Real estate

More Housing Bad News: Household Formation At 30 Year Lows

Iif there is to be a real housing recovery, households have to be formed at a much faster pace. Alas, in recent years household formation has not made a "combeack", it has crashed. In fact, according to Census Bureau data, in Q1 the number of households formed each month was 189,000, down from 1,563,000 in 2013, dropping more or less in a straight line since the article's publication!

Frontrunning: May 30

  • Ukraine Rebels Outfox Army to Dent Poroshenko Troop Goal (BBG)
  • Russia Withdraws Most of Forces From Ukraine Border: U.S. (BBG)
  • Super-Size Me! China’s ’Mini’ Stimulus Starts Expanding (BBG)
  • Option B: The blueprint for Thailand's coup (Reuters)
  • Big investors replace banks in $4.2tn repo market (FT)
  • Draghi Shields Catalan Independence Bid From Market (BBG)
  • U.S. companies seek cyber experts for top jobs, board seats (Reuters)
  • Parsley CEO Emerges as One of Youngest U.S. Billionaires (BBG)
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Financial expert, Pentagon insider and bestselling author James Rickards has warned that “typical investors” may not be able to acquire physical gold when prices begin to surge hundreds of dollars a day as “massive shortages” will take place. In another fascinating interview,, Rickards said that gold will become the preserve of the “big guy” in the form of sovereign wealth funds and central banks.

The "Golden Era" For Chinese Housing Is Over , Warns China's Largest Property Developer

Western strategists and talking heads, we are sure, will know better and continue to pitch China as the renewed engine of growth in the world and that everything will be fine... but when the country's largest property developer says, the "golden era" for China’s property market has passed, adding that "The period in which everybody makes money out of property is gone," perhaps it is time to listen? Of course, we are sure there will be an orderly exit (just as there was in CNY last night which crumbled to 19-month lows) but as China Vanke Co's Yu Liang warns, "the phase where 'whoever buys makes money' is gone." Property sepculators are frustrated that the government won't bail them out "are they tryng to kill us?" as one analyst notes "this downturn is more serious than 2008."

The Malinvestment Boom In Coders

There can be no doubt that computer science knowledge is currently in great demand; however, we do believe that there are some signs that the boom is - so to speak - 'getting out of hand' and is beginning to reflect the effects of the technology echo bubble on Wall Street. The give-away is the size of the demand for computer science studies relative to other fields of study. The last time enrollment in computer science peaked was in the year 2000 – concurrently with the technology mania. This is obviously no coincidence. What is slightly disconcerting is that the current peak in enrollments towers vastly above that previous bubble peak.

Frontrunning: May 28

  • Yellen Concerned by Housing Slowdown She Has Scant Power to Cure (BBG)
  • Because snow in Q1? Citigroup’s CFO Says Trading Revenue Could Slide 25% (BBG)
  • Banks Raise Caution Flag on Trading (WSJ)
  • The answer is yes: Hilsenrath asks if BOJ’s Kuroda Awakening to His Limits? (WSJ)
  • Google Develops Prototype Cars for Fully Autonomous Driving (WSJ)
  • Amazon Expects Lengthy Hachette Dispute (WSJ)
  • Tencent $1 Billion Game Shows Global Hunt for Mobile Hits (BBG)

The Retail Death Rattle Grows Louder

The inevitable shuttering of at least 3 billion square feet of retail space is a certainty. The aging demographics of the U.S. population, dire economic situation of both young and old, and sheer lunacy of the retail expansion since 2000, guarantee a future of ghost malls, decaying weed infested empty parking lots, retailer bankruptcies, real estate developer bankruptcies, massive loan losses for the banking industry, and the loss of millions of retail jobs. Since we always look for a silver lining in a black cloud, we predict a bright future for the SPACE AVAILABLE and GOING OUT OF BUSINESS sign making companies.

