Real estate

Asset price inflation, a disease whose source always lies in monetary disorder, is not a new affliction. It was virtually inevitable that the present wild experimentation by the Federal Reserve - joined by the Bank of Japan and ECB - would produce a severe outbreak. And indications from the markets are that the disease is in a late phase, though still short of the final deadly stage characterized by pervasive falls in asset markets, sometimes financial panic, and the onset of recession.

For a few days, Fox News didn't know how to handle Donald Trump's "blood" comments about one of the network's favorite anchors. Then someone woke up and realized that if you're Fox, being boycotted by the GOP frontrunner simply isn't tenable.

The overnight market has been a repeat of yesterday's action, when following China's repeat 1.6% devaluation of the CNY (which was to be expected since the PBOC made it quite clear the fixing would be based off the market value, a value which continues plunging), the second biggest in history following Monday's 1.9% plunge, traders appeared stunned having believed the PBOC's lies that the devaluation was a one-off and as a result the E-Mini tumbled overnight, and is now 30 points lower from last night's PBOC fixing announcement, trading at around 2058, and far below the "magical" 200-DMA support line, which has now been solidly breached.

On Monday, we got some color on Hillary Clinton’s $350 billion plan to make college more affordable. Students and former students across the country owe more than $1.2 trillion in college loans, and as Bill Ackman so eloquently put it earlier this year, "there’s no way they’re going to pay it back." Now, one Boston-based hedge fund is building a short position on what it says is "runaway inflation in post-secondary education."

As we first warned in March, and as became abundantly clear over the weekend Beijing had no choice but to join the global currency wars, as the yuan's dollar peg will ultimately prove to be too painful going forward. And sure enough this evening the PBOC weakens the Yuan fix by the most on record. 

• China Rattles Markets With Yuan Devaluation (BBG)
• China Move Sparks Wave of Yuan Selling (WSJ)
• China's devaluation raises currency war fear as Greece strikes deal (Reuters)
• Protests return to Ferguson streets, state of emergency declared (Reuters)
• Heavily armed 'Oath Keepers' inject new unease to riot-hit Ferguson (Reuters)
• Greece Secures Bailout Deal After All-Night Talks in Athens (BBG)
• U.S. Identifies Insider Trading Ring With Ukraine Hackers (BBG)

Housing is a very important component of any economy, and often an indicator of the well-being of a society.  In the US, housing has been deteriorating since the sub-prime crisis.  The changes are not only cyclical but structural.  Past experiences need to yield to an objective analysis of where we are heading.  Here is the way we see it...

When China's tinderbox economy implodes, who will be left to bid up the world's surplus commodities and real estate?

It began in Dec 2008. To understand it, it is necessary to understand two principles. The first is that gold is money and the dollar is credit (which is currently worth 28.4mg gold). For the second, we emphasize it's not just price, but separate bid and ask prices.

"The future is unknown and we are not dealing with markets that are free markets anymore...now we have government interventions everywhere. [But] in the last say twelve months, I have observed an increasing number of academics who are questioning monetary policies. That's why I think they will take the gold away and go back to some gold standard by revaluing the gold say from now $1000/oz to say $10,000 dollars. An individual should definitely own some physical gold. The bigger question is where should he store it? because... the failure of monetary policies will not be admitted by the professors that are at central banks, they will then go and blame someone else for it and then an easy target would be to blame it on people that own physical gold because - they can argue - well these are the ones that do take money out of circulation and then the velocity of money goes down - we have to take it away from them... That has happened in 1933 in the US."

A decline in the desire to own products conferring and announcing one’s high social status happens close to, or hand in hand with fairly severe economic downturns. People no longer want to stand out as rich when times are getting tough. This effect can be observed in numerous areas, even in the colors and shapes people choose when buying cars.

If Tesla doesn't start to get its act together with respect to delivering new products and getting their service back into its former tip-top shape, I suspect the symbol TSLA will make a long, tortured trip back down to the double digits.

After 30 years of torrid expansion, perhaps the single most consequential factor in China’s economy is how much of it is a “black box”: a system with visible inputs and outputs whose internal workings are opaque. China’s recorded history stretches back thousands of years, but in terms of applicable financial and economic parallels to the current economy, there is no precedent. China’s leadership is truly in uncharted waters. This in itself heightens the risk of miscalculation and basing policies on faulty premises.

"But an increase in the quantity of money and fiduciary media will not enrich the world... Expansion of circulation credit does lead to a boom at first, it is true, but sooner or later this boom is bound to crash and bring about a new depression. Only apparent and temporary relief can be won by tricks of banking and currency. In the long run they must lead to an all the more profound catastrophe."

"I’ve just slogged through all ninety-two pages of Donald Trump’s financial disclosure submission to the Federal Election Commission, and I can’t make heads or tails of it. I cannot tell how much Trump is worth, if anything. His empire, if he has one, is as mysterious as his haircut, and as impervious as his skyscraper in Chicago - a gigantic phallic mirror named after himself."