Something Smells Fishy

Tyler Durden's picture

Submitted by Jim Quinn of The Burning Platform

Something Smells Fishy

It’s always interesting to see a long term chart that reflects your real life experiences. I bought my first home in 1990. It was a small townhouse and I paid $100k, put 10% down, and obtained a 9.875% mortgage. I was thrilled to get under 10%. Those were different times, when you bought a home as a place to live. We had our first kid in 1993 and started looking for a single family home. We stopped because our townhouse had declined in value to $85k, so I couldn’t afford to sell. In 1995 I convinced my employer to rent my townhouse, as they were already renting multiple townhouses for all the foreigners doing short term assignments in the U.S. We bought a single family home in 1995 with the sole purpose of having a decent place to raise a family that was within 20 minutes of my job.

Considering home prices on an inflation adjusted basis were lower than they were in 1980, I was certainly not looking at it as some sort of investment vehicle. But, as you can see from the chart, nationally prices soared by about 55% between 1995 and 2005. My home supposedly doubled in value over 10 years. I was ecstatic when I was eventually able to sell my townhouse in 2004 for $134k. I felt so smart, until I saw a notice in the paper one year later showing my old townhouse had been sold again for $176k. Who knew there were so many greater fools.

This was utterly ridiculous, as home prices over the last 100 years have gone up at the rate of inflation. Robert Shiller and a few other rational thinking people called it a bubble. They were scorned and ridiculed by the whores at the NAR and the bimbo cheerleaders on CNBC. Something smelled rotten in the state of housing. We now know who was responsible. Greenspan and Bernanke were at least 75% responsible for the housing bubble and its eventual implosion, which essentially destroyed our economic system. They purposely kept interest rates at obscenely low levels, encouraging every Tom, Dick and Julio to buy a home with a negative amortization, no doc, nothing down, adjustable rate mortgage, so they could live the American dream of being in debt up to their eyeballs.

Greenspan and Bernanke were also responsible for regulating the Wall Street banks. They allowed them to leverage themselves 30 to 1. They allowed them to create fraudulent high risk mortgage products. They looked the other way as Wall Street sliced and diced these guaranteed to default mortgages into AAA rated derivatives that were then spread throughout the global financial system like ticking time bombs. As home prices rose three standard deviations above the long term average, these Ivy League educated geniuses cheered it all on. Bernanke saw no bubble, just as it was bursting. He saw no mal-investment or systematic risk from this orgy of greed and fraud. And then it all blew up in our faces, while the perpetrators walked away unscathed to pillage and rape once more.

And now we come to present day and something really smells fishy again. Home prices crashed by 40% between 2005 and 2012, putting prices back to 1978 on an inflation adjusted basis. All of the bubble gains were wiped out in the blink of an eye. Bernanke and his Wall Street owners had a real problem with this development. Wall Street banks had/have billions in toxic mortgages on their books and only accounting fraud by not having to mark them to market has kept these banks from having to declare bankruptcy. Bernanke, Geithner, and the Wall Street banks hatched their master plan to save themselves at the expense of young people in 2011/2012.

We know for a fact that real median household income is still 7% below 2007 levels and sits at the same level as 1989. We know for a fact that wages have been stagnant since 2007. We know for a fact GDP has barely broken 2% since 2009. We know for a fact the price of healthcare, food, energy, tuition, rent, and a myriad of other daily living expenses are dramatically higher since 2009. We know mortgage originations are at 1997 levels. We know housing starts are 60% below the 2005 highs and at levels seen during the 1991 and 1981 recessions. Existing home sales are 30% below the 2005 high, only up 10% from 2012 levels, and sitting at levels reached in 1999 before the boom.

A critical thinking person might wonder how median single family home prices could possibly skyrocket by 37% in the last three years when household incomes are falling, living expenses rising, and the number of houses being sold are at recessionary levels. The stinking rotting fish again sits in the hallways of the Eccles Building in Washington D.C. Janet “Yellowfish” Yellen has inherited the bubble blowing machine from Ben “Blowfish” Bernanke and has continued to inflate a new housing bubble, because one housing bubble just isn’t enough.

