Touched By The Modern Gold Rush
The Seattle Times reports from Washington. “Just how hot is the Seattle real-estate market? People are now reserving condos under construction and then flipping them for a six-figure profit before they even open. Matt Goyer, a local real-estate broker and blogger, combed through some recent sales at the new Insignia high-rises in the Denny Triangle. He found several brand-new condos that their owners reserved during construction over the last couple of years and just sold again before ever living in them. The condos fetched an average of $637,000, up from their original purchase price of about $526,000 — a profit of 21 percent.”
“Bree Al-Rashid, a Redfin agent who sold one of the condos that sold again before the original buyer ever lived in it, says the trend of flipping new-construction homes is especially appealing to foreign buyers and investors because they are usually sold initially for a set price, avoiding a bidding war. ‘It’s a less risky investment than flipping homes that have been on the market before,’ Al-Rashid said.”
From Tech Crunch on California. “Buying a home in Silicon Valley is no joke. It’s difficult for tech workers and it’s even more difficult for those not touched by the modern gold rush. One mortgage originator, Opes Advisors, is incorporating restricted stock units (RSU) and private shares to make it easier for techies to move from incubator to nest egg. But what appears helpful to a population that sees housing prices moving out of reach could actually end up damaging the Bay Area economy if startup valuations take a turn south.”
“A reasonable reaction to this might be to wonder how a mortgage lender values a mostly illiquid asset like a restricted stock unit, and ultimately forms a judgement of the borrower’s ability to repay. Opes is counting RSUs as income, which in simple terms is a metric for earnings. The key lies in debt to income ratios of prospective borrowers. Because Opes can visualize RSUs as income or stock, it can effectively make a statement about how close a borrower is to being overwhelmed by debt. ‘We have investors that allow Opes Advisors to look at RSU’s as both income and / or stock,’ said Edgar Urrutia, Marketing Communications Manager for Opes Advisors. ‘Because of this we can help clients come up with mortgage solutions that are ideally suited to their individual needs.’”
“Markets for trading secondary shares have helped some entrepreneurs convert nebulous equity into income, but it’s always the participating market determining the value of shares. There are enough problems with information disclosure and cognitive bias in this process alone without letting mortgage lenders take a stab at it. In the simplest terms, the 2008 housing crisis was born partially out of the link between the public stock market and the housing market and partially out of loans being originated to folks who couldn’t pay them back. When banks bet on future income that could disappear in the blink of an eye, they create unnecessary risk in the system that can have major consequences.”
The New York Times. “At first blush, it seems as if times are good for the real estate industry in New York. The superhigh end — as in apartments for $10 million or more — has met with headwinds recently, but people continue to stream into New York, while developers benefit from cheap capital and a pro-growth mood. Apartments have been built and sales overall have been strong. Some projects have nonetheless struggled to take off.”
“Developers say delays are normal and no cause for alarm, even though building permits have expiration dates and loans can have strict terms about construction start dates and other milestones. Some of the developers and developers’ representatives who were contacted for this article refused to talk on the record about their projects; even then, most had little to say beyond asserting that the projects would eventually be built. Others failed to return multiple phone calls over the course of weeks.”
“These projects are in limbo just as the ultraluxury market weakens and there are warnings of a coming downturn across the board. Whether the projects can recover in time is an open question. ‘I think we are due for a reset in the residential condo market,’ said Jason Meister, a senior director and an investment sales broker at Ackman-Ziff Real Estate Group, a commercial brokerage. ‘We’re starting to see the beginning of a correction.’”
The Miami New Times in Florida. “Right now, the downtown Miami skyline is absolutely flooded with cranes, and it’s impossible to drive more than ten blocks in any direction without hitting construction traffic. But a study released this week by the Miami Downtown Development Authority (DDA) might be the first hint that the city’s latest construction boom is finally ending: Following five straight years of price hikes, downtown Miami condo resale prices have dropped 4 percent this year.”
“In essence, the price drop shows there have been so many new condos built over the past few years that investors simply have no need to buy old units. This is a problem, because gigantic condo towers are a bit harder to dispose of than last year’s BMW X6. A city with no resale market means entire towers could end up empty in a few years’ time.”
“Though the DDA expects things to “level off” as more condos are built, Miami doesn’t exactly weather that whole ‘leveling off’ period well. As famed cocaine importer Mickey Munday told Vice in February: This city is basically one gigantic pyramid scheme, centered around selling condos to an ever-increasing list of outside investors.”
’several brand-new condos that their owners reserved during construction over the last couple of years and just sold again before ever living in them’
If there aren’t any interest only loans involved, this can only turn out well.
I wonder how many people in CA r still upside down?
I wonder how many will be upside down after prices roll over again?
Prices have plateaued, and price reductions are common, but still up 5% from last year based on sales. Lots of small towns are not building do to no water, more demand, less product. Econ 101
Big question: Will this plateau prove permanently high, unlike all previous plateaus that followed parabolic bubble price blowouts?
Or to restate my question, is it different this time?
I presume the upscale cars I see on the road in my part of OC are HELOC cars. Audi’s, Infiniti’s, etc.
Everyone in the OC leases. Especially MB, BMW, Audi.
You can write off the lease if you own your biz.
Just picked up a supercharged Audi. Ear-to-ear grin.
No HELOC.
I’ve been trying to understand where the RE market is going to go. There are two types of demand here, consumption demand (want to live in the house) and speculative demand (want to sell it and make money). And it’s a spectrum - people will buy to want to consume and also with the hope they would be able to sell for more later. The extreme speculative case are those chronicled in the article.
So… what happens if the market stops going up gangbusters like it’s been doing for the past few years?
We know there will be an increase in defaults - it’s been documented that prime loans were the majority of defaults, but that subprime (IO, neg-am, sketchy borrowers) blew up immediately instead of later on: “Twice as many prime borrowers as subprime borrowers lost their homes over the full sample period.”
