Today’s 5 Minute Podcast Covers The Following Exciting Topics.
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Eurasia, which advises businesses on political and economic concerns, released its annual list of potential risks to global economic stability in 2014 — and impending financial doom is not among them.
“That’s over,” the Eurasia analysts wrote in the report. “In 2014, big-picture economics are stable if not yet comforting.”
Europe has emerged from recession and Japan’s economy is shaking off decades of stagnation. The recovery in the United States is expected to accelerate this year even as the Federal Reserve gradually reduces its stimulus policies. China’s new government is implementing reforms to make the world’s second-largest economy more stable.
The relatively calm outlook comes after a period of heightened financial risks. Investors and economists have been on alert for another meltdown since 2008. But none of the dire predictions came to pass. The euro is still around. China has not crash landed. And the U.S. didn’t fall off the fiscal cliff.
Read The Rest Of The Article Here
I am sure you have heard of the “Calm Before The Storm”. The report above pertains to exactly that. Just because the “storm” hasn’t arrived yet, doesn’t mean that it never will. Let’s take a look at the reality.
Has Europe emerged from a recession?
Is there any evidence to support this statement? Of course not. As far as I am concerned only German economy is doing good. The rest of EU members are not doing so well. While the Socialist Party in France is working overtime trying to destroy their economy, countries like Spain, Italy and Greece are going through downright depression with 20%+ unemployment and an insolvent banking systems. Maybe the EU emerged from a recession right into a depression.
Japan’s economy is shaking off decades of stagnation?
It might seem that way at the initial glace, yet the reality is different. The perceived improvement in Japan has nothing to do with real economy or any sort or real economic growth and everything to do with currency debasement and massive credit/stimulus expansion. As always, short term gains will eventually turn into a long term pain.
As for the US and China, all of the fundamental issues remain there. Just because the calendar year turned 2014 doesn’t mean that all structural issues got better or vanished into thin air. If anything, things are getting worst. The only reason things haven’t blown up, just yet, is because both Governments pumped a huge amount of liquidity into the system to paper over issues. Eventually, this will force the markets to correct themselves with greater intensity in the future.
Bottom line is, the report above is garbage. Don’t believe it for a second. This is the calm before what might be “The Perfect Storm”.
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What You Ought To Know About The Upcoming Economic Storm
Yahoo Finance Writes: 4 Reasons You Shouldn’t Worry Over Rising Mortgage Rate
An amazing puff piece from the Real Estate Industry. Please see my comments below. Also, please note that I have called for the Real Estate top back in early October of 2013. You can see it here. I Am Calling For A Real Estate Top Here. I am still sticking to that forecast. The market is already rolling over, although, a little bit slower.
If buying a new home is on your list of goals in the New Year, don’t let talk of rising mortgage rates derail your plans just yet.
As the economy recovers, the Federal Reserve tapers, and home values rise, experts predict we are well on our way to seeing mortgage rates crack 5% in late 2014.
Rates for a 30-year fixed-rate mortgages already hit 4.69% this week, up from 4.63% the week prior, according Bankrate.com. In May, the 30-year rate was 3.52%. Fifteen-year fixed mortgages were up as well, from 3.70% last week to 3.73% this week.
But rising rates don’t necessarily spell doom for house hunters. Here are four big reasons not to worry.
1. Mortgage rates are getting higher but not drastically so.
“I don’t think there’s any reason to panic,” says Keith Gumbinger, vice president of mortgage rate tracker HSH.com. “Buying a home will be somewhat more expensive, but I don’t think it’s going to be a matter of ‘Oh, I’m losing so much ground that I have to go out and buy [a home] right now.’”
Historical context is important. A little over a decade ago, the lowest average rate for a 30-year fixed rate mortgage was around 5.24%, Gumbinger notes. It’s easy to forget that when rates fell so dramatically following the housing crash.
“Even if we do start to see 5% rates appearing in 2014, rates will absolutely remain favorable [to buyers],” he says.
When someone in the industry says “I don’t think there’s any reason to panic”, you MUST panic. While in historic terms rates are still low they are still up over 100% in the last 1.5 years. That is a huge move within a short period of time and it will take its toll. It is already happening. Don’t let anyone fool you that it doesn’t matter.
