Bits Bucket for January 18, 2015
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The Housing Bubble
Examining the home price boom and its effect on owners, lenders, regulators, realtors and the economy as a whole.
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Name:Ben Jones
Location:Northern Arizona, United States
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Are we due for another round of panic?
Nothing has really changed to fix real problems in the economy. Lower rates have hallowed some people to refinance homes.We just went more in debt.I don’t see why people think another financial crisis wont happen when none of the problems have gone away.
Lower rates have hallowed some people to refinance homes.We just went more in debt ??
Not necessarily…Many people over the last couple of years likely refinanced their existing debt and got a boost to net monthly income due to reduced monthly payments…
…… and recommitted to years of debt service on a rapidly depreciating asset at a grossly inflated price.
The current mindset … if you buy it, and home prices go up, you win. If you buy it, and home prices drop, just stop paying the mortgage and squat … the bank loses. That is the game. You win or the bank loses. You never lose.
The current mindset is expressed in housing demand at 20 year lows and falling.
There are millions of underwater home-debtors and millions more being created.
Just how far underwater are you?
“You win or the bank loses.”
It’s the homeowner’s version of Heads We Win, Tails You Lose.
“likely refinanced their existing debt”
The stronger hands, perhaps. Perhaps.
You may or may not be able to squat all that long. In Joizee and CT, yeah - judicial foreclosure gives a lot of leeway to deadbeats or other people down on their luck. I am told over 490 days of breathing room.
In VA, not so much. Not a judicial state, you can just file the notices and start cranking. I don’t know how long it takes, but it would not be over a year. Pushing the process would take three months, I’m told. It would take me that long to get organized enough to evacuate.
There will be another financial crisis. No question. But, the central banks will do “whatever it takes” … a famous quote from Draghi. What does this mean? The central banks know deflation would result in a potential economic collapse. So, they will do what ever it takes to avoid deflation … they will go as far as currency devaluation if they have to. Eventually, the central banks will cause people to lose faith in the printed currency, and the big inflation spike will be on. I expect some of this spike to appear shortly. Look for bidding wars on real estate shortly. Once the inflation gets out of control, it will be game over for the central banks. So you should see a big jump in home prices, followed by an economic disaster once the central banks give up. What should you do? Enjoy your life. Find a nice girl and settle down. Good luck.
In the meantime prices continue to fall and we can thank central banks for making them fall faster.
Yeah, gasoline gets cheaper nearly every day. It’s hard to imagine that a “big inflation spike” will happen any time soon.
Well wages have been stagnant or declining the last few years. And real wages have been stagnant since 1989 as the zerohedge post today mentioned. The wage decline is now more severe. Combined with the severe student debt, the monetary inflation scheme looks like it will continue a few years. Whether or not house prices fall. I am even beginning to question whether the Fed even cares anymore about preserving house prices as it does in keeping watch on wages. Because declining wages, student debt, and severely overpriced stucco boxes are the real reason people won’t buy houses.
If the government really wanted an ownership society, their policies would be the opposite of propping up home values. there would be a return of high rates to lower the prices. You don’t own if you owe. You own if your house is paid off.
“I am even beginning to question whether the Fed even cares anymore about preserving house prices as it does in keeping watch on wages.”
If they want to jump start the economy, it would seem to make sense to allow the fundamental convergence between wages and home prices to play out, rather than continually driving a wedge between the demand side (U.S. households) and the supply side (home owners) of the market.
‘But, the central banks will do “whatever it takes” … a famous quote from Draghi. What does this mean?’
It means that the most reckless gamblers with money available to bet know the central banks have their backs; hence all bets are on, no matter how foolish or certain to lose money. The risk incentive to make crazy bets is quite likely to encourage endless rounds of gambling on projects which make no sense whatever from the standpoint of economic fundamentals (e.g. building never-to-be-occupied towers to the air in ghost cities).
I’m pretty sure they have already done everything in their ever-loving power.
That’s what those who predict high future inflation seem to miss. Given how much quantitative easing has already played out, with persistent and growing deflationary pressure to show for it, why would one expect inflation to suddenly and miraculously transpire from here?
The central banks can do a lot more beyond QE, and they will if deflation sets in. They can go all the way to currency devaluation if they need. Put your seat belts on.
And central banks have done nothing but drive prices and demand lower.
Why buy today when you can buy tomorrow for less?
Currency devaluation would be tantamount to wiping out another generation of retirees, similar to what happened in the 1970s.
I suppose you could argue that there is an existing precedent…
The world is riding a huge RE and Stock market bubble. But no country wants to fix it. Instead want to make it even bigger. I don’t think any panic would be there unless there is some catastrophic natural event.
I think this nonsense will keep going on and on and on for many many years. The central banks have the key of playing with interest rates and freely printing money. They want to make todays conditions as the new normal.
I was talking to some folks in Australia, young folks who say they have been priced out to be able to buy a house for the past decade and have no hope even in the future as their RE bubble is the biggest in the world and Govt doesn’t want to burst it due to fear of widespread recession in the country for a prolonged period.
Only hope they say if China has a hard landing, Aussie prices will come down by 50%. Now, China is another story which has been pretending for so many years about their growth and don’t want any uprising in their masses.
The RE bubbles across the World are intact and doing well. Be it Canada, Australia, S. Africa, China, Singapore, Brazil and many EU countries.
Countries with bubbles are:
Hong Kong,
Singapore,
China,
Israel,
Turkey,
Indonesia,
India, (Biggest bubble rank 1)
Brazil,
Canada, (Biggest bubble rank 2)
Australia, (Biggest bubble rank 1.5)
S. Africa
New Zealand,
Norway,
Sweden,
Finland,
France,
Germany and
UK
Canada, whoa. Under normal circumstances, they’d be screwed and still might be, you never know.
I’ll have a soft boiled egg, a slice of back bacon with some brown bread, a bag of ketchup chips and another bag of milk, eh. How many loonies?
With the crude oil price meltdown, Alberta real estate prices should crumble 75%.
It’s different this time in Canada, because it’s essentially an “oil patch” country, so it gets a double whammy. And it just may have exhausted its supply of Asian buyers.
I would think that as Xi escalates his campaign against corruption in China (meaning corrruption carried out by those other than his cronies), the flight of Chinese embezzlers to Canada and California will only increase.
And you forgot the US.
And you forgot the US.
US bubble was pricked well in 2008 but the power players just want to re-inflate it back to 2006-7 levels by printing more and more money and easy loans with almost zero down payments.
Major US areas with bubbles are California (San Fran, LA etc.), now even Texas, the biggest US RE bubble is in DC metro area, much of NYC. Please add all other major metro areas that are again very high in prices.
edit: ‘Please add all other major metro areas that are again very high in prices……. and falling.
It should be noted that housing prices are grossly inflated in all areas of the country.
“It should be noted that housing prices are grossly inflated in all areas of the country.”
There are a few noteworthy exceptions.
Ferguson Home Prices & Values
Zillow Home Value Index
The median list price per square foot in Ferguson is $42, which is lower than the St. Louis Metro average of $104. The median price of homes currently listed in Ferguson is $47,140 while the median price of homes that sold is $54,757. The median rent price in Ferguson is $800, which is lower than the St. Louis Metro median of $850.
…
The hard landing in China looks increasing unlikely, the decline in home prices there is already flattening out:
BEIJING, Jan. 18 (Xinhua) — China’s real estate market has extended its slump with new home prices in December registering month-on-month declines in a majority of surveyed cities.
Of 70 large and medium-sized cities surveyed, 66 saw new home prices drop in December from the previous month, according to data released on Sunday by the National Bureau of Statistics (NBS).
Meanwhile, new home prices were flat in Zhengzhou, Wuhan, and Ganzhou last month, while Shenzhen saw prices rise 1.2 percent from November, the NBS data showed.
For existing homes, prices in 60 cities fell in December from the previous month, while eight cities recorded gains, with the first-tier cities of Beijing, Shanghai, and Guangzhou seeing prices gain 0.2 percent, 0.4 percent, and 0.2 percent, respectively. Nanjing and Urumqi were flat in price growth, the data showed.
On a year-on-year basis, 68 cities saw new home prices decline in December. Meanwhile, 67 cities reported price drops for existing homes.
Despite widespread price drops, the rates of decline have narrowed for both new homes and existing homes on a monthly basis, according to analysts.
“On average, prices of new homes and existing homes in December in the 70 cities fell 0.2 percent and 0.3 percent respectively from a month ago,” said NBS statistician Liu Jianwei.
The rate of price decline fell by 0.2 percentage point compared to November for both new and existing homes, Liu said.
BTW, a few years ago Chinese houses were selling for 12 times family income, by a few months ago, they were down to 9. Chinese income continues to grow by at least 8% per year while housing prices are flat to slightly down per month. The average Chinese saves 30% of his or her income. Don’t ask me how they are that frugal on low incomes but they are. Thus, while housing is still in bubble territory in China, it is not too different from many places in California and on the East Coast and rapidly becoming more affordable. Particularly, since Chinese save far more than Americans and can afford to pay a far higher down payment.
The decline in Chinese home prices “flattening out” means nothing. Once again you have taken some momentary statistical blip and interpreted it as some sort of long term trend. The Chinese now understand that they can actually lose money in real estate, and that is a huge change in psychology. That was how the U.S. bubble first started to pop. Prices fell slowly at first as buyers became a little more aggressive on price, then they fell very fast after that. As more and more Chinese realize that the last one to buy will be the biggest loser, prices will drop even more as desparate sellers try to mitigate their losses. The biggest fools will be the ones holding the most empty apartments.
You are wasting your breath on this ignorant tool.
There is no point in trying to hold a conversation with Bring-a-Crayon Dan. He is a paid troll. He merely parrots the talking points that he was given. He knows they are wrong, but why should he care? This is how he earns a living, believe it or not.
“I think this nonsense will keep going on and on and on for many many years.”
The problem with the dominoes is that more than a handful of them are already tipped over.
It’s not a matter of “wanting to fix it”. It’s already crumbling so you don’t have to worry about it going on for “years and years”.
I hope you make it out alive.
Excellent post, Martin.
“I think this nonsense will keep going on and on and on for many many years.”
When it comes to house prices in my part of Region IV, I came to that conclusion in 2011.
What should have happened didn’t.
Exactly. Because government has tools to keep nominal prices of homes from dropping. It cannot raise them in real terms or create prosperity but it can keep nominal prices from dropping on a prolonged basis.
Just like they did in Japan. And China.
Oh wait…
China home prices fall as trends diverge among cities
English.news.cn | 2015-01-18 10:04:52 | Editor: Yang Yi
Photo taken on Jan. 16, 2015 shows residential buildings in Taiyuan, capital of north China’s Shanxi Province. Home prices declined in most Chinese cities in December as 66 saw month-on-month price drops among 70 surveyed cities, the National Bureau of Statistics announced on Jan. 18, 2015. (Xinhua/Zhan Yan)
BEIJING, Jan. 18 (Xinhua) — China’s real estate market has extended its slump with new home prices in December registering month-on-month declines in a majority of surveyed cities.
Of 70 large and medium-sized cities surveyed, 66 saw new home prices drop in December from the previous month, according to data released on Sunday by the National Bureau of Statistics (NBS).
Meanwhile, new home prices were flat in Zhengzhou, Wuhan, and Ganzhou last month, while Shenzhen saw prices rise 1.2 percent from November, the NBS data showed.
