Chase Cook, ccook@capgaznews.com
October 12, 2014
When Tim O’Brien walks outside his house, the homes to his right are well kept.
On his left, a different story.
Vines scramble up the side of the house. A board covers a broken window pane. The grass is now cut, but there’s still a cracked garage and fading paint, and a backyard with stained sheds and a lonely tire swing.
O’Brien worries the property makes his neighborhood look bad and hurts home values.
“The grass was about a foot and half tall,” O’Brien said, placing his hand near his knee. “It’s not good. It is going to affect you.”
O’Brien is right.
As the real estate and mortgage collapse of 2008 fades into history, state officials and real estate agents point to the decreasing number of new foreclosures and default notices as evidence of recovery.
But thousands of bank-owned properties sit empty in neighborhoods across the state, a backlog of unsold properties that will eventually make it into Maryland’s housing market at a discount.
Maryland has just recorded the largest influx of “real estate owned” properties in its history, with 2,859 lender purchases through April and June, according to the state Department of Housing and Community Development.
State residents are waiting for their homes and neighborhoods to return to pre-recession market values will have to wait longer — possibly years — until the banks unload their inventory of foreclosed homes to homeowners and investors.
…
One thing I admire about you, oxide, is that you’re always respectful. I may not agree with some of your positions on housing, but that’s ok. You’re a smart, classy gal.
“a frugal oxide would have had no money left to buy anything…”
No Oxy, you were governed by fear. You chose a low paying job in an overpriced area and compromised your financial future with long term debt. I may be an exception in many ways, but these are choices. I chose a high paying job in a low cost area. I’m not that smart really, I just focused on how to make that work rather on how to make the mainstream debt slave living in the ant hill thing work. I didn’t always, but once I did the nut wasn’t that hard to crack. You though, you are trapped. It’s a choice. You chose it. Others did not impose this on you with universal powers as you always claim.
You bet inflation is a permanent thing, so borrowing will make you rich (yes refer to your posts a few years ago). If expansion is not permanent you are totally screwed out of years, even decades of donkey work. We will see. The rest of us are going to be screwed in various other ways so don’t feel too special. We’ll figure out that you and your army of debt junkies caused the mess and won’t be feeling sorry for you.
Detroit — City leaders are borrowing a page from scrappers and thieves by selling old copper wire to boost Detroit’s finances.
The city will scrap 13 million pounds of copper wire left over by decommissioning the Public Lighting Department, a city consultant testified Tuesday during the Detroit bankruptcy trial.
The copper wire will generate as much as $40 million, though Detroit is conservatively budgeting for $25 million in revenue, city consultant Gaurav Malhotra testified.
Did someone post this? If not:
“Someone has placed a bid of more than $3 million for 6,350 foreclosed Detroit properties that have been bundled together by the Wayne County Treasurer’s Office.”
“Among the 6,350 properties are roughly 1,000 that are considered valuable.”
http://www.detroitnews.com/story/news/local/wayne-county/2014/10/21/m-bid-placed-bundle-foreclosed-properties-detroit/17659389/
Tresho-
I found your post yesterday re: someone (one entity) buying up thousands of Detroit houses to be very interesting.
Clearly, something’s up. Wonder what that something is - a federal bailout of the city to shore up pensions and votes? A foreign “investor”?
Why now?
A Chinese ex-pat colony in the heart of Detroit may be just what the city needs to get back on its feet.
Well those 16M new immigrants the fed govt is now planning on bringing in need to live somewhere!
Region VIII
May the odds be ever in your favor Region VIII
Detroit firefighters’ tools stolen while they were fighting a fire
That’s been happening forever. I swiped a hydrant wrench off a fire truck back in the 80’s. The truck was at the scene of a huge bonfire we were having.
You never know when you might need a fire hydrant wrench.
Perfect for dispute resolution.
I recall several news stories following the Loma Prieta earthquake that many victims in Oakland, CA had their jewelry removed by local thieves while they lay injured and helpless.
Loma Prieta earthquake that many victims in Oakland, CA had their jewelry removed by local thieves ??