Power-Sharing, As Un-American As Humble Pie

Contrary to blatant propaganda ignited by an insincere West, Putin’s government has no intention of enlarging the Russian Federation. All Putin, and overwhelmingly the Russian people, are after is the assurance of a buffer state in Ukraine without US missiles pointing at Moscow, and that implies a nation that would not join NATO. With the looming elections, Tymoshenko is decidedly pro-NATO but the front-runner Poroshenko has often suggested that Ukraine joining NATO would not be such a good idea. Meantime our neocon-infested State Department and the Pentagon continue to provide imprimatur to America’s corporate media to propagate lies demonizing Putin and Russia and glorifying our American empire. Yet, we are the folks who started the entire mess in Ukraine.

Financial Storm Chasing With Blinders On: How The Fed Is Driving The Next Bust

Monetary central planning at the zero bound embodies a destructive internal contradiction. It inherently generates rampant speculation in real estate and financial assets because ZIRP massively subsidizes the cost of carry. At the same time, its practitioners are institutionally disposed to bubble denial because they falsely believe that their policies are what is keeping the real economy advancing - even if currently it is at a sub-normal pace by historical standards. Without fail, therefore, monetary central planners keep their feet on the accelerator to the very end, boasting that the “in-coming data” shows the macro-economy approaching the nirvana of full-employment. What they are actually doing, however, is driving the financial system to unsustainable extremes of valuation and speculation - and eventually to a crash landing. We have had two of these processions of the lemmings - that is, Fed driven cycles of bubble inflation and bust - already in this century. Now we are at the asymptote of the third.

China Has A Housing Bubble In "Some Cities", PBOC Admits

While US central bankers shudder at the idea of admitting their could be a bubble in real estate or stocks (unless its obvious in hindsight); and England's Bank of England explains 'if there is a bubble, it's not their fault, but there isn't so there'; it appears the Chinese are more comfortable with the truth. As Bloomberg BusinessWeek reports, China's central bank Governor Zhou Xiaochuan said, China may have a housing bubble only in “some cities,” - an issue that’s difficult to resolve with a single nationwide policy. As concerns mount of dramatic over-supply on the back of extrapolated urbanization dreams, Zhou notes, “The economy has slowed down a bit, but not very much," adding that "we should keep vigilance on whether it continues to slow down." Which is odd because US talking heads have made up their minds that China is fixed...

"Political Earthquake" - Nigel Farage "Big Winner" In Local Elections

Yesterday we highlighted the European people's growing 'revulsion' against Europe and overnight we got yet another confirmation that the status quo - despite record low bond yields and record high stock and real estate prices - are losing their grip on control. Having taken the lead in the polls last week, UKIP's Nigel Farage has scored a major victory in local elections in England with early results pointing to considerable gains for the euro-skeptic party:

UKIP GAINS 20 SEATS IN EARLY ENGLISH LOCAL-ELECTION RESULTS
U.K. TORIES LOSE 20 SEATS IN EARLY LOCAL-ELECTION RESULTS

As Reuters reports, one MP noted "I think Nigel Farage for quite a lot of those people is just a big sort of two fingers stuck up at what they feel is a sort of hectoring, out-of-touch elite."

Chinese Premier Li Keqiang Punctures The Keynesian "Excess Savings" Myth

For two decades now mainstream Keynesian economists have been gumming about China’s remarkable economic boom and its accumulation of unprecedented foreign exchange reserves. The latter hoard has now actually crossed the $4 trillion mark. But this whole narrative is PhD jabberwocky with a Wall Street accent.

Bundesbank Warns European Investors: "We See Risks, Despite Calm Markets"

A day after the Federal Reserve warned that "low level of expected volatility implied by some financial market prices might also signal an increase in risk appetite" and this complacency; the Bundesbank has decided to try and jawbone back investors' exuberance across Europe. As Die Welt reports, while stocks and bonds are near record highs across Europe - thanks to the ECB's Mario Draghi's promises, Bundesbank board member Andreas Dombret warned "we see risks - despite the fact that markets are calm," and perhaps incredibly suggested investors "flatten all risks now to avoid the herd behavior."