InvestWithAlex.com 

Subscribe Today
My Account

Category: Uncategorized

Posted on

Real Estate Collapse 2.0 Why, How & When

 infographic 2 - real estate - main picture

If you ever want to ascertain the primary psyche of the American culture, just watch 1 hour of TV, paying particularly close attention to the commercial breaks.  Here is what “The Man Behind The Curtain” wants you to do. The worst part is… most people seem to comply.  

First, you must go to college, get a massive student loan and get a bunch of credit cards. After you graduate, buy your girlfriend a giant diamond ring, get married and she will love you forever.  Then buy a house, a new car, start a family, get a dog and drink a lot of beer.  Of course, the overwhelming pressures associated with all of the above will grind you into the ground. But not to worry, our top notch pharmaceutical and medical industry got you covered.  Bonner pills, ADD pills, depression pills,  high blood pressure pills, surgery and who can forget ….adult diapers.  And that’s your future, in a nutshell.  

In all of the above, one thing stands out. There is nothing more prevailing in the American culture than the notion that any self respecting, reasonable American with half a brain should own his/her own house. If you don’t, you are viewed as a failure. Now, before I destroy that notion with a few simple calculations and tell you why the housing market is going down the drain again (yes, it’s happening right now), please allow me to destroy the notion of home ownership with some simple common sense.

Reason #1: You Will Never See Your $50-100K Cash Down Payment Again:

Let’s say you are a responsible member of society and instead of getting Interest-Only-No-Down-Payment-I-Am-Never-Going-To-Pay-It-Back Loan, you get a typical 30-Year fixed with 20% down payment. In fact, you have worked incredibly hard and saved up $50,000 – $100,000 to do just that. Congratulations. However,  the stupidest think you can do next is to buy a house and get a mortgage. If you do, kiss that money goodbye. Under today’s monetary conditions you are never going to see it again.

“But Alex, my realtor is telling me that buying a house right now is an opportunity of a lifetime….if I don’t do it now, I will never be able to afford it again, recovery is here, the prices are about to go through the roof, blah, blah, blah…”  – Everyone.

Well, unless your realtors name is George Soros or Warren Buffett, tell your realtor to go pound sand.  What we have experienced between 1994-2007 in the real estate sector is not only atypical, but is truly once in a lifetime. More on that later, but if you are lucky enough to sell the house you buy today at a breakeven, you will still not see the down payment again. It will simply roll over into your next house.  From my point of view it is a lot better to invest that money into your future as opposed to park it in an illiquid asset that is likely to lose at least 50% of its value over the next 2 decades.  

Reason #2: Closing Costs, Maintenance & Property Taxes:

Finally got that house of your dreams?  Great, now bend over and take it like a man. Everything in this house will break down over the next 20 years and it will cost you a boatload of money to maintain.  Throw in closing costs and property taxes and you talking about real money.  Realtors themselves estimate you should budget about $8,000-$12,000 annually on a $500,000 house. Sure, there is an interest deduction on your taxes, but typically (based on your family’s tax structure) the costs above are never fully recovered.

housing bubble

Reason #3: It’s Not An Investment:

Stop saying that your house is an investment. Just stop. It’s a debt burden, not an investment.  Investments produce income and pay dividends. Your house doesn’t do either unless and until you rent it out.  Yes, your house can exhibit capital appreciation, but that is not an investment either. That is more accurately defined as a speculation.  What we saw during the housing boom was just that. Speculation.  Household incomes didn’t go up 500% between 1994-2007, but house prices did.  People who were in the real estate sector simply got lucky. Now, it’s time to ride this Cho Cho Train down.  

Reason #4: Your House Is A Trap:

Got that house of your dreams in The City of Compton, California? Congratulations, you are now trapped.  Even if you get a $100K job offer to wax dolphins in Fiji, you won’t be able to take it. You will be tied down and unable to sell your house at break even. Particularly over the next 2 decades and that is exactly where “Corporate/Government Interests” want you to be. They don’t want you to have the ability to move and get a better job elsewhere. They want you to be tied down, “to have roots”, to be paid less. That wouldn’t be the case if you could increase your salary 25-100% by simply picking up your things and moving across the country. 

And that’s just a few of the points. I can keep going, but I think you get the point. The housing myth is just that….a carefully crafted marketing message.  

Now, let’s get to the best part.

Here are the reasons why you should be mentally committed if you are even thinking about buying a house. Plus, why you should sell your house NOW if you are misfortunate enough to OWN one.

First, you must understand where we are and the cause/effect behind today’s market.

UNDERSTANDING THE HOUSING MARKET, ECONOMY, SPECULATION AND DRIVERS BEHIND BOTH.

Yes, I called for the real estate crash and credit collapse as early as 2005. While my call was a little bit early and premature, eventually it was right on the money. Now, I am saying that the housing crash is not over. 

Before we can understand where we are now and where we are going in the future we must understand where we came from. The Real Estate run up that we have experienced between 1997-2007 has no historical  precedent.  Real estate data going all the way back to 1890 clearly shows that the US housing market basically appreciated at the rate of inflation.  Yes, there were some bubbles and substantial declines, but overall, appreciation at the rate of inflation is an appropriate way to look at the US real estate sector.

us-history-home-values

A QUICK HISTORY LESSON:

All of that changed in 1997 when Bill Clinton signed The Taxpayer Relief Act into law, basically allowing $250,000 in tax free capital gains in real estate.  While real estate was already appreciating at a good clip at that time, that law added fire to the trend. 