When we have a big earthquake, one that causes lots of damage like 1989, the entire valley is “gridlock”…You cannot move if you are in a vehicle…Therefore, its impossible for first responders to get anywhere in any reasonable time…Everyone is vulnerable to theft during this time…
Everyone is vulnerable to theft during this time…
unless you are carrying a firearm in which case you are LESS vulnerable to theft. No one is ever invulnerable, you can only lessen your vulnerability.
Californians voted to disarm themselves, and voted in politicians like Diane Feinstein and Nancy Pelosi that would void the Second Amendment. They are in for a hard lesson if a true disaster hits.
How will real journalists script this narrative?
And more importantly, how will Jesse Jackson overcome 400 years of slavery, oppression, colonialism and achieve Social Justice™ by getting his sons another Anheuser Busch distributorship to atone for the sins of the white supremacist capitalist patriarchy?
Report: Autopsy analysis shows Michael Brown may have gone for Darren Wilson’s gun
http://www.washingtonpost.com/news/morning-mix/wp/2014/10/22/report-autopsy-analysis-shows-michael-brown-may-have-gone-for-darren-wilsons-gun/
Happy Wednesday
Forward
This is a Drudge Report link
http://stlouis.cbslocal.com/2014/10/21/protester-all-hell-is-going-to-break-loose-if-darren-wilson-isnt-indicted/
Got 7.62×39?
Badge lickers and uniform fetishists have a reason to celebrate today
http://www.businessinsider.com/michael-brown-autopsy-supports-story-of-cop-who-shot-him-2014-10
And when Darren Wilson is declared innocent, Social Justice™ will be achieved by looting Foot Locker
But never mind the hundreds of black kids killed by other black kids in Chicago every year, because there’s no way Jesse Jackson and Al Sharpton can make money off them
Exactly!!! JJ and not so Sharpton have checked out of that conversation while the killings go on.
You gotta live here to believe it.
Zillow still has Ferguson appreciating ! get long in ferg,yo
or get a condo hotel there
I’m going to open my own franchise of Freddy’s Fashion Mart in Ferguson.
More fundamental change from the most transparent administration in history
“Three teen girls from Arapahoe County told their parents they were on their way to school Friday morning, but within hours they were flying overseas potentially seeking to join Islamic State militants, officials said Tuesday.
The girls, two of them sisters of Somali descent and another of Sudanese descent, were stopped at an airport in Frankfurt, Germany. One of their families reported that $2,000 was missing after the girls fled with their passports, the Arapahoe County Sheriff’s Office said.”
http://www.denverpost.com/environment/ci_26770787/fbi-denver-3-colorado-teenagers-stopped-headed-join
See?
Colorado = The Next California.
Wonder when young Coloradoans will start joining hippie communes? They have access to the dope, the parents have the wealth…
What does this article have to do with legal marijuana?
These girls are from Africa (Obama was born in Africa) and they were flying to Africa to attack Israel because they hate our freedoms.
What does this article have to do with legal marijuana?
You’re the one making the wacky connections between all kinds of disparate phenomena. Give it some thought. For example, Obama was a supposedly a big pothead in high school. All that marijuana smoke in the air in Colorado is going to turn teenagers into little Obamas, heading off to engage in jihad in the Middle East. African Muslim kids are the most susceptible, of course, but eventually all types of Coloradans will be doing all kinds of crazy things.
senator dianne feinstein approves this message
http://www.infowars.com/feinstein-youre-not-a-real-journalist-unless-you-draw-a-salary/
LOL! I love how Obama, The African, is now POTUS! Wow! are we dumb! LOL!
William Kristol is not a real journalist
But he is very, very, very effective at whipping up the emotions of Christian Zionists so they can send all their sons to die in wars for Israel
The Protocols of the Elders of Liberalism
http://m.weeklystandard.com/articles/protocols-elders-liberalism_816389.html
Forward
Breitbart dot com are not real journalists
“White House Press Secretary Josh Earnest declined to address a Breitbart News report about a “surge” of immigration ID’s requested by the U.S. Citizenship and Immigration Services”
http://www.breitbart.com/Big-Government/2014/10/21/White-House-Punts-On-USCIS-Request-For-Surge-Of-Immigration-ID-s
Open your wallets, America, because you’ve got 34,000,000 more Free Sh*t Army to pay for
“Breitbart dot com are not real journalists”
Sure they are. They are yellow journalists of the first order.