There is nothing free market about the 37% increase in home prices. It has absolutely nothing to do with supply and demand. It has nothing to do with normal families looking for a home. It has everything to do with the Federal Reserve’s 0% interest rates, the $3.5 trillion of QE injected into the economic gambling system, Wall Street banks withholding foreclosures from the market, hedge funds buying up tens of thousands of foreclosed homes and renting them out to the former middle class, Fannie and Freddie guaranteeing 70% of all sales, the government encouraging 3.5% subprime loans again, Chinese and Russian billionaires parking their ill gotten wealth in US real estate, and flippers reappearing in the same old places (Las Vegas, Phoenix, Florida, California).

The Federal Reserve created the last housing bubble and they’ve created the new housing bubble, along with stock and bond bubbles, with their easy money policies designed to enrich their Wall Street owners and the parasites who feed off the financial industry. Their entire plan smells to high heaven. They have thrown young people and most of the middle class overboard, while the bankers, billionaires, politicians, and connected cronies party like it was 2005 on their $250 million yachts.

Now what? The Fed says they are going to raise rates. The QE spigot has been turned off. The hedge funds are selling their buy and rent hovel investments, cash buyers are dwindling, the flippers who appeared in 2005 are back, Boomers are looking to sell and downsize, young people are already in debt up to their eyeballs thanks to the government doling out student loans like candy, the number of full-time good paying jobs continue to dwindle, and the rigged 37% price increase has priced millions of people out of the market.

The good news is the Wall Street banks have inflated their balance sheets and celebrated by giving themselves $20 billion in bonuses for a job well done. If mortgage rates rise to 4% or God forbid 5%, the entire housing complex would implode faster than a blowfish out of water. If you’ve bought in the last two years you will be underwater sleeping with the fishes like Luca Brasi in the not too distant future.

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Took Red Pill's picture

Yellen smells like tuna

two hoots's picture

The smell is gone, along with the flies. All that is left are the bones. That too will be crushed.

Richard Chesler's picture

What did the blind man say on his way by the fish market?

Good morning Mr. Yellen!

 

bdc63's picture

The FED works for the banks.

The FED will always take actions that are in the best interest of the banks.

Any benefits to the american public is unintended happenstance.

Any negative impacts on the american public is blamed on the policies of the political party not currently in power.

Wash. Rinse. Repeat.

 

usednabused's picture

Whats that you smell? Well if it isn't her feet, it has to be her pussy. Fuckin phewwww Yellen

VinceFostersGhost's picture

 

 

Oh yeah, let's go double digit interest rates on trillion of dollars of debt.

 

Really screw ourselves.

 

Yeah, that's the ticket.

KnuckleDragger-X's picture

We're already royally screwed, we'd just speed up the process. Personally, I want to get it over with......

stoneworker's picture

Yeah you are right they are not going to screw themselves. Which is why imho all that this article do is provide evidence to the theory that they will not raise interest rates by any significant amount any time soon....and not in an election year either.

New_Meat's picture

bdc:

"The FED works for the banks."

Actually The FED IS da banks.

- Ned

chokeNpuke's picture

Looks like Yeelen gave you, your first -1

chokeNpuke's picture

Looks like Yeelen gave you, your first -1

junction's picture

Everything is ready to implode, except the World Trade Center buildings, which the Saudis and their USA "slaves" rubblelized in 2001.  The earthquake today east of Tokyo was first classified as 8.5, now it is a magnitude 7.8.  Yesterday, California got wrecked in the movie "San Andreas."  Monday should be a peak day for bad news if the past week is any indication.  400 point drop in the Dow, maybe?  Anything is possible in the twilight zone world we live in now.

--- 

The US Geological Survey said the 7.8-magnitude earthquake was centred 874km (543 miles) from the Japanese capital, at a depth of almost 700km.

