The Housing Bubble

“Because everyone loves living in an icebox like Winnipeg.”

+1 An icebox is warmer than Winnipeg.

+100

lol.

I think I’ll be checking Netflix for that one tonight…

One of my favorite cult classics.

So he’s dialing it back.

Not really, he still sees $100 oil in the 18th month timeframe.

Kind of reminiscent of dialing back on China’s growth rates…

Never did, I always said it would be around 7%, you disagreed and you were wrong, deal with it.

Is growth below 4% in the tea leaves?

Opening Remarks
Is China Coming Down to Earth?
By Brian Bremner January 22, 2015

Few Chinese leaders are as revered as Deng Xiaoping. His late-1970s modernization drive led to an unrivaled run of high-speed growth. Chinese President Xi Jinping, who has big reform ambitions of his own, often evokes the memory of the paramount leader, who died in 1997. In 2012, shortly before he assumed the top government job, Xi signaled his own liberalization agenda by retracing Deng’s famous tour in 1992 of southern Guangdong province to promote economic reform. Last August, in a speech marking the 110th anniversary of the revolutionary leader’s birth, Xi, like his predecessors, recycled Deng-era slogans such as “socialism with Chinese characteristics.”

Deng’s legacy as the architect of Chinese modernity rides on a record of 10 percent average annual growth from 1980 through 2012. Xi oversees an economy that’s decelerating and that grew 7.4 percent in 2014, the weakest performance since 1990, when it grew 3.8 percent. The International Monetary Fund predicts that Chinese expansion will steadily decline to 6.8 percent this year and 6.3 percent in 2016, when archrival India is expected to eclipse China at 6.5 percent. All of which raises a question unthinkable a few years ago: Is the China growth miracle winding down for good?
…

Is that your prediction? You love to hide behind your link posts. Do you think they are right, yes or no?

I find the practice of making excessively precise predictions about fundamentally unpredictable events lame. That’s your business, not mine.

Those that cannot do, teach, those that cannot teach, teach gym. How is your gym class doing?

One poster that predicts everything under the sun wrong is enough.

At least he got the 2012 election right…didn’t he?

Right about China, right about AGW, will be right about oil, Right about what would happen to the Democrats if they did not repeal the ACA, right about how the Arab Spring would fail miserably, right about the time to buy my house, right about the correct time to refinance, I could go on and on most of these were against the consensus when made. How is your record about where the price of houses would be in any year?

You are liar to suggest I even predicted it.

Just forgetful…I thought Rasmussen nailed it. Thanks for the correction.

I thought telephone surveys were proven as an unreliable survey method with the 1936 Literary Digest poll. Phone surveys over select rich people!

Romney Leads the GOP Pack – For Now
in Politics
Friday, January 23, 2015

Generally, at this stage of the game, it’s mostly about name recognition, and Mitt Romney, the Republican presidential nominee in 2012, is the leader in the race to be the party’s standard-bearer in 2016.

A new Rasmussen Reports national telephone survey asked Likely Republican Voters to choose among nine of the early Republican wannabes if their state primary were held right now, and Romney earns 24% support. Three candidates are closely grouped together for second place: former Florida Governor Jeb Bush at 13%, retired neurosurgeon and conservative columnist Ben Carson with 12% of the vote and Wisconsin Governor Scott Walker at 11%.
…

Actually, I would not say nailed it but he was within the margin of error of his polls which was the reason neither Rasmussen or I would predict the outcome.

I feel sorry for people who have to lie to put bread on the table, such as lawyers and Realtors™.

I predict a debt-donkey pounding.

Honest question — is Pickens a good indicator of fundamentals for oil? He’s a big enough player in oil as to be Icahnic. Pickens’s words alone could influence prices.

Pickens’s words alone could influence prices.

That is true. However, the fact that he has one of the sharpest minds in the area means that his opinion would have to be taken seriously even without that factor.

You’re again linking to a “peak oil” website which is a sham. DIPSTICK.

“Pickens’s words alone could influence prices.”

He could also project a perspective opposite his true views in order to set up the other side of prospective trades.

Re “Socialism with Chinese characteristics:” that is really the honest thing for him to say. The USA rulers should come out and be as honest and admit the USA is under Fascism with American characteristics. At least in this fascist society I own as many firearms as I want to and do not register them. My CCW is the key for me buying more firearms without the paperwork. At least that is good in Arizona.

