Real estate

"The ECB’s bond buying programme has created favourable financing conditions and provides member states with an incentive to defer much-needed budget consolidation and structural reforms. However, further structural reforms to strengthen markets and competitiveness are crucial for a self-sustaining economic recovery. In addition, monetary policy is leading to a build-up of risks to financial stability which could pave the way for a new financial crisis."

On the heels of placing its third former employee at the Fed this year alone, Goldman explains why the market is wrong about inflation and whyv a handful of ex-Goldmanites will hike by 200bps in the next two years.

"It is a bloodbath. We’re at the highest point of fear and uncertainty now.... God only knows what’ll happen if oil doesn’t rebound. I try not to let that penetrate my mind."

The "unexpected" weakness among US consumption, that segment accountable for 70% of US GDP, continues this morning when moments ago Macy's reported a trifecta of weak data, reporting a miss on Q3 sales which came at $5.87 billion below the $6.1 billion expected, and down from the $6.2 billion a year ago, but also a plunge in comparable store sales which tumbled by 3.9%, far worse than the expected drop of -0.4%, and nearly three times as bad as the 1.4% drop a year ago.

“Debt wasn’t a problem during the boom years because profits kept growing. But it’s not sustainable when the economy slows."

In what's being described as a "palpably tense" tense auction, a "Chinese Beverly Hillbilly" dubbed "The Eccentric Mr. Liu" paid the second highest price at auction in history for a Modigliani. 

Those who choose to distance themselves (and their wealth – however large or small) geographically from the centre of the hurricane will fare best.

• Global Stocks Slip Lower (WSJ)
• Dollar sits pretty, bond yields rise as Fed bets firm (Reuters)
• Takeover Loans Have Few Takers on Wall Street (WSJ)
• Chinese Buyers Seek Dollar Assets as Promise of Yuan Gains Fades (BBG)
• Banking Giants Learn Cost of Preventing Another Lehman Moment (BBG)
• Eurozone Finance Ministers Won’t Release $2.15 billion Loan to Greece (WSJ)

Once again, the two major macroeconomic announcements over the weekend came from China, where we first saw an unexpected, if still to be confirmed, increase in FX reserves, and then Chinese trade data once again disappointed tumbling by 6.9% while imports plunged 18.8%. So how did the market react? The Shanghai Composite Index rose for a fourth day and reached its highest since August 20because more bad data means more easing from the PBOC, and just to give what few investors are left the green light to come back into the pool, overnight Chinese brokers soared after Chinese IPOs returned after a 5 month hiatus. Elsewhere, Stocks and currencies in emerging markets slump on prospect of higher U.S. borrowing costs before year-end and after data underscored slowdown in Asia’s biggest economy. Euro strengthens.

"The Fed is a relic of the age of command and control. The Fed is an anachronism,” Grant tells Bloomberg TV in this excellent interview, "The Fed ought to get out of the business of masterminding ‘the American enterprise,’ what we call the U.S. economy." Central bankers, Grant adds, by pressing rates to nothing, have given rise to this "very pleasant kind of inflation we call bull markets." While bull markets are great insofar as they reflect what is actually going on, "they are very dangerous to the extent that they are the artificial creation of artificial interest rates."

The cries for going totally crazy are growing louder... the lunatics are running the asylum. One shouldn’t underestimate what they are capable of. The only consolation is that the day will come when the monetary cranks will be discredited again (for the umpteenth time). Thereafter it will presumably take a few decades before these ideas will rear their head again (like an especially sturdy weed, the idea that inflationism can promote prosperity seems nigh ineradicable in the long term – it always rises from the ashes again). The bad news is that many of us will probably still be around when the bill for these idiocies will be presented.

The funds have flowed in a torrent into stocks, bonds, and real estate, just as 1940's NY Fed President Allan Sproul predicted. That flood of easy-money created the delta of plenty in which we live today. Unfortunately, it’s not likely to continue, because funny things happen when you do funny things to money.

Just days after the potential for more capital injections for Fannie Mae and Freddie Mac (GSEs) are admitted to, we discover another 'scheme' to enrich the 'have-yachts' on the backs of the 'have-nots'.

"This is essentially the result of very low export prices out of China that are impacting prices worldwide. It is obvious that we are operating in a very challenging market."

“Consider for example a tax cut for households and businesses that is explicitly coupled with incremental Bank of Japan purchases of government debt – so that the tax cut is in effect financed by money creation”

- Ben Bernanke, Some Thoughts on Monetary Policy in Japan, 2003