Bits Bucket for June 2, 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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Originally posted yesterday for Housing Analyst, but reposting here for better response from anyone. thx Tarara Boomdea.
H.Analyst,
Do you own or rent?
I sold my last house two years ago, had to bring cash to the table to leave, had to leave b/c job change made it difficult to afford. Didn’t short sell, just lost a lot of savings.
I’m renting, was hoping for a bottom before buying again.
I think prices will keep dropping, part of me wonders if I should buy at all again. Or wondering if I should wait a few years.
Just curious what your thoughts are on buying when or if at all.
Anyone is welcome to chime in as well. I read this blog almost daily, have for over a year, never comment but am really on the fence.
Thx
Where do u live and want to buy? Some areas look real frothy right now. San fran, san diego basically all the trendy areas in CA are way overvalued. If you live in CA drive until you qualify! That might include a drive out of state.
Moving from a NYC suburb to a Boston suburb. One frying pan to another.
I qualify. I have great credit since I brought cash to the table to sell the old house. But now I feel burned even though it has been two years.
I’m renting again even though my kids really wanted to buy a house. I think they feel a stigma. It just didn’t feel right, I’m still kicking myself from buying at the high last time.
I wish there were a good calculator, one that allowed you to see how inflation affects a bought/sold house after 15 or 30 years, in other words, are you really ever profiting with all things considered (upkeep, prop taxes, and inflation)
If I do buy, I’d like to do a 15 year mortgage and stay around 25-30 percent of my take home. Not easy to do, but fiscally, the right thing. Or just rent and save up for an all cash retirement house in a low tax area.
“I think prices will keep dropping”
You’re right. The reality is current asking prices are 300% higher than long term trend and 2x construction cost(lot, labor, materials and profit).
http://www.bizjournals.com/denver/blog/real_deals/2015/06/denver-declared-the-hottest-home-market-in-the.html
I grew up in Aurora, we had to leave when the oil industry fell apart around 1981 (my dad worked in the petro industry and couldn’t find work)
A young couple from California and bought our house for 40k more than we paid for 5 years earlier. This stuff was happening way back then.
My parents treated the money like winnings from a lottery instead of saving it.
You can gain or lose a lot, partly due to timing and partly to good common sense or lack thereof.
Aurora, CO Housing Prices Fall 15%
http://www.movoto.com/aurora-co/market-trends/
Not buying a home could cost you $65,000 a year
Renters are missing out on savings in most metros
Not buying a home right now will cost you, because home prices and interest rates are going to rise. Many renters would like to own, but they can’t afford down payments or don’t qualify for mortgages. Those two conclusions, drawn from separate reports released this week, sum up the housing market dilemma for many young professionals: Buyers get more for their money than renters—but most renters can’t afford to enter the homebuying market.
The chart below comes from data published today by realtor.com that estimates the financial benefits of buying a home based on projected increases in mortgage rates and home prices in local housing markets. Specifically, it shows the amount that buyers gain, over a 30-year period, over renters in the country’s largest metropolitan areas.
The penalties for waiting to buy tend to be greater in smaller metro areas, especially in California. For example, the estimated cost of waiting one year was $61,805 in San Jose and $65,780 in Santa Cruz. Over the course of 30 years, homeowners save more than $1 million in Santa Cruz, the largest amount of any U.S. city.
full story
http://finance.yahoo.com/news/not-buying-home-could-cost-182337704.html
Why buy a house at these grossly inflated prices when you can rent it for half the monthly cost?
Remember…. houses are depreciating assets than never pay you back.
San Luis Obispo, CA Housing Prices Fall 4%
http://www.zillow.com/san-luis-obispo-ca/home-values/
Not buying a home could cost you $65,000 a year
Methinks they deliberately forget to include the crash years in their calculations and simply assume that it’s double digit appreciation year after year to eternity. Using that logic someday an ordinary house in the Bay Area will cost one billion dollars.
And deliberately forgetting the crushing losses to depreciation that houses are.
“I grew up in Aurora, we had to leave when the oil industry fell apart around 1981 (my dad worked in the petro industry and couldn’t find work)”
A former boss of mine left Casper, WY when the gas/oil industry experienced a severe downturn. He left behind more than ten years worth of equity gains and principal payments. It’s likely affecting his retirement standard of living today.
Warning: PDF article
http://oilshaleassoc.org/wp-content/uploads/2013/06/OIL-SHALE-HISTORY-REVISITED-Rev1.pdf
“Not buying a home right now will cost you, because home prices and interest rates are going to rise.”
Do the morons who write this kind of crap actually get paid for their work?
“It just didn’t feel right, I’m still kicking myself from buying at the high last time.”
Hint: DON’T BUY NOW!
Today’s prices are consistent with a market peak if you look historically. Unless you feel that you have massive job security (like you aren’t going to leave for 15-20 years…easily), the math works, and you will end up living in nicer digs, you’re better off renting today and saving money.
I made the same choice in the early 2000’s, and felt foolish for years as people kept telling me I should buy, and prices would keep going up. Fight the urge.
The housing market will cycle again, and there will be a better time to buy. If you are diligent about saving, you will have a nice down payment waiting for you when the market is better.
This is not a cycle Rental_Fraud. It’s a mania.
*Learn* the difference.
Thank you for pointing that out.
I have a very rare tulip bulb - I wonder if I could trade it for a house here in Seattle?
Seriously - $400k median price for an area where median family income is under 80k? Don’t fund someone else’s retirement!
After you “retire” owning is the last thing on my mind. I want the freedom to explore the planet.
“San fran, san diego basically all the trendy areas in CA are way overvalued.”
It also seems like everyone out here suffers from the same mathematically impossible thinking that was prevalent back in 2006. Double-digit price appreciation forever, baby!
“Some areas look real frothy right now. San fran, san diego basically all the trendy areas in CA are way overvalued.”
The insane price increases are much spottier this time around. Also, I’ve noticed that raw land prices are nowhere near where they were prior. During the last run-up, one could borrow from the bank for land, oftentimes with no-doc, subprime loans. This led to far flung regions seeing massive land price increases purely on speculation. That is a no-go this time, so it seems the small time speculators are completely shut out of this bubble. This bubble is being carried by the big money for the most part, with the little guy left on the sidelines save for some runway foam here and there.
“…had to bring cash to the table to leave, had to leave b/c job change made it difficult to afford. Didn’t short sell, just lost a lot of savings.”
I’m curious why you decided to bring cash to the table rather than just walk away, which seems like the normal course of action under such circumstances. The I.R.S. goes so far as to offer a tax exemption for a deficiency judgment, up to $2 million dollars worth of tax-free income!