2. Housing inventory is on the rise.
Nationwide home values have soared over the last year, with year-over-year gains of 13.6%, according to the Dec. 31 S&P/Case-Shiller Home Price Indices. That marks a seven-year high and the 17th consecutive monthly increase.
But new-home construction has picked up in the last few months and is expected to ramp up more, which should help lift supply. New housing starts were up 30% year-over-year in November 2013, according to the Commerce Department. On top of that, more homeowners will likely sell this year to capitalize on rising home values, contributing to an inventory boost.
I am not sure how this positive for the housing market, but they are absolutely correct. There is too much inventory out there. Too much hidden inventory for that matter, still sitting on bank balance sheets. Eventually all of that will come to the market and drive the prices lower.
3. There will be less competition from investors.
Real estate investors were notoriously greedy in the wake of the housing crash, snatching up cheap properties and elbowing out individual home buyers before they knew what hit them. But Jed Kolko, chief economist for Trulia, predicts that competition from investors will die down now that the market is recovering.
Last year “was the year of the investor, but 2014 will be the year of the repeat home buyer,” he says.“Investors buy less as prices rise. Higher prices mean that the return on investment falls, and there’s less room for future price appreciation.”
In other words, the author wants retail buyers to come in and purchase inventory from investors before market declines. This occurs in the stock market all the time. Again, I am not sure how this is a positive for the real estate sector. It predicts its inevitable decline. Don’t be that FOOL buying from investors at or near the top.
4. Fed tapering isn’t all bad news.
All eyes are now on Janet Yellen, the incoming Federal Reserve chairman who will be charged with phasing out the bond-buying program that has helped to steady interest rates over the last five years. It will be a delicate process. If Yellen moves too quickly, investors could get spooked and send mortgage rates soaring, notes Bloomberg’s Kathleen Howley. If she moves too slowly, rates could fall and the market could get flooded with home buyers.
But there’s a silver lining, Gumbinger points out: “Mortgage rates have started to firm up again not strictly because the Fed has started to taper but because the economy has gotten better,” he says. The fact that they’re considering winding down quantitative easing is a sign that the sluggish economic recovery is at least making some headway.
You joking, right? The economy has NOT gotten better. It has gotten sicker. A distinction must be made between real economic growth and a “drunken” credit driven speculative party. What we have seen over the last few years is the later. When it comes to an end in 2014 (based on my timing work) and the bear market resumes, this will be made very clear. Again, this is a horrible position to be in for the real estate market. As I have said many times before, the 3rd leg of the real estate decline will be a severe one. Position yourself now.
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4 Scary Reasons You Should Run Away From Real Estate…..Right Now!
First it won at “Jeopardy.” Now it might threaten millions of low-wage jobs. At least, that seems to be the implication of a Bloomberg News article on International Business Machines Corp.’s Watson supercomputer.
Developers are now figuring out how to use Watson’s processing power to replicate the experience of working with an “experienced in-store salesperson” when shopping for clothes. The software would combine databases provided by retailers with customer preferences for style and fit to help people find what they’re looking for.
If it works, this technology would be a boon for everyone who prefers to buy things from the comfort of home. Right now, only a small percentage of shopping occurs online. Shipping costs could be one reason. Another is that many people are hesitant to buy things over the Internet when they can’t try them out first, especially clothing. That reticence could be overcome by these new technologies. If a computer knew your body shape and knew the dimensions of each piece of clothing, it could show you exactly how items would fit.
Read The Rest Of The Article Here
As we move deeper into the 21st century, technological changes continue to accelerate. One thing that fascinates me as an investor is what type of an impact machines (computers and robotics) will have on the future of the labor force and by default, the overall economy.
I believe both robotics and enhanced computer systems are already having a significant impact on the overall labor force. It is difficult to measure, but in many sectors of the economy improved productivity means fewer jobs. While I don’t believe it is having an impact on the overall rate of employment just yet, within a few decades things might be drastically different. Imagine a world where robotics take most (if not all) lower skill manual or blue color type of jobs at the cost of $0.5-2 an hour. What happens when enhanced computer system get so good that they start to squeeze out white color work force at the fraction of the cost. To be honest with you, I have no idea.