Later,  fearing significant economic slowdown in 2002-2003 the Bush administration added a huge amount of jet fuel to the Real Estate Bubble by cutting interest rates and making mortgage finance available to everyone (yes, even to the dead people).  As people used to say, if you can fog a mirror you can get a mortgage. Of course, all of that led to the largest finance bubble in the history of mankind that “kind of” melted down in 2007-2009. I say “kind of” because most of those excesses are still within our financial system and will have to be worked through in the future.  

WHERE ARE WE NOW?

Issue #1: US Home Ownership Rate Is Plunging

On historical basis, home ownership rate in the US is in free fall. Take a look at the chart. I think it speaks for itself.  

USHOWN_Max_630_378

Issue #2: Real Estate Affordability Is Plunging

Take a look at the chart as it speaks for itself. The affordability index is in free fall as well. Most certainly, due to higher interest rates and rising prices. fredgraph111

Issue #3: Interest Rates Are Going Up             

The trend has shifted up and the 10-year rate is up 100% over the last 12 months. I gave detailed interest rate analysis here. Please take a look here.

Issue #4: US Economy & The Stock Market Is About To Turn Down (Big Time)

This has been the primary trend in our blog since inception. Based on our mathematical and timing work the stock market will go through a bear market between 2014-2017. Pushing the US Economy back into a severe recession.  To learn more about the upcoming bear market please Click Here and read the report.  With further job losses , lower incomes and an economic contraction it would be impossible for the real estate sector  to sustain any sort of a rebound. On the contrary, as the economy tanks real estate prices are bound to collapse further.

Issue #5: Who Is Buying All Of These Properties For Cash Today?

Chinese buyers, hedge funds, banks themselves, investors, speculators, etc…..  Who cares!!!  Remember all those Japanese investors buying everything they could in California and Hawaii in the late 1980′s. I wonder how that turned out for them.

In one of my previous reports I have outlined how large hedge funds, including Blackstone Group, are buying tens of thousands of real estate properties across the nation. With some hedge funds and financial institutions going to the extreme and investing in the likes of plumbers and dentist to help them find and manage properties(Click Here To Read). In Las Vegas alone 70% of real estate purchases over the last year have been done by investors. If all of this doesn’t not scream out “Market Top” at you, I really don’t know what will.

las-vegas-home-buyers-with-cash1

On a more serious note, notice that I didn’t say Average American Family. That is the only category that we should track if we want to accurately predict the future trend in the US Real Estate market. Every other category is irrelevant over the long run.  And guess what? They are not buying. See the charts above. 

Issue #6: Bear Market In Real Estate (sucks people back in)

As I have said in one of my previous posts (US Real Estate At A Turning Point), this is how the bear market works. This is the stage #2 bounce, before the big decline (stage #3).  The bear market tends to suck people back in, offer them perceived safety and a high return before slamming the door, ripping their head off, drinking their blood and taking all of their money. The US Real Estate market is topping in Stage #2 run up here. That is why you are seeing so many divergences. The market should turn down soon. Beware.  

Dead-cat-bounce-graph-yahoo-finance

FUTURE OF REAL ESTATE:

Real estate is not made of Gold.  There is a tremendous amount of land available in California, Florida, Nevada and all over the US.  There is no housing shortage. As such, expect real estate to decline significantly in order to revert back to its natural inflation adjusted mean. It might take a few years, it might be different for various cities, but one way or another the market will get there.

BubbleBurst investwithalex

HOW FAR DOWN?

Let’s do very simple math for the San Diego market.  It doesn’t have to be exact for our purposes.

Setup:

  • San Diego Median Family Income: $61,500
  • As Per Various Financial Guidelines Families Shouldn’t Spend More Than 30% Of Their Income On Housing.  That means a $1,500/monthly payment.
  • Median Home Price in San Diego: $425,000
  • Interest Rates: 30 Year Mortgage 4.35% (Rates as of 2/21/2014) 

With such fundamental input variables median house value should be $300,000 -OR – A 30% DECLINE     ($1,500x360month@4.72%)

What if interest rates go to 7% over the next 5 years, which can easily happen? 

The fundamental value of the median house drops further to $225,000 -OR- A 47% DECLINE

Also, don’t forget that markets oftentimes overshoot to the bottom, just as they set blow off tops. In such a case I wouldn’t be surprised to see a median price of $150,000- 200K -OR- A 65%-50% DECLINE

You say impossible….. I say study financial markets. Nothing is impossible. Here is another way to look at this. Have household incomes increased 500% over the last 20 years? Nope. They have barely moved. Therefore, real estate decline in excess of 50% would simply return the prices to their inflation adjusted base.

TIMING:

In one of my earlier reports “I Am Calling For A Real Estate Top Here“ I clearly outlined the fundamental reasons of why the real estate market has peaked and is now in the process of rolling over. I continue to believe that the nationwide real estate prices are in the process of setting in a top. Since real estate is local, it is much more difficult to identify exact tops. As such, we must go back to the stock market in order gage a better understanding of WHEN the real estate market will tank.

