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China To Russia: We Stand With You…..Suck It America

russia-china-investwithalex

The world is being divided in half as we speak. As my in depth report (coming out next week) will show it will be NATO Vs. Russia/China coalition. Today Chinese Foreign Ministry released the following statement. 

“China has consistently opposed the easy use of sanctions in international relations, or using sanctions as a threat.”

Later, Russia fought back with a statement of their own. Indicating that if sanctions are imposed they will turn to China as their primary ally and business partner. Further adding, “Western countries would largely be hurting themselves if they impose tougher sanctions.”

Who cares and why is any of this important?

As my next weeks ( Wednesday’s Report) report will show, this development will lead to an eventual war. Not in the Ukraine, but worldwide. This war will impact everyone. We are still many years away, but this is an initial development. My timing and mathematical work confirm the same.  I encourage you to visit us next Wednesday to read the report and to see how it will play out.  

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China To Russia: We Stand With You…..Suck It America  Google

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Chinese Companies Skidding Towards Default. What’s Next?

On March 4th, 2014 China experienced it’s first ever onshore default when Shanghai Chaori Solar Energy Science & Technology Co. failed to pay full interest on its bonds. Signaling two things. 1. Chinese government is no longer interested in bailing out (most) Chinese companies and 2. A lot more defaults to come. Here is where China is today. 

  • $21 Trillion Debt Mountain. Roughly the same size as the entire US Banking Sector. It took the US 220 years to get to that number, it took China just 5 years of explosive credit growth. 
  • $6 Trillion In Shadow Banking. Actually, no one knows how large this number is. I have read good data/reports putting this number at $10-15 Trillion range.  
  • Empty cities, shopping centers, massive speculative bubble in real estate, built out infrastructure, rising cost of labor and export driven economy. 

With massive debt burden, increasing borrowing costs and an upcoming bear market/recession in the US/Worldwide (2014-2017), shit is about to get real.  

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Chinese Companies Skidding Towards Default. What’s Next?  Google

skidding

China Heralding $1.5 Trillion Emerging Debt Wall: Credit Markets

A surge in interest rates and the worst currency rout since 2008 in developing nations from Russia to Brazil are inflating corporate borrowing costs as $1.5 trillion of obligations come due by the end of 2015.

Companies in the MSCI Emerging-Market Index (EEM) are facing the highest debt loads since 2009 as profit marginsnarrow to the least in four years, according to data compiled by Bloomberg. More than 36 percent of bonds and loans by Turkish companies will mature by 2015, while Chinese firms need to pay off $630 billion, or 29 percent, of their borrowings just as the country experiences its first-ever onshore corporate-bond default.

Even as higher rates help shrink trade deficits and stabilize currencies, they are damping emerging-market economic growth, eroding corporate profits and curbing bank lending. That’s increasing the cost to refinance debt for companies from Yasar Holding AS, the Turkish maker of Pinar dairy products and DYO paints, to Brazilian sugar and ethanol producer Grupo Virgolino de Oliveira SA.

“Tightening interest rates in a bad economic cycle exacerbates the stress,” Michael Shaoul, New York-based chairman and chief executive officer of Marketfield Asset Management LLC, which oversees $21 billion, said in a March 5 telephone interview. “If economic and credit conditions start to fall apart, then how can you refinance your existing bonds?”

Junk Bonds

That stress is already being reflected by a jump in bond yields. Investors demanded 166 basis points, or 1.66 percentage points, more to hold non-investment grade debt of developing-country companies than their global peers, Bloomberg data show. The premium jumped from 34 basis points a year earlier and reached a 16-month high of 172 basis points on Jan. 31.

In China, Shanghai Chaori Solar Energy Science & Technology Co. failed to pay full interest on its bonds, leading to the first default in the nation’s onshore bond market and signaling the government will back off its practice of bailing out companies with bad debt.

The maker of energy cells to convert sunlight into power is trying to sell some of its overseas solar plants to raise money to repay the debt, Vice President Liu Tielong said in an interview today at the company’s Shanghai headquarters.

Policy makers have reined in credit expansion, helping boost the yields on three-year AAA-rated corporate bonds to 6.26 percent in January, the highest since at least 2010, according data compiled by ChinaBond, the nation’s biggest debt clearing house.

Rate Increases

Russia’s central bank unexpectedly raised its benchmark interest rate 150 basis points to 7 percent on March 3, joining central banks in Brazil, Turkey, India and South Africa in raising borrowing costs to stem their currency declines this year. Brazil’s real has retreated 24 percent over the past two years, increasing their foreign debt payments in local currencies. Turkey’s lira, India’s rupee and Russia’s ruble each tumbled 18 percent.

Interest-rate increases may slow emerging-market economic growth to the weakest expansion since 2008, increasing the financial risks for banks and corporates, economists led by Dominic Wilson at Goldman Sachs Group Inc. wrote in a note on Feb. 19. Emerging-market economies grew 4.5 percent in 2013, the slowest since the 4.45 percent expansion during the 2008-2009 credit crisis, according to the International Monetary Fund.

