- Tea Party struggles to repeat Cantor-style shock in Tennessee (Reuters)
- Iran Deploys Forces to Fight al Qaeda-Inspired Militants in Iraq (WSJ)
- Oil Rallies as Militant Advance in Iraq Threatens Crude (BBG)
- Gold Set for First Back-to-Back Weekly Gain Since April (BBG)
- Hedge Funds Get Stung by Slow Markets (WSJ)
- Sterling nears 5-year high after Carney speech (FT)
- Britain Warns Boom in Real-Estate Prices Threatens Economy (WSJ)
- East Europe Leaders Urge EU Unity to Counter Russia (BBG)
- Formula One Said to Be Valued at $8 Billion as Malone Seeks Stake (BBG)
- Dumb and dumber: Abe Plans Company Tax Cut in 2015 as Kuroda Warns on Budget (BBG)
We all knew just how wrong it was as we sat there and listened to the World Bank going on in January about how world economic growth would top 3.2%. Today the World Bank has downgraded economic growth to 2.8%, which some might say is even over the odds
“Go and get educated, you weakly fools, learn to compete; it’s a tough world out there.” And with that push by the Knightly Elite, Americans by the millions have entered a path offering them skills or greater opportunity, instead of taking the alternate route to an almost guaranteed permanent welfare. In their obsequious tradition of creating self-serving opportunities and promoting waste, legislators have allowed the creation of a field of uncontrolled helter-skelter, unqualified schools (new or existing) offering shelter to mostly unemployed or unemployable men and women wearing student uniforms. Yet, as this throw-away part of society gets “educated” there are none-to-few jobs waiting for them. These “money advances,” appear as the only way to subsist. For now... we’ll just wait until this bubble bursts.
Sticker shock. Expect to pay a lot. Hellishly hot in the summer and shockingly less sexy than advertised. But the city and local people, called Cariocas, are clean and the crime is greatly exaggerated. The Marvelous City is amazing in many ways. But if you look closely, you see the same old corruption and thuggery, the same painful poverty and injustice, that plague many states. And then there's the Brazilian prostitutes, called programas, who frequent the bars and brothels of Copacabana and Ipanema as well as Central Rio... People in Rio and Brazil are the same as anywhere. They want the same things. Happiness, diversion, laughter, distraction, the so-called good things in life. A slightly larger piece of the pie. The World Cup is just a showcase and a distraction. Bread and circus on a grander scale.
Over 1 in 5 homes (with $674 billion of mortgages) in China stand empty... and if you think that urbanization will fix that, as WSJ reports, a 10 percentage point rise in the urbanization rate (already at 54%) would result in only a 2.6% drop in vacancy rates. China has a major over-supply issue thanks to property developers who had rushed into the market to build homes, which have been a popular investment as prices seemed bound to keep rising. But now, as Vanke recently warned, things are changing and "the golden era" of China's property market are over. The vacancy rate of sold residential homes in urban areas reached 22.4% in 2013 and as new home prices are slashed to move product, a 30% drop would leave 11.2% of Chinese homes underwater on their mortgages...
The middle class happily accepts high risk in return for temporary gains in the asset bubble of the day, guaranteeing a steady progression of losses. The illusory safety of following the crowd feeds the wealth-destroying dynamic of taking on high risk for either zero gains or huge losses once the asset bubble du jour pops.
Just how badly is Generation X doing? Bad enough to turn around the entire concept of middle-class prosperity in America - one where every next generation should do better than the preceding one - on its head. "Only one-third of Generation X households had more wealth than their parents held at the same age, even though most earn more, The Pew Charitable Trusts found." And there, in a nutshell, is your so-called recovery: two thirds of an entire generation - one which is in its prime working years - doing worse than the one before them!
As we showed a week ago, it is not just the coincident housing signals confirming that the latest artificial bounce has faded, but both upstream and downstream indicators. Specifically, we showed that lumber prices - that one component so critical in the building of new homes and a traditional leading indicator - have cratered. That's the upstream indicator. As for the downstream, we go to Bank of America which finds that not only has home improvement store spending declined substantially since the dead housing bounce peak last summer, but that furniture spending according to BofA estimates, is now once again negative: the first such drop since early 2012.
“Excessively low interest rates are inflationary because they mean that bonds, stocks, real estate and unincorporated businesses are capitalized at excessively high rates, and will fall in value even though the annual income they pay remains the same, if interest rates rise.” If interest rates were artificially low, it would follow that prevailing investment values are artificially high. I contend that they are, and you may or may not agree. Natural interest rates — free-range, organic, sustainable — are what we need. Hot-house interest rates — the government’s puny, genetically modified kind — are the ones we have.
Yes, the nonfarm payroll clocked in at 138.5 million jobs and thereby retraced for the first time the point at which it stood 77 months ago in December 2007. This predictably elicited another “milestone of progress” squeal from the mainstream media. So you have to wonder. Did these people skip history class? Do they understand the vital idea of “context”? So if you want to try a little “context” absurdity recall this. So far we have created a trifling 100k “new” jobs since the last cyclical peak. During the equivalent 77 months in the Reagan era the US economy actually generated 150 times more jobs!
- Attorneys Known for Large Civil Settlements Line Up to Sue GM Over Company's Handling of Defective Ignition Switches (WSJ)
- Pakistani Taliban attack airport in Karachi, 27 dead (Reuters)
- U.S. Official: Sgt. Bowe Bergdahl Has Declined to Speak to His Family (WSJ)
- Ukraine Gas Talks Resume in Brussels to Avoid Cut-off This Week (BBG)
- China's Central Bank Flexes Muscle (WSJ)
- China says Vietnam, Philippines' mingling on disputed isle a 'farce' (Reuters)
- World Needs Record Saudi Oil Supply as OPEC Convenes (BBG)
- Kraft Raises Prices on Maxwell House, Yuban U.S. Coffee Products (BBG)
- United Continental: One Sick Bird (WSJ)
First, the world's oligarchs slowly but surely took over London real estate, where as we reported last week, home prices in May soared by the most in 12 years, and now, according to the Telegraph, in order to make London into an even more exclusive enclave where only the uber-wealthy can rub shoulders, assorted luxury buildings are installing metal spikes on the ground outside to fully deter homeless people from sleeping (and hence living) there. In other words, in London homeless people have been relegated to pigeon status, as the same technique has been long used to prevent rats with wings from landing, and defecating, at select locations.
When looking at residential real estate, we often tend to focus almost solely on recent price movements in assessing the health of the housing market at any point in time. But as both homeowners and income-earners in the larger economy, of which the housing market is an important component, to really understand what's going on, we need clarity into the larger cycle driving those price movements. The more we look at today's data, the more it looks like that we are in a new type of pricing cycle -- one that homeowners and housing investors have no prior experience with. And the more we learn about the fundamentals underlying the current cycle, the harder it becomes to justify today's home prices on any sustained level. Meaning a downward reversion in home values is very probable in the coming years.
Everywhere you look, Americans appear to be extremely obsessed with wealth and money. As a society we love money, and we are not ashamed to admit it. In fact, there are times we absolutely revel in it. For example, Time Magazine published an article this year entitled "Science Proves It: Greed Is Good" and hardly anyone even raised an eyebrow. But where will America's sick obsession with wealth and money end? Could it end up destroying us?
It is highly likely that bond markets come under pressure and interest rates rise within the next five years. Do you have an insurance policy against that?