January 3, 2016

Housing Bubble Predictions: 2016

What’s your housing bubble predictions for 2016? From analysts or economist? “Home values didn’t grow as fast in South Florida this year, but don’t worry about a housing hiccup in 2016. ‘We are not going to regress,’ said John Tuccillo, chief economist for the Florida Realtors trade group. ‘There’s not going to be a slump or a bubble burst. We have a nice, strong foundation.’”

“Jack McCabe, a Deerfield Beach housing consultant, said corporate and individual investors that bought homes after the housing crash and turned them into rentals will be ready to sell. He expects the increase in supply to flatten out prices and make the market more balanced between buyers and sellers. ‘I think 2016 will still be a good year for real estate, but I definitely think we’ll see some changes in the last half of the year,’ he said.”

For markets outside the US? “If 2015 goes down in history as a bad year for the Canadian economy, next year could be far worse. The national housing market watchdog – Canada Housing and Mortgage Corporation – recently determined oil staying in the mid-US$30s for a five-year period would not only end the country’s housing boom, it would actually cause a 26 percent price correction nationwide; with the particularly hot markets of Toronto and Vancouver taking an even more significant hit. Philip Cross, former chief economic analyst for Statistics Canada, considers that estimate to be ‘conservative.’”

“‘Last year we were looking at a sharp drop from which the industry could recover quickly enough,’ he said. ‘But now, we are looking at a sustained decline. …This could be painful.’”

From six months ago. “Denver will continue double digit rent and used house price increases for the next two years. Everybody wants to live in Denver.”

Another said, “I see more of the same in the housing market for the next six months with an eventual flattening in house prices. The longer term problem is the whole food chain issue - plankton (lower income buyers) buy cheaper houses, allowing move up buyers to move up. Right now, it seems like a lot of wealthy players driving the housing market, at least from media reports. And not so many plankton.”

“I think there will be without question a generational change in the attitude towards real estate as a path to riches. Peak debt was reached, the mortgage finance market was nationalized, and this seems to be the system going forward. But it was with the run up in debt that also sparked the runup in house prices. So, in the future, the experience of homeowners will be more ‘meh, it’s a lifestyle choice, better to raise kids in, but wait till you can afford it’ rather than the older generation telling their kids, ‘OMG you have to buy RIGHT NOW and AS MUCH AS YOU CAN because it’s only going to go up in price and inflation’s going to make it affordable eventually’ and that was exactly their experience. Plus they had affordable mortgages, before the evolution of the debt markets to their current go-go form.”

One year ago. “Interest rates stay in a holding pattern even as the fed ends qe. Treasury rates also stay in a holding pattern. Junk bonds fall as oil prices tank and a mini stock market turmoil develops as losses in junk bonds make some investors sell off their stocks. Some pension funds that carry these bonds fail. This might extend to those homes for rent funds but that may just be wishful thinking.”

“More small time flippers get tired of the work for less than the fancy returns they expected, sell their housing stock at a loss and get a real job. Rents stabilize and house prices stay in a holding pattern overall. More apartments built with wooden framing catch fire in California resulting in the government restoring the old requirement for steel framing for multistory buildings.”

“Getting roommates becomes more normal for more people in the Bay Area supporting high rents but allowing individuals to pay less than they had prior to the boom. Los Angeles silicon beach siphons tech workers from the Bay Area but sf continues to be the main draw with both businesses and housing concentrated in the city proper. The overvaluation/ bubble existing in preipo stocks like uber and lyft stay high but wait for 2016 when the need to start showing a profit becomes real.”

One had this, “The world economy is so messed up with excessive debt, the Fed will never raise rates in many many years.”

And another, “If I remember correctly, I predicted last year that little would change economically, at least from a housing standpoint; that we’d have the same stale and failed ideology from the same poor economic and political leadership. I think that’s the same for 2015 and even 2016. We can’t and won’t change voluntarily for the better. Period. We’re totally committed, to the point where I suspect that radical proposals would be seriously considered, or implemented, if the status quo were to be threatened by any event: eliminating paper money, negative interest rates for U.S. savers, and/or bank bail-ins.”

“Just in general, it pains me to see 2% annual inflation being sold by unelected central bankers as a positive thing to a country characterized by stagnant or falling wages for very large majority. I predict that will continue too.”

And finally, “Oil cannot be produced at these prices in sufficient quantity to meet demand. Spiking the dollar may keep oil and gold prices down for a while, the first six months of 2014 both rose until the manipulation began, however, it is going to have a major impact on multinational profits and it is very difficult to see how they can continue to spike the dollar without causing a recession in this country. What Obama is doing is just a little more sophisticated than Mugabe but in the end it is just trying to set prices by fiat. It did not work in the old Soviet Union or in Zimbabwe and it will not work now. We lost 35 rigs just last week, oil production instead of going up one million barrels per day in the US in 2015 may drop. In the end the physical market will prevail over the paper (futures market) despite the manipulation.”

“Prediction: $70 plus oil by the end of 2015 and gold over $1300.”

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Comment by Professor Bear
2015-12-28 06:20:19

I predict mean old Mr Grinch will destroy the last hopes of a Santa Claus rally, setting up Wall Street for more losses in early 2016.

Comment by Professor Bear
2015-12-28 06:23:27

Marketwatch dot com
Wall Street braced for a loss as oil prices pull back
By Ellie Ismailidou and Barbara Kollmeyer
Published: Dec 28, 2015 7:52 a.m. ET
Crude oil tumbles 3% after last week’s rally
Getty Images

Stock futures pointed to a weaker start for Wall Street on Monday in a holiday-shortened week, with oil prices under pressure and trading volumes expected to be low as some traders not expected to return until after New Year’s.

Dow Jones Industrial Average (YMH6, -0.51%) futures dropped 84 points, or 0.5%, to 17,365, while those for the S&P 500 index (ESH6, -0.49%) eased 9.95 points, or 0.5%, to 2,041.25. Nasdaq Composite futures (NQH6, -0.34%) dropped 15.25 points, or 0.3%, to 4,595.75.

The S&P 500 (SPX, -0.16%) booked a gain of 2.8% last week, which was shortened by the Christmas holiday. But on Thursday, the index fell 0.2% as nine of its 10 main sectors closed lower, led by a 0.9% loss for the energy sector.

With just four trading days left to the year, investors will be looking at a final chance for stocks to rally this week and add to a meager return of just 0.1% for the S&P 500 in 2015. Since 1928, the index has managed an average gain of 1.3% in the last five trading days of the year, 76% of the time.

Comment by Professor Bear
2015-12-28 07:27:53

Oil prices fall again. Down 11% in month
by JIm Boulden
December 28, 2015: 8:04 AM ET
Oil prices started the last week of the year by falling hard after a brief rally.

Crude declined more than 3% Monday to trade below $37 a barrel. Crude had topped $38 per barrel on Thursday, the highest it has been since it started the month above $41.

Oil is down more than 11% for the month and is hovering around seven-year lows amid a glut of production and weak demand in China.

Traders in Asia were citing reports from Iran’s official news agency IRNA that quoted government officials reiterating the country’s goal to increase production by 500,000 barrels a day in 2016.

Iran is set to reenter the global oil market when economic sanctions are lifted by the West.

Related: Oil price crash could get even worse in 2016

Some traders wondered what the fuss is about, saying that Iran had already telegraphed that it expected to raise production by 500,000 barrels a day.

“This is very much already priced in the market, and what will matter at this stage will be the actual levels above or below this mark,” Naeem Aslam of AvaTrade wrote early Monday.

Comment by Professor Bear
2015-12-28 08:00:18

Marketwatch dot com
U.S. stocks open lower to kick off final week of 2015
By Mark DeCambre
Published: Dec 28, 2015 9:36 a.m. ET

Stocks slumped in the last week of the year as oil prices retreated from last week’s rally. The Dow Jones Industrial Average (DJIA, -0.31%) fell 43 points, or 0.3%, to trade at 17,489, while the S&P 500 index declined 7 points, or 0.3%, to trade at 2,052. Meanwhile, the Nasdaq Composite index (COMP, -0.40%) dropped 18 points, or 0.4%, to trade at 5,029. Declining crude-oil prices CLF6 have been a drag on stock indexes throughout 2015. In corporates, FedEx Corp. (FDX, -0.99%) shares were down 0.5% after the company was forced to make deliveries on Christmas due to heavy storms in the Southeast and Midwest.

Comment by Professor Bear
2015-12-28 10:10:37

Marketwatch dot com
Oil slides below $37 as focus returns to global glut
By William Watts and Biman Mukherji
Published: Dec 28, 2015 10:46 a.m. ET
Don’t look at oil prices right now for guidance over 2016, says analyst

Oil futures fell Monday, failing to extend last week’s brief rally ignited by a drop in U.S. oil stockpiles, as investors turned their attention back to a global crude glut and renewed worries over demand.

On the New York Mercantile Exchange, light, sweet crude futures for delivery in February (CLG6, -3.23%) traded at $36.80 a barrel, down $1.30 cents, or 3.4%. February Brent crude (LCOG6, -2.56%) on London’s ICE Futures exchange fell $1.15, or 3%, to $36.74 a barrel.

