Entering The Ponzi Stage
A report from Business Insider. “Quietly, over the last three months, Sotheby’s auction house has seen its stock lose one-quarter of its value. This is, in large part, due to its high-end clients. Something is about to happen to them. The polite way to say it is that — as Sotheby’s CEO Tad Smith put it earlier this month — they are about to get more ‘discerning.’ The frank way to say it is that they’re about to get walloped by this year’s choppy markets.Yes, we’re seeing record-breaking sales for some items, but if you look below that tier the picture isn’t so great. ‘The Modigliani sold last week for $170 million, but we’re seeing second-tier artists and second-tier works by the best artists starting to slide down in price,’ billionaire hedge fund manager and art collector Ken Griffin said in a CNBC interview.”
“For years, some have said that we are in the midst of an asset bubble spurred on by the Federal Reserve’s low-interest-rate policy. ‘When you keep the price of money at zero, all sorts of silly things start to happen,’ said Ruchir Sharma, head of emerging markets and global macro at Morgan Stanley Investment Management at a Bloomberg conference.”
The Press and Journal in Scotland. “The number of homes sold in the Aberdeen area has fallen in the last six months due to the effects of the oil price crash, new figures have show. A report by property firm Savills shows that the number of house sales in the Aberdeen area fell by 23%, while homes selling above the £400,000 mark dropped 44% between May to September 2015, based on the prior year. In the third quarter of the year compared to the same period the year before, homes over £400,000 saw their values drop 9%.”
“Faisal Choudhry, Savills’ head of residential research Scotland, said this had to be taken in context of the stellar rise in residential values in recent years. ‘Looking at the ten year average for the overall residential market, values are 24% higher in Aberdeen and 19% higher in Aberdeenshire, compared to 11% for Scotland as a whole,’ he said. The property group said it expects ‘further adjustment’ next year as the oil price is expected to remain subdued.”
The National Post in Canada. “The slumping oilpatch in Alberta continues to take its toll on the Fort McMurray housing market, as the average MLS sale price of a home in that northern community plunged by more than $117,000 in October. Data obtained from the Canadian Real Estate Association indicates that the average sale price for the month of $468,199 was down 20 per cent from $585,438 in October 2014. Sales also plunged by 41 per cent to 85 from 144 a year ago.”
“Doug Porter, chief economist with BMO Capital Markets, said there are many — mostly oil-driven — cities that have softened markedly. ‘The renewed sag in oil in recent months looks to have triggered a renewed weakening in housing markets across much of Alberta and Saskatchewan. Six of the 25 major markets reported double-digit declines in sales last month, and four of those were in these two provinces,’ he said.”
AFP on Brazil. “Brazilian Monica de Oliveira thought she’d forever left behind those days of worrying about getting her daughter new clothes. Biting recession in the world’s seventh biggest economy is starting to undermine the country’s widely lauded progress in dragging some 40 million people out of poverty, starting in 2003. De Oliveira knows what it’s like to be one of them and now she’s afraid her family is sliding back. She and her husband had a combined monthly salary of about $500 working as security guards in Caieiras, near Sao Paulo, and both have been laid off.”
“One by one their little luxuries have disappeared. Family outings on the weekend are over, the dream of a new car and bigger house is on hold. Even interest payments on debts are no longer feasible. She’s far from alone. ‘Soon there will be no new clothes for my daughters. We won’t go to the circus, we won’t go out to McDonalds,’ de Oliveira, 36, said. ‘I wanted to pay for them to study, to give them a better life.’”
From Perth Now in Australia. “Perth rental vacancies have risen 64 per cent in 12 months, according to a report. Property analysts SQM Research said the figure was based on a total of 7507 vacancies in October this year compared to 4567 vacancies at the same time last year. Asking rents were also down 6.4 per cent for houses and 8.4 per cent for units in the past 12 months, the company found. Perth is second behind Darwin for a challenged rental market, with their vacancy rate rising 75 per cent in the 12 months and their asking rents falling 20.5 per cent.”
“‘Clearly, vacancies have been soaring in Perth and Darwin, while our east coast capital cities have generally been stable,’ the SQM report found. ‘This is just one indicator on how the mining downturn has effected the economy. Clearly, not everywhere has been effected, but those cities and townships that do have exposure have been hit hard.’”
