Real estate

The US Federal Reserve orchestrated an artificial boom from 2001 to 2007 through artificially low interest rates and has resumed doing so once again. Entrepreneurs operating under faulty market signals created by the Federal Reserve malinvested hundreds of billions of dollars into capital intensive projects primarily in the housing sector. We paid for our boom with millions of destroyed jobs, wasted labor, and wasted resources. The Chinese Central Bank learned nothing from the Fed’s catastrophic experiment. They will reap the same rewards.

Today marks a “major change in trend of monumental proportions," according to Martin Armstrong. The government will start to lose control and the lurking monster that is excess debt will rear its head. Today is the start of the "real" sovereign debt crisis - "this concentration of confidence in government marks the peak - from here on out, this will not be a video game - this is real."

According to the Fed, there is about $60 trillion of US Dollar credit or claims for US dollars. Also according to the Fed, there are about $12 trillion US dollars.  So, the data show plainly there are five times as many claims for US dollars as US dollars in existence. Does this matter to investors? Well, yes, it matters a lot.

Hedge fund manager looks under the hood of the current oil price collapse

Bill Richardson could teach Donald Trump something about the art of the deal. He has done a lot of them. At present Richardson sees one of his deals in jeopardy, and he was in Washington last week to raise the alarm, meeting privately with former colleagues and appearing at a press conference at the National Press Club. The deal in jeopardy involves a commitment he made, when he was secretary of Energy in the Clinton administration, with the Russians to dispose of weapons-grade plutonium, the long-lived ingredient in nuclear weapons.

"We are seeing more globalization as Southern California has become a destination for international buyers," said Mark Hughes, chief operating officer with First Team Real Estate, covering the Southern California market. "Eighty percent of new construction in Irvine last year was sold to Chinese buyers. International buyers are driving home prices up and sometimes out of reach for many local residents."

We know that the corporate credit bubble has been highly disturbed, but the action in mREIT’s these past few days more than suggests that risk perceptions systemically are being affected. That all ties back to funding considerations, as the collapse in REM may be investors selling ahead of liquidity problems that are still building and expanding. In other words, there may be a growing sense (not unlike inflation breakevens) that the corporate pricing problems are going to break out in short order beyond just junk (and beyond what already has).

This is a damn shame. You can't be upset if your banker calls you a muppet if you hand him the marrionette strings... The tools to cut the strings are just around the corner. Let's see if regulators do the right thing, or if will they stilfe innovation to protect status quo.

It takes ignorance on an almost unbelievable level to try to claim that “nothing is happening” in the financial world right now.

What worked in the post-global financial meltdown era of 2008-2014 will not work the same magic in the next seven years.

This system is pure insanity, as are its prices... it wouldn’t bother us if the price of gold went negative, just like propane in Alberta (after all, we're not trading paper currency for gold, just to trade it back for more paper currency if the 'price' goes up). The idea behind buying gold is to swap paper money for something real. Banks can rig its 'price' all they want; gold’s true value comes from its function as a long-term form of savings and a hedge against a broken financial system. And the more ridiculous the system gets, the more valuable it becomes.

When you tell people in self denial the market could drop 40% in a few months, they think you are crazy. They declare this could never happen. They would get out of the market before it would fall vertically. Their memories are conveniently short as their normalcy bias and cognitive dissonance blind them to what happened over three months in 2008/2009. We wonder how many willfully ignorant investors can handle a 50% to 70% haircut in their 401k, especially if they are over 50 years old. We wonder how much angrier the populace will become when the current recession results in more job losses, bankruptcies and revelations of Wall Street malfeasance. Beware of the bear.

The solution is not to let politicians redistribute the wealth from the rich to the poor. Crony capitalism must be replaced by true free market capitalism, practiced with integrity, fairness, principled conduct, intelligence, and high moral standards. Profits generated by corporations are not evil, but seeking profits at any cost to society is reckless, shortsighted and immoral. Capitalism without capital is destined for failure. When corporate CEOs, Wall Street bankers, and shady billionaires exercise undue influence over the financial, political and judicial systems, their short-term quarterly profit mindset and voracious appetite for riches override the best interests of the people and create a sick, warped, repressive society. Today our system is in the grasp of psychopaths whose hubris and myopic focus on enriching themselves will ultimately be their downfall.

• Headline winner: "Read Beyond Massive Job-Cuts Headlines: Labor Market Is Fine" (BBG)
• And speaking of lies: The More Yellen Talks Up Inflation, the Less Traders Believe Her (BBG)
• How Some Investors Get Special Access to Companies (WSJ)
• Victorious Catalan separatists claim mandate to break with Spain (Reuters)
• Russia seizes initiative in Syria (Reuters)
• Former VW boss Winterkorn investigated for fraud (Reuters)
• Investors Pull Back From Junk Bonds (WSJ)

Are some Chinese banks ramping up their exposure to shadow conduits on the way to obscuring massive amounts of credit risk? Moody's says yes...