Posts Tagged ‘real estate bubble’

FLECKENSTEIN: THE STOCK MARKET HAS LOST ITS DISCOUNTING MECHANISM

FLECKENSTEIN: THE STOCK MARKET HAS LOST ITS DISCOUNTING MECHANISM

Courtesy of The Pragmatic Capitalist 

Very interesting thoughts here from Bill Fleckenstein.  Fleckenstein argues that the market has lost its discounting mechanism. I am not so sure I agree that it ever really had a discounting mechanism.

To me the market is a non-linear dynamical system which is susceptible to substantial chaos. The market is very inefficient in the short-term due to the inefficiency of its participants.  The idea of the efficient market and the market as an efficient discounting mechanism has been sold hook line and sinker to the public. We are taught that equities can’t go down over the long-term, that a PE ratio of 10 is “historically cheap”, that you can’t outperform the market, yet none of this is founded in solid proof, but rather a very short history of data that is currently available and adds up to nothing more than theory (a weak one at that).   Fleckenstein’s comments are well worth a listen:

Source: Bloomberg TV


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Why the “Nascent Recovery” Won’t Last

Why the "Nascent Recovery" Won’t Last

Democratic Donkeys Blowing Financial Bubbles

Courtesy of Charles Hugh Smith, Of Two Minds 

The "nascent recovery" continues to be nascent a year later. Why? Because it’s constructed on sand and hyped by smoke and mirrors.

The "nascent recovery" will soon be revealed as "failed" rather than "nascent." How long can "nascent" be deployed as cover for a "recovery" constructed of propaganda, manipulated statistics and "confidence-building" spin?

As my esteemed blogging colleague Mish pointed out not long ago, "nascent" continues to be the word of choice in the MSM, as if no one dares declare the "recovery" real for fear that such a claim will be easily revealed as utterly false. So to keep the spin machine intact, the "recovery" will remain "nascent" as cover for the less rosy reality.

Let’s run through the fundamental reasons the recovery is bogus, not nascent.

1. Propaganda and "confidence-building" are constantly substituted for reality. The problem, we are repeatedly told, is a "lack of confidence." Consumers’ and corporations’ accounts are bulging with idle trillions awaiting "renewed confidence" to gush back into the economy, creating millions of new jobs and trillions in new wealth.

Here is a typical example:

Forecasters optimistic about economy, job creation

How many MSM stories have you read which refer to the "162,000 jobs created last month" as evidence that the "economy is turning around? Dozens, if not hundreds. How many note that the 162,000 number is entirely bogus, boosted by temporary Census Bureau hiring and tens of thousands of fictitious "birth/death model" phantom jobs?

The spin, hype and forced good cheer is essentially unlimited. As I write, stocks are up on news that Caterpillar reported an 11% decline in revenue to $8.24 billion, a huge "miss" since analysts polled by Thomson Reuters had forecast $8.84 billion in revenue.

The "surge in profits" didn’t come from sales; it came from squeezing costs, a strategy which has some upper limit of effectiveness on goosing the bottom line.

Machinery sales surged 40% in the Asia-Pacific region, but of course no one explores the source of that "surge:" out of control spending on empty cities and luxury highrises in China. If that unprecedented real estate bubble in China ever pops-- and can any bubble continue forever?--then Cat sales will go into freefall.

That’s not "confidence building" so it goes unsaid, despite being glaringly obvious.

2. Tax/borrow and spend is alive
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Andy Xie: I’ll Tell You When Chinese Bubble Is About to Burst

Andy Xie: I’ll Tell You When Chinese Bubble Is About to Burst

Beijing Spring Real Estate Trade Fair

Courtesy of Edward Harrison at Credit Writedowns 

“My maid just asked for leave,” a friend in Beijing told me recently. “She’s rushing home to buy property. I suggested she borrow 70 percent, so she could cap the loss.”

It wasn’t the first time I had heard such a story in China. Some friends in Shanghai have told me similar ones. It seems all the housemaids are rushing into the market at the same time.

There are benefits to housekeeping for fund managers. China’s housemaids may be Asia’s answer to the shoeshine boy whose stock tips prompted Joseph Kennedy to sell his shares before the Wall Street Crash of 1929.

Another friend recently vacationed in the southern island- resort city of Sanya in Hainan province and felt compelled to visit a development sales office. Everyone she knew had bought there already. It’s either buy or be unsocial.

“You should buy two,” the sharp sales girl suggested. “In three years, the price will have doubled. You could sell one and get one free.”

