The Housing Bubble

It amazes me when attorneys pretend to be economists, and make total jackasses of themselves in the process.

Remember when the fake attorney told us oil had bottomed at $55, then it promptly dropped below $45? Obama must have “spiked the dollar” with his secret button in the White House.

It is below $1.80 this morning in my part of Phoenix.

Markets
Surge of Swiss Franc Triggers Hundreds of Millions in Losses
Brokerage FXCM Gets Rescue Package; Deutsche Bank and Citigroup Suffer Big Hits
Brokers around the world are crumbling in the wake of the Swiss National Bank’s shock decision to remove the cap on its currency. WSJ’s Tommy Stubbington reports. Photo: EPA.
By Ira Iosebashvili, Andrew Ackerman and Alexandra Wexler
Updated Jan. 16, 2015 7:02 p.m. ET

Banks, brokers and individual investors were left with hundreds of millions of dollars in losses a day after an unexpected surge in the Swiss franc sent shock waves through markets.

FXCM Inc., a major U.S. retail foreign-exchange broker, emerged as the biggest victim so far and had to be rescued by an emergency $300 million lifeline from investment firm Leucadia National Corp.

Shares of FXCM, one of the largest retail currency brokers in the world, were suspended on the New York Stock Exchange on Friday after the company said client losses on Swiss franc trades threatened to put it in violation of regulatory capital rules.

The two-year loan, with an initial interest rate of 10%, is “designed to maintain FXCM’s financial strength and allow it to prosper going forward,” said Leucadia Chief Executive Richard Handler .

FXCM didn’t respond to a request for comment.
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Credit Markets
U.S. Treasurys Post Biggest Weekly Rally in a Month
Demand for Haven Bonds Climbed Amid Uncertain Global Growth Outlook
By Min Zeng
Updated Jan. 16, 2015 4:12 p.m. ET

U.S. government bonds in the past week posted the biggest price rally in a month as demand for haven bonds climbed amid an uncertain global growth outlook and a deflation scare in Europe.

The market extended its weekly winning streak to a third week. A stunning policy shift Thursday from Switzerland’s central bank hammered that country’s stock market and generated sharp swings in currencies world-wide, adding to investors’ anxiety and boosting the allure of holding highly liquid U.S. government debt.

“People are scared, and they want to protect their assets,” said Andrew Brenner, head of international fixed income at National Alliance Capital Markets in New York. “Given what the Swiss did [Thursday], there is a flight to quality. There is also fear that central banks will not be able to prop up markets forever.”
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New York Times - Romney Signals Interest in 2016 Run for President

SAN DIEGO — Mitt Romney made it clear publicly on Friday night what he has spent the last week conveying in private to Republicans across the country: He is considering another presidential campaign.

“I’m giving some serious consideration to the future,” Mr. Romney, the 2012 Republican presidential nominee, told a group of Republicans gathered here for the party’s winter meeting.

In light of the french attacks, I suspect we (USA) better prepare for even less privacy…

“We were devastated and we just connected,’’ Vitale recalled. “We kind of knew that we would spend the rest of our lives together.’’

The humanity is touching. Where’s my silk handkerchief?

Mid-1964: While campaigning for president, Johnson says, “We are not going to send American boys nine or ten thousand miles away from home to do what Asian boys ought to be doing for themselves.” Yet, behind closed doors, he is planning to escalate the role of America in the war. — PBS Timeline of Vietnam

Being the world’s largest debtor nation is not conducive to being the world’s policeman as well the ultimate decision maker on who rules their own country.

If countries in the Middle East wants to organize themselves as purely Islamic societies, and they’re not going to f–k with us, really, what business is it of ours? Certainly we have interests in the region, and some local terror Mafia doesn’t have any business telling us what we can and cannot do.

If the Middle Easterners want to shape their region, their own boys should be the ones spilling their blood to get it done. Not our boys.

Politicians are insane. They are trying to kill us all so that their Armagadden will come true.

Why does the Cruz care more about Israel than his home country Canada?