New Jersey is the very worst state to short sell, really horrible, very litigious. They will hunt you down for life, sue you, etc.
“A deficiency judgment is a court judgment entered against a borrower typically for the difference between the amount remaining due under the borrower’s mortgage loan and the amount the lender recovers in a foreclosure sale. In other words, if the borrower owes $200,000 on the mortgage, but the home is sold at a foreclosure auction for only $150,000, in some states the lender may secure a deficiency judgment against the borrower for the $50,000 deficiency, or difference.
“New Jersey allows lenders to sue borrowers to recover the deficiency after a foreclosure. A deficiency judgment can have serious consequences for the borrower, such as wage garnishment or the freezing of bank accounts. Therefore, if you’re facing foreclosure in New Jersey, it is important to understand the process leading up to a deficiency judgment and protections available to borrowers in New Jersey.”
In the end, I’ve had to rationalize, some of the money was from our first home purchase, and buying houses is a risk.
I don’t think buying now, esp near a major metropolitan area, is a good time due to: foreign inventors, boomers not downsizing b/c of low rates, young people moving close to metro areas, etc.
BUT I don’t want it to make me fearful (in general) about buying again. I read something somewhere,housing would drop until around 2022 and then stay flat. But there are no crystal balls.
Here’s an idea: Move to California, and take out the largest mortgage you can afford while interest rates remain at historically low levels.
“I read something somewhere,housing would drop until around 2022 and then stay flat.”
That’s crazy talk, as all signs show real estate is steadily rising along with the recovering economy.
“housing would drop until around 2022″
The price declines will be steep irrespective of duration.
“Just curious what your thoughts are on buying when or if at all.”
Next you should ask Dan whether he thinks China is great or not.
“Next you should ask Dan whether he thinks China is great or not.”
Phuck more better!
The problem you have is the world is mad, but many people have an interest in keeping it that way. As Keynes said
“The market can stay irrational longer than you can stay solvent.”
Rationally we know we are in a bubble and prices should drop, but the power that be are trying to prevent economic reality breaking through, it could be quite awhile.
So I suppose the questions are
How urgently do you need a house
Is it cheaper to buy than rent
Do you have to put a large sum of money down
Are willing to walk
Can you walk away without people chasing you for the mortgage.
If the answer to those questions is very urgent, Yes, No, Yes and Yes and you are willing to become a deadbeat (most people are), then buy a house.
A wise old Indian once said: “Never gamble more than you are willing to lose.”
About the kids; if they are teens now they will see things differently in a few years when they are paying their own bills.
^^True on both counts. Plus I’m saving for their future, not just mine.
What does your husband think about the situation?
He pretty much goes along with what I think –which is great some of the time– but puts pressure on me. I’m m the worry-wort, over-analyzer. And if my hunch is on, great. But if not, its my fault.
Before the bubble burst, I ran into a economist at a park. We started chatting as our kids played. He told me all about subprime mortgages and that the bubble would pop. I came home and told my husband our discussion and that I wanted to sell our house and rent for a few years.
My husband said it was crazy talk, no bubble and no burst. Now he thinks II’m m some kind of Oracle and says how much better off we would be had we done that. Problem is, it was the economist who knew it all. Not me. I wish I had gotten his card so I can pick his brain now.
I just signed a years lease so I have time to ponder. And time to make a calculator on excel that is better than the worthless rent/vs/buy ones online.
“Now he thinks II’m m some kind of Oracle and says how much better off we would be had we done that.”
Sweet! Though it would have been much better if he had listened to you back when it mattered.
“I’m the worry-wort, over-analyzer. And if my hunch is on, great. But if not, its my fault.”
Same here.
At this point, anyone who points out that there is still a mania in play runs the risk of ridicule — similar to in 2006!
I’ve gotten so tired of trying to analyze this whole bubble that I’m resigned to the fact I cannot foresee the outcome, and any time frame for fallout. I never thought they could pump things back up like this, but I underestimated the control of the monied interests. It’s apparent they pretty much control all assets, and can produce wild price distortions well beyond what supply and demand would normally call for.
GR said: I’ve gotten so tired of trying to analyze this whole bubble
We can’t find a reasonable place to rent (we’re widening our parameters every couple of days.) This morning I saw two story house with a “downstairs bedroom” that was the size of a postage stamp.
So we buy our “okay” rental and end up a bag holder after watching and waiting and putting up with wacky LLs and draconian property managers for nine years…aaarrrggghhh! I have a pain in my side.
“calculator on excel”
I have some spreadsheets that took six months to write and I will say that no spread sheet replaces insight.
Here’s a thought:
Buy now, or get priced out forever!
Bulletin U.S. house-price gains accelerate: CoreLogic
Economic Report
U.S. house prices accelerate in April, CoreLogic says
Published: June 2, 2015 10:32 a.m. ET
By Steve Goldstein
D.C. bureau chief
Bloomberg
A trio of new homes under construction in a suburb of Dallas, Texas.
WASHINGTON (MarketWatch) — U.S. house prices accelerated further in April, as low inventories and growing sales push costs higher, a leading data provider said Tuesday.
CoreLogic reported a 2.7% monthly advance to take the year-on-year gain to 6.8%.
The spring is traditionally the strongest portion of the year for housing, and data from CoreLogic and other providers suggest an upturn.
“Old-fashion supply and demand, fueled by historically low mortgage rates and improving consumer finances and confidence, continue to push home prices up,” said Anand Nallathambi, president and CEO of CoreLogic.
…
‘prices accelerated further in April, as…growing sales push costs higher’
‘Old-fashion supply and demand’
Higher prices would lower sales in a supply versus demand viewpoint.
I’ve been finding a barrage of loan standard lowering in recent months. The UHS have been saying appraisers are helping too.
“Higher prices would lower sales in a supply versus demand viewpoint.”
Not with the roaring Democrat-led economic recovery underway!
Me thinks you’d be joining all the other Boomerang buyers now and should stay out.
I’ve heard it said only buy if:
You have 3 - 6 months living expenses saved
completely debt free
20%+ down payment
No more than a 10 year fixed mtg. Or pay cash.
The house is a steal when weighed to comps
Otherwise just rent…
You left out the most important item;
“If you have to borrow for 15 or 30 years, it’s not affordable nor can you afford it.”
True.
Me thinks you’d be joining all the other Boomerang buyers now and should stay out.
Agreed, I couldn’t think of a worse time to buy a house.
Just curious what your thoughts are on buying when or if at all.”