It struck at 18:30 local time (11:30 GMT). Buildings in the capital swayed for almost a minute as the quake built in intensity, AFP news agency says.

 
failure to perform's picture

All kinds of good times ahead. How they can downgrade it thar much just leaves me scratching my head. There is going to be another corresponding release soon with that kind of depth.

Dead Man Walking's picture

i think the first readings were manually calculated by humans-the revised number was computer driven.

MSimon's picture

700km depth? That is about 420 miles. Very deep - as those things go.

Adahy's picture

Is there anything solid enough to generate a quake at that depth?  The Russian borehole was only like 7 1/2 miles and it became too elastic to even drill further because of the heat.  How could something fluid enough to seal a borehole as fast as it is drilled, build up enough rigid friction to transfer to the surface like that in a small area?  Especially from 420 friggin' miles...

Anyone with knowledge of geology want to chime in here, surely there is some aspect that I am not aware of right?

SubjectivObject's picture

It's amazing what a missing decimal point will cause people to do, to say.

doctor10's picture

Local, state and Fed.gov have trashed American business so badly that since 1995, the only remaining collateral underpinning the mountain of debt is real estate. The title-trashing that occurred in the mid-2000's as part of the securitization process instigated by WallSt to pump the balloon higher, has in reality trashed many property's for decades until their title provenance gets sorted out again at a local level.

 The debt balloon breaks when finally real estate has to be "priced to reality'

It wil be a double-whammy then, because the international derivative house of cards will detonate simultaneously with the domestic muni-bond market as property tax revenues will disappear.

depending upon how Fed.gov decides it will respond will then determine whether a modern multi-generational "dark-ages" can be avoided.

 

 

SimplePrinciple's picture

Most cities can maintain their property tax revenues by upping the rates.  It would be sold as fair, taking from the rich etc.  It is a nasty way to go because it all immediately gets capitalized into home values, leaving the owners no easy escape.

Billy the Poet's picture

You can't get blood from a stone. Maybe some lead.

post turtle saver's picture

"... as property tax revenues will disappear."

this, This, THIS, a thousand times this... politics are local and that statement is the greatest fear the local bureaucrats have... it's also why home values have to be jacked to the moon in spite of any market forces indicating the contrary, because if valuations fall the property tax revenues fall with them... now, we can't have that can we? that means the feather bed that "education administrators" etc. have set up for themselves will disappear, and then what will happen? who will think of the children? how will police and fire dept. employees retire at 55 with full income pensions? oh, the humanity!

the problem is taxes are too high to allow recovery to happen, but they're not high enough to meet all the obligations that have been made... well, we get to see which force wins out it would seem... it's not pretty no matter which way you look at it...

FredFlintstone's picture

Yes, another sad thing is that the federal government taxes and spends more than the state and the state more than local governments. This should be inverted with local government at the top and the federal government at the bottom of the tax/spend scheme.

Billy the Poet's picture

In a civilized world the individual is the sole arbiter of his own actions and he allies himself with others according to his own needs.

Clarabell's picture

That's the way things are right now - for the oligarchs.

post turtle saver's picture

someone recently posted an excellent observation regarding voting with your feet... I'm betting info like this will help people know where to point their toes...

http://taxfoundation.org/article/annual-state-local-tax-burden-ranking-f...

Pie rre's picture

In Seattle we have a system where if the value of the property goes down the tax % goes up.

post turtle saver's picture

yep... see, incoming revenue can never go down, it must always be maintained or preferably increased... those pension funds always have to make 8% YoY too, for that matter... can never have a loss...

"fuck you, pay me"... sounds familiar...

RichardParker's picture

Local governments will start cutting costs by turning off ALL of the street lights and cutting funding/hours for local libraries.  Pensions as well as DHS grants for local police to purchase/train on military style hardware will be the LAST things to be cut.

DHS budget was something like 56 billion dollars a year back in 2010.  You could cut $11,000 checks to 5 million people with that and still have money left over.  Too bad the "terrorists" hate us for our freedom.  (Sarc)

 

LooseLee's picture

...and that's when we see politicians and Wall St. bankers hanging from lampposts at every intersection across the country! What a movie that will be!