WTI rose 5.7% last week. For the year, the U.S. benchmark remains down more than 30%.

Comment by Professor Bear
2015-12-28 12:30:13

Marketwatch dot com
Wall Street’s forecast for 2016: Worse than 2015’s
By Wallace Witkowski
Published: Dec 28, 2015 11:50 a.m. ET
10 analysts we polled have an average target of 2,193 next year, down from last year’s 2,201

Many Wall Street strategists are dusting off their 2015 targets for the S&P 500 index and trimming them for 2016.

Crashing-oil prices and fears of a global recession threw cold water on the index’s performance in 2015, causing it to fall short of the average expected gain of about 10%. With a handful of trading days left in the year and the S&P 500 (SPX, -0.35%) closing at 2,061 on Thursday (for a 0.1% gain year to date), only a handful of the more bearish analysts can hope to meet their 2015 targets — and only if a Santa Claus rally plays out.

Optimism in the stock market took a hit in 2015. The average year-end 2016 target for the S&P 500 for the 10 strategists surveyed by MarketWatch is actually lower than the average of their original 2015 targets. At this time last year, the strategists had pegged the S&P 500 ending 2015 at an average of 2,201. For the end of 2016, those same analysts have an average target of 2,193.

Comment by Professor Bear
2015-12-28 20:36:57

“…and fears of a global recession…”


Comment by Jingle Male
2015-12-31 05:44:15

No gulping….it’s a normal occurrence in the cycle and represents an opportunity.

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Comment by Mafia Blocks
2015-12-31 06:48:55

You’re confusing a business cycle with a global credit mania Jingle_Fraud.

Comment by Professor Bear
2015-12-31 08:13:56

What happens next is highly dependent on the Fed’s efforts to end its easy money regime (or not).

Comment by redmondjp
2016-01-02 02:48:11

How much liquidity will they drain out, that is the trillion dollar question . . .

I still think that NIRP is coming. From some of the articles I’ve read, surveys say that people will tolerate up to negative 10% interest rates before they really get upset. That’s gotta be due in part to legalized pot IMO.

Comment by Professor Bear
2015-12-31 08:04:07

Chicago PMI plummets to 42.9; lowest since 2009
By Andrea Riquier
Published: Dec 31, 2015 9:57 a.m. ET
Midwest economic indicator has had a choppy year

Economic activity in the Midwest contracted at the fastest pace in more than six years in December, according to the Chicago Business Barometer, also known as the Chicago PMI.

The index fell to 42.9 from 48.7 in November. Economists had expected it to rise 1.3 points to 50 in the December reading. The index has spent much of the year below the 50 mark that separates expansion from contraction.

Order backlogs were the biggest drag in December, dropping 17.2 points to 29.4. That’s the lowest since May 2009 and marked the 11th-straight month in contraction. The last time such a sharp decline was registered was 1951.

New orders also sank to the lowest level since May 2009. That’s bad news for activity down the road.

Comment by Professor Bear
2015-12-31 08:05:38

Attribution: MarketWatch dot com

Comment by Professor Bear
2015-12-31 08:10:39

Marketwatch dot com
U.S. & Canada
U.S. stocks open lower as 2015 comes to a close
By Mark DeCambre
Published: Dec 31, 2015 9:34 a.m. ET

U.S. stocks opened lower Thursday in the final trading day of 2015. A continued slump in crude-oil prices (CLG6, -0.16%) helped pressure stocks–a persistent theme for much of the year. The Dow Jones Industrial Average (DJIA, -0.59%) opened 102 points, or 0.6%, to trade at 17,502, while the S&P 500 index (SPX, -0.58%) fell 10 points, or 0.6%, at 2,052. Meanwhile, the Nasdaq Composite Index (COMP, -0.68%) was 25 points, or 0.5%, lower at 5,040. A fourth straight year of gains was on the line for the S&P 500. The S&P is looking at an annual gain of 0.2%, while the Nasdaq is eyeing a gain of nearly 7% for 2015. Meanwhile, the Dow needs to climb about 220 points to break even for 2015.

Comment by Professor Bear
2015-12-31 08:46:55

FT dot com
Global shares and oil hit by China data
China’s industrial profits fall 1.4% in November
Global Market Overview
Stock Market
December 28, 2015
by: Neil Dennis and Eric Platt

Monday 1730 GMT: Equities across the globe were undermined on Monday by losses in mainland China after a near 3 per cent drop on the Shanghai exchange triggered fresh commodity losses.

As many markets reopened following the Christmas weekend break, China’s Shanghai Composite fell 2.6 per cent after weak industrial profit data for November dashed hopes of an end-of-year rally.

The data, released on Sunday, showed profits earned by Chinese industrial companies fell 1.4 per cent last month — a sixth-consecutive month of year-on-year declines.

More than a third of the losses on the Shanghai index came from the financial sector, while a fifth were from the industrial sector. The index’s 2.6 per cent loss was the biggest daily decline since the 5.5 per cent rout seen on November 27.

Fears of a fresh bout of capital outflows hit the renminbi, which had just enjoyed a six-session winning streak. China’s currency fell to a four-and-a-half-year low against the dollar, down 0.2 per cent to Rmb6.4871.

The smaller Shenzhen equity market also fell sharply, down 2.2 per cent, while in Hong Kong, the Hang Seng index was down 1 per cent.

“Industrial profits are closely watched as a gauge to the health of the Chinese economy. Falling profits imply less demand for commodities,” said Marshall Gittler of FX Primus.

In the US, equity markets slid with volume light on the New York Stock Exchange. The benchmark S&P 500 fell 0.2 per cent to 2,057 while the technology heavy Nasdaq Composite also declined 0.2 per cent, although both pared earlier losses.

Energy and materials companies made up nine of the 10 biggest declines on the S&P, with Consol Energy, Chesapeake Energy, Freeport-McMoRan and Marathon Oil all down more than 6 per cent at the close.

Sentiment towards European stocks was also damped, as the FTSE Eurofirst 300 dropped 0.6 per cent to 1,432, with losses recorded for resource stocks.

ArcelorMittal, the steelmaker, was the biggest faller on the pan-European index, down 5.2 per cent, followed by a 4.1 per cent loss for Spanish oil group Repsol.

Commodity markets were hit by the Chinese data. After last week’s 2.7 per cent rally, Brent crude oil was down 3.6 per cent at $36.52 a barrel on Monday and nearing an 11-year low. Nymex WTI, which took the premium from its Brent rival last week, was down 3.7 per cent to $36.71 a barrel.

There was little impact from China’s stock losses on the currencies markets, however. The dollar index, which measures the US currency’s performance against a basket of its main rivals, was 0.1 per cent higher at 97.91.

Comment by Mr Grinch
2015-12-31 13:12:29

We wish you a dreary Christmas and a dismal New Year.

Comment by Professor Bear
2015-12-31 19:15:23

Marketwatch dot com
S&P 500, Dow post losing year, break annual win streaks
By Wallace Witkowski and Mark DeCambre
Published: Dec 31, 2015 4:46 p.m. ET
S&P 500 ends 3 years of gains, Dow industrials snap 6-year win streak
S&P 500, Dow log losses in 2015; only Nasdaq sees gain.

U.S. stocks ended the final trading day of 2015 with a whimper rather than a bang Thursday, as the S&P 500 Index and the Dow Jones Industrial Average both snapped multiyear winning streaks.

The S&P 500 index (SPX, -0.94%) dropped 19.42 points, or 0.9%, to close the year at 2,043.94, snapping a three-year winning streak. The index had traded between fractional gains and losses for the year for most of the session, then nose dived in the final hour of trading, netting a 0.7% loss for 2015.

Comment by PorkChop Express
2015-12-28 06:23:03

The current tech boom, being based on a huge lie, will come to an end. There are no profits.

Comment by Professor Bear
2015-12-28 06:24:41

It’s only a matter of when, not whether.

Comment by The Order Of The Golden Chainsaw
2015-12-28 06:42:26

What lie is that?

Comment by Blue Skye
2015-12-28 10:27:40

That stocks are worth something when there are no profits?

Comment by Jingle Male
2016-01-01 09:01:20

Alphabet’s revenue is over $1,000,000/employee. There is profit!

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Comment by redmondjp
2016-01-02 02:49:29

OK don’t call it a lie, but what else is a 985X P/E ratio (Amazon)?

Comment by Goon
2015-12-28 06:38:48

Adding to my earlier comments on Denver, the traffic in the city and getting to and from the mountains will continue to get worse as 50,000 people a year keep moving there without the infrastructure to support it. One of my neighbors in my building just got hit with a 10% rent increase on their lease renewal.

Comment by In Colorado
2015-12-28 12:09:57

Traffic on weekends is now also bad. Bumper to bumper on I-25 on Sat and Sunday, even in the recently widened T-Rex section.

Comment by Oddfellow
2015-12-31 07:36:13

One of my neighbors in my building just got hit with a 10% rent increase on their lease renewal.

Just wait til they reprice your penthouse!

One of the problems with the “rent and move where the jobs are” plan is that places where the jobs are get swarmed.

Comment by Mafia Blocks
2015-12-31 08:05:10

There are jobs here and it’s not swarmed.

How can this be Lola?