For existing homes, prices in 60 cities fell in December from the previous month, while eight cities recorded gains, with the first-tier cities of Beijing, Shanghai, and Guangzhou seeing prices gain 0.2 percent, 0.4 percent, and 0.2 percent, respectively. Nanjing and Urumqi were flat in price growth, the data showed.
On a year-on-year basis, 68 cities saw new home prices decline in December. Meanwhile, 67 cities reported price drops for existing homes.
Despite widespread price drops, the rates of decline have narrowed for both new homes and existing homes on a monthly basis, according to analysts.
“On average, prices of new homes and existing homes in December in the 70 cities fell 0.2 percent and 0.3 percent respectively from a month ago,” said NBS statistician Liu Jianwei.
…
‘but it can keep nominal prices from dropping on a prolonged basis.’
Not really. Not at all. Housing prices are sinking again.
“Because government has tools to keep nominal prices of homes from dropping.”
Silly, silly man.
Somebody has the tools to keep lots of houses off the market for years while the inventory is trickled out. I watched it happen.
You’re missing it, Martin. Bubbles and financial panics are two sides of the same coin.
PB, I hope you are right and we can see this go down and correct meaningfully in our lifetime. 2008 was a good time for this to have been cleaned up, but the central banks all over printed 8-10 times their GDP with excess liquidity all over.
It’s not a matter of being right. What goes up comes down as painful as I think that might be.
“2008 was a good time for this to have been cleaned up, but the central banks all over printed 8-10 times their GDP with excess liquidity all over.”
Last time they had the advantage of surprise. But now everyone expects bailouts to make them whole in the wake of a crisis and is hence gambling more fecklessly than ever.
A bubble is just two types of panic that occur in succession. The first panic is “better buy or miss out”. The second panic is “better sell or miss out”.
Yep. And in between those two types of panic are volatility traders who make money on the way up and then again on the way back down.
“I don’t think any panic would be there unless there is some catastrophic natural event.”
Please remind us of the catastrophic natural event that triggered the Panic of 2007-08.
I remember it clearly. I was in Venice, Italy in August 2007 with the flu, bedridden for three days. Eagerly reading HBB to hear the news of the rapidly declining secondary MBS market, I knew that was the start. No external event whatsoever.
Hurricane Katrina? After that hit, no one was defending Littleboots’ incompetence…
My recollection was that the year Katrina hit (2005) was a record setting year for hurricanes and a stellar year for real estate investors. I even remember an article by June Fletcher about Florida real estate investors chasing condo deals in the tail winds of hurricanes.
So no, this is not an example of a major natural catastrophe setting off a real estate crash, unless you believe this mechanism operates with a two-year time lag.
However, as Captain Credit Crunch pointed out, it was the collapse of the Markit subprime ABX index in December 2006 which got the ball rolling on the first wave of housing bubble collapse. So far as I am aware, this catastrophe was strictly man made.
…
The 2008 issue was partly real, and partly panic. Whenever the economy slows down, real estate drops substantially. That is normal. But, the 2008 event had another factor, outright financial panic pushed prices too low. Eventually the panic subsided.
2008 was the result of liquidity drying up. The panic came later.
And even greater panic to come.
Remember…. Hold onto every dollar you’ve got as they’re becoming more valuable by the day. You’ll be glad you did.
jt:
That always happens. Whenever a market is full of speculators, you will see prices shoot to the upside, and then shoot to the downside. 2008 was not different that time.
Right. It was no different than 1987, 1989, 1990, 1992, 1994, 1998, 2000, 2002, 2007-09, etc etc etc.
So are you saying “It will be different this time?”
That’s for you to ponder Jingle_Fraud. We already know the answer.
Martin: I was talking to some folks in Australia, young folks who say they have been priced out to be able to buy a house for the past decade and have no hope even in the future as their RE bubble is the biggest in the world and Govt doesn’t want to burst it due to fear of widespread recession in the country for a prolonged period.
There’s a very good reason central bankers and politicians love Reverse-Robin-Hood policies - they’re the beneficiaries. Either via the revolving door, or donations from affected companies, future employment opportunities or through personal investments. Actions speak louder than words, and with politicians and central bankers, there are many words:
One Member of Congress = 18 American Households: Lawmakers’ Personal Finances Far From Average
by Russ Choma
January 12, 2015
OpenSecrets.org
While the median net worth of an American family has declined by nearly one-third between 2007 and 2013, members of Congress have recovered quite well from the recession. The Senate’s median net worth went from $2.3 million to $2.8 million over that period, while for members of the House the numbers went from $708,500 to $843,507.
The median net worth of a member of Congress was $1,029,505 in 2013 — a 2.5 percent increase from 2012 — compared with an average American household’s median net worth of $56,355. Once again, the majority of members of Congress are millionaires — 271 of the 533 members currently in office, or 50.8 percent.
http://www.opensecrets.org/news/2015/01/one-member-of-congress-18-american-households-lawmakers-personal-finances-far-from-average
The young folks in Australia may have more to worry about going forward than being priced out of the housing market. When the Chinese bubble collapses, the Communist Party leadership could become more militaristic in a bid to rally the population and take by force what they view as rightfully “theirs.” Here is the Australian version of Red Dawn: “Tomorrow when the War Began” - a great movie if you have Netflix.
https://www.youtube.com/watch?v=f_KhErNyiq8&spfreload=10
I was thinking something like that. If China crashes, the Aussie job market will crash along with the Aussie housing market. Young people will see cheap houses but won’t have the jobs to afford them.
I’ve read that many Australians have had this fear in the back of their minds for the last 100 years. That’s probably a reason that they always participate whenever Washington decides to go to war.
So the past housing crashes, stock crashes, and the current oil crash don’t sway your opinion at all? Whenever a bubble is on, it seems that everyone forgets the mulitudinous recent and ongoing crashes that should give them pause.
So long as you can buy the dip and always make money, why worry?
He who panics first, panics best.
Are you referring to the Swiss central bank, or just making a general observation?
The Wall Street Journal
Switzerland could act on currency again, central banker says
Published: Jan 18, 2015 5:38 p.m. ET
Swiss Franc is ‘greatly overvalued,’ central bank President
Thomas Jordan says
By John Revill
ZURICH — The Swiss central bank is ready to intervene in the currency markets again to weaken the franc if necessary, the bank’s head said, just two days after the removal of a cap on the franc triggered a surge in the currency’s value.
Swiss National Bank President Thomas Jordan said the central bank was forced to scrap its policy of keeping minimum exchange rate of 1.20 Swiss francs a euro due to divergent economic developments and mounting risk from its euro-buying operations.
The bank will continue to monitor the situation and act if necessary, Mr. Jordan said in an interview with Swiss newspaper Neue Zuercher Zeitung.
“We have said goodbye to the minimum exchange rate,” Mr. Jordan said in the interview published Saturday. “But we will continue to consider the exchange-rate situation in our decisions and intervene in the foreign-exchange market if necessary.”
Mr. Jordan said the franc remains “greatly overvalued.” He said he expects negative interest rates introduced by the SNB to make the franc less attractive, but ruled out introducing capital controls to further weaken demand for the currency.
…
Swiss franc QE on the way?
Pin, meet housing bubble 2.0. Popperooo!
http://www.zerohedge.com/news/2015-01-17/pin-meet-housing-bubble-20
“We’ve never had a decline in house prices on a nationwide basis. So, what I think what is more likely is that house prices will slow, maybe stabilize, might slow consumption spending a bit. I don’t think it’s gonna drive the economy too far from its full employment path, though.” – Ben Bernanke – July 2005
Read.The.Whole.Thing.
New home builders’ admitting they are done on 2015.
I know Hoaxide will come in with cognitive dissonance and claim that if it starts to decline they’ll just do as before to keep it propped up.
Chemo does not always work the second time, and this article’s stats on comparing the homebuilders now to the peak shows it didn’t even really work the first time.
Also I don’t think they will be able to take action quick enough this time. It’s already too late.
Oxide lives in the permabubble area of and around DC. That can affect one’s worldview, so I like to cut oxide a little slack.
We’re seeing the standoff here in the Tampa Bay area between buyers and sellers. This is the point at which the corporate cookie cutter builders start cutting the knees out from under those who have purchased already, just to unload inventory. It’s going to be a very interesting season here in this part of Florida.
And I am reading your post while drinking from my souvenir Tampa Starbucks Coffee cup! I had a great place I rented in New Tampa in a mixed race area. Fond memories of paying under 950 for a two bedroom place on he third floor with a lot of space, full kitchen, and separate laundry room of my own!
Didn’t mean to be too harsh on oxide. She posts in good faith and is not a shill.
“It’s different” in DC because the government borrows money to create jobs. I would not have bought in DC without the stable job. There are fewer, and much less stable jobs in other cities. And it is reflected in the house prices.
Yet you could have rented the same square footage for half your carrying costs but you chose to ignore t hat.
Do donkey’s like cut slack? I always thought they preferred cut hay.
strike the apostrophe
she’s a fed governmentarain- a believer
Whoops there it is!
‘Real median household income is exactly where it was in 1995. It is currently below the level of 1989. Average Americans have made no headway in 20 years. The median price of a home in 1995, according to the Census Bureau, was $128,000. The median price of a home today is $281,000.’
Once again…. Do you really believe wages will double or triple to meet grossly inflated prices?
Of course not. This why prices are falling. And prices will continue falling until they meet wages.
HA, I also noted that paragraph. Funny how the text in black and white glared with its facts!
Most people you meet today who are not in the top 5% of income won’t dare bring up the point that the middle class has rapidly contracted since the endless wars begun. Many of these same people want more US military involvement. Useful idiots.
Military keeps kids out of the labor pool. Cut the military and they all will compete with everybody else for jobs.
Back to the canneries. In the central California farm area where I grew up, older boomers and people older than them would say they worked in canneries. Even in the Midwest parts of the USA it was not uncommon for whites to work in slaughterhouses. A cousin of mine, around my age did, back 20 years ago.
Military also is a way of offing young people in combat to draw down the population.
We are in a fascist society for sure.
My first job was cleaning a slaughterhouse in the evenings. I was 8 or 9.
My first job was cleaning toilets (age 17). Second was trimming weeds at a county park (age 18). Third was clearing shopping carts off the parking lot and disposing of waste in the department store trash compactor (age 19).
Work got steadily better thereafter.
It has nothing to do with the endless wars. It has everything to do with the endless outsourcing and the endless illegals.
offshoring, I think you mean.
This;
‘FNMA and Freddie Mac did their part by selling their bulk foreclosures to the same connected hedge funds. The average person had no opportunity to bid on foreclosed homes and reap the benefits of lower prices. Blackstone has since created a new derivative, by packaging their rental income streams into an “investment” to sell to muppets. Their rental properties are concentrated in the previous bubble markets of Arizona, California, Florida, and Nevada.’
Then this;
‘The areas of the country with the highest percentage of Wall Street owned rental properties have had the largest price increases over the last three years. Some people never learn. Blackstone and the rest of the Wall Street crowd stopped buying properties in 2014. They’ve achieved their objective – easy profits. They have no intention of being long-term landlords. They are seeking the greater fools to take these properties off their hands at inflated prices. The result will be rapidly falling prices, as there is no real demand for these properties.’
Let’s look look at this;
-25 MILLION excess, empty and defaulted houses
-Housing Demand at 20 year lows or 1995 levels as the article states
-Population growth at the lowest level in US history
-70 million boomers already starting to expire leaving 35 MILLION excess empty houses
-Resale Prices at massively inflated levels that are 250% higher than reproduction costs(lot, labor, materials, profit) that are just starting to fall
Now what do you think is on the menu?