Gr, they picked it up from CNBC. Peak oil is a reliable website. But of course when you have nothing attack the source.

With a global oil glut, sinking demand and cratering oil prices, I don’t think anyone is worried about peak oi.

I’d be worried about peak cr8er if I had bet long on oil.

Business
Refiners Top Off Their Storage Tanks
Inexpensive Crude Fuels Glut of Gasoline in U.S., Slicing Pump Prices
Gasoline prices are likely to average $2.33 this year, off 31% from 2014, according to the U.S. Energy Information Administration. Regular sold for $1.68 a gallon in Dellwood, Mo., on Tuesday.
Photo: Getty Images
By Alison Sider
Jan. 21, 2015 4:47 p.m. ET

The global glut of crude oil is turning into a U.S. glut of gasoline.

As oil prices have tumbled during the past few months, U.S. refiners have been sucking up as much of the abnormally inexpensive crude as they can, turning it into gasoline, diesel and other fuels. Prices at the pump have plunged to almost $2 a gallon, the lowest nationwide average in more than five years.

Even though U.S. drivers are filling their tanks more often, they can’t keep pace with surging gasoline supplies. So a lot of the fuel that refiners are producing is sitting in storage tanks. Gasoline inventories stood at 240.9 million barrels as of Jan. 16—the highest they have been at this time of year since at least 1990, according to federal figures released on Thursday.

This has some refining experts scratching their heads. The fuel makers “are running at pell-mell rates that are not justified,” said Tom Kloza, head of energy analysis at the Oil Price Information Service. But before they cut back, he added, “Refiners are going to have to basically say, we’re just choking on it.”

All of this is great for American drivers. The U.S. Energy Information Administration expects gasoline prices to average $2.33 this year, down 31% from 2014. It predicts the average U.S. household will spend roughly $750 less on gasoline this year.

Companies that do the expensive work of discovering oil and extracting crude from the ground are cutting spending amid the slide in oil prices, which are down about 55% since June.
U.S. refineries like the Phillips 66 plant in Los Angeles are producing more gasoline and diesel, helping lower the nation’s fuel prices.

But heading into the late winter months when many refiners perform maintenance work, refiners ran their equipment full out. Over the four weeks ended Jan. 16, refiners processed an average of 15.9 million barrels of oil a day—relatively high for this time of year—and used more than 91% of their operating capacity.

On the whole, refiners slowed production sharply last week. But gasoline output still rose, and stockpiles of the fuel still grew to a level that the EIA said is well above the typical mid-January range.

Refiners have been doing this even though the margin between what they pay for crude and what they get for gasoline was negative in some of the country during parts of last month.

“The mentality is, ‘I’m not making as much money as I’d like to, but if I cut the only thing that will happen is that everybody else is going to be making more money,’ ” said Cowen & Co. analyst Sam Margolin. “That’s why they don’t stop until they absolutely have to.”

When U.S. oil was, on average, much cheaper than crude from the Middle East and North Sea, American refiners were able to make sizable profits refining low-cost U.S. crude and selling fuel abroad. But as oil prices plunged, the differential between benchmark American oil and Brent crude has narrowed to less than $2 a barrel, and the U.S. advantage has dimmed. Refiners also could face competition from new plants in Latin America and the Middle East that are ramping up production.

As a result, analysts are predicting an end to the recent streak of blowout earnings performances when refiners start reporting their results next week. While refining stocks haven’t been pummeled as heavily as exploration and production companies, shares of independent refiners were on the decline earlier this month, although they have since rebounded somewhat.

Even more fuel is coming in from overseas. Cheap oil has given struggling European refiners a new lease on life, and they are also churning out fuel as fast as they can. That continent largely runs on diesel, so the extra gasoline produced is shipped to the U.S. East Coast.

Fuel manufacturers are hoping that U.S. consumers will spend some of those savings on more fuel by driving more, and that demand from other fuel-consuming industries such as trucking will pick up—even as refiners record higher profits on secondary products such as asphalt.

“We’ll probably see some increase in consumption,” said Tom O’Malley, executive chairman of refiner PBF Energy Inc., in an interview last month.

