Housing Market

The world is becoming increasingly chaotic and the American people are seeking a leader who can bring order, make tough decisions, and capture the zeitgeist of this moment in history. They are in search of a prophet generation (Boomer) Grey Champion, whose arrival marks the moment of darkness, adversity and peril as the Fourth Turning careens towards its climax. The Grey Champion doesn’t necessarily have to be a good person, but they must lead and display tremendous confidence in their cause and path. Franklin, Lincoln, and FDR have many detractors, but during their Fourth Turnings, they most certainly led, casting aside obstacles (sometimes illegally) and enduring dark days and bleak prospects for success. Is there someone of that stature ready to lead the American people now?

"Looking into 2016, we believe the three major headwinds highlighted in the medium term - excess capacity in many industries, oversupply in the housing market and high debt burdens (especially among local governments) - together with anti-corruption and policy uncertainties will continue to weigh on growth."

Never go full Krugman...

The title does give it away: the only event that everyone will be focusing on this week will be the Fed's announcement and Yellen's press conference on Thursday. Here is what else is on deck.

While any moves in the US stock market ahead of Thursday are largely irrelevant, as only Yellen's statement in 4 days will unleash epic algo buying or short covering (yes, according to JPM the Fed statement is bullish no matter what), it is what happened in China that is concerning, because while we had expected Chinese stocks to go nowhere in particular now that index future trading volumes have plunged by 99% or perhaps rise on hopes of even more easing after the latest terrible economic data, the Shanghai Composite dropped 2.7%, but it was the retail darling Shenzhen Composite which tumbled 6.7% - its worst selloff since August 25, while China's Nasdaq, the ChiNext crashed -7.5%.

The U.S. economic system is slipping into dystopia and the Government/Fed is doing everything it can to try and prevent the process. The two most obvious signs of this are the perpetual market interventions by the PPT to prevent a stock market dump and the relentless propaganda flowing through the mainstream media which originates from the policy-implementing elitists (business and political). Both efforts are insidious attempts to force control over our system... and as it heads toward "Lord of the Flies." we will see and experience the truly dark side of humanity.

In the past year, we have extensively profiled the collapse of ground zero of Canada's oil industry as a result of the plunge in the price of oil. Since then it has only gotten far worse. As Mark Thornton of the Mises Institute points out, in a report from the Financial Post shows that Calgary in Alberta Canada now has 1.7 million square feet of empty office space, the most in North America with another 5.2 million under construction! But that's just the beginning, because for many recent millionaires, the real cash crunch has finally arrived which means business is thriving for at least one industry: pawn shops.

Liar loans are back from the dead which means that if you look under the hood, you might just have a shoddy credit or two hiding in the collateral pool of your triple-A mortgage-backed paper. Meanwhile, in a further sign that we've learned nothing since the crisis, non-Agency RMBS is set to stage a comeback.

"What happens in any bull asset bubble such as what we've seen is you run out of buyers. It's hard to get deals done if the bottom third can't get a mortgage."

With just 20 minutes to go until the latest most important jobs report ever in the history of man, Richmond Fed Chief Lacker just explained why "the case for raising rates is still strong"...

LACKER: BOTH MANDATE CONDITIONS 'APPEAR TO HAVE BEEN MET', EXCEPTIONALLY LOW RATES NO LONGER WARRANTED BY JOB MKT
LACKER: AUG. JOBS REPORT UNLIKELY TO `MATERIALLY ALTER' PICTURE

But perhaps most crucially, Lacker explains "recent financial market volatility is unlikely to affect economic fundamentals in the United States and thus has limited implications for monetary policy," removing the one last leg for permabulls to rely on (that is if you velieve The Fed is not Dow-Data-Dependent).

There is no doubt that the Chinese economy is in a material economic slowdown. Policy officials’ aggressive actions and scare tactics against equity short sellers could continue to cause capital flight. However, this does not mean that China is going to sell large quantities of Treasuries. There is too much co-dependency between the US consumer and Chinese exporter. Destabilizing the US Treasury market with large sales would be tantamount to shooting themselves in the foot.

Given “highly accommodative” policy almost everywhere, and so little gained; it isn’t a good sign particularly after eight incessant years of it and the lagged effects from the renewed “dollar” wave still to be withstood. Every year was supposed to be “the year”, but 2015 was a surefire lock according to orthodox versions. The real difference, unlike past years, is that everything is going wrong so far just as predicted by the “strong dollar.”

When the bubble vision stock peddlers get desperate, they talk decoupling. So by the end of yesterday’s bloodbath you would have thought China was on another planet, and that “commodities” were some trinket-like collectibles gathered by people who don’t wear long pants, drink coca cola or jabber on their cell phones. On these fine shores, of course, its all awesome from sea to shinning sea. So don’t be troubled. Buy the dip.

By turning the health of the economy into a reflection of the stock market, the Status Quo has made the stock market into the one bellwether that matters. In effect, the stock market is now integral to the economy as a measure of sentiment and evidence that all is well with the economy as a whole.

Following China's official PMI print at a 3-year low, Caixin's PMI collapsed to 47.3 - the lowest sinec March 2009. Despite another CNY150bn liquidity injection (but the biggest strengthening of Yuan since Nov 2014 and a financial conditions tightening in FX trading), China, US, and Japanese stocks are plunging... SHCOMP -4%, Dow -280, NKY -340