How could anyone resist an offer like that?

But, before you rush out and make paid on this offer, you might want to read up on Edward Chancellor’s Ten ways to spot a bubble in China.  This is a tale recounted by Sinosceptic Andy Xie. For his part, Xie says corruption is rife in the public sector, a bad sign since Chancellor warns that "blind faith in the competence of the authorities" is a telltale sign of a bubble. In a recent post, I wrote:

James Packer's 'City Of Dreams' Casino Opens In Macau

"It’s absurd that people think the communist leaders of China are better at steering their economy than the leaders of the US have been." I think this statement may be in error.*  – Marc Faber: "Symptoms of a bubble building in China"

Yet, some comments I received suggested that the beauty of totalitarian regimes is their free hand in coercing private sector actors and banks to do its bidding.  Gosh, maybe we need more muscular forms of government. Forget about free-market democracy.

I find this line of argument facile because public sector officials have every incentive in the world to turn a blind eye to the mania, the most important of which is making their GDP growth targets. Xie points to other incentives:

When it


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CHANOS: THE CHINA BUBBLE IS ABOUT TO BURST

CHANOS: THE CHINA BUBBLE IS ABOUT TO BURST

Courtesy of The Pragmatic Capitalist

Famed short seller, Jim Chanos, has been vocal in recent weeks about his concerns in China.  He is growing increasingly concerned about the real estate bubble in China where an “unprecedented” and “staggering” bubble is being blown by the government.  Chanos says 30 billion square feet of commercial real estate are under construction – that’s a 5 foot by 5 foot cubicle for every person in China.  Although he isn’t calling for a crash, he is increasingly risk averse: 

 


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China and the U.S.: Dysfunctional Real Estate Bubble Twins

China and the U.S.: Dysfunctional Real Estate Bubble Twins  

Courtesy of Charles Hugh Smith, Of Two Minds

Snow storm hits Beijing

China and the U.S. share two central traits: a financial-command-economy and an addiction to cheap, easy money to prop up bubbles that serve the status quo.

Despite the many obvious differences between the Chinese and American systems of governance and "capitalism," there are two key similarities. We might phrase this thusly: China’s leadership has empowered specific strains of capitalism to serve the party’s socialist goals, while the American leadership has socialized the mortgage/housing/banking sectors to serve its predatory-capitalist Masters (the financial-rentier Power Elite).

One of the key threads in the Survival+ analysis is the divergence/ convergence of the interests of the Elites and general public. When the interests of the Elites and the public are roughly parallel/convergent, then prosperity--as measured by increasing income equality--tends to rise. (Or put another way: income inequality falls.)

Conversely, when income inequality between the financial Elites and the public rises, as it has in the U.S. since 1973, then prosperity becomes concentrated in the top layer of the society to the detriment of the lower 95%.

This inequality inevitably breeds social disorder, and thus the Power Elite is driven to mask the rising inequality with various simulacra of prosperity (asset bubbles, etc.).

Another trait China and the U.S. share is rising income/asset inequality. A small Elite class of each nation’s citizenry has reaped the majority of the last 30 years’ financial rewards; recall that some 2/3 of the productive assets of the U.S. are owned by the top 1% of the citizenry. While I haven’t been able to find the statistics for China, I am confident that 2/3 of China’s newfound private wealth remains in relatively few hands--undoubtedly many of Hong Kong or Taiwanese origin.

One of the key mechanisms financial Elites use to create a simulacrum of widespread prosperity is a real estate bubble. Homeownership in the U.S. is now around 67% of the households, though it is probably heading down to around 60-62% as foreclosures continue climbing.

2007 Beijing Spring Real Estate Trade Fair

The homeownership rate in China is much higher--around 85%, for the reason explained here before: citizens were deeded their homes for very modest sums in the early 1980s. (All land is owned by the government; it is only leased to private owners.)…
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Green Shoots or Greater Depression?

Green Shoots or Greater Depression?

green shoots or depression?Courtesy of Bud Conrad/David Galland, Editors, The Casey Report

While we aren’t contrarian for the sake of being contrary, more often than not that is the position in which we find ourselves. Today, with the media falling all over itself to paint a rosy outlook for the economy while simultaneously voicing encouragement to the new administration in its remake of the nation in previously unimaginable ways, it’s hard not to question our conviction that the worst is yet to come.

Could the economy really recover this quickly from the traumatic trifecta of a record real estate bubble, leviathan levels of debt, and a global credit collapse? We don’t see it as remotely possible, but yet… but yet… there for everyone to see are countless happy headlines and breathless exhortations that the worst is behind us.