Comment by Oddfellow
2015-12-31 08:17:20

No one wants to live near you.

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Comment by Mafia Blocks
2015-12-31 09:37:35

This is a metropolitan area.

How can this be Lola?

Comment by Oddfellow
2015-12-31 10:17:11

Where do you live?

Comment by Mafia Blocks
2015-12-31 12:20:11

In your empty skull.

Comment by Oddfellow
2015-12-31 12:41:17

This is a metropolitan area

How’s the metropolis treating you? You still hanging out with Hitler and Stalin? I hear you guys got an apartment together.

Comment by Mafia Blocks
2015-12-31 15:27:45

….. Rent free.

Comment by Oddfellow
2015-12-31 15:54:04

Tell Hitler to turn down the oom-pah music.

Comment by Mafia Blocks
2016-01-01 06:20:14

Your long list of grievances are up here….. and barack is befuddled by them.

Comment by frankie
2015-12-28 06:44:22

At some point reality will break through the clouds of delusion, I’m just not sure 2016 will be the year; far to many politicians will move heaven and earth to avoid that happening. Pretend and extend too continue, might have a few more years of that left.

Comment by Professor Bear
2015-12-28 07:49:25

“Interest rates stay in a holding pattern even as the fed ends qe. Treasury rates also stay in a holding pattern. Junk bonds fall as oil prices tank and a mini stock market turmoil develops as losses in junk bonds make some investors sell off their stocks.”

Nailed it!

Comment by Professor Bear
2015-12-28 07:52:01

“Prediction: $70 plus oil by the end of 2015 and gold over $1300.”

Double fail.

Comment by Professor Bear
2015-12-28 07:55:44

“Oil cannot be produced at these prices in sufficient quantity to meet demand. … We lost 35 rigs just last week, oil production instead of going up one million barrels per day in the US in 2015 may drop. In the end the physical market will prevail over the paper (futures market) despite the manipulation.”

I predict AlbqDan will eat alot more crow in 2016…ALOT.

Comment by Bad Andy
2015-12-30 08:04:15

It’s a global market and using US non-traditional methods as your baseline could get you killed in the futures market. The glut will continue through 2016 AND if we enter any type of recession…look out below!

Comment by Professor Bear
2015-12-31 00:54:31

Faber Seeing Recession Clashes With Yellen, Likes Treasuries
Wes Goodman
December 28, 2015 — 5:50 PM PST
Updated on December 29, 2015 — 5:53 AM PST
Marc Faber: U.S. Stock Market Will Go Down in 2016
U.S. is entering recession and stocks will fall, Faber says
Yellen said rate increase is sign of confidence in economy

Marc Faber recommends Treasuries and says the U.S. is at the start of an economic recession, clashing with Federal Reserve Chair Janet Yellen’s view that things are improving.

“Ten-year U.S. Treasuries are quite attractive because of my outlook for a weakening economy,” Faber, the publisher of the Gloom, Boom & Doom Report, said in an interview with Bloomberg on Monday. “I believe that we’re already entering a recession in the United States” and U.S. stocks will fall in 2016, he said.

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Comment by da bear
2015-12-28 15:48:47

I was thinking of a gold price target of $1,300 for the end of 2016. $1,500 in 2017. Low in 2018 or 2019 of $890. Up from there.

Not sure on oil. Probably range bound closer to $50.

Stocks: Slightly new lows by March. Sluggish but up a bit by the end of the year from there. New highs by late 2017, but a Fall CRASH.

BONDS: not in good shape. Getting worse.

Real Estate becomes more sluggish in the vast majority of areas.

The Real Estate Wealth Effect goes into reverse.

TRUMP wins.

Comment by Professor Bear
2015-12-28 20:42:37


2016 US Presidential Election - Next President of the United States
Odds as of December 28 at Bovada

Hillary Clinton -140
Donald Trump +500
Maco Rubio +550
Bernie Sanders +700
Ted Cruz +1000
Jeb Bush +2000
Chris Christie +2800
Ben Carson +10000
John Kasich +12500
Carly Fiorina +15000

Comment by Professor Bear
2015-12-28 20:46:28

Wishful thinking does not elections win.

– Yoda

Comment by Professor Bear
2015-12-28 20:49:31

To show how far off your TRUMP prediction is, notice the divergence between Democrat and Republican Winner-Take-All Iowa Electronic Market futures as Trump’s poll numbers improved this year.

Long story short: The more likely it is that Trump wins the Republican nomination, the more likely it becomes that the Democrats will win the 2016 presidential election.

I still suspect that Trump and all you Trump trolls secretly work for the Clinton campaign.

Comment by Bad Andy
2015-12-30 08:06:13

The guy is way to arrogant to be in it just to throw an election. It’s very possible that Hillary will keep the Dems at home no matter who she’s up against.

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Comment by The Central Scrutinizer
2015-12-30 12:22:29

Trump is enough to get people out to vote against him. Aside from a core of intellectualy bereft moonbats, it’s clear to everyone that a Trump presidency would certainly be a high speed disaster for this country and for the world.

Hillary offers the option of continuing the low speed disaster.

So the question is, do we want somebody to drive the bus into the brick wall, or drive it into the ditch? We passed the off ramp 20 years ago.

Comment by redmondjp
2016-01-02 02:54:03

I guess that there are a lot of intellectualy bereft moonbats in this country then.

One only has to look at how many of these moonbats show up at a Trump rally, as compared to any of the other candidates.

Is somebody paying them all to show up? I’m sure that the big unions aren’t bussing people from several states away to attend like they do for their candidates.

Comment by Professor Bear
2015-12-29 13:51:44


This may be crude oil’s most bullish signal
Published: Dec 29, 2015 2:10 p.m. ET
Crude oil has shed a third of its value in 2015
By Mark DeCambre

Crude-oil prices are on track for their worst 18-month drop ever. But that might be a good thing, according to strategist and technical expert Chris Kimble at Kimble Charting Solutions.

On Tuesday, West Texas Intermediate oil futures trading on the New York Mercantile Exchange (CLG6, +2.77%) were enjoying a rally, up 2.6%, in a holiday-shortened week.

However, the reality is crude oil has shed a third of its value in 2015 with a couple trading days left in the year. The commodity is off a whopping 63% from its June 2014 peak, according to FactSet data.

As it stands now, that would mark the worst 18-month decline for Nymex-traded crude since the period ended March 1986, according to Kimble. A whisker lower over the next two trading days would represent the worst 18-month stretch for crude oil ever, as Kimble’s table below indicates:

Comment by Professor Bear
2015-12-29 21:17:25

Asian markets run out of juice despite oil’s gains
Saheli Roy Choudhury
1 Hour Ago

Asian shares ran out of juice, retracing some early gains Wednesday to trade mixed, with Hong Kong and South Korea’s markets falling into the red.

Oil prices saw some respite overnight during U.S. trading hours, with both U.S. crude’s West Texas Intermediate (WTI) and the global benchmark Brent futures rising over 2.5 percent each.

However, the upward momentum did not continue. In Asian trade WTI futures were down 68 cents, or 1.8 percent, at $37.19 a barrel, while Brent traded at $37.33 a barrel, down some 1.22 percent.

Comment by Rental Watch
2015-12-30 10:43:48

Here’s the thing.

It is close to indisputed that the world will use more oil in 2016 than it did in 2015.

It is close to indisputed that it costs more than $50 per barrel to bring one more barrel online through drilling another well.

it is also indisputed that the most recent 4-5MM barrels per day brought on line through fracked wells have very high rates of decline.

At some point in the near future (2-4 years), oil will be back above $50 per barrel, and oil service companies will be busy again.

I wouldn’t day trade oil…as I have no idea when the current glut will be worked through, but $35 oil is just as unstable as $100 oil was.

I would not want my life to depend on mining the oil sands–as I’m not sure when that will be economic again.

Comment by The Central Scrutinizer
2015-12-30 12:25:19

My brother supervises the drilling of oil wells. He tells me they are pumping oil for $14 a barrel, on average, including the cost to put up the well.

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Comment by Rental Watch
2015-12-30 12:45:37

Then they must be drilling like crazy, right?

Comment by Rental Watch
2015-12-30 12:53:52

If $14 is common, then why all the hand wringing about upcoming defaults on drilling related debt? There should be no problems at all. None.

Comment by Mafia Blocks
2015-12-30 12:56:51

The amateurs and speculators paid too much Rental_Fraud. That’s what they do best.

Comment by Professor Bear
2015-12-31 01:00:24

“If $14 is common, then why all the hand wringing about upcoming defaults on drilling related debt?”

Cuz the debt was borrowed on the presumption of $100/bbl oil forever?

Comment by redmondjp
2016-01-02 02:55:55

OK, there we have it everybody, Housing Analyst has rolled out yet another screen name. HA, get some professional help in 2016, please. It’s so obvious by what you write that it is from the same person.

Comment by Mafia Blocks
2016-01-02 06:32:05

Data my friend. Stick with the data.

San Gabriel, CA Housing Prices Crater 6% YoY


Comment by Mafia Blocks
2015-12-30 12:26:46

And it costs $6(less is most cases) to produce a barrel of oil.

Data Rental_Fraud data!