This is it's picture

I love that smell.

Now let me get some bread to go along with it...

Vincent Vega's picture

Ooooh that smell
Can't ya smell that smell
Ooooh that smell
The smell of death that surrounds you.

Debt-Is-Not-Money's picture

"Yellen smells like tuna"

Yellen-Fin tuna?

Honey Bun's picture

My last pay check was $9500 working 12 hours a week online. My sisters friend has been averaging 15k for months now and she works about 20 hours a week. I can't believe how easy it was once I tried it out. This is what I do... http://tinyurl.com/kmwz6ln

Oh regional Indian's picture

Live in a Yurt.

Or a dome.

At least round out your home.

Make some walls soft like a moroccan tent...

Play...solid homes LOCK us.

Guitar UNLOCKED ;-) In a over-tonic, harmonic creating dome of rock....

https://www.youtube.com/watch?v=zYhFoIWaR4k

813kml's picture

I have thought about yurts, simple and effective.  The only problem is security although I suppose one could get some guard dogs or trained cobras.

Americans would also need a few storage yurts for their collections of Beanie Babies and pink flamingos.

Oh regional Indian's picture

I think they'll be called Garage Yurts or Expansion Yurts...that is a funny visual :-)

When the dot was CONNING at it's peak and I was wealthy-ish by my own standards, I went to look at yurt on the wind-blown plains of New Mexico. Right off the Rio Grande...frigging breathtaking and scary all at once.

They lady selling had three huge dogs (a couple of Great Danes and a Rottie)...

$25,000, 30 foot, double wall, fully functioning. I was so tempted. My friends raised and trained Spanish Mustangs nearby. 

Interesting turn that I looked at seriously and went back to the valley of Con, not -ready or not called, not sure!

Professorlocknload's picture

Sounds like that country out around Taos. A bit haywire out there, but beautiful scenery when one looks away from the Yurts and makeshift dugouts. https://m.youtube.com/watch?v=H8j8C9zrA_I

Oh regional Indian's picture

Yup, that is right wehre it was, near Taos. ANd staggering views. The Rio Grande Gorge was a mile east of the Yurt....

And apologies for broken youtube link above...

Fresh link:

Guitar, differently...

https://youtu.be/lk1TSBW_368

813kml's picture

Hey ORI, off topic but I have a friend near Bangalore that you might be interested in befriending.  He has a master's in EE and is working at a renewable energy startup, common pursuits and he put in his time at the US salt mines as well.

I will email his details if you're interested.

Oh regional Indian's picture

Sure thing 813,  sounds interesting. I'll take that introduction gladly. Appreciate the offer.

I'm sure you'll give him due warning of what to expect? ;-)

813kml's picture

Details sent to email in your profile.

Nostradumbass's picture

A yurt is a consideration for my wife and I. Placing a shipping container on the property for security would be an option too. 

Oh regional Indian's picture

Both excellent considerations.

In case anyone is interested clif high at halfpasthuman.com is selling two brand new Pacific Yurts.....

JustObserving's picture

The Fed says they are going to raise rates.

Not one in a billion chance.  The Fed routinely lies to keep dollar strong and to attack gold and silver.

US debt and unfunded liabilities are $1,400,000 per taxpayer and rising at $70,000 per year.  When you have a 1 cent aspirin costing $20 and $1 bag of saline water billed at $800 in your hospitals, your Medicare unfunded liabilities are sky-high.

There is no chance that Fed will ever increase rates.  Look for NIRP in the land of the free even as inflation accelerates especially in food.

 

Economist Laurence Kotlikoff: U.S. $222 Trillion in Debt

http://www.realclearpolicy.com/blog/2012/12/01/economist_laurence_kotlik...

That $222 trillion in 2012 is now over $250 trillion - that works out to be over $2,000,000 each over the 122 million taxpayers in USA.


nmewn's picture

I think its about time to start building the gallows for all those learned Keynesian economists who screamed "Just print! We can just inflate the debt away!!!"

Don't you? ;-)