Archive - Mar 2010 - Blog entry

A meltdown of Biblical proportions hits the vacation home market. A market plagued by giant snow drifts and burst pipes. Cash out refi’s have come back to haunt. Sales on the county court house steps at prices down 60%-70% from the 2006 peak. Jumbo financing is now an extinct species. A shortened school year has killed the rental market. A “bear” market of a different sort. Care to join Fredo Corleone?

Reserves? We don't need no stinkin' reserves!

This past week the S&P500 made a marginal new high at 1159. Since the last marginal new high 9 weeks ago, the S&P500 has made 1.2% and along the way it had a 7% draw down. In my opinion, that's the path to the poor house - not the end of the rainbow.

China: When you build roads so fast, sometimes you never know what you may run into at the end of the road. A very short story for your Sunday reading.

As the House gets ready to pass a "historic" bill on health care reform, let me introduce you to the real crisis in health care...

My take on views expressed by Jim Rogers at a BBN interview on Mar. 18 about the recent currency and trade confrontation between the US and China, the Canadian loonie and the U.S. bond market.

Phinance's phavorite political prisoner, Martin Armstrong, cautions that "the EU is in dire position", on the precipice of shattering. Since "debts will never be paid and interest expenditures are the greatest transfer of wealth in history ... Western society is falling apart ... If we do not act, civil unrest will explode. The current choice is DEFAULT or HIGHER TAXES & CIVIL UNREST ... Someone has to step forward to save us or we may be doomed. It's time to wake up for this is the future of our children and their children at stake. "

As promised, here is the complete article, "China's Fragile Economy, Its Housing Bubble, and What It Means To Us," in a downloadable PDF. You can download it, print it out, and read the entire piece at your leisure. The conclusions aren't encouraging, for them or us.

Europe faces a commercial property debt timebomb with almost €1 trillion (£896bn) outstanding from the sector and a quarter of that potentially distressed. The UK accounts for 34% of the €970bn total, with Germany second with 24%. Not to worry, global pension funds are busy snapping up properties but do they really know how long it will be before this crisis blows over? And what if it gets a lot worse before it gets better? Are pensions prepared to deal with those losses?

Easy as 1-2-3 ...

As I warned in my Pan-European Sovereign Debt Crisis series and amid a depression, this Eastern European government has collapsed. Western European countries (and their banks) have material claims within this country, and when combined with pressure from the PIIGS, may be the ones that set off the financial/economic contagion daisy chain. It is difficult to determine who sets it off, which is why it is best to attempt to determine the path of the contagion instead...

A recent joint poll by Responsible-Investor.com, the Network for Sustainable Financial Markets and AQ Research, showed more than 90% of investment professionals believe moral hazard has increased. And yet, global pension funds and wealth funds who manage trillions of dollars have not taken the lead to push for financial reforms. Why do they acquiesce, and not push for meaningful post-crisis reforms?

The fact that Google will not kowtow to Bejing and will walk away from the market of greatest potential is to me a commendable act. This is a companion piece to my series, "China's Fragile Economy, Its Housing Bubble, and What It Means To Us." China is not a liberal country, by far.

The outlook for natural gas is terrible. Will this be the ETF that kills the goose that laid the golden egg? Torpedoed by contango. Sarah Palin’s pet project bites the dust. Sweating bullets in Qatar. Moral of the story: read the damn prospectus first. A new 100 year supply of natural gas will be a dead weight on prices for decades. Gas companies are racing to out-produce each other in the hope of offsetting falling prices with increased volumes. It’s sad to see such a great molecule fall on such hard times. Pitiful, really. (UNG), (CHK), (DVN), (XTO).

We think that China is an indestructible economic juggernaut but its economy is very fragile and it is sitting on a property bubble which will burst. What China does in response has major implications for their economy and the rest of the world. This is the third part of a three-part series on this topic: The Consequences.