Typically, the stock market foreruns the actual economic recession by 6-12 months. In other words, the stock market prices break down 6-12 months before Economic Data confirms a recession. While real estate prices, in theory, should start breaking down in conjunction with the stock market, that is not always the case. As such, it would be prudent for us to say that the housing prices will start breaking down 6-9 months after the start of the bear market in stocks.

As you know, it has been my claim (based on my mathematical and timing work) that the stock market topped out on December 31st, 2013 ushering in the final leg of a cyclical bear market. If such is the case, we can safely assume that we will start seeing drops in real estate prices sometime in the summer of 2014. Once the market rolls over and confirms, we should see a significant acceleration to the downside in real estate price over the next 3 years (at least).

With that said, we already starting to see evidence that the housing has topped. Please see volume data from RedFin.com below. As always, the volume of sales is first to go. Prices tend to follow. 

california-sales

WHAT SHOULD YOU DO?

That part is somewhat simple. If you do not own a home and thinking about buying one…..just DON’T do it.  You will save a lot of cash (and your down payment) by renting and waiting for the market to come down over the next few years.

If you already own a home the situation is a little bit tricky. Listen, I am no fool and understand that your house is a home and is important for family formation/structure. If you are happy with you home and could care less what is going on in the real estate market……stay put. However, if you are thinking about selling your home, right now would be a great time to do so.

If you own rental properties that generate positive cash flow and they are not in any way tied into the upcoming real estate decline, keep them. If you are buying investment and/or rental properties as a “speculation” in hopes of capital appreciation or a “flip” you are better off liquidating all of your positions (right now) and getting out. 

CONCLUSION:

Now, I understand and agree that there are various market forces at play that make the picture a lot more complicated. Interest rates, timing, mortgage finance, cash buyers, the FED, foreign buyers, speculation, location, supply/demand, etc….    However, fundamentals will always prevail over time. Everything else is just temporary BS. 

Did you enjoy this article? If so, please share our blog with your friends as we try to get traction. Gratitude!!!

Real Estate Collapse 2.0  Why, How & When Google

Posted on

Warning: George Soros Is Shorting The Market. Should You?

No matter what you think of him, when George Soros does something in the financial markets, it typically pays to pay attention.

So, what is he up to? 

As ZeroHedge reports below he is increasing his PUT option position against the stock market and increasing his CALL options position for gold mining ETFs. Let’s explore both positions a little bit further. 

While his bearish position against the market represents a small portion of his overall portfolio, about 11%, it is up significantly since Q3…… establishing a clear upward moving trend. Certainly, a large chunk of it was put in as a hedge against his overwhelmingly bullish allocation. However, I think there is something bigger brewing under the surface. 

George Soros is not stupid. I hope we can all agree on that. He is not about to go and put up a massive short position when the market is in a clear technical uptrend. Yes, he is hedging, but he is also getting ready to go short when the time is right.  I would do exactly the same thing. Test the water at a potential point of inflection (today’s market), feel it out with a small position, go big once the market confirms the downtrend. That’s just proper money management. 

I am certain Mr. Soros understands today’s macro economic environment better than anyone else out there. What he sees troubles him. Massive global credit bubble throughout western economies, emerging markets and China. Substantial asset overvaluation and a general “psychological” setup that shorts can only dream of. In other words, the market is perfectly setup for a bear leg. The bear leg that the market will exhibit between 2014-2017, as per our forecast. 

On the gold side, I am starting to like both Gold and Gold Miners here. From both the technical as well as the fundamental point of view. From the technical side, both are exhibiting signs of stabilization and a reversal. This bodes well with my fundamental analysis of the overall market. As the bear market decimates the US Economy (once again) over the next 3 years (2014-17), the FED’s are bound to keep the stimulus coming. At any cost. Trying to get inflation and dollar devaluation going. Under such circumstances Gold typically does very well. Not only as a monetary instrument of “stability”, but also as hedge against economic trouble.

So, should you short the market and buy gold?  Yes and Yes. The question is…..when? Please log in into your Premium Account to find out the WHEN.  

george-soros-investwithalex

A curious finding emerged in the latest 13F by Soros Fund Management, the family office investment vehicle managing the personal wealth of George Soros.

Actually, two curious findings: the first was that the disclosed Assets Under Management as of December 31, 2013 rose to a record $11.8 billion (this excludes netting and margin, and whatever one-time positions Soros may have gotten an SEC exemption to not disclose: for a recent instance of this, see Greenlight Capital’s Micron fiasco, and the subsequent lawsuit of Seeking Alpha which led to the breach of David Einhorn’s holdings confidentiality).

The second one is that the “Soros put”, a legacy hedge position that the 83-year old has been rolling over every quarter since 2010, just rose to a record $1.3 billion or the notional equivalent of some 7.09 million SPY-equivalent shares. Since this was an increase of 154% Q/Q this has some people concerned that the author of ‘reflexivity’ and the founder of “open societies” may be anticipating some major market downside.

Then again, as the chart below shows, as a percentage of total AUM, the put position rose to 11.1% of his notional holdings. By way of reference, as of June 30 2013, his SPY put may have had a smaller notional value, but it represented both more shares (7.8 million), and was far greater as a % of AUM, at 13.5%.

