Why are commodity prices, including oil prices, lagging? Ultimately, it comes back to the question, “Why isn’t the world economy making very many of the end products that use these commodities?” If workers were getting rich enough to buy new homes and cars, demand for these products would be raising the prices of commodities used to build and operate cars, including the price of oil. If governments were rich enough to build an increasing number of roads and more public housing, there would be demand for the commodities used to build roads and public housing. It looks to me as though we are heading into a deflationary depression, because prices of commodities are falling below the cost of extraction. We need rapidly rising wages and debt if commodity prices are to rise back to 2011 levels or higher. This isn’t happening.
"I would push back against the notion that we are unduly affected by the ups and downs of the stock market"
The US Federal Reserve has been universally lauded for the apparent success of its extreme monetary policy of recent years. With key world stock markets near record highs, traders universally love the Fed’s zero-interest-rate and quantitative-easing campaigns. But this celebration is terribly premature. The full impact of these wildly-unprecedented policies won’t become apparent until they are fully normalized. The most-extreme monetary experiment by far in US history is just at half-time now, the fat lady hasn’t even taken the stage. The full normalization of ZIRP and QE is likely to be as negative for stock and bond prices as its ramping up proved positive for them.
The NAR Sees "No Housing Bubble", So Here Is A Look At NAR's History Of Absolutely Disastrous ForecastsSubmitted by Tyler Durden on 06/22/2015 17:54 -0500
Prepare to laugh. A lot.
The phenomenon of homeowners objecting to new development is called NIMBYism, which stands for "Not In My Back Yard." The premise behind this is that homeowners don't want to risk any changes that could adversely affect their living space or the value of their property. However, it's easy to see another motive behind NIMBYism: greed. As an investor of a highly leveraged asset, the average homeowner has every reason to inflate the price of their home as much as they can. NIMBYism also contributes to inequality... and perpetuates the two-class society that we see today.
For those concerned if their city is among the top most frequented by this particular, and very unpleasant, breed of "zombies", here are the top 50 cities in the US in which zombie foreclosures represent the highest percentage of all properties in foreclosure. For those readers certainly located among the Top 10, now may be a great time to hit a bid, any bid and get out while the getting is good.
“Things always become obvious after the fact” – Nassim Nicholas Taleb
“Facts do not cease to exist because they are ignored.” – Aldous Huxley
- China’s Record Capital Outflows Spark Financial Stability Fears (FT)
- U.K. Inflation Falls Below Zero for First Time Since 1960 (BBG)
- Islamic State Solidifies Foothold in Libya to Expand Reach (WSJ)
- Judge sentences 11 Afghan police over lynching of woman in Kabul (Reuters)
- The $18 Trillion Global Economic Boost If Everything Went Right (BBG)
- Eurozone Prices Confirmed Flat Year-on-Year in April, Core Inflation Inches Higher (Reuters)
- Greek Finances to Stagger On Longer Than You Think (BBG)
- Athens sees EU deal soon, Greeks' approval of government stance dwindles (Reuters)
Sitting in Silicon Valley, it feels like we’ve reached the peak again. Hot money is chasing deals at ridiculous valuations. Housing prices are more than incomes can cover. Optimism is high. Jobless Claims are at cyclical lows. We’ve seen this before, in 2000 and 2007.
The 20th century could be categorized as THE century when communications took off and we started living in each other’s pockets. Lives had been ruined by war, trouble and strife. Wealth had been redistributed beyond belief.
Following the default on major Chinese developer Kaisa this week, and with the continued softness in the Chinese property market, many are asking who's next among the highly-leveraged firms. However, as The Real Deal's Konrad Putzier notes, Kaisa’s default carries significance for New York’s real estate industry. Chinese investors spent $3 billion on New York properties in 2014. Many in New York continue to associate Chinese real estate companies with limitless funds and a never-ending ability to invest... But what if they are wrong?
We recently revealed that $5.3 trillion of government debt trades at subzero interest rates. In today’s fiscally profligate world that is a thundering tell. What it signifies is nothing less than financial regime change. There are no markets left in any meaningful sense of the word - just a raging casino infected with the madness of the crowds and the central bank pied pipers who mesmerize them. Every day there are new confirmations of the mania.
In January when we first brought news of one of China's largest developer's inability to cover interest payments on its debt, we raised the question of who's next. Now that it is official - China's first major developer to default on its US currency debt - and property prices are falling at a record rate, we suspect the likes of Wanda and Agile will also start to collapse once again (after being bid up incredibly amid China's latest exuberant bubble). Kaisa’s debt problems underscore the slump in China’s property sector, which has been hit by the slowing economy and a series of cooling measures instituted by Beijing to avoid a bubble in what had been an overheated housing market.
Greek FinMin Varoufakis is meeting sovereign debt lawyer Lee Buchheit today, the ‘fairy godmother to finance ministers in distress’... The big questions concern not just the difference between on the one hand, economic issues and on the other, political ones. Syriza doesn’t have the mandate to take Greece out of the eurozone. That is a huge point. But neither does it have the mandate to give in to the troika’s insistence on pensions cuts. At a certain moment, it may come down to what can be explained to the Greek people, and how well it can be explained. This explanation will almost certainly have to come after the fact, since holding a referendum pre-Grexit would carry far too much potential risk of uncontrolled demolition of the entire Greek economy and banking system.
The fairy dust peddlers who moonlight as Wall Street economists were out in force yesterday after March retail sales came in with a positive m/m change for the first time since November. This purportedly confirms that we’re back on track for a big rebound in Q2. In any event, what happens next is not too hard to figure. Unless you are a Wall Street economist.