So, is it Green Shoots or Greater Depression?

Getting the answer right is critical, because from it flow serious consequences to each of us. And not just in our investment portfolios but in how we organize our lives.

Looking for an evidence trail leading to the correct conclusion, Casey Chief Economist Bud Conrad once again put in very long hours digging through the data. Here’s what he uncovered, about the claims of green shoots, and what may actually be in store for the economy moving forward. 

- David Galland    

Rather than accepting the many commentaries that our economy may be improving, let’s focus for a minute on the important forces that will play out over the decade ahead,  and the minor improvements – from disastrous levels – that have given commentators such hope that the worst of our problems are behind us.

What Do the “Green Shoots” Really Look Like?

While some individual measures of economic activity appear slightly less dire than previously, it’s important to understand that most improvements are largely attributable to government intervention.

For example, at the onset of this crisis, commercial paper spreads rose to the point that this important source of corporate short-term funding had virtually shut down. Today, those spreads have returned to almost normal levels. But the bulk of this improvement is not due to a return of confidence in the economic system but rather to the Federal Reserve directly intervening in the market with several hundred billions of dollars.

And mortgage interest rates, which…
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Phil's Favorites

The Year 2020 - The Pandemic and Speculation

 

The Year 2020 – The Pandemic and Speculation

Courtesy of Howard Lindzon

It’s December and I can’t really tell if this year moved really fast or really slow.

Time seemed to stand still in March as we all locked down.

But here we are in December and the stock market is acting like we are secretly running around and spending like never before.

The year 2020 will forever be remembered for the pandemic, but I will also forever remember it for speculation.

There are all kinds of reasons for the historic speculation.

We were locked in our homes…we had Robinhood and fractional share ownership and apps that let us chat 24/7 about stock...



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Biotech/COVID-19

New DIY contact tracing app expands the fight against COVID-19, using the science of memory

 

New DIY contact tracing app expands the fight against COVID-19, using the science of memory

This app is different. Designed by psychologists, the free and anonymous web-based app can help you remember who you came in contact with. Ani Ka via Getty Images

Courtesy of Jacqueline R. Evans, Florida International University; Christian Meissner, Iowa State University; ...



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ValueWalk

Stephanie Kelton: Stop Worrying About National Deficits

By Jacob Wolinsky. Originally published at ValueWalk.

Tomorrow evening, Bernie Sanders’ economic advisor Stephanie Kelton, a leading voice behind the push to spend more on progressive priorities, is appearing in the Intelligence Squared U.S. debate on the motion “Stop Worrying About National Deficits.”

Q3 2020 hedge fund letters, conferences and more

Economic Advisor Stephanie Kelton Debates About The About National Deficits

She's arguing for the motion alongside James Galbraith, who was Executive Director of the Joint Economic Committee in Congress. Arguing against them are Todd Buchhol...



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Zero Hedge

Restaurants Slashed Jobs Last Month

Courtesy of ZeroHedge

By Jonathan Maze of Restaurant Business

The restaurant industry lost 17,400 jobs in November, according to new data from the U.S. Department of Labor released on Friday.

It was the first monthly decline in the number of restaurant workers since April, suggesting that a renewed virus and state shutdowns of dine-in service are taking their toll.

The data is likely to increase pressure on Congress and the president to approve a new stimulus package, one that includes specific aid to independent restaurants that have been devastated by the pandemic.

The industry had been adding jobs at a rapid clip since May, as restaurants reopened dining rooms and expanded while consumers grew more comfortable with dining out. But it remains far below its pre-pande...



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Kimble Charting Solutions

Is The US Dollar About To Reach A Melting Point?

Courtesy of Chris Kimble

It’s been 20 years since the last major peak in the US Dollar. Could the greenback’s latest turn lower confirm another peak?

Today’s chart takes a macro view of the US Dollar Index and highlights the long-term down-trend at each point (1). As you can see, the buck is on a topsy turvy ride, bouncing up and down within this down-trend.

The latest bottom formed after the financial crisis and has seen the US Dollar trade within a 9 year up-trend channel marked by each (2). This gave bulls some confidence that the US Dollar may have formed a long-term bottomȂ...



