The Housing Bubble

I will check, but I doubt it. It hasn’t been long enough for defense attorneys representing the scumbags to leak the info out.

Do you associate with obviously violent criminals with jail tattoos?
Only when & if I were paid to do so. Even then I’d have my doubts.

Den Sedin
9 months ago

Not anymore man…Get INTO Denver…hahahaaa

Why Ol’ Barbara? Falling prices just fattens your wallet.

Don’t you like your wallet to grow?

Just kidding (although after handing over my hard-earned cash for $4/gal+ gas for months on end, I did feel some joy!)…that was the best sentence I could come up with using “putin” gas in the tank at 6am.

Leave it to Dave to fear monger.

Dave…. falling prices of anything to dramatically lower and more affordable levels doesn’t create “financial stress”. It lowers financial stress and tension and accelerates the economy.

Comments like this always make me laugh. Look at your own country before commenting on other countries problems.

The price of oil is set by a cartel. It has no relation to supply and demand. When the price is held high enough, for long enough and suddenly, gosh, there’s all this oil in the US and Canada! That oil was always there. The Saudi’s could make a barrel of oil $8 tomorrow if they wanted. Any company or country not aware of this plentiful supply and price fixing have only themselves to blame.

“price fixing”

Oh my. There’s that term again.

Price fixing? Some call it a free market….

I would too if I were doing the price fixing.

“The price of oil is set by a cartel. It has no relation to supply and demand.”

At least up until the point when U.S. politicians have the requisite support to stand up to the global warming lobby…

‘Price fixing?’

OPEC has been around for a while. I grew up in the north Texas oil patch and can remember the embargo’s. Prices up for years, everybody drilling. Then OPEC pulled on the rug. What most of us were unaware of was how much debt the oil state economies had taken on, and the related real estate bubble/S&L fraud, etc. Had Texans pocketed that cash and refused to go into debt, it would have hurt, but not sunk the economy. Leverage is a wonderful thing when you’re up, not so great when you’re down.

A couple months ago I was on a flight over Midland, Texas. For probably 20 minutes I looked down on a vast maze of connecting dirt roads to little pads with wells on them. Tight together like small tiles on a floor. Hundreds, maybe thousands of them.

‘One area of concern for us is the impact of lower oil prices in high yield debt market. Lower oil prices portend lower margins and thus less cash flow for debt servicing. A lot of issuance in the high yield debt market has gone to funding E&P companies as demonstrated by the Oil & Gas 14 % composition in the HYG - iShares High Yield ETF, only slightly behind the Utility Sector. For now there does not appear to be too much disturbance in the junk market but we would be wary owning shares of E&P companies with high levels of DEBT/EBITDAR and DEBT/Total Capital, relative to peers.’

http://finance.yahoo.com/tumblr/blog-opportunity-and-risk-in-the-oil-patch-170217923.html

Is a bailout in the works for the high-yield debt used to finance fracking investments?

I don’t know. But we can add this to the list of distortions created by artificially low interest rates.

Right. I haven’t heard anyone at the Fed ever once acknowledge how interest rate suppression, and particularly leveling of risk premiums, encourages malinvestment. Albeit Greenspan did once make a Delphic utterance which, if properly translated, at least hints at the problem:

…this vast increase in the market value of asset claims is in part the indirect result of investors accepting lower compensation for risk. Such an increase in market value is too often viewed by market participants as structural and permanent. To some extent, those higher values may be reflecting the increased flexibility and resilience of our economy. But what they perceive as newly abundant liquidity can readily disappear. Any onset of increased investor caution elevates risk premiums and, as a consequence, lowers asset values and promotes the liquidation of the debt that supported higher asset prices. This is the reason that history has not dealt kindly with the aftermath of protracted periods of low risk premiums.

‘In an apparently improvised effort to relieve the rebels and prevent the loss of more of their strongholds close to the Turkish border, the U.S. bombed positions of Jabhat al Nusra, Al Qaeda’s Syria branch. It was a remarkable turnaround, because previously the administration had said it was avoiding attacks on the group, which used to occasionally fight alongside the American-supported rebels.’

‘U.S. intelligence officials warned that any additional American attacks against al Nusra could drive a wedge between the group and their erstwhile allies in the American-backed, moderate opposition.’

‘The U.S. intelligence community’s fear, according to individuals involved in the discussions, was that hitting al Nusra could draw a giant target on the rebels’ backs—which is precisely what appears to have happened. In the initial round of airstrikes in late September, the U.S. struck targets occupied both by al Nusra and a third group, an al Qaeda unit known Khorasan that U.S. intelligence agencies believed was plotting attacks against commercial airliners. Khorasan may have been the target, but Nusra was hit, too, and the impression on the ground was that the U.S. had meant to go after al Nusra all along.’