I think it was the failure of the loans in a debt-saturated environment that brought on the first bubble deflation. This time around, it will be a flattening of appreciation for a few years, perhaps actual price declines that blunts the investment demand, which will lead to another deflation.
Then, there will be further government and central bank intervention, if the past is any guide, to juice the market further. But the market is pretty heavily juiced now. but I’m sure they’ll come up with something. Then another cycle, perhaps lower amplitude than the first and second?
When will the government and central bank actually run out of ammunition for juicing the market?
My “sense” is this will take a long time to play out. But when real estate stops having these sharp, artificially induced (by artificial I mean due to changes in financing and government/central bank intervention) runups, then prices will decline to where consumption demand drives the prices, rather than speculative demand.
Like I say, I think in the long run, this will happen because of debt saturation and ultimately these policies are politically driven and once someone becomes a homeowner, they want these policies to keep going so they don’t become the bagholder, the people left standing when the music stops. But when a majority of voters vote against boosting house prices, then price support policies will change.
It’s true that population is growing but population has always grown, steadily, for the past century, decade by decade. One can look at the Case Shiller chart and see when government interventions and finance market changes have introduced volatility.
“Granted, the study took only condo prices, not overall rents, into account. But until the city diversifies its talent pool and starts drawing in more high-earning millennials in science and technology jobs, building new towers is pretty much all we’ve got.”
Yeah, good luck with that. Miami is not exactly a mecca for science and technology. And it never will be. So building new towers is all it’s gonna get.
Sigh. Poor Miami. The eighties was its peak, really. And it’s one vicious hurricane away from collapse.
‘As famed cocaine importer Mickey Munday told Vice in February: This city is basically one gigantic pyramid scheme, centered around selling condos to an ever-increasing list of outside investors’
You know it’s bad when famed cocaine importers are chiming in on the condo market.
Actually, they’re the experts. And have been since the 1970s at least.
Mickey “tour of duty”, in the skies above, made it all possible for former Miami Mayor Maurice Ferre to have his Maule Industries’s cement factory, in the 1970’s, literally lay the foundation for Act One of Miami’s construction.
I’m tellin ya, there’s a great book here, but, some of the principals are still around, so it’s gonna have to wait another decade.
‘A reasonable reaction to this might be to wonder how a mortgage lender values a mostly illiquid asset like a restricted stock unit, and ultimately forms a judgement of the borrower’s ability to repay. Opes is counting RSUs as income…Because Opes can visualize RSUs as income or stock, it can effectively make a statement about how close a borrower is to being overwhelmed by debt. ‘We have investors that allow Opes Advisors to look at RSU’s as both income and / or stock’
Golly, then these borrowers can turn this imaginary income into comps! It’s the gold rush that keeps on rushing.
From the article:
‘Last month, Bloomberg reported that so-called “100 percent mortgages” were trending in California. These mortgages, which require little to no down payment, are being specially built for tech workers who have a substantial portion of their assets tied up in RSUs and don’t have the liquidity for a large down payment.’
‘Helping tech companies attract and retain employees is one thing, but by incorporating RSUs into mortgage origination, lenders are effectively playing the part of VCs. It’s incredibly difficult to value private companies, and shareholders are really only worth what they can sell their shares for. Ask Elizabeth Holmes, CEO and founder of Theranos, who saw her net worth plunge from $4.5 billion to almost nothing overnight. It’s one thing for someone like Holmes to lose money, it’s another for tech workers to be granted mortgages that they have no chance of paying back because their equity was overvalued.’
Opes is counting RSUs as income, which in simple terms is a metric for earnings ??
Frank/Dodd…Lending now is based solely on income…Reported income via tax returns or payroll stub…You assets are irrelevant in underwriting…You could have millions of dollars in lets say, rare cars…Lender does not even take into consideration that you could sell one or two and pay off the loan…If you don’t have verifiable monthly income to service the loan, you don’t get it…
“Ask Elizabeth Holmes, CEO and founder of Theranos”
Or ask the Clintons
Controversial Hillary Clinton donor and fundraiser goes bust
Posted by Mary Chastain
Thursday, June 2, 2016 at 11:30am
Fraud and lies continue to follow the Clintons.
Theranos founder Elizabeth Holmes’s worth went from $4.5 billion to zero in a year after officials found her company failed at blood testing.
Holmes founded the company in 2003 “with plans of revolutionizing the diagnostic test market.” President Barack Obama named her as an ambassador for global entrepreneurship while the Clinton family propped her up at their Clinton Global initiative meeting last year.
But Forbes has found that her stake in the company equals absolutely nothing. The company has faced “allegations that its tests are inaccurate” and investigations from government agencies. Plus their annual revenues equal less than $100 million.
In March, Holmes wanted to host a fundraiser for Clinton for $2,700 a person at the company’s headquarters. But Clinton’s campaign received criticism “for holding an event at the offices of a company under federal investigation.” Holmes still hosted alongside Chelsea Clinton.
Here’s Chelsea Clinton w/ Elizabeth Holmes, CEO of Theranos, at the campaign’s San Francisco fundraiser today:
2:39 PM - 21 Mar 2016
96 96 Retweets
From CNBC:
But now an official invitation to the event, obtained by CNBC, shows that the Clinton fundraiser will not be held at the company’s offices, but instead at the private home of Susie Hwang and Matt Glickman in Palo Alto. Holmes is listed first on a list of 11 female Silicon Valley figures hosting the event. According to the invitation, hosts contribute or raise $2,700 for Hillary for America presidential campaign, and attend a reception with the former first daughter.
The Wall Street Journal found that Theranos only used “a small fraction of the tests then sold to consumers” even though the website said they offer 240 tests. The company received over $400 million, which pushed the company to $9 billion.
One employee said Theranos used a device called Edison for 15 tests, but many employees doubted the accuracy of the machine. Another employee “accused the company of failing to report test results that raised questions about the precision of the Edison system.” This violates federal rules.