Many will argue that this is a normal economic shift that will create more and better jobs in other sectors of the economy. Perhaps it will, but I don’t see how. This change is very different from the industrial and the low level technology revolution that preceded it. Given expected massive worldwide population growth I don’t see where the future high paying jobs will come from.
Does that mean a lower overall standard of living? Once again, not necessarily. It might mean a better standard of living for future generations. One thing is for sure. This is a trend worth watching as it will impact our lives over the next few decades more than we can imagine.
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What You Ought To Know About Machines Taking Your Job
Bloomberg Writes: France’s ‘Culture Tax’ Could Hit YouTube and Facebook
Should YouTube subsidize le cinéma français? France’s audiovisual regulator thinks so. In a report this week, the Superior Audiovisual Council (CSA) says that video-sharing websites should be subject to a tax that helps finance the production of French films and TV shows.
The so-called culture tax, totaling more than €1.3 billion ($1.8 billion) annually, is paid by movie theaters, broadcasters, and Internet service providers in France. The CSA contends that YouTube (GOOG), French video-sharing site DailyMotion, and their ilk are effectively providing video-on-demand services, which are already subject to the tax. And to the extent Facebook (FB) and other social media sites are content providers, they should be taxed as well, the CSA says.
Separately, France is considering a tax on smartphones, tablets, and other devices as another source of revenue for cultural subsidies. A government-commissioned report, released in May, said that a sales tax of 1 percent should be imposed on electronic devices capable of accessing movies, music, and other content. The proposed tax would raise an estimated €86 million annually that would be used to finance the “cultural industries’ digital transition,” France’s Culture Ministry said at the time.
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Superior Audiovisual Council to subsidize le cinéma français. Really France? Sounds like an organizations straight out of Nazi Germany. Plus, does anyone outside of France even watch French movies anymore? Even Gérard Depardieu was chased out of France and now lives in Russia.
In the past, I have left France alone, but their recent actions are going from worse to beyond ridiculous. Just recently (I believe today) they have passed a law that would require limo drives to wait 15 minutes after picking you up before they could actually start up the vehicle and drive away. This is, of course, to appease the taxi drives and their claims of unfair competition. Now, there is a talk about taxing Google and Facebook for their video distribution platforms. How do you say “insanity” in French? Please be aware that this is just the latest in the slew of new and “crazy” laws coming out of France and their new socialist government.
Simply put, we are witnessing systematic destruction of the EU second largest economy by the French Socialist party. I will go as far as saying that France is done from the economic perspective. Its citizens should expect a much lower standard of living going forward. Let’s see how long Germany’s economic engine can sustain the rest of the economic freeloaders within the EU.
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Lunatics Are Driving France Into Economic Suffering
Huffington Post Writes: Larry Summers’ Desperate Depression-Fighting Idea May Soon Be Reality
If you think people who save money are being punished by low interest rates, wait until they have to deal with negative interest rates.
Slashing rates well below zero to make it painful not to spend money is the desperate approach to avoiding an economic depression recently endorsed by Larry Summers, President Obama’s former top economic advisor and one-time pick to run the Federal Reserve. With economic growth likely to be weak for the next infinity, the job market stubbornly awful and inflation disappearing, central bankers around the world have been toying with the idea for a while. Every day it gets closer to being a reality.
Read The Rest Of The Article Here.
Well, there you have it.
First, why are they talking about a depression? If you listen to Bernanke, Yellen and/or Obama you would believe things are great and getting better. Unemployment is down, economy is up, stock markets are surging, etc…. What the hell do they mean by “desperate approach to avoiding an economic depression.” Is Larry Summers on drugs?
Maybe the FED’s are not as stupid as I make them out to be. If that is true, that makes them liars and criminals, committing economic crimes against the American people. Technically speaking that is exactly what they are doing. Uhmmmm, moving on before I get a call from NSA……
Listen, they know what they did and they know what is coming. The only way to combat that is to continue pumping a tremendous amount of money into the economy while hoping that interest rates stay low. However, they are running out of options. Given current economic backdrop there isn’t that much more they can do. Will bringing interest rates down to zero work ?