‘“The goal of the airstrikes has evolved from combatting ISIS in Iraq to combating ISIS and Al Nusra in Syria, because they pose an increasing threat to the opposition,” said a former U.S. official.’

‘It’s those rebel forces that the Obama administration wanted to train and equip to help destroy ISIS. And it’s those forces that the U.S. military is now trying to save with these latest bombing raids against al Nusra.’

‘At the time of the initial strikes, U.S. officials stressed repeatedly that the Americans were after Khorasan, not al Nusra. It was a measure of how concerned the White House was not to be seen attacking a group that enjoys popular support because of its opposition to Assad.’

http://www.thedailybeast.com/articles/2014/11/06/spies-warned-white-house-don-t-hit-al-qaeda-in-syria.html

Abbott: Well, let’s see, we have on the bags, Who’s on first, What’s on second, I Don’t Know is on third…

Costello: That’s what I want to find out.

Abbott: I say Who’s on first, What’s on second, I Don’t Know’s on third.

Costello: Are you the manager?

Abbott: Yes.

Costello: You gonna be the coach too?

Abbott: Yes.

Costello: And you don’t know the fellows’ names?

Abbott: Well I should.

Costello: Well then who’s on first?

Abbott: Yes.

Costello: I mean the fellow’s name.

Abbott: Who.

Costello: The guy on first.

Abbott: Who.

Costello: The first baseman.

Abbott: Who.

Costello: The guy playing…

Abbott: Who is on first!

Costello: I’m asking YOU who’s on first.

Not just Saudi Arabia. It’s a four hand game with Turkey, Iran and Egypt all playing. Not forgetting Israel and the US and even Russia. Lord it’s complicated, you can’t help feeling sorry for the locals.

Oh, but now it’s going to be worse, much worse. Better move away from the coast very soon!

But nobody ever got a prize for proving deflation was the result of too little money supply.

LOL…this may happen still. Bernanke or Yellin would be my bet. Don’t underestimate the stupidity of the Nobel committee.

“What if deflation is the result of market forces? Excess capacity, excess supply in relation to demand, etc.”

There it is.

But, but… Keynesian economics can’t be discredited because it’s not used. The Fed’s bank reserves-for-Treasuries-and-mortgages swap shenanigans is not what Keynes had in mind. Similarly, I make no judgment about Austrian economics because the Austrians themselves don’t practice it.

‘Keynesian economics can’t be discredited because it’s not used’

A theory that holds we should dig ditches and fill them in, then when faced with a lack of results complains that the ditch was simply not long enough or deep enough, is discredited on the face of it. Of course, now the high priest has called for phoney space aliens. Is it any wonder why we don’t rush to follow his advice?

‘The Fed’s bank reserves-for-Treasuries-and-mortgages swap shenanigans is not what Keynes had in mind’

Well, this is a faction of the cult I call central bank-ism. Which was summarized by Eric Cartman when he said, “I can do whatever I want!”

‘Austrians themselves don’t practice it’

Sure they do. And you do too. It’s called market forces. Mean Ol’ Mister Supply and Demand. The Soviets found out what happens when it’s ignored.

“But nobody ever got a prize for proving deflation was the result of too little money supply. What if deflation is the result of market forces? Excess capacity, excess supply in relation to demand, etc.”

A major natural experiment to test that theory is underway right now in China’s real estate construction sector.

Digging ditches or digging graves?

>> “This would suggest central banks “fighting” deflation are digging a deeper hole.”

Could QE be Deflationary? - Reality Might Topple a Beloved Economic Theory
http://www.bloombergview.com/articles/2014-11-04/reality-might-topple-a-beloved-economic-theory

“Now, the overwhelming majority of empirical studies tell us that QE, and Fed easing in general, tends to raise inflation in the short term. But what if that’s at the cost of lower inflation in the long term? Japan has been holding interest rates at zero for many years, and its economy has been in and out of deflation. Massive QE has noticeably failed to make the U.S. hit its 2 percent inflation target. What if mainstream macroeconomics has it all upside down, and prolonged periods of low interest rates trap us in a kind of secular stagnation that is totally different from the kind Harvard economist Larry Summers talks about?”

Of course, the article references equations and fiscal stimulus without getting down to the obvious: incomes. People SPEND income and REINVEST capital gains. Under ZIRP, where asset appreciation is plentiful and income is scarce, the only money made is capital gain. In the interest of wealth preservation, this is not spent but reinvested in other assets, reinforcing the cycle.

