For many, the collapse of the housing bubble was the trigger that began the era of economic slowdown Americans find themselves mired in. But recently there have been growing reports in the media of a housing "recovery." So we've invited Patrick Killelea, founder of the popular housing site Patrick.net and author of The Housing Trap: How Buyers Are Captured and Abused and How to Defend Yourself, to clarify the situation. The short answer is this: While there are some markets where home prices are back in line with both fundamental and historic norms, buyers still need to exert caution when making a purchase. Patrick also shares insights from his analysis of years of national home purchases. These include: don't sell too often (the transaction costs will kill your returns), don't upgrade too frequently (it's more costly than you think), and it's worth it to transact without an agent if you're able to do so.
The Obama Administration thus far has proven itself in favor of increased Government control and Central Planning. That is, the general trend throughout the last four years has been towards greater nationalization of industries (first finance, then automakers and now healthcare and insurance), as well as greater reliance on our Central Bank to maintain our finances.
It is easy to get swept into the momentum of the housing market. The Federal Reserve has managed to push interest rates to historically low levels creating additional buying power for US households. As we enter the slower fall and winter selling season, there is unlikely to be any major changes until 2013 as the election year concludes. We do face major challenges ahead. This current momentum in housing isn’t being caused by flush state budgets or solid wage growth. No, this is being caused by low inventory, big investors crowding out households, and a concerted effort to push mortgage rates lower. If you simply follow the herd, you would think that prices are now near peak levels again (or soon will be) and household incomes are hitting record levels. Let us examine where things stand today deep in 2012.
Regardless of who owns them
At the end of the day, you can announce all the fancy sounding programs you like. But unless someone comes up with actual cash none of it announces to much other than political posturing.
Hedge Fund "gating", or the forced administrative limit on how much money hedge fund investors can redeem at any given moment, is one of those bad memories that most wish could remain dead and buried with the peak of the credit crisis, when virtually every hedge fund was swamped with redemption requests as impatient LPs couldn't wait to get what was left of their money back. However, the problem for hedge funds, in addition to underperforming the market substantially for a 5th year in a row, with almost all hedge funds now returning far less than the broader market (which continues to successfully defend the 1400 barrier every day) especially after October when the two biggest hedge fund darling stocks GOOG and AAPL finally reincountered gravity, is that their LPs have once again gotten restless and are now again actively seeking their money back from underperformers. Sadly, it was thus only a matter of time before the "gates" returned. As of this weekend they have.
"Obama/Romney, Romney/Obama – the most important election of our lifetime? Fact is they’re all the same – bought and paid for with the same money. Ours is a country of the SuperPAC, by the SuperPAC, and for the SuperPAC. The “people” are merely election-day pawns, pulling a Democratic or Republican lever that will deliver the same results every four years. “Change you can believe in?” I bought that one hook, line and sinker in 2008 during the last vestige of my disappearing middle age optimism. We got a more intelligent President, but we hardly got change. Healthcare dominated by corporate interests – what’s new? Financial regulation dominated by Wall Street – what’s new? Continuing pointless foreign wars – what’s new? I’ll tell you what isn’t new. Our two-party system continues to play ping pong with the American people, and the electorate is that white little ball going back and forth over the net. This side’s better – no, that one looks best. Elephants/Donkeys, Donkeys/Elephants. Perhaps the most farcical aspect of it all is that the choice between the two seems to occupy most of our time. Instead of digging in and digging out of this mess on a community level, we sit in front of our flat screens and watch endless debates about red and blue state theologies or listen to demagogues like Rush Limbaugh or his ex-cable counterpart Keith Olbermann."
Four years of glorious central-planning "extend and pretend" have enriched the political and financial Aristocracies, and imbued them with a bubble-era hubris that they have indeed gotten away with murder: the $6 trillion the Federal government borrowed over the past four years, the Fed's $2 trillion in fresh cash, the Fed's $16 trillion bailout of the banking sector and various perception management manipulations have righted the storm-tossed ship. All those with power in 2008 remain in power and all those with outsized wealth in 2008 still hold their outsized wealth. Except the financial tides and winds have shifted, and the linearity of central planning is about to be disrupted by nonlinear, positive-feedback storms.
Readers of Zero Hedge know well that one of the most abhorred (by us) accounting gimmicks employed by banks each and every quarter over the past 3 years to boost their bottom line, is to engage in loan-loss reserve releases: a process which has absolutely no associated cash flow benefit, but merely boosts EPS for GAAP purposes. In some cases, like this quarter's absolutely farcical JPM earnings release, the abuse is beyond the pale, as the offending bank releases reserves even as it reports surging non-performing loans: two processes which in a normal world can not coexist. Yet quarter after quarter banks keep on doing this, and in fact a big part of Q3's to date EPS outperformance is courtesy of financial company "earnings", of which, in turn, loan losses amount to about 50% of the entire blended financials bottom line. Yet while we can rage and warn, nothing usually happens until there is a market crash due to the gross manipulation of reality that such an activity entails. Luckily, this time someone with more clout in the legacy establishment has now stood up to warn about the mounting dangers associated with the relentless abuse of loan-loss reserve releases: none other than the US Comptroller of the Currency.