In Hot areas if it’s cheaper to rent then rent, cheaper to buy then buy.
Its usually cheaper to rent because buyers who overpay count on price appreciation to offset low rents.
That changes after a bubble bursts and usually brings on vulture buyers like Blackrock. Buy then.
Sell when 10% or less of the wage earners can afford a median priced house in the area. This can be hard to do because everyone ( except this place) will tell you how dumb U are.
Its usually cheaper to rent because buyers who overpay count on price appreciation to offset low rents.
Perhaps, but do you want to rent from those buyers?
My experience is that accidental landlords don’t make the best landlords.
And accidental landlords hire inefficient, uncaring, sleazy property managers.
Talking with my LL, I found out that he wanted to give me a full two months notice of his wanting to sell. The PM emailed me out of the blue, more than two weeks late, and did not pass on a message from our LL. A week in charm school wouldn’t hurt them any.
He’s asked for a counteroffer for his asking price of $175K, which puzzles me. I guess my low ball of offer is next, as I’ve seen two rentals since, more expensive by $100 - $200 than my present rent ($1,395) and not suitable for someone who’s sick.
Perhaps, but do you want to rent from those buyers?”
Nope and this is another reason I decided to buy
That’s your funeral.
A very simple calculation I read of and like is that it might be worth buying if the cost is about 10 years rent or less, it was roughly that when I bought waaay back in 1997 and it worked out well…and FWIW I sold that place in early 2007 thanks in large part to following the HBB daily. The cost was about there again in 2011 but I was not able to buy with a mortgage, got beat by a 100% cash flipper or speculator every time….and since then prices are up 60% so I continue to rent. After the echo bubble pops may try buying again if prices drop back to 2011 levels.
Good on you for listening to your gut. I’m trying to do that this go around. Too bad I didn’t read this way back then, but live and learn.
Coastal CA is way overpriced.
Santa Fe, NM is still low. I’d head there for a fantastic quality of life and 4 mild seasons.
Wrong again.
Sante Fe housing is grossly inflated like everywhere else.
nope, still ~25% less then what I sold for in 2009. I actually watch it. Great town if you are an outdoors-man.
The nice places have been more expensive then WV for decades.
Nope.
There isn’t a house in Santa Fe that can’t be replaced for under $50/sq ft.
Here’s one thought: I know several people who bought before the bubble. Their houses are worth significantly more than what they paid for them. But they can’t monetize that gain, since they’d have to buy an equally appreciated house.
Their net result from being so much “wealthier”? A higher tax bill.
The bubble only made a small group wealthier: realtors, who make money on a percent of the sales price, and Wall Street which made money on the origination and sale of debt and derivatives. There are contracting companies which rehab houses which made money but those are actual skilled professionals who do it full time. For the typical person, the houses they buy would turn into a wealth sucking money pit, which they would partially rehab then run out of money and (try to) walk away. I’ve seen that happen.
It seems to me that a house is a lifestyle choice. It’s basically an experience you want to pay for, versus an apartment.
What about the whole “after 30 years, we have an asset but all the renter is left with is a shoebox full of receipts” - well, not exactly if you save the difference between buying and renting. Renting is typically cheaper, that’s why poorer people historically did it. If you have some discipline, you can have a larger bank account at the end of that 30 years, while the homeowner has a large illiquid asset.
You also have to figure in interest and maintenance, which can easily double the purchase price.
If you have no financial discipline, you could buy a house, and it can be sold and the money passed on to your heirs. I’ve seen that happen too. But I’ve never seen it be the path to riches for the buyer, except for people who bought in a desirable neighborhood well, well pre-bubble, passed away and the proceeds of the house sale was left to their heirs. And then it depends on how many ways the proceeds have to be split. And that’s an element of luck as I’ve seen another family for whom that occurred, in a bigger house, but in a neighborhood that has gone downhill. The sale will still make money after interest and maintenance are figured in, as the house was purchased many decades ago, but it will hardly be a huge windfall.
I find it hard to believe with debt load people have, that prices will skyrocket again.
But - consider this another voice in the discussion. YMMV and good luck in whatever route you choose.
Exactly. Nor is there any buyer at whatever price they think it’s worth.
About a month ago when I said I saw signs of the Chinese housing market stabilizing, I was attacked by the usual suspects, well here comes Moody’s call, I will not be able to post much today, this will probably be it:
http://www.chinadaily.com.cn/business/2015-06/02/content_20890712.htm
Story:
Moody’s Investors Service has changed its outlook on China’s residential property sector to stable from negative. This comes on the back of improved sales nationwide after new government policies were launched to boost the housing market.
The rating agency expects modest growth in the next 12 months. It is predicting a rise of up to 5 percent in the value of property sales in China by June, 2016, compared with a decline of 7.8 percent in 2014.
“Moody’s is changing its outlook for China’s property sector to stable from negative — which had been effective since May, 2014 — to reflect our improved expectations for the industry’s fundamental business conditions over the next 12 months,” Kaven Tsang, a Moody’s vice-president and senior analyst, said on the release of the agency’s report on Tuesday.
Last year, Moody’s predicted a static, or negative, sales growth in 2015.
But this latest report has highlighted the government’s new policies to boost sales in the next 12 months. Measures include more mortgage options and reduced down-payments as well as helping buyers to finance second homes with bank loans.
Moody’s findings were released as residential property sales in May hit a record high.
ADVERTISING
According to the China Index Academy (CIA), the largest independent property research organization and part of SouFun Holdings Ltd, total sales in terms of floor space increased in 38 cities in May. They climbed by 14.6 percent to 24.6 million square meters compared to April and 37.3 percent year-on-year.
Sale in first-tier cities jumped 83 percent in May to 4.69 million sq m compared to the same period last year. Sales in second-tier cities climbed 25 percent to 15 million sq m year-on-year and in third-tier cities the figure increased by 49 percent to 4.8 million sq m.
why are you trying to defend these chinese bubbles? clearly stock and house bubble over there.
Because China’s scrupulously honest data shows the economy coming up roses.
And Caitlyn Jenner’s boobs are real, and they’re spectacular….
/sarc off
The “progressive” corporate media is pimping tranny acceptance so hard with this freakshow
yep every webpage I have been visiting has a picture of that vanity fair shoot. Its quite disturbing.
So which restroom is Jenner going to use?
(IMO just use the ladies rr. Goodness there are enough overly curious little boys in there anyway.)
When Hitlury gets in that comment will be a the crime
The “progressive” corporate media is pimping tranny acceptance so hard with this freakshow
That wouldn’t be a good strategy for the long run. It’s the freak show aspect that garners all of the page views. If everyone accepts the trannies, it’s no longer a freak show.
