Bank of America
Prem Watsa's 9 Observations Why There Is A "Monstrous Real Estate Bubble In China Which Could Burst Anytime"Submitted by Tyler Durden on 03/09/2014 18:12 -0400
In the last few years we have discussed the huge real estate bubble in China: "Real estate bubbles never end with soft landings. A bubble is inflated by nothing firmer than expectations. The moment people cease to believe that house prices will rise forever, they will notice what a terrible long term investment real estate has become and flee the market, and the market will crash." Amen! As they say, it is better to be wrong, wrong, wrong and then right than the other way around! In case you continue to be a skeptic, here are a few observations...
South Korea stands out as a buying opportunity amid the indiscriminate emerging markets sell-off.
Today's consensus estimate for the non-farm payroll is for a 149K increase broken down as follows among some select banks:
- Bank of America 115K
- Deutsche Bank 120K
- Goldman Sachs 125K
- Citigroup 135K
Why is the expectation so low? Why cold weather of course - the same cold weather that supposedly impacted December and January data. Then again, one wonders just what is the seasonal adjustment factor for if not to adjust for the, gasp, seasons. So when one puts the February actual number in the context of its average adjustment over the past decade, what does one get? Simple - a boost of 1.5 million "jobs" which exsit nowhere in the real world but in some Arima-X-13 spreadsheet.
UPDATE: It's happened - China has suffered its first domestic corporate bond default as Chaori fails to meet interest payments on schedule and rather more surprisingly failed to receive a last-minute mysterious or otherwise bailout...
*CITIC BANK WON'T HELP CHAORI MAKE INTEREST PAYMENT: 21ST HERALD
Ever since the specter of the first real domestic default on a Chinese corporate bond hovered over the markets, the Chinese credit markets have been leaking lower. The last 3 days have seen the biggest drop in Chinese credit markets in almost 4 months. That situation, wistfully occurring half way around the world while US equity markets press on to ever more exuberant (and ignorant) heights, meant at least 3 other Chinese firms pulled their bond issues today and, as Reuters reports, has "triggered widespread upheaval in the bond market." Banks are awash with liquidity (as indicated by low repo/SHIBOR rates) but clearly unwilling to lend and external investors are now running scared.
- Spot the inaccuracies: Stocks rise on Ukraine diplomacy, ECB easing speculation (Reuters)
- Bank of England Extends Record-Low Rates Into a Sixth Year (BBG)
- China's Chaori Solar poised for landmark bond default (Reuters), explained here previously
- EU leaders meet in Brussels to address Ukraine crisis (FT)
- Nine-month-old baby may have been cured of HIV, U.S. scientists say (Reuters)
- China Raises Defense Spending 12.2% for 2014 (WSJ)
- China Stock Index Rises as Developers Jump on Policy Speculation (BBG)
- VTB Cancels New York Forum as U.S. Relations Sour (BBG)
- IBM workers strike in China over terms of Lenovo takeover (FT)
- College Board Redesigns SAT Exam Making Essay Portion Optional (BBG)
The Biggest Component Of CPI - Rent - Is Now The Highest Since 2008: What Does This Mean For Broad Inflation?Submitted by Tyler Durden on 03/03/2014 12:35 -0400
Even as the Fed laments that inflation as measured by either the hedonically adjusted CPI, or the PCE deflator measure (which on any given month is whatever a seasonal adjustment excel model says it is), is persistently below its long-term target of 2%, one component of the broader CPI basket has quietly continued risen to new multi-year highs. That would be the so-called owners’ equivalent rent (OER), which is the biggest component of the CPI, and measures imputed costs of renting one’s own home: it is currently the highest it has been since 2008. But what does this mean for broad inflation? Read on to find out why it is precisely the soaring rent, courtesy of the Fed's latest housing bubble, that means inflation will remain subdued for years to come.