The menu will be housing at a 70% special cut.
This paragraph is also chock full of what I have observed personally. And all my sisters are renting. One is kind of in a poor folks shelter as she is one of the “working poor,” and very Republican conservative. “You see, average Americans buy houses not as an investment, but as a place to live. They save enough for a down payment by spending less than they earn, and then make monthly payments for 30 years from their rising household income. Of course, that was the old days. Real median household income is exactly where it was in 1995. It is currently below the level of 1989. Average Americans have made no headway in 20 years. The median price of a home in 1995, according to the Census Bureau, was $128,000. The median price of a home today is $281,000. When prices go up 120% and your real income remains stagnant, even record low mortgage rates is just pushing on a string. With real wages continuing to fall, young people saddled with a trillion dollars of student loan debt, the full impact of the Obamacare neutron bomb (kills small business, doctors and jobs, but not insurance conglomerates or government bureaucracy) just detonating, and an economy clearly going into the tank, there is absolutely no possibility of a real housing recovery in the foreseeable future.”
So in 1995 real household income was at 1989 levels. That is no headway in 26 years.
That $281,000 is the probably the median price of a newly built house. Zillow has the national median at $177,600.
http://www.zillow.com/home-values/
Is it just a coincidence that the incomes are stagnant at around 1989 levels and the endless wars started shortly after that, in 1991? A lot of middle class wealth was siphoned off to use to kill brown skinned people of a different religion than your grandparents’ religion. For 24 years. The biggest profits went to the CEOs, boards of directors, and shareholders of defense companies, kickbacks to uniformed top brass, campaign kickbacks to McShameful politicians, charity to both sides of every conflict, training of two generations of rebels who turned against the allies, and so on. And the bankers. I am glad I got out of that. But it took Glenn Greenwald’s book and the RNC’s shameful treatment of Ron Paul to make me go the other way.
What gets me is they don’t even kill them off efficiently… a few hundred thousand here and there over a period of decades. In WWII, we killed white folks by the MILLIONS in just a few years.
If we’re going to war, I want to see many more deaths per dollar.
500,000 men,women and children killed in Iraq, alone since 2001.
http://www.huffingtonpost.com/2013/10/15/iraq-death-toll_n_4102855.html
Vs 60 million in 4 years.
True.
But we humans should have learned from the evils of war.
I know people today, even younger people, who tell me that they are glad the nuclear bombs were dropped on Hiroshima and Nagasaki.
My dad fought in WWII, and was stationed in New Guinea, so he was in combat against the Japanese. After the war, and years of being in and out of the hospital, he and my mom bought a house and a new neighbor knocked on the door. The man was kind and introduced himself and asked my dad if he did not mind that a man of Japanese descent would live next door. My dad turned it around and asked “would you mind if I was your neighbor?” They were good friends since then and the Japanese man and his family moved next door.
I was born in 1959. The baby next to my incubator was a Japanese baby born on the same day. Both our families became friends.
My dad was one of the big proponents of “People To People,” to bring the world together. Ike Eisenhower started that.
And Eisenhower also - shortly after that gave his famous speech warning of the military industrial complex. That speech was long lost by the Republicans of today. Very shameful.
Bill, thanks for sharing some very personal memories of your post-WWII friendly experience with Japanese people. I have had similar experiences with members of America’s “enemy” nations of the past century, including Japanese, Russian and Vietnamese people.
When you get down to it, the similarities outweigh the differences among ordinary citizens from most of the westernized or developing countries of the world. It’s a shame when political expediency leads to forced hostilities between peoples who by nature would prefer peaceful coexistence.
I’d be satisfied with just a few more moonrocks.
Deflation is wonderful.
I’m loving $2/gallon gas. Now I’m seeing prices of everything else just starting to tank.
Nice to see the dollar actually reverse to where you can buy gas at prices I say more than ten years ago! I feel young again!
It seems the frequent flier air miles also is a good thing to hold onto.
Yes. This flyer is for a pricy supermarket in Vegas; easily 25%+ more expensive than the rest. (They also carry regional favorites for transplants from the midwest and east coast.)
They appear to be changing their tune; gigantic banner outside “Thousands of Prices Reduced” .
88¢/pound for bell peppers, 88¢ for lettuce, 98¢ for chicken thigh… $3 for milk… holy crap. That’s about half what food costs in DC. And grass fed organic chicken thighs costs SIX times as much in DC.
It’s a good thing CraterTaters magically appear in your feed bag.
Friend visiting from NYC was shocked at the low prices here (she mentioned milk, particularly.) I complain that they’re high, but that’s because they’ve increased quite a bit in the past year - now obviously on their way back down again.
$2? That’s expensive. I am going to buy it for $1.70 today.
“Deflation is wonderful.”
… in that it makes cash the king.
And it makes debt really, REALLY suck.
I just would not fully trust the Dollar. It might be king, but the reign of that kingdom could be abruptly shortened by some other currency. Diversify.
Maybe the PRPFX, which had a dismal performance since 2011, would be a way to protect from he Dollar collapse.
In the meantime I feel safe with my 52 week T-Bills and savings bonds, and cash under my mattress.
“Diversify.”
BITCOINS! BUY THE DIP!
Bitcoins, silver, and the strongest fiat currency, if you can find one.
Silver is looking quite strong. It is actually my solar energy play.
I’d be tempted to buy bitcoins if I had a stash of gambling money. They can’t go much lower from here, right?
“They can’t go much lower from here, right?”
The lower that prices go the closer to the bottom these prices will get.
I don’t know. You can buy $10 worth and just mess around, Learn how to use wallets and addresses and study the block chain.
“They can’t go much lower…”
Good point. Governments everywhere are going to need to collect more taxes on a shrinking economic base. Government never attack tax avoiding plays like making up your own currency, right?
“Bitcoins, silver, and the strongest fiat currency, if you can find one.”
Swiss francs are looking pretty strong for the moment.
Swiss ETF FXF is already up 15% YTD. Thanks PB
De nada…
Did you shed debt like we’ve suggested?
The Swiss seem to like it:
https://sg.finance.yahoo.com/news/christmas-rush-cash-soaring-swiss-175252174.html
You’d think some savvy politicians would pick up on the unrestrained glee of the people at having actually *gained* purchasing power for the first time in years. I await the “Say Yes To Deflation” campaign slogans.
http://www.freepatriotpost.com/billionaire-soros-spent-33million-bankrolling-ferguson-demonstrators/#
I guess I’d riot if I was getting paid too!
Heh. He also funded the 2006 illegal immigrant demonstrations that took place all over the US. That must have cost a huge piece of change, but my guess is that a lot of the demonstrators got stiffed. I’m sure the organizers made out, though.
Hardly surprising that the financial mega-speculator who was most responsible for hand-picking Obama and grooming him to be our next president (f*** you, Obama Zombies, you gave Soros his money’s worth) is also financing street mobs.
http://www.dailymail.co.uk/news/article-2913625/Billionaire-George-Soros-spent-33MILLION-bankrolling-Ferguson-demonstrators-create-echo-chamber-drive-national-protests.html
Oxide you may have to move to China for a pay raise. BTW, the salary is a monthly salary, I had to check a few other articles on China Daily to confirm that, the primary reason for the rise is to reduce corruption:
Chinese mainland authorities have rolled out its long-expected plan to increase salaries for civil servants, Hong Kong-based Wen Wei Po reported on Sunday.
The pay raise plan, released by the State Council on Jan 12, covers grass-roots officials to ministerial level officials. The plan actually went into effect on Oct 1, 2014. This month civil servants will get their one-off compensation for salaries from the fourth quarter of last year.
The base salary for ministerial level officials will increase from the current 7,020 yuan ($1,130) to 11,385 yuan, while the salaries for the lowest level officials will jump to 1,320 yuan from 630 yuan, according to the plan.
The plan also said that in the future salaries for civil servants will be adjusted every year or every two years.
The newspaper quoted an expert saying that the first increase in salaries of civil servants seems big, but is still reasonable while taking inflation into consideration.
It is noteworthy that lower level officials are receiving a bigger increase, said the expert.
While increasing the level of base salaries, the plan also puts a freeze on the rise of allowances. Some allowances will be merged with the base salary. The allowances for ministerial level officials will be reduced by 650 yuan, while those for the lowest level officials will be down by 220 yuan.
On Wednesday, the State Council unveiled measures to unify old-age pension systems for enterprise employees and workers in government agencies and public institutions. In the past, corporate employees had to pay for their own pensions, while government staff enjoyed pensions without making any contribution at all.
‘Oxide you may have to move to China for a pay raise’
Yeah, we got a real genius right here.
Ben, I was joking.
I was too.
China is one huge paper tiger fraud. I believe little or nothing written about China, its products, services, finances, etc because I suspect nobody really knows what the true state of affairs is. There may be some truth written from time to time, but I have no way of weeding it out, so I don’t even bother.
Having said that, there’s much I don’t believe about the US, either. As one zerohedge commenter said regarding the pop of bubble 2.0 and the homebuilder data, KB Home admitted things were bad, and it’s probably worse than what they’re reporting.
“There may be some truth written from time to time, but I have no way of weeding it out, so I don’t even bother.”
Propaganda 101: Mix lies in with the truth and maybe you’ll land yourself a schmuck.
Again (and again and again) …
1. Dumb ‘em down.
2. Prosper.
“paper tiger fraud”
Like origami, you mean? That would be cool. A fraudulent tiger origami.
“I had to check a few other articles on China Daily to confirm that…”
Oxymoron of the day.
No worries, Bill Gates is working on turning Africa into the next Asia, so those pay raises will go away. AFRICA.
Interesting a Chinese truck driver is now making about $13,000 a year, the days of ten cents an hour are long gone. Business people are complaining but it is how the system is suppose to work, after the invisible hand employs the vast majority of people, wages are suppose to rise and even out the benefits of production. The Chinese policy is only backfiring for those that want to keep China a sweat shop with all the value added occurring outside the actual factory floor. Of course, George Soros would like to prevent wage growth from occurring in this country with open borders:
http://www.businessweek.com/news/2014-11-19/china-wages-policy-backfiring-as-cost-jump-means-sock-city-blues
“The Chinese policy is only backfiring for those that want to keep China a sweat shop with all the value added occurring outside the actual factory floor.”
This “Chinese policy” used to work when China had external markets to sell into (markets that were fueled by enormous quantities of debt) but it only “works” now (choke) because China has decided to provide for itself an internal market - one also fueled by debt.
Which, as with many things will “work” until it doesn’t.
Which, as with many things will “work” until it doesn’t.
Yes, but they have decades before it will not work anymore. Even their trade surplus continues to increase. By slightly reducing their rate of growth, they are getting bargain prices on commodities swelling their surplus and making many of their factories competitive again.
“… and making many of their factories competitive again.”
That’s great! Now all they need to do is find markets to sell into.
We are in the 9th inning of the “game” and China is in the 3rd. When Chinese are saving at our 5% rate instead of their 30%, they will be close to where we are. When China’s total governmental debt is not 60% but close to where we are now where the federal debt alone is over 100% of GDP, they will be where we are now. Right now in China businesses are shedding their debt by issuing stock. Many of the private businesses in China paid 20% interest, so these cost savings are huge and have turned many of these companies into profit machines. We have seen this game play out in the U.S. for decades but they have a long way to go until businesses are paying negative real rates like the U.S.
