Archive - Nov 2012

Desirable areas in Los Angeles County are finding bidding wars and many places are selling for prices last seen during the peak of the bubble. A fierce competition between flippers, foreign money, and households with healthy incomes leveraging low mortgage rates are pushing prices higher. A few readers were sending over some of the recent action taking place in Culver City. A few recounted their tales of open houses and the sense of urgency to purchase a property. The flood of easy money has certainly had an impact on mid-tier and prime locations. Only a two hour drive up north, in California City you can find homes selling for rock bottom prices. This is a trend bearing out in income statistics. It is becoming harder for the middle class to find affordable housing in California. Some have mentioned in zombie like fashion that some areas are becoming fortresses while other areas are left struggling. Let us take a look at some recent data.

While "Fiscal Cliff" may be having its 15-minutes of fame - a la "Honey Boo Boo" or "Sneezing Panda" - there is one thing that has consistently been more and more searched in the last eight years. According to Google Trends, internet users are skipping just plain old simple "ammo" as a search query, and in a tried and true American tradition, confirm that size matters. The size of the ammo order that is, as can be confirmed by the following chart showing queries for "bulk ammo". What goes without saying, are the wavelike periodicities of the quantized jumps higher in popularity at select times over the past decade: they just happen to aggregate around a very specific event taking place each November every 4 years. At this rate by November 2016 we are going to need a bulkier chart...

As Washington hunts ill-defined al-Qaeda groups in the Middle East and Africa, and concerns itself with Iran’s eventual nuclear potential, it has a much more pressing problem at home: Its energy grid is vulnerable to anyone with basic weapons and know-how. For the past two months, the US Federal Energy Regulatory Commission (FERC) has been tasked with creating a security strategy for the electric grid and hydrocarbon facilities through its newly created Office of Energy Infrastructure Security. So far, it’s not good news. “There are ways that a very few number of actors with very rudimentary equipment could take down large portions of our grid.” Forget about cyber warfare and highly organized terrorist attacks, a lack of basic physical security on the US power grid means that anyone with a gun could do serious damage.

Just under two months ago we noted, somewhat comedically, that the Fed's researchers were 'confused' that its models (the wonderful DSGE) pointed to 'explosive inflation' given its current ZIRP regime. Perhaps those same PhDs will also be surprised to note that, based on the 44 month average length 'out of recession', that the next recession (as proffered by the NBER) is due to begin March 2013 (though of course, the resolution of the fiscal cliff and a renaissance in Europe will hold off the next recession forever, right?)...

The plight of Chinese Homeowners Attempting to Resist Eviction When the Government Wants to Build Something on their Land ...

Chicken race update...

Every hour of every day, we are persuaded that the benefits of being extraordinary in some way are equally extraordinary. This has two propaganda components: 1. If you buy this product or service (touted by An Extraordinary Person), you will feel the vicarious thrill of acting/looking like you're extraordinary. 2. Our society is a meritocracy, blah blah blah; if you are naturally talented/bright and if you make extraordinary efforts, you might rise above mere ordinary and start accruing all those fabulous benefits reserved for the extraordinary. What if these benefits aren't as wonderful as advertised? That would hurt sales and the drive of those who bought into the meritocracy claim. Being extraordinary is a terrific bother, truth be told, so please appreciate the benefits of ordinariness if you are so blessed.

... In which Zero Hedge looks at the implications of taxing nouveau riche Powerball winners at the "fair" marginal rate of 100%.

S&P 500 futures are at 1412 as our leaders address the nation (or each other)...

If common sense was truly common, the rating agencies should get the shit sued out of them unless & until they start downgrading EU countries en masse, and quite quickly. Read this & you'll have all you need to start suing! Hmmm, the best laid plans....

Awful unemployment, dismal German retail sales, huge uncertainty over the Greek buy back plan. Have no fear, "buy stocks and you're good to go" seemed to be the message this week in Europe. However, as the afternoon went on in Europe, so equities gave back their day's gains and started to catch down to the far less exuberant credit markets. European sovereign credit rallied into the close leaving Spain and Italy -25bps on the week. The European week was dominated the massive squeeze in the US driving a wedge overnight from Wednesday's close to Thursday's open in Europe - the squeeze seems to be done for now as we are fading back today. EURUSD pushed higher on the week by a mere 25pips to close its week in Europe above 1.30. Europe's VIX stabilized today at 16.5% (after falling 1.25 vols on the week). Bottom Line - Europe closed weak and equities feel very lonely up here.

Judging by how the SkyNet formerly known as "the market" has been trading in the past three weeks (and years), one may get the impression the "smart money", hiding behind Bloomberg terminals for 9 hours each day, has gone full lunatic retard. Yet not even said Bloomberg terminals users are completely insane, as confirmed by a just released poll of Bloomberg Professional users, who were asked on their opinion for the two next probably Bernanke replacements: one Larry Summers, best known, together with Robert Rubin, Alan Greenspan and everyone in Congress and Senate over the past 30 years, for destroying the US economy, as well as one Janet Yellen, currently vice chair of the Fed, and almost certain replacement for the Chairsatan once his term expires in early 2014. The verdict: nay to both, but a resounding hell no to the man who destroyed the US banking system, then crushed the Harvard endowment, and finally brought the US consumer and economy to a state of complete ruin.

Just like yesterday, as we head into the European close it seems someone somewhere has the dire need to reduce exposure to precious metals in a hurry... Collateral calls? Cash calls across month-end? Who knows?

Following last night's explanation that the potential for a short-squeeze is significantly reduced, and given the end of the typical month-end shake-out of excess positioning, this morning has seen stocks pull back modestly intraday and catch down to risk assets' view of the world in the short-term. Volume remains light and the question remains - will the European close bring trend reversal, or will Washington open their mouths and change the game again?