The Washington Times is a Moonie rag with no circulation that gets 99% of its website traffic from the Drudge Report
President Obama lets slip his scheme for a permanent majority
http://www.washingtontimes.com/news/2014/oct/20/editorial-green-cards-on-the-table/
And if you don’t want your 14 year old daughter dating a 25 year old high school freshman student MS-13 gang member, you are a racist
“Hold onto every dollar you’ve got and get out of debt and stay out. You’re going to be glad you did.”
Bingo
“So much cash, gotta keep it in Hefty Bags”
Ice T — New Jack Hustler
The New York Times are the real journalists
They will decide what you are allowed to think
MikeyMite approves the New York Times, and Obama = DoublePlusGood
Demand Jumps for Protective Equipment as Ebola Cases Spur Hospitals Into Action
http://www.nytimes.com/2014/10/22/business/demand-jumps-for-protective-equipment-as-ebola-cases-spur-hospitals-into-action.html
There’s plenty to criticize about the New York Times, but you’ll never know what that is by reading Breitbart or listening to Limbaugh.
president obama had andrew breitbart murdered
and he learned how to do it straight from the clinton playbook
http://www.huffingtonpost.com/2013/06/24/michael-hastings-car-hacked_n_3492339.html
May the odds be ever in your favor real journalists
RE REFI - boggles the mind-less
http://finance.yahoo.com/news/slump-mortgage-rates-fails-rally-110002131.html
Complete extortion going on with Fannie Mae jobs at this point. The bids are being doled out by a third party who will mark up the bids by thousands of dollars. It seems like pay to get work and have someone else steal your labor. Btw Italians are involved.
Honest to God
^
ahem…. truth.
They are also not using the existing contractors that had been working with Fannie but looking for new ones and insist that the new ones go thru their company.
“Btw Italians are involved.
Honest to God”
Why is this whatsoever surprising?
If the definition of insanity is “doing the same thing over and over again and expecting a different result,” then clearly Albert Einstein is not responsible for America’s housing policies.
Federal Housing Finance Agency director Mel Watt on Tuesday unveiled new regulations that would make it easier for Americans to buy a house with little or no money down. The rules are aimed at private lenders who opposed a proposal that borrowers make a 20% down payment.
“Finalizing this rule represents a major step forward to providing greater certainty to the housing finance market and paves the way for increased participation by the private sector,” Watt said Tuesday at the Mortgage Bankers Association’s annual conference held at the Mandalay Bay in Las Vegas (A casino? Really? The optics couldn’t be worse.)
In 2013, less than 2% of the $1.6 trillion of MBS issued were so-called private-label securities, meaning they did not have government backing.
In separate but related news, Watt earlier this week announced that Fannie and Freddie are planning to guarantee loans with down payments as little as 3%, down from 5% previously and back to pre-crisis levels.
3% down is old news. Fraudie and Phoney have been financing suckers with 3% since 2007.
NASA Federal Credit Union has 0% down mortgages, no PMI, jumbo loans included. Haven’t checked the details.
You don’t need to be a federal employee either. I heard this on the radio Sunday when I was driving to a family reunion. It is on the website, page 1.
https://www.nasafcu.com/
NASA Federal Credit Union has 0% down mortgages
To the moon, Alice!
by ibbots
Thanks. East Coast presence only.
Interesting, that there are no locations in Pasadena (So Ca), where NASA/JPL has a huge “campus”. Stunningly beautiful macro area.
Las Vegas, NV Sale Prices Plummet 12% YoY; Down QoQ and MoM
http://www.zillow.com/las-vegas-nv-89131/home-values/
I anxiously await reasonable prices. I want another chance, but that time is not yet here. (Exactly the opposite, as I posted yesterday.) Prices are dropping, and I realize this data is not current, but the link you provided gives the wrong impression about the Vegas market.
Add to above:
Cold - 89131 home values have gone up 20.0% over the past year and Zillow predicts they will rise 8.2% within the next year.