Last November, Chris Jennings, who remained a “longtime advisor to both Bill and Hillary Clinton on health care issues that is currently advising Clinton’s presidential campaign,” also advised Theranos. After Bill’s presidency, Jennings became a lobbyist for the pharmaceutical industry where he earned millions.
Obama also hired him to “coordinate health reform for the White House despite his decade of lobbying.” He resigned after six months and returned to his firm.
http://legalinsurrection.com/2016/06/controversial-hillary-clinton-donor-and-fundraiser-goes-bust/ - 213k -
Hillaryous is unelectable.
Hillary’s election will cap our national descent into IDIOCRACY.
I watched some of the youtube video on that link where at 3 minutes Bill gushes over how wonderful her blood test is…
President Clinton speaks with Elizabeth Holmes and Jack Ma (2015 CGI Annual Meeting) Clinton Global Initiative
But when I watched the other youtube video…
Granholm shrugs off Clinton fundraising with scandal-ridden Theranos: ‘She’s trying to raise money’
823 views
Published on Mar 15, 2016
And looked at the comments, dradis84 had several items listed I had never seen before.
dradis84
4 months ago
Hillary Clinton’s Achievements:1.) Whitewater Gate.2.) Made $100,000 insider trading on cattle futures off a $1000 bet.3.) Received the Margret Sanger award for aborting babies.4.) Her girlfriend Huma is connected to Muslim Brotherhood terrorists.5.) Defended a child rapist and laughed about it.6.) $6 billion dollars from the State Department went missing.7.) Covered up that the Ambassador to Belgium is a known pedophile.8.) Threatened her husband’s rape victims.9.) Lied about being under sniper fire in Bosnia.10.) Fined $300,000 under the Logan act for attending a Bilderberg meeting.11.) Her law firm partner Vince Foster shot himself in the back of the head.12.) Used al-Qaeda terrorists to destroy Libya.13.) As a lawyer, she was thrown off the Nixon case for unethical behavior.14.) Stole the dishes from the White House.15.) Allowed Ambassador Stevens to die to cover up arms trafficking to al-Qaeda.
I’m waiting for that Theranos fraudster Holmes to pull off her wig and reveal that “she” has been Elon Musk in drag all along.
I’m waiting for Hillary to pull off the wig and announce she is Beelzebub.
USA / Politics
Why Donald Trump calls Hillary Clinton ‘the devil’
Donald Trump’s latest descriptor for Hillary Clinton continues both his appeal to Evangelical Christian voters and his willingness to engage in relentlessly negative campaigning.
By Lucy Schouten, Staff / August 6, 2016
…
A co-worker stuck with a house back east in Detroit, which I’ve mentioned here before has finally sold his place; closed two weeks ago. He had to bring roughly $6,000 to the closing table, which was probably “washed-n-rinsed” for the down payment. Hehe… no corruption in this industry.
Funny thing, he bought the place from the bank, REO, when the previous loan owner lost the place. Co-worker kept-up his end… never missed a payment despite being a Detroit landlord for five years after his family had lived in the place for four years. His career took him there, and he bought to get his kids into a good school district. FWIW, co-worker has his security clearance intact!
There is a house on the way to where I surf a lot thats had plenty of drama the past couple years. Up for sale for a good year, price reduction after price reduction. When it sold I was surprised but didn’t think much of it until recently when I saw all kinds of construction material in the driveway and someone has gone all edward scissorhands on the hedge out front - looks like the battlements of a castle. It wasn’t an old or bad looking house either, so I looked online - it sold at the peak in 08 for 500K, was bought for 455 just over a year ago, and it looks like the new owner may try and flip it. Market peaked about a year ago - right around the time the current owner bought - cue Alanis Morrisette. Gotta change the saying to a sucker born every millisecond.
‘Some of the developers and developers’ representatives who were contacted for this article refused to talk on the record about their projects; even then, most had little to say beyond asserting that the projects would eventually be built. Others failed to return multiple phone calls over the course of weeks’
Won’t return calls to the NYT? I wonder if they answer the phone when the lender calls?
get ready for ” like everyone else” excuses.
aqius! Howzit going? I thought of you yesterday when I saw some tear-jerking news story how foster children in the Tampa Bay area need back to school supplies and some local business is sponsoring a drive.
They really went over the top implying if the kidz didn’t get some free chit, they’d all become dropouts and a drain on society.
What a shakedown!
hey there Palmetter, you ol’ boiled-peanut-eatin He-coon!
hehe
fer sure, I’m a heartless bastard daring to question the poverty pimps never-ending “war on poverty”!
(btw, Craigslist will have some great deals on new/slightly used backpacks, courtesy of the kind hearted people: flea market stalls too. cash only. no EBT)
BTW it’s a well known tradition out here in Sacramento that the annual Thanksgiving FREE Turkey giveaways by various charities are overrun by Asian & Russian (see, I capitalized … NOT a racist) women, who then sell them.
They have absolutely no shame, smile & laugh when filmed, and think working citizens are dumbasses for not gaming the system.
And of course, the TV stations will decree “THIS YEAR THE NEED IS GREATER THAN EVER” during the holidays.
clovers.
translation: the FSA has skillfully brought along every relative & friend for separate food baskets.
as it has been.
as it ever will be.
Rock on, Palmetto!!
Food stamps are great for the economy.
As a fiscal conservative, I approve.
Some recipients may not react well if their food stamps (or SNAP cards) ever get cut off.
https://www.youtube.com/watch?v=3Z5-qQU8KnY
I’ve got an anecdotal account of the Sacramento underground.
A co-worker knows a Sac cop who had a very classic car (picture a coiled snake). He noticed a car parked in front of his house one day (rural area) and walked outside to introduce himself. The occupant, obviously Russian, said “How much for your car?” (the garage door was open). The cop said “it’s not for sale”. Mind you there’s a F-in cop car parked in the driveway. The motorist said “OK, we take”. Basically said F-you to the cops face.