“And Caitlyn Jenner…”
Is Larry Flynt going to offer $1M to do a spread? [pun intended]
If you don’t want to see “her” junk tucked and taped and a 65 year old hairy @sshole, you are probably racis
^
BWHAHAHAHAHAHAHAHAHAHAHA!
the family is laughing all the way to the bank again. Could be one publicity stunt to keep the cash rolling in.
Poet…. You can join him and Lola.
“Could be one publicity stunt to keep the cash rolling in.”
+1 NEXT: Kanye caught with Caitlyn; story at eleven!
“And Caitlyn Jenner’s boobs are real, and they’re spectacular….”
Maybe she’s on to something, as white men are redundant in today’s society, anyway. (Black men matter, but not white men.)
LOL…nice seinism!
I wish the GOP loved FOX channel would stop showing Ms. Jenner.
It is not news!
“Last year, Moody’s predicted a static, or negative, sales growth in 2015.
“But this latest report has highlighted the government’s new policies to boost sales in the next 12 months. Measures include more mortgage options and reduced down-payments as well as helping buyers to finance second homes with bank loans.”
Translation: Last year Moody’s saw that China’s housing market sucked but now it sees that the Chinese government is implementing “new policies to boost sales in the next 12 months” which suggests that the Chinese housing market, at root, still sucks but this suckiness will be managed and massaged by the Chinese government in an effort to make its suckiness somehow evaporate.
“Measures include more mortgage options and reduced down-payments as well as helping buyers to finance second homes with bank loans.”
Translation: Measures include creating more debt slaves.
“…the Chinese housing market, at root, still sucks but this suckiness will be managed and massaged by the Chinese government in an effort to make its suckiness somehow evaporate.”
Even Albuquerquedan has to agree that is a great analysis!
“the Chinese government is implementing “new policies to boost sales in the next 12 months””
Government intervention in markets is good when someone as smart as the Chinese government is doing it. Just look at how they’ve brilliantly planned out their new cities, years, even decades before they’re even needed. That’s high IQ, long-range planning.
And then they went ahead and built them, too. Because they’re doers, not lazy fataas americans.
(I’m standing in for Dan today. He’s taking a mental health break.)
I think the Chinese Oil Boom Bubble is causing Global Lukewarming.
German bonds seem to be shooting up over the past couple of days.
http://www.marketwatch.com/investing/bond/tmbmkde-10y?countrycode=bx&mod=MW_story_quote
Those are the yields that are shooting up, which is the flip side of German bonds crashing.
P.S. Those yields bounced off the zero bound like a toddler’s finger off a hot stove!
America’s Champion now has a campaign song.
Traveling Wilburys End Of The Line - YouTube
http://www.youtube.com/watch?v=OmtlqB0×59Y - 282k -
———————————————————————————
I am your champion now get your @ss to the end of the line serf!
Caught on video: Hillary gives autograph seeker the brush-off: ‘Go to the end of the line!’
June 1, 2015 by Michael Dorstewitz
Democratic presidential hopeful Hillary Clinton dismissed a supporter and autograph seeker at a New Hampshire event Monday with a curt order: “Go to the end of the line.”
When the fan persisted, asking for a photograph as well as a signature, according to The Weekly Standard, Hillary repeated, “Why don’t you go to the end of the line?”
Read more: http://www.bizpacreview.com/2015/06/01/caught-on-video-hillary-gives-autograph-seeker-the-brush-off-go-to-the-end-of-the-line-209527#ixzz3buLplaru
Uppity serfs…being forced to mingle with the Great Unwashed must be SO unpleasant for our oligarch masters.
Please don’t taint this talented ensemble group by associating them with the Wicked Witch of Arkansas.
‘In the early days of Hillary Clinton’s latest presidential campaign, hedge fund managers have taken it on the chin. “There’s something wrong when hedge fund managers pay lower tax rates than nurses or the truckers that I saw on I-80 as I was driving here over the last two days,” Clinton declared in mid-April as she campaigned in Iowa.’
“People aren’t getting a fair shake. Something is wrong when CEOs earn more than 300 times than what the typical American worker earns and when hedge fund managers pay a lower tax rate than truck drivers or nurses,” she repeated a month later.’
‘Now, one such manager is firing back. “I don’t need anybody crapping all over what I do for a living,” Leon Cooperman, the billionaire founder of the Omega Advisors hedge fund, told CNN on Monday, adding that she “hangs out with all these people in Martha’s Vineyard and in the Hamptons and then the very first thing she has to say is to criticize hedge funds.”
http://www.bloomberg.com/politics/articles/2015-06-01/hedge-fund-giant-tells-hillary-clinton-to-cut-the-crap-?cmpid=yhoo
‘Now, one such manager is firing back. “I don’t need anybody crapping all over what I do for a living,” Leon Cooperman, the billionaire founder of the Omega Advisors hedge fund, told CNN on Monday, adding that she “hangs out with all these people in Martha’s Vineyard and in the Hamptons and then the very first thing she has to say is to criticize hedge funds.”
Oh, please, it’s not as if she really means what she is saying.
The game is: Speak to the masses and say these words and you may just get elected. Speak the truth and you probably won’t.
This hedge fund guy has gotta know this is how the game is played; If he doesn’t know this then he is an idiot.
But he is most likely not a idiot so what he says just might be part of the game.
Wouldn’t Hillary be helped if it is perceived that the hedge fund guys are her enemies?
The political world: The world where nothing is ever as it seems.
If these hedge fund guys really REALLY want to screw with Hillary then they shouldn’t trash her, instead they should ENDORSE her. They should talk about how wonderful life would be for the one-percenters if Hillary got elected.
It could be the hedge fund guy’s subtle hint that he really, really hopes Hillary gets elected, as dissing her with a profane utterance will only serve to rally her populist base.
These guys sure seem like they have thin skins.
Pay me a gazillion bucks, and you can call me anything you want.
-fixrs new job title= “Designated National Scapegoat”
Gotta have someone to fill the position. Hire me now, so the transition will be complete when Obama leaves office.
To be honest, his outburst sounds like a secret guilt trip. He knows that he’s cheating. And he doesn’t want people to remind him of it, or he’ll feel even more guilty.
Oh lord, if that pitiful video is worthy a lengthy post and link, it’s gonna be a loooong election season.
What are the odds of that happening?
10 to 1 ?
I’d say it’s a mortal lock, bro, knowing you.
She also has a Southern accent.
Blarf. really?
I’m not sure whether to laugh or gag at that fake accent.
