Housing Bubble

The bottom line: the gross profit from a "flip" in any of these 20 markets will result in an average profit of just over 102% in as little under 7 months. Good luck.

"House prices have decoupled most from local incomes in Hong Kong, London, Paris, Singapore, New York and Tokyo. Buying a 60-square-meter apartment exceeds the budget of most people who work even in the highly-skilled service sector. Loose monetary policy has prevented a normalization of housing markets and encouraged local bubble risks to grow"

For generations, single family housing development was a driver of US economic growth. Today, there is no single family housing industry to speak of. These 7 charts derived from this week’s release of new house sales data from the Census Bureau illustrates just how bad things are.

A bursting of property bubbles in London and New York would be expected to have an impact on national economies and indeed on national property markets. Sentiment would be badly impacted. Caution should be the order of the day.

• Fed puts December rate hike firmly on the agenda (Reuters)
• Charting the Markets: A More Hawkish Fed Rattles Investors (BBG)
• China to modernize and improve fiscal and tax systems (Reuters)
• Deutsche Bank to Cut 35,000 Jobs in Overhaul (WSJ)
• Deutsche Bank Said to Near $200 Million Sanctions Settlement (BBG)
• Barclays profits drop as it abandons cost-cutting targets (FT)

Norway's $860 billion sovereign wealth fund (tasked with managing the country's vast oil wealth) just had its worst quarter in 4 years and its first back-to-back quarterly loss since 2009 after an array of EM bets went awry. Meanwhile, the government is set to start making withdraws from the fund as slumping crude prices have effectively reduced inflows to zero. 

Fearing the size of Mario Draghi's bazooka (so to speak), Sweden's Riksbank has just expanded QE by SEK65 billion, marking the fourth expansion in nine months and serving notice that the beggar-thy-neighbor, monetary madness gripping DM central banks isn't likely to dissipate anytime soon.

If this is indeed a rerun of the post-LTCM/pre first tech bubble days, then oil is about to soar by 150%

Why is the deal particularly notable? Because Zell has traditionally had a very keen nose about such things as "market peaks": the 74 years old is credited with calling the top of the real-estate market in 2007, when he sold another of his companies, Equity Office Properties Trust, to Blackstone for $23 billion. Soon after, the commercial-property market crashed as prices fell and debt defaults surged when it became apparent that subprime was not contained.

"The nightmare for the Riksbank board is maybe something like this: they are gathered in the south of Sweden, looking out over the Baltic Sea, when they see a giant wave of money coming in from the euro zone and try to fight it with a hose."

Homebuilders were exuberant, The Fed was confident, and stock markets have recovered... so why did New Home Sales collapse 11.5% in September (missing a 0.6% drop expectation by a proverbial mile)? This is the largest MoM drop since July 2013. Worst still, the excitement of July and August data has been notably revised lower to press the current New Home Sales SAAR to 468k - its lowest since November 2014. At the same time, median home prices surged to $296,900 - the highest in 2015. Time to hike rates?

Can the stock market completely ignore these five key changes and keep powering higher on the fumes of Mario Draghi's promises?

Doing as Yellen and her counterparts demand is the biggest risk of all. The Yellen Doctrine requires that central banks be both correct and able, abilities that have been (and can only be) in utter short supply. Her view would show more proactive and effective central bank management where only reactive and impromptu, last minute white-knuckling has abounded. Central banks have been in the past year only holding on for dear life, which is where obscurity has been their benefit. In the end, however, it will bring about their own downfall as it only serves to make matters worse. Yellen wants the central bank to be viewed as almost godlike, but they continually reveal themselves weak, deceptive and ineffectual; eschewing all long run sustainability in order to just make it through one day at a time.

Yesterday Doi and Gina were back at 7 Little Bloomfield Street, Surry Hills. Their fingers crossed for greater fools because Doi was keen to offload his March purchase. The reason? Like most of us who've bought $800k crack shacks, Doi had a healthy dose of buyers' regret and came to his senses "after realising just how small the property was he decided to sell." How lucky was Doi? This is Australia! Doi found a plumber willing to go 60k higher than he'd paid six months earlier