Finally, remember that what was disclosed on Friday is a snapshot of Soros’ holdings as of 45 days ago. What he may or may not have done with his hedge since then is largely unknown, and since there are no investor letters, there is no way of knowing even on a leaked basis how the billionaire has since positioned for the market.

That said, while the SPY puts are most likely simply a hedge to his overall bullish exposure, perhaps more notable was the $25 million call position that Soros put on the gold miners ETF which has been beaten into oblivion over the past year, in the fourth quarter. Does Soros think that it is finally the miners’ turn to shine?

Did you enjoy this article? If so, please share our blog with your friends as we try to get traction. Gratitude!!!

Warning: George Soros Is Shorting The Market. Should You?  Google

Posted on

Economic Survey Proves, Most Economists Are Worthless

If the article below does not prove that the economists are no better than clowns in forecasting future events, nothing else will. I don’t know why the profession exists, but I guess someone must get paid for taking past events and forecasting them into perpetuity. If you have wondered why 99.5% of the economists, including Bernanke, Greenspan and Yellen missed the 2000, 2007 and the rest of the bubbles, wonder no more.

In the past I used to think that they really know, but for one reason or another, mislead the public into believing that everything is fine. However, after watching them in action for some time, I am really beginning to think that they believe in their interpretation of reality and their “lets print our way to prosperity” approach.   Making them not only reckless, but pretty damn stupid. 

Based on the survey, the economy is about to accelerate because the weather is getting better, the emerging markets distress is over, the stock market correction is over, the unemployment rate is collapsing, corporations are hiring by the millions and only sunshine and flowers are on the horizon. Yet, you know better dear reader.  

EconomistsMessedUp

—————————————————————————————————————–
Economists: U.S. will see better growth in ’14

Despite some disappointing economic news recently, economists surveyed by USA TODAY expect the recovery to accelerate this year.

The U.S. economy is headed for stronger growth in 2014 that will steadily chip away at the unemployment rate, top economists predict in a largely optimistic USA TODAY quarterly survey.

The jobless rate, which dipped to a five-year low of 6.6% in January, will fall to 6.3% by the end of the year, their median forecast indicates.

Job gains, which averaged 194,000 a month last year, will reach a monthly average of 200,000 this year, they predict. Employers added 113,000 jobs in January, well under many economists’ forecasts, the government reported last week.

The economy got off to a slow start in January as a result of financial turmoil in emerging markets, a stomach-churning drop in stock prices and extreme winter weather that kept many shoppers at home. But the economists surveyed expect growth to accelerate after a weak first quarter, reaching a solid 2.8% rate for the year.

“I think we will regain momentum and not fall on our face,” says Diane Swonk, chief economist of Mesirow Financial, drawing a contrast with previous ups and downs in the five-year-old recovery.

Many of the 40 economists surveyed Feb 5-6 recently cut their first-quarter forecasts. Most of the change is due to the adverse January weather and an expected pull-back in business stockpiling after firms aggressively replenished shelves in the second half of 2013.

While growth late last year was driven largely by the stockpiling, this year’s expansion will be fueled by higher consumer and business spending, says Dean Maki, chief U.S. economist of Barclays Capital.

“It’s more durable,” he says.

Many were anticipating a breakout year in 2014, signaling a new course for a generally sluggish recovery. Households have shed much of the debt they amassed during the mid-2000s real estate bubble. A stock run-up and rising home prices have made consumers feel wealthier. And the effects of federal spending cuts and tax increases are fading, while state and local governments are poised to increase outlays after years of austerity.

Several economists say those improving fundamentals remain intact. Some see financial troubles in emerging markets such as Turkey and Brazil as risks to the USA’s outlook. Chris Varvares of Macroeconomic Advisers has trimmed his growth forecast, saying the turmoil could curtail U.S. exports and stock prices, crimping business investment and consumer spending.

But more than eight in 10 of those surveyed said January’s stock sell-off and emerging markets’ woes have not caused them to be less optimistic about growth this year. Sixty-four percent said their 2014 forecasts are more likely to prove too conservative than too rosy.

Maki says the recent stock swoon pales compared to last year’s market gains and is unlikely to hurt consumer spending this year. Rising interest rates may cause Americans to buy smaller homes, but they shouldn’t deter purchases, he says.

Did you enjoy this article? If so, please share our blog with your friends as we try to get traction. Gratitude!!!

Economic Survey Proves, Most Economists Are Worthless Google

Posted on

The Russian Machines Are Coming. Save Yourself

Great analysis of how Skynet will take over the world and nuke mankind back to the stone age. In all seriousness, a great read if you believe robotics will have a significant impact on our economy and our labor force over the next few decades. While I believe the author comes to a “pie in the sky” conclusion, the reality is brutal. 

Today’s robots can already replace some of the blue color/white color workers at the cost of $3.40/hour. With technology improvements the cost of robotics is expected to plummet over the next decade. Will anyone be able to compete against $1.10/hour robots who don’t whine, form unions or take pissing breaks? Let me think about that for a second.

terminator-investwithalex

—————————————————————————————————————————————
The Bear’s Lair: What happens when the robots take over?

February 3, 2014 posted by Martin Hutchinson

The economic disruption will be considerable, but robots will likely be a boon to the economy by pushing technological frontiers and facilitating entrepreneurship.