‘Less Room’

Gross debt in companies in the MSCI emerging-market index amounted to 2.93 times earnings before interest, taxes, depreciation and amortization in February, up from 1.46 times in June 2009, Bloomberg data show. Profit margins declined to 7.81 percent from 8.34 percent in December and 10.35 in March 2011.

“We’ve moved into this environment where weaker growth in emerging markets, slower credit growth and compressed corporate margins give them less room to absorb higher costs,” Vanessa Barrett, a credit strategist at Morgan Stanley in London said in a phone interview on Feb. 6. “That certainly will challenge the debt servicing capabilities of emerging-market corporates.”

Morgan Stanley recommends its clients sell emerging-market bonds and currencies, predicting non-performing loans for Brazilian banks may increase to 5 percent from 3 percent.

Fitch Ratings Ltd. warned in January that almost 1 trillion rupees ($16.2 billion) of Indian bank loans are at risk of souring as companies’ ability to generate cash and service debt deteriorates.

Yasar Maturity

Turkish companies including Yasar, which owns everything from meat and dairy producers to fisheries businesses, and Dogan Yayin Holding AS, a media conglomerate, may have their credit outlook cut to “negative” after the lira weakened, Fitch said Feb. 14.

Yasar has $250 million of speculative-grade notes maturing in October 2015. More than 70 percent of Yasar’s debt is denominated in foreign currencies, while most of its revenue is generated in the lira, according to Fitch. Should the local currency decline further, Yasar’s net debt will rise beyond 4.5 times Ebitda, the upper limit for the B rating assigned by Fitch, the ratings firm said in a report on March 3. The company’s leverage was 4.4 times earnings in 2012.

The company’s 9.625 percent, dollar-denominated notes due next year were yielding 11.9 percent last month in trading on Trace, the bond-price reporting system of the Financial Industry Regulatory Authority.

Virgolino de Oliveira

A telephone call to Yasar’s finance department wasn’t returned and Murat Dogu, vice president at Dogan responsible for finance and capital markets, didn’t respond to calls and e-mails seeking comment.

Bonds sold by Brazil’s Virgolino de Oliveira tumbled this year as Standard & Poor’s said lower sugar prices and higher interest rates may it more difficult to refinance its “sizable” short-term debt. The $300 million of debt due in 2018 fell to 56 cents on the dollar from 80 cents in November.

Virgolino is seeking financing in the international market and is getting “a very good response,” Chief Financial Officer Carlos Otto Laure said in a telephone interview on Feb. 28.

Companies in emerging markets went on a borrowing binge following the crisis five years ago as central banks cut rates to spur economic growth.

Private credit growth in each of China, Brazil and Hong Kong was more than 60 percent of their GDP since 2008. That’s second only to Ireland, at about 90 percent, among major countries tracked by Deutsche Bank AG.

Maturity Wall

Companies in the 20 largest developing countries have $808 billion debt maturing this year and another $645 billion coming due in 2015, Bloomberg data show.

Turkey has about $36 billion in debt and loans coming due. About 86 percent of the borrowings are denominated in foreign-currencies, making them more expensive as the lira’s value declines.

Russia’s companies need to pay off $142 billion in debt within two years, accounting for 25 percent of the total, Bloomberg data show.

Borrowing costs are still low compared with three years ago. Yields on dollar-denominated corporate bonds traded at 5.21 percent, down from a peak of 7.35 percent in October 2011, according to Bloomberg Emerging Market Corporate Bond Index.

Boom-to-Bust

“Higher refinancing cost alone is usually not sufficient to cause a ‘meltdown’,” Zsolt Papp, a money manager who helps oversee $2.6 billion of emerging-market debt at Union Bancaire Privee in Zurich, said in an e-mail on Feb. 21. “It would have to be coupled with a collapse in the economy and no access to credit, basically a 2008-2009 scenario. And that looks not likely.”

Capital is becoming less available, making it more difficult for companies to roll over their maturing debt. Global investors pulled $11 billion out of emerging-market bond funds this year through Feb. 26, already approaching the full year outflow of $14 billion in 2013, according Barclays Plc.

A “multi-year elongated EM cycle of underperformance” is likely as the credit and economic growth slows, according to Alan Ruskin, the global head of Group of 10 foreign exchange at Deutsche Bank in New York.

“A rapid increase of credit tends to associate with boom turning into bust,” Ruskin said in a phone interview on Feb. 21. “In an environment where there’s excess of credit, a slowing economy feeds on itself as assets go down and the banking system starts to decline. When financial markets seize on a theme, then things can accelerate.”

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Philippine Stock Market Is Surging. Should You Invest?

philippines-stock-market

With the Philippine stock index surging higher over the last few months and with large funds increasing capital allocation, the question is……should you invest in this fast growing emerging market?

The answer might surprise you. 