Some analysts are dubious that will be enough to shrink the flood of gasoline. “Although we are optimistic on gasoline demand for 2015, on low prices in the U.S. and some other countries, supply growth is far greater,” Amrita Sen, chief oil analyst at Energy Aspects in London, wrote in a recent research note.
…

Note that once the gasoline storage facilities are full, and the ships at sea are full, there is nowhere else for the flood of newly produced crude to go.

“its nice to go to the pump and feel like your not getting screwed over.”

Have you ever been to (by the liter) Europe?

Absence make the heart grow fonder.

Presence makes my wallet grow fatter.

You will need it in the NE. You are about to receive the Bathhouse Barry Treatment (”BBT”). Due to the AGW scare, coal plants were closed or converted to NG. Without sufficient NG lines into your area, the price spikes during cold spells for both NG and electricity, you are about to go into a two week ice age.

Where you find poverty, you’ll find crime.

“California Most Impoverish State In The US”

http://en.wikipedia.org/wiki/List_of_U.S._states_by_poverty_rate

“California Most Impoverish State In The US”

+1 The wealthiest poor people in the nation!

poor people ??

Its those poor people in California that send the most tax dollars to DC out of any state…Poor eh ??

That patially explains why CA is so poor. And don’t forget that CA has 33% of the nation’s poorest yet the only 13% of the national population.

Ben noted:

“‘Menlo Park, CA’

Never heard of it.”

I hope he’s being facetious, but if he’s not:

Sandwiched between Palo Alto and Atherton and also adjacent to Stanford, home to Sand Hill Road (where all the major VCs are located), and Facebook’s headquarters (which is in a pretty crummy part of town, but still Menlo Park). Excellent schools and a sleepy downtown. Way cheaper than PA, but still ridiculously expensive.

“Ridiculously expensive” simply means more fraud.

What’s it doing in the $40’s? You said it had bottomed at $55. DIPSTICK.

Additional manipulation, the prediction was for 80 by the end of the year and I stand by it.

Increased spiking of the dollar,but it only means less drilling which has increased my faith in my true prediction of 80 by December.

Goldman was filling idle tankers as the price of oil rose. It would be ironic if they also filled them up to take advantage of collapsing prices. Anyway, it’s all backstopped by our fiends at the Fed.

“fiends”? (I’m hoping that wasn’t a typo…LOL!)

fiend

“Anyway, it’s all backstopped by our fiends at the Fed.”

+1 Remove the risk!

Our fiends, Goldman’s friend. There, fixed it for you.

But REIT’s and pension funds are.

So how are your losses stacking up on that shack you bought in 2010?

Just gains, also since it is income tax time thanks for the nice tax deduction, your taxes are paying for.

I always marvel at the glee some spendthrifts express to take a tiny tax benefit against massive losses to bank interest.

If someone is willing to loan money at below the real inflation rate, I will take as much as I can get and if the government is willing to give me a tax benefit on top of that I will take that too.

That would be great if someone was loaning below inflation rate. Problem is, we’re in a deflationary spiral.

Remember….. Liquidate and retire debt and stay out of debt. You’ll thank me later.

That is problematic for our dipper. He is living in the inflationary spiral. Up, up and away!

Giving a dollar to the bank to save 25 cents in taxes does not make someone a financial genius.

REITs are concentrated in the oil industry? Huh?

As are pension funds.

The Shakespeare reference was obviously lost on you.

No, I understood that what I was laughing about is your belief that you could think.

You forget your manners.

Manners are a two way street.

Then start using them.

***FAKE ATTORNEY ALERT***

“I understood that what I was laughing about is your belief that you could think.”

That’s deep; went right over my head.

Better build some more storage.

It is hard to argue with the obvious.

Which makes it all the more surprising how much time you spend here doing so…

You don’t usually state the obvious,you post things that show you are oblivious to the facts.

Facts? Like China GDP down 45% in 72 months?

… or crude oil collapsing 65% in 6 months?

…. or housing demand at 20 year lows and falling?

…. or 25 million excess, empty and defaulted houses in the US?

The size of China has about doubled in the last seven years. Thus, a seven percent growth rate now increases China’s GDP by the same absolute amount as 14% seven years ago. Of course, geometric growth will slow down as you become a larger and larger part of the global economy.