The Hegelian Dialectic

The Anti-Human Principle
U.S. Pavlovian Conditioning

Revolutionaries in government have created economic chaos, shortages in food and fuel, confiscatory taxation, a crisis in education, the threat of war, and other diversions to condition Americans for the “New World Order.”

The technique is as old as politics itself. It is the Hegelian Dialectic of bringing about change in a three-step process: Thesis, Antithesis and Synthesis.

The first step (thesis) is to create a problem. The second step (antithesis) is to generate opposition to the problem (fear, panic and hysteria). The third step (synthesis) is to offer the solution to the problem created by step one: A change which would have been impossible to impose upon the people without the proper psychological conditioning achieved in stages one and two.

Applying the Hegelian Dialectic, and irresistible financial influence, concealed change agents seek to dismantle social and political structures by which free men govern themselves — ancient landmarks erected at great cost in blood and treasure.

Their objective is to emasculate sovereign states, merge nations under universal government, centralize economic powers, and control the world’s people and resources.

http://www.fhu.com/hegelian.html - 27k -

Big Pharma is the ultimate gateway. Get ‘em hooked on innocent looking little white pills, then watch them end up with a needle in their arm on some dingy alley way.

I wonder if Andrew Lahde is back in the game?

Qatar-ater

“… and 13,000 km of direct current lines in 2015.”

Are there any electrical gurus out there who would know why this should be, why they would build out DC transmission lines?

You neglect to mention that the reason for all that spending is that an agreement with the U.S. forces them to do it. China has a third world reliance on coal. Hopefully, this will catch them up with the rest of the developed world and they will quit dumping hydrocarbons into the atmosphere.

Lol

http://www.mediaite.com/tv/alan-grayson-releases-video-of-alleged-domestic-dispute-with-wife-she-hit-me/

I don’t think it is so much about stopping deflation as it is putting it indefinitely on hold through more hair-of-the-dog stimulus.

Of course everyone knows what eventually becomes of alcoholics who too often resort to the hair-of-the-dog hangover cure. The question is whether economies fare better or worse over time.

I sure hope my family members can offload the several houses they own free and clear before the next Minsky moment arrives. I’m optimistic for my parents, since we have collectively decided to sell for whatever the market may bear, which may not be much. Lil Sis has bigger problems, since my BIL is unwilling to give houses away at a dime less than he believes they are worth.

“Did you shed debt?”

Shed?
One must acquire before one can shed.

Comment by phony scandals
2015-01-17 10:31:19

NO INFLATION UNLESS YOU EAT FOOD, USE WATER, LIVE IN A HOUSE OR APARTMENT, HEAT YOUR HOME, GET SICK, TRAVEL, PAY CAR INSURANCE, GO TO SCHOOL, MAIL LETTERS, OR DO YOUR TAXES
theburningplatform.com/2015/01/16/no-inflation-unless-you-eat-food-use-water-live-in-a-house-or-apartment-heat-your-home-get-sick-travel-pay-car-insurance-go-to-school-mail-letters-or-do-your-taxes/

Mrs. Cleaver: “Wally, easy on the Beaver.”

It reminds me of the punchline from my all-time favorite Mormon church talk: “Them that understands interest, gits it. Them that don’t understands it, pays it.”

I know several Mormon families, and they all apparently “don’t understands it.”

Eventually one of the myriad recent or current stock market storm warnings is going to correctly predict a storm!

Streetwise
Storm Warning for the Stock Market
Several key figures suggest that the long bull run may be coming to an end.
By Jonathan R. Laing
Jan. 16, 2015 9:28 p.m. ET

We’ve witnessed five stock market swoons since last August, including two declines alone this month. Yet in the first four instances, the market averages came roaring back in V-shaped recoveries to make new highs. And only in one of the slides, in October, did stock indexes even flirt with correctionland, a 10% fall in prices.

Of course, the book has yet to be completed on the most recent decline, which started on Jan. 9. Perhaps it ended when stock prices rose on Friday after five straight sessions of decline. We’ll see. But one thing seems clear: Stock-market price volatility, after several years of quiescence, seems to have lapsed once more into a period of atrial fibrillation.