Here’s some more:
Sunrise Manor - Very Hot
http://www.zillow.com/sunrise-manor-las-vegas-nv/home-values/
Enterprise - Hot
http://www.zillow.com/enterprise-las-vegas-nv/home-values/
Paradise - Warm
http://www.zillow.com/paradise-las-vegas-nv/home-values/
89120 - Warm
http://www.zillow.com/las-vegas-nv-89120/home-values/
89121 - Warm
http://www.zillow.com/las-vegas-nv-89121/home-values/
89031 - Very Hot
http://www.zillow.com/north-las-vegas-nv-89031/home-values/
89014 (Green Valley) - Very Hot
http://www.zillow.com/henderson-nv-89014/home-values/
89015 - Very Hot
http://www.zillow.com/henderson-nv-89015/home-values/
“Add to above:
Cold - 89131 home values have gone up 20.0% over the past year and Zillow predicts they will rise 8.2% within the next year.”
Who cares what “values” are. Prices are falling.
Here’s another. Falling prices showing up all over Nevada.
Henderson, NV Sale Prices Crater 19%
http://www.zillow.com/henderson-nv-89011/home-values/
“US Home Prices Are Rolling Over “
http://wolfstreet.com/2014/10/02/us-home-prices-roll-over-in-one-chart/
crater
All the charts show crater. The text that goes with this is good also:
“There is no instance in recent history when home prices soared like this beyond the reach of actual home buyers, then landed softly on a plateau to somehow let incomes catch up with them. Despite the well-honed assurances by the industry, there is no plateau when home prices are inflated by outside forces. When these forces peter out, the hangover sets in.”
Only a food would buy now. I hear fearful braying….. HEE haw.
The breadth is widening which is increasing the momentum. I have some east coast data that’s goes directly against what everyone is told that I’ll be posting tomorrow.
I also have a link of realtor criminality(the offense is sickening) and the reader comments are strikingly similar to what is written here. The comments would be hilarious if they weren’t so true.
Realtor Among 9 Linked To Cocaine Ring
http://www.syracuse.com/news/index.ssf/2014/10/liverpool_lawyer_and_realtor_among_9_indicted_in_cocaine_ring.html
Ottawa shooting - Canada Parliament SHOOTOUT! - YouTube
http://www.youtube.com/watch?v=wYrMzh1960U - 152k - Cached - Similar pages
5 hours ago …
There has been an increase of ads on the radio here in Chicago area touting house flipping ’strategies’ using OPM.
What say you regions VIII etc.? Seeing this too or no?
That’s the best sign the peak fraud prices are behind us.
Climate change PROVED to be ‘nothing but a lie’, claims top meteorologist
THE debate about climate change is finished - because it has been categorically proved NOT to exist, one of the world’s leading meteorologists has claimed.
By: Jason Taylor
Published: Wed, October 22, 2014
John Coleman, who co-founded the Weather Channel, shocked academics by insisting the theory of man-made climate change was no longer scientifically credible.
Instead, what ‘little evidence’ there is for rising global temperatures points to a ‘natural phenomenon’ within a developing eco-system.
In an open letter attacking the Intergovernmental Panel on Climate Change, he wrote: “The ocean is not rising significantly.
“The polar ice is increasing, not melting away. Polar Bears are increasing in number.
“Heat waves have actually diminished, not increased. There is not an uptick in the number or strength of storms (in fact storms are diminishing).
“I have studied this topic seriously for years. It has become a political and environment agenda item, but the science is not valid.”
Mr Coleman said he based many of his views on the findings of the NIPCC, a non-governmental international body of scientists aimed at offering an ‘independent second opinion of the evidence reviewed by the IPCC.’
He added: “There is no significant man-made global warming at this time, there has been none in the past and there is no reason to fear any in the future.
“Efforts to prove the theory that carbon dioxide is a significant greenhouse gas and pollutant causing significant warming or weather effects have failed.
“There has been no warming over 18 years.”
The IPCC argue their research shows that man-made global warming will lead to extreme weather events becoming more frequent and unpredictable.
US News and World Report noted that many of the world’s largest businesses, including Coke, Pepsi, Walmart, Nestle, Mars, Monsanto, Kellogg, General Mills, Microsoft, and IBM, “are now engaged and actively responding to climate science and data.”
Climate expert William Happer, from Princeton University, supported Mr Coleman’s claims.