MIT professors Erik Brynjolfsson and Andrew McAfee in their new book, “The Second Machine Age” (Norton, 2014), look at recent advances in machine capability and suggest that we are going through a second Industrial Revolution, with robots soon capable of taking over massive new areas of human activity. Their picture of a world with ubiquitous robots is interesting but lacks definition; there is rather too much popular, but fallacious, economics and not enough futuristic robot wisdom. I thought therefore that I would fill the gap, using their admirable analysis of what robots might be able to do and consider, using better economics albeit infinitely less understanding of robots, what kind of a world this would produce. 

The move to a world of robots has been slower than the 1950s expected. On the one hand, Moore’s Law, formulated by Intel founder Gordon Moore in 1965 and which says that the capacity and speed of computers doubles every two years, has been fully in operation since that time. On the other hand, many quite simple operations are in fact very difficult indeed for robots to carry out. For example, according to “The Second Machine Age,” it currently takes a robot fully 24 minutes to fold a towel.

This makes robots a lot less useful than they might be. The Jetsons world of a universal robot housemaid is still decades away. If it takes a robot 24 minutes to fold a towel, it presumably takes it several hours to make a bed properly and days-upon-days to clear up the living room after the kids have been through. We therefore are reduced for the foreseeable future to the simple iRobot Roomba, an admirable machine that is nevertheless modestly capable only of vacuuming the apartments of compulsive neat-freaks who don’t scatter junk about.

The most exciting part of the book is its description of the ways in which the power of computers is beginning to make things possible that were previously regarded as beyond the machines’ capability. While the doubling period has slowed somewhat, from little over a year to about two years, sophisticated advances in design have enabled engineers to overcome physical barriers that had been thought impenetrable. 

That means that problems that appear impossible may be relatively straightforward only a decade later when computers are some 32 times more powerful and faster. In 2004, a DARPA race for self-driving cars was a fiasco; ten years later Google self-driving cars are buzzing all around the streets of Mountain View (although there still may be difficulties in extreme driving situations). Beating Grandmasters at chess was the great achievement of IBM’s Watson in the late 1990s; 15 years later Watson can even match wits with the far greater intellects of “Jeopardy” champions (though switch to “Wheel of Fortune” without reprogramming and Watson is toast).

There is thus good news for harried homeowners: the move to a “Jetsons” robot housemaid is only a matter of time. For example the robot which takes 24 minutes to fold a towel simply needs a few more iterations of Moore’s Law. After 10 more iterations, in 2034, the robot will be able to fold a towel in 1/1,024 of its present time, or 1.4 seconds. Problem solved: the towel closet will no longer be a baffling intellectual Matterhorn for the robotic household help. 

Before rejoicing at the future capabilities available to us, we should however remember the Great Moore’s Law Compensator, propounded by Niklaus Wirth in 1995, which says that software is growing more sluggish and complex faster than computer power is increasing. For example, according to a 2008 InfoWorld article, the 2007 version of Microsoft Office performed approximately half as fast on a 2007 computer as the 2000 version did on a 2000 computer.

The entry into robot bliss is thus not guaranteed. What’s more, the authors lose considerable credibility when they take a mechanistic approach to technological change, asserting that very little changed in the millennium before 1750 and that “human population growth and social development were very nearly flat until the steam engine came along.” 

While I defer to nobody in my admiration for Song Dynasty China, the fact remains that from about 1500 technological change was rapid in the West. In Britain, at least, this was accompanied by considerable economic growth. Anyone who has read N.A. M. Rodger’s excellent history of the British Navy, for example, will know that Nelson’s flagship “Victory,” built in 1759, could have blown the entire 1588 Spanish Armada out of the water single-handedly because of its guns’ greater range, higher muzzle velocity and much faster reload time.

Even today, productivity has advanced less than you think. The great Earl of Clarendon, exiled in 1667, compiled his magnificent “History of the Great Rebellion” of about 1.2 million words, a three-volume autobiography, an excellent refutation of Hobbes’ “Leviathan” and several other books—a total of about 2 million carefully researched words—almost entirely in the seven years before he died. And he was working with a quill pen, in candlelight and moving from one temporary exile abode to another, haunted by the illnesses of old age and seventeenth-century medicine. Given the amount of learning involved and the quality of the prose, there is no modern writer who could do as well, with all his modern equipment. 

While a computer could certainly compose 2 million words in half an hour or so, they would be rubbish, little better than the output of a million monkeys on typewriters. Even at the level of investment recommendations, one can easily spot the automated ones, and however many further iterations of Moore’s Law we get, they are not going to enable a computer to write like Clarendon. Typesetting and proofreading Clarendon’s “History” took the Oxford University Press several years in 1699-1703; that would certainly be quicker today, but the actual writing wouldn’t.

One area where future robots may provide major productivity lifts, however, is medicine. IBM is already attempting to turn Watson into “Dr. Watson,” capable of undertaking medical diagnosis. The theoretical knowledge is of course no problem here; the difficulty is applying that knowledge to individual cases. Once diagnosis is possible, one can imagine robots undertaking surgery—presumably only after they have got towel-folding down cold. There are a number of mechanical operations in surgery that one would not wish carried out at one hundredth the normal speed.

