Real estate

Marc Faber Blasts "A Corrupt System That Rewards Stupidity"

For the greater part of human history, leaders who were in a position to exercise power were accountable for their actions. The problem we are faced with today is that our political and (frequently) business leaders are not being held responsible for their actions. Thomas Sowell sums it up well: "It is hard to imagine a more stupid or more dangerous way of making decisions than by putting those decisions in the hands of people who pay no price for being wrong." Fortunately, there is an institution that exercises control over the academics at the Fed; it is called the 'real' market economy... and it has badly humbled the professors at the Fed.

Frontrunning: October 9

  • Janet Yellen, a Backer of Pushing the Fed's Policy Boundaries (WSJ)
  • Jos. A. Bank proposes to buy Men's Wearhouse for $2.3 billion (Reuters)
  • J.P. Morgan to Cull Business Clients (WSJ)
  • RBS Said to Pass Currency Trader Chats to FCA Amid Probe (BBG)
  • Prosecutors give SAC settlement ultimatum (FT)
  • U.S. builders hoard mineral rights under new homes (Reuters)
  • Bill Comes Due for Brazil's Middle Class (WSJ)
  • US expected to slash aid to Egyptian government (AP)
  • Samsung launches world's first smartphone with curved screen (Reuters)
  • Microsoft’s $7.2 Billion Nokia Bet Not Luring Apps (BBG)
  • China raises hurdles for foreign banks (FT)

At Least Now It's Obvious Who's In Charge

It’s clear to everyone by now that the government of the largest country in the world is careening towards default in just over 200 hours. Yet curiously, even though the US government’s completely ridiculous, untenable fiscal situation is a front page embarrassment for the entire world to see, markets have barely budged. A few very short-term rates have shot up, but for the most part, stocks are very close to where they were before the shutdown. Stocks and bonds haven’t moved because nobody cares what’s happening in the US government anymore. And that’s because every serious investor understands that the US government long since abdicated any economic power to the banking sector. Everyone knows that the Fed is going to keep printing money, ergo they’re going to keep sending markets higher. And this debt ceiling charade only proves it. The secret is out there in the open. And now it’s completely obvious who’s really in charge.

Paul Singer: The "Trapped, Harmful" Fed "Revels In The Role Of Atlas, Holding Up The World"

"You don't need me to tell you that the developed countries, the US, Europe, Japan, are insolvent.... I don't want to paint  a picture of clarity about the workout of this thing. Because once a society, a financial system gets in a position of the central bank being trapped, and being unwilling or frightened of stopping this merry go round, things get very dicey. They may move to stopping the money printing, markets collapse, then they panic, go the other way... We are in a period where confidence should be jostled and it could be lost at any time for a variety of reasons, how this works out nobody knows.... There is one right thing to do right now: after five years of 0% interest rates, after $3.5 trillion here and several trillion sprinkled around the globe, this Fed chairman, the next Fed chairman, should say: "We've done enough. It is up to the president and Congress to remove the impediments for growth and provide the catalysts for growth, and help this country grow. The country is capable of growing at a far faster rate than it has been. And I think that the Fed, which is the only central bank which has a dual mandate, has embraced this dual mandate in a very harmful way because they actually revel in the role of being Atlas, holding up the world by themselves."

GoldCore's picture

His government has ramped up spending to ward off unrest, helping drive inflation to a 15-year high last year, and pushing Algerians into the currency and real estate markets as they seek to shield savings.

“To protect themselves against inflation, and therefore the devaluation of the dinar, Algerians are investing in property, gold and foreign currencies,” Abderrahmane Mebtoul, a professor of economics at the University of Algiers, said in an interview. 

Frontrunning: October 7

  • A U.S. Default Seen as Catastrophe Dwarfing Lehman’s Fall (BBG)
  • Software, Design Defects Cripple Health-Care Website (WSJ)
  • Gunmen kill 5 Egyptian soldiers near Suez Canal, 2 people die in blast (Reuters); Egypt death toll rises to 53, streets now calm (Reuters)
  • Three retailers sell Apple iPhone 5C for $50 or less (Sun Sentinel)
  • New American Economy Leaves Behind World Consumer (BBG)
  • Dow's Exiles Often Have Last Laugh (WSJ)
  • Macy's Puts China Online-Expansion Effort on Hold Amid Economic Slowdown (WSJ)
  • Gold Befuddles Bernanke as Central Banks’ Losses at $545 Billion (BBG) - just ask the BIS gold selling team: they are unbefuffdled
  • Markit Group Said to Avoid U.S. Antitrust Claims as EU Proceeds (BBG) - being owned by the banks has benefits
  • Paulson leads charge into Greek banks (FT) - and scene for the Greek banking sector

Greece Considering Confiscation Of Private Assets

The last time we opined on the possibility of a Cyprus-style "bail-in" in Greece, which is essentially a legally-mandated confiscation of private sector assets held hostage by the local financial system, until such time as the balance sheet of said financial system is viable, we were joking. Well, not really joking. But not even we thought that a banking sector "bail in", in which unsecured bank liabilities, which include bonds and of course deposits, are used as a matched source of extinguishment of non-performing bad debt "assets" could spread to the broader economy, and specifically to unencumbered private sector assets. Alas, this is precisely what Greece, which is desperately to delay the inevitable and announce it needs not only a third but fourth bailout, appears keen on doing. As Kathimerini reports, the Greek Labor and Social Insurance Ministry is "seriously considering drastic measures in order to obtain the social security contributions owed by enterprises and to avoid having to slash pensions and benefits." What drastic measures? "The ministry is planning to force companies to pay up or face having their assets seized, so that the 14 billion euros of contributions due can be recouped."