With the way things are crumbling globally, we’re in the first inning.
Remember… Take extreme caution as this begins to unwind and stay out of debt. You’ll be glad you did.
What does it matter when 50% of the working population is unemployed?
Remember…. Falling prices of all items is positively bullish, patriotic and good for the economy.
It’s amazing that that Business Week piece lacks any mention of inflation. Those wage gains are necessary to keep up with a vigorous inflation rate.
As for losing jobs due to rising costs, it’s spot on. Apparel manufacturing is moving to Vietnam, Cambodia and places that just barely have the infrastructure to support it.
The logistics involved in running those facilities are insane - six hour drives over muddy dirt roads that are washed out by the seasonal streams is pretty typical. You wouldn’t believe it…
Most of these countries are setting up “sewing schools” to teach 100s of young girls how to run the machines. And they’re trying to improve the roads.
Check your labels. You’ll be surprised at where your clothes and shoes are made these days. China will still be there but there are now many many others.
There is no “floor” for housing prices. Remember…. Owners go negative.
‘According to top secret documents from the archive of NSA whistleblower Edward Snowden seen exclusively by SPIEGEL, they are planning for wars of the future in which the Internet will play a critical role, with the aim of being able to use the net to paralyze computer networks and, by doing so, potentially all the infrastructure they control, including power and water supplies, factories, airports or the flow of money.’
‘During the 20th century, scientists developed so-called ABC weapons — atomic, biological and chemical. It took decades before their deployment could be regulated and, at least partly, outlawed. New digital weapons have now been developed for the war on the Internet. But there are almost no international conventions or supervisory authorities for these D weapons, and the only law that applies is the survival of the fittest.’
‘Canadian media theorist Marshall McLuhan foresaw these developments decades ago. In 1970, he wrote, “World War III is a guerrilla information war with no division between military and civilian participation.” That’s precisely the reality that spies are preparing for today.’
‘The US Army, Navy, Marines and Air Force have already established their own cyber forces, but it is the NSA, also officially a military agency, that is taking the lead. It’s no coincidence that the director of the NSA also serves as the head of the US Cyber Command. The country’s leading data spy, Admiral Michael Rogers, is also its chief cyber warrior and his close to 40,000 employees are responsible for both digital spying and destructive network attacks.’
So it’s saying we should have cash under the mattress, physical precious metals, collections of Colt 1911s and ammo, lots of Johnny Walker to barter with?
Don’t forget lanterns for light and a cheery glow. I love the galvanized, German-made Feuerhand 276s that can burn lamp fuel, kerosine, or even olive oil. These will be good to have on hand if or when the grid goes down.
http://www.vermontlanterns.com/content/german-hurricane-lantern-kit-18
Yeah, what’s scary is that all of my liquid savings — in cash or money market — are just digits on a screen. One hack, server crash or government edict away from changing the digits to zero.
You can pack away all the preparedness stuff you want, but how do you protect yourself from millions of stupid people casting votes?
I am thinking that renting a house in one of the safest neighborhoods of Gilbert, AZ (Mormon Central) or of Orange County, where I have space to store things and add a generator, might be a thing to do.
Is 2015 the hear the SHTF? then I certainly am not ready. Maybe in three years. Maybe 2016 might be the year they pull the plug and turn the military on us.
But people will take fiat, silver, even whiskey for barter. A good idea to get a place with a pantry to store canned goods.
Keep paper copies of your balances in a few safe, geographically diverse, locations.
Should be something we all do - all banks and everyone want to be “paperless”, but that means they are the only ones with records. Get/print paper copies of your account balances, insurance policies, etc, and keep them somewhere(s) safe.
Excellent point.
Paper copies without legal signatures will do you no good.
‘Paper copies without legal signatures will do you no good.”
Doesn’t it depend more on coming from an authentic source than whether there is a signature on it? I’ve never received a signed fund balance statement in memory. Hopefully that doesn’t mean the statements are not a legally valid confirmation of my holdings.
I’m with you perfessor - I did not sign anything to claim I invest in the funds when I opened up the funds. Same thing with my brokerage accounts. And I totally got out of some funds and bought new ones. I don’t think a signed statement is necessary. Particularly if you have bank records of contributing to the funds and you have statements YOU received that claim you own the funds. What about the 1099-Bs? If you pay taxes on the gains and dividends, then that is more than enough claim on that investment vehicle.
No, the United States will be the country that does this to someone else. It actually is a huge advantage being the richest country on Earth, with a military 10x as big as the second runner-up. And no one is going to barter for Johnny Walker, either. Stills aren’t that hard to operate.
For those who believe future energy price and interest rate increases are “in the bag”:
Sunday Journal
Investing for the Long Term
How to Play Trends That Will Move Markets for Years to Come
Consumers and companies are becoming more efficient in their use of energy. Bloomberg News
By Gregory Zuckerman
Jan. 17, 2015 8:38 p.m. ET
Investors often try to profit by betting on short- and medium-term shifts in stocks and bonds. But the real money comes from anticipating long-term trends, the kinds of changes that take place over many years.
That’s why some experts encourage investors to focus on shifts that may develop over the next decade or so.
…
Energy Prices
Oil prices have tumbled below $50 a barrel as rising crude supplies overwhelm meek global demand, upending financial markets and giving consumers a lift. Analysts don’t think the shift will last very long, though. Eventually, they say, global demand will outstrip the new supplies. The U.S. Energy Information Administration recently predicted that benchmark Brent global oil prices would hit $235 a barrel by 2040 as global consumption grows, amid a growing middle class around the world.
Experts were caught flat-footed by the remarkable supply of oil pouring out of U.S. fields, though. They could be just as wrong about demand over the next few decades.
For one thing, consumers and companies are becoming more efficient in their use of energy. The average American new car and truck will get nearly 55 miles a gallon by 2025, up from 24 miles in 2012. Chinese oil demand is starting to slow. Alternative-fuel vehicles, such as all-electric cars and hybrids, are gaining popularity. If the Chinese government can push citizens to embrace electric cars, an expected source of new oil demand could evaporate.
Google expects to roll out a self-driving car in the next five years. Any widespread embrace of self-driving cars could also cripple oil demand. Meanwhile, demand for urban living also will reduce auto use.
Ed Morse of Citigroup , one of the few analysts to anticipate the U.S. energy revolution, predicts global oil demand could drop to around 74 million barrels a day from about 93 million today, as global transportation shifts from a reliance on oil to plentiful natural gas.
The upshot: Be wary of investing in energy shares in the years ahead.
Low Interest Rates
Investors assume interest rates, held down by an aggressive Federal Reserve, eventually will rise, making it harder to make money. But Darren Pollock, portfolio manager of Cheviot Value Management, says rates could stay low for years to come, to bolster markets and deal with debt that’s built up throughout the economy. Tepid inflation also could sideline the Fed, some say.
“The U.S. held interest rates low from the 1930s into the late 1950s,” he says. “Japan has suppressed rates since the early 1990s. Markedly higher rates in the U.S. may not be something we see for a very long time.”
…
No lie shall go unrefuted.
‘CNN’s Jim Clancy resigns after anti-Israel tweets’
‘Anchor leaves Cable News Network after 34 years following controversial Twitter debate with pro-Israel activists over terror attack on Charlie Hebdo.’
‘A CNN spokesperson issued the following statement in response: “Jim Clancy is no longer with CNN. We thank him for more than three decades of distinguished service, and wish him nothing but the best.”
“To learn who rules over you, simply find out who you are not allowed to criticize” - Voltaire
He didn’t even say much that was critical. He just disagreed a little with some online commentators. Got thin skin?
This is one of the best pieces I’ve read on the issue, by someone who has been on the receiving end of what Clancy got:
http://takimag.com/article/hate_speech_derby_mohammed_vs_auschwitz_david_cole#axzz3PC7TmpuR
And because I know you’re busy, let’s just cut to the chase, the author’s conclusion about which is more dangerous in the hate speech derby
“So in the end, which is more dangerous?
Ernst Zündel underwent what can only be described as psychological torture during his odyssey of imprisonment in Canada and Germany. Germar Rudolf is back in the U.S. after his imprisonment in Germany, but he missed his child’s formative years. On the other hand, the murdered employees at Charlie Hebdo will never see, hear, read, or write anything again, or spend another moment with their loved ones.
It’s a toss-up. Do you want your mind scrambled, or your skull crushed? Times like this, I say: I’m grateful to be in the U.S., where my punishment these days comes in the form of editors in the mainstream press killing reviews of my book, no one wanting to employ me, and only a sparse few of my old friends wanting to hang out with me. The book thing ticks me off, and the “not earning an income” thing is irksome, but being left alone by false friends? It has its charms.”
In other words, criticize Israel or the Jews as a group, you get harassed or fired or otherwise psychologically persecuted. Criticize Mohammed, you’re dead.
And if you criticize Jesus, then you have nothing to worry about. Kinda funny how no one ever mentions that little quirk with the way things work, huh?
You wrote a book? What’s the title?
I didn’t write a book, that’s a quote from the author of the article.
+1. Maybe now Jim Clancy will be able to speak truth to power in a way he never could at the corporate media.
Another outcast to join the honest side. Maybe he will be happy with the new freedom to speak his mind and we will see him on alternative media. Like Paul Craig Roberts!
Not to mention David Stockman and Alan Greenspan…
I have not seen any links of criticism by Greenspan against government policies yet.
I have.
Greenspan Sees Turmoil as QE Boost to Markets Unwinds
By Matthew Boesler
Oct 29, 2014 7:35 AM PT
Photographer: Andrew Harrer/Bloomberg
Alan Greenspan, former Federal Reserve chairman and president and founder of Greenspan Associates.
Former Federal Reserve Chairman Alan Greenspan said he doesn’t think the Fed can unwind years of extraordinary stimulus without causing turmoil in financial markets.
“I don’t think it’s possible,” Greenspan said during an event today at the Council on Foreign Relations in New York, responding to a question about the likely market impact of the Fed’s exit.
The Federal Open Market Committee is poised to announce the end of bond purchases, finishing its third round of quantitative easing, when it releases its latest policy statement today at 2 p.m. in Washington.
While the Fed’s bond-buying program has been a “terrific success” in boosting asset prices, it hasn’t galvanized effective demand in the real economy, Greenspan said.
…
It’s sad. Greenspan is a ray of illumination compared to Bernanke and Yellen.
Labor Force Participation Rate Plummets To 37 Year Lows
http://data.bls.gov/timeseries/LNS11300000
This seems to be a trend without end…
Lovers of Argentine wine, might want to stock a few extra bottles as another centrally-planned economy is circling the drain with predictable consequences for producers.
http://wolfstreet.com/2015/01/16/what-the-heck-is-going-on-in-mendoza-with-my-wine/
‘The Justice Department on Wednesday issued a press release trumpeting its latest success in disrupting a domestic terrorism plot, announcing that “the Joint Terrorism Task Force has arrested a Cincinnati-area man for a plot to attack the U.S. Capitol and kill government officials.” The alleged would-be terrorist is 20-year-old Christopher Cornell (above), who is unemployed, lives at home, spends most of his time playing video games in his bedroom, still addresses his mother as “Mommy” and regards his cat as his best friend; he was described as “a typical student” and “quiet but not overly reserved” by the principal of the local high school he graduated in 2012.’