NO. The Philippine stock market is more or less reliant/follows the US Market. As soon as the US bear market takes control (2014-2017) and breaks down, I would expect the Philippine stock index to do the same. With one major difference. Since this is an emerging market with a highly speculative banking sector I would expect it’s decline to be much, much worse. How bad? If the PSEI Index breaks below 5,500 there is nothing stopping it (technically) until it gets to about 1,000. As such, if the PSEI breaks as anticipated, it turns into a wonderful shorting opportunity.

Please do your own research and make your own investment decisions.  

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Philippine Stock Market Is Surging. Should You Invest?  Google

Top Philippine Fund Doubles Consumer Stocks With Record Bet

The top-performing Philippine stock fund in the past five years has doubled holdings of consumer companies as record remittances boost the spending power of shoppers in Southeast Asia’s fastest-growing economy.

The UBP Large Cap Philippine Equity Portfolio (IFDLCPE)increased positions in the consumer industry to a record 60 percent of assets from about 30 percent in mid-2013, said Robert Ramos, who oversees about $897 million as the chief investment officer at Union Bank of the Philippines. Holdings include Emperador Inc. (EMP), the nation’s largest liquor company, and Puregold Price Club Inc., the biggest grocery-store operator. Both stocks have jumped at least 12 percent this year.

Overseas remittances to the Philippines increased a bigger-than-estimated 9.1 percent in December, while slower inflation last month eased pressure on the central bank to raise interest rates that have stayed at a record low since October 2012. Consumer spending accounts for almost three quarters of the $250 billion economy, which grew at a 6.5 percent pace last quarter.

“Everywhere you go, people say the economy is better and that global Filipinos are richer and have higher disposable income,” Ramos, 38, whose UBP Large Cap fund returned an annualized 46 percent in the past five years, the most among 28 Philippine stock funds tracked by Bloomberg, said in an interview in Manila on March 4. “I expect more gains from the sector.”

Earnings Jump

Overseas Filipinos sent home a record $2.16 billion in December, bringing the 2013 tally to an all-time high of $22.8 billion, data from Bangko Sentral ng Pilipinas show. The central bank forecast remittance growth of 5 percent this year.

The cash inflows, which make up about 10 percent of the economy, have helped companies such as Emperador and Puregold (PGOLD) post record earnings. Profit at Emperador, the UBP Large Cap fund’s biggest holding, rose to an all-time high of 5.8 billion pesos ($130 million) in 2013.

Ramos shifted the $67 million UBP Large Cap fund’s strategy in the middle of 2013 to shield it from volatility after the U.S. Federal Reserve signaled stimulus cuts. He sold financial, energy and property shares, deterred by regulatory headwinds and rising valuations.

“We wanted stocks that will outperform but at the same time won’t be very erratic,” Ramos said.

Valuation Risk

Consumer companies also stand to benefit as the Philippine currency’s slide against the dollar boosts the value of remittances, Ramos said. The peso has weakened more than 8 percent since May 22, when the Fed signaled it would trim its monthly bond purchases as the economy improves.

“Families of overseas Filipinos feel richer because the peso has devalued,” Ramos said. “They are probably spending a little more than before.”

The Philippine Stock Exchange Index (PCOMP) fell 0.1 percent to 6,508.58 as of 12:32 p.m. in Manila.

Consumer stocks are growing more expensive and the companies are unlikely to match the growth they enjoyed last year, when campaign spending in congressional and local elections boosted demand, according to COL Financial Group Inc.

Puregold is valued at about 25 times estimated 12-month earnings, while Emperador trades at 24 times, according to data compiled by Bloomberg. That compares with a multiple of 17.5 for the Philippine Stock Exchange Index, which has climbed 11 percent this year.

Growth Outlook

“I am less certain that growth will be as fast,” said Jed Pilarca, an analyst at COL Financial. “Consumer stocks aren’t cheap. It might be time for a correction.”

Emperador’s net income will probably increase 24 percent this year, while Puregold’s profit may climb 28 percent, according to analysts’ estimates compiled by Bloomberg. The nation’s economicgrowth is set to exceed 6.5 percent in the first quarter, boosted by rebuilding after Typhoon Haiyan, stronger exports and tourism, Economic Planning Secretary Arsenio Balisacan said on Feb. 4.

The government estimates growth of between 6.5 percent and 7.5 percent this year. The economy expanded 7.2 percent in 2013 and 6.8 percent in 2012, the fastest two-year pace since the 1950s, data compiled by Bloomberg show.

“A big chunk of the economy is driven by consumption,” Ramos said. “When GDP is growing, you know that a lot of people will be consuming more.”

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Job Creation Surges Higher. Now What?

Despite the bad weather, the US Economy added 175,000 jobs in February Vs. estimated 149,000.  Damn, I am impressed. Let me run out and buy some shares of Facebook, Netflix, Tesla, Google, etc… Even though I can puncture the “validity of data” hole (as I have done before) wide enough for a semi to drive through, that is not the angle I am going to take today.  