He added: “No chemical compound in the atmosphere has a worse reputation than CO2, thanks to the single-minded demonisation of this natural and essential atmospheric gas by advocates of government control and energy production.
“The incredible list of supposed horrors that increasing carbon dioxide will bring the world is pure belief disguised as science.”
In 2010 a high-level inquiry by the InterAcademy Council found there was “little evidence” to support the IPCC’s claims about global warming.
It also said the panel had purposely emphasised the negative impacts of climate change and made “substantive findings” based on little proof.
http://www.express.co.uk/…is-a-lie-global-warming-not-real-claims-weather-channel-founder - 112k -
Warmists gonna warm.
whoops
NEW YORK (Reuters) - Global equity markets fell on Wednesday, reversing earlier gains driven by solid corporate earnings and mild U.S. inflation data that may let the Federal Reserve keep interest rates lower for longer, as U.S. stocks retreated after some big corporate names sold off.
Wall Street fell as Boeing Co (BA.N) and Biogen Idec (BIIB.O) tumbled after their results disappointed investors, the two biggest drags on the S&P 500.
Does anyone else find it odd that liberal Democratic politicians who faithfully execute oligarch-dictated agendas like gun control (Andrew Cuomo) or dismantling Glass-Stegal (Hillary of the Clinton co-presidency) invariably reap huge windfalls from book advances on self-promoting drek that sits on bookshelves? Or could these huge book advances actually be a form of post-public service quid pro quos for services rendered, since nobody could reasonably expect these stinkers to hit any bestseller lists.
http://www.weeklystandard.com/blogs/cuomo-sells-945-copies-book-paid-over-700000-advance_816973.html
Region VIII checking in
Marvin Gaye with Tammi Terrell “You’re all I need to get by”
http://www.youtube.com/watch?v=gdqtmnd2T0U
Are home sales in China rising or falling? The news is hard to read on this.
Home sales in China soar after policy relaxation
PUBLISHED : Tuesday, 21 October, 2014, 11:12am
UPDATED : Tuesday, 21 October, 2014, 11:12am
Langi Chiang
We recommend
Bear bites off boy’s arm at Chinese zoo
News
20 Oct 2014
Residential property sales in Shanghai surged 78 per cent last week from the previous week. Photo: AFP
Home sales in China surged last week amid a policy relaxation and rising supply, according to the latest data from two leading consultancies.
Sales in the four first-tier cities showed a strong recovery, led by a 57.5 per cent week-on-week rise in Shenzhen, data from E-House (China) showed.
Data from China Index Academy, run by the country’s largest real estate website operator Soufun Holdings, showed residential property sales in Beijing and Shanghai surged 134 per cent and 78 per cent, respectively, last week from the previous week.
“Most cities posted rising sales,” the academy said. “Some cities are seeing a continued drop in their housing inventories.”
China’s property market, a key driver of the broad economy, started to crack early this year under the strains of oversupply and tight credit.
E-House said second-tier cities had mixed fortunes, with 16 seeing rising sales and six suffering falls. Xiamen in Fujian province enjoyed a weekly gain of 107 per cent in home sales, but transactions fell 39 per cent in Haikou, the capital of Hainan province.
The consultancy said new pre-sale approvals in 10 key cities, including Beijing and Shanghai, soared 166 per cent last week from a week earlier to 3.35 million sq metres as developers tried to make the best of improving market sentiment after a substantial policy relaxation last month.
The People’s Bank of China announced at the end of September that banks could regard families that had paid up outstanding mortgage loans for their only home as first-time buyers and consider lending to families that owned multiple homes.
But commercial lenders have no incentive to offer a 30 per cent discount on mortgage loans as repeatedly encouraged by the central bank. Their discounts are mostly less than 10 per cent. That puts in doubt the sustainability of the recovery.
…
Markets
China Housing Sales Fall
Sales Down 10.8% in First 3 Quarters of 2013
By Esther Fung and Richard Silk
Oct. 20, 2014 10:23 p.m. ET
Laborers work atop scaffolding at a residential construction site in Shanghai. Reuters
SHANGHAI—Housing sales in China in the first three quarters this year fell 10.8% to 4.05 trillion yuan ($661 billion), according to data released by the National Bureau of Statistics on Tuesday.