Mirroring to increase rapport - oldest trick in the book, but it really reads as condescending.
“She also has a Southern accent.”
A Southern Drawl from a Wellesley mouth?
good!! a no cheating policy!!!!
Are the sheeple finally waking up and seeing the oligarchy’s annointed candidates for the corrupt and venal charlatans that they are?
http://www.cnn.com/2015/06/02/politics/hillary-clinton-2016-poll-gop-field-close/index.html
Rand polls best among the top GOP candidates in a head-to-head matchup with Hillary. Bush and Cruz the worst.
Uh-oh…PIIGs bonds starting to pop upwards. Who will be forced to raised interest rates first: the ECB or the Fed?
http://www.marketwatch.com/investing/Bond/TMBMKES-10Y?countrycode=BX
How would higher long-term rates force the Fed’s hand? Seems like bankers make more money when the spread between long-term and short-term rates widens, plus rising long-term rates are an indicator for green shoots of economic recovery. Why mess with a good thing?
Bulletin Fed’s Brainerd indicates she wouldn’t support a June rate hike
Market Pulse
Fed’s Brainard indicates she won’t support a rate hike in June
Published: June 2, 2015 10:00 a.m. ET
By Greg Robb
Senior economics reporter
WASHINGTON (MarketWatch) - Soft data in the first quarter raise questions about the outlook and don’t support an immediate liftoff, said Federal Reserve Governor Lael Brainard on Tuesday, suggesting she does not support a rate increase at the upcoming June policy meeting. “Based on the data available today,” it is hard to dismiss the chance that the economy is weaker than had been expected, Brainard said in a speech to the Center for Strategic and International Studies. This possibility “argues for giving the data some more time” to confirm further improvement in the labor market and firming of inflation, Brainard said. Brainard joined the Fed in June 2014 after working at the Obama Treasury Department. This is her first speech on monetary policy.
Is it “Brainard” or “Brain-nerd”?
Rule By The Corporations
TTIP: The Corporate Empowerment Act
by Paul Craig Roberts | InfoWars | June 2, 2015
The Transatlantic and Transpacific Trade and Investment Partnerships have nothing to do with free trade. “Free trade” is used as a disguise to hide the power these agreements give to corporations to use law suits to overturn sovereign laws of nations that regulate pollution, food safety, GMOs, and minimum wages.
The first thing to understand is that these so-called “partnerships” are not laws written by Congress. The US Constitution gives Congress the authority to legislate, but these laws are being written without the participation of Congress. The laws are being written by corporations solely in the interest of their power and profit. The office of US Trade Representative was created in order to permit corporations to write law that serves only their interests. This fraud on the Constitution and the people is covered up by calling trade laws “treaties.”
Indeed, Congress is not even permitted to know what is in the laws and is limited to the ability to accept or refuse what is handed to Congress for a vote. Normally, Congress accepts, because “so much work has been done” and “free trade will benefit us all.”
The presstitutes have diverted attention from the content of the laws to “fast track.” When Congress votes “fast track,” it means Congress accepts that corporations can write the trade laws without the participation of Congress. Even criticisms of the “partnerships” are a smoke screen. Countries accused of slave labor could be excluded but won’t be. Super patriots complain that US sovereignty is violated by “foreign interests,” but US sovereignty is violated by US corporations. Others claim yet more US jobs will be offshored. In actual fact, the “partnerships” are unnecessary to advance the loss of American jobs as there is nothing that inhibits jobs offshoring now.
What the “partnerships” do is to make private corporations immune to the laws of sovereign countries on the grounds that laws of countries adversely impact corporate profits and constitute “restraint of trade.”
For example, under the Transatlantic Partnership, French laws against GMOs would be overturned as “restraints on trade” by law suits filed by Monsanto.
Countries that require testing of imported food, such as pork for trichnosis, and fumigation would be subject to lawsuits from corporations, because these regulations increase the cost of imports.
Countries that do not provide monopoly protection for brand name pharmaceuticals and chemical products, and allow generics in their place, can be sued for damages by corporations.
Obama himself has no input into the process. Here is what is going on:
The Trade Representative is a corporate stooge. He serves the private corporations and will go on to a million dollar annual salary. The corporations have bribed the political leaders in every country to sign away their sovereignty and the general welfare of their people to private corporations. Corporations have paid US senators large sums for transferring Congress’ law-making powers to corporations.http://www.theguardian.com/business/2015/may/27/corporations-paid-us-senators-fast-track-tpp When these “partnerships” pass, no country that signed will have any legislative authority to legislate or enforce any law that any corporation regards as inimical to its bottom line.
Yes, the great promiser of change is bringing change. He is turning Asia, Europe, and the US over to rule by the corporations.
Only those who have sold their integrity for money sign these agreements. Apparently Merkel, a Washington vassal, is one of them. http://sputniknews.com/politics/20150530/1022740004.html
According to news reports, both of France’s main political parties have sold out to the corporations, but not Marine Le Pen’s National Front Party. In the last EU elections, the dissident parties, such as Le Pen and Farage’s, prevailed over the traditional parties, but the dissidents are yet to prevail in their own countries.
Marine Le Pen objects to the secrecy of the agreements that establishes corporate rule. As Europe’s only leader, she speaks:
“It is vital that the French people know about TTIP’s content and its motivations in order to be able to fight it. Because our fellow countrymen must have the choice of their future, because they should impose a model for society that suits them, and not one forced by multinational companies eager for profits, Brussels technocrats bought by the lobbies, and politicians from the UMP [party of former president Nicolas Sarkozy] who are subservient to these technocrats.”
It is vital that the American public also know, but not even Congress is permitted to know.
How does it work, this “freedom and democracy” that we Americans allegedly have, when neither the people nor their elected representatives are permitted to participate in the making of laws that enable private corporations to negate the law-making functions of governments and place corporate profit above the general welfare?
I dont know why Republicans are having trouble with the TPP.
Arent they the ones always grousing about how the private sector always does things right, and the gubmint always screws up?
So now, we have a trade treaty negotiated by and for major corporations. Whats not to like?
Countries that do not provide monopoly protection for brand name pharmaceuticals and chemical products, and allow generics in their place, can be sued for damages by corporations.
They hate us for our “freedoms”.
As the article says, if true, conspiracy theory becomes conspiracy fact.
http://www.zerohedge.com/news/2015-06-01/hacked-emails-expose-george-soros-ukraine-puppet-master
I’ve also read that, through his foundations, he financed the amnesty demonstrations back in 2006, and the Ferguson riots. In fact I read something about some of the Ferguson riot participants grumbling about not having been paid.