This offers the possibility of a really major advance. Medicine is, after all, only maintenance of the human body; it is thus ridiculous that it should cost 17% of GDP. It’s as if a $30,000 automobile required $5,000 of garage work every year in order to keep it on the road. That may have been the case with the unreliable beasts of 1910, but today the maintenance proportion is far below that. Similarly, we can envisage medical costs being reduced by robotics to the 5% of GDP or so that they historically averaged in 1960. That would leave 12% of GDP available for other things and relieve a huge burden from government budgets.

The authors’ economic prescriptions for dealing with a robotized world are disappointing – standard Whig rubbish including higher taxes on the rich, handouts to the unemployable impoverished and, incredibly, more immigration in spite of their assumption of massive low-skill unemployment. Their one really helpful insight is that in many areas a combination of machine and human can produce results superior either to unaided humans or unaided machines (apparently a man-machine combination can still ace “Jeopardy” against IBM’s Watson.) Presumably a man/machine combination might prove especially capable in the medical area, at least for highly specialized processes.

At first sight, that sounds like a solution to the unemployment problem the authors so eloquently point out. As robots take over household and low-wage tasks, such as janitorial services, landscaping, food service and low-end retail, people can be attached to the robots in areas where a robot-human combination is optimal. However, there are almost certainly far too many humans for this to work, because as in a modern factory one human will be able to supply the “human factor” for a dozen robots or more, leaving a huge surplus of unemployed labor. Once again, as in so many other areas of human activity, when one looks forward one is forced to the conclusion that the system will only work properly with a population perhaps one tenth of that today – in other words about the 1 billion humans of 1800 about which the authors are so scathing. Maybe the population increase that accompanied industrialization isn’t permanently sustainable after all, but merely a giant blip.

Contrary to the authors’ estimate, I do not see further inequality or mass unemployment from the robot revolution. By all means, there will be actresses and athletes paid excessive sums, as the entertainment complex has always valued the tiny extra stratum of excellence. For the rest of us, however, apart from those who design robots or interact with them in some way, there will be the universe of “long-tail” products and services appealing to a small minority audience. 

Authors, artists and musicians have always made a living appealing to a relatively small group of connoisseurs.  While J.K. Rowling is a billionaire, that kind of wealth from the arts is a modern phenomenon. Dr. Johnson, the most successful writer of his age, was only able to live comfortably because of a royal pension of £300 per annum granted by George III. In a world of robots and 3D printing, the opportunities for specialized, quirky, non-machine-made output in the arts and crafts (or, by all means, “twerking” pop music) will be much greater than today, and hundreds of millions may find satisfaction and a modest living thereby.

I can almost get enthusiastic about the advent of genuinely functional robots. I was brought up in the 1950s and 1960s expecting that everything would be robotized by now, so it’s good that it’s actually happening. The economic disruption will be considerable, but I refuse to believe we will enter a world where 80% of the population lives on welfare while the other 20% pay 90% income taxes to support them. Instead, I think arts and crafts will support far more of us than they do today, while others will work with the robots and a small group will push forward the technological frontiers or engage in entrepreneurship. It will be a more prosperous world if we have fewer people. But that also is a problem we can solve if we have to, possibly through interstellar travel—that other fantasy of the 1950s that has been unaccountably delayed. Above all, it will still be free, and we will be richer, not poorer.

The Russian Machines Are Coming. Save Yourself Google

Posted on

Ukraine Imposes Capital Controls. Is Ukraine About To Collapse?

Typically, governments don’t impose capital controls on bright shiny days. They do it right before shit hits the fan. Argentina and Venezuela are perfect examples of that. No doubt Ukraine is on the brink of a political collapse or worse, much worse, economic collapse. With political meddling from EU, US and Russia, this powder keg is about to explode. If you know anything about the region, understand one thing. There is no way in hell, in this universe and the next, that Putin will let Ukraine go to the EU or Western side. As far as Russian government is concerned, Ukraine is still part of the iron “Soviet Union” and will remain so for the foreseeable future. No matter how many tantrums the UE or the US throws. Yet, even with Russia’s support I would expect Ukrainian economy to be flushed down the toilet and soon. Capital controls are never short term and are never good. Expect the worst especially when the Ukranian Government assures otherwise. 

ukraine currency

————————————————————————————-
Ukraine Imposes Capital Controls as President Meets Putin

Ukraine’s central bank imposed limits on foreign-currency purchases, bolstering a sagging hryvnia after interventions failed to, while President Viktor Yanukovychprepared to meet Russia’s Vladimir Putin in Sochi.

The monetary authority set a monthly cap on foreign currency purchases for individuals and imposed a waiting period of at least six working days for companies and people, according to a statement on its website yesterday. The crisis, in its third month, has rocked the hryvnia, squeezing reserves as authorities struggle to contain a record current-account gap.

With a leak of undiplomatic language from a U.S. diplomat rattling ties with the European Union as they discuss potential aid, Yanukovych traveled to the opening ceremony of the Sochi Olympics where he is to meet the Russian president, who halted payments from a $15 billion bailout after nationwide protests led to the cabinet’s collapse.