‘The affidavit filed by an FBI investigative agent alleges Cornell had “posted comments and information supportive of [ISIS] through Twitter accounts.” The FBI learned about Cornell from an unnamed informant who, as the FBI put it, “began cooperating with the FBI in order to obtain favorable treatment with respect to his criminal exposure on an unrelated case.” Acting under the FBI’s direction, the informant arranged two in-person meetings with Cornell where they allegedly discussed an attack on the Capitol, and the FBI says it arrested Cornell to prevent him from carrying out the attack.’
‘Family members say Cornell converted to Islam just six months ago and claimed he began attending a small local mosque. Yet The Cincinnati Enquirer could not find a single person at that mosque who had ever seen him before, and noted that a young, white, recent convert would have been quite conspicuous at a mosque largely populated by “immigrants from West Africa,” many of whom “speak little or no English.”
‘The DOJ’s press release predictably generated an avalanche of scary media headlines hailing the FBI. CNN: “FBI says plot to attack U.S. Capitol was ready to go.” MSNBC: “US terror plot foiled by FBI arrest of Ohio man.” Wall St. Journal: “Ohio Man Charged With Plotting ISIS-Inspired Attack on U.S. Capitol.”
‘The known facts from this latest case seem to fit well within a now-familiar FBI pattern whereby the agency does not disrupt planned domestic terror attacks but rather creates them, then publicly praises itself for stopping its own plots.’
‘The DOJ’s press release predictably generated an avalanche of scary media headlines hailing the FBI….”
… which sold a lot of newspapers and attracted a lot of viewers …
“CNN: “FBI says plot to attack U.S. Capitol was ready to go.” MSNBC: “US terror plot foiled by FBI arrest of Ohio man.” Wall St. Journal: “Ohio Man Charged With Plotting ISIS-Inspired Attack on U.S. Capitol.”
And the symbiosis between the government and the media is thereby strengthened.
Thanks Ben. My family believes Fox or CNN is gospel and they are glued to the televisions. Therein lies the problem. They don’t understand my Facebook shares. And I share pretty much the same kind of stuff you guys comment about.
There used to be a legal concept called “entrapment”. Whatever happened to that?
Looks like capital flight from Russia (mainly in the form of oligarchs parking their ill-gotten gains abroad) is hitting record levels. Bullish for Mayfair Mansions, perhaps, but also looks like a leading indicator of a pending systemic financial crisis.
http://www.businessinsider.com/russias-net-outflows-reached-record-1515-billion-2015-1
And they told us there is an embargo on Russia.
The great leveraged junk bond bubble that enriched Wall Street while financiing shale oil plays predicated on $100 a bbl oil is looking mighty shaky. In order to get financing, many shale oil producers had to lock in floor prices of $70 per bbl or more via hedges (derivatives): whatever financial institutions were counterparties to that hedged production are experiencing some major rectal bleeding right about now, as will taxpayers when we once again have to make good Wall Street’s gambling losses (thank you, Obama Zombies, McCain Mutants, and Romney Retards for your votes for the larcenous crony-capitalist status quo).
http://wolfstreet.com/2015/01/16/money-dries-up-for-oil-gas-layoffs-spread-write-offs-start/
Welcome to the Obama-Fed-Goldman Sachs “recovery.” Comrad Pelosi’s importation of millions of Central American votes-for-entitlements lifetime Democrats for her permanent Democrat Supermajority is going to mean even more impoverished schoolkids for local municipalities (and their permanent Democrat administrators and NEA collectivists) to look after.
http://www.zerohedge.com/news/2015-01-18/welcome-oligarch-recovery-majority-public-school-students-are-poverty-first-time-50-
I don’t care how poor y’are, you should still be capable of wiping your own bottom, and if not, you’re too young to be in school.
As we sink deeper into IDIOCRACY, bottom-wiping may become optional.
Forbes: The End of the Partisan Divide Over Climate Change
Sentiment is beginning to shift towards more acceptance of climate change. Even the American Petroleum Institute is on board with climate change as a threat to the economy and they even welcome solar power:
http://www.forbes.com/sites/tomzeller/2015/01/18/the-end-of-the-partisan-divide-over-climate-change/
Building solar cells not only increases oil consumption, it pulls it forward drastically.
To conserve a precious resource, we must waste it!
The smart folks at the API know that solar power is an intermittent power source and has to supplemented by other sources to avoid power interruptions. Gas or coal usually plays that role. Thus API can embrace solar because it creates a hydrocarbon market while scoring “green marketing points” by sounding like eco-friendly good guys.
‘Historically neutral Switzerland’s foray into the global currency war ended in defeat this past week after its central bank left markets shell-shocked by abandoning the franc’s exchange rate floor, analysts said. The move caused plenty of collateral damage: stocks in Swiss companies heavily dependent on exports were devastated. It engulfed eastern European neighbours whose mortgage debt is denominated in the franc, and wiped out at least two international foreign exchange brokers.’
‘Agnes Benassy-Quere, a professor at the Paris School of Economics, said “it seems an exaggeration to talk about a currency war when one sees in the world floating exchange rates and the free movement of capital.”
‘She thinks the adjustments in the exchange rates of currencies often reflect a “good functioning” of the system in which Switzerland was an anomaly with its rate floor.’
The Swiss “had taken a course that’s used infrequently” and “weren’t playing the game of financial globalisation,” she said.’
Buy your Swiss chocolate now or be priced out forever!
http://www.dailymail.co.uk/news/article-2915018/EUROGEDDON-shocking-new-price-Swiss-cheese-chocolate-means-Europe-s-single-currency-dream-heading-disaster.html
or your swiss watches!
On that note, I’m headed upstairs to enjoy a piece of the Toblerone chocolate I received as a Christmas gift.
State Capitalism and the US mortgage market.
So the value of a house comes from the ability to “consume” it - use the benefits it provides. And for sufficiently large mortgages, tax advantages. And finally, value comes from the ability to flip the house for more money in some timeframe.
The government and central bank have aggressively encouraged speculation in houses, by guaranteeing virtually the entire mortgage market. They take speculative debt and turn it into a government-backed security. After the 2008 financial crisis, the mortgage market was nationalized. Before, it was a public-private hybrid. But that model imploded. However the profits to top political donor companies, and the personal portfolios of politicians and treasury officials had to be protected.
The question is where does it go from here? Will expenditures on the state-owned-enterprises (Fannie, Freddie, FHA, USDA, VA, etc) be sufficiently small as to be continued indefinitely? What about the millenials’ desire to buy houses? What about peak debt?
There’s been no significant reform in the system. Too Big To Fail - which allows big financial companies free reign to engage in risky activities and yet be insured by the taxpayer, still exists. Creative destruction at the top has not been allowed, where it is most desperately needed. This was the core benefit of the government interventions - it protected the positions and fortunes of the architects of the crisis. To be fair, most politicians have survived the elections since 2008, so the electorate seems to be generally okay with it. I expect the government to remain under regulatory capture for some time.
It seems to me the question really is, will the FIRE sector tell politicians to make changes to the system due to falling profits? Mel Watt has already loosed up credit standards at the big State Owned Enterprises, Fannie and Freddie. Loosened credit standards are the easiest way for the FIRE sector to make money, with government insuring the debt. Mr. Watt assiduously avoids any mention the toll low credit standards take on the marginal buyers, as running marginal buyers through the wringer is very profitable for the FIRE sector.
Ultimately, house prices are where they are due to government and central bank intervention. This is generally considered a positive point for existing asset holders. Bob Toll said that the new paradigm would be that young people would live with their parents till their 40s and then when they buy, when they have a second child, and they’ll pay 45-50% of their income to service the debt. The only reason for this is government and central bank support of house prices. Will this model be acceptable to millenials?
Sen. Feinstein’s husband to make $1B off new insider deal
January 18, 2015 10:50 am EST
More shady deals emerge despite the $18T national debt
CALIFORNIA (INTELLIHUB) — You know how they all do it, obtaining no-bid contracts for their private corporations, insider deals, solicitations, the scandals run deep in Washington for sure.
And now Democratic California Senator Dianne Feinstein has managed to help get her husband an insider government deal worth around $1 billion, which is mere chump change when compared to the national debt of $18 trillion that others have looted.
According to Page Six:
The US Postal Service plans to sell 56 buildings — so it can lease space more expensively — and the real estate company of the California senator’s husband, Richard Blum, is set to pocket about $1 billion in commissions.
Blum’s company, CBRE, was selected in March 2011 as the sole real estate agent on sales expected to fetch $19 billion. Most voters didn’t notice that Blum is a member of CBRE’s board and served as chairman from 2001 to 2014.
Se. Dianne Feinstein’s wealth is said to already be $70M. Now some wonder what the spousal support may be.
http://www.intellihub.com/sen-feinsteins-husband-make-1b-off-new-insider-deal/ - 80k -
Why do you hate capitalism? And stop your war on womyn!
If you like your crony capitalism, you can keep your crony capitalism….
The Middle East could be heating up. Bullish for oil?
http://www.businessinsider.com/an-israeli-airstrike-killed-at-least-one-hezbollah-commander-in-syria-2015-1
The escalating war in Ukraine has been relegated to the MSM memory hole.
http://www.theburningplatform.com/2015/01/18/ukraine-in-full-scale-war-u-s-msm-silence/
Low demand + high supply = MASSIVELY FALLING PRICES
when do you think the chinese will unpeg their currency like the swiss did to the euro?
What are the impacts for dollar holders?
crater taters will be in high demand!
They won’t unpeg, as that would cream their export markets. Rather you can expect them to keep snapping up U.S. Treasurys at bubble valuations in order to suppress the renminbi’s value.
then why don’t all the economies heavily dependent on exports to the US peg to the dollar?
Can the chinese economy withstand the inflation that is caused by the PBOC printing to mop of dollars for much longer?
what would happen to the value of dollar denominated chinese reserves if they unpeged?
“Can the chinese economy withstand the inflation that is caused by the PBOC printing to mop of dollars for much longer?”
They appear to be stuck between the rock of high consumer price inflation and the hard place of increasing unemployment if they unpeg their currency and lose exports.
This article makes me wonder if AlbqDanEsq is a hired mouthpiece for Megabank, Inc.
Stockswatch
Falling oil’s next victim: banks
By Matt Egan
January 16, 2015: 8:11 AM ET
NEW YORK (CNNMoney)
Big energy companies aren’t the only ones losing out on the dramatic fall in oil prices. Banks are in the hot seat, too.
Hundreds of banks were forced to shut down in Texas when the state fell into a recession in 1986 during a steep decline in oil prices. That 1980s meltdown mirrors the current drop in prices that carried oil below $45 a barrel this week.
Cheap credit helped fuel the U.S. shale boom, allowing countless energy companies to find oil in new places. Banks also capitalized on economic booms in oil-rich regions like Texas and North Dakota. It would only make sense for these same banks to feel some pain from oil’s downward spiral.
Drilling projects that made sense at $100 may now be losing money, creating headaches for the lenders that financed the expansions. Some highly-leveraged shale companies may even go belly up due to the plunge in oil prices.
But there’s also the economic fallout of the energy meltdown. It’s great for consumers saving money on gas, but Texas is bracing for a wave of layoffs and a possible oil-fueled recession. Other big energy regions like North Dakota, Oklahoma and Alaska are also facing economic headwinds.
Bank losses likely to grow: If the oil plunge causes certain economies to stumble, banks are likely to be hit by higher credit losses and a slowdown or even decline in loan growth. Likewise, fees for wealth management and customer activity could be dented.