The cop eventually sold the car soon thereafter on the advice of his superiors. These guys are the real deal.
The criminal syndicates from the “Russian” mob (about as Russian as I am) and other former Soviet republic criminal syndicates comprised of ethnic Armenians, Georgians, Chechens, Uzbeks, etc. are the most vicious and sophisticated mobsters on the planet. And thanks to open borders, they are well-established all over America.
Of course, Ray, there no surprise about the kind of person who would be featured in that YouTube link. I wonder if the YouTube people realize how popular how they are among the loser classes.
CalifoH20 made a point, Mikey. I happen to agree with him that paying out food stamps might be a lot more affordable, ultimately, than the alternative. People with nothing left to lose, lose it. Yeah, the thug in the video was an extreme example, but we need a basic social safety net given the sorry state of the economy and lack of living-wage jobs in our “recovery.” Societal unrest is already simmering; nobody benefits if it boils over.
Societal unrest is already simmering; nobody benefits if it boils over.
I think I disagree with this. Things won’t change until they boil over.
Can you point to an example of a “gradual” improvement of the situation for the lower/middle classes due to a representative form of government?
Can you point to anything good that comes out of urban riots? Sorry, not a fan of lawlessness, whether its being perpetrated by hood thugs or presidential candidates and her Wall Street accomplices.
No, I think urban riots largely just destroy the neighborhoods of the rioters, further impoverishing them.
However, the motivation behind them is a necessary element to change IMO. It needs to be directed in the right place, however (at those responsible for policy — government, companies which bribe/influence government, etc).
….and now I’m on yet another watchlist I’m sure
The latest research, out this week, shows Miami will be partially submerged into the Atlantic Ocean by the year 2100.
http://thinkprogress.org/climate/2016/08/03/3804614/sea-level-rise-could-drown-millions-of-coastal-homes/
Oregon coast will lose a whole bunch of land too.
Might want to stay inland.
faster please. my midwest farm land will be a beach front property one day.
Warmists gonna warm.
How much has global warming raised coastal sea levels so far?
Funny how some people still deny science. Are they all Mormon?
Still the best SOuth Park ever!
“Are they all Mormon?”
Definitely not.
8 Dumb Quotes About Science From New NASA Overseer Ted Cruz
Adam Clark Estes
1/12/15 12:07pm
The new Republican-led Congress is currently busy picking people to chair its many committees and subcommittees. Guess what! Tea Party hero Senator Ted Cruz is the new chair of the Subcommittee on Space, Science and Competitiveness. That means he will oversee NASA. Yep—the climate-denying Tea Party hero who tried to defund NASA is now in charge of NASA.
…
According to the graphics that were featured during the opening ceremony of the Olympics, half of the world’s coastal cities are already underwater.
We’re doomed.
Hey-hey! The first bitcoin bail-in! And a real commie type bail-in it is, too. Everyone gets a haircut, the losses are shared!
http://www.zerohedge.com/news/2016-08-07/first-bitcoin-bail-all-bitfinex-users-lose-36-shared-loss-after-historic-hack
As one commenter at ZH said:
“This chit makes the FED and the Banksters look like clergymen by comparison.”
Bill? Bill? Come in, Bill!
Do you mean when a bank gets robbed, the losses aren’t spread across the entire currency base?
Oh…
And by the way, where should one go to stamp feet if you disagree with the loss-sharing policy?
LOL! Shocker!!!!!!!!!!!!!!
When I lost my precious metals in that tragic boating accident, I don’t recall all other PM holders being docked to make my losses whole. Hmm…sounds decidedly un-libertarian!
It seems one of the shortcomings of investing in currencies created by block-chain technology has been revealed by this incident. A similar problem applies to certain eurozone currencies.
Who are the central planners who get to decide how to share losses across this supposedly-decentralized currency?
That’s a really. good. question.
Socialize the losses! Privatize the profits! it’s the globalist way.
(Gary Johnson: “I would sign the TPP”. Yeah, you go Gary! Bill’s right behind ya!)
But…but…secure wallet! And surely “libertarian anarchist” Bitcoin users would find the “socialized losses” response morally repellant, no?
Oh, heck, no, they made bank on this move.
That’s the dirty little secret of all these movements and philosophies. Their adherents will lecture YOU at great length to “be GOOD! be MORAL!” while they do something different.
Pol Pot and his inner circle of Paris-educated intellectuals who presided over the genocide of two million Cambodians in the killing fields were almost invariably described by former associates as austere and incorruptable in a material sense, unlike the US-backed Lon Nol government which was corrupt to the core. Many of them were former monks or schoolteachers. And yet they were monsters, as all collectivists are once they have free rein to carry out their “fundamental transformation” against an unarmed populace.
Idiot. Bitifinex, Coinbase, and all the other Bitcoin apps are NOT secure. They claim they are. But relative to a cold wallet they are a hacker’s dream. They are useful for ones weekly spending money and mostly to move fiat from banks into Bitcoin. Then immediately to the cold storage wallet.
Bill’s response to the resident HBB jokesters reminds me of Rain Man’s reaction when he didn’t get his eight fish sticks.
So why the hell do you keep writing against he Fed and Yellen?
You either like fiat or you do not. Which is it?
Which of the HBB scamps is the question addressed to, Bill?
Since you volunteered, I address it to you. If you have USD, you are losing value in it over ten years, over twenty years, over 100 years. It lost 97% of its value since 1913.
What is your alternative to fiat if it is not crypto currency? Especially since when you look over just the three min performance Bitcoin beat 103 years of the USD by gaining 30%…
This seems self-evident, but I’ll indulge you. I get paid in USD. The stuff I buy is in USD. The Fed’s debasement of the currency infuriates me, because I see what a screw-job is is against every American except the tiny class of plutocrats who are the sole beneficiaries from this rigged system. I use USD because it’s the medium of exchange those of us who exist in the real world have to use in our real workaday lives. I will not use Bitcoin, not because I think it’s fundamentally unsound (though I suspect it is), but because I’m lerry of using yet another medium of exchange that has no intrinsic value.
