Demographics

It just blows our mind, that in the face of almost every indicator having collapsed over the first 6 months of this year, market ‘pros’ just act as though it isn’t happening!  It’s impressive to watch the insanity, the denial, the delusion, that has become the basis of the steady state market. What is continuing is us extending ourselves again on the very assumption that the American Consumer will rebound to its peak strength.  Because there are those few all powerful economic cannibals that profit on policy rather than economics, we will continue down this flawed path until the legend of the Almighty American Consumer succumbs to reality.  And that day my friends will be an ugly one for the record books.

"Qualified households will be unable to move from renting to owning as housing-cost burdens, slow wage growth and student debt make it harder to cobble together even a modest down payment," WSJ says. As homeownership becomes increasingly unrealistic, demand for rentals will only increase, driving further increases in the cost of rental housing. The question then becomes this: what happens when a family that can't afford a down payment can no longer afford to pay the rent?

FTW (For Those Who Say I Just Don't Get It... Get This!) There seems a shift showing itself in dramatic fashion unseen since the 2008 financial meltdown. Not only are some key players, or institutions beginning to notice some troubling signs; but rather; those very signs that everyone was told 'won’t or shouldn’t happen', not only are, they’re starting to rear their ugly heads in much greater frequency.

When the "very serious people" start to admit that the entire house of cards was held together with nothing but bullshit and propaganda, it may be a time to panic...

On Saturday we introduced readers to the “Ferguson Effect”. The idea is that the recent spate of prosecutions and instances of social unrest that followed a series of events involving perceived police misconduct directed at African Americans have made police officers gun shy — literally. A new study by The Washington Post suggests otherwise...

Rates have been so low for so long, that many of the traders who will be on the front lines if and when the Fed ever does decide to start down the long path to normalizing policy have never, in their professional careers, seen a rate hike. “The experience that many investment operations have with rising rates for most of us is very low for some it’s nonexistent," Jeff Gundlach warns.

We did not actually need confirmation that global trade is slowing to a crawl (and has in fact reversed): after all, we have been showing just that for the past year, most recently earlier this week but it is important to note that in today's negative GDP print, it was net trade (exports less imports) that subtracted -1.9% from the final GDP print, driven by a -1.03% annualized drop in exports. This was the biggest hit to US trade since thegreat financial crisis.

Goldman Sachs proposes that society should bend to the needs of the financial and monetary system rather than reform of that system. At any rate, the proposals put forward by them are unlikely to achieve any kind of long-term solution to the problem of massive unsustainable debt faced by the western world and Japan. 

Markets are not cheap by any measure. If earnings growth continues to wane or interest rates rise, the bull market thesis will collapse as "expectations" collide with "reality." This is not a dire prediction of doom and gloom, nor is it a "bearish" forecast.  It is just a function of how markets work over time. This time is "not different." The only difference will be what triggers the next valuation reversion when it occurs.

"...it is imperative that the data does turnaround during 2015h2 for the recent rise in yields to be sustained. It is quite surprising to us that there is so much focus on US employment data and Fed Funds normalization to the exclusion of global trade data or US demand let alone productivity. A case perhaps of the lunatics trying to run the asylum."

"Water is one of the great opportunities of our times. If you look at the world there are some huge shortages developing in some parts but there is also a lot of water in other parts, just in the wrong place – like water in Siberia for instance, which is not where most people are. There are going to be wars in the Middle East over oil east of the Red Sea, but west of that there will be wars over water since there are serious water problems in that region." Jim Rogers:

Explaining all that is wrong with the fraudulent US "jobs recovery" using the case study of Japan.

"Young people are not going to be talking about cutting back," exclaims billionaire hedge fund manager Stanley Druckenmiller, ominously concluding "there will be nothing to cut back." The reason he is so doom-full about the future - an aging population will present a "massive, massive problem" for the U.S. in 15 years - as Bloomberg reports, because of demographics, "we're just using more and more of society’s resources to fend for the old people," warning that Obama's plans to tax the rich to pay for more social services for the poor would be futile.

At the core, a healthy housing market is one where owner-occupied buyers dominate the bulk of home sales. That is simply not the case. This is how you have well paid tech workers in San Francisco cramming into a 2-bedroom apartment like a clown car simply to get by. One thing that is certain from the overall trend is that larger investors are pulling back from the market dramatically.