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Comment by snake charmer
2015-12-31 08:23:05

I subscribe to the Peak Oil philosophy, so I believe a time will come when oil will be very dear and viciously fought over. I just don’t know when. I still am of the view that Peak Oil was the principal reason why the U.S. invaded Iraq — if not to gain outright control of Iraq’s resources, then as part of a geopolitical strategy to deny them to others.

Right now oil costs less than bottled water. That can’t last forever. Producing too much of a non-renewable resource is going to hurt in the long run.

There also could be an attack, by some country or group, on Saudi Arabia’s oil infrastructure. That would send the price of oil in the other direction in a big hurry.

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Comment by Mafia Blocks
2015-12-31 09:39:24

With a globe full of oil, excess production capacity and more oil formed every second of every day, the supply is infinite.

Comment by Mafia Blocks
2015-12-28 08:20:51

‘There’s not going to be a slump or a bubble burst. We have a nice, strong foundation.’”

A housing market founded on widespread fraud.

Comment by Professor Bear
2015-12-28 10:19:39

…also on mass delusion.

Comment by snake charmer
2015-12-28 08:41:04

Heh. Thanks for quoting my prediction Ben! On balance I feel that I was correct, but I missed a lot of things — I didn’t predict what’s happening with rents, or the low price of oil and producers responding by ramping up output, or our decision to re-introduce Russia as an major prospective antagonist, or Trump.

I’m going to give some renewed thought to what 2016 might look like, and post down-thread a bit later.

Comment by snake charmer
2015-12-29 15:53:00

OK, here we go. Apart from the U.S. election, my prediction for 2016 is that Europe and the EU will be the big story. At least one terrorist incident will occur. More Libyan/Syrian/Iraqi/Afghan migrants will arrive, at the same time a recession does. Frustrated, unemployed young people will riot somewhere. More countries become like Greece; that is, they have an anthem and a flag, but otherwise lack more than nominal political or economic independence, which was ceded to the EU and ECB, who serve an ephemeral belief and large private banks, respectively. Anti-EU parties gain more support. Having been failed grotesquely by all politicians, Greece suffers either an armed insurgency or a military coup. At least one country schedules a referendum on continued EU membership. I don’t think Europe does something that provokes Russia to shut off the gas in winter, but European nations lately have had the foreign policy that the U.S. tells them to have, so it might happen. Smiling European leaders appear at Davos, pose with Draghi and Christine Lagarde, and insist that they’ve got everything under control.

This country will be interesting. We are one big recession or large-scale domestic terror attack away from radical change, and I don’t think the change will be for the better either. But on economic matters, with a presidential election pending, my thinking is the same as it was for 2015. Much as I would like to see the echo housing bubble, and other asset bubbles, dissipate, and they all will eventually, I think they will continue in the short-term, whether the Fed makes minimal rate changes or not. We bet everything on propping up assets, and therefore we’ll do anything and everything to make that bet win, to include reversing course or changing the rules in the middle of the game. And I’m not the first to make this point, but we have many non-asset bubbles too. We have bubbles in government, empire, Fed credibility, credit, healthcare, higher education, and surveillance. None of those things can continue indefinitely at their current size and complexity. Diminishing returns are everywhere. We’re stuck in a highly self-destructive paradigm. This road goes over a cliff, but we’re stepping on the accelerator.

As for foreign policy, I’ve read Chris Hedges’ book “War is a Force that Gives Us Meaning,” and I think war, against foreign and domestic enemies, is the direction in which we’re going. What meaning do Americans have in their lives right now? Lining up for the next iPhone? Buying NFL team gear? Social media? This isn’t a country based on rights or the rule of law anymore, and no matter what our statistics and pundits might say, jobs will continue to disappear due to off-shoring and technology. They won’t be replaced by equivalently remunerative work. Once you take away rights, justice, and economic opportunity, we don’t have much of a national identity to fall back on. My prediction for 2016 is more war, which will generate more blowback and unforeseen consequences.

Comment by goedeck
2015-12-30 09:44:05

Nice job SC. Here in Oregon I see copious vinyard plantings; let me add some other bubbles: wine, craft beer, leased cars, cable channels ( do some of them have <50,000 viewers? ),and RV’s.

Comment by Prime_Is_Contained
2016-01-01 00:13:02

Here in Oregon I see copious vinyard plantings; let me add some other bubbles: wine,

Folks I know well in the WA wine industry say that 2015 has been their best sales year since the downturn…

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Comment by Dutch Spikes
2015-12-28 09:05:06

Long time for me posting here (maybe seven years) and a new handle (formerly Spykeeboi, maybe). My predictions:

Housing price spread narrows with QE ending. Market for high end homes (continues) to soften while demand for affordable entry level properties holds up. Overall market declines in both volume and prices. Long, soft landing–except for where things are really out of whack (Vancouver, Bay Area).

Oil recovers sooner than expected. Commodities markets typically overcorrect. There’s just too much being shut down too fast right now. Still–oil likely won’t see boom times again because of increasing pressure to phase out fossil fuels.

Dot com has shake out version 3.0. 2002, 2009, 2016… (Predicted above also.) Another effect of QE ending: dot coms have to show profits not just growth. Money ain’t so free anymore.

Inflation is higher than expected. Nota bumma: I called the 2008 housing bust back in 2002 (like others here), but it took six more years to occur. I’ve been calling higher inflation since 2010, and it also seems like it’s taking forever to get here. In the meantime, I’ve been taking on water in commodities and TIPS. At least I haven’t been alone: the strength of the dollar (because it’s the best house in a bad neighborhood) has taken out a lot of typically savvy investors. Because of my exposure to commodities and TIPS, I’m obviously biased toward higher inflation, but I absolutely believe that until we get a modicum of inflation back in the mix, analyzing the markets is useless because one of its key components is totally AWOL.

Happy and prosperous 2016 all!

Comment by Rental Watch
2015-12-28 10:37:59

I once heard Charles Schwab say in a speech “The Fed is trying like hell to create inflation, and eventually they’ll be successful.”

I think this was post crash in 2009 or 2010.

The “eventually” is longer than I expected too, but I also believe that higher inflation will come.

Comment by Mafia Blocks
2015-12-28 11:02:08

Meanwhile the deflationary spiral accelerates.

Comment by Neuromance
2015-12-30 18:06:00

Debt saturation, or peak debt, I think has a disinflationary effect, as it draws consumption forward, but then must be paid back, with interest, over time.

Eventually most everyone is in as much debt as they can handle, hence “debt saturation”.

The Fed I think has conflicting desires, like:

• The junkie who wants to get clean, but loves heroin too much.
• The student who wants good grades, but doesn’t want to study.
• The fat guy who wants to get into shape, but doesn’t want to exercise.

The Fed is a bank which is dictating national economic policy. They’re the experts according to conventional wisdom. The ones with their “hand on the tiller of the economy”.

As a bank, they believe more debt is good. The banks are their primary clients. Keep them in good condition, the cornerstone of the economy according to themselves, and they’ve done their job in establishing the conditions for the economy to grow.

But more debt suppresses spending and is disinflationary. Also, the big players, the big political donors, are making out like bandits in the current policy regime.

However, banks do like a certain measure of inflation as it makes debt more attractive. I think we all expect inflation in the grand scheme of things eventually. That the Fed will become more reckless and more novel in its experiments. But they also love debt in an era of debt saturation.

Contradictory desires.

Comment by snake charmer
2015-12-31 08:28:20

There once was a poster here with the handle of Txchk57 who believed a “Ka-BOOM” was coming: an extended period of deflation, followed by rapid hyperinflation.

Comment by Mafia Blocks
2015-12-31 09:40:40

“Hyperinflation”. Think about it my friend.

Do you really believe wages are going to double or triple any time soon?

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Comment by Bill, just South of Irvine
2015-12-28 09:38:19

The S & P 500 gain for 2016 will be a double digit percent gain.

Gold will end the year above $1150.

Bitcoin will spike above $800.

Comment by Bill, just South of Irvine
2015-12-29 08:39:37

RE will be either flat or go up by 2% in 2016.

My reasoning is I think there will be a soft landing, but it will be good for stocks, not RE. Houses are unaffordable and are on the verge of collapsing in value.

More people will vacate the banking system and that spells trouble for war profiteers. Eventually there will be no fiat money in the developed nations.

Comment by Bill, just South of Irvine
2015-12-31 21:08:25

Bitcoin and then cash were the best in 2015


Next year the best asset class will be crypto currency and the next best will be international stocks followed by domestic stocks.

Comment by Mafia Blocks
2015-12-28 10:48:59

“And finally, “Oil cannot be produced at these prices in sufficient quantity to meet demand.”


Liars keep a’ lyin and pimps keep a pimpin’.

But isn’t the same old story though? “You can’t produce a ______(fill in the blank) for that amount of money!”

They’re lying to you my comrades. They’re not in the ____ business so that just guess and speculate because they themselves were hooked in at some point.

Comment by Blue Skye
2015-12-28 11:05:25

After 10 years on a massive commodities bubble roller coaster, the double peak and retreat to 2006 prices has completed. It’s a classic tits up picture on the Commodities Price Index. There is still another 50% drop to return to the relatively stable ‘92 to ‘02 level. I don’t know about 2016, it could take several years of liquidations to wring out the most obvious excesses. A third spike to extreme bubble pricing is unlikely as it would require another credit expansion and building boom of gigantic proportions. Who is willing and able to step up to that?