The South China Morning Post on Hong Kong. “Hong Kong’s home rents fell 1.8 per cent month on month in October, the biggest monthly decline in four years, a private study shows. The worst performer was City One Sha Tin, where average rents fell of 4.5 per cent month on month to HK$36.20 per square foot. ‘It is the biggest monthly decline in four years,’ said Wong Leung-sing, head of research at Centaline Property Agency, citing an increase in supply as a reason.”
“Rents have also been softening in popular housing estates such as Taikoo Shing. ‘The average rent once hit more than HK$42 per square foot when the market peaked in the second quarter, now it’s down to the HK$39.60 level,’ said Kenneth Chiu, sales manager at Centaline’s Taikoo Shing branch. ‘The average rent a few months ago was HK$26,000 a month. Now you can rent one at between HK$23,000 and HK$24,000.’”
From Bloomberg on China. “Chinese borrowers are taking on record amounts of debt to repay interest on their existing obligations. The amount of loans, bonds and shadow finance arranged to cover interest payments will probably rise 5 percent this year to a record 7.6 trillion yuan ($1.2 trillion), according to Beijing-based Hua Chuang Securities Co. Dubbed ‘Ponzi finance’ by Hyman Minsky, the use of borrowed funds to repay interest was seen by the late U.S. economist as an unsustainable form of credit growth that could precipitate financial crises.”
“‘Some Chinese firms have entered the Ponzi stage because return on investment has come down very fast,’ said Shi Lei, the Beijing-based head of fixed-income research at Ping An Securities Co., a unit of the nation’s second biggest insurance company. ‘As a result, leverage will be rising and zombie companies increasing.’”
“China Shanshui Cement Group Ltd. became the latest company to default on yuan-denominated domestic notes last week as overcapacity in the industry hurt profits and a shareholder dispute stymied financing. State-owned steelmaker Sinosteel Co., which pushed back an interest payment on a bond last month, postponed it again this week.”
“The amount of bad debt among Chinese banks rose 10 percent in the third quarter from the previous three months to 1.2 trillion yuan, about the size of New Zealand’s economy. Total debt at listed companies has climbed to 141 percent of common equity, based on a market-capitalization weighted average, the highest level in three years. Defaults will probably keep rising as profits fail to keep up with interest expenses at some Chinese borrowers, according to Zhou Hao, a senior economist at Commerzbank AG in Singapore. ‘We will see more defaults and rising bad loans in the financial system,’ Zhou said.”
Seattle, WA Housing Craters; Prices Fall 6% YoY
http://www.zillow.com/market-report/11-15/99624/seattle-wa-98199.xls?rt=14
Wrong as usual, HA . . . cherry-picking data again to support your position.
http://seattlebubble.com/blog/2015/11/24/case-shiller-seattle-home-prices-strong-september/
Sorry but CS excludes foreclosures and defaults.
There’s nothing like current sale prices. Boots on the ground data my friend. Boots on the ground data.
“For years, some have said that we are in the midst of an asset bubble spurred on by the Federal Reserve’s low-interest-rate policy. ‘When you keep the price of money at zero, all sorts of silly things start to happen,’ said Ruchir Sharma, head of emerging markets and global macro at Morgan Stanley Investment Management at a Bloomberg conference.”
Economic historians certainly will enjoy analyzing the many different species of bubbles that were inflated by Greenspan and his near-term successors.
It’s all rich people games designed to amass/protect their wealth at the expense of the masses.
‘the use of borrowed funds to repay interest’
‘Some Chinese banks, hit by a surge of troubled borrowing in a weakening economy, are increasingly failing to recognise loans gone sour on their books to avoid having to stump up capital. Loans to borrowers that have missed a payment are growing three times faster than loans the banks recognise as non performing, according to their regulatory filings.’
‘An increasingly large chunk of these overdue loans sit on the banks’ books at their full value, even when payments have been missed for more than 90 days - the accepted international criteria for classifying loans as non-performing.’
‘At 18 listed Chinese banks, overdue loans that had not been written down jumped 57 percent to 645 billion yuan ($101 billion) in the first half of this year from the end of 2014, while NPLs increased 17 percent to 692 billion yuan, a UBS analysis of Chinese banks’ balance sheet data show.’
‘For loans overdue for more than three months, the increase was a hefty 166 percent from the end of 2014 to 149 billion yuan ($23.4 billion), a problem that analysts say is more widespread at mid-tier and smaller unlisted Chinese banks.’