“It may be difficult for the central bank to contain the situation until there is more clarity regarding a bailout from Russia or, potentially, from the West,” Ben Griffith, an analyst at Victoria 1522 Investments LP in San Francisco, said by e-mail. “The market needs to know what changes would cause Russia to pull its agreement or cause the Western bloc to step in with assistance.”

Hryvnia, Bonds

The hryvnia, which has fallen to a five-year low of 9 per dollar several times in the past three days, gained 3.6 percent to 8.545 by 12:59 p.m. in Kiev, the biggest gain since September 2009, according to data compiled by Bloomberg. That pared the decline this year to 3.4 percent.

“The decision by Ukraine’s central bank to impose targeted capital controls should bring some short-term relief to the hryvnia,” Neil Shearing, a London-based analyst at Capital Economics, wrote in an e-mailed report today. “But it is unlikely to prevent further falls in the currency over the coming months.”

The yield on Ukraine’s dollar bonds due this June rose 191 basis points, or 1.91 percentage points, to 16.67 percent yesterday, the highest since before the Russian bailout was announced Dec. 17. The rate was 97 basis points lower at 15.70 percent at 2:18 p.m. today.

The cost of insuring the country’s debt against non-payment for five years using credit-default swaps fell 15 basis points to 1,071 after reaching the highest in almost two months yesterday, CMA data showed.

Did you enjoy this article? If so, please share our blog with your friends as we try to get traction. Gratitude!!! 

Book Formlead Big

Ukraine Imposes Capital Controls. Is Ukraine About To Collapse?  Google

Posted on

Why Is Donald Trump Freaking Out? He Knows What Will Happen In The Real Estate Over The Next Few Years. It’s Time You Find Out As Well.

housing bubble

Today’s 5-10 Minute Podcast Covers The Following Topics:

Reader’s Question: “I am thinking about buying a house, the prices are up significantly in my area over the last few years, should I do it now or wait?”  – Lili, Maryland. 

    • The Secret Behind Today’s Real Estate Prices. 
    • What The US Government Doesn’t Want You To Know About Real Estate. 
    • What Will Happen Next. Trust Me, It Is A 100% Certainty Now. 
    • What You Should Do To Save or Make A Lot Of Money Over The Next Few Years. 

Please tweet me your questions @investwithalex

Did you enjoy this podcast? If so, please review it on iTunes and share it with your friends as we try to get traction. Gratitude!!!

Posted on

Daily Stock Market Update. InvestWithAlex.com February 4th, 2014

Daily Chart February 4, 2014

Continue to maintain a LONG/HOLD position if invested -OR- be in CASH if not. 

2/4/2014 – A fairly slow bounce day in the market with the Dow Jones being up 72.44 points (+0.47%) and the Nasdaq being up 34.5 points (+0.86%). 

As of right now there is no indication in my mathematical work that this particular bear leg from the December 31st, 2013 top is over. I have a number of points of force showing a lower Dow Jones before an eventual turn around and a bounce. I advise that you continue to maintain our In Cash -or- Hold/Long position as we wait for the bear market confirmation. 

While such a stance might cause further short-term losses, it is the most prudent thing to do from a long-term trading strategy.

Short Term Update:  My short-term update includes exact points for force and anticipated turning points in both price and time. If you would be interested in knowing when the market will turn around….please visit our premium Subscriber section. 

Did you enjoy this article? If so, please share our blog with your friends as we try to get traction. Gratitude!!!   

Daily Stock Market Update. InvestWithAlex.com February 4th, 2014 Google

Posted on

Why Is National Association of Realtors Trying To Destroy America …..Again

 CNBC Writes: Pending homes plunge, surprising economists

evil realtos investwithalex

Signed contracts to buy existing homes dropped 8.7 percent in December as abnormally cold weather hit much of the U.S., according to a new report from the National Association of Realtors.

The plunge caught economists by surprise. Economists polled by Reuters had forecast pending home sales would tick up 0.3 percent.

This pending home sales index fell to 92.4 from a downwardly revised 101.2 in November. These signed contracts are an indicator of sales in January and February, and are at the lowest level since October 2011.

“Home prices rising faster than income is also giving pause to some potential buyers, while at the same time a lack of inventory means insufficient choice. Although it could take several months for us to get a clearer read on market momentum, job growth and pent-up demand are positive factors,” said the association’s chief economist, Lawrence Yun.

There is close to 1 million Real Estate Agents in the US. I think it’s time we give a serious consideration to rounding them all up and shipping them to Siberia.  Maybe we can make some sort of a deal with Mr. Putin in exchange for oil or natural gas.  For all I care, let them sell pine trees to hungry bears in Taiga and get paid with berries. We should start with Lawrence Yun.

Come on!!! Does anyone even believe NAR fools anymore.  Keep in mind, NAR  is the same organization that was cheering the housing bubble all the way until it blew up and killed all of those poor souls in Florida, California and Nevada who couldn’t fog a mirror yet each had 10 houses to their name. Now they are blaming the “cold weather” for a severe plunge of 8.7%.  Jesus Christ, I guess it was too cold for all of those Chinese investors and hedge funds with bags full of money to buy real estate in southern states.  

Unlike NAR, dear reader, I will not insult your intelligence.  You see, in my October post  “I am Calling For A Real Estate Top Here“, I clearly outlined a case for why the real estate market is finishing its “Dead Cat Bounce” and is about to roll over to continue its bear market that started in 2007.