I expect we have already entered a decades long period of deleveraging and deflation, despite the foolish efforts of central planners. If you are going long commodities, debt and housing, best of luck.

Comment by Professor Bear
2015-12-29 09:42:45

“If you are going long commodities, debt and housing, best of luck.”

Does it matter whether you gamble with debt or with equity?

Comment by Rental Watch
2015-12-29 11:20:04

“Does it matter whether you gamble with debt or with equity?”

Yes, it does.

If you gamble with equity on an asset, you are generally never a forced seller.

If you gamble with debt, you may become a forced seller.

And too many forced sellers is what causes price collapses.

Comment by Mafia Blocks
2015-12-29 16:00:55

Not really…. not at all.

Remember…… When you pay a grossly inflated price, you roll the dice…… irrespective where you got the money.

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Comment by Professor Bear
2015-12-29 21:18:25

“If you gamble with equity on an asset, you are generally never a forced seller.”


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Comment by Professor Bear
2015-12-29 21:22:15

Case in point on the effects of excessive leverage used to purchase assets:

International China
China stocks crash into bear territory as margin calls bite
by Scott Cendrowski
June 29, 2015, 7:17 AM EST

The central bank’s weekend interest rate cut has had no effect as an over-leveraged market runs out of credit.

Hope lasted for about eight minutes in China’s stock markets Monday.

Hope from tens of millions of small investors that the country’s policy makers would stave off a traditional bear market. Hope from investors who have taken out record loans over the past year to fling at the stock market.

Over the weekend, policy makers enacted a two-punch response to the country’s stock market’s 7.4% dive on Friday, that left it down 19% in just the two weeks since June 12. The central bank cut the one-year lending rate by 0.25 percentage point to 4.85% and reduced some banks’ reserve-requirement ratio in what analysts said was the first time China’s policy makers had cut both rates in the same day since Oct. 2008, when the entire world economy looked on the edge of collapse. It was the fourth interest rate cut in eight months.

And on Monday, Shanghai stocks opened up slightly—reflecting the government’s desired effect. The Shanghai index rose almost 100 points to 4,276 in the first few minutes of trading. Analysts agreed that the central bank was telling investors it didn’t want to see panic selling following a manic 150% rise in Chinese stocks over the last year, which started when the country’s state-owned press began touting stocks to the country’s small investors.

But eight minutes after the open, around 9:38 a.m., the sellers took over and Chinese markets later slipped into traditional bear market territory (a 20% decline from peaks) for the first time since 2010.

Today’s continued fall wasn’t unexpected. Steven Sun, HSBC’s head of Hong Kong and China equity research, said the reduction in margin financing is behind the rout in stocks, as leveraged traders furiously try to cut their exposure.

Margin financing was the primary market driver on the way up, and it will be a key driver on the way down as well,” he wrote today.

Margin loans allow investors to bet a multiple of their own capital. That juices returns as stocks rise but exacerbates losses on the way down, as brokerage will generally liquidate their clients’ positions if they don’t add more ‘margin’ to cover losses on their account.

Sun said the volume of margin loans outstanding had declined by 6%, or $23 billion, over the past five trading days after peaking on June 18.

Not only are Chinese traders stretched, so are stock valuations. The CSI 300 Information Technology Index, a mix of high-tech names similar to the Nasdaq, trades around 75 times earnings, or a 75 P/E ratio; the Nasdaq is trading for about 3o times earnings.

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Comment by taxpayers
2015-12-28 12:37:12

off 2%

what do u say to relatives that just bought a house?

Comment by Mr. Banker
2015-12-28 12:53:47

Tell them I said “thank you” and also tell them that David Lereah thinks that their mattress will soon be stuffed with hundred dollar bills.

Comment by Professor Bear
2015-12-28 20:43:37

“Good night and good luck.”

Comment by Professor Bear
2015-12-28 20:56:07

I predict that Trump will continue to tap into the populist anger vibe, but the Republican base will dump him at the convention through a brokered procedure.

Comment by Professor Bear
2015-12-28 21:12:41

ft dot com > Comment >
December 27, 2015 4:57 pm
Donald Trump’s bile is a healing balm for spurned Americans
Frank Luntz
Those who support him now will support him next November, writes Frank Luntz

Outraged by what Donald Trump says? You are not alone. No high-polling presidential candidate in the modern era has so intrepidly drawn the ire of so many within the American electorate. And there remains no end in sight.

Yet in rendering one voting bloc utterly apoplectic, he has appealed viscerally to another. The balance of middle ground politics is not, shall we say, Mr Trump’s bailiwick. But America is no longer a middle ground country. We are already scared by our division — and it is getting worse.

The simple truth is, the more provocative his language, the deeper and more passionate his support. He is no dummy; there is a method to his proverbial madness. Mr Trump says — to the growing legions who will listen — what tens of millions of Americans are already thinking. Respect or revile him, the man has hit a vein.

I spent three hours in a deep dialogue focus group with 29 Trump supporters. The phenomenon of “The Donald” is rooted in a psyche far deeper and more consequential than next November’s presidential election. His support denotes an abiding distrust in — and disrespect for — the governing elite. These individuals do not like being told by Washington or Wall Street what is best for them, do not like the direction America is headed in, and disdain President Barack Obama and his (perceived) circle of self-righteous, tone-deaf governing partisans.

Trump voters are not just angry — they want revenge.

Mr Trump has adroitly filled the vacuum of vitriol, establishing himself as the bold, brash, take-no-prisoners megaphone for the frustrated masses. They see him as the antidote to all that Mr Obama has made wrong with America. So to understand why millions love Mr Trump so much, you have to take a step back and listen to why they hate Mr Obama so much.

Here, my Trump voter focus group was particularly illuminating. Some still believe the president is not Christian. Many believe he does not love America. And just about all of them think he does not reflect the values the country was built upon. Indeed, within this growing faction, Mr Trump has licence to say just about anything. As we have seen repeatedly, the more outrageous the accusation, the more receptive the ear.

Comment by redmondjp
2016-01-02 03:04:09

PB, why do you cut and paste this progressive propaganda here?

Seriously. It adds nothing, other than lends evidence that you are one of the paid posters here.

It is obvious to anybody with a brain that both the president and his wife are no fans of America. They chose to spend 20 years in a church where the pastor curses this country. His own words (and those of his wife) condemn him. Plenty of quotes out there on this.

What is amazing to me is that progressives are so out of touch with average-joe Americans that they can’t possibly fathom why Trump is so popular.

Comment by Professor Bear
2016-01-02 11:55:44

Trump isn’t that popular; that is just a line of BS that is popular among a small minority of Americans who find Trump appealing.

Hillary Clinton is predicted to beat him in a one-on-one election, unless you rely on Rasmussen for your poll results.

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Comment by Professor Bear
2015-12-28 21:34:49

The Guardian
Islamic State
The terrorists and demagogues want us to be scared. We mustn’t give in
George Soros
It’s not easy to resist the threats and the hysteria that surround us, but we must do, as fear is the greatest danger to open society

Vigil in Paris after the Charlie Hebdo attacks of January 2014
People gather for a vigil in the Place de la Republique, Paris, after a terrorist attack on the offices of Charlie Hebdo in January 2015. Photograph: Ian Langsdon/EPA
Monday 28 December 2015 08.27 EST
Last modified on Monday 28 December 2015 16.36 EST

Open societies are always endangered. This is especially true of America and Europe today, as a result of the terrorist attacks in Paris and elsewhere, and the way that America and Europe, particularly France, have reacted to them.

Jihadi terrorist groups such as Islamic State and al-Qaida have discovered the achilles heel of our western societies: the fear of death. Through horrific attacks and macabre videos, the publicists of Isis magnify this fear, leading otherwise sensible people in hitherto open societies to abandon their reason.

Scientists have discovered that emotion is an essential component of human reasoning. That discovery explains why jihadi terrorism poses such a potent threat to our societies: the fear of death leads us and our leaders to think – and then behave – irrationally.

Science merely confirms what experience has long shown: when we are afraid for our lives, emotions take hold of our thoughts and actions, and we find it difficult to make rational judgments. Fear activates an older, more primitive part of the brain than that which formulates and sustains the abstract values and principles of open society.

The open society is thus always at risk from the threat posed by our response to fear. A generation that has inherited an open society from its parents will not understand what is required to maintain it until it has been tested and learns to keep fear from corrupting reason. Jihadi terrorism is only the latest example. The fear of nuclear war tested the last generation, and the fear of communism and fascism tested my generation.

The jihadi terrorists’ ultimate goal is to convince Muslim youth worldwide that there is no alternative to terrorism. And terrorist attacks are the way to achieve that goal, because the fear of death will awaken and magnify the latent anti-Muslim sentiments in Europe and America, inducing the non-Muslim population to treat all Muslims as potential attackers.

And that is exactly what is happening. The hysterical anti-Muslim reaction to terrorism is generating fear and resentment among Muslims living in Europe and America. The older generation reacts with fear, the younger one with resentment; the result is a breeding ground for potential terrorists. This is a mutually reinforcing, reflexive process.

