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 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.
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.
GE’s announcement that its getting out of the finance business should be a reminder of how crony capitalism is corrupting and debilitating the American economy. The ostensible reason the company is unceremoniously dumping its 25-year long build-up of the GE Capital mega-bank is that it doesn’t want to be regulated by Washington as a systematically important financial institution under Dodd-Frank. Oh, and that its core industrial businesses have better prospects. We will see soon enough about its oilfield equipment and wind turbine business, or indeed all of its capital goods oriented businesses in a radically deflationary world drowning in excess capacity. But at least you can say good riddance to GE Capital because it was based on a phony business model that was actually a menace to free market capitalism. Its deplorable raid on the public purse during the Lehman crisis had already demonstrated that in spades.