@ Ben Jones — “(Keynesian) theory that holds we should dig ditches and fill them in”

The US has at least a trillion worth of deferred infrastructure to rebuild and replace (bridges, water treatment, sewage treatment, dams, decrepit school buildings…). That’s not “make work.” This is part of what Keynes would want, build public infrastructure to stimulate demand in the private sector. Which is why we need to… Bring Back the WPA

‘The US has at least a trillion worth of deferred infrastructure to rebuild and replace’

One would think that with all the trillions spent on stimulus in the past few years, this would have been taken care of. Which gets to a flaw in Keynes theory. Government isn’t very good at doing stuff.

‘The Works Progress Administration (renamed in 1939 as the Work Projects Administration; WPA) was the largest and most ambitious American New Deal agency, employing millions of unemployed people (mostly unskilled men) to carry out public works projects,[1] including the construction of public buildings and roads. In a much smaller but more famous project, the Federal Project Number One, the WPA employed musicians, artists, writers, actors and directors in large arts, drama, media, and literacy projects.[1]‘

‘Much of the criticism of the distribution of projects and funding allotment is a result of the view that the decisions were politically motivated. The South, as the poorest region of the United States, received 75 percent less in federal relief and public works funds per capita than the West. Critics would point to the fact that Roosevelt’s Democrats could be sure of voting support from the South, whereas the West was less of a sure thing; investing in the West was a way of swaying voters.[38]‘

‘There was a perception that WPA employees were not diligent workers. Employers said the “WPA is bad for people since it gives them poor work habits. They believe that even if a man is not an inefficient worker to begin with, he gets that way from being on WPA.”[39] Having been on the WPA made it harder for alumni to get a job because employers said they had “formed poor work habits” on the WPA.[40]‘

‘A Senate committee reported that, “To some extent the complaint that WPA workers do poor work is not without foundation. … Poor work habits and incorrect techniques are not remedied. Occasionally a supervisor or a foreman demands good work.”[41] The WPA and its workers were ridiculed as being lazy. The organization’s initials were said to stand for “We Poke Along” or “We Putter Along” or “We piddle around” or “Whistle, Piss and Argue.” These were sarcastic references to WPA projects that sometimes slowed down deliberately because foremen had an incentive to keep going, rather than finish a project.[42]‘

http://en.wikipedia.org/wiki/Works_Progress_Administration

“Reality Might Topple a Beloved Economic Theory”

I doubt it. Didn’t Japan’s (original) version of QE lead to decades of deflation, which was handily ignored at the height of crisis?

‘I doubt it’

Like the “ditch we filled in wasn’t deep enough”, we get “Japan was the model.” Meaning, do what Japan did, just go bigger. This is why I say cult; these Keynesian types will never admit to being wrong. No deviation will ever be considered. Critics are said to have blasphemed, or worse. All this in spite of the fact that it doesn’t work. Sure, print me up a trillion dollars and I can throw a good party. But sustainable growth, no.

If it works big, it should work small.

I understand what WPA is saying, but it demonstrates who we are dealing with. Why is a trillion of infrastructure let to rot? When we give, give! billions of dollars every year to countries richer than ours. Look at the military. Gotta let the government run it, too important. Waste all over the place. And who can forget when Rumsfeld came out and said, uh, we lost two trillion bucks. Or the solar panel fiasco a while back.

Back to Keynes; he didn’t say fix stuff. He said borrow and spend, on anything. This was before the Fed printed up $4 trillion and spent it. Now if Keynes was right, because this is basically the same principle, we’d be standing in high cotton right now. And don’t forget the US government borrowed and spent a few trillions at the same time.

Look at wages. Look at debt to GDP. Look at labor participation. What we have here is the biggest confirmation in history that this theory doesn’t work.

“Critics are said to have blasphemed, or worse. All this in spite of the fact that it doesn’t work.”

It’s equally sacrilegious as suggesting that putting on a buzz on New Year’s Eve and the hair-of-the-dog hangover cure administered the next day don’t work.

What do these policies have in common? It’s the easy way out. All gain, no pain. We would laugh at anyone who applied this to their own lives, but if a bunch of goofs in DC say it, it must be true.

All gain, no pain.

More like pass the trash: Stimulate the crap out of the economy during your time in office and let your successor deal with the deflationary aftermath.

I found a small gold coin in a foreclosure and bought some green papers with it.

Anyone else here ever found gold, like Ben did?

“After a short conversion to a different currency.”