Comment by Oddfellow
2015-12-31 07:43:50

The terrorists and demagogues want us to be scared. We mustn’t give in
George Soros

That’s just pure evil, right there.

Comment by Mafia Blocks
2015-12-29 09:19:59

2016- Housing demand will continue to crater as it did in 2015. Instead of 20 year lows, demand will fall to 25 year lows. The price declines will continue to spread geographically and and they’ll accelerate. Capitulation and defaults will continue to rise.

Comment by Professor Bear
2015-12-29 09:40:52

So it turns out the two main items I endlessly argued with AlbqDan about throughout the first half of 2015, namely the China slowdown and the commodities crash, were ranked by AP business editors as the top two business stories of 2015.

Does it strike anyone besides me as odd that Dan somehow missed what is now plainly obvious to every literate being on the planet?

Comment by Professor Bear
2015-12-29 10:13:35

Year in Review: Top AP business stories
Koji Sasahara — The Associated Press file
By Paul Wiseman, The Associated Press
Posted: 12/28/15, 6:48 AM PST

WASHINGTON >> China’s economy lost some luster and its leaders their aura of invincibility. A commodities boom went bust, spreading pain from Texas oil fields to Indonesian coal mines.

Seven years of near-zero interest rates ended in the United States, while easy money kept flowing elsewhere. Volkswagen cheated on emissions tests. And the rise of Uber intensified a debate about the definition of an employee.

China’s sharp slowdown was chosen as the top business story of 2015 by business editors at The Associated Press, followed by the plunge in energy prices.

Here are the top 10 business stories of the year:


It took five years for people to become really worried over China’s slow-motion economic deceleration. The freak-out finally hit global markets in August. Between Aug. 10 and Aug. 25, the Dow Jones industrial average plunged 11 percent on fears that everyone had underestimated China’s troubles and their impact on the rest of the world.

China’s deceleration is part of an official plan to shift from unsustainable growth from exports and wasteful investment to slower but steadier expansion based on consumer spending. Yet its leaders tarnished their reputation for economic stewardship by clumsily intervening to prop up plunging stock prices. Then they shocked and confused markets by devaluing the Chinese currency.

Economists began to conclude that China’s official story — that its economy was growing at around a brisk 7 percent a year — was far too rosy and that growth might be closer to 5 percent or 6 percent and likely to weaken further.


China’s slowdown and a global oil glut crushed commodities and energy prices. The Standard & Poor’s GSCI commodities index has plunged 34 percent this year to its lowest level since 1999, down 80 percent from its peak. And the main culprit was China’s slowdown. When they were booming, Chinese factories devoured about half the world’s copper, aluminum, nickel and steel.

Oil prices, too, tumbled from $98 a barrel two years ago to under $35. The biggest factor was unrestrained production across the world, which led to a huge supply glut. In response, energy companies slashed investment in America’s oil patch. And workers lost jobs in Zambian mines, Indonesian coal pits and Australian ports. But consumers enjoyed a windfall: Near year’s end, U.S. motorists were paying just $2 a gallon for gasoline, down from $2.47 a year ago.


When the Fed cut short-term interest rates to near zero in December 2008, the American economy was losing hundreds of thousands of jobs a month. The financial system had nearly toppled. The rate cut was an emergency response. No one expected it to last.

But it did — for seven years. On Dec. 16, the Fed declared that the economy was finally healthy enough to withstand a modest rate hike: It raised the short-term rate it controls from a range of zero to 0.25 percent to one of 0.25 percent to 0.50 percent. But with Europe and Japan still struggling and China decelerating, the European Central Bank, the Bank of Japan and the People’s Bank of China had gone in the reverse direction: They acted to continue or expand their easy-money policies.

Comment by Ol'Bubba
2015-12-30 16:14:23

Albuquerque Dan is living rent free in your head. Move on, PB.

Comment by Mafia Blocks
2015-12-30 17:22:47

Falling prices my friend. Falling oil and housing prices to dramatically lower and more affordable levels accelerates the economy like nothing else.

Comment by Professor Bear
2015-12-31 01:01:51

Entertainment is what I got from AlbqDan. I miss the chance to constantly point out where his predictions were doomed to fail.

Comment by Mole Man
2015-12-29 16:49:43

As software continues to take over the world we are going to see more and more data driven calculations used to figure out what is happening and what to do next. The Inclusionary Housing Calculator shows that building housing units is profitable for all market segments. The big difference is that building high end units yields very fat margins for developers while lower end units are merely less profitable. Big metros are likely to use this to force developers to service more of the market.

Comment by Mafia Blocks
2015-12-30 09:24:18

^ Now theres an obvious scam.

Comment by Little Al
2015-12-29 22:28:45

At the end of The Big Short, they revealed that new irresponsible bets on housing were introduced in 2015. If that is true, the bubble in housing has not fully even reignited yet. There is no way we are anywhere near the mania I saw in 2015, so nobody here has an ounce of proof that housing is in the process of crashing.
You guys are right about commodities, but I’ll take that bet if anyone is foolish enough to say its tanking from here.
If there is no true discussion here, and assumptions cannot be challenged, then we don’t have much here.
Oh yeah, Hillary will win. That’s a hard prediction.

Comment by Mafia Blocks
2015-12-30 07:56:19
Comment by snake charmer
2015-12-30 08:15:35

I had an investment in a commodities fund, but finally decided this year to sell and take a capital loss after a brutal beating. I do intend to try to buy the shares back at the bottom, presuming that I can estimate when that is. I listened to Chris Martenson’s podcast the other day where the speaker, Dave Collum, claimed that certain gold mining companies weren’t profitable even when gold was at $1,800 per ounce.

I agree that this isn’t like 2004-06, when we had a full-blown cultural mania, epitomized by the infamous Time magazine cover. Back then it seemed like real estate came up in almost every discussion. I rode in a cycling event, and was chugging with effort up a series of hills when two guys “sat on” my back wheel and discussed real estate. I was in Uruguay, and in a restaurant overheard another American talking about real estate.

Some posters here are more amenable to discussion and debate than others. If you look back at archived posts from 2005-06, what’s the first thing that jumps out at you?

Comment by Mafia Blocks
2015-12-30 08:54:30

“If you look back at archived posts from 2005-06, what’s the first thing that jumps out at you?”

Denial. Just like right now.

Comment by Blue Skye
2015-12-30 10:16:37

This was the echo bubble, where those who have not been absolutely crushed come to believe that the primary bubble was actually the “normal”. We have plenty of them here to educate us (bought in 2011 at 2004 prices WOHOO). The current participants are fewer. So it will go, step by step down.

Comment by Neuromance
2015-12-30 18:26:27

Little Al: At the end of The Big Short, they revealed that new irresponsible bets on housing were introduced in 2015. If that is true, the bubble in housing has not fully even reignited yet. There is no way we are anywhere near the mania I saw in 2015, so nobody here has an ounce of proof that housing is in the process of crashing.

The market in my area does still seem to be manic. It’s all escalation clauses and bidding wars and pre-qualifications from reports I’ve seen.

Demand for housing is a two-part object:

• Consumption Demand: Demand to consume the house, i.e. use it.
• Speculative Demand: Demand for the speculative aspect, i.e. sell it for a profit later.

The central bank has indemnified the mortgage market which helps push up prices and boost speculative deman. Government also does its part to boost prices for the stealth property tax benefits (aside: I heard on the radio that tax assessments had increased 11% in Maryland. I thought people who merely want to use houses should be delighted).

So speculative demand will continue to be strong, backed by the central bank and government. Consumption demand will probably drop I think, as renting seems a tolerable substitute good, and more beneficial to the net worth than the “Ramen Noodle” mortgage (i.e. can only afford Ramen Noodles when you take it on).

Comment by Neuromance
2015-12-30 19:54:58

And, in light of this dichotomy in demand, consumption demand versus speculative demand for houses, that probably blunts the impact of the lack of plankton. The lack of plankton would still be a brake on demand, but speculative demand could still provide an updraft for prices.

I recall in Baltimore City, in the early to mid 2000s, the city had been losing population for decades, yet prices were skyrocketing. That was speculative demand, not consumption demand.

In non-recourse, judicial states, I’d expect speculative demand to be even higher as individuals’ assets are protected from lenders in foreclosure proceedings.

Comment by Muggy
2015-12-30 10:27:57

Prediciton: I’ll probably buy a house in 2016.

Comment by Blue Skye
2015-12-30 11:38:39

Watch that next step Muggy, it could be a long way down!

So what happened to the crisis of possible futures?

Comment by Muggy
2015-12-30 18:58:42

“So what happened to the crisis of possible futures?”

It’s still there, but the best option for my children is to stay where we are. My wife puts up with a lot of _hit and is generally a great person. I’m not saying I want to buy a house. I’m not saying it’s the best way to go about the money situation. It is, however, probably the best option for my family, which is 75% people other than me.

Nothing stupid: modest 3/2 ranch in a decent ‘hood, 1,600 sq. ft.

Comment by Blue Skye
2015-12-30 19:36:29

Good luck friend. Stop in and have a beer on the Lake.