Listen, jobs is a lagging indicator. It’s a trend measure and is not indicative of future market developments. Let me give you an example. The US Companies were hiring hand over fist at 2000 and 2007 tops. In fact, they continued to do so 6 months after said tops. With the stock market surging higher over the last 6 months, I would hope that the February jobs report come in above expectations. Yet, it is all in vein.  As the 2014-2017 bear market accelerates speed over the next few months, any job gain will quickly turn into mass layoffs. 

What Bear Market? Read the  bear market report here.  

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Job Creation Surges Higher. Now What?  Google

jobs-feb-14-2

The U.S. economy added 175,000 jobs in February, more than anticipated despite brutal weather conditions across much of the U.S., with the unemployment rate ticking slightly higher.

Economists had predicted 149,000 new jobs. The headline unemployment rate was 6.7% last month, up from 6.6% in January, actually a positive sign because it means more people entered the workforce.

The December and January figures, both well-below expectations, were revised higher by a combined 25,000.

Weather had been widely predicted to put a dent in the numbers ahead of the release of Friday’s data by the U.S. Labor Department. That was the case but it didn’t impact overall hiring as much as analysts had anticipated.

“The weather was unseasonably cold in February, especially during the period leading up to and including the (Labor Department’s) survey week. In addition, snowfall has been unseasonably high over the same period,” analysts with Nomura’s Global Markets Research unit wrote in a note prior to the release.

Instead of chilling overall hiring, the Labor Department said the weather resulted in 7 million people working part-time last month rather than full-time, 10 times the number in January and the largest figure since January 1996, when a blizzard paralyzed the Northeast.

Todd Schoenberger, managing partner at LandColt Capital in New York, said the February numbers bode well for the spring.

“Despite headwinds, such as the continuation of a brutally cold winter, the labor market persevered, which leads to added optimism for a spring thaw in discretionary spending as we close out the first quarter of 2014,” he said. “Wall Street will cheer this report because strict attention is now given to economic and fundamental analysis as the (Federal Reserve) continues its tapering strategy.”

Despite a weak January jobs report, Fed policy makers voted unanimously earlier this  year to continue scaling back the central bank’s monthly bond purchases by $10 billion. The amount has been whittled down to $65 billion a month.

In public comments, Fed members have said the economic data would have to shift dramatically for the Fed to alter its stated objective of reducing bond purchases at $10 billion intervals until the program, known as quantitative easing, expires later this year.

After gaining an average of 194,000 jobs each month in 2013, the numbers have fallen off significantly in early 2014. The economy added a meager 113,000 jobs in January, which followed the  addition of just 75,000 new positions in December.

But members of the policy-setting Federal Open Market Committee, including newly installed  Fed Chair Janet Yellen, have taken pains to explain that labor data, especially the headline unemployment rate, is one of several economic indicators the Fed is using to determine future policy.

The unemployment rate has fallen to its lowest level since the onset of the 2008 financial crisis  but often for the wrong reasons, namely because thousands of people have been leaving the workforce each month which reduces the number of people the government counts as unemployed.

In addition to labor numbers, gross domestic product, which slowed to 2.4% in the fourth  quarter compared to the 4.1% growth in previous quarter, and consistently low inflation have been cited by policy makers as key barometers for the health of the U.S. economy.

In any event, central bankers have vowed to take a cautious approach to tapering, seeking to  find a balance between dialing back bond purchases too quickly, which could backfire if the economy shows signs of stalling again, and not scaling back fast enough, which could lead to runaway inflation.

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The FED Continues To Impress With Stupidity

In another point of reference that, once again, proves without a shadow of a doubt that the FED doesn’t know what is happening within our economy and our financial markets, the FED is talking about accelerating tightening.  Of course, exactly at the wrong time.

You see, most of the damage from their loose monetary policy since 2008-09 has already been done. They have already distorted most of the markets to the 10th degree and with speculation running rampant, the worst thing they can do now is to stop or tighten. Doing so will collapse all markets.

Believe it or not, even though markets are surging higher and the economy seems to be doing better, we are on a verge of a vicious bear market and a deep recession within our economy. That is based on my mathematical and timing work. In fact, it would be wise to be liquidating all of your long positions as we speak.  You can read an in depth report on this matter HERE. If you would like to know the exact structure of the upcoming bear market, please CLICK HERE. 

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The FED Continues To Impress With Stupidity Google

stupid fed

(Reuters) – The Federal Reserve may find its monetary policies quickly becoming overly easy if it sticks to the current pace of reductions to its bond-buying program in the face of a growing U.S. economy, a top Fed official said on Thursday.

“If the economy continues to improve, we could find ourselves still trying to increase accommodation in an environment in which history suggests that policy should perhaps be moving in the opposite direction,” Philadelphia Federal Reserve Bank President Charles Plosser said in remarks prepared for delivery to the Official Monetary and Financial Institutions Forum in London.

