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I Am Calling For A Real Estate Top Here

Daily Ticker Writes: “The Party Is Over” for Housing — and Bank Earnings:

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Market watchers are increasingly concerned about recent weakness in the financial sector.

In a related development, technical analyst J.C. Parets of All-Star Charts has expressed concern about a potential topping pattern in JPMorgan while blogger ChessNWine identified a bearish pattern in Goldman Sachs “with potentially devastating ramifications to financials.”

“The party is over” for refinancing activity while a weak job market and flat consumer incomes are preventing a pickup in purchase activity, Whalen says. “Structural reasons, apart from rates [mean] you’re going to see a real tail-off in demand” for mortgages.

Read The Rest Of The Article Here

Those following the Real Estate market should be very concerned with the data coming out. It is showing that the top is very near or has already been set. If you actively participate in the real estate market this is an important issue to watch.  Let’s look at some bullet points.

  • Refinancing is down substantially.
  • Banks are shutting down/moving their mortgage operations and firing tens of thousands of people. They expect a substantially lower volume going forward.
  • Interest rates are much higher from a year ago and are likely to rise further.  
  • Rapid speculation in various markets. Las Vegas and So.Cal.
  • Banks are lowering their earnings due to much lower volumes.
  • Bearish technical patters are starting to develop in real estate and financial stocks.
  • Both the US Economy and the stock market are facing severe declines.
  • Please see other factors in my previous posts CLICK HERE

These are just a few, but it gives us enough information to paint a clear picture. Real estate is toast. The rebound that we have experienced over the last 2-3 years is now over (or nearly over).  While various local markets might top at different times, the overall real estate market is topping right now and should start its decline shortly.

Therefore, I feel confident enough to call for a real estate market top right here and now.  I am going on the record here. Even if I am a few months early I believe it is a good call.

“I never buy at the bottom and I always sell too soon.” – Baron Rothschild

If you are in, now is a good time to get out.  

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Hello Beijing, Washington Here. Listen, Do We Have Your Permission To Shut Down Our Government?

Reuters Writes: Analysis: Default or not, Asia a hostage to U.S. debt

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SEOUL/BEIJING (Reuters) – Unless the U.S. Congress settles a political showdown to raise the country’s debt ceiling in coming weeks, it will be left on the edge of an unprecedented default. But America’s main creditors in Asia may be the least of its worries.

The creditors – China, Japan and other Asian governments – have a hoard of U.S. Treasuries in their $5 trillion cache of foreign exchange reserves, the equivalent of almost a third of U.S. gross domestic product.

Despite having so much at stake as bond prices lurch violently, they are not about to do anything more than minor tweaking of their portfolios.

“But the expected returns from bond investment will fall greatly in the future,” Choo said. “How to deal with this structural change in investment environment is what all the central banks are agonizing over.”

U.S. bond yields have already risen more than 100 basis points since May, when the Fed first indicated it is going to cut back on its $85 billion per month asset purchases.

Read The Rest Of The Article Here

With a lot of theatrics going on in Washington, I do not believe Asian countries debt holders should worry about any sort of a default. At the end of the day, the US Government will pay on all of its obligations.

The biggest story here is not the shut down or the potential default, but the eroding confidence in the US Economic and political system.  The US politicians are acting like a bunch of 5 year olds on the playground (I guess no surprise there) while the rest of the world is watching. Why is this important? Very simple.

Not a good idea when you OWN $16.5 TRILLION 

If Asian creditors see this continue, they could (well, they should) in theory start reducing their US Debt exposure.  As that happens, yields would spike leading to a significant stock market and the US Economic decline. So, as the US Politicians aimlessly point fingers at each other while scarring the rest of the American people with Economic Armageddon,  our creditors are watching very closely. That’s what we should be really worried about. 

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America Will Eat Its Own Young

Business Insider Writes: Go-Nowhere Generation: Why Young People Are Stuck

drunk americans 

At a time when young Americans have never been more connected, they sure have gotten used to staying put.

The chance that 20-somethings would pack up and move to another state has fallen by more than 40% since the 1980s, according to U.S. Census data. At the same time, young people are increasingly choosing to move back home with their parents and, in some cases, never leave in the first place.

“Sometime in the past 30 years, someone has hit the brakes and Americans — particularly young Americans — have become risk-averse and sedentary ,” Todd G. Buchholz, author of “Rush: Why You Need and Love the Rat Race,” wrote in a controversial NY Times piece. ” Today’s generation is literally going nowhere. This  is the Occupy movement we should really be worried about.” 

Read The Rest Of The Article Here

Interesting article and I highly recommend everyone to read it.

I am not sure what to think of it.  Is American youth staying put due to latest technological advances that make it easier to communicate -OR-  have years of what I call “You Are The Best” generation and narcissism finally catching up to the American youth?

Are they too scared to leave their homes and face failure? If so, that is not a good trend for the health of the US Economy or the Nation overall. It is too early to say, