I really need to stop being so pessimistic. I’m getting richer by the day. My home value is rising at a rate of 1% per month according to the National Association of Realtors. At that rate, my house will be worth $1 million in less than 10 years. Every mainstream media newspaper, magazine, and news channel is telling me the “strong” housing recovery is propelling the economy and creating millions of new jobs. Keynesian economists, Wall Street bankers, government apparatchiks and housing trade organizations are all in agreement that the wealth effect from rising home prices will be the jumpstart our economy needs to get back to the glory days of 2005. Who am I to argue with such honorable men with degrees from Ivy League schools and a track record of unquestioned accuracy as we can see in the chart below? These are the facts. But why trust facts when you can believe Baghdad Ben and the NAR? It’s always the best time to buy.
- Risk of instability hangs over Italy poll (FT), Protest votes add to uncertainty in close Italy election (Reuters), and... Risk On
- Czech inspectors find horsemeat in IKEA meatballs (Reuters)
- China’s Slower Manufacturing Casts Shadow Over Recovery (Bloomberg)
- So much for reform: China Prepares for Government Shuffle as Zhou Stays at PBOC (Bloomberg)
- France to pause austerity, cut spending next year instead: Hollande (Reuters)
- Sinopec to buy stake in Chesapeake assets for $1.02 billion (Reuters)
- White House warns states of looming pain from March 1 budget cuts (Reuters)
- China Quietly Invests Reserves in U.K. Properties (WSJ)
- Osborne Keeps Austerity as Investors See Downgrade as Late (BBG)
- South Korea's new president demands North drop nuclear ambitions (Reuters)
- Russia accuses U.S. of double standards over Syria (Reuters)
“Facts do not cease to exist because they are ignored.” – Aldous Huxley
The entire system is corrupt to its core. Both political parties, regulatory agencies, Wall Street, the Federal Reserve, and mainstream media are participants in this enormous fraud. They grow more desperate and bold by the day. The lies, misinformation and propaganda being spewed on a daily basis become more outrageous and audacious. They are using the Big Lie method on a grand scale. They frantically need to lure the muppets into the stock market and the housing market to keep the game going a little longer. You can sense we are reaching a tipping point. The system they have created is mathematically unsustainable. Therefore, it will not be sustained.
- Tunisian opposition politician shot dead, protests erupt (Reuters)
- China says extremely concerned after latest North Korea threats (Reuters)
- Postal Service to cut Saturday mail to trim costs (AP)
- Debt Rise Colors Budget Talks (WSJ)
- Obama proposes short-term budget fix, Republicans swiftly object (Reuters)
- S&P Analyst Joked of Bringing Down the House Before Crash (BBG)
- Dell’s Bigger Challenge Ahead in Turnaround After Buyout (BBG)
- Some of the Mark Carney Gloss Is Coming Off (WSJ)
- Japan Official Says BOJ Tools Sufficient as Shake-Up Looms (BBG)
- S&P Lawsuit Undermined by SEC Rules That Impede Competition (BBG)
- Heavy Clashes Erupt in Syrian Capital (WSJ)
We make more than we’ve ever made, we owe more than we’ve ever owed, and we have less than we've had in decades which is distributed to those that did not earn the money. This is a working definition of Trouble. The stock market is at an all-time high while the financial condition of the country has seriously deteriorated. The world is in a gigantic bubble and it is going to get pricked. You cannot keep printing money without consequences and when absolute and intrinsic valuations replace relative valuations then the game is afoot. When the survival of the State puts its people in dire straits then, eventually, the citizens will rebel as the nation has forgotten just who composes its constituents. The people and institutions that have the capital will only go along quietly for so long when nations try to take what they have earned and dispossess it for others. The rich will become poorer and the poor will become poorer and when those with the capital have been deprived of it so that everyone is worse off then the Lords of Chaos will be in control once again.
- Obama's Gun Curbs Face a Slog in Congress (BBG)
- Euro Area Seen Stalling as Draghi’s Pessimism Shared (BBG)
- China Begins to Lose Edge as World's Factory Floor (WSJ)
- EU Car Sales Slump (WSJ)
- Fed Concerned About Overheated Markets Amid Record Bond-Buying (BBG)
- Australia Posts Worst Back-to-Back Job Growth Since ’97 (BBG)
- Abe Currency Policy Stokes Gaffe Risk as Amari Roils Yen (BBG)
- Japan Opposition Party Won’t Back BOJ Officials for Governor (BBG)
- Fed Reports Point to Subdued Economic Growth (WSJ)
- China Set to Exit Slowdown by Boosting Infrastructure (BBG)
- Greece not out of woods, must stick to reforms: finance minister (Reuters)
- Russian Rate Debate Flares Up as Cabinet Seeks Growth (BBG)
Just hours after Ackman announced his joining Einhorn's alleged Herbalife short, we jokingly tweeted our expectation of bandwagon-following 'value' investors imminent herding...
Ackman joins Einhorn in the HLF short. Next up: Titney Wilson
— zerohedge (@zerohedge) December 19, 2012
And sure enough, with the holidays providing just enough time to read the 300 pages and to form his own "blindingly obvious" conclusion, Whitney Tilson has jumped in short HLF. We can only imagine the cost of borrow and wonder on the post-OPEX timing of a short squeeze given the huge short interest and the fact that HLF has recently hired Boies, Schiller, and Flexner to defend its business model. HLF is trading up 2% in pre-market.
Government programs created in the 1960s created a culture of dependency, government control, relentlessly higher debt, materialism, and willful ignorance. The incompetence, arrogance, ineptitude and insanity of government officials at the Federal, State, and Local level are stunning to behold. We need to ask ourselves whether we the people are getting better government service and efficiency today; with government spending at 35% to 40% of GDP, than we did in the 1950’s and early 1960’s when government spending was 20% to 25% of GDP. We doubt that most people are getting 60% more value from our benevolent government today than they did in the 1950’s. By encouraging dependency and reliance upon the all-powerful government, the motivation to educate yourself, get married before having children, work hard, and pull yourself out of poverty is diminished. Can a small minority of critical thinking citizens lead a revolution that topples the existing social order and restores the Republic to its founding principles of liberty, self-responsibility, civic duty, and mutual obligation to future generations?
- Draghi Says Next Move Not His as Spain Resists Bailout (Bloomberg)
- EU Doubts on Deficit Cutting May Hinder Spain’s Path to Bailout (Bloomberg)
- Merkel to Visit Greece for First Time Since Crisis Outbreak (Bloomberg)
- Fed's Bullard warns inflation won't ease U.S. debt burden (Reuters)
- Walmart Workers Stage a Walkout in California (NYT)
- Natural Gas Glut Pushes Exports (WSJ)
- BOJ Refrains From More Stimulus as Political Pressure Mounts (Bloomberg)
- Big funds seek to rein in pay at Wall Street banks (Reuters)
- Hong Kong Luxury Sales Fall as Chinese Curb Spending (Bloomberg)
- Dave and Busters Pulls IPO due to "Market Conditions" (Reuters) - so market at anything but all time highs now is market conditions?
- Weak U.S. labor market looms ahead of elections (Reuters)
- Glut of Solar Panels Poses a New Threat to China (NYT)
Whereas earlier today we presented one of the most exhaustive presentations on the state of the student debt bubble, one question that has always evaded greater scrutiny has been the very critical default rate for student borrowers: a number which few if any lenders and colleges openly disclose for fears the general public would comprehend not only the true extent of the student loan bubble, but that it has now burst. This is a question that we specifically posed a month ago when we asked "As HELOC delinquency rates hit a record, are student loans next?" Ironically in that same earlier post we showed a chart of default rates for federal loan borrowers that while rising was still not too troubling: as it turns out the reason why its was low is it was made using fudged data that drastically misrepresented the seriousness of the situation, dramatically undercutting the amount of bad debt in the system. Luckily, this is a question that has now been answered, courtesy of the Department of Education, which today for the first time ever released official three-year, or much more thorough than the heretofore standard two-year benchmark, federal student loan cohort default rates. The number, for all colleges, stood at a stunning 13.4% for the 2009 cohort. And while it is impossible using historical data to extrapolate with precision what the current consolidated federal student loan default rate is, we do know that there is now $914 billion in federal student loans (which also was mysteriously revised over 50% higher by the Fed just a month ago). Using simple inference, all else equal (and all else has certainly deteriorated), there is now at least $122 billion in federal student loan defaults. And surging every day.
Ladies and gentlemen: meet the new subprime.
Another thesis regarding the housing market’s future path is that of a bounce and slog market. The theory focuses on the negative equity home owners and also the low inventory on the current market. This view point actually holds some solid ground. As of last count, there are over 11 million negative equity home owners in the US. This data is usually put out quarterly but with the stronger home price movement this summer, many will move out of the negative equity position. The theory proposes that many are not selling today simply because they cannot without bringing cash to the table. Out of the 11 million underwater home owners, how many would like to sell but simply do not because they would actually lose money on their sale? This is an interesting perspective on the underwater segment of the market. Yet the outcome is probably not as clean cut as one would expect.
Too Big Leads To Destruction of the Rule of Law
With Europe, the BBA, and virtually everyone shocked, shocked, that the global bank cabal schemed and colluded for years to manipulate interest rates, so far only America appears relatively blase, and totally ignorant, about the issue. Perhaps it is because the first bank exposed in the manipulation scheme so far is European, perhaps because it is just tired of all the endless crime coming out of the criminal complex known as Wall Street. It is unclear. Then again, America will soon have its own manipulation scandals to deal with: and if it is not the US BBA member banks, all of whom were just as guilty as Barclays, and the only question is which bank will be the sacrificial scapegoat whose CEO will have to demonstratively depart (to warmer, non-extradition climes), it will be the following story from Bloomberg which will likely pick up much more steam over the next weeks and months, detailing how the bank which just barely avoided a triple notch downgrade (wink wink) has had previous dealings with the very same rating agencies seeking to, picture this, artificially inflate ratings! So to summarize: Fed manipulates capital markets, HFT manipulates bid ask spreads, "self-policing" CDS pricing market groups fudge the prices on trillions in Credit Default Swaps, bank cabals collude and manipulate short-term interest rates, and now banks are confirmed to have manipulated the ratings on tens of billions of bonds using monetary incentives and threats. Is there anything in this "market" that was fair over the past several decades, and was actual price discovery ever actually possible? Because by now it should be very clear going forward all the things that actually make a free and fair market are forever gone, and that without endless fraud and manipulation by all the market participants who realize that anyone defecting the ponzi group means immediate and terminal losses for all, and all those calls for an S&P 400 would actually prove to be overly optimistic.
The middle class has a gut feeling they are being screwed by somebody, they just can’t figure out who to blame. The ultra-wealthy elite keep up an endless cacophony of propaganda and misinformation designed to confuse an increasingly uneducated and willfully ignorant public while blurring the facts for those educated few capable of understanding the truth. They have been able to keep the masses dumbed down through government run education; distracted by sports, reality TV, Facebook, internet porn, and igadgets; lured by mass media messages of materialism; and shackled with the chains of debt used to acquire the goods sold by mega-corporations. We’ve become a society oppressed by a small faction of ultra-wealthy masters served by millions of impoverished, uneducated, sedated slaves. But the slaves are getting restless and angry. The illegally generated wealth disparity chasm is growing so large that even the ideologue talking head representatives of the elite are having difficulty spinning it. Even uneducated rubes understand when they are getting pissed on.