Life was quite miserable in 1913 compared to today.
This seems self-evident, but I’ll indulge you. I get paid in USD. The stuff I buy is in USD.
In other words, you’re part of the sheeple.
irrelevant
I have to live in the world that I inhabit, moron. That doesn’t mean I don’t confront evil, pursue justice, and hold on to my integrity even when it costs me.
You didn’t notice that I was ridiculing your crackpot philosophy.
Your engagement with enragement is causing your derangement.
Ordinarily I’d tell ankle-biters like you to eff off, but please explain what part of my philosophy is “crackpot” and/or why you judge it so. I’m all ears.
“Life was quite miserable in 1913 compared to today.”
But then the Fed was created. Since they control the movements of the stars, the moon and the sun, the only logical explanation for the subsequent uninterrupted improvement in U.S. living standards is that the Fed made it happen.
Bill? Bill?
(Crickets)
Van Halen - Big Bad Bill is Sweet William Now.
https://www.youtube.com/watch?v=9RPx6A3gKiA
That’s statist. Shame on you.
Most of my Bitcoin is in cold wallets palmy. No hacker can get to the cold wallets. You are a fool by writing on subjects you know nothing about.
“Most of my Bitcoin is in cold wallets palmy.”
That’s what she said.
1. You create a wallet on an air gapped machine that is never connected to Internet. That is a cold wallet.
2. You only send Bitcoin to that wallet and never reveal the private address until you sweep the wallet. Once you do, you no longer have a cold wallet.
How does that protect the value of your bitcoin against a collectivist devaluation?
You dream of a devaluation. Check the price performance of Bitcoin over the last three months.
You only pray to your sky wizard that the 1% of my net worth that is in crypto currency will become zero percent
Only because I am against your fuhrer trump.
How has your Yellen currency fared since 1913?
Lost 97% of its value and you waste time laughing about some short term loss to Bitcoin?
Idiotic.
I really don’t get all this venom for Bill or anyone who makes an investment that doesn’t become a winning super lottery ticket in a few minutes. WTF? Seems pretty lame to me. We’ve heard this on gold, oil, china, bitcoin, and probably a bunch of other stuff - don’t be a soulless tool who feasts off schadenfreude (unless its corzine coming down with ass cancer). Hell, this all started way back as a debate over whether there was a bubble in RE. And the poster boy is a wannabe professor with zero life and an amazing ability to predict things with 100% accuracy - in hind sight.
I’ve said before, blockchain intrigues me. I don’t know about the safety of air gapped systems, Iran had its centrifuges supposedly comprised and they were air gapped. Plus we don’t know how much hardware is compromised out of the box. I think when it comes to things like this its good to try a little bit as an early adopter and then bail before it matures and gets widespread popularity - then the deep state will step in and choke the life out of it as it tries to leave its crib.
Thanks Junior, particularly since I emphasize a YUUUUUGE (I hate that word) 1 percent of my net worth is in crypto currency. These Trump nuts post against crypto because I hate fascism.
Don’t confuse good-natured jibes for a well-liked HBB regular for “venom.” This place is a bit like a neighborhood bar where the regulars are quick to call eachother out if somebody starts waxing sanctimonious on any given topic. Bill has repeatedly touted Bitcon’s supposed security as one of its most salient qualities and blasted questioners as ignorant at best and tools of the corporate statists at worst. So a bit of merriment at Bill’s expense won’t go amiss. That said, I freely concede I’m ignorant about Bitcoin, while acknowledging its utility as a medium of exchange that lends itself well to libertarian-minded users. But a lot of us enjoy levity, and thin-skinned people who take themselves too seriously tend not to stick around the HBB for very long.
These Trump nuts post against crypto because I hate fascism.
Bill, do you have Aspergers? You seem to live in your own made-to-order reality where you make these ludicrous associations that you seem to genuinely believe.
Ben, I cannot believe you removed my response to RKH and let his own childish name calling stand.
I apologize. When I’m cleaning out a few dozen comments it can be indiscriminate.
What happens if some burglar steals your air gapped machine with your Bitcoin wallet?
“What happens if some burglar steals your air gapped machine with your Bitcoin wallet?”
You assume I store 100 base-58 alphanumeric symbols on a computer?
Three ways: pencil and paper copy, print out the wallet on a local printer, copy the wallet to a USB flash drive on a USB port. You can even take a digital picture (using a camera with no internet) and store the wallet on a smart card.
Sheesh.
I’ll stick with the barbarous relic, thank you very much.
The barborous relic seems simpler, safer and more time-tested than cryptocurrency.
I never even heard of bitfinex until you authoritarians and war mongers and democide mongers brought it up.
That’s us, all right. When we’re not posting in here, most of the HBB gang are hanging out at the Bohemian Grove bonding and jelling with the oligarch movers and shakers. And cursing you clever anarchist Bitcoin users for foiling our diabolical designs.
“In the simplest terms, the 2008 housing crisis was born partially out of the link between the public stock market and the housing market and partially out of loans being originated to folks who couldn’t pay them back.”
Substitute 1987 for 2008 and ‘high yield bond’ for ‘housing’ and you get a succinct description of the late-1980s financial meltdown, which was a raging inferno at about the time I entered the full-time workforce.
Are these systemic financial crises always precipitated by a period where financiers peddle high-risk debt on a massive scale?
As part of our weekend entertainment consumption activities, my wife and I attended the play “Junk: The Golden Age of Debt” at the La Jolla Playhouse. It brought back memories of the late-1980s financial shenanigans of the likes of Michael Milken, Ivan Boesky and Rudy Giuliani. Good times!