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Comment by Muggy
2015-12-31 15:43:12

“Good luck friend. Stop in and have a beer on the Lake.”

I predict this will be the year that this happens! We’ll be in the area June 25-July 6. Tickets are booked, and this year we’re not visiting Adirondacks or NYC - we want to visit Stony Brook, Letchworth, Skaneateles, Ithaca, Taughannock… we’re keeping it completely upstate.

Comment by snake charmer
2015-12-31 09:05:13

I completely understand Muggy. While I’m still not happy about it, I finally capitulated a couple of years ago. Our long-time landlord was going to sell, and preferred to sell to us, without using a realtor. We got a good deal, looking at comparable sales. We like our neighborhood, it’s safe and quiet and a short commute to work. There are a lot of kids who are the same age as my son. We plan to stay indefinitely, although I know from personal experience that you never know where your life will take you.

Since 2011, a large number of the remaining $200,000 to $300,000 3/2 houses in the neighborhood have been bulldozed and replaced by $600,000 McMansions. While we could afford a $200,000 to $300,000 house, we couldn’t afford a $600,000 house, and wouldn’t buy one even if we could. If we wanted to stay here, we had to act.

And most critically, I had no confidence whatsoever in our leaders and institutions. Prices need to fall. They should fall. If we let the market work, they would fall. But our leaders and institutions, regardless of political party, won’t permit that to happen. Like I wrote last year, I expect all kinds of radical economic approaches to be deployed to preserve the status quo. Those approaches might damage us financially as much or more than buying a house.

I expect that we will lose money when all is said and done. We’ll have to win at something else.

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Comment by Mafia Blocks
2015-12-31 09:35:16

“We got a good deal”

How much did you pay? Square footage?

Comment by Muggy
2015-12-31 15:27:01

“I expect all kinds of radical economic approaches to be deployed to preserve the status quo.”

I think it’s already happened, yes? The Fed owns every mortgage, basically. This means when they are finally walked away from during the next crash, they will restrict supply. Expect even more zombie foreclosures.

Comment by Blue Skye
2015-12-31 16:05:43

Check your hbb@gmail

Comment by Tarara Boomdea
2015-12-30 12:55:02

Prediciton: I’ll probably buy a house in 2016.

I will in mid-2017, when my lease is up. I’m worn out and sick of dealing with landlords. The thought of moving again kills me and we will have to at least one more time, since we would never buy this place we’re renting.

Comment by clark
2015-12-31 04:21:09

“I’m worn out and sick of dealing with landlords.”

Oh, I hear ya. Do I ever. But, do you think things could be made worse by buying? Trading one landlord, that’s easy to change out of, for another that’s hard to shake off: Mr. Banker & Mr. Goobermint?

Especially if 2016 fits into this time-line by the PTB in an unpleasant way?:

Never Forget … Your Country Admits to False Flag Terror


Buying in 2016 could be The worst move, Ever. Because, if ever there were a year for a major F.F. greater than 9/11, this next year would be it. Followed by a price drop from Hell. ?

Comment by Tarara Boomdea
2015-12-31 15:59:28

Site bookmarked.

I’m not going to do it, I just wish we could. Along with reasons discussed here, whatever we buy would not be suitable in a few years (family situation might change completely - or not - elderly mother could live to be 102 like her father, Asperger-y daughter could get her act together and be on her own.)

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Comment by Prime_Is_Contained
2016-01-02 11:08:34

Asperger-y daughter

Teach her to code! Women in tech are in short supply, and many on the spectrum deal well with computers—and the industry is used to them….

Comment by Tarara Boomdea
2016-01-02 14:43:44

Teach her to code!
Thanks, I thought so too, so I tried to push her in that direction when she was younger, no interest.

I think I ruined her. Because of her social cluelessness and utter lack of any ability to defend herself, I overprotected her. (She’s told me “Thank you, because I needed it.”)

She’s gotten more “regular” as she’s gotten older. High IQ but hampered by severe anxiety, over sensitivity. National Merit scholarship qualified because of her SAT scores but denied because of her grades; still angry over that one.

When she goes back to school, she is going to major in chemistry.

Comment by Professor Bear
2015-12-31 01:03:42

A long-time holdout in my circle recently bought, which I took as a sign the Echo Bubble peak is nearing the capitulation stage.

Comment by Muggy
2015-12-31 06:48:00

“which I took as a sign the Echo Bubble peak is nearing the capitulation stage.”

I’ve thought about this. ALOT.

I had all of my retirement funds in money market. A month ago I moved them into a date fund and blam, then fund immediately starting losing (I mean LOOSING) money.

This might be my own shoeshine moment.

Here’s the thing: everyone, and I mean EVERYONE here WORSHIPS RE. I am more of an outcast now than I was in 2007. I’m fine with that, I wouldn’t do it for other people. But the point is, everyone now knows it’s no big deal to walk away if you feel like it, so people are rolling the dice again.

Comment by Blue Skye
2015-12-31 10:40:27

Here’s more to think about.

Your timing was bad on the funds transfer. Your timing is bad on buying a house.

China credit expansion and astronomically rising commodities prices to support their malinvestment binge is what kept the world out of (much worse) recession over the past maybe 5 years. It is unraveling now. Bankruptcies and defaults are mounting, even in the US.

If there is a natural time for the echo RE bubble to roll over it is now. Take a hard look at what happened to RE prices after ‘06. If you really must buy, think about your timing.

You shouldn’t buy something when EVERYONE worships it. You should buy when everyone thinks you are crazy to buy. If prices fall, that will be the case in a couple of years. Pleasing others will not improve your retirement prospects.

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Comment by Mr Grinch
2015-12-31 13:26:40

“Your timing was bad on the funds transfer. Your timing is bad on buying a house.”

I’ve noticed that one bad household financial decision often leads to more bad decisions going forward.

Comment by snake charmer
2015-12-31 11:54:26

Timing is a funny thing. When I look back on things, despite my intention to be right all the time, I’ve had bad timing about as often as I’ve had good timing. And I am contrarian by nature.

Like Yogi Berra said, it’s tough to make predictions, especially about the future. The only people with perfect timing are HFT guys that profit every trading day because they’re front-running the market.

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Comment by Neuromance
2015-12-31 12:28:39

Muggy:: I had all of my retirement funds in money market. A month ago I moved them into a date fund and blam, then fund immediately starting losing (I mean LOOSING) money.

I’ve learned the hard way that moving significant chunks of money into the stock market is a good way to lose money. If one is going to get into the stock market, I think dollar cost averaging is the only way to go, slowly building a position.

Remember: We don’t have inside information. Trading on inside information is perfectly legal by the way, and there are organizations who spend a great deal of time and money getting that information. As long as the person who passes on the inside information doesn’t directly profit from it (quid pro quos are fine I’m sure), it’s all good.

We don’t have HFTs and trading desks whose sole multi-million or multi-billion dollar purpose is winning at stocks.

So, if you think stocks will go up long term for whatever reason, then dollar cost averaging, little by little, is IMO, the right way to get into the market.

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Comment by Muggy
2015-12-31 15:30:21

I wanted to dollar cost average, but that isn’t allowed with the date funds and the state. My teacher retirement package is so bad, it’s almost not worth thinking about. I’ll probably be mostly relying on SS (if I make it).

Comment by Neuromance
2015-12-31 18:26:58

In those circumstances, it’s good to remember the Will Rogers quote: “I’m not as concerned with the return ON my money as I am concerned with the return OF my money.”

The ECB and China are going to be pouring lots of money into the economy via their versions of QE, which work to boost asset bubbles (including financial assets). And the Fed is also concerned with the stock market so they’re not going to tighten too much. Net result: the fund will probably come back.

Comment by Mr Grinch
2015-12-31 13:25:04

“…everyone now knows it’s no big deal to walk away if you feel like it, so people are rolling the dice again.”

So your decision is predicated on the assumption that if you buy at the Echo Bubble peak and find yourself deep underwater in a few years, you can just walk away with no consequences. Or would you simply bite the bullet and continue to pay the high monthly payment you agreed to, even if prices dropped and others were able to obtain the same kind of home you buy for a lower price in the future?

Do you assume there will be damage to your credit rating due to eventually walking away from an underwater mortgage, but the benefit of living in a home of your own for a few years before you walk away will outweigh whatever costs arise due to your damaged credit rating? Or is this time different, in that real estate can only go up from now on?

I’m having trouble understanding your decision tree.

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Comment by Muggy
2015-12-31 20:46:56

I’m not looking to walk away per se, but I am acknowledging that the psychology driving the bubble is back, with no fear of repercussions, even in recourse states. None of my coworkers that walked away got deficiency judgments. None.

Comment by Jack McCabe
2016-01-05 22:32:40

Deficiency judgements can be filed anytime with in 10 YEARS after foreclosure.
Your friends haven’t received deficiency judgements….as yet.

Comment by Prime_Is_Contained
2016-01-02 11:41:39

But the point is, everyone now knows it’s no big deal to walk away if you feel like it, so people are rolling the dice again.

Ah, the smell of moral hazard in the morning…

Doesn’t the fact that everyone now knows this suggest the potential for even higher heights of speculation, and an even faster unwind the next time around?