They have overcapacity in everything, which makes building more a complete waste. What they have built in the past 5 years has been with borrowed money. They can only continue to “grow” by borrowing more and more. That’s not a unique story, but the magnitude of it is. Better for them if they just continue to print lies about growth for rubes like dan and continue to liquidate their bad debts.

Iron, coal and oil do not lie.

Just wait until it drops below 4% again…

You mean about 2040 when their economy will be much bigger than ours?

Dr. Copper doesn’t lie.

Commodities
Copper Prices Slide to 5 1/2-Year Low
Much of Metal’s Recent Slide Is Attributed to Worsening Outlook for Global Economy
By Tatyana Shumsky
Jan. 23, 2015 2:51 p.m. ET

Copper prices extended their rout, as the U.S. dollar’s gains against the euro discouraged foreign buyers and fed into worries about global demand for the industrial metal.

The most actively traded contract, for March delivery, fell 7.7 cents, or 3%, to $2.5015 a pound on the Comex division of the New York Mercantile Exchange. The contract fell 4.4% for the week.

It was the lowest close since July 29, 2009, when futures settled at $2.4775 a pound.

Much of copper’s recent slide has been ascribed to a worsening outlook for the global economy. Demand for the metal tends to ebb and flow with the pace of business activity, as copper is widely used in manufacturing and construction. In recent days, both the International Monetary Fund and the World Bank cut their forecasts for global growth.

“Chinese growth is slowing, Europe is still in the doldrums, and copper has always been a major economic bellwether,” said Frank McGhee, a broker with Integrated Brokerage Services LLC in Chicago.

China is the world’s top copper consumer, accounting for 40% of demand, while Europe is in second place.

On Friday, the dollar extended its gains against the euro, as traders continued to digest the European Central Bank’s plans for a bigger-than-expected bond-buying program, announced on Thursday. That monetary policy aims to spur business activity in the region, but some investors worry that the measure shows the extent of Europe’s moribund economy. The euro fell 1.4% to $1.1206 in late New York trading Friday, from $1.1368 Thursday.

Copper is priced in dollars and becomes more expensive for foreign buyers in their home-currency terms when the dollar strengthens, limiting their pull in the market.

“The dollar has more room to go, and it will continue to put downward pressure on copper,” said Bob Haberkorn, a senior commodities broker with RJO Futures in Chicago.

But copper’s decline also reflects falling production costs, and further losses are in the cards, Goldman Sachs analysts said in a research report. Sliding oil and iron-ore prices reduced input costs, making copper production less expensive, they said.

Also, the bulk of the world’s copper is mined outside the U.S., so a stronger dollar helps hem in labor costs in local-currency terms, the bank said.

Goldman estimates that the cost of mining a metric ton of copper for the most expensive 5% of the world’s copper producers will drop by roughly 20% to $5,600 in 2015 from $7,000 a ton last year. Goldman expects copper prices to average $2.36 a pound over the next 12 months.

In other commodities markets, cocoa prices fell to a one-year low after a report showed Asia processed fewer beans than expected during the last three months of 2014, underscoring weak demand world-wide.

The most actively traded cocoa contract, for March delivery, fell 1.6% Friday to $2,755 a ton, the lowest since Jan. 22, 2014. It was the sixth consecutive session of losses for the contract on the ICE Futures U.S. exchange.
…

China is not the problem, Europe is.

With the excess capacity and massive stockpiles financed by borrowed cash, China is a much larger problem.

Funny that Isaiah quote popped into my mind as well:

The voice of him that crieth in the wilderness, Prepare ye the way of the LORD, make straight in the desert a highway for our God.

Isaiah 40:3

My opinion is that it will fail because Europe will not be ruled by Germany

it will fail because the concept is flawed. differing economies can’t easily blend into one. some country always works more efficiently than another.

thanks for the welcome back.

If you consider the youth unemployment rates in southern Europe, it might be reasonable to say the euro has already failed.

i’m talking about when it’s officially defunct.

I agree with you a system that tries to make a Germany and Greece use the same currency is doomed to fail. They only thing they have in common is their names start with g. To stay together Germany has to receive enough benefits from a weak currency to justify its subsidies to the other countries and the countries receiving the subsidies have to believe that they are receiving sufficient subsidies to justify the use of the Euro even though with their inefficient economies they are non-competitive using the currency.

