Liquidity Bubble

This Is What The Unprecedented Chinese M&A Scramble In America Looks Like

The level of Chinese cross-border M&A chasing after US targets is literally off the charts. Notably, China has accounted for 26% of global cross-border activity YTD, which is nearly 3x higher than the next highest year. At $28 bn YTD, US-inbound deal flow from Chinese acquirers is already a record level and nearly 2x last year’s volumes

Making Sense Of The Sudden Market Plunge

The eventual outcome to all this is captured brilliantly in this quote by Ludwig Von Mises, the Austrian economist: "There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as the result of a voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved." The credit expansion happened between 1980 and 2008, there was a warning shot which was soundly ignored by ignorant central bankers, and now we have more, not less, debt with which to contend.

Mark Hanson Is In "Full-Blown, Black-Swan Lookout Mode" For Housing Bubble 2.0

Real Estate is a highly “illiquid” asset class ‘most of the time’.  It always has been and always will be.  However, some times, such as now - and from 2003 to 2007 as a prime example - when liquidity is flowing like water, Real Estate’s illiquidity is masked.  Speculators can do no wrong.  Simply having access to short-term or mortgage capital to purchase Real Estate guaranties a double-digit return.  This continues until one day, suddenly, it doesn’t; and, the snap-back to the true, historical illiquid nature of the Real Estate sector happens suddenly and is amplified at first. This creates a snowball effect from which both house supply and illiquidity surge at the same time. Price then becomes the liquidity fulcrum and will drop, relentlessly ripping speculators faces off, until capital begins to view the asset class as a relative value once again.

Right Now, In Hong Kong...

Sit back, grab some popcorn and just watch as the exponential gets exponentialer... and then it all goes splat.

Bad News For America's Biggest Housing Bubble: San Francisco Home Prices Suffer Biggest Drop In Three Years

It was not only the annual growth rate of only 7.9%, matching the lowest since the European debt bubble burst in 2010, but also the sequential rate of price drops, at -0.9% - the biggest monthly drop in three years, or since January 2012 - that will once again be a subject for concern of housing watchers. Because should the price decline resume its acceleration without any emerging tailwinds to prop up the local housing market, then there will surely be some severe fallout such as this peak housing bubble example, in which as Curbed reported last week, a run down shack which listed for $799,000 sold for 50% more, or $1.2 million a few weeks later!

A Most Curious Disconnect

While the actual number of new homes sold has barely budged during the so-called Recovery, the incentive for the builders, is right there, and as can been by median new home prices which continue to rise, and in fact hit an all time high as recently as December!

The Impact Of A Liquidity Bubble On Price In One Chart

The following chart courtesy of Citigroup, demonstrating the liquidity cliff, i.e., the impact of a liquidity bubble on price and risk, is so mindbogglingly simple, it is no wonder that virtually nobody gets it.

5 Things To Ponder: The Interest Rate Conundrum

After several months of quite complacency, investors were woken up Thursday by a sharp sell off driven by concerns over potential rising inflationary pressures, rising credit default risk and weak undertones to the economic data flows. One of the primary threats that has been readily dismissed by most analysts is the impact from rising interest rates...

America's Most Important Housing Market Signals A Red Alert For Housing Bubble Watchers

While today's Case Shiller data was widely disappointing across the board, indicating a significant slowdown in price gains (and on a sequential seasonally adjusted basis, practically a decline), the one market we paid particular attention to was San Francisco. What we found is a red flag for everyone waiting to time the bursting of the latest housing bubble. Because after an unlucky 13 months of posting consecutive 20% Y/Y price gains, the San Francisco bubble appears to have finally burst, posting "just" an 18.2% price increase, the lowest since January of 2013.

Subprime 2.0: 125% LTV Loans Are Coming Back

Yesterday we mocked China for being desperate enough to push its tumbling housing market (which directly and indirectly accounts for some 80% of Chinese GDP per SocGen estimates) no matter the cost, that at least 20 developers were offering the kinds of mortgages that resulted in the first credit bubble crack up boom and collapse, namely "Zero money down." Little did we know that the US, never one to lag in the financial innovation department had once again one-upped China, by bringing back from the dead the company that according to Housing Wire was "once a poster child for pre-crash subprime lending" - Ditech Mortgage Corp.  But best of all, ditech was known as a leader in subprime. The bulk of the mortgages were interest-only, low-documentation subprimes, and ditech was a pioneer in offering 125% loans allowing the borrower to borrow more than the sale price.