“If you’re a small bank in Texas or North Dakota, the risk goes well beyond drilling for oil or gas. You funded the mobile homes that workers live in, the doctor’s office and other facilities that live off the energy industry,” said Dick Bove, a banking analyst at Rafferty Capital Markets.
“There’s no question about the fact that energy is going to be a big issue for banks, particularly the ones closely associated with production areas,” he said.
The U.S. banks with at least $1 billion in assets that have the greatest percentage of deposits in these regions are International Bancshares (IBOC) (42.4%), Guaranty Bancorp (GBNK) (39.7%), Cullen/Frost Bankers (CFR) (35.9%), CoBiz Financial (COBZ) (26.6%), First Interstate (FIBK) (17.3%) and National Bank Holdings (NBHC) (16.3%), according to Morgan Stanley.
Exposures for certain banks mount if the analysis includes Houston and Dallas, two metro areas that may experience oil fallout as well.
Including Houston and Dallas, Cullen/Frost’s exposure soars to 78%, while Prosperity Bancshares (PB) comes in at 37% and Zions Bancorp (ZION) hits 24%, according to Morgan Stanley.
Too big to feel oil tumble? Even Wall Street banks are facing questions about the impact of falling oil prices.
While just a small fraction of their total loan portfolio is directly tied to energy lending, Bove estimates around 20% of their investment banking revenue comes from energy.
JPMorgan Chase (JPM) CEO Jamie Dimon, in a call with analysts this week, acknowledged there may be “slight negatives” for the bank related to commercial and real estate trouble in Dallas, Denver and Houston.
Yet the big banks are well diversified. That means they should benefit from the anticipated boost to consumer spending caused by lower oil prices.
The oil price slide is “not going to be a big deal” for JPMorgan, Dimon said.
…
“Falling oil’s next victim: banks”
Stay tuned on this one.
Iran Blames Oil-Price Plunge for Delay in Minister’s Saudi Visit
By Ladane Nasseri
Jan 18, 2015 1:00 PM PT
A meeting between the foreign ministers of OPEC’s Iran and Saudi Arabia was delayed in part due to discord over falling crude prices, said Hossein Amir-Abdollahian, Iran’s deputy foreign minister for Arab and African affairs.
Saudi Arabia, the world’s biggest oil exporter, made an invitation in May to Iran’s Mohammad Javad Zarif for talks in the kingdom with his Saudi counterpart Prince Saud al-Faisal. The visit, postponed a few months ago because of differences over the Syria conflict, has been pushed back again “due to oil-price declines,” Amir-Abdollahian said on Al-Alam state-run television, according to its website.
Oil producers in the Persian Gulf region, including Saudi Arabia, “are expected to make efforts to stop the fall in oil prices and not let the decline have a lasting impact on oil-producing nations’ economies,” Amir-Abdollahian said, according to Iran’s Al-Alam. Brent crude has dropped 53 percent in the past year.
Sunni-ruled Saudi Arabia and Shiite-led Iran are at opposite ends of some of the Middle East’s major crises, including in Syria. Saudi Arabia backs rebels seeking to overthrow Syrian President Bashar al-Assad, an ally of Iran. Saudi Arabia and neighboring Kuwait opposed Iran’s unsuccessful effort to persuade the Organization of Petroleum Exporting Countries to cut output at its last meeting on Nov. 27.
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Contrary to AlbqDanEsq’s hopeful prediction for a return to $100+/bbl oil by the end of 2015, similar collapses in the past have left prices in the basement for 5+ years.
Oil Collapse of 1986 Shows Rebound Could Be Years Away
By Mark Shenk
Jan 13, 2015 4:00 PM PT
The last time excess supply caused a plunge in oil, it took almost five years for prices to recover.
The CHART OF THE DAY shows how West Texas Intermediate, the U.S. oil benchmark, tumbled 69 percent from $31.82 a barrel in November 1985 to $9.75 in April 1986 when Saudi Arabia, tiring of cutting output to support prices, flooded the market. Prices didn’t claw back the losses until 1990. Oil has dropped 57 percent since June and OPEC members say they’re willing to let prices sink further.
Surging prices in the 1970s led to the development of the North Sea and Alaska oil fields. OPEC members also increased capacity, leaving the Saudis to trim output when demand softened.
In the 1980s, Saudi Arabia “was tired of the other members cheating and just opened the spigots,” Walter Zimmerman, the chief technical strategist for United-ICAP who predicted last year’s drop, said by phone from Jersey City, New Jersey yesterday. After the plunge in prices “the Saudis lost their nerve and they resumed the role of swing producer. If they hadn’t lost their nerve, we wouldn’t be seeing the shale oil boom today and North Sea production would be substantially lower because investment would have been less,” he said.
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Futures Movers
Oil prices slightly lower but likely to remain volatile
Published: Jan 19, 2015 1:59 a.m. ET
Markets watching ECB, macroeconomic data
By Eric Yep
Crude-oil futures were down in Asian trade Monday and traders expect oil prices to stay volatile this week with little evidence of stronger demand or tighter supply to support a solid rebound.
On the New York Mercantile Exchange, light, sweet crude futures for delivery in February traded at $48.40 a barrel in recent trade, down 29 cents in the Globex electronic session. March Brent crude on London’s ICE Futures exchange fell 33 cents to $49.84 a barrel.
The two main oil benchmarks ended last week on a mixed note. Nymex February crude gained 0.7% last week, snapping a seven-week losing streak. Brent crude for March lost 2.2% last week and has been down for eight consecutive weeks.
“Despite a nearly 60% fall in oil prices since mid-2014, oil market balances remain weak, with prospects of a recovery looking dim until the latter months of 2015, in our view,” Barclays analysts said in a report over the weekend.
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“…vertiginous…”
Love that word!
Commentary
Jan. 19, 2015 | 12:13 AM
Lower oil prices portend sharp changes
Chris Miller| The Daily Star
Oil shocks four decades ago transformed the world economy and geopolitical landscape, and the latest oil crisis threatens to do the same. The price of oil hovered near $100 per barrel during the past three years, and the recent vertiginous fall in price to near $50 per barrel has sent markets reeling. Ali al-Naimi, the oil minister of Saudi Arabia, considered the industry’s most powerful decision maker, said oil could fall to $20 a barrel.
While oil-consuming nations celebrate, the exporting nations anticipate unprecedented economic and political challenges. Most countries are importers of oil, so they will benefit from lower prices.
Lower prices improve economic prospects by way of two main mechanisms: The first is through better public finances. In many developing countries, governments heavily subsidize energy usage by selling fuel for automobiles far below the market price. These policies have been destructive on many levels. By reducing fuel prices, such subsidies discourage fuel efficiency, exacerbating global warming. And they impose a dangerous burden on public finances because governments are on the hook when oil prices increase. Though fuel subsidies are often rhetorically justified on the grounds that they help the poor, research suggests that in most countries the middle class receives the bulk of benefits.
Some developing countries have taken advantage of lower prices to cut or eliminate fuel subsidies. When prices are high, scrapping subsidies shifts costs to consumers and risks political backlash. Now, however, extremely lower oil prices provide political cover to undertake tough reforms. Indonesian President Joko Widodo, for example, is developing a plan to sharply cut fuel subsidies and redirect public spending to more productive uses, such as infrastructure or education. If more countries follow Indonesia, the policy changes facilitated by lower oil prices will underwrite more economic growth for years to come.
The second mechanism by which oil consumers benefit from lower prices is straightforward: households have more money to spend on other goods. In the United States, for example, consumers spent $370 billion on gasoline in 2013, according to analysis from Goldman Sachs. That constitutes roughly 3 percent of total household spending. Lower prices may save American consumers $125 billion over the coming year. Chinese consumers are less avid drivers than Americans, but they too will notice the economic effects as energy costs influence the price of food – Chinese spend near 27 percent of their income on food while Americans spend about 6.5 percent. Indeed, across the world, consumers will experience similar windfalls if oil prices stay low. In economic terms, this will function as a medium-size tax cut and boost consumption as people can afford to buy more goods or save.
Both the short and long-term effects of lower oil prices bode well for the global economy. But there are downsides, too, including threats for Japan and the European Union. Japan has suffered from years of falling prices and low inflation, and the governor of the Bank of Japan, Haruhiko Kuroda, has declared a goal of returning Japan to “normal” levels of inflation, meaning an increase in prices each year of at least 2 percent.
Similarly, falling prices in Southern Europe coupled with stagnation in Germany threaten to pull the entire eurozone into sustained deflation, thus dragging down regional economic growth yet further. For both Japan and the EU, lower oil prices complicate monetary policymaking as central bankers currently look for higher, not lower prices.
Japan has already embarked on one of history’s largest programs of so-called “quantitative easing,” by which the central bank increases the money supply in order to spark gross domestic product growth and higher prices. Many economists have urged the EU to do the same, but complicated politics – and the Germans’ aversion to active monetary policy – restrict Europe’s ability to enact an expansive monetary policy.
Although lower oil prices will likely help repair family budgets, central bankers in Europe and Japan are wary that falling oil prices will lead consumers to expect falling prices in the future. Consumers’ expectations about price movements have significant effects on spending habits. If they expect lower prices in the future, they may put off purchases, threatening overall reductions in consumer spending and economic growth.
The biggest losers from lower oil prices, however, are countries that depend on energy exports. Many of the Gulf exporters, such as Saudi Arabia and Kuwait, are rich enough to survive a period of low prices with only a bit of belt-tightening, though even Saudi Arabia posted a budget deficit this year. If oil prices stay low for a period of years, the Saudi social contract may face a wrenching revision. That is a long-term prospect, but other countries, such as Iran, Venezuela and Russia, are suffering immediate financial crisis as reduced oil-export revenue wrecks government budgets and sends those economies into a tailspin.
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Business Day
What’s So Bad About Cheap Oil?
JAN. 17, 2015
Pumping oil near Williston, N.D., in March 2013. Low oil prices are bad news for boomtowns like Williston but could be a windfall for the overall American economy. Credit Shannon Stapleton/Reuters
By GRETCHEN MORGENSON
The sharp drop in oil prices will benefit American consumers, many of the nation’s businesses and the economy as a whole. So why are stock market investors behaving as though oil under $50 a barrel and gasoline prices hovering around $2 a gallon are bad news?
The overall market’s recent decline reflects more than just the free fall in oil prices. Overseas economies are struggling; last week, the World Bank cut its forecast for global growth to 3 percent from 3.4 percent.
But fears about losses emanating from a devastated oil patch have weighed heavily on broad stock indexes, investment strategists say. This response appears to be a case of investors seizing on the industry’s highly visible losers while ignoring the far larger number of winners.
“The stock market has reacted negatively, and some of that comes down to the fact that you can see what the impact is on large energy firms,” said Paul Ashworth, chief North American economist at Capital Economics in Toronto. “It’s harder initially to see the positive impact that spreads around the rest of the economy. The big benefit to consumers is not as noticeable.”
Since the beginning of 2015, the broad market averages have lost roughly 2 percent of their value. The collapse in oil company shares, of course, has been far greater.
The Standard & Poor’s index of 80 oil and gas exploration companies is down 11.14 percent in 2015 and 35.4 percent over the last 52 weeks. The S.&P. index of six large oil services companies has fallen 5.2 percent so far this year, and 12.4 percent over the last year.
Both indexes reflect the undeniable pain that oil and gas producers, their investors, suppliers, service providers, workers and lenders are going to feel.