Smaller Firms Start to Feel the Impact of ECB Stimulus
FRANKFURT—European Central Bank stimulus policies, including cheap bank loans and large scale purchases of public and private sector bonds, are making their way to small and medium-sized firms, a survey released Tuesday by the ECB suggested.
The ECB’s survey looked at the change in financing conditions for smaller firms from October 2014 to March 2015. It found that such firms reported “for the first time since 2009… on balance, an improvement in the availability of bank loans.” Moreover, “In the same vein, they reported, on balance, a fall in interest rates and an increase in the available size and maturity of loans and overdrafts,” the report said.
Still, it said that a net percentage of small and medium-sized firms “continue to indicate a tightening in banks’ collateral and other requirements.” The survey also found that “Of the 30% of SMEs that had applied for a loan in this survey round, 64% received the full amount requested and 8% said their applications were rejected.”
The data signal that recent ECB policies, such as targeted loans to banks and the bond purchases—known as quantitative easing, or QE—are improving financing conditions for smaller eurozone firms, which are more dependent on banks for financing than their larger counterparts which have greater access to capital markets.
http://blogs.wsj.com/economics/2015/06/02/smaller-firms-start-to-feel-the-impact-of-ecb-stimulus/
Why has the Supreme Court turned against struggling homeowners?
Capitol Report
Supreme Court hands defeat to struggling homeowners
Published: June 1, 2015 3:41 p.m. ET
By Ruth Mantell
Economics reporter
WASHINGTON (MarketWatch) — Underwater homeowners who file for Chapter 7 bankruptcy protection are still on the hook for secondary loans tied to their properties, the Supreme Court said Monday.
In a nine-to-zero decision, the court said in Bank of America, N.A. v. Caulkett that borrowers whose homes are completely underwater — debtors owe more on a mortgage than the home is worth — cannot void or “strip off” a junior lien when they file for Chapter 7 bankruptcy. A junior lien, such as a home-equity loan, is taken after a first mortgage, and uses a home as collateral.
In the case, two borrowers each had two mortgages on their homes, with Bank of America holding the junior liens. Both borrowers were underwater and filed for Chapter 7 bankruptcy two years ago. The borrowers wanted to “strip off” the junior mortgages, shedding those debts.
On Monday the Supreme Court cited a decision from a prior case, Dewsnup v. Timm, finding that lenders still have a secured claim, “regardless of whether the value of that property would be sufficient to cover the claim.”
The decision “is a clear victory for mortgage lenders” said Isaac Boltansky, an analyst at Compass Point Research & Trading, a Washington-based investment firm.
“It clarifies the path to recoveries for second lien holders in bankruptcy,” Boltansky said. “This decision will undoubtedly make the bankruptcy process more difficult for impacted borrowers.”
…
“A junior lien, such as a home-equity loan, is taken after a first mortgage, and uses a home as collateral.”
Depends… what did they pizz it away on? A new roof or a vacation?
Because at some point people have to take responsibility for their own debts. No more free rides. If you liked your Hummer you’ll be paying for that Hummer.
If the Hummer is paid for and they file Chapter 7, creditors already could claim against a portion of the Hummer’s value, I believe. Some amount is protected, not sure, a few thousand I think. So if the Hummer is worth say 30K then they might have to sell it to pay off creditors.
As for the second, with the new ruling, either they continue to service the second or get foreclosed. But if they are foreclosed they should be protected from having to pay the bank any shortfall on the mortgages.
Is it Greek bailout worries or weak manufacturing numbers that put a bee in Mr Market’s bonnet today?
Bulletin U.S. house-price gains accelerate: CoreLogic
Market Snapshot
U.S. stocks weaker as Greece bailout drama continues
Published: June 2, 2015 10:30 a.m. ET
Factory orders fall for eighth time in nine months
Getty Images
Greek Prime Minister Alexis Tsipras
By Anora Mahmudova
Reporter
Sara Sjolin
Markets reporter
U.S. stocks moved lower in early trade Tuesday as concerns about Greece bailout talks continued to weigh on global equity markets.
News that Greece’s creditors have reached a consensus on the terms of a proposed deal to put to the Greek government as well as better-than-expected inflation sent the euro soaring against the dollar. The dollar sold off as a result, breaking technical levels of resistance.
The S&P 500 (SPX, -0.09%) fell 4 points, or 0.2%, to 2,103, with five of its 10 main sectors trading lower. The Dow Jones Industrial Average (DJIA, -0.08%) lost 40 points, or 0.2%, to 18,000. The Nasdaq Composite (COMP, -0.10%) dropped 14 points, or 0.3%, to 5,068.
Investors assessed factory order, that fell short of expectations, falling for the eighth time in nine months.
Colin Cieszynski, chief market strategist at CMC Markets, said the moves over the past few days have been tepid and mostly due to lack of significant news.
“Stock investors are simply waiting for labor market data, beginning from ADP on Wednesday and official jobs report on Friday,” Cieszynski said.
…
I’m seeing green shoots of monetary stimulus in today’s gold and oil price moves!
I’m looking to borrow some cash to buy some stocks. I’m will to give you interest plus a cut off the profits.
The tax battle in Kansas continues…….
The House won’t do anything until the Senate passes SOMETHING.
Republican Senator challenges other Senators to identify “budget cuts”. Which was followed by the sound of crickets.
The stalemate continues between the guys who want to raise taxes on the wretched refuse (sales, gasoline, cigarrettes, cut deductions for property taxes), and the guys who oppose ANY tax increases on principle.
In the meantime, the KCK school Board Superintendant blasts the Governor, for cutting school funding. Governer comes up with numbers showing a block grant increase. Superintendant points out that this money was sent because the state Supreme Court sided with the district vs. Brownback’s original funding plan. And part of this money was earmarked for pensions and a mandated “rainy day” fund.
They should just privatize all K-12 education in Kansas, cut all public funding and give everyone with kids a bigger tax deduction (but no tax credits) so they can “afford” private schools.
Problem “solved”.
They will be “shutting down the government” starting next Sunday.
Thankfully, the Republicans will have Governor Obama, and all those Democrats/Socialists to blame.
Oh wait……..never mind.
Given AlbqDan’s repeated assurances that oil prices are soon headed back up to the stratosphere, I find this news rather puzzling.
Market Extra
Norwegian krone books largest 1-day loss against the dollar in 2 years
Published: June 1, 2015 5:20 p.m. ET
Falling crude takes its toll
By Joseph Adinolfi
Markets reporter
Bloomberg
Low oil prices have taken a toll on Norway’s economy.