‘If they do declare a lender as delinquent, it would have a domino effect, since the information is posted on the central bank’s national credit database, prompting all banks to write down their loans to the same borrower. Bankers are reluctant to take such a hit to profit if they believe the loan can eventually be recovered, in full or part.’
“If an overdue loan is classified as entirely non-performing, then we have to set aside 100 percent in provisions,” said a senior executive at a joint-stock Chinese bank. “But we may not have 100 percent of loss. So it’s not reasonable to put aside so much. It’s a waste of capital.”
As I was reading that it reminded me of the savings and loan stuff I would see in the paper back in the mid-80’s.
do what they do in the us
ignore the loan for 5 years or more
‘Even interest payments on debts are no longer feasible. She’s far from alone. ‘Soon there will be no new clothes for my daughters. We won’t go to the circus, we won’t go out to McDonalds’
Those things are a waste of capital Monica.
“we have to set aside 100 percent in provisions… It’s a waste of capital.”
We may not actually have the money to set aside.
Ben:
Just finished watching on Netflix this documentary (if it can be called that) about the Seigel’s empire gone poof called “The Queen of Versailles”. Man on man - debt is an addiction and this is an addiction show that is so over the top that one wonders how these folks are still walking.
watch “antiques roadshow” then and now
prices swing wildly
crushing.housing.losses.
Coral Gables, FL Housing Prices Crater 6% YoY
http://www.zillow.com/coral-gables-fl/home-values/
Sotheby’s is likely being negatively impacted by the negative wealth effect of the cratering of high-end real estate market.
I don’t know the mind of rich people, but ISTM that at this level, isn’t it more about showing off than about ROI? If my luxury digs are losing value, then I wouldn’t want to draw attention to my cratering empire by bidding up art. Even if I did have the money.
It’s money laundering:
‘A Chinese billionaire will never have to pay for a plane ticket again, after he accrued a staggering number of air miles using his American Express card to buy a $170m painting. Liu Yiqian Liu was the winning bidder for Amedeo Modigliani’s Reclining Nude at a Christie’s auction house earlier in November.’
‘Lui, who is worth $1.4bn according to Forbes, probably didn’t use his Amex for the points. China allows its citizens to transfer no more than $50,000 out of the country in any year, and using his card could help him get around this limit because he’s just paying back American Express or the bank in China that issues his card.’
“Amedeo Modigliani’s Reclining Nude”
Google images shows several different works by this artist of that title. None of them look like $170M, or even $170K. I guess my eye isn’t “discerning” enough.? Yeah, clearly money laundering.
On a side note, can he buy a $1 M house with his Citi card? He could pay it off $100K per month and goose his FICO score!
isn’t it more about showing off than about ROI ??
On the periphery, its about ego rubs….At the core its about controlling assets….Strategic or sometimes rare assets…ROI is not the driver…Safety comes first…For the uber wealthy, the money comes in the door faster than they can push it out the door for assets that they want…
“If you go back to the Beijing Olympics in 2008, China was this miracle growth economy. Two Olympics later China is a debt story, no longer a growth story,” says Fraser Howie, author of “Red Capitalism.”
‘When banks cut off this last resort of Ponzi financing, the company follows the same fate as Charles Ponzi or Bernie Madoff: default. Only three years ago the term “default” was unheard of in China, but this year already six companies could not meet their payments. “When I was in China in the late ’90s underwriting bonds, people just assumed there is no default risk, the government will bail you out,” says Howie.’
“Will they allow defaults? This is critical to see whether they allow the market to function,” says Diana Choyleva, chief economist at Lombard Street Research.’
‘Given the huge amount of Ponzi financing, the answer is probably no, at least not for the time being.’
“One of the dangers when you’ve got a credit boom like that going is you’re terrified of keeping it going. If you keep it going for longer, you’re going to have a worse problem when you eventually stop,” says Adair Turner, the former British Financial Services Authority chief and author of “Between Debt and the Devil.”
“But you’re terrified of stopping it because the moment you stop it, you’re going to have a whole load of unemployed builders and steel mills with excess capacity.”
“One of the dangers when you’ve got a credit boom like that going is you’re terrified of keeping it going. If you keep it going for longer, you’re going to have a worse problem when you eventually stop,” says Adair Turner, the former British Financial Services Authority chief and author of “Between Debt and the Devil.”