Layoff announcements, disclosures of capital spending cuts and falling rig counts are all highly visible to investors. So are anecdotal tales of woe from former boomtowns in North Dakota.
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Got dollar spiking?
Why are oil prices falling?
Category: Oil & Gas, Second Lead
January 18, 2015
Oil prices became the main topic that closed 2014 and the main topic to begin 2015. Many people are facing up to the crude awakening of a consistent drop in world oil prices in a manner never seen before.
The oil industry, with its history of booms and busts, appears to be in the latent stages of its latest downturn. Since June 2014 the price of oil has plunged more than 55% to $47 a barrel as at the second week of January 2015; that is the lowest price since the depth of the 2009 recession.
Oil analysts predict that the price could fall below $40 before it rebounds. The fall of oil prices has been so steep that not a business day goes without mention of a new drop in price, prompting business people and decision makers to wonder how suddenly unpredictable the terrain has become and they are taking measures to counter the numerous challenges posed by the fall in price.
Slippery Slide
The key factor causing the continuous slide in the price of oil is demand and supply economics. Supply has outstripped demand since the third quarter of 2013. Global Demand (long term) and specifically from China is low because of weak economic activity. China’s opening to world trade was responsible for lifting the oil price from around $20 a barrel to around $100. This price move correlates approximately with China joining the World Trade Organization at the beginning of the last decade; in which period, China alone added the equivalent of Japanese and U.K. total oil consumption to existing demand.
Even though China’s oil imports reached seven million barrels for the first time in December 2014, oil product demand is slowing as Chinese consumption becomes more efficient and less oil intensive. China’s appetite for crude imports will also plateau once it completes building its Strategic Petroleum Reserves.
A second factor is that, the United States has suddenly become the world’s largest oil producer. Though it does not export crude oil, it now imports much less, creating a lot of spare supply. According to Energy Information Administration (EIA) data, the U.S. alone added nine million new barrels of crude oil per day to the global market in 2014 which is a considerable chunk of the global crude production of 91 million barrels per day.
The US continues to cut imports from OPEC and stopped importing crude from Nigeria all together. The downside of the US oil production is, it is relatively more expensive and analysts suggest that US shale oil production can only survive on $70 dollar per barrel, hence the current prices of oil makes the US production not competitive in the medium term.
Thirdly, turmoil in Iraq and Libya – two big oil producers with nearly 4m barrels a day combined – has not affected their output as was expected. The oil market has historically thrived whenever there was a real or imagined threat to supply which, invariably pushed prices up because countries buy and store more than they would ordinarily need. During this same period, OPEC, led to a large extent by Saudi Arabia and the UAE, have decided not to cut production which would have stopped the slide of prices. OPEC could curb production sharply, but there is a theory, albeit conspiracy that OPEC curbing prices would benefit Iran and Russia – countries they are not really fond of. Saudi Arabia can tolerate lower oil prices quite easily. It has $900 billion in oil reserves. Its own oil costs about $5-6 per barrel to produce – theoretically and all things being equal, they could go even lower than current prices of $47 per barrel.
The reasons oil prices started sliding in June 2014 were hiding in plain sight: growth in US shale production, stagnating demand from Europe and China, and Mideast violence that threatened to disrupt supplies but never did.
To understand the current fall, we first have to go back to the mid 2000s. Oil prices were rising sharply because global demand was surging — especially in China — and there wasn’t enough oil production to keep up, leading to large price spikes where oil prices averaged $100 per barrel between 2011 and mid 2014.
At those high prices, many companies started producing from previously expensive sources. In the US, companies began using techniques like fracking and horizontal drilling to extract oil from shale formations in North Dakota and Texas. In Canada, companies were heating Alberta’s oil sands with steam to extract usable crude. With the current fall in price of oil however, it is no longer profitable for companies to continue oil production using these techniques.
In October 2014, the International Energy Agency cut its global oil demand forecast for the fourth time in a row and by November, OPEC was meeting to decide on their next steps. In the past, OPEC has sometimes tried to influence the price of oil by coordinating to either cut back or boost production. Surprisingly, OPEC took a decision not to cut production for the next six months; as a result the price of Brent crude went from $80 per barrel to $70 per barrel in a few days and kept tumbling to below $60 per barrel by mid-December.
OPEC countries, like Venezuela and Iran were in favour of cutting back on production in order to push up the price. These countries need high prices in order to break even on their budgets and pay for their governments heavy spending.
It really does not make sense for OPEC to hold production at 30 million barrels a day considering that the current price of oil has adverse effects on some of its members. For example, member countries like Nigeria, Ecuador and Iran need the oil price to be around $120 dollars to break even. There is also growing concern that the steep fall in price could hurt Venezuela’s economy, which is set to shrink 3% in 2015. Saudi Arabia, the kingpin of OPEC itself is not immune from the effects of the low price of oil. As the world’s second largest crude producer (after Russia), Saudi Arabia will still run a deficit equal to 14 percent of its budget should prices hover even at a moderate price of $60 per barrel.
Perhaps the key to understanding the reasons why Saudi Arabia would push for keeping production at the same level lies in understanding the effects the falling prices has on non OPEC countries like Russia and the Unites States, as well as competing production from shale oil.
Russia is heavily dependent on oil and gas production — with oil revenues making up 45% of the government’s budget. Bloomberg reports that Russia’s GDP will shrink at least 4.5% in 2015 even if oil stayed at $60 per barrel. The plunging price of oil has also caused the value of the Russian currency to collapse — which is leading to panic inside Russia and a rise in inflation as imports become drastically more expensive. Even at $50 dollars a barrel, Russia is set to lose at least $45 billion rising to as high as $90 billion if prices decline further. There are those who link Saudi Arabia/OPEC’s stance to the effect it has on Russia (who remain unpopular since the Crimea affair) and they may be right, after all there is a historical antecedent – when Saudi Arabia decided to increase production suddenly from two million barrels per day to 10 million barrels per day, it led to the collapse of the Soviet Union.
America is not laughing yet; the falling price of oil makes its shale oil development unprofitable. If oil stays below $60 per barrel, some US companies will cancel or scale back shale oil production, especially those who have borrowed and invested heavily with high crude prices in mind. The US Energy Information Administration still expects that overall US oil production will grow another 700,000 barrels per day in 2015 — though that’s slightly lower than the prediction when prices were high.
In the US, Alaska, North Dakota, Texas, Oklahoma and Louisiana will face economic challenges since they are states heavily dependent on shale oil revenues. Some smaller oil companies that are heavily in debt may go out of business or be acquired by bigger players. For consumers however, the fall is good in the short term as this will lead to fall in fuel price and by extension an increase in disposable income. In the US for example, gasoline prices have fallen to $2.47 per gallon, the lowest since 2009.
End to the Turmoil?
As John Maynard Keynes famously said ‘ in the long run we are all dead’. This works true, if you replace ‘we’ with ‘consumers’. In the long run, oil always finds its true price level, which is often a price suppliers comfortably determine (as much as they claim otherwise).
Just like previous bust and boom cycles, there are key things to look out for in 2015.
First with gasoline prices falling lower and lower, disposable income will increase. Already in the US sale of high fuel consumption cars is rising. Invariably, the International Energy Agency (IEA) will raise their global demand forecast since lower fuel prices will increase demand.
Another thing to look out for is mergers and acquisitions. The major and large oil companies with high revenues will swoop in to take advantage of the situation to buy up some distressed smaller companies at bargain prices.
Active rigs count will drop rapidly. US oil production will continue to increase during the first quarter of 2015, slow in the second quarter and be flat to declining by the third quarter. American oil production does not auger well for 2015 based on its response to falling prices.
The price of oil will rebound before the end of the 2nd quarter. Price will not return to $100 per barrel anytime soon, primarily because of the strength of the U.S. dollar and other short term factors. We should expect $70 – $80 as the price of oil before end of year. Of course much hinges on what OPEC decides to do at the end of the first quarter of 2015 as to whether it will cut production.
Russia on the other hand is on the brink and may well turn out to be the biggest loser in this whole decline in oil prices. Russia’s attempts to produce more oil to sell for more dollars is not sustainable, On the other hand it also cannot close its very expensive oil production installations unless something drastic happens, expect Russia and Venezuelan economies in 2015 to suffer their worst performance in recent decades.
The continuous fall in the price of oil has certainly been a crude awakening in the economic and geopolitical arena with accompanying conspiracy theories.
In the long run, this will become a little water under the bridge and in time OPEC – a slick business group – will always ensure that they preserve their oil wells.
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Does law school provide future attorneys with coursework in how to lie without getting thrown into jail for fraud?
Lawyer Joke Collection
WARNING: Some of these jokes are in bad taste. Some are indecent. A few are obscene. But we’re talking about lawyers…
PARENTS: Some of the jokes on this site may not be suitable for children.
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The fed is no more in control of this mess than I am, Ben Jones or anyone else. Look no further than this;
Housing Demand Plummets To 20 Year Lows
http://2.bp.blogspot.com/-fqSztKilps8/VFlPKlr52JI/AAAAAAAAhKU/v5oS41S-y0s/s1600/MBANov52014.PNG
Are you suggesting that dollar spiking won’t save housing, the way it is saving oil?
its a lot of hype. they have the media fooled. stocks are more overvalued than the 2000 bubble it seems.
nothing has been fixed. they have just papered over the structural problems.
Who lies more: Realtors™ or attorneys?
Q. How do you know if a (Realtor™|attorney) is lying?
A. Check whether his lips are moving.
realtors are liars
DC and Denver tidbits…
Housing Market Update, Dave Kranzler
continues…
Like I’ve said all along… You can’t hide 25 million excess empty houses.
Chinese stocks tanking tonight. Sorry, AB Dan.
http://www.zerohedge.com/news/2015-01-18/chinese-stocks-crash-following-renewed-crackdown-margin-accounts
‘The plunge in Shanghai comes after stocks there have more than doubled in recent months, as mom and pop investors piled into the market, with the help of borrowed money.’
‘The Hong Kong-listed shares of Citic Securities Co. , Haitong Securities Co. and Guotai Jun’an Securities Co.—the firms that China’s margin trading curb was directed at in particular—were down 12.7%, 11.3% and 5.6% respectively.’
‘Citic Securities said Sunday that it would suspend opening of new margin-financing and securities-lending credit accounts in China for three months, as well as raise the threshold of clients’ assets required to open margin-financing and securities-lending accounts.’
http://www.wsj.com/articles/asian-shares-china-shares-fall-1421635218
OK, so ’stocks have more than doubled in recent months’. What’s the problem? Don’t prices of stuff double all the time? These Chinese are the worst investors in history. I think I agree with HA. Degenerate gamblers.
de·gen·er·ate
‘having lost the physical, mental, or moral qualities considered normal and desirable; showing evidence of decline.’
‘with the help of borrowed money.’
Whoops there it is!
‘…as mom and pop investors piled into the market, with the help of borrowed money.’
Is there any stronger warning sign of an incipient crash in any asset class than mom and pop investors piling in with borrowed money?
No worries, as the prices are certain to be back up to the same levels or higher by year-end 2015 (channeling AlbqDanEsq…).
Shanghai A Share Index 1/19/2015 12:21-6.32%
Isn’t it funny how AlbqDanEsq has a way of disappearing when this kind of story surfaces?
China Stocks Sink Most Since 2009 on Margin-Trading Suspensions
By Bloomberg News Jan 18, 2015 7:54 PM PT
Chinese equities plunged the most in five years, led by brokerages, after regulatory efforts to rein in record margin lending sparked concern that speculative traders will pull back from the world’s best-performing stock market.