Big macroeconomic uncertainties are currently buffeting the stock market, but isn’t that always the case. The relentless drop in oil and other commodity prices has investors on tenterhooks over global deflation fears. A punk number in December retail sales has shaken confidence in the power of the U.S. recovery. Then last week’s decision by the Swiss National Bank to let their currency float against the euro shocked the currency markets.

We’ll leave such weighty macro issues aside for the time being to look at some more mundane technical stock market factors. These might give investors some pause in the months ahead, after six years of rallying stock prices.

For example, how often have we heard that the Standard & Poor’s 500, currently trading at a price of 17.8 times its trailing 12-month earnings, isn’t wildly expensive compared with the measure’s historical average price/earnings ratio of around 15? Jim Paulsen, chief investment strategist of Wells Capital Management and a longtime stock market bull, has hewed to that view, particularly in light of the seeming pickup in steam of the U.S. economic recovery last year.

Thus he admits to having been somewhat discomfited when he recently chanced upon figures compiled by finance professor Kenneth French of Dartmouth’s Tuck School of Business. The numbers, from the CRSP database at the University of Chicago, detail stock prices and returns on all listed stocks going back to 1926. Nobel Prize–winner French found, for example, that according to midyear annual data, the median U.S. stock price in 2014 stood at a post-World War II high of over 20 times earnings.

The median price-to-cash-flow ratio, at 15, was also at a postwar high. In fact, the median P/E alone had jumped from around 12 at the depth of the Great Recession in 2009 to the aforementioned 20-plus.

To be sure, market-capitalization weighted indexes like the S&P 500 have sold at even more outlandish P/E ratios—more than 30 times during the 2000 dot-com mania. But high median valuations covering literally thousands of listed stocks, equally weighted, can likewise lead to trouble. “It’s the very stealth nature of the overvaluation without the obvious, headline-grabbing signs of overexuberance” that Paulsen says concerns him.

He points out that after previous highs of the median P/E in 1962 and 1969—periods most comparable to today’s broad-based high valuations—nasty selloffs of 27% and 35%, respectively, occurred.
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Warning: Bond rates are going negative
By Matt Egan
January 16, 2015: 3:56 AM ET

NEW YORK (CNNMoney)
Investors are so nervous that they are basically willing to lose money when they buy some government bonds.

It’s part of the latest fad in finance that’s all the rage: “going negative.”

The yields on government bonds in Europe and Japan have dipped into the uncharted waters of negative territory. That means buyers of those bonds are essentially taking a loss just to hold onto those assets. They think their money is better off losing a few cents than putting it elsewhere.

“It’s basically a fee for fear,” said Nicholas Colas, chief market strategist at ConvergEx. “Fear of deflation, fear of volactility in other capital markets and general fear of the known.”

Below zero: Just look at Switzerland, where the yield on bonds fell further into negative territory this week after the country’s central bank dropped a bombshell on investors by scrapping a currency cap.

In addition to allowing the Swiss franc to trade freely against the euro, the Swiss National Bank lowered a key interest rate further into negative territory, from -0.25% to -0.75%. That’s like a bank charging customers to park their money there instead of paying them interest.

Switzerland isn’t alone in going negative. The yield on short-term government bonds of Belgium, Denmark, France, Germany, Japan, and the Netherlands are all sub-zero. Even short duration U.S. bond rates are barely above zero.

The Swiss central bank is trying to get people to spend and invest more instead of putting their money in the bank or in cash-like assets like short-term government bonds, but investors just keeping buying up these safe haven assets, sending yields even lower.

“The whole move is shocking. You have to take out a microscope to see the yields on a lot of this paper,” said Peter Boockvar, chief market analyst at The Lindsey Group. “People are strangely willing to pay for liquidity.”

No playbook for this: All of this is unprecedented in the history of modern finance. Yields of major government debt typically stay above water.

“It’s a glaring warning sign of deflation. We’ve never really had deflationary fears throughout such a widespread part of the world before,” said Phil Camporeale, a multi-asset specialist at JPMorgan Asset Management.