“…and bought some green papers with it.”

Which gets straight to my point: Ben’s lucky find notwithstanding, gold is an investment asset, not a currency. If gold were liquid, there would be no need for conversion to a currency printed on green papers before spending the proceeds.

DEFINITION of ‘Investment’

An asset or item that is purchased with the hope that it will generate income or appreciate in the future. In an economic sense, an investment is the purchase of goods that are not consumed today but are used in the future to create wealth. In finance, an investment is a monetary asset purchased with the idea that the asset will provide income in the future or appreciate and be sold at a higher price.

DEFINITION of ‘Currency’

A generally accepted form of money, including coins and paper notes, which is issued by a government and circulated within an economy. Used as a medium of exchange for goods and services, currency is the basis for trade.

Not I; but there was this great recent story about a gold find.

California couple auctions off $11 million worth of rare gold coins they found buried in yard
A Northern California couple discovered more than 1,400 gold coins buried in their yard last year. Now the coins, valued at $11 million, are up for sale. The couple plans to donate some of the auction money to charity and use the rest to pay off bills.
THE ASSOCIATED PRESS
Published: Wednesday, May 28, 2014, 9:42 AM
Updated: Wednesday, May 28, 2014, 9:42 AM
…

‘If gold were liquid’

Gold is extremely liquid. The reason I didn’t use it to buy stuff directly is because I can’t maximize the purchasing power, or get exact change. This isn’t hypothetical. Take a gold coin and go sell it. You’ll have your green papers in minutes. Of course, a gold backed currency would give you the advantages of both.

“Take a gold coin and go sell it. You’ll have your green papers in minutes.”

Tell that to someone holding on to gold purchased at the recent peak above $1800 an ounce. Sure he can sell in minutes — at a 33%+ loss. Same actually can be said for underwater homeowners — it may take a week to sell, but certainly no more than that, provided the owner is willing to price to whatever the market will bear.

“I doubt if you read the zerohedge article WAB.”

You’re right. But then I know enough about finance to have an independent opinion.

“I am convinced it is insurance and use it myself as a currency.”

That statement is self-contradictory, since insurance is an investment, which currency is not an investment.

P.S. In case it isn’t obvious yet, I’m also quite atheistic on opinions offered by zerohedge or anyone else with an agenda. I’m 99% certain whatever their argument was wouldn’t change my opinion on whether gold is an investment or a currency one iota.

‘Ron Paul asks the Bernanke if he thought gold was money. Bernanke almost swallows his tongue, stares blankly for a few seconds and then says, “no.”

So let me get this straight, banks hold billions of dollars of an asset that pays no interest or dividends on their balance sheet for reasons of “tradition”. nothing to do with anything else, just tradition. uh, yea. That must be it.’

I went and looked at that exchange on YouTube. Bernanke paused for a couple of seconds. It didn’t appear to me that he was staring blankly and nearly swallowing his tongue. Also, the reference to tradition was an answer to the question why gold, not diamonds.

‘the question why gold, not diamonds’

Diamonds have never been a good hedge against risk. I did read that the last Russian Czar had them sewn into his families clothes when they were executed, but it didn’t stop the bullets apparently.

This is all very simple really. Gold can’t be burned, corroded, easily counterfeited. It has a long history of reliability in transactions.

‘When the U.S. lifted its arms ban and agreed to supply Britain with guns, tanks and planes, it was on one strictly enforced condition - cash on delivery.’

‘While America reaped huge profits from these arm sales, the British government exhausted every expedient to meet U.S. invoices. From Cape Town in South Africa, an American warship collected Britain’s last £50million in gold bullion.’

Insurance and currency is not contradictory at all. I have more fiat than precious metals. It is both for insurance and currency. just like precious metals.

“It is both for insurance and currency. just like precious metals.”

If you are using the currency as ‘insurance,’ then you are holding it as part of your investment portfolio.

That’s a really informative article. It contradicts the establishments characterization of pre-WW2 US/UK relations.

Seems gold his the pinnacle for the US yet that reality seems played down.

More than ironic.

Same in all pro sports

Signed football shirts, shorts and balls - a must purchase for any die-hard fan.

But what about the hard-up players selling them?

With earnings of up to £35,000 per week you wouldn’t think any Premier League star would need to auction off their memorabilia.

But some do. As items owned by ex-England goalkeeper David James are up for sale we look at footballers who’ve played, earned and lost.

http://www.bbc.co.uk/newsbeat/29896728

Doesn’t stop them. I forgot it was there
I also quit answering the door altogether unless I am expecting a caller.