Sales were 3.43 trillion yuan in the first eight months of the year—down 10.9% from the same period of 2013.
China has been grappling with a downturn in the property market since the start of the year, as home buyers stay on the sidelines in anticipation of further falls in prices as property developers struggle to pare down high inventories. Average housing prices in September fell for the fifth straight month on a month-over-month basis.
Analysts and investors are concerned about the weakening property market—an important determinant of China’s economic growth—and whether it could result in a hard landing for the world’s second-largest economy.
…
ft dot com
Comment Bleak house prices: glass half full edition
a day ago
Many a modern day Cassandra points to evidence of disquiet in China’s property market as the clearest sign the world’s second largest economy could be heading for a fall.
Housing sales in the first nine months of the year fell 10.8 per cent compared with the same period a year earlier according to data from the National Bureau of Statistics of China this week, but Alvin Wong, China property analyst at Barclays, argues there is cause for optimism - in the short-term at least.
Here’s why:
Developers aren’t standing pat: China’s property companies are escalating promotional efforts and cutting prices in a bid to maintain sales volumes. In August it was revealed that China Vanke Co, the country’s biggest developer, will give discounts that match shoppers’ spending of up to Rmb2m ($325,000) to homebuyers who shop on Alibaba’s Taobao, an e-commerce platform. Others are offering free chickens.
Neither is the central bank: Last month the People’s Bank of China implemented several measures to boost mortgage lending by banks, chief among them a new policy allowing buyers who already own one home but have paid off their mortgage to be considered as first-time buyers, thus qualifying for a mortgage downpayment of 30 per cent of the cost of the loan. Previously, they would have been considered as second home buyers and had to pay a downpayment of at least 60 per cent. Other measures included the availability of mortgage finance to buyers who already fully-owned at least two homes.
Behind the scenes, broader help is at hand: It has also been reported that the central bank is planning - quietly - to inject Rmb500bn ($81bn) into the banking system which Mr. Wong believes will “eventually benefit from the lower financing cost in the broader economy.” The PBOC has quietly offered the funds to China’s five largest banks on a temporary three-month basis through a relatively new mechanism known as the standing lending facility, as the FT’s Jamil Anderlini and Josh Noble reported here.
But Mr. Wong adds there are winners and losers, with a huge range of difference among developers - some showing year-on-year sales increases of almost 50 per cent, with others declining as much as 63 per cent.
Of course for many China-watchers the big questions don’t concern what tools there are to stoke the property market even more, but rather whether doing so is merely delaying the inevitable and what the wider economic and social consequences of a slowdown will be.
…
IMF downgrades growth forecasts, highlights China housing concerns
By AM business editor Peter Ryan
Updated 7 Oct 2014, 6:19pm
The IMF nameplate is displayed on a wall Photo: The IMF has again lowered its forecasts for global economic growth. (Jonathan Ernst: Reuters)
The International Monetary Fund has again downgraded its forecasts for global economic growth.
The revisions coincide with bad news about Germany’s economy and an array of international problems, including Ebola.
Investors on Wall Street ran for the exits when the IMF also warned of a possible correction on financial markets.
The IMF says the risks of an equity price correction this year have risen, and that is consistent with concerns the IMF sees that some valuations could be “frothy”, in other words unsustainable.
The fund did not name any particular market, but the comments were enough for big investors to take the hint that it might be time to sell and the Dow Jones Industrial Average dived and closed 272 points, or 1.6 per cent, weaker.
The other factor here was gloomy news about Germany where industrial production dropped by 4 per cent in August and that’s the biggest decline since 2009 in the height of the global financial crisis.
So that has made investors very nervous, given that Germany has really been underwriting the euro area where growth is still flat-lining as a result of the eurozone debt crisis.
Not surprisingly, markets across Europe - in particular France, Germany and Spain - all closed deeply in the red.
…
The IMF also mentions booming housing prices, and that in Australia the rises have been restricted to Sydney, Melbourne and Perth and are related to low supply.
The fund notes that the price rises have not been linked with a large increase in indebtedness, with moderate credit growth.
However, there is a bigger concern about China where the IMF says the challenge is to manage a real estate slowdown to prevent it becoming a crash.