Doesn’t this also capture the Fed’s liftoff timing conundrum?
“Rents have also been softening in popular housing estates such as Taikoo Shing. ‘The average rent once hit more than HK$42 per square foot when the market peaked in the second quarter, now it’s down to the HK$39.60 level,’ said Kenneth Chiu, sales manager at Centaline’s Taikoo Shing branch. ‘The average rent a few months ago was HK$26,000 a month. Now you can rent one at between HK$23,000 and HK$24,000.’”
Any thoughts on how soon the California rent bubble will pop? People in our personal circle are doing silly things such as buying houses priced near the Echo Bubble peak in order to avoid further rent increases eating away their household budgets.
““Units with two bedrooms, with a size of 675 sq ft, are the most popular units at the estate…Now you can rent one at between HK$23,000 and HK$24,000 .”
The picture that goes with the HK article is worth a look. Tiny flats in a lifeless row of high rises for US$3,000 per month are “popular”.
People in our personal circle are doing silly things such as buying houses priced near the Echo Bubble peak in order to avoid further rent increases eating away their household budgets ??
Its not about price Its about interest rates Pbear…Particularly “fixed” rates…Thats whats driving their decision to buy besides getting out from under the thumb of a landlord…
Or it could be completely about the price. The belief that prices will continue to go up is what the housing mania is all about. Low interest rates are just a facilitator.
Or it could be completely about the price ??
Completely ?? For some I suppose so….For most, I believe its about being grounded…Setting down some roots for whatever reason…
At what cost? They’re committing financial suicide by grossly overpaying for a depreciating asset.
We get the appeal of owning a place to sleep.
Safety is an illusion when you pay more than you can afford.
We get the appeal of owning a place to sleep. Safety is an illusion ??
Really ?? Been in my house for 36 years….
Grandparents were in theirs for almost 70 years…
If losing a lifetime of earnings is acceptable, why not?
Daves specific does not negate the generality.
It’s nice for you, but you absolutely know that it is not the norm.
Absolutely it’s typical. Especially in the last 15 years.
We’ve been in our house for 36 years as well.
We’ve derived a great deal of satisfaction from owning our house and consider it money well spent.
The topic was suckers buying houses at current prices. It’s a financial death sentence. Today, yesterday, 15 years ago.
“Safety is an illusion ??”
Yes Dave. Some places the price of a house approaches 10x income. Purchasing that with credit results in the majority of the proceeds of working for several decades going just to the shelter (and bank), and the payments can be relentless through the bumps and turns of three decades. It is a debt prison, not a safe haven, because the price is too high.
and the payments can be relentless through the bumps and turns of three decades ??
I would not disagree with that….Its tough going sometimes along the way…
It is a debt prison, not a safe haven, because the price is too high ??
The burden of debt is diminished through increased earnings…I had my first full time job when I was 19…I then went self employed when I was 24…At 30, I made a hell of a lot more money then I did at 24…At 40 even more so vs. 30…When I was making my first payment on my house things were tight…10 years later I was laughing at them thinking about just how tough it was just 10 years earlier and what a difference 10 years makes…
Diverting any earnings to a massive debt burden from which you’ll never recover makes zero sense.
I understand.
I was married when I was 19. I worked full time while going to college full time. My first mortgage came on graduation. House 2x my starting salary.
We grew and worked during the big inflation. Wages do not double and quadruple like they did. Paying too much starting on the 30 yr debt plan today is more likely to end in tears.
25 MILLION excess, empty and defaulted houses CHECK
Housing demand at 20 year lows and falling CHECK
Housing prices inflated by 250% CHECK
Household formation at multi decade lows CHECK
Rampant housing fraud CHECK
A media corrupted by the housing industry CHECK
Population growth the lowest in US history CHECK
Immigration flat to slightly negative CHECK
What were you saying about housing?
Oh, so today it’s 25M?
What happened to 30M?
Or the 4M a few days before that?
Data, HA, Data . . . give me one Zilloto link that backs that up.
25 million excess empty houses. Not to mention the additional 35 million houses just beginning to empty as boomers die off. Demographics my friend…. demographics.
Nice comedy act Red. If it were explained, you’d have the same question tomorrow.
Oh really? He can’t even gin up one Zillovoto link for me to back up this ridiculous claim.
I can make up numbers out of thin air as well as anybody, but the difference is I don’t repeatedly put them into blog comments.