“Reducing the pace of asset purchases in measured steps is moving in the right direction, but the pace may leave us well behind the curve if the economy continues to play out according to the (Fed’s) forecasts.”

Since the onset of the Great Recession and throughout the more than four years since its end, Fed has kept interest rates near zero and has bought trillions of dollars of long-term assets in order to suppress borrowing costs and boost investment and hiring.

Late last year, in a nod to the improving economic and labor market outlook, the U.S. central bank took its first step toward easing up on the monetary gas pedal by trimming its current round of bond buying and signaling it could end purchases altogether later this year.

But the hawkish head of the Philadelphia Fed worries the wind-down will take too long, if, as he expects, the economy grows about 3 percent in 2014, pushing down the jobless rate to at least 6.2 percent by the end of this year and “plausibly” even below 6 percent.

Plosser’s forecast for growth falls squarely inside the 2.8 percent to 3.2 percent forecast range from the majority of Fed officials.

“As the expansion gains traction, the challenge will be to reduce accommodation and to normalize policy in a way that ensures that inflation remains close to our target, that the economy continues to grow, and that we avoid sowing the seeds of another financial crisis,” Plosser said.

“While there continues to be some downside risk to growth, for the first time in years, I see the potential for more upside risk to the economic outlook. We need to consider this possibility as we calibrate monetary policy.”

The economy grew at a 2.4 percent pace last quarter, and recent soft economic data suggests growth may have since slowed. But Plosser cautioned against reading too much into recent weakness, chalking most of it up to severe winter weather.

That’s a view shared by many at the Fed.

Most investors expect the central bank to look past the soft data and continue to reduce its bond-buying program by $10 billion per month at each meeting, setting it on course to end the program before the year is out. The Fed next meets to discuss policy in less than two weeks.

But Plosser, who votes this year on the Fed’s policy-setting meeting and is among the most hawkish of the nation’s central bankers, wants to ratchet back super-easy policies more rapidly than most of his colleagues.

Unlike many of his colleagues, who predict it could take years for inflation to return to normal levels, Plosser said Thursday he sees upside risks to inflation, now languishing at just above half of the Fed’s 2-percent target.

Plosser also called for the Fed to remake its guidance to markets for how long it will keep rates low, because the current promise, to keep them low until well beyond the time the unemployment rate falls to 6.5 percent, has lost any usefulness.

The U.S. unemployment rate stands at 6.6 percent.

He reiterated his view that the Fed should strive to follow monetary policy rules, reduce its reliance on discretionary decisions, and pull back from the aggressive intervention that has marked its actions since the financial crisis.

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California Middle Class Is Priced Out. What’s Next For California Real Estate?

Do not worry my dear friends. The upcoming “severe” bear market in real estate will fix this issue. To read my full report on this matter and to see the “why, how and when” please Click Here

While upscale places like Irvine and Pasadena approaching their 2006-07 highs, the middle class neighborhoods are still down to the tune of 30-40% with higher % of Californians not being able to afford a home.. Plus, over 30 percent of California buyers are cash investors (hedge funds, institutions, etc…). BTW, that number is as high as  75-80% in Las Vegas.

All of this is just another symptom of the enormity of the credit bubble juiced by the FED. While this might be the case now, the upcoming bear market in real estate will resolve this problem sooner rather than later. 

california-home-ownership-rate-investwithalex

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California Middle Class Is Priced Out. What’s Next For California Real Estate? Google

From our friends at DoctorHousingBubble.com 

California is a land of booms and busts.  Generations ago gold rush fever brought many to speculate and gamble for future glory.  In the 1900s the promise of uninterrupted sun and great weather lured families to the area.  This trend has only magnified with global forces becoming so dominant and people fully connecting and thinking alike on the technological hive mind.  In other words, people are seeking the same goals and dreams.  People also love speculating on real estate.  Language is hardly a barrier when documents can be translated in the click of a mouse button.  California housing is leaving many middle class families behind as the state gentrifies dramatically.  Reports are very clear, and that is only one out of three California families can actually afford to purchase a home at today’s prices.  Yet the market is attracting investors from all across the country and world.  People are willing to leverage their income with low interest rates and funnel upwards of 50 percent (or more) of their household income into real estate.  What is interesting is that in many “prime” areas housing prices are inching back close to their former peaks.  Yet working class areas, only a few miles away from these markets are still years away from reaching their former peaks.  California is a magnifying glass to the slow erosion of the American middle class.

Prime areas reaching peaks while other areas crawl out of recession trough

As mentioned in a previous article, housing is an odd industry where prices are set at the margins.  In the US, we have 81 million single family homes.  From the latest figures we have something like 2.2 to 2.5 million homes available for sale (existing and new homes).  What this means is that at any given point we have roughly 3 percent of all existing inventory on the market for sale.  This is nationwide.  In some prime markets, you have even lower percentages and this drives up prices especially if speculation is running wild.