During the intermission I discovered from his Wikepedia bio that Ivan Boesky lives in La Jolla. It was fascinating to think that he could have been in the audience.
My Google research also revealed that Michael Milken attended UC Berkeley as an undergrad, then went on to Trump’s alma mater, The Wharton School, for his graduate business degree.
Aug 6, 2016 @ 07:57 PM
The Little Black Book of Billionaire Secrets
World Premiere of “Junk: The Golden Age of Debt” at La Jolla Playhouse
Brad Auerbach
The expanding interest in once-oblique topics is evidenced by the success of last year’s excellent film “The Long Short” and myriad books that highlight the intriguing intersecting worlds of finance, economics, and psychology. The public’s appetite for works by Malcolm Gladwell and the “Freakonomics” team indicate we have moved beyond what was narrowly called the dismal science.
An excellent production has just opened at the prestigious La Jolla Playhouse, which ably tracks the go-go years of the mid 80s, when greed was good and junk bonds, er…high yield bonds made their mark on Wall Street and Main Street. “Junk: The Golden Age of Debt” was written by Ayad Akhtar, a Pulitzer Prize winner and Tony Award nominee. The riveting production centers on the rise and fall of the apparently fictional Robert Merkin, a takeover pioneer and junk bond king. Mounted in three crisp acts, the simple stage set serves effectively to bring the wide cast of characters to life. Director Doug Hughes overcomes the high hurdle of putting believable characters into what could be a confusing plot.
Commanding the lead role is Josh Cooke, whose charisma and powers of persuasion are massive. As Merkin, he builds a fortune via his innovative financing schemes. “Debt is an asset,” he declares as he sets his sights on a family owned steel mill.
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Was Michael Milken the Father of Subprime Lending? The ending of the play “Junk: The Golden Age of Debt” we attended this weekend suggests the possibility.
So does this snippet from his Forbes biography:
Drexel Burnham Lambert’s legacy
Stars of the junkyard
Twenty years after Michael Milken’s junk-bond firm came crashing down, the financial revolution that it fostered lives on
Oct 21st 2010 | LOS ANGELES | From the print edition
Timekeeper
IN JANUARY 2007 Creative Artists Agency (CAA), which manages George Clooney, Julia Roberts, Brad Pitt and other film-industry luminaries, opened its new offices on Avenue of the Stars in Century City, Los Angeles. As famous actors and directors file into the marble-lined entrance to strike lucrative film contracts, even more serious money is being made upstairs.
The 12th floor is occupied by Ares, which has $37 billion of funds invested in private equity, high-yield bonds and other corporate debt. One floor down is Canyon Partners, an alternative-investment firm that manages $18 billion. The CAA building is also home to Imperial Capital, a boutique investment bank. All three firms can trace their origins to Drexel Burnham Lambert, an investment bank that collapsed into bankruptcy in 1990, fatally wounded by an insider-trading scandal.
Twenty years ago next month Michael Milken, Drexel’s most talented and best-paid financier, who was based in Los Angeles, was sentenced to ten years in prison after pleading guilty to six counts of securities fraud. His sentence was later commuted and he was released in 1992 after serving 22 months. He was also forced to pay much of the huge bonuses he earned at Drexel in fines and settlements.
It is rare even in Hollywood to find a star that rose and fell so quickly. For much of the 1980s Drexel was the hottest firm in investment banking, thanks to its dominance of the market for high-yield corporate bonds, of which Mr Milken was king. These bonds were known as “junk” because they were ranked below investment grade by ratings agencies. Drexel used its muscle in high-yield bond trading, which Mr Milken had built up in the 1970s, to push into other areas of investment banking such as mergers and acquisitions and underwriting. By 1986 Drexel, which in its long history had not previously threatened to join the financial elite, was Wall Street’s most profitable firm.
But Drexel slumped under the weight of legal battles and the $650m fine it agreed on with the American government to settle an investigation of alleged securities fraud. When Mr Milken was forced out at the end of 1988, the firm lost its biggest source of revenue. His acumen was missed all the more as the junk-bond market started to implode at the end of that decade. Rising interest rates, defaults on bonds that had been issued too readily in the go-go years and new regulations that forced troubled savings-and-loans to unload their high-yield holdings all conspired to drive junk-bond prices down. This seemed only to validate claims that the junk-bond market was a Ponzi scheme perpetuated by Mr Milken’s tight control of it.
Those claims turned out to be false. Drexel has left three enduring legacies: a junk-bond market that has grown at least sevenfold since the firm’s demise; the firms and industries, from gambling to cable television, that owed their rapid expansion to the investment bank’s junk bonds; and the influence of the “Drexel diaspora”, the young MBA graduates who worked in the 1980s under Mr Milken, on the finance industry in Los Angeles and elsewhere.
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Bust to boom
In 1990 the outstanding stock of junk bonds (estimated by subtracting redemptions from new registered issues since 1970) was about $150 billion. Now the total is over $1 trillion. Around two-fifths of all outstanding corporate bonds in America are rated as “speculative”, or below investment grade (BB+ or lower), according to Dealogic, a financial-data firm. Even better-class bonds are not as pukka as they once were: much of the non-junk issued since 1992 has been rated BBB-, the lowest investment grade.
Like all other credit, the junk-bond market was badly damaged during the recession. But it has bounced back, just as it did in the early 1990s and early 2000s. This year new issuance has surged: with around $200 billion raised in America already, the total for 2010 is sure to be a record (see chart 1). The revival is in part driven by a renewed search for yield by investors disappointed with the poor returns on cash or Treasuries: the interest premium they demand for holding junk has tumbled (see chart 2).
The reopening of the junk-bond market has also afforded medium-sized firms access to credit again. The businesses that have tapped the market are a cross-section of corporate America: airlines, clothing manufacturers and retailers, health-care providers, drug firms, restaurant chains, oil-exploration firms and semiconductor manufacturers. Some of the new issuance is by firms looking to lock in long-term financing on good terms.