Central bankers and investors are still scarred by Japan’s experience with deflation when a scary spiral in lower prices caused more than a decade of lost growth.

“The current system has many things to commend about it but the one thing that makes it brittle is deflation. If prices don’t go up to encourage people to buy, their proclivity not to consume kicks in,” said Colas.

“As a central bank you have to manufacture inflation otherwise the wheels come off the whole construct,” he said.

Europe is ‘Jaw-dropping’: Alarm bells went off when consumer prices shrank in the eurozone in December for the first time since the Great Recession.

Fearing deflation, the European Central Bank is set to launch a massive new stimulus program aimed at boosting growth.

But the ECB printing press is also knocking yields further into negative territory. The thinking goes that if Spain, with all of its economic problems, can sell five-year bonds at less than 1%, then German bonds at -0.05% aren’t an awful deal, at least relatively speaking.

“It’s a bit jaw-dropping. It all makes you wonder: Do we really have a functioning global banking system when rates are essentially zero?” asked Colas.
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3 red flags causing the market to panic
By Patrick Gillespie
January 14, 2015: 11:52 AM ET

NEW YORK (CNNMoney)
It might not be as cold as last year’s Polar Vortex, but some winter warning signs are popping up for the U.S. and global economy.

Here are the three red flags spooking the stock market with the Dow dropping over 300 points at one point before closing down 187. They go deeper than the oil price meltdown that has received so much attention.

1. Americans are pulling back on spending. Retail sales dropped 0.9% in December, the critical holiday shopping month, compared to November. It was worst monthly plunge since the Polar Vortex halted much business activity last January. Consumer spending drives the U.S. economy, so any major pullback is alarming, especially around Christmas.

Consider that experts were only predicting a 0.1% drop in December.

While many shoppers have enjoyed low gas prices, gas stations were hit hard at the pump in December. Gas sales plummeted 6.5% last month, by far the biggest drop of any retail category, according to the Commerce Department. December’s gas decline was more than double what it was in November.

The news is not all bad: food and furniture businesses saw sales rise in December. But even some positive retail sales did not offset the overall loss in sales.

2. Keep an eye on copper’s dramatic fall: One growing global worry is the steep decline in copper, which is used in many products and is often viewed as good gauge on how China is doing. The price of copper hit its lowest price since 2009 on Wednesday at $2.46. Copper is down nearly 7% this week alone.

Investors are fleeing commodities, like copper, as oil prices continue to fall. Copper is also priced in dollars, which makes it less attractive to foreign buyers as the dollar strengthens.

The rapid decline in copper is raising fresh concern about the health of Asia and other emerging markets, although Capital Economics notes there wasn’t a clear catalyst for the large drop between Tuesday and Wednesday.

3. The global economy looks even worse: Worries are growing that the global economy is deflating. The World Bank slashed its global growth projections this week for 2015 from 3.4% to 3%. The World Bank also cut its expectations for 2016. Plunging oil prices are hurting OPEC nations, while Japan and Europe continue to suffer from deflation.

Japan’s government recently approved its highest annual budget, while the European Central Bank plans start an economic stimulus program soon. Leaders from nations that rely heavily on oil exports, such as Venezuela and Qatar, are convening this month to help save their economies from further decline.
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Let’s consider a few current economic facts:

1) The entire planet is looking towards America as the only hope for pulling the global economy out of its persistent malaise.

2) 67% of the U.S. economy is driven by consumption spending.

3) U.S. households are broke, as evidenced by the recent pullback in consumer spending.

4) The dollar is at a multi-year high, which portends a drop in U.S. exports.

Any thoughts on the implications?

All I know is the climate is not stable enough for me to predict a house I obligate to will be inhabitable 20 years from my purchase. Or that fertile farmland I buy now will be fertile in 20 years.

I love Phoenix but it is experiencing the heat island effect and the summer lows get higher every year it seems. You would think that would draw in even more moisture from the Gulf of Mexico and moderate things more.