The answer is NO. Japan has tried that for 20 years without any success. All they succeeded at is destroying their economy while trying to stimulate it. Here is the kicker….
Everyone, and I mean everyone believes that the markets behave based on what the FED does. Everyone believes that the FED’s can control and manipulate financial markets at will. That is the biggest and the most dangerous misconception everyone has. It might look that way, but they do not.
Remember 2007-09? Eventually markets will readjust on their own accord. When they do, there will be hell to pay. With or without 0% interest rates. The bear market is coming in 2014.
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Warning: Obama Admits. Another Depression Is Just Around The Corner
Moscow (AFP) – Russia’s failure to significantly change its energy-dependent economic model under President Vladimir Putin is consigning the country to potentially decades of low growth and eroding its status as a top emerging economy.
The Russian economy ministry on Thursday dramatically confirmed what was obvious to many, by downgrading its estimate of Russia’s average growth to 2030 to a paltry 2.5 percent, a far cry from over seven percent rates in the early Putin years.
“The pace of Russia’s economic growth will fall behind the global average in the forecast period,” admitted Economy Minister Alexei Ulyukayev.
This year even Russia’s official forecast puts 2013 growth at just 1.8 percent. But most worrying for the Kremlin is that the weakness cannot just be blamed on external factors but stems from domestic shortcomings.
The Russian economy faces a daunting list of troubles –- a declining population, the re-emergence of the United States as a rival energy superpower due to shale gas, and the government’s colossal spending on defense that stretches the budget.
These factors are compounded by Russia’s failure to stimulate private enterprise, reform the judicial system, improve labor productivity and turn the Russian economy into more than a lumbering energy producer.
Russia is screwed. Big time.
The only thing that kept Russia afloat over the last decade or so is high energy prices. Now that energy prices are down substantially and with no indication for them to recover, Russia is standing on the edge of the cliff looking down into abyss. No doubt, there are multiple structural problems in Russia (aging population, low energy prices, corruption, etc…), however, the biggest problem is psychological/cultural.
Having lived in both Russia and the USA I know exactly what I am talking about. The difference between the two economies is as follows. In the USA everyone knows that they have unlimited potential in terms of starting their own business and trying to get rich. Everyone has an understanding that if they work hard, risk, sacrifice and get lucky, there is really no limit to what they can accomplish. As a result, everyone tries to excel at something and you end up with a highly diversified economy benefiting all.
That part of the equation is gone in Russia. Culturally people do want to get rich, but they don’t want to work for it. They want it to happen overnight and the only way to do that is too steal or take something away from someone or to be corrupt. That is how most “New Russians” got rich and that is what most Russians aspire to.
Given this reality, I do not see how Russia will amount to anything anytime soon. The fact that their economy will suffer over the next decade is now a certainty. The only way to fix it going forward is to change the culture or to change the psychology. Unfortunately, I do not see that happening anytime soon.
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It’s hard to be a bear. No one likes bears. Here are the top 10 signs that you might be a bear hater as well.
This goes to all the bears out there.
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Why Do You Hate Me?
Imagine someone who runs a thriving luxury car dealership, yet does the weekly shopping at a no-frills discount store. That pretty much describes the Germans. The global No. 3 exporter is famously thrifty at home, so Germany runs a trade surplus equaling nearly 7 percent of its economy.
Now, imagine telling the Germans that this is bad. That’s what is happening as a growing chorus of international critics warns that Germany’s trade surplus is endangering global growth, and putting Germany’s own future at risk.
On Nov. 5, the European Union threatened to probe Germany’s trade surplus, which since 2007 has exceeded EU guidelines of a maximum 6 percent of gross domestic product. Germany must boost consumption and raise wages “to open the bottlenecks to the growth of domestic demand,” EU Economic and Monetary Affairs Commissioner Olli Rehn said.