The market’s revival has been helped by fewer defaults on high-yield bonds. The default rate on junk bonds stayed above 8% for 14 months in 2009-10, according to CreditSights, a research firm. That compares with 20 months in the previous two recessions.
Junk bonds, once despised, are now mainstream. “Milken and Drexel took high-yield bonds from a cottage industry to one of the cornerstones of the financial industry,” says Howard Marks, one of Mr Milken’s early customers and now chairman of Oaktree, a Los Angeles firm that manages around $75 billion in funds, much of it in high-yield bonds and related investments.
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It seems like the timing of release for the play couldn’t be better! (I keep musing that the title should have been “Debt: The Golden Age of Junk”.)
What the Heck is Happening to Junk Bonds?
by Wolf Richter • July 1, 2016
Honeymoon already over? Bad breath of reality next?
If you bought the crappiest bonds on February 10, you’ve made a killing unless the company defaulted, in which case you got killed, and a lot of companies defaulted. But so much money poured into junk bonds that prices soared and yields plunged even for the riskiest near-default issues.
At the riskiest end, junk bonds rated CCC and lower, with D being default, the average yield, as per BofA Merrill Lynch High Yield index, plunged from over 21% on February 10 to 15% at the close yesterday. And bond prices skyrocketed. The BofA Merrill Lynch total return index for CCC and lower rated bonds soared 30% over the period:
us-junk-bond-total-return-CCC-2016-07-01
Retail investors have difficulties buying junk bonds. Retail brokers usually sell only investment grade bonds. And that may be a good thing because each bond issue is a treacherous contract full of pitfalls and landmines that even specialists fall into or step on and often end up buying what they didn’t think they were buying. That can cause some painful surprises when the bonds default, which is a significant probability with low-rated junk bonds.
So retail investors have to make do with junk-bond mutual funds and ETFs. They give their money to institutional investors who then buy the actual bonds. Those funds have done well too over the period: for example, the high-yield bond ETF HYG has risen 12.6%, though it remains 11% off its recent high in June 2014.
But over the last three weeks bond-fund investors have soured on this gamble and have yanked their money out.
During the week ended June 29, $1.63 billion were pulled out of junk-bond funds, according to LCD of S&P Capital IQ. It was the third weekly outflow in a row. All three of them combined totaled $4.2 billion ($3.62 billion from mutual funds and $581 million from ETFs).
LCD put it this way:
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Business Economics
Junk Bonds Are Back—And We Should All Be Terrified
Rana Foroohar
Jan. 27, 2016
Financial Markets Wall Street
The guttural rumblings of a major financial correction are growing louder
Remember junk bonds? They’re back. We haven’t heard too much the so called “high yield debt market” since the 1980s and Michael Milken. But the high risk, potentially high-return securities known as junk bonds are behind a good chunk of current market volatility. Many of them are in the energy sector, which issued lots of debt in the aftermath of the 2008 crisis and are now at increasing risk of being downgraded or even going bust as oil prices collapse. Indeed, as Moody’s recently warned, some of the world’s biggest firms, like Royal Dutch Shell, Total, and Chesapeake Energy, are among the 175 firms that are at risk of ratings downgrades thanks to plunges in commodity prices.
Obviously, this isn’t great news for junk bond owners. But it’s a headache in the making for the rest of us too.
Why? To start, more individual investors own junk bonds than you might think. The size of the high-yield market has doubled over the last 5 years, as investors have looked for higher returns thanks to the record low interest rates imposed by central bankers in the wake of the financial crisis and Great Recession. About a quarter of those firms are in the energy sector, and lots of mutual funds and ETFs (exchanged traded funds) have invested in them in recent years, since very high oil prices made energy look like a great bet.
Now that those firms are in danger—witness the recent job and investment slashing in the U.S. shale oil and gas sector, for example. So are the mutual funds that invested in them. Just a few weeks ago, a formerly low-key mutual fund called Third Avenue was forced to halt trading and go into liquidation, the largest such market event since the financial crisis. Third Avenue had mom and pop investors, as well as lots of institutional clients, both of which counted on being able to withdraw their money at any time, as is typical with mutual funds. The problem was that they couldn’t, because the fund had invested in lots of very risky corporate debt. Why would they ? Because junk bonds offer high returns. But they also have a greater chance of blowing up, especially when rates start to rise, as they finally did last month, for the first time since 2006. When investors saw Third Avenue’s investments start to go down, they rushed to pull out their money, causing the fund itself to collapse—a classic market panic scenario.
The blow up wasn’t a singular event. It comes amidst larger market corrections, not just in corporate bonds (which have seen record outflows in recent months), but in sovereign debt, commodities, and major emerging markets like China, which recently had to halt trading on the Shanghai exchange for the second time in just a few months to avoid a major market crash. “It’s not just the corporate bond markets that have become unhinged,” says Mohamed El-Erian, chief investment advisor for Allianz, and the author of a new book tackling many of the debt driven risks in today’s markets (The Only Game in Town: Central Banks, Instability and Avoiding the Next Crises; Random House). “It’s also energy companies, emerging market currencies, and even government influenced areas like real estate in some countries.”
Each of those risky markets has something in common, and it’s the same thing that brought down the global economy in 2008—loads and loads of debt. Indeed, the junk bond market is in some ways just a canary in the coal mine for coming turbulence in other parts of the global financial markets. As one investor pointed out to me recently at the World Economic Forum in Davos, risk in junk bonds often tumbles into other areas like the higher grade bond markets and even the stock markets—consider that the telecom bust of the late 1990s started in the junk bond market and spread out from there.