A sister of mine lived in Tempe with her boyfriend in the late 80s and she said the rainstorms in the summer were like clockwork, starting at midnight usually. I spent two or three entire summers in Phoenix and never encountered such regular storms. In Tucson, in he 1990s the heavy rain would start at 4pm, like clockwork.

The heat island effect has been blamed for chasing away monsoons.

So why pretend change in your environment will not happen? Plunking down $hundreds of thousands is a huge gamble on climate.

Best to rent…everything.

It should not annoy you. If they have a yapper dog keeping you awak then maybe yeah. But…Yeah call a cop. I am sure nothing can go wrong with a cop around (eyes rolling).

“My new Chinese neighbors are parking their car with the passenger-side wheels on the sidewalk these days.”

They couldn’t do that so easily in Portland, OR.

The Bond Market Is Warning of Huge Trouble Ahead
Collapsing long-term yields reflect rising debt-deflation fears.
By Anthony Mirhaydari,
The Fiscal Times
January 15, 2015

Something odd is happening in the government bond market: Interest rates are pricing in a debt-deflation cataclysm.

How else can you explain the fact that the yield on the U.S. 30-year bond hit a record low of 2.4 percent on Wednesday? Or that Japanese and German 10-year yields are plumbing record lows? Or that five-year yields of bonds issued by Eurozone safe havens Finland, Germany and Switzerland are in outright negative territory?

Something is very wrong here.

For the U.S. 30-year yield, current levels have dropped below the lows set during the 2008 financial panic and 2012 pre-QE3 slowdown. And this is down from the post-recession high of 4.85 percent set in 2010 and a recent high of nearly 4 percent set in late 2013.

With stocks not far from late December’s record highs, with job growth surging, investor confidence at extremes, consumer and small business confidence high, GDP growth strong and the Federal Reserve telling everyone it’s preparing for its first interest rate hike since 2006, the bond market’s message comes off as downright weird.
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This calls for celebration.

2 Ways Crashing Oil Prices Could Trigger the Next Global Financial Panic
By Adam Galas
January 17, 2015

The recent crash in oil prices, the worst since the financial crisis, has left investors in oil-related stocks reeling, but U.S. consumers are cheering as gas prices have plunged nearly 40% to their lowest levels in five and a half years.

This has led some economists and analysts to speculate that declining energy costs will serve as a strong global economic stimulus. In fact, Citigroup estimates that low oil prices will contribute over $1.1 trillion in extra spending money to global consumers in 2015.

However, while most people are cheering oil’s fall as they drive past the pump, some analysts are also warning that the severity and speed of oil’s fall increases the risk of another financial panic, one on a potentially global scale. Here are the two biggest risk factors that could bring about such a worst-case scenario.
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Sunday 18 January 2015
Swiss franc shock triggers mortgage panic for wealthy homeowners
It’s a bad time to be a Russian billionaire owning a chalet in the Swiss Alps
The world’s largest Swiss flag is fixed by climbers on Mount Saentis (2502 metres/8209 feet above sea level) near Schwaegalp in the eastern Swiss Alps. The flag measures some 120 by 120 metres (394 by 394 ft)
Existing homeowners who hold a mortgage in Swiss francs will see their loan-to-value stretch following an announcement from the national bank that it has scrapped the euro currency peg. Photo:
By Anna White, Property correspondent
12:49PM GMT 15 Jan 2015

UK homeowners that hold a mortgage in Swiss francs will see their monthly repayments shoot up after the country’s central bank abandoned its currency peg to the euro, experts have warned.

Switzerland abandoned its exchange rate control and cut interest rates to -0.75pc this morning, sending the franc soaring against the single currency and the pound, triggering mortgage holders to panic switch to another currency.

Buying homes with Swiss francs loans was very popular at the height of the last boom, as the currency was seen as a safe haven investment and sterling-Swiss franc was a good pairing, explained Jeremy Cook, chief economist at the currency firm World First.

But following the collapse of Lehman Brothers and onslaught of the global financial crisis, the pairing has never really recovered.

“While there won’t be many people who have newly taken on such mortgages, there will still be some who hold that debt,” he said. “Following falls today, these loans will be 12pc more expensive.”
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