The Norwegian krone recorded its largest drop against the dollar in two years on Monday after a report showed that manufacturing activity was much weaker than expected in May.
The krone shed 2.4% of value against the dollar, (USDNOK, -1.3245%) trading at 7.95, its lowest level since April, down from 7.77 krone to the dollar.
The decline began after the NIMA Manufacturing Purchasing Managers’ Index, a widely watched gauge of manufacturing activity in Norway, declined to 46.6 in May from 50.5 in April. Economists had expected a reading of 50.1. Weakening crude oil prices then compounded the krone’s losses.
…
“According to MarketWatch, Dallas is the most “business-friendly city” in the country.
Dallas landed ahead of San Francisco, Seattle, Des Moines and Raleigh which rounded out the top 5.”
http://bizbeatblog.dallasnews.com/2015/06/dallas-ranked-as-nations-most-business-friendly-city.html/
Dallas-area tops U.S. in home price increases
Dallas home prices were 10.3 percent higher than in April 2014, according to the latest report from CoreLogic Inc.
Houston was second with a 9.5 percent gain. Nationwide prices were 6.8 percent higher during the same period.
http://bizbeatblog.dallasnews.com/2015/06/dallas-area-home-price-increases-highest-in-u-s.html/
Here’s the money quote for Fixr:
‘Drive the region’s elaborate web of new and relatively uncrowded highways — seemingly ready to accommodate an onslaught of humanity”
I almost fell out of my chair when I read that.
“Relatively uncrowded”
Compared to LA or London, I guess.
Typical DFW scenario……
Drive down the interstate, and you will see a sign telling you your exit is in three miles. No intervening signs to count it down. The only sign you will see is at the actual exit.
And, BTW, the exit comes off the left lane, instead of the right/slow lane? Try getting across five lanes of traffic with people running 90 mph.
Smart people say eff it, and go on to the next exit. Except for the fact that half the time, there is no way to get back on the highway going the other direction. Or if there is, there is no exit for the street you want to get off on.
Did I mention that urban planning/zoning seems to be a Commie plot in Texas?
Only place I’ve ever seen that was stupid enough to close three lanes of US-75 traffic down to one lane, during rush hour, for a five man pothole filling crew.
It’s an elaborate web! Hot dang!
There are some new express toll way entrances near my place that are a death trap, terrible signage, confusing layout, very easy to end up going the wrong way…just bad planning from what I can tell.
Seems like North Texas gets the traffic engineers who got C’s in college or something.
Some folks who think nothing of commuting 45 minutes each way. Some actually like it, says it gives them alone time….whatever. I can see my house (technically, the tree tops near my house) from my office. Its about 1.5 miles tops thank goodness.
“Kansas City…….One of the few livable cities left”
(Old KC advertising slogan)
Something interesting has been happening here. The old areas of KC, and older, inner ring suburbs are being “gentrified”. Tons of millenials are buying 50-60s builts 2-3 bedroom ranches, old “foursquares/”shirtwaists” south of downtown. A bunch of my neighbors work downtown, or at the KU Med Center. 10 minute drive, and passes by plenty of Starbucks/food stores/restaurants/etc on the way, so you can run errands to/from work. I’m within 5 miles of just about any place I need or want to go.
OTOH, the I-35/I-435 corridor and loop are becoming a gridlocked mess, Dallas-lite.
You know, it’s kinda boring being right all the time…..
You heard it first….on the HBB!
http://tinyurl.com/o6fd8ws
BTW……read the article “comments”.
Some of the locals don’t appear to have joined the cheerleading squad.
Question: What have you heard about the quality of maintenance on ultra discount airlines like EasyJet or RyanAir? Their fares are so low that they make our US based budget airlines look expensive by comparison, so I guess I don’t blame the guy who took the picture from freaking out and assuming the mechanic was using plain old duct tape.
U get what you pay for. I’d rather pay to make sure the plane was properly maintained.
Complain some and get a free bump to first class!
The authorities in the EU live to fine anything nonconforming. If what was done didn’t conform to the ISOffice standard and was caught it would be a huge headache and hit to the bottom line of said airline. I have flown Ryanair many times and will fly with them again.
Your money buys you a cramped seat with anything approaching comfort, like a drink of water, costing extra. They are not charging to use to commode, yet…
Thought I’d share a quick anecdote on the Phoenix market. About a year ago, I sold a house that I bought in 2010 for $450k. Bought it for $310k so it worked out great for me. Not sure what happened with the people that bought it, but It’s now for sale again. Think their jobs moved so they had to move. Started out listed at $465k and it’s been at $459k now for a month or so. So with commissions they’re already losing money.
Very curious where it’ll end up selling since most of the data says Phoenix is up year over year. My hunch is the market has already started to turn and will show up in the data in the coming months. Inventory is still relatively tight, but that may be changing as well.
Thought I’d share a quick anecdote on the Phoenix market. About a year ago, I sold a house that I bought in 2010 for $450k. Bought it for $310k so it worked out great for me.
That’s unpossible. Our resident expert here says that you always lose money on a house. ALWAYS.
You must have spent more than the $140K appreciation repairing the house, servicing the the mortgage (minus what it would have cost to rent and minus the MID savings) and paying the closing costs, right?
Good timing on unloading it, too.
The depreciation ate up all the profits.
So, you are saying that houses are money trees. They pay you to own them and they grow to the sky, just all on their own.
You can’t see a mania when you are living in it.
But why would it be good timing to sell, or are you contradicting yourself?
Link?
:crickets:
Get a margin account and back up the truck on stocks cause uncle fed has your back!
Beep….beep…beep…beep…
I’m looking for some bird dogs for phx metro. U must be able to work well with others and know a good line of BS when called upon.
Crank up the volume to 11, hit play and fill your empty skull with this…
https://youtu.be/eDd-GXkMrJs
So a few weeks ago I posted about two co-workers who sold their homes in the Nashville area in less than 24 hours with multiple offers over asking price (one cash).
As if to confirm that wasn’t a fluke, a third co-worker listed his house last week and had 4 offers immediately at full price — SIGHT UNSEEN. The potential buyers made offers based on the photos on the MLS.
Also starting to hear stories again of people in established careers bailing out to become realtors. I told a 20-something today to keep piling up cash and not get in a hurry to buy and she looked at me like I’ve lost my mind.
Sounds sketchy. Nashville housing demand is at record lows too.