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Comment by Professor Bear
2015-12-31 20:08:35

My wife just kindly reminded me that we are looking at the start of year 12 of rentership!

Comment by Prime_Is_Contained
2016-01-02 11:45:32

start of year 12 of rentership

2005, eh? Just started year 14 here.

Comment by Professor Bear
2016-01-02 11:57:17

Eventually fundamentals HAVE to revert in favor of renters, right?!

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Comment by Professor Bear
2016-01-02 12:12:15

Though interesting, this article is overburdened with a plethora of REIC propaganda, which makes it confusing to take home any conclusions. Based on the discussion in the article, my guess is that the conclusions are flawed, due to basing the analysis on “how much a month” rather than net worth and future capital loss considerations, and it also sounds like the analyst(s) made the egregious error of ignoring the underlying income and home price distributions in their analysis (i.e. a representative home owner with average income is assumed to purchase or rent the average-priced house, resulting in an absurdly high monthly payment to income ratio like 37% or 38%). But I haven’t read the actual study to say for sure.

By the way, whatever became of the old prudent underwriting rule-of-thumb that said a mortgage payment should be limited to 30% of household income?

Buying More Affordable than Renting in 58 Percent of U.S. Markets According to 2016 Rental Affordability Analysis
Dec 21, 2015
Realtytrac Staff

IRVINE, Calif. – Dec. 23, 2015 — RealtyTrac® (www.realtytrac.com), the nation’s leading source for comprehensive housing data, today released its 2016 Rental Affordability Analysis, which shows that buying is still more affordable than renting in 58 percent of U.S. housing markets despite home price appreciation outpacing rent growth in 55 percent of markets. The report also shows that the rise in rents is outpacing weekly wage growth in 57 percent of markets.

Across all 504 counties analyzed, average wage earners will need to spend 37 percent of their income on rents for a three-bedroom property in 2016, slightly less than the 38 percent of income to make monthly house payments — assuming a 3 percent down payment and including mortgage, taxes, insurance and mortgage insurance — on a median priced home on average across all 504 counties.

Renting was more affordable than buying in 213 of the 504 counties analyzed (42 percent), including counties in Los Angeles, Houston, San Diego, New York City (Brooklyn), and Dallas. Buying was more affordable than renting in 291 counties (58 percent) including counties in Chicago, Phoenix, Miami, the Inland Empire of Southern California, Las Vegas and Detroit.

Comment by Prime_Is_Contained
2016-01-02 18:32:47

Eventually fundamentals HAVE to revert in favor of renters, right?!

I certainly always thought so! Beginning to wonder whether I will have sufficient time in life to see it happen, tho!!

Comment by Professor Bear
2016-01-02 19:54:57

“Beginning to wonder whether I will have sufficient time in life to see it happen, tho!!”

It’s too late for me, but I still hold out hope at this point for my kids.

Comment by Muggy
2016-01-02 16:46:38

Graduated 2000

2000-2003 Rent
2003-2005 Own
2005-2015 Rent

Comment by Mafia Blocks
2016-01-02 18:00:38

2016-2060 CRATER

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Comment by Senior Housing Analyst
2015-12-30 11:59:15

“Pending Home Sales Plunge In November, Realtors Warn Fed Over Higher Rates”


Comment by Rental Watch
2015-12-30 12:55:55

Plunge = down 0.9% (up 2.7% year on year).

Not even out of the error bars…

Comment by Mafia Blocks
2015-12-30 13:18:56

So what is it you think they’re telegraphing Rental_Fraud?

Could it be that they’ve been overstating demand for years like they over stated demand from 2007-2011 and then had to come clean?

Actual Housing Demand


“National Association Of Realtors Caught Lying About Home Sales”


Comment by Professor Bear
2015-12-31 19:06:52

Error bars don’t apply to collapsing credit bubbles.

Comment by Mafia Blocks
2015-12-30 13:26:51

How did the HBB Brigade miss this?

“Home Sales Pimp Larry Yun Caught In A Blatant Lie”


Comment by Blue Skye
2015-12-30 14:32:48

I rather think a headline like “Larry Yun Caught in a Blatant Truth” would be more sensational.

Comment by Raymond K Hessel
Comment by Bambi
2015-12-31 08:13:42

I’m a finance grad but not a particularly talented one. Yet even I can see the stupidity of the statement - “Current housing prices have not yet returned to pre-bust levels.” Was it not widely known that the housing bubble and it’s ridiculously high prices were due to mass corruption?

They were never legitimate yet we are nearly back to the same level — or “approaching pre- bust levels”. Does that not scream “echo bubble”?!

Am I missing something or is my water filter perhaps working better than others?

Comment by Neuromance
2015-12-31 13:12:17

Bambi: “Current housing prices have not yet returned to pre-bust levels.” Was it not widely known that the housing bubble and it’s ridiculously high prices were due to mass corruption?

It’s propaganda. Consider who is repeating the mantra, and how they get paid.

“It is difficult to get a man to understand something, when his salary depends upon his not understanding it.” — Upton Sinclair

Comment by Neuromance
2015-12-31 13:18:01

More specifically, journalists are people too. If an advertiser hands them a professionally written pre-packaged story, they’ll be happy to submit it, get paid, and go home.

Eisenhower warned of the Military-Industrial complex. The FIRE-political complex has utterly and totally surpassed the wildest dreams of what the MIC could ever be.

Elizabeth Warren warned about CitiGroup’s influence on the government. That’s real, and it’s just one company.

Comment by Professor Bear
2015-12-31 19:11:19

Hi Bambi. Thanks for your post. It sounds to me like you learned alot more than the average finance graduate.

I love your blog handle, though being a heterosexual male, I hope you are a female (blush)…

Comment by Oddfellow
2015-12-31 08:23:00

I predict David Stockman will predict America’s doom on 366 days next year (leap year!).

Zerohedge, unfettered by western ideas of rationalism and logic, will predict America’s doom on 628 days next year. (But they’ll never say a single bad thing about Putin.)

Comment by Mafia Blocks
2015-12-31 09:42:21

I forecast Donald Trump, Mafia Blocks and a few others will occupy 100% of the vast empty space of your skull for the next 8 years.

Comment by The Order Of The Golden Chainsaw
2015-12-31 12:10:35

And you sad lot will continue to obfuscate and conflate the issues.

Comment by Fang nu
2015-12-31 08:53:31

I predict anyone who relys on interest and specations to make up for their shortcomings in earning ability will be devastated.

If gambling on equity, interest, dividends, commodity price is part of your plan to get ahead, you need to get a better job, work overtime if available, get a second job if need be, and quit being a gambling chump.

If it isn’t post tax cash… It just isn’t.
Nothing will make this more true than our upcoming year will.

Fools of the past fooling themselves in this near future.

Comment by cactus
2015-12-31 09:38:54

predictions Hilary will win and taxes will go up one reason is because Social Security and Medicare is broke.

More renters living in crappy investment bank owned housing

Comment by The Order Of The Golden Chainsaw
2015-12-31 12:05:02

We will schlong more brown people in 2016.

Comment by Bill, just South of Irvine
2015-12-31 23:28:41

A record number of people will npbe murdered by uniformed thugs in the U.S. in 2016.

Comment by Bill, just South of Irvine
2015-12-31 23:32:00

“”will be”

Comment by Bill, just South of Irvine
2016-01-01 17:50:28

It is humbling to look back on those years you had losses in your net worth. But you then let it go and stay true to your asset allocation plan. I dropped my stocks allocation from 67% to 57% over the last three years and part of it was I needed money. Sold off the biggest gainers. My losses in 2015 were about 4%. i am thinking about staying 57% for the next ten years.

International stock funds have spcertainly laggrd the U.S. for years. 2015 was a bigger hit on international stocks. Yields are higher than the U.S.

My once a year purchase of DODFX has basically resulted in a marginal increase in the NAV. I would have been better off in TBills and have been in that fund for ten years. Win some, lose some. My transaction fee in the voyager brokerage is $20, hence I buy lots of shares once a year. Once I have $50k in the Vanguard brokerage the transaction cost will be $7. I could just go directly to Dodge and Cox and set up an account, but that would be more paperwork.

Over time I will do well in DODFX. I like that it is mostly developed countries outside the U.S. Keep going the course. The 2.4% yield is nice.

Comment by Professor Bear
2016-01-01 19:44:13

The U.S. economy is overdue for a recession. How will either U.S. or international stocks fare if that comes to pass?

Comment by Bill, just South of Irvine
2016-01-01 20:14:30

I think the U.S. Is tightening credit before Europe and Asia, This will bite the U.S. military ventures in the rear as the constituents of Congress put pressure on cutting military spending. Europe and Japan don’t waste as much money on killing innocent people, so their economies get the “peace dividend” before ours.

I think the U.S. is trying to engineer a soft landing. The next rate hike will be December 2016. Yellen might apply monetarist capitalist policies successfully.

Or not. In such case a return to higher unemployment. Housing bubble could crash or slowly deflate, but it is peaked.

Comment by snake charmer
2016-01-02 23:26:18

Are recessions allowed?

Comment by Professor Bear
2016-01-04 00:48:58

Are they preventable?

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