The Shanghai Composite Index (SHCOMP) sank 6.3 percent to 3,163.72 at 11:30 a.m. local time, poised for the steepest drop since August 2009. Citic Securities Co. (600030) and Haitong Securities Co., the nation’s two biggest listed securities firms, fell by the 10 percent daily limit after they were suspended from lending money to new equity-trading clients. The stock gauge’s 30-day volatility rose to a five-year high.
The penalties have raised concern that policy makers are trying to curb a surge in stock purchases using borrowed money, after outstanding margin loans surged to 1.08 trillion yuan ($174 billion) as of Jan. 13 from about 400 billion yuan at the end of June. The Shanghai Composite index has jumped 61 percent during the past 12 months on record volumes as individual investors piled into the market.
“Regulators are concerned that shares have run too hard, too fast,” said Hao Hong, a strategist at Bocom International Holdings Co. in Hong Kong. “They want a measured increase in the stock market. After all, margin financing is one of the reasons for people to be bullish on brokerage stocks, and these stocks have run particularly hard.”
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Asia Stocks to Watch
News and commentary about the Asian stocks you need to know about today
January 18, 2015, 8:17 P.M. ET
China Brokers Slump: Beijing Cracks Down On Margin Financing Malpractice
By Shuli Ren
Last Friday, Beijing’s securities watchdog China Securities Regulatory Commission, or CSRC, suspended three large brokers CITIC Securities (6030.HK), Haitong Securities (6837.HK) and Guotai Junan Securities (1788.HK) from opening new margin financing accounts for the next three months, after these brokers violated margin financing rules.
Margin financing in China is supposed to be less than six months and can’t be extended under current regulations. These three brokers let customers delay repaying financing for longer than they were supposed to, the regulator said. CSRC reiterated that brokers must not lend money or stocks to investors with assets less than 500,000 yuan.
Chinese brokers have been calling for financial deregulation. Deregulation is a double-edged sword, Wall Street banks from UBS to Credit Suisse say (ah, they should know!). “We should not forget that while financial deregulation brings about new business opportunities, CSRC is also keen to enhance overall risk-management requirements on brokers,” wrote UBS analyst Bob Leung and team.
CSRC’s decision is a negative for the brokerage industry as a whole. While CITIC and Haitong may lose some clients to their rivals, “other brokers not punished this time may also act more cautiously and correct their malpractice,” wrote Credit Suisse analyst Vincent Chan.
Chinese brokers are likely to open soft this morning after a fast and furious rally. In the last three months, CITIC Securities gained 58.3% and Haitong Securities advanced 49.6% as trading volume in Shanghai soared and investors piled into brokerage houses as China’s monetary easing beta plays.
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China stocks plunge after crackdown on credit products
By AFP | 19 Jan, 2015, 09.53AM IST
SHANGHAI: Chinese shares plunged on Monday after regulators launched a wide-ranging crackdown on brokerages for rule violations of margin trading business, which has fuelled an extended market rally, analysts said.
The benchmark Shanghai Composite Index sank 4.50 percent, or 152.00 points, to 3,224.50 in late morning trade after falling as much as 5.96 percent earlier.
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Asia Markets
China stocks plunge amid regulator crackdown on margins
Published: Jan 19, 2015 12:09 a.m. ET
Fresh fall in Chinese home prices also weighs on markets
By Laura He
Asia markets reporter
Reuters
Chinese stocks dive Monday morning, even as most other Asian markets trade higher.
HONG KONG (MarketWatch) — Chinese stocks took a dive Monday, with a wide sell-off sweeping across the financial sector as investors turned jittery over the latest move by securities regulators to clean up the margin-trading business.
The benchmark Shanghai Composite Index (SHCOMP, -7.84%) had tumbled 6.3% by the end of the morning session. Prior to Monday’s heavy loss, the index was up 4.4% for the month to date, extending gains after finishing 2014 with a sharp 53% advance.
The plunge in mainland China helped to push Hong Kong’s benchmark Hang Seng Index (HSI, -2.04%) down 1.1%, with the Hang Seng China Enterprises — which tracks Hong Kong-listed mainland Chinese companies — down 4.4%.
The China Securities Regulatory Commission, the nation’s top market watchdog, announced Friday that a dozen brokerage firms had been punished for violations of margin-trading rules after a two-week overhaul. Infractions included allowing customers to delay margin repayments by longer than currently allowed.
The three most severely punished brokers were Citic Securities Co., Haitong Securities Co. and a unit of Guotai Junan International Holdings Ltd., which were all banned from opening new customer accounts for three months.
The A-shares of both Citic Securities (600030, -1.53% 6030, -16.46%) which is owned by financial giant Citic Group, and Haitong Securities (600837, -0.29% 6837, -16.96%) were suspended from trading after falling limit-down by 10%.
Other financial stocks, including banks and insurances, were also under heavy selling pressure in Shanghai.
China Citic Bank Corporation Ltd (601998, -10.03%), another listed subsidiary of Citic Group, also hit the 10% daily price-drop limit.
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Also affecting sentiment was a fresh fall in home prices across China’s major cities.
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Rut Roh:
Chinese Developer Kaisa edges closer to default and money managers are spooked. Bloomberg.
http://www.bloomberg.com/news/2015-01-18/kaisa-on-brink-of-dollar-default-spooks-world-s-money-managers.html
‘Tis a mere flesh wound.
Kaisa Group’s collapse - an isolated case or China’s property bubble cracking?
Who’d be an investor in China property bonds right now? Only those with an iron stomach for risk.
PHOTO: BLOOMBERG
19 Jan10:15 AM
[HONG KONG] Who’d be an investor in China property bonds right now? Only those with an iron stomach for risk.
The plot is thickening in Shenzhen, the fishing-village- turned-metropolis that borders Hong Kong.
Authorities there restricted sales by local developer Kaisa Group late last year because of “irregularities.” Within weeks, the company showed signs of imploding. Its bonds collapsed, the stock fell 47 per cent in December and was suspended, top executives left, the company failed to repay a loan and a bond coupon payment was missed. Credit analysts said they had no one left to call at Kaisa.
An isolated case or an early sign of the cracking of China’s debt-fueled property bubble? The initial consensus was the former, to judge from the lack of contagion in dollar bonds of other Chinese developers.
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Looming default
By Yang Jing
Source: Global Times
Published: 2015-1-18 21:53:01
Home buyers fear developer could go broke
Kaisa Group Holdings used to be one of the top property developers in Shenzhen, but now it is facing a financial crisis and possible collapse. Hundreds of people are worried that they could lose homes they have already paid for, but the reasons for Kaisa’s troubles are shrouded in mystery.
A worker walks past a Kaisa construction site in Shenzhen, South China’s Guangdong Province on January 14. Photo: CFP
Just a month ago, Hong Kong-listed Kaisa Group Holdings was considered one of the top property developers in Shenzhen, South China’s Guangdong Province but now it is facing a worsening financial crisis and possible bankruptcy.
The company is close to becoming the first Chinese property developer to default on offshore bonds, and its customers are worried that they may lose new homes they have already paid for if the company goes broke.
Home buyers’ worry
Hundreds of people who have bought homes in Kaisa property developments gathered at one of its projects in Shenzhen on January 11, demanding that the local government protect their rights and lift a sales ban on Kaisa properties that they have paid for.
More than a thousand home buyers wrote a joint letter to the Shenzhen government demanding a solution, Beijing-based China Times newspaper reported Wednesday.
Many of these home buyers have handed over down payments and borrowed more than 1 million yuan ($161,000) from banks. But if the developer goes broke, some of its projects will be left unfinished and creditors will seize Kaisa’s assets, so the home buyers will lose both their money and the properties, the report said.
From November to December 2014, the Urban Planning Land and Resources Commission of Shenzhen Municipality placed a sales ban on four of Kaisa’s property projects in Shenzhen, the company said in a filing with the Hong Kong Stock Exchange on December 4, 2014.
Media reports said that the four projects include about 2,000 homes and offices, and noted that almost all of Kaisa’s real estate business in Shenzhen has been suspended.
Kaisa did not reveal the reason for the sales ban in its filing.
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World Affairs 1/18/2015 @ 12:15PM
China Cities Signal Property Crash By Halting Apartment Sales
Gordon G. Chang, Contributor
A sales woman (R) waits for customers at the entrance of a real estate agency in Beijing. AFP PHOTO / WANG ZHAO
Without explanation, authorities in two Chinese cities have refused to issue approvals for transfers of apartments built by selected developers, including troubled Kaisa Group.
Most analysts believe the extraordinary moves are related to Xi Jinping’s so-called anti-corruption campaign, but that explanation fails to explain certain crucial facts. There is reason to think there could be bankruptcy law factors behind the withholding of the approvals, which have unsettled markets in recent weeks. The bankruptcy explanation suggests a market correction is coming soon.
Late last year, Shenzhen began to withhold ordinary approvals and permits to Kaisa. Later, Kaisa in a December 21 filing with the Hong Kong Stock Exchange, disclosed that Shenzhen had blocked pre-sales at four of its projects.
Then last week the Wall Street Journal reported that Hangzhou, in coastal Zhejiang province, blocked the sale of almost all the apartments in Kaisa’s 749-unit Xixi Puyuan project. The Journal, in a cryptic passage, raised the possibility that the projects of other developers in Hangzhou had also been affected.
Moreover, Shenzhen has begun blocking the sales of at least five other builders. In the middle of last week, the city’s Urban Planning Land and Resources Commission stated that sales of 2,800 units constructed by China Overseas Land & Investment were blocked.
Shenzhen has also stopped sales in projects of Rongchao Real Estate, Dong Dao Real Estate, and China Merchants Land.
And Fantasia Holdings Group may now be under a partial sales ban with four units at Hua Xiang Garden listed as “restricted.”
There is little known about the blockages. Fantasia’s chairman, Pan Jun, maintains that the ban relates only to circumstances peculiar to the four purchasers, not Fantasia itself. Shenzhen, for its part, said the blockage on flats built by China Overseas was normal.
Yet even with the comments involving the Fantasia and China Overseas blockages, extremely little is known about the sales bans. Shenzhen has disclosed almost nothing else on the general matter. Moreover, authorities in Hangzhou did not explain the freeze on Kaisa’s flats, and, as the Wall Street Journal noted, it “wasn’t clear” whether the authorities in the two cities were coordinating their actions against the now-beleaguered developer.
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Icezilla: Ice storm leads to hundreds of accidents from Philly to New York and Connecticut
Posted 6:49 pm, January 18, 2015, by CNN Wire Service
(CNN) — The mayor of Danbury, Connecticut, appears to be the first to give the Northeast’s ice storm a hashtag: #Icezilla.
Mark Boughton tweeted updates to his constituents about the icy weather; some of them were enduring interruptions on the metro this weekend as freezing rain coated Connecticut and Pennsylvania and pelted New Jersey and New York.
“Still slippery, but calls are slowing down in our 911 center. #Danbury #Icezilla,” Boughton tweeted.
Don’t drive. Just don’t do it, fire and police officials are urging.
They said every surface is slick: Bridges, overpasses, interstates.
A photo on the Danbury Fire Police Facebook page shows a lighted road sign that says, “The roads are wicked slippery!”
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Outages are spreading but this is a mere 10% of the disaster of Oct 2011.
phony scandals
What got Nixon in trouble?