Zillow has some great reports on markets across the US.  Let us look at a few Southern California cities in terms of the latest housing figures:
California areas

Source:  Zillow

This chart is very telling.  First, you’ll notice that places like Irvine and Pasadena are only 4 percentage points away from reaching their previous peaks hit in 2006-07.  These markets pull from local investors, global investors, flippers, Wall Street, and of course professional families.  But take a look at areas like Compton (still off by 38 percent from the peak), Inglewood (off by 32 percent), Santa Ana (off by 36 percent), and Santa Clarita (off by 26 percent).  Santa Ana is only a few minutes away from Irvine but this is like comparing two different worlds.  Of course the majority of people by definition live somewhere in the middle and that is why looking at household incomes is important.  Yet these are unlikely to be the current buyers.  Over 30 percent of California buyers for close to half a decade are coming from big money investors.  Many are stretching out with FHA insured loans but this is likely to be in more working and middle class neighborhoods.  Talking with colleagues in the industry they mention that FHA in prime areas is virtually a no-go for buying with sellers.

People might look at a home value of $749,200 in a place like Irvine and scratch their heads.  But with ARMs, interest only loans, and dual income families people are willing to stretch to buy.  Investors of course are willing to go deep into the game.

Yet we may be seeing a slowdown here, even in prime areas.  For example, in Irvine inventory hit a low of 400 late in the fall and is now at 620 (up 55 percent).  You’ll also notice that month-over-month prices dipped which is telling but then again, your typical California family is not going to swing a $750,000 home.  Which is really the big divide happening across the US, a gutting of the middle class.

Homeownership not available to everyone

I made the argument close to a decade ago that homeownership was not always the best option.  For most parts of the US, owning may be a good option (when the median home price is $190,000) but in high cost areas the math isn’t so simple.  Renting may make a lot more sense for those starting a career and looking for mobility for work.  Yet young Americans are facing a very tough economic climate.  Beyond the economics, the homeownership rate has fallen dramatically in California:

Even before the bust, the homeownership rate was already trending back to where it was in the late 1980s.  Not much has changed since.  In fact, with high levels of investors buying properties and lower sales figures, this trend is likely to continue.

For many families, the quick run-up in prices in 2013 has completely shut them out.  We are now seeing investors slowing down given that good deals are harder to find.  Some are venturing into lower priced areas but you also deal with lower incomes.  This may matter if you are looking at hiking rents or trying to flip to an actual potential long-term homeowner.

Housing starts and future trends

Even if housing were to erase the gains of 2013, California has essentially shut out a good number of middle class families from owning.  The market has hit a turning point recently:

CAR report

You’ll see that across the state, year-over-year prices went up 22.1 percent but fell 6.2 percent over one month.  Inventory is up 22 percent from last year and time on the market is up 20 percent as well.  More to the point, sales volume has fallen by 13 percent even in the face of rising prices.  At current price levels in more selective markets, you really have to be upper middle class to wealthy to own a home.  In fact, you will likely need to be in the top 15 to 10 percent of household income (meaning a household income of $150,000 a year is the minimum to play the game without leveraging your entire future on real estate).

California is largely leaving a good portion of the middle class out of the homeownership race.  This trend looks to be the case for years to come.

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As The US Continues To Piss On Russia, How Long Before Ukraine Reignites?

If you have been reading this blog, you know that I have correctly predicted both the Russian invasion of the Ukraine as well as the subsequent calm on Tuesday. Before it had happened. I ended my analysis with one statement. For as long as the US Administration and the EU Bureaucrats stop pressuring or going after Russia and/or Putin, things will die down. 

Not to be outdone by anyone, today Hillary Clinton decided to throw her panties in the ring by comparing Putin to, what else,  Hitler of course.

Trust me when I tell you this. Nothing will infuriate Putin more than when a high ranking ex member of Obama Administration and a presidential hopeful calls him a Hitler.  If this sort of behavior from the US continues Putin will have no choice but to demonstrate his “manhood”, “power” and “the size of his co@$” by invading Ukraine or worse. I am not sure why this is so hard for everyone to understand. 

Then again, maybe that is exactly what our military industrial complex wants.  

hillary_clinton

Speaking at a fundraiser in California, Clinton drew a parallel between Adolf Hitler’s rhetoric that ethnic Germans living in neighbouring countries he later invaded were oppressed, and Vladimir Putin’s claim that ethnic Russians in Ukraine are under threat by nationalists and radicals.

The former US secretary of State, who is widely expected to run for US president in 2016, particularly criticised Moscow over the issuing of passports to ethnic Russians living in Ukraine’s Crimean peninsula.

“Now if this sounds familiar, it’s what Hitler did back in the 30s,” Clinton said, the Long Beach Press-Telegram reported.

“All the Germans that were … the ethnic Germans, the Germans by ancestry who were in places like Czechoslovakia and Romania and other places, Hitler kept saying they’re not being treated right. I must go and protect my people and that’s what’s gotten everybody so nervous.”

Clinton, 66, made the comment at a $1,500-a-head fundraiser for the Boys and Girls Club of Long Beach.

