Real estate

How Healthy Is The Real Estate Market?

The strength of the real estate market should not be measured by price appreciation, or the number of new and existing home sales. It should be measured by the support of underlying fundamentals and whether they can help to withstand economic cycles without policy makers having to go hog wild just to avoid a total collapse.

So how healthy is the real estate market today?

Frontrunning: February 17

  • Venezuela's Lopez says ready for arrest at Tuesday march (Reuters)
  • Record Chinese liquidity sends Shanghai Composite back to green for the year (WSJ)
  • Deflation Threat Worries G-20 Roiled by Emerging Markets (BBG)
  • Neither U.S. nor EU has strategy for Ukraine (Reuters)
  • AngloGold Ashanti Chairman Steps Down (WSJ)
  • Italy Yields Seen Climbing as Renzi Gets Mandate (BBG)
  • Group Led by Starr Near Deal to Buy MultiPlan (WSJ)
  • Thai PM under siege, lengthy protests take toll on economy (Reuters)
  • The Value of Annoying Co-Workers (WSJ)

Spoos Rise To Within Inches Of All Time High As Overnight Bad News Is Respun As Great News By Levitation Algos

After tumbling as low as the 101.30 level overnight on atrocious GDP data, it was the same atrocious GDP data that slowly became the spin needed to push the USDJPY higher as the market became convinced that like everywhere else, bad news is great news and a relapse in the Japanese economy simply means more QE is coming from the BOJ despite the numerous articles here, and elsewhere, explaining why this very well may not be the case. Furthermore, as we noted last night, comments by the chairman of the GPIF panel Takatoshi Ito that the largest Japanese bond pension fund should cut its bond holdings to 40% were used as further "support" to weaken the Yen, and what was completely ignored was the rebuttal by the very head of the GPIF who told the FT that demands were unfair on an institution that has been functionally independent from government since 2006. The FSA “should be doing what they are supposed to be doing, without asking too much from us,” he said, adding that the calls for trillions of yen of bond sales from panel chairman Takatoshi Ito showed he "lacks understanding of the practical issues of this portfolio.” What he understands, however, is that in the failing Japanese mega ponzi scheme, every lie to prop up support in its fading stock market is now critical as all it would take for the second reign of Abe to end is another 10% drop in the Nikkei 225.

Foreigners Bought Half Of All London Homes Selling For Over £1 Million

Actually, according to the first detailed estimate of international purchase activity in London by Knight Frank, the percentage of all central London homes that sold for more than 1 million pounds to foreigners in the 12 months through June 2013, was 49% to be exact. And as we showed yesterday when we put China's loan creation in the context of US and Japanese QE, keeping in mind the use of proceeds of all this newly created inside money has to ultimately go somewhere - that somewhere in this case being London and other global luxury real estate, said percentage is only going to get higher. Especially when one adds Russian, the middle east and other various regions whose oligarchs are desperate to park their money in "safe" havens.

Western Banks And China: "Interesting Times" Are Coming

There is a very good chance that the crisis that began in 2008 is actually not over by any stretch – it is merely moving from one place to the next. After all, the developments discussed below are a direct result of the reaction of the world's monetary authorities to the initial crisis. China's credit bubble and ZIRP in the US and Europe are all children of the crisis and have evidently sown the seeds for the next crisis. As we always stress, we expect that the next major crisis will eventually lead to a crisis of confidence in said monetary authorities. At some point, faith in central banks is bound to crumble and then we will really experience 'interesting times'.

5 Things To Ponder: Cash, QE, Investing & 1929

The market correction that begin in January appears to be subsiding, at least for the moment, as Yellen's recent testimony gave markets the promise of the continuation of Bernanke's legacy. With the markets back into rally mode, for the moment, this week's "Things To Ponder" focuses on some of the bigger issues concerning the effectiveness of QE, investing and "77 reasons you suck at managing money."

Certainty, Complex Systems, And Unintended Consequences

When it comes to complex systems and unintended consequences, the key phrase is "be careful what you wish for." A lot of people are remarkably certain that their understanding of how systems will respond in the future is correct. Alan Greenspan was certain there was no housing bubble in 2007, for example (or he did a great job acting certain). Some are certain the U.S. stock market is going to crash this year, while others are equally certain that stocks will continue lofting higher on central bank tailwinds. Being wrong about the way systems responded in the past doesn't seem to deter people from being certain about the future. Complex systems don't act in the linear way our minds tend to work.