I agree with you a system that tries to make a Germany and Greece use the same currency is doomed to fail.

greece could share the mark without a problem. the problem lies in trying to blend 2 or more currencies. a sound fiat needs a single authority that is responsible for it. typically a government.

the rest of what you said is accurate.

the euro was started by tiny minds that thought they needed a currency to compete with the dollar.

they thought the strength of a fiat was in the size of the country’s economy. in other words, they didn’t understand the way a fiat currency works.

a fiat’s value is directly tied to the efficiency of the issuing authority’s labor. that’s it. the hard part is knowing what strengthens and weakens the efficiency of a country’s labor. it boils down to what strengthens the economy or what weakens it. expanding the money supply won’t weaken a country’s currency if the efficiency of labor rises equal or faster. that’s what needs to be understood.

a fiat’s value is directly tied to the efficiency of the issuing authority’s labor. that’s it.

Well said.

glad you liked it and i hope you can prosper from it.

“There’s an estimated backlog of $2 Trillion worth of needed infrastructure rehab in the USA. The private sector needs a quality public infrastructure (water treatment, roads, dams, etc.) in order to remain globally competitive.”

You’re out of your league.

You’re quoting ASCE’s 2009 estimate. You know. The American Society Of Civvies. Those guys that get paid huge sums for doing govt design work and construction oversight which accounts for 90% of design firm revenues.

Hint for you: There is no demand for replacing large bridge/highway, WP’s, WWTPs with larger facilities. There is some demand for replacement with smaller facilities.

“Globally competitive”…. <—- LOL. Why considering there is no demand domestically or globally?

Make work? There’s an estimated backlog of $2 Trillion worth of needed infrastructure rehab in the USA.

all of it would be done quite inefficiently by the government. but yes, it does need to get done. at least most of it.. at least some of it.

The private sector needs a quality public infrastructure (water treatment, roads, dams, etc.) in order to remain globally competitive.

But I wasn’t really intending to debate Keynesianism with you, only to point out Keynes gets a bad rap for the current fad of unlimited QE and boosts in money supply.

i believe that keynes ideas are ultimately responsible for more suffering than WWII.

Instead of the death of Keynesianism I think it’s more accurate to say we’re on the verge of seeing the death of central bank activism.

if by activism you mean bailouts like harp, tarp and the QEezings, then i’d be happy with that too. i’d be even happier if it killed keynesianism though.

There is no demand for replacing large bridge/highway, WP’s, WWTPs with larger facilities. There is some demand for replacement with smaller facilities.

well argued HA.

Probably because they are getting them at 20-cents on the dollar?

The buyer will try to foreclose, win some, lose some, and on average come out with a nice return.

Sounds to me as though Fannie/Freddie are getting someone else to do the dirty work on loans with defective paperwork.

With housing demand at 20 year lows and 25 million excess empty houses, why would anyone erect more SFR’s?

*THINK*

To make money, think. As long as people are paying this much for houses and they are, it is not like no houses are selling, why not produce more until the price goes below your cost of production?

BTW, if there are twenty five million excess houses in the U.S. our housing bubble is much worse than China’s bubble. They have a population four times our population. So on a per capita basis they need to have one hundred million empty homes. However, we talk on this board about China having sixty million empty homes and the horror of such a number.

why not produce more until the price goes below your cost of production?

And that is my closing point on both housing and oil. You say that oil can be produced at present prices but I argue that most drilling cannot occur profitably at these prices. Each week the plummeting rig counts support the view I am right. On housing the fact that builders are not rushing to build SFHs shows that there are not obscene profits to be made at today’s prices.
I believe that the free market works when government does not intervene, and ultimately will overwhelm a government when it does intervene. Oil prices which do not support sufficient production cannot be maintained. The fact that there is not a rush to build houses is evidence that housing prices compared to cost of construction are not widely out of whack.

There is no money to be made when there is no demand. Hence the reason we have 25 million excess empty houses.

2% ceiling on increases from original base value (purchase price)

True that. Never thought of the prop tax angle. I’m sure there must be people who bought in 2011 whose assessed values are now 50% of today’s market value. A nice tax break for them.

So on the down side you had a nice windfall when they reduced it. You should have saved that amount or used it to pay off you mortgage debt.
Hey you always sell and rent or move away.