She also said that Putin believes “his mission is to restore Russian greatness.”

“When he looks at Ukraine, he sees a place that he believes is by its very nature part of Mother Russia,” Clinton said.

Harry Saltzgaver, who attended the event, told Buzzfeed that Clinton added there was “no indication that Putin is as irrational as the instigator of World War II.”

Earlier this week, Vladimir Putin was accused of acting like Hitler in 1930s also by the former foreign minister of the Czech Republic, Karel Schwarzenberg.

“Since he wanted to invade Crimea, he needed a pretext and said that his compatriots were oppressed,” said Schwarzenberg.”When Hitler wanted to annex Austria, he said that Germans there were oppressed.”

Putin has claimed it would be legitimate for Russia to use force to protect its interests in eastern Ukraine and Crimea.

“We have received a request from a legitimate president,” Putin told a press conference. “Also we have historical and cultural ties with those people. And this is a humanitarian mission. It’s not our goal to conquer somebody.”

He said deploying the military would be the last resort but and denied that troops without insignia who took over strategic locations in Crimea are Russian.

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China: Get Rich Or Die Trying

China’s goal is to grow at any cost. Forget the consequences and an eventual collapse to it’s political and economic system. That is exactly what China’s leadership is doing by pushing for 7.5% annual growth through credit.  Now, lets refresh our memory. China has….

  • $21 Trillion Debt Mountain. Roughly the same size as the entire US Banking Sector. It took the US 220 years to get to that number, it took China just 5 years of explosive credit growth. 
  • $6 Trillion In Shadow Banking. Actually, no one knows how large this number is. I have read good data/reports putting this number at $10-15 Trillion range.  
  • Empty cities, shopping centers, massive speculative bubble in real estate, built out infrastructure, rising cost of labor and export driven economy. 

Maybe I am stupid, but tell me again how this is going to end well for China? When the US financial market starts its bear market and when the US Economy enters into a severe recession, there will be hell to pay in China. When will that happen? Luckily for you, we know to the day. Please Click Here to learn more.   

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China’s leaders spurred speculation they will allow the country’s $21 trillion debt mountain to inflate after refraining from cutting their annual economic-growth target.

Analysts at Australia & New Zealand Banking Group Ltd. and Nomura Holdings Inc. said authorities will need to loosen monetary policy, after Premier Li Keqiang yesterday announced a goal of 7.5 percent growth, the same target as last year. Li said China will seek an “appropriate” increase in credit.

Any easing would contrast with leaders’ efforts to rein in a $6 trillion shadow-banking industry and control the build-up of local-government debt that followed stimulus measures unleashed in 2008. Li is seeking to support growth amid three money-market rate surges in eight months and the threat of defaults of high-yield investment products and corporate bonds.

“I had hoped that they would pay more attention to curbing the risks but instead they focused on growth,” said Dariusz Kowalczyk, Hong Kong-based economist and strategist at Credit AgricoleSA. “They will just have to pay the price of higher leverage and once they start to deal with this in earnest, the costs of solving the issue will be bigger.”

The benchmark Shanghai Composite Index (SHCOMP) fell 0.9 percent yesterday, the most in a week, amid concern that the country may face its first onshore corporate bond default. Shanghai Chaori Solar Energy Science & Technology Co. said it may not be able to make an 89.8 millionyuan ($14.7 million) interest payment in full by the March 7 deadline.

Trust Bailout

The warning came little more than a month after the nation averted its first trust default in at least a decade as investors in a 3 billion-yuan high-yield product issued by China Credit Trust Co. were bailed out days before it matured.

Shadow banking was rated as the biggest challenge for the Chinese economy by more analysts than any other concern in a Bloomberg News survey of 29 economists ahead of the National People’s Congress meeting. The risk of vested interests blocking efforts to increase the role of markets in the economy was the next most-cited issue.

Economists also saw dangers from the property market; the increased funding required to generate each unit of gross domestic product; local government debt; and the threat that liberalizing interest rates will trigger financial turbulence.

The combined debt of Chinese households, corporates, financial institutions and the government rose to 226 percent of GDP last year, up from 160 percent in 2007, Credit Agricole estimated in a report last month. GDP reached $9.4 trillion in 2013.

Creating Money

“Given increasing credit risks, many would have expected Mr. Li to talk about financial deleveraging of some sort,” Kevin Lai, economist at Daiwa Capital Markets in Hong Kong, wrote in a note. “There is still a desire to ensure enough money is created to satisfy the refinancing pressure from many borrowers.”

The economy expanded 7.7 percent in 2013, the same pace as in 2012. Previous data this year have shown a slowdown in manufacturing, while trade and credit expansion exceeded estimates.

This year’s growth target is “flexible and guiding,” the National Development and Reform Commission said in a related report yesterday.