These are people I personally know. They aren’t lying. Believe me, I’m not happy about it, but it’s what’s really happening in this area (Brentwood and Franklin TN south of Nashville). I think it’s nuts and I want no part of this craziness…
I didn’t say they were lying. I’m simply stating the reality that housing demand is at record lows.
duh,
“demand is at record lows” HA
prices going up on multiple offers.
one report from the front lines, one from a cave.
Data my friend data….
US Housing Demand Plunges To 20 Year Low
http://2.bp.blogspot.com/-fqSztKilps8/VFlPKlr52JI/AAAAAAAAhKU/v5oS41S-y0s/s1600/MBANov52014.PNG
Muddy Waters warns that Chinese stocks are “the biggest pump & dump in history.”
http://wolfstreet.com/2015/06/01/muddy-waters-warns-on-chinese-stocks-largest-pump-and-dump-in-history/
AB Dan, I’ve picked out your anthem for when the Chinese bubble bursts.
https://www.youtube.com/watch?v=j-fWDrZSiZs
And another one gone and another one gone, another one bites the dust…
http://www.zerohedge.com/news/2015-06-02/defaults-continue-china-duck-producer-sinks
You’re never too old to become an FB.
http://bigstory.ap.org/article/39c19ef44eaa46888423ae1072226596/more-older-americans-are-being-buried-housing-debt
“Ralph Kanz, 60, and Martha Lowe, 56, of Oakland bought too much house at the wrong time: They paid $487,000 for a home in Oakland, California, in 2005.
At the time, Lowe was making $51,000 at an environmental consultant. Kanz was experimenting in commercial fishing and earning around $10,000. Drawing on an inheritance, they made a down payment of $137,000 and took on a $350,000 mortgage.
They say they shouldn’t have qualified for a loan that big. They alleged in an unsuccessful lawsuit against two mortgage firms and a title company that “someone” without their knowledge had inflated Lowe’s income on the loan application to get the mortgage approved. (A court ruled in 2013 that “a reasonably prudent person” should have spotted “the alleged wrongdoing” in the application in 2005.)
Worse, the couple took on a dangerous mortgage: They had to pay only interest for 10 years. They would then be hit with bigger payments, including the principal, for the next 20. The bigger payments are set to begin in June.
In the meantime, Lowe contracted a rare disease and went on disability. They still hope to renegotiate the mortgage.”
Easy prey for the commission junkies. Lösers!
The number one reason you NEVER take out more than a 15 year if you’re 45 or older.
ft dot com > GlobalEconomy >
Asia-Pacific Economy
June 2, 2015 12:30 pm
US Congress pushed China into launching AIIB, says Bernanke
David Pilling and Josh Noble in Hong Kong
Federal Reserve Chairman Ben S. Bernanke gives the semiannual monetary report to the House Financial Services Committee, Feb. 15, 2007 in Washington, D.C. Bernanke, in his first clash with the Democratic-controlled House of Representatives, signaled the central bank will need to raise interest rates if inflation accelerates. Photographer: Dennis Brack/Bloomberg News
©Bloomberg
Ben Bernanke says he understands why other countries say, ‘well let’s take our marbles and go home’
Beijing was pushed into launching the Asian Infrastructure Investment Bank by US lawmakers’ refusal to give China greater clout in existing multilateral institutions, Ben Bernanke has said.
“The US Congress is largely at fault for all that’s happening,” the former chairman of the Federal Reserve said in Hong Kong on Tuesday.
America’s legislature blocked a 2010 International Monetary Fund agreement to shift 6 per cent of quota — and voting rights — to emerging economies, which Mr Bernanke believes would have “better reflected the increasing role of China” and other nations.
“The US Congress has not approved it. They should, they haven’t,” Mr Bernanke said. “So I understand why other countries say, ‘well let’s take our marbles and go home’.”
The AIIB, which will be capitalised at $100bn, now has 57 members including most big European economies.
Mr Bernanke’s remarks add to those of other senior US figures who argue that Washington has mishandled its response to China’s ambition to play a bigger role in the international economy.
Lawrence Summers, former US Treasury secretary, wrote recently that US cold-shouldering of the AIIB may be remembered as the moment it “lost its role as the underwriter of the global economic system”.
Mr Bernanke said those remarks were “a little strong” but agreed it was “unfortunate” that China had felt the need to go its own way. “It would be better to have a globally unified system and allow resources to go where they are needed,” he said.
However, the former Fed chairman played down the practical implications of the AIIB, saying the bank was largely symbolic.
“There’s now a huge amount of private capital flows going in and out of emerging markets, including money that goes into infrastructure projects,” he said.
According to a former senior official at the Asian Development Bank, which is dominated by Japan and the US, ADB lending accounts for less than 2 per cent of Asia’s infrastructure needs.
…
ft dot com > Markets > FTTradingRoom >
June 2, 2015 6:17 pm
Asset managers’ push into bonds prompts regulatory scrutiny
David Oakley in London and Barney Jopson in Washington
One word goes a long way to explaining why regulators are now focusing on big asset managers as they try to make the financial system safer: bonds.
Since the financial crisis, the amount of bonds asset managers have on their books has grown dramatically, filling a void created by big dealer banks that have cut their exposure to fixed income.
This shift has triggered worries among regulators about what will happen if a rise in US interest rates sparks a rush for the exit in bond markets — and that prospect has fuelled debate on tougher regulation.
The Financial Stability Board, a global watchdog that has already designated some big banks and insurers as risks to financial stability, is now considering whether to slap the same “systemically important” label on asset managers.
The FSB is chaired by Mark Carney, governor of the Bank of England, who in April said: “Concerns arise about rising risks stemming from the overestimation by investors of the degree of liquidity [in] fixed income markets, as well as the growth of assets under management in funds that offer on-demand redemptions but invest in less liquid assets.”
But another pillar of the UK regulatory establishment, Martin Wheatley, head of the Financial Conduct Authority, has now taken a different stance.
Mr Wheatley said global regulators faced “big questions” that needed to be answered before determining whether the world’s largest asset managers should be deemed systemically important.
His intervention is a boon to the asset managers most likely to be designated as potential threats to the system — BlackRock, Vanguard and Fidelity.
The industry is broadly opposed to the FSB’s moves because they do not want to be exposed to tough new regulations such as stress tests and capital requirements.
Bill McNabb, chief executive of Vanguard, which has the largest amount of mutual fund bonds on its books with $497bn, says it would be foolish to regulate asset managers in the same way as big banks.
“We’re not doing anything really fancy or sexy, it’s really basic stuff,” he says. “The fund business is so different than banking. One, it is an agency business so you as an investor in a fund take all the risk. We take no risk. Banks have a proprietary business model, they’re taking client risk, which is completely different.”
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