America's "Black Gold" Rush Is Leading To Soaring Homelessness

Lured by the promise of jobs created by the oil and gas boom, unemployed people are flocking to North Dakota en masse. This is heralded by many in the mainstream media as great news - labor mobility at its best - however, there is a darker side: rents are surging and finding a place to live at any price is difficult. As Reuters reports, amid all the boomtime plenty, however, is a housing affordability crisis. North Dakota saw a 200% jump in homelessness last year, the biggest increase of any state - "people are coming because it's widely publicized that we have jobs, but it's not widely publicized that we don't have housing."

Paper Gold Ain't As Good As The Real Thing

For the first time ever, the majority of Americans are scared of their own federal government. A Pew Research poll found that 53% of Americans think the government threatens their personal rights and freedoms. Americans aren't wild about the government's currency either. Instead of holding dollars and other financial assets, investors are storing wealth in art, wine, and antique cars. The Economist reported in November, "This buying binge… is growing distrust of financial assets." Every central banker on earth has sworn an oath to Keynesian money creation, yet the yellow metal has retraced nearly $700 from its $1,895 high. The only limits to fiat money creation are the imagination of central bankers and the willingness of commercial bankers to lend. That being the case, the main culprit for gold's lackluster performance over the past two years is something else... It won't be inflation that drives up the gold price but the unwinding of massive amounts of leverage.

Frontrunning: February 12

  • Anti-Euro Party’s Le Pen Gains Supporters, French Poll Shows (BBG)
  • Carney Renews BOE Low-Rate Pledge to Fight Slack in Economy (BBG)
  • Bank of England hints at 2015 rate rise (Reuters)
  • ECB bond-buying intact and ready after court decision-Coeure (Reuters)
  • Canada scraps millionaire visa scheme, dumps 46,000 Chinese applications (SCMP)
  • Scrap this then? Vancouver facing an influx of 45,000 more rich Chinese (SCMP)
  • China's January Exports Power Higher, Up 10.6% (WSJ) ... and nobody believes the number
  • Emerging-Market Shakeout Putting Reserves Into Focus (BBG)
  • Wall Street's most eligible banker Fleming waits for suitor (Reuters)
  • Kazakh Devaluation Shows Currency War Stirring as Ruble Dips (BBG)

Guest Post: The Broken Limb & Burst Pipe Fallacies

We have become a delusional state dependent upon fallacies to convince ourselves our foolhardy beliefs, ludicrous economic policies, corrupt captured political system, and preposterously fraudulent financial system are actually based on sound logic and reason. The fallacy being flogged by government drones and the legacy media about companies not hiring new employees because it has been cold and snowy during the winter is beyond absurd. The other fallacy being pontificated by retail executives in denial, cheerleaders on CNBC and the rest of the propaganda press is weather is to blame for terrible retail sales over the last quarter. Revealing the truth about pitiful employment growth and dreadful retail sales would destroy the fallacy of economic recovery stimulated by the monetary policies of the Federal Reserve and fiscal policies of the Federal government. We have a country built on a Himalayan mountain of fallacies.

What Does Bill Ackman Know About The Future Of Commercial Real Estate?

Bill Ackman helped rescue General Growth Properties (GGP) - the US 2nd largest shopping mall operator - from bankruptcy in 2009/10 as the company collapsed in the financial crisis. Ackman  "turned $60 million into $1.6 billion" in the process but, according to Bloomberg, has now exited his entire position, dumping his final 28 million share back to the company via a buyback. The spin, of course, is that it's right to take profits and that GGP is now 'a much different company than it was then." However, given Ackman's knowledge of JCP (and perhaps RSH), we can't help but wonder, given all the exuberance about Fed tapering must mean the recovery is here and sustainable - just why Ackman would unload it all at such a pivotal time in the US economy...?

Guest Post: Low-Wage Hours At New Low As Obamacare Fines Loom

Low-wage workers clocked the shortest workweek on record in December - even shorter than at the depth of the recession, new Labor Department data showed Friday. The figures underscore concerns about the Obamacare employer insurance mandate's impact on the work hours and incomes of low-wage earners. Still, as Krugman told Colbert recently, he's "ok with a little bit of wealth redstribution from people who have been lucky to people who are unlucky."