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Politics

Ignoring Warnings His Election Lies Could Get People Killed, Trump Posts 46-Minute Rant Full of 'Unhinged' Falsehoods

 

Ignoring Warnings His Election Lies Could Get People Killed, Trump Posts 46-Minute Rant Full of 'Unhinged' Falsehoods

"Georgia elections director yesterday: Trump's rhetoric is going to get people killed. Trump today: here's 46 minutes of unhinged conspiracy theories."

Courtesy of Jake Johnson, Common Dreams

Activists march through the city of Detroit on November 7, 2020 to denounce President Donald Trump's false claims of voter fraud. (Photo: Adam J. Dewey/NurPhoto via Getty Images)

Just days...



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Chart School

Gold Chart Review

Courtesy of Read the Ticker

Gold swing trade is due, lets review some charts to see if it is a viable move.

The seasonal period of gold is now upon us, gold should advance for the next 3 months.

Gold Gann Angle Chart ...



Gold Channel Chart .. close up!



 

Gold Channel Chart
 


Changes in the world is the source of all market moves, to catch and ride the change we believe a combination of Gann Ang...



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Digital Currencies

Five Reasons Why Bitcoin is Going Up

 

Five Reasons Why Bitcoin is Going Up

Courtesy of 

Call it the “Respectability Rally”…

A few reasons for Bitcoin’s return to the record highs. It’s about $18,500 as of this writing, matching the previous highs from 2017’s original explosion.

Reason one: It’s going up because it’s going up. Don’t scoff, this is the reason most things in the markets happen and then the explanations are called for afterwards. I’m in financial television, I have literally watched this process occur in real-time. The more something moves in a given direction, the more peop...



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Mapping The Market

COVID-19 Forces More Than Half of Asset Management Firms to Accelerate Adoption of Digital Marketing Technology

By Jacob Wolinsky. Originally published at ValueWalk.

There is no doubt that the use of technology to support client engagement initiatives brings both opportunities and threats but this has been brought into sharp focus this year with the COVID-19 pandemic.

The crisis has brought to the fore the need for firms to enable flexibility in client engagement – the expectation that providers will communicate to clients on their terms, at their speed and frequency and on their preferred channels, is now a given. This is even more critical when clients are experiencing unparalleled anxiety from both market conditions and their own personal circumstances.

...

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The Technical Traders

Adaptive Fibonacci Price Modeling System Suggests Market Peak May Be Near

Courtesy of Technical Traders

Our Adaptive Fibonacci Price Modeling system is suggesting a moderate price peak may be already setting up in the NASDAQ while the Dow Jones, S&P500, and Transportation Index continue to rally beyond the projected Fibonacci Price Expansion Levels.  This indicates that capital may be shifting away from the already lofty Technology sector and into Basic Materials, Financials, Energy, Consumer Staples, Utilities, as well as other sectors.

This type of a structural market shift indicates a move away from speculation and towards Blue Chip returns. It suggests traders and investors are expecting the US consumer to come back strong (or at least hold up the market at...



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Lee's Free Thinking

Texas, Florida, Arizona, Georgia - The Branch COVIDIANS Are Still Burning Down the House

 

Texas, Florida, Arizona, Georgia – The Branch COVIDIANS Are Still Burning Down the House

Courtesy of Lee Adler, WallStreetExaminer 

The numbers of new cases in some of the hardest hit COVID19 states have started to plateau, or even decline, over the past few days. A few pundits have noted it and concluded that it was a hopeful sign. 

Is it real or is something else going on? Like a restriction in the numbers of tests, or simply the inability to test enough, or are some people simply giving up on getting tested? Because as we all know from our dear leader, the less testing, the less...



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Insider Scoop

Economic Data Scheduled For Friday

Courtesy of Benzinga

  • Data on nonfarm payrolls and unemployment rate for March will be released at 8:30 a.m. ET.
  • US Services Purchasing Managers' Index for March is scheduled for release at 9:45 a.m. ET.
  • The ISM's non-manufacturing index for March will be released at 10:00 a.m. ET.
  • The Baker Hughes North American rig count report for the latest week is scheduled for release at 1:00 p.m. ET.
...

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Promotions

Free, Live Webinar on Stocks, Options and Trading Strategies

TODAY's LIVE webinar on stocks, options and trading strategy is open to all!

Feb. 26, 1pm EST

Click HERE to join the PSW weekly webinar at 1 pm EST.

Phil will discuss positions, COVID-19, market volatility -- the selloff -- and more! 

This week, we also have a special presentation from Mike Anton of TradeExchange.com. It's a new service that we're excited to be a part of! 

Mike will show off the TradeExchange's new platform which you can try for free.  

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About Phil:

Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...

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