Li, who reiterated that China will pursue a “prudent” monetary policy, announced a target of 13 percent growth in M2, the government’s broadest measure of money supply. That was the same target as last year, when M2 expanded 13.6 percent. The budget deficit as a percentage of GDP will be about the same as last year, Li said at the annual meeting of the legislature in Beijing.

Leverage Pace

“If they are pursuing a trajectory to slow down the pace of leverage they should target a slower M2 growth,” said Wang Tao, chief China economist at UBS AG in Hong Kong, who previously worked at the International Monetary Fund. “Without doing that it’s not clear.”

People’s Bank of China Governor Zhou Xiaochuan may elaborate on monetary policy during a press briefing that normally is held during the legislature’s meeting, which ends March 13.

China hasn’t adjusted benchmark interest rates since July 2012 and is in the process of removing controls on borrowing costs and savings rates.

Currency Bets

The yuan slumped about 1.4 percent in February amid speculation the PBOC wants an end to the currency’s steady appreciation before a possible widening of the trading band. The yuan climbed 0.24 percent yesterday, the most since 2012, on anticipation the central bank has reached its goal of discouraging one-way bets on the currency after spurring last month’s record decline.

Zhou said recent foreign-exchange rate moves are “normal,” the official Xinhua News Agency reported on its microblog on March 4.

Not everyone saw a conflict between the growth target and China’s vow to introduce more market-driven change. Stable economic and labor-market conditions are “conducive for actually implementing the top-down reforms,” Qu Hongbin, chief China economist with HSBC Holdings Plc in Hong Kong, wrote in a note yesterday. “Reform and growth should support each other.”

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Obama’s Budget BS

Obama’s new budget proposal is so laughable it has more holes than a block of Swiss Cheese. Let’s take a look at just a few things to see how ridiculous it is. 

The U.S. economic recovery that began in 2009 will continue to gain momentum over the next few years. 

Oh yeah, based on what? If anyone in the Government had bothered to study economic cycles they would soon conclude that they can’t forecast prosperity into perpetuity. Particularly, today’s recovery that has been driven entirely by credit and speculation. As our forecast clearly indicates (Click Here) the US Economy and financial markets are about to go through a major bear market/recession. Good luck with that momentum. 

The unemployment rate, which was 6.6 per cent in January, will continue to slowly decline over the next five years, stabilizing at 5.4 percent by 2018

Why not just say 1.2% by 2075. Again,  the upcoming recession and bear market (2014-17) will drive unemployment much higher. Would you want to read something scary? Here, 4 Reasons US Unemployment Rate Will Be At 20% By 2017. 

U.S. housing market has shown clear signs of recovery. 

I would hope housing would show some signs of recovery after the FED pumped over a $1 Trillion into the economy over the last 3 years alone. Yet, this recovery is nothing but a dead cat bounce. Would you like to know what the real future of real estate is? Click Here to read our comprehensive real estate report. 

In a nutshell, this report is not worth the paper it is printed on. 

P.S. I have no political affiliation either way. In fact, I believe we will be much better off without government at all.  

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WASHINGTON (AP) — President Barack Obama’s $3.9 trillion budget proposal for next year suggests the U.S. economic recovery that began in 2009 will continue to gain momentum over the next few years but that the unemployment rate won’t fall to pre-recession levels of below 6 percent until 2017.

The White House forecast that the budget deficit would fall from $649 billion in the fiscal year that ends Sept. 30 to $564 billion in fiscal 2015 and $458 billion in 2017. If the projections hold up, it would mark three years in a row of annual red ink below

$1 trillion.

The unemployment rate, which was 6.6 per cent in January, will continue to slowly decline over the next five years, stabilizing at 5.4 percent by 2018, the administration projected. That’s down from a high of 10 percent reached during the 2008-2009 recession.

The economic forecasts, included in the president’s budget proposal for the fiscal year that begins Oct. 1, are generally in line with projections made by other government and private forecasters.

However, the White House projects a 6.7 percent unemployment rate for 2015. While that’s the same level as in the Blue Chip Consensus — an average of about 50 private-sector forecasts— it is more optimistic than the Congressional Budget Office, which projects 2015 unemployment at 7.1 percent.

The administration forecast is based on assumed congressional approval of all of Obama’s budget tax and spending proposals, an unlikely prospect.

The most recent unemployment rate available is January’s 6.6 percent. That’s getting close to the 6.5 percent threshold the Federal Reserve suggested might be the point at which it would back away from its policy of keeping short-term interest rates at near zero.

The budget document said that the U.S. housing market has shown “clear signs of recovery, after its collapse in 2007 and 2008, which was a major cause of the financial crisis and recession.”

The administration projects that, as a share of the nation’s total economic output, the deficit next year would be 3.1 percent of the nation’s gross domestic product. That’s down from the 2009 peak of 10.1 percent.

Still, spending is expected to rise again in the next decade as the population ages and draws on retirement and health care benefits without new sources of revenue.

The White House projected that interest on a 10-year Treasury bill would rise from 3.0 percent now to 4.3 percent in 2017 and reach 5.0 percent by 2021.

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