Rehn’s comments follow recent criticism from the International Monetary Fund, which says German export policy is hindering Europe’s economic recovery. A “significantly smaller current account [surplus] would be useful,” David Lipton, the IMF’s first deputy managing director, said in Berlin last week.
The U.S. has weighed in, too, with a recent Treasury Department report (PDF) warning that German policies were placing “severe pressure” on troubled European economies and creating “deflationary bias for the euro area, as well as for the world economy.”
Not surprisingly, the Germans are furious. Trade surpluses “are a sign of the competitiveness of the German economy and global demand for quality products from Germany,” the country’s Economy Ministry said on Oct. 31. “There are no imbalances in Germany which require a correction of our growth-friendly economic and fiscal policy,” spokesman Martin Kotthaus told reporters in Berlin. An article in the magazine Spiegel
The critics, though, aren’t really asking Germany to export less—although that certainly would help such EU trading partners as Spain and Italy, which are struggling to export more of their own goods. The Germans are mainly being asked to spend more money on themselves. Over the past decade, Germany has dramatically lowered labor costs and reduced unemployment by creating a large number of low-wage and part-time jobs.
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Sometimes I feel like I live in the parallel universe where only stupidity is rewarded.
Germany is running its economy as any responsible country should (well, besides being a part of the European Union) and IMF/USA have the balls to tell Germany to that it is doing everyone a disservice by not spending more. I have never heard anything more ridiculous.
While I understand the reason behind such a statement, this is equivalent to having a friend who has already maxed out all of his/her credit cards telling you that you should live it up a little and instead of saving money should blow it all on coke and hookers.
It is terrifying, but that is the state of our economic leadership today. It leads to nothing more than an eventual decline in economic standard or worse…..an economic collapse that is just around the corner.
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Carl Giannone says he’s given up hunting for quality stocks. Now he’s simply riding the wave of upward momentum in the U.S. market. “It’s a game of musical chairs,” said Giannone, who manages an equities team at T3 Trading Group LLC in New York. “You just want to make sure you can sit down.”
The Federal Reserve’s near-zero interest rate turns five years old next month, the longest period without an increase in history. Coupled with more than $3 trillion of asset purchases, it adds up to “Bernankecare,” said Joshua Brown, chief executive officer of Ritholtz Wealth Management in New York. And it’s causing parts of the market to behave strangely. Stocks of companies with weak balance sheets are rising twice as fast as stronger ones; junk borrowers get rates lower than their investment-grade counterparts did before the credit crisis; and initial public offerings are doubling on their first day of trading.
While in the minority, some investors say prices have climbed so high it’s possible to look ahead and see an ugly end.Laurence Fink, chief executive officer of BlackRock Inc., the biggest U.S. money manager, said in an interview with Bloomberg Television on Nov. 12 that he feared a bubble and the Fed ought to quit buying so many securities.
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Have you ever seen a real bull orgy? I haven’t, but a fathom it would be a fairly gross site to feast your eyes upon. Luckily for you can see an artificial one by turning on CNBC or reading any other kind of financial media. Bulls are salivating over each other, predicting the DOW at 20,000, 25K, 50K, to infinity and beyond. It’s quite entertaining to watch.
The article above is right on the money. At this stage everything is in the speculative bubble that will pop and it has become a game of musical chairs. However, that is not why I bring this up. I want to point your attention to a psychological breakdown of market participants. We all know the saying “Buy Low Sell High” or “Buy When There Is Blood On The Streets”, yet not a single person I know actually does it.
Case and point, March 2009 bottom. Not a single person I know, not on TV or elsewhere advocated buying. No, they were all talking about the end of the world, how low the market will go and what stocks to short best. The blood was running on the street, the stocks were being given away and these fools couldn’t see the forest through the trees. Now the situation is completely reversed. When everyone should be selling and/or going short, everyone is screaming BUY, BUY, BUY. It’s a fools game and if you buy today you are that fool. I guess human psychology, the primary driver behind the stock market, will never change.
With such a backdrop it is very nice to know exactly when the Bear leg of 2014-2017 will start and the damage it will do. While Bulls are busy having their orgy, the market is getting ready for a massive haircut. You have been warned.
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