So far, lots of investors will say that the risk in junk bonds is “contained.” But as another high level corporate debt investor recently put it to me, “when someone says something is contained, you should run the other way. Things are never contained.” Even if junk bonds don’t bring down the stock market, the debt that the companies issuing such bonds have created carries its own problems, since much of it has been used to pay back investors via dividends and stock buybacks, rather than for more productive investments. Debt is, of course, always at the root of financial crises—whether the junk bond market will be at the root of the next crisis remains to be seen.
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“…and even government influenced areas like real estate in some countries.”
Names, please…
The attitude toward these debt-driven runups is that “no one wants to stop the party.”
Well, it seems like the aftermaths of the debt parties are pretty clear: at best deflation, at worst bank failure and involuntary transfer of consumer deposits (no harm to the execs of course).
The problem is the feckless and venality of politicians, and their corruptibility. The Founders understood power, and set up a system where power-hungry people would have to vie with each other to gain power, while serving the people.
They did not foresee organizations - corporations, unions, lobbying groups - growing so big as to be able to reliably corrupt politicians.
We’re slowly slipping into oligarchy/plutocracy, which seems to be the default human condition.
‘It’s a less risky investment than flipping homes that have been on the market before,’
The dumbest things come out of used home sellers’ mouths.
Greetings from Munich! This is the last stop on the trip. Was out in the burbs and lo and behold! I walked past a real estate office and decided to take a looksie at the window display. 1000 sq ft (100 m2) flats: 500,000 Euros and up. A 250 m2 house on a 700 m2 lot … 1,500,000 Euros and up.
Silicon valley prices without the IPOs and no MID either. And cranes everywhere.
Must be all that Saudi money pouring into Western Europe.
We visited Munich in 2009, near the peak financial crisis. Stayed with friends in their home on the outskirts of the city, which was located within walking distance of the light rail line. They have an awesome setup, with easy access to the central area but a semi-rural feel to where they live.
They must feel like they live in a real estate gold mine by now!
Merkel’s Marauders haven’t been fully priced in to the market, I suspect.
And not a buyer in sight.
Why buy it when you can rent it for half the monthly cost?
Buy later after prices crater for 70% less.
If u get close to Hungary or Poland hide your 401k
It’s probably a good thing that the “stupid voters” responsible for Obama and Obamacare won’t realize how how badly they were shafted until 2017.
http://libertyblitzkrieg.com/2016/08/05/an-update-on-the-obamacare-disaster/
NY up 17% CA up 13% they voted for ACA / dem
why wait till 2017?
Someone remind me why we still even bother to pretend we still have First Amendment rights. Free-dumb!
http://www.breitbart.com/california/2016/08/05/black-labs-matter-police-san-francisco/
Don’t all labs matter? What’s wrong with golden labs?
I support the right to keep and arm bears.
BLM*, too.
* Bear Lives Matter.
Bankster racketeering in taxpayer-backed bailouts is exceedingly lucrative.
http://wolfstreet.com/2016/08/07/big-investment-banking-fees-italian-banking-crisis-jpmorgan-monte-dei-paschi/
BIRD DOGGING IS BACK
“Chic” and Boise in the same sentence.
http://boise.craigslist.org/apa/5700797940.html
“Boise”
Maybe try a French pronunciation (bwah-say)?
Anyone know anything about growing hops? Seems like some of that overpriced farmland might be able to produce some high quality hops for this craft beer boom.
Anyone ever drank any beer from mike hess? Saw it the other day at total wine.
Picked up a killer breakfast stout last night, Founders brewing.
I have been drinkn little sumpin from lagunitus here lately. Very good beer.
“…craft beer boom…”
You assume this won’t get washed away with the next Wall Street wipeout?
This might have already started. I spoke with a regional brewer the other day. He noted one statewide brewer which was bought by the bigs was lowering the price much more than the original company ever had. Yesterday I was at one of those pricier grocery stores and was struck by all the $7.99 six pack displays from high end (owned by the majors though) larger breweries. The price war may have begun. These majors could be trying to snuff out the craft stragglers. I was told California has 700 breweries now.
YellenBucks lookin for a place to evaporate.
I will gladly pay 7.99 for a six pack of good beer.
When you go out a quality pint is easily 5 bucks.
So if I stay home and have a quality pint its like 1.50.
There is value in that to me.
That founders 4 pack was < 10 bucks @ costco .
There’s a few things; plenty of $9 six packs are just so so beer. And are there enough people like you to drink all this beer? More open every day and everybody is expanding. You can’t store this stuff for the most part.
“And are there enough people like you to drink all this beer?”
Home equity ATM cash needs a place to die…
demand for craft is skyrocketing. People will pay for quality. There will always be your bud and coors drinkers.
Bud and Coors should not be allowed to call themselves beer.
Some of the ladies I date drink Coors light to go gluten free….made from rice.
Firestone is expanding.
http://www.brewbound.com/news/firestone-walker-investing-15-million-to-double-brewhouse-capacity
According to Walker, 80 percent of the company’s beer is consumed in California, which is a primary reason why the company opted to expand in California instead of with a second location in another part of the country.
“These majors could be trying to snuff out the craft stragglers.”
Didn’t work for OPEC trying to snuff out non-OPEC oil producers (or did it?)…
Austin, TX Housing Prices Plunge 17% YoY As Housing Correction Ramps Up
http://www.movoto.com/austin-tx-williamson-county/market-trends/
SHOCK PHOTO: Multiple staffers help unstable Hillary up stairs …
https://theamericanmirror.com/shock-photo-grandma-hillary-helped-stairs/ - 59k - Cached - Similar pages
Maybe it takes some acclimatizing moving between the infernal regions and the earth’s surface.
Drudge Report and Breitbart getting record pageviews - are people finally wising up and ditching the MSM propaganda outlets?
http://www.breitbart.com/big-journalism/2016/08/07/blow-breitbart-news-sets-traffic-records-july-192-million-pageviews-31-million-uniques-89-million-visits/
MSM biggest looser in this election.
What little bit of credibility they had is gone.
Fixed!