The data has been posted and discussed over and over again. You just don’t like it.
Keep gyrating my friend. Keep gyrating.
It’s an even squillion now.
http://goo.gl/XK02Pc
‘When you keep the price of money at zero, all sorts of silly things start to happen’
Do you remember when one company like Enron was a big deal?
‘Hundreds of layoffs at several Indian start-ups have sparked fears the bubble is starting to burst for the country’s e-commerce companies, amid claims by analysts that many of them are overvalued.’
‘Restaurant search website Zomato, food delivery app TinyOwl and property portal Housing. com are all letting staff go, and experts are warning of echoes of the dot-com boom which crashed spectacularly in 2000.’
“The valuation bubble is bursting. The valuations had reached levels where they were ridiculous and could not be justified at any level,” said Arvind Singhal, chairman of management consulting firm Technopak.’
‘Wealthy investors boosted by low interest rates have been lining up to lavishly back India’s booming start-ups, with the government hailing the sector as proof of the country’s entrepreneurial spirit. Yet despite the billions of dollars invested in recent years, most of India’s online startups are yet to turn profits and investments are largely based on speculative future earnings.’
“Investors are not looking objectively at the sector. They are just seeing a few success stories and ignoring the failures, just like they did in the dot-com era,” Paras Adenwala, investment consultant at Capital Portfolio Advisors in Mumbai, told AFP.’
‘Recent events at TinyOwl, Zomato and Housing.com suggest that not all is well. There were dramatic scenes at TinyOwl’s offices in Pune earlier this month when disgruntled staff refused to leave the building after losing their jobs. They also held hostage a member of top management, who laid off 300 employees, preventing him from leaving for two days as they demanded the immediate payment of their severance deals.’
‘Housing.com recently fired 600 employees, according to widespread reports, and on Thursday announced there would be a “reorganising of the company”, although it declined to confirm the layoffs. Zomato, a so-called “unicorn” startup because it is valued at more than 1 billion, is laying off 10 percent of its 3,000-strong staff worldwide, mostly in the United States.’
‘An official for the New Delhi-headquartered company, which operates in 22 countries, said “the restructuring that led to the redundancies was based on a business call”. “I do not think that the pace of growth has suddenly slowed. Is the market correcting? Perhaps it is, and I guess it’s about time that happened as well,” added the official, who asked not to be named.’
Been there done that. Is the market correcting? There is no market dunce-cap, you guys are all losing money pretending to be in business. The only market is for venture capital. It’s all a fantasy.
This bit at the end:
‘Singhal, the Technopak chairman, sees the job cuts as part of an inevitable “evolution” of startups, where the early movers lacked well thought-out business models but successors will learn from their mistakes.’
Call me old fashioned, but please take the time to at least think of a plan before you start hiring people and running up bills.
“The valuation bubble is bursting.”
They always do.
‘disgruntled staff refused to leave the building after losing their jobs. They also held hostage a member of top management, who laid off 300 employees, preventing him from leaving for two days as they demanded the immediate payment’
Bollywood will have a field day with this. It’ll be a combination of Startup and Office Space, complete with staple guns, guys tied up with packaging tape, line dancing and a rousing chorus of songs.
Yahoo’s future is looking very shaky also…the WSJ story reminds me of “The Caine Mutiny” (and nautical disasters in general
http://www.wired.com/2015/11/once-upon-a-time-yahoo-was-the-most-important-internet-company/
http://www.wsj.com/articles/yahoo-ceo-marissa-mayer-faces-morale-challenge-1448326486
I am a member of some Yahoo groups, and a couple of years ago the format changed without warning, to the point where it became almost impossible to navigate the content posted within your group, especially if you wanted to look at old threads. Photos disappeared. So one of the groups migrated to Facebook, and the others became dormant. If Yahoo wanted to ruin a good thing, they couldn’t have done much better.
Me too, I’ve been a member of a several Yahoo groups and currently run a small unlisted one for some local gearhead friends. I remember that years ago the group interface was kinda primitive but basically worked really well for discussion, sharing ideas, events, etc….now not so much. It still works OK to send emails out to all the members but not for much else.
From the wired article: “It was for many the first way they experienced the web.”
I resemble that remark. My first internet surfing was looking up the results of the 1996 Olympics.
I’m still amazed that people believe an economy can be built on people employed by food-delivery apps and restaurant search websites.