David Stockman Explains The Keynesian State-Wreck Ahead - Sundown In America

David Stockman, author of The Great Deformation, summarizes the last quarter century thus: What has been growing is the wealth of the rich, the remit of the state, the girth of Wall Street, the debt burden of the people, the prosperity of the beltway and the sway of the three great branches of government - that is, the warfare state, the welfare state and the central bank...

What is flailing is the vast expanse of the Main Street economy where the great majority have experienced stagnant living standards, rising job insecurity, failure to accumulate material savings, rapidly approach old age and the certainty of a Hobbesian future where, inexorably, taxes will rise and social benefits will be cut...

He calls this condition "Sundown in America".

Have We Reached Peak Federal Reserve?

Billionaires and political lackeys alike have been falling all over themselves in the rush to praise the Federal Reserve's unprecedented monetary intervention since 2008. That billionaires and political hacks, apparatchiks and toadies cannot laud the Fed's Cargo Cult enough is no surprise: the billionaires and the government that feeds them both gained handsomely from the Fed's policies. As the Fed-induced asset bubbles in stocks, bonds and real estate follow the inevitable Supernova track to implosion, that we've reached Peak Federal Reserve will be obvious - in hindsight.

Frontrunning: October 4

  • Troops Forage for Food While Golfers Play On in Shutdown (BBG)
  • Police suspect dental hygienist Miriam Carey was behind the wheel of Capitol chase (WaPo)
  • Italian Senate committee starts Berlusconi expulsion process (Reuters)
  • Swiss Regulator Probing Banks Over Foreign-Exchange Manipulation (WSJ)
  • GOP Begins Search for Broad Deal on Budget (WSJ)
  • No Jobs Report Means Economists Chew on Football Instead of Data (BBG)
  • U.S. default seems unthinkable but investors have options (Reuters)
  • Citigroup fined $30 million after analyst sent report to SAC, others (Reuters)
  • FBI Snags Silk Road Boss With Own Methods (BBG)
  • Recession Warnings Found in Asset Price Falls (BBG)
  • Bank of Japan warns of severe global impact from U.S. fiscal standoff (Reuters)

Frontrunning: October 3

  • Mounting Wall Street fears of US default (FT)
  • This is what the US government does when it is "shut down" - CIA ramping up covert training program for moderate Syrian rebels (WaPo)
  • SEC Weighs Overhaul of Exchanges’ Self-Regulatory System (WSJ) - just let Goldman and JPM do all the policing; not like anyone cares anymore
  • Reid Sets Tone for Democrats in Shutdown Fight (WSJ)
  • No Movement in Shutdown Standoff (WSJ)
  • Shutdown will not slow Fed nomination, says Obama (FT)
  • Syrian Regime Chokes Off Food to Town That Was Gassed (WSJ)
  • Tesla Says Car Fire Began in Battery (AP)
  • China Services Index Increases in Sign of Sustained Rebound (BBG) or sustained data manipulation

Key Pillar Of Housing "Recovery" Cracks As Private Equity Becomes Marginal Seller

With mortgage applications down around 60% from their peak in April, the last best hope for sustained "recovery" in housing 'was' the cash-only bid from private equity and hedge capital in the REO-to-rent or flip-dat-house trades. As we have noted previously, that last pillar was starting to falter and as Bloomberg reports, it seems is now in full crack mode as Carlyle Group switches from marginal buyer to marginal seller in its $2.3 billion real estate funds. "Our capital was useful at the front edge of the recovery," the firm notes - implying the big gains are over as rent growth fades (as employment and income growth slows). Crucially, they add, "investors really want the new Class A properties so we’re selling into that demand." We assume that by "investors" they mean greater-fool bag-holders.

Frontrunning: October 2

  • U.S. Government Shut Down With No Quick Resolution Seen (BBG)
  • 12 House Republicans now say they’d back a ‘clean’ CR (WaPo)
  • Republicans’ 2014 Senate Edge Muddied by Shutdown Message (BBG)
  • Obama Shortens Asia Trip Due to Government Shutdown (WSJ)
  • Fed Said to Review Commodities at Goldman, Morgan Stanley (BBG)
  • Foreign Firms Tap U.S. Gas Bonanza (WSJ)
  • Behind Standoff, a Broken Process in Need of a Broker (WSJ)
  • Japan Awaits Abe’s Third Arrow as Companies Urged to Invest (BBG)
  • Microsoft investors push for chairman Gates to step down (Reuters)

Frontrunning: October 1

  • Government Shuts Down as Congress Misses Deadline (WSJ); Shutdown starts, 1 million workers on unpaid leave (Reuters); Government Shutdown Begins as Deadlocked Congress Flails (BBG)
  • This is not The Onion: Stocks Rise on U.S. Government Shutdown (BBG)
  • Pentagon chief says shutdown hurts U.S. credibility with allies (Reuters)
  • In historic step, Japan PM hikes tax; will cushion blow to economy (Reuters)
  • Obama Says He Won’t Give Into ‘Ideological’ Budget Demand (BBG)
  • More part-time warehouse workers: Amazon to Hire 70,000 Workers for the Holidays (WSJ)
  • Less full-time legitimate workers: Merck to fire 8,500 workers  (BBG)
  • Education cuts hit America’s poor (FT)
  • Euro-Zone Factory Growth Slows (WSJ)
  • Watchdog Warns EU Not to Water Down Insurance Rules (Reuters)