“The most notable case is China, where the challenge is to allow for the necessary correction in real estate markets while preventing an excessively sharp slowdown,” it noted in its report.
“In larger cities in China, house prices show signs of overvaluation relative to fundamentals despite measures aimed at restricting speculative demand.”
QE3 is scheduled to end NEXT WEEK. Are you ready for more volatility?
Credit Markets
U.S. Government Bonds Retreat After Inflation Report
Yield Rises to 2.234% in Recent Trade
By Min Zeng
Updated Oct. 22, 2014 3:36 p.m. ET
Treasury bonds pulled back on Wednesday for a second straight session as the latest inflation report spurred investors to take some chips off the table.
In late-afternoon trading, the benchmark 10-year note was 8/32 lower, yielding 2.234%. Yields rise as prices fall.
The yield remains sharply below 3% at the start of the year.
The consumer price index for September rose by 0.1% after a decline of 0.2% a month earlier. The modest rise matched economists forecast, but it soothed concerns that inflation could continue to fall to alarmingly low levels amid uneven global growth and falling commodities prices.
A weaker inflation report might have bolstered the case for the Federal Reserve to delay ending its monthly bond buying program from next week’s policy meeting. The Fed’s bond purchases have been a main factor keeping bond yields near historic lows.
“It is likely we see the Fed end its bond buying” next week, which generated some profit-taking in the bond market, said Larry Milstein, head of government and agency trading at R.W. Pressprich & Co. in New York.
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Both long-dated Treasurys and Wall Street stocks dropped today. Makes me curious what could possibly have gone up?
Dollar holds steady, supported by Treasury yields, sagging euro
By Shinichi Saoshiro
TOKYO Thu Oct 23, 2014 2:03am BST
U.S. dollar bank notes are seen in a bank in Budapest August 8, 2011. REUTERS/Bernadett Szabo
(Reuters) - The dollar steadied on Thursday, hovering near a one-week high versus the euro, supported by a slight rise in Treasury yields following news of an uptick in U.S. inflation.
Concerns over the health of the European banking sector also weighed on the euro and underpinned the dollar after media reported that 11 euro zone banks had failed stress tests run by the European Central Bank. The test results will be published on Sunday.
The dollar edged up 0.1 percent to 107.20 yen, so far eking out a 0.2 percent gain versus the Japanese currency this week.
Data from the U.S. overnight showed the U.S. CPI rose 1.7 percent in the 12 months through September after a similar rise in August.
The euro stood little changed at $1.2645, within reach of a one-week low of $1.2637 hit overnight.
Market focus was on the euro zone business sentiment PMI due later in the session. Signs of the euro zone economy losing momentum have helped feed global growth fears this month, and any fresh suggestion of economic weakness is expected to push the euro lower.
“The euro will come under pressure if the PMI readings disappoint. But it will not benefit the dollar too much in turn, as U.S. yields still remain relatively low,” said Junichi Ishikawa, market analyst at IG Securities in Tokyo.
“Market players are hesitant to build positions ahead of next week’s Federal Reserve meeting, especially as officials have sent dovish signals recently,” he said.
A weak euro zone PMI reading could also dampen expectations of an early rate hike from the Federal Reserve, and act as a drag on the dollar.
The dollar index, a gauge of the greenback’s strength against a basket of major currencies, stood little changed at 85.766, hovering close to a one-week high of 85.789 reached the previous day.
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Enjoy your limited negative equity, as this is as good as it’s going to get.
And if you buy now, you can look forward to soon joining the underwater homeowner party already underway!
15% of homes still seriously underwater
Published: Oct 23, 2014 12:02 a.m. ET
By Catey Hill
Reporter
The housing recovery is well under way — not that homeowners in some states (and some congressional districts) would necessarily know it.
According to a report released Thursday by RealtyTrac, 15% of U.S. properties (representing 8.1 million properties) with a mortgage are seriously underwater — meaning the homeowner owes at least 25% more than the estimated market value of the property. This is down from 17% of mortgaged properties in the second quarter of this year and the lowest rate since the company began tracking negative equity in the first quarter of 2012. The highest percentage of homes that are seriously underwater were those bought during the housing bubble in 2006 (40% of homes bought in 2006 are still seriously underwater), 2007 (35%) and 2005 (32%) in particular.