Uni-Pixel, Inc. (UNXL) -Nasdaq
0.75 Down 0.73(49.32%)
Day’s Range: 0.72 - 0.85
52wk Range: 0.72 - 8.50
Volume: 4,550,370
Avg Vol (3m): 390,028
EPS (ttm): -2.87
http://finance.yahoo.com/q?s=UNXL&ql=1
I’ll pick just two:
‘A luxury-laden private-bus went zero to 60 … to zero. In four months. Leap Transit was heralded as the bus only San Francisco deserved. It had Wi-Fi and wood paneling and a cute logo in requisite inoffensive blue. It even served pressed juice. It ran a route similar to San Francisco’s public transit, but, well, cost a rider three times as much. It launched in March. By July, the vehicles were selling at a bankruptcy auction.’
‘Secret, an app on which individuals could post anonymous tidbits–say, a rumor about a celebrity, or, as was the more likely case, a blind item about a Silicon Valley figure–was all the rage for tech blogs and, for a hot minute, venture capitalists. Founders David Byttow and Chrys Bader, two former Google employees, raised more than $33 million in 2014. It peaked after 10 months and shut down. Oh, but not before its founders took $6 million for themselves. Bill Maris, a prominent VC who’s a managing partner at Google Ventures (an early Secret investor that opted out of the last huge funding round), said it was “like a bank heist.” Perhaps this investor was referring to how founder David Byttow notoriously bought himself a red Ferrari–though he later sold it.’
I was riding a shuttle bus recently, wound up sitting directly in front of some bearded and bespectacled Millenial tech-boi on his way from couch-surfing in NY to couch-surfing in SF (or maybe versa vicea — whatever, he was between couches). He was so very excited about apps and creating content and reaching people, or whatever these tech-bois rant about, like it was all there was to life.
I was thinking to myself — you better hope that there are Millenials who didn’t buy into the tech nonsense, and learned how to do actual stuff, like grow your food and keep your electricity on.
There are some millennials like that, I recently worked with a few dozen at a small company building automated machinery from scratch for several months…nearly all were mechanically and/or electrically talented and hard working. That had a lot to do with the company culture, they were picky about who they hired and the pace on the shop floor was very brisk. Anyway a great experience for me after retiring from a huge coroporation with very low standards.
So many of these new companies require large, dense urban areas and cater to a shrinking population of people with disposable income.
I’m embarrassed for everyone who funded Secret. Aren’t people supposed to be super-smart out there? Fail.
“Super smart”, ha!
I lived most of my life in the valley, and let me assure you, there are plenty of idiots there. Some of them come into money and then fancy themselves Angel Investors or VCs. Plenty of opportunity for dumb investments.
LOL! Should have just saved yer money.
How dare they hold management responsible and kidnap them. Sounds like the Indian techie and the French airline workers have figured out something. The American worker believes they will be part of the FANG payoff.
‘High unaffordable prices, endless wait, incomplete houses and unprofessional attitude is leading the Indian real estate losing people’s trust. It is affecting the economy in many ways. The worst sufferers are public sector banks as its Rs 61,500 crore loans to 25 real estate companies have turned in to bad debt.’
‘There are many other smaller groups who also together owe at least another Rs 20,000 crore. CRISIL director Sushmita Mazumdar says that the 25 developers account for half of the bank lending to the real estate sector.’
‘The common man is finding the sector an unending pit where their savings are dumped. They neither get the house nor their money back. Litigation is common and regulations none.’
‘In 2006, RBI director of Monetary Policy Department, Himanshu Joshi, published a paper which raised concerns about the rapid growth of the housing market and its sustainability. The paper said that the house prices in India were correlated more with interest rates and credit growth, and very little with the growth of real income.’
‘This has caused many convolutions. It leads the housing sector to fix arbitrary prices. People are exposed to debt value of at least 36 times their income and when projects are delayed their interest costs increase.’
‘But the builder is stated to make a fast buck by pledging the same money somewhere else at higher interest rates. So even if houses remain incomplete, it does not break the builders. In October 2013, the RBI issued an advisory to buyers and banks. It asked banks to release sanctioned individual housing loan amounts in phases linked to construction stages, instead of releasing the funds as a lump sum. The unlinked loans used to act as free credit for builders.’
‘Instead builders on flimsy grounds – that their inventory cost is increasing – fleece more from the prospective buyers. It is leading to severe impoverishment of the salaried class.’
