What if there was some degrees of freedom in the centrally planned capital markets that rational, non-emotional and non-ideologically-laden thinking could shed light on ? Here is such an attempt
While the memory of a financial market participant can be measured in nanoseconds, it appears that the average American has also become goldfish-like as RealtyTrac reports a total of 797,865 home equity lines of credit were originated nationwide, up 20.6% from a year ago and the highest level since 2008. As Jim Quinn so eloquently notes, after a two year Wall-Street-engineered fraudulent boost in home prices in the exact markets that led the bubble in 2003 through 2007, the delusional dolts are now acting like the increase in home equity is real: As RealtyTrac's Blomquist exudes, "this recent rise in HELOC originations indicates that an increasing number of homeowners are gaining confidence in the strength of the housing recovery."
- It wasn't Obama this time: Pakistani teen, Indian activist win Nobel Peace Prize (Reuters)
- Surging VIX Shakes Bulls as S&P 500 Charts Go Haywire (BBG)
- Global shares hit six-month low as growth worries mount (Reuters)
- Police, protesters clash in St. Louis ahead of weekend of rallies (Reuters)
- We're Sitting on 10 Billion Barrels of Oil! OK, Two (BBG)
- Spain seeks answers as seven more enter Ebola isolation (Reuters)
- Iran will sell its oil to Asia in November at the biggest discount (BBG)
- Redefining honeypot: U.S. DEA 'most interested' in U.S. investors in Canadian marijuana firms (Reuters)
- UKIP Wins First Commons District With Conservative Defector (BBG)
- Fake Ebola Patients Help Hospitals Prepare for Next Case (BBG)
Low interest rates are a direct cause of credit bubbles, and this is what is happening in Singapore
The take-away from last month’s housing data was that “the market was returning to normal”, which despite the persevering weakness, was viewed as a “great thing”. This overly-simplistic and flawed assumption was made, as the all-cash cohort demand dramatically cooled and distressed supply and sales plunged YoY. What people are suffering from is a lack of a medium-term memory, as what’s happening today happened in 2007/08; “Peak Housing” It was the stimulus-driven, unorthodox “things” that drove the “V” bottom in demand and prices yet again, not coincidentally from exactly the time in 2011 that Twist was first announced and yields plunged. Although 2003-07 and 2011-13 were basically the same in nature, a big difference is that this stimulus-cycle was much greater in stimulus input over a shorter period of time than from 2003 to 2007. If stimulus “hangovers” are proportional to the amount of stimulus that preceded them, then this one could be a doozy.
- As we warned in May 2013... Gross Exposes $42 Trillion Bond Market’s Key Flaw in Exit (BBG).... hint: no liquidity
- WTI Crude Slips Below $90 for First Time in 17 Months (BBG)
- Traders Thank Fed for Once-in-Decade Surge in Profit (BBG)
- Islamic State committing 'staggering' crimes in Iraq: U.N. report (Reuters)
- Philippine Islamist militants threaten to behead German on October 17 (Reuters)
- Draghi’s Buying Spree for the ECB Might Start Modestly (BBG)
- Russian Officials Say No Plans for Capital Controls (WSJ)
- Indians Join the Wave of Investors in Condos and Homes in the U.S. (NYT)
- Leader of Mexican drugs cartel captured (FT)
- Dallas Ebola patient vomited outside apartment on way to hospital (Reuters)
The ultra high end of US housing is now sliding fast, and that unless some other central banks steps up and resumes the injections of some $100 billion in outside money into inflating asset prices such as stocks and billionaire mansions, then all bets are soon off.
At the heart of the problem is the fact that the Federal Reserve’s manipulation of the money supply prevents interest rates from telling the truth: How much are people really choosing to save out of income, and therefore how much of the society’s resources — land, labor, capital — are really available to support sustainable investment activities in the longer run? What is the real cost of borrowing, independent of Fed distortions of interest rates, so businessmen could make realistic and fair estimates about which investment projects might be truly profitable, without the unnecessary risk of being drawn into unsustainable bubble ventures? All that government produces from its interventions, regulations, and manipulations is false signals and bad information.
The US economy and financial system are in worse condition than the Fed and Treasury claim and the financial media reports. Gold serves as a warning for aware people that financial and economic trouble are brewing. In the 21st century, US debt and money creation has not been matched by an increase in real goods and services. The implication of this mismatch is inflation. Without the price-rigging by the bullion banks, gold and silver would be reflecting these inflation expectations.
New Home Sales rose a magnificent (seasonally-adjusted annualized rate) 18% in August - the biggest monthly rise since January 1992 albeit with a 16.3 90% confidence interval, meaning the final number may well be +1.7%. At 504k, new home sales are back at May 2008 levels (though obviously massively below the 1.4 million homes sold at the peak in 2005). As a reminder, May's 504K new home sales print was later revieed later to 458K. But even more stunning, new home sales in The West rose a mind-numbing 50% in August (and up 84.4% YoY - nearly double). And just to confuse matters, the average new home sale price rose to a new record high of $347,900. So as existing home sales are sliding (and prices dropping), new home sales are surging (to new record highs) - makes perfect sense. We await the extrapolations for how great this move is. (or the realization that it is entirely seasonal-adjustment-biased and unsustainable given the realities of mortgage applications).
European stocks, U.S. equity index futures fall after Euro area PMI for Aug. missed ests., while bond yields for German, Spanish, U.K. debt fall. Copper rises with positive Chinese PMI data, while oil gains as OPEC discusses output cut. European health care stocks among largest underperformers as U.S. plans tighter rules on tax inversion M&A.
With the snoozer of an FOMC meeting in the rearview mirror, as well as Scotland's predetermined independence referndum, last week's key events: the BABA IPO and the iPhone 6 release, are now history, which means the near-term catalysts are gone and the coming week will be far more relaxed, if hardly boring. Here is what to expect.
- Quid pro quo Clarice: Iran seeks give and take on Islamic State militants, nuclear program (Reuters)
- Alibaba’s Banks Said to Boost IPO Size to Record $25 Billion (BBG)
- European Stocks Fall Amid China Concern as Tesco Slides (BBG)
- Tesco Suspends Executives, Probes Error That Triggers New Profit Warning (WSJ)
- Kurds say they have halted Islamic State advance on Syrian town (Reuters)
- Because luck and managing money is genetic: Financial Elite's Offspring Start Their Own Hedge Funds (WSJ)
- Islamic State Onslaught Spurs Mass Exodus of Syrian Kurds (BBG)
- Rockefellers, Heirs to an Oil Fortune, Will Divest Charity From Fossil Fuels (NYT)
Ever wonder why for the US, it is all about reflating the stock market bubble in order to boost the "wealth effect", if only for a small portion of the population? Or, for that matter, why in China where the Shanghai Composite has gone absolutely nowhere since the Lehman crash (and certainly isn't up some 200% unlike the liquidity-supercharged S&P 500), it is all about preserving the sanctity of the housing bubble? Then the following chart should make it all clear.