Chinese Manufacturing PMI Slumps To 8-Month Low, Services PMI To 3-Month High; Goldman Admits Growth DeceleratingSubmitted by Tyler Durden on 03/02/2014 21:09 -0400
UPDATE:*CHINA HSBC MANUFACTURING PMI AT 48.5 FOR FEB. (as expected and marginally above the Flash print)
Chinese manufacturing PMI fell to an 8-month low holding barely above the crucial 50 level yesterday forcing Goldman to admit that "this signals further deceleration" in Chinese growth. All sub-indices showed signs of cyclical slowdown from January to February with perhaps the two most-critical ones - production and new orders - showing considerably larger falls than the headline index itself as we await this evening's HSBC print to confirm an average 'contraction'. China's Services PMI just printed at 55, up from 53.4, to a 3-month high led by a surge in the "expectations" sub-index.
So you want to be a mortgage banker? then listen now to what i say Just get liability insurance... and get ready to pay and pay...
Yuan volatility is part of a major rebalancing of global trade. The next phase of EM turmoil will involve banking crises in several countries including China.
There’s good propaganda and bad propaganda. Bad propaganda is generally crude, amateurish Judy Miller “mobile weapons lab-type” nonsense that figures that people are so stupid they’ll believe anything that appears in “the paper of record.” Good propaganda, on the other hand, uses factual, sometimes documented material in a coordinated campaign with the other major media to cobble-together a narrative that is credible, but false. The so called Fed’s transcripts, which were released last week, fall into the latter category... But while the conversations between the members are accurately recorded, they don’t tell the gist of the story or provide the context that’s needed to grasp the bigger picture. Instead, they’re used to portray the members of the Fed as affable, well-meaning bunglers who did the best they could in ‘very trying circumstances’. While this is effective propaganda, it’s basically a lie, mainly because it diverts attention from the Fed’s role in crashing the financial system, preventing the remedies that were needed from being implemented (nationalizing the giant Wall Street banks), and coercing Congress into approving gigantic, economy-killing bailouts which shifted trillions of dollars to insolvent financial institutions that should have been euthanized. What I’m saying is that the Fed’s transcripts are, perhaps, the greatest propaganda coup of our time.
For those who follow folksy Uncle Warren, here is the breakdown of Berkshire's Q4 and full year results, as well as his latest letter to investors.
Maybe because, gasp, it wasn't the weather?
Ocwen Financial, dubbed by Moody's as poised to become the "next generation" of subprime lenders, has come under considerably pressure this morning amid news that NY State regulators are investigating the firm for "conflicts of interest"...
- *NY DEPT FINL SERVICES FINDS POTENTIAL CONFLICTS OF INTEREST
- *NY CITES REVIEW OF OCWEN'S MORTGAGE SERVICING PRACTICES
- *NY SEEKS INFO ON FINL INTEREST OF OCWEN EXECS IN AFFILIATED COS
It is the Mortgage Servicing Rights (MSRs) that has Moody's the most-concerned as the volumes required may force Ocwen (and others) to shift their business model to ever lower quality loans.
- California couple finds $10 million in buried treasure while walking dog (Reuters) ... not bitcoin?
- Dimon Says Threats to JPMorgan Span Google to China Banks (BBG)
- Stocks So Many Love to Hate Buoyed by Fed’s Jobs Priority (BBG)
- White House Weighs Four Options for Revamping NSA Phone Surveillance (WSJ) ... to pick the fifth one
- Credit Suisse Executives Weren’t Aware of U.S. Tax Dodges (BBG)
- Militias Hunt Kiev Looters From Central Bank to Bling Palace (BBG)
- Crisis Gauge Rises to Record High as Swaps Avoided (BBG)
- Obama to Propose Highway-Repair Program (WSJ)
- Ukraine Pledges to Protect Deposits as Kiev Rally Called (BBG)
For the second night in a row, China, and specifically its currency rate which saw the Yuan weaken once more, preoccupied investors - and certainly those who had bet on endless strenghtening of the Chinese currency - however this time it appeared more "priced in, and after trading as low as 2000, the SHCOMP managed to close modestly green, which however is more than can be said about the Nikkei which ended the session down 0.5%. Still, the USDJPY was firmly supported by the 102.00 "fundamental" fair value barrier and as a result equity futures, which had to reallign from tracking the AUDUSD to the old faithful Yen carry, have been propped up once more and are set to open at all time highs. If equities fail to breach the record barrier for the third time in a row and a selloff ensues after the open in deja vu trading, it will be time to watch out below if only purely for technical reasons.