‘The extension of metro again built with public finance and bank loans even in cities like Bengaluru have turned into severe loss-making business. It seems decisions are not being taken in a prudent manner. In reality it is not the loss of the banks. People are losing their deposits and the government is struggling to make those losses through what is called recapitalization. Both ways people’s money is being utilized to help improper planners if not wrong-doers.’
‘It is a misnomer that debt-laden developers in the country’s key property markets—Mumbai, Bengaluru, Chennai and the National Capital Region (NCR centred on Delhi) — is struggling with slow sales. Their high unsold inventory, delayed construction and stalled projects may bother the bankers but not the real estate business. Its profits are growing and bank finances are being used for purposes in many cases other than the core business.’
‘It also calls for a probe as to why the banking sector lent to projects in far off, inaccessible areas, in many cases without a metalled road, public transport or even a proper access.’
‘One reason for the slowdown in the housing sector is credited to tough anti-black money measures of the NDA government. At least 50 per cent sales were for speculation and parking black money.’
‘The below Macquarie chart shows steel mill profitability both literally and figuratively in the red. Why would Chinese steel mills maintain production in the face of low or non-existent profitability? Macquarie has a few thoughts. For a start, analysts led by Colin Hamilton point out that steel mills have been pulling some levers to offset losses. Those levers include encouraging traders to pre-pay for purchases and, to put it diplomatically, attempt “VAT evasion among small and private mills.” Such measures have mitigated the effect of lower steel prices, Macquarie says.’
‘But there are other dynamics at play too. “Our speakers generally thought any capacity closure is extremely difficult and that few closures are actually urgent at the moment for a number of reasons. One of them is that we have constantly heard that local governments simply wouldn’t allow steel mills to be closed down for the sake of local employment and fiscal income … It was also emphasized that mills are concerned about losing market shares and having to spend fresh capital to resume operation if they stop producing now. It’s therefore a prisoner’s dilemma that has prevented some capacity from being shut down. It can actually be argued that banks are also part of this game – as mentioned by a steel trader, banks have been pushing mills to stay in the market so they don’t have to admit large bad loans.”
‘Still there may be limits to steel mills’ stubbornness, Macquarie says. “It was thus quite gloomy to hear that the Chinese mills would just keep producing no matter how much their losses get,” the analysts conclude.’
answer- gov subsides
gov turns all to sht
REAl E-hc-edu
you name it
Macquarie Infrastructure CorpMIC:NYSE
Sector:IndustrialsIndustry:Airport Services|Mid Cap Stock
Last Price Today’s Change Bid/Size Ask/Size High/Low Volume
$74.56 -0.69(-0.92%) $74.49/100 $74.57/100 $75.10/$74.29 195,485
Carmichael, CA Housing Craters; Prices Dive 5% YoY
http://www.zillow.com/market-report/11-15/17310/carmichael-ca.xls?rt=14
inland FL- got teeth?
ZILLOW predicts next year, 8.4% increase for Orlando
I could see Crescent Beach or something waterfront but landlocked?
There’s always falling waterfront prices in CA.
Huntington Beach, CA Housing Prices Crater 6% YoY
http://www.zillow.com/market-report/11-15/25218/huntington-beach-ca.xls?rt=14
Airbnb for Disney.
I think the Lincoln Bedroom was the first AirBNB.
I don’t think so. Where I grew up there were hundreds of houses sporting “George Washington slept here” signs.
Forbes: Case-Shiller index shows home prices up
“On a national basis, single-family home prices rose 4.9%, according to the S&P/Case-Shiller U.S. National Home Price Index, which covers all nine U.S. census divisions.
The cities with the highest year-over-year gains were San Francisco (11.2%), Denver (10.9%) and Portland (10.1%).
Home prices have continued to rise at more than double the rate of inflation, causing some concern about whether it’s getting increasingly difficult for those looking to buy a home. Rising rents and soft wage growth add to the challenge, starting with saving for a down payment.”
This upward trajectory is not sustainable without significant wage growth. Mathematically impossible!
Yet NAR shows prices down every month for the last 4 months.
With housing demand at 20 year lows and falling, nothing changes(except for collapsing demand) until prices fall to dramatically lower and more affordable levels.
Strange things are possible in a debt donkey mania Pineapple.
Case Shiller is off something like six months. Prices have been falling since peaking earlier in the year.