- U.S. Super Storm’s Record Flooding Lands Blackout Blow (Bloomberg)
- Sandy Carves a Path of Destruction Across the U.S. East Coast (WSJ)
- Losses May Exceed Those of 2011 Storm (WSJ)
- Hurricane Sandy Threatens $20 Billion in Economic Damage (Bloomberg)
- Huge fire in Sandy's wake destroys dozens of NYC homes (Reuters)
- Possible levee break in New Jersey floods three towns (Reuters)
- Apple Mobile Software Head Forstall Refused to Sign Apology (WSJ)
- Stagflation in Spain (Bloomberg)
- German Oct. Unemployment Rose Twice as Much as Forecast (Bloomberg)
- A declining Japan loses its once-hopeful champions (WaPo)
- Unable to copy it, China tries building own jet engine (Reuters)
- Obama Signs Disaster Declarations for NY, NJ (YNN)
The details of the Spanish bad bank are being released and it is ugly - far uglier than many had expected. And while the Spanish government expects priovate interest to take some of this massively discounted 'crap' off their hands, we have three words: 'deleveraging' and 'no bid!'.
- *RESTOY SAYS BAD BANK AIMS TO BE PROFITABLE
- *SPAIN BAD BANK TO DISCOUNT LOANS AVG 46%; FORECLOSED ASSETS 63%
- *SPAIN AIMS FOR BAD BANK NOT TO COUNT TOWARDS PUBLIC ACCOUNTS
- *SPAIN TO DISCUSS BAD BANK WITH INVESTORS IN COMING DAYS
- *SPAIN BAD BANK TO INCLUDE FORECLOSED ASSETS, LOANS, STAKES
The Spanish government remain in a world of their own with this level of self-delusion. Discunt details below...
- Markets Go Dark Ahead of Storm (WSJ, RTRS, BBG, FT)
- MF Global Problems Started Years Ago (WSJ)
- Major Greek daily reprints Swiss accounts list, editor who published list to go on trial for violating data privacy laws (RTRS)
- Coming soon to a USA near you: Hong Kong government imposes a property tax on overseas buyers (Bloomberg)
- The pain in Spain is endless: Spain’s Pain Seen Intensifying as Slump Deepens Plight (BBG)
- Las Vegas Sands Discusses Possible Settlement With Justice Department (WSJ)
- Why Does the SEC Protect Banks’ Dirty Secrets? (BBG)
- Honda slashes forecast on China territorial spat (AFP)
- UBS shares jump on expected radical overhaul (Reuters) ...so if UBS cuts 150% of workforce, shares will hit +?
- CEOs Seeking Global Range Tilts Market to 8,000-Mile Jets (Bloomberg)
It is cloudy out there as Sandy enters the mid-Atlantic region, although for all the pre-apocalypse preparations in New York, the Frankenstorm may just be yet another dud now that its landfall is expected to come sufficiently south of NYC to make the latest round of Zone 1 evacuations about overblown as last year's Irene hysteria (of course it will be a gift from god for each and every S&P company as it will provide a perfect excuse for everyone to miss revenues and earnings in Q4). That said, Wall Street is effectively closed today for carbon-based lifeforms if not for electron ones, and a quick look at the futures bottom line, which will be open until 9:15 am Eastern, shows a lot of red, with ES down nearly 10 ticks (Shanghai down again as the same old realization seeps day after day - no major easing from the PBOC means Bernanke and company is on their own) as the Friday overnight summary is back on again: Johnny 5 must defend 1400 in ES and 1.2900 in EURUSD at all costs for just two more hours.
There is an interesting dynamic unfolding in the housing market. Real estate agents in places like California are arguing that there is a lack of inventory and are also generally against the government unloading blocks of properties to big investors. Why? There has been bulk selling and buying to the investor class and a large amount of crowding out has occurred. This brings about an interesting set of problems for your average buyer in the current market. They are competing with swaths of big investors but also local flippers trying to make a quick buck once again courtesy of low interest rates and another mania in some markets. SoCal is now in a mania again as you will see with some of the patterns occurring. This is also happening in many other states as well. A new feudal system has emerged. The banks were bailed out by the Fed, were allowed to circumvent accounting standards, and now deep pocket investors in the financial class are buying up these places either to increase prices on flips or to hike up rents. In the end, if you want to compete in today’s market you need to bow down to the Fed, put on a football helmet and go head-to-head with big investors, flippers, suckers, and take on a massive mortgage.
After My Contrarian Calling OF Apple's 3rd Miss, I Come Clean On My Apple Research Track Record For 2 1/2 YearsSubmitted by Reggie Middleton on 10/26/2012 10:03 -0500
Well, here you go! Apple missed a 3rd time in a year and a half, and after going against the crowd to call all three misses I now release my subscription valuation bands from the last two years for the fanbois, haters and honestly interested alike...