What is a dead cat bounce? Allow me to present a powerful illustration I worked on for 2 days.

Dead-cat-bounce-graph-yahoo-finance

Such bounces exist, once again, to fool the masses. They act to suck people back in with the promise that the worst is over.  Fools rush back in only to have the trap snap shot right behind them.  On Friday I wrote about Hedge Funds funneling money to plumbers and dentists so they can become “landlords”. If that doesn’t scream out “Market Top”, nothing else will and you are on your own.

Today’s real estate market is not the function of economy, jobs, supply/demand, family formation or any other crap real estate propaganda machine (aka NAR) would like you to believe. It is a function of credit and speculation.

It is has been artificially driven up by over $3 TRILLION of monopoly’s money being pumped into our economy by Uncle Ben.  No, not the Uncle Ben that sells rice, but the one at the FED.

When the credit bubble goes, you will find the real estate bubble collapsing along with it…..again. 

Did you enjoy this article? If so, please share our blog with your friends as we try to get traction. Gratitude!!!

Why Is National Association of  Realtors Trying To Destroy America …..Again Google

Posted on

TIMED VALUE is ready. Get Your Copy Today

3d Timed Value Cover 2

 

My investment book is finally ready. I am incredibly excited and proud of it. This is a one of a kind book that talks about my “Timed Value” style of investing and my secret mathematical approach to market timing. If you would be interested in learning more about the book please CLICK HERE to get 2 free chapters and further information.

Book summary…. 

Have you ever wondered if it was possible to generate outsized investment returns by timing the stock market and/or individual stocks with great precision?

If you have, this book is for you.  Financial media and most financial professionals would lead you to believe that such a task is impossible.  Yet, Timed Value challenges this traditional assumption head on by presenting a clear cut case that the stock market is not random,  on the contrary, it is precise.

The book starts by discussing the traditional aspects of “Value Investing”, its hidden secrets and problems.  The second part of the book shifts into the timing aspect by showing the reader the exact calculations needed in order to time the market or individual stocks with stunning accuracy.

Further, the author shows “HOW” once the stock market structure is understood in its entirety,  the market or individual stocks can be timed with great precision. Not by some arbitrary technique that cannot be replicated, but through the use of modern science and mathematics. Math doesn’t lie and when the market turns/reverses at exact mathematical points of force,  only one explanation remains. The market is not a randomly volatile instrument, but a mathematically precise tool that baffles the mind. 

As such, this “How & Why” stock market timing masterpiece is a must have book for any true market practitioner or those wanting to improve their overall returns. 

Posted on

From Flipping Real Estate To Flipping Real Estate

Breakout Writes: Underwater mortgages are a bigger problem than the national average suggests

flipping real estate investwithalex

If you follow real estate prices or sales trends or the number of homes going into foreclosure, you’re apt to have a pretty positive feeling that things are improving. If you dig a little deeper, however, and look only at the 15 hardest hit states, you’ll find a totally different story.

While these outlier markets and metropolitan areas are also seeing improvement, they are still years away from breaking even and being whole again.

For example, December’s headline data from RealtyTrac showed the national rate slipping to 18% of homes being underwater or having negative equity (which simply means a homeowner owes more than the property is believed to be worth), but at the bottom of the scale, there are still 9.3 million “deeply underwater” homes that are in the hole by twenty five or more. In fact, six states that are at least ten points above the national average of 18%, including Nevada (38%), Florida (34%), Illinois (32%), Michigan (31%), Missouri (28%), and Ohio (28%).

The case in certain cities is even worse, as the latest data shows towns such as Las Vegas, Orlando, Tampa and Chicago still have negative equity ranging from 33 to 41 percent.

Read The Rest Of The Article

What a shocker. Las Vegas still has negative equity to the tune of 33-41% even though Blackstone and other investors have been buying real estate by the billions in the city (to the tune of 50-70% of all transactions in the city are to all cash buyers/investors). I wrote about it in my previous article Timing The Real Estate Market Crash.

Is this good or bad? It depends on who you listen to. If you listen to traditional media and real estate professionals, this is of course, great news. The real estate market has bottomed and on the way up. Eventually, the negative equity in question will be recovered. However, if you listen to assholes like me, someone who would publish a blog post titled I Am Calling For  A Real Estate Top Here, you would have a different point of view.

Listen, this is fairly basic and easy.  The real estate market recovery has been driven by excessive credit available to financial institutions, private equity and investors (not you). Still, while some select markets, such as So. Cal, have almost fully recovered, the rest of the country continues to lag behind. As the article above suggests, to the tune of 30-40%.

What troubles me the most is the fact that the real estate market is starting to roll over. As the stock market declines into the 2017 bottom, the US Economy will once again experience a severe recession. The real estate market will also roll over and begin its 3rd leg down. As I have suggested previously, the 3rd down leg down is the most severe. As such, I wouldn’t be surprised to see real estate decline to the tune of 20-50% from this point on.

My valuation work displayed HERE showed that real estate could and technically should decline to the tune of 45-70%. As such, it pays to anticipate things. 

Did you enjoy this article? If so, please share our blog with your friends as we try to get traction. Gratitude!!!