Real estate

Is The U.S. About To Break One Of Its Own Nuclear Treaties?

Bill Richardson could teach Donald Trump something about the art of the deal. He has done a lot of them. At present Richardson sees one of his deals in jeopardy, and he was in Washington last week to raise the alarm, meeting privately with former colleagues and appearing at a press conference at the National Press Club. The deal in jeopardy involves a commitment he made, when he was secretary of Energy in the Clinton administration, with the Russians to dispose of weapons-grade plutonium, the long-lived ingredient in nuclear weapons.

80% Of All New Home Buyers In Irvine Are Chinese

"We are seeing more globalization as Southern California has become a destination for international buyers," said Mark Hughes, chief operating officer with First Team Real Estate, covering the Southern California market. "Eighty percent of new construction in Irvine last year was sold to Chinese buyers. International buyers are driving home prices up and sometimes out of reach for many local residents."

Liquidation Warning; Bottleneck Spotted

We know that the corporate credit bubble has been highly disturbed, but the action in mREIT’s these past few days more than suggests that risk perceptions systemically are being affected. That all ties back to funding considerations, as the collapse in REM may be investors selling ahead of liquidity problems that are still building and expanding. In other words, there may be a growing sense (not unlike inflation breakevens) that the corporate pricing problems are going to break out in short order beyond just junk (and beyond what already has).

Gold: "The More Ridiculous The System Gets, The More Valuable It Becomes"

This system is pure insanity, as are its prices... it wouldn’t bother us if the price of gold went negative, just like propane in Alberta (after all, we're not trading paper currency for gold, just to trade it back for more paper currency if the 'price' goes up). The idea behind buying gold is to swap paper money for something real. Banks can rig its 'price' all they want; gold’s true value comes from its function as a long-term form of savings and a hedge against a broken financial system. And the more ridiculous the system gets, the more valuable it becomes.

This Bear Is Just Waking From Hibernation

When you tell people in self denial the market could drop 40% in a few months, they think you are crazy. They declare this could never happen. They would get out of the market before it would fall vertically. Their memories are conveniently short as their normalcy bias and cognitive dissonance blind them to what happened over three months in 2008/2009. We wonder how many willfully ignorant investors can handle a 50% to 70% haircut in their 401k, especially if they are over 50 years old. We wonder how much angrier the populace will become when the current recession results in more job losses, bankruptcies and revelations of Wall Street malfeasance. Beware of the bear.

Fourth Turning: Crisis Of Trust, Part 3

The solution is not to let politicians redistribute the wealth from the rich to the poor. Crony capitalism must be replaced by true free market capitalism, practiced with integrity, fairness, principled conduct, intelligence, and high moral standards. Profits generated by corporations are not evil, but seeking profits at any cost to society is reckless, shortsighted and immoral. Capitalism without capital is destined for failure. When corporate CEOs, Wall Street bankers, and shady billionaires exercise undue influence over the financial, political and judicial systems, their short-term quarterly profit mindset and voracious appetite for riches override the best interests of the people and create a sick, warped, repressive society. Today our system is in the grasp of psychopaths whose hubris and myopic focus on enriching themselves will ultimately be their downfall.

Frontrunning: September 28

  • Headline winner: "Read Beyond Massive Job-Cuts Headlines: Labor Market Is Fine" (BBG)
  • And speaking of lies: The More Yellen Talks Up Inflation, the Less Traders Believe Her (BBG)
  • How Some Investors Get Special Access to Companies (WSJ)
  • Victorious Catalan separatists claim mandate to break with Spain (Reuters)
  • Russia seizes initiative in Syria (Reuters)
  • Former VW boss Winterkorn investigated for fraud (Reuters)
  • Investors Pull Back From Junk Bonds (WSJ)

Uncomfortably Revisiting Yellen's Bubble Doctrine

There is growing turmoil in buybacks that threatens the very fabric of the stock bubble. That was always the primary transmission of the foundation of its current manifestation, corporate debt, into asset prices; especially the huge run following QE3 and QE4. The problem once momentum fades is that investor attention turns toward valuations that were repeatedly ignored before. As long as everything is moving upward and any fundamental downside is completely contained (in perception) as “transitory” then valuations are easily set aside as one form of rationalization. The effect of reversing momentum is for a more honest measurement; particularly by force of change in economic sentiment which is almost always concurrent.

Frontrunning: September 24

  • Stocks slip for fifth straight day, euro holds steady (Reuters)
  • VW recall letters in April warned of an emissions glitch (Reuters)
  • VW Cheating Scandal Threatens to Ensnare BMW as Probe Widens (BBG)
  • Pope Francis set to address fractious U.S. Congress (Reuters)
  • Norway Cuts Rates to Record Low to Save Economy From Oil Slump (BBG)
  • Taiwan Cuts Rate for First Time Since 2009 as Exports Falter (BBG)
  • Janet Yellen to speak at UMass on Thursday (Daily Collegian)
  • A Big Bet That China’s Currency Will Devalue Further (NYT)
  • Debt Relief for Students Snarls Market for Their Loans (WSJ)

Harvard Endowment Chief Warns Of Market Froth, Compares Rate Hike To Bubble-Bursting Catalyst

"We are proceeding with caution in several areas of the portfolio: many of our absolute return managers are accumulating increasing amounts of cash; we are being careful about not over-committing into illiquid investments in potentially frothy markets, while still ensuring we will be involved if market dislocations arise. ...  An interesting question emerges: could rising interest rates in 2016 have an analogous impact to falling house prices in 2007, where a range of largely unanticipated second-order effects was triggered?"