While that sounds like good news — and it mostly is — there are some caveats. First, the rate of decline in negative equity is slowing, as home price appreciation is slowing, says Daren Blomquist, RealtyTrac vice president . Plus, the negative equity problem is particularly troubling for those with more modest homes: More than half of properties worth less than $50,000 and more than one-third of those worth $50,000 to $100,000 are seriously underwater, compared with fewer than 10% of homes worth $300,000 and above.
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Who will win, the bulls or the bears?
Published: Oct 22, 2014 2:54 p.m. ET
By Bill Gunderson
The stock market bulls have been right for almost six years. They have been crushing the bears since March of 2009. It hasn’t even been close. During this time, the S&P 500 has gone from 666 to a peak of over 2,000 in mid-September of this year.
What about now?
Right now, there is a battle going on between fundamentals and sentiment.
On the positive side, the economy is nothing like it was back in 2008 when we experienced a global financial crisis. The bubble excesses in real estate, finance and credit have burst and resumed a more reasonable shape. The U.S. economy has recovered and is now experiencing low unemployment and strong underpinnings for growth. The underlying fundamentals for the market and the economy appear sound.
But there are also several negatives weighing on the bull market. For one, the “Fed Juice” that had been pumping through the veins of the U.S. economy is being taken away. Quantitative easing is coming to an end, and there is the prospect of higher interest rates in the coming year.
Another overhang on the market is the stalling recovery in Europe. Europe was not as aggressive as the U.S. in fueling economic recovery, and now they are paying the price. Economic growth in Europe has sunk back to levels so dismal that the European Central Bank (ECB) and president Mario Draghi might have to cook up a batch of European stimulus of their own. This could help Europe stave off recession and help calm nervous investors. So far, Draghi has said no to QE, European Style, but he may be left with no alternative.
The downturn in Europe has caused the MSCI EAFE Index Fund (EFA, -0.73%) to technically unravel and plunge into a steep downtrend.
Thanks to problems in Europe, slower global growth, and concerns about the economic impact of Ebola, market sentiment has turned sour, and volatility has increased dramatically. The concern is that these global ills could jeopardize the health of our economy and markets.
Usually hawkish St. Louis Fed President James Bullard is even proposing that the Fed might need to consider delaying the end of QE. Nothing like a market correction to get the Fed’s attention. Over the last month, the market suffered a correction of more than 9%, before rallying back to just below the 1900 level last Friday.
So given the current market environment and the heightened risk and volatility, what is an investor to do?
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Has the world ever before witnessed a more arrogant aggregation of fools?
The Tell
Yes, 100% of economists were dead wrong about yields
Published: Oct 22, 2014 8:01 a.m. ET
Back in April every economist in a survey thought yields would rise. Guess what they did next
As it turns out, economists are not soothsayers.
By Ben Eisen
Reporter
NEW YORK (MarketWatch) — Just about six months ago, a headline flashed across the top of MarketWatch’s home page. It read: “100% of economists think yields will rise within six months.”
The April 22 report was based on a Bloomberg survey of 67 economists, all of whom expected the 10-year Treasury note (10_YEAR, -0.18%) yield — which closed at 2.73% that day — to rise over the following half year.
“How quickly we would get to 4[%] was the discussion at the beginning of the year,” said Mohamed El-Erian, chief economic adviser at Allianz SE, on CNBC Tuesday morning.
The market, however, has a funny way of leaning one way, just as the herd is heading in the other direction.
On Tuesday, the 10-year note traded at a yield of 2.21%, almost four-tenths of a percentage point lower than in April. Let’s not forget that the yield unexpectedly dipped below 2%, just last week.
That underscores the difficulty of calling the direction of interest rates. It also makes all 67 economists wrong, as this chart of the benchmark yield shows:
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Treasury yields tend to rise, and prices drop, as the U.S. economy grows and investors begin to expect the Federal Reserve to normalize monetary policy more quickly.
“There’s an inherent bias out there that you can only get validation that the economy is improving if rates go up,” said George Goncalves, head of interest-rate strategy at Nomura Securities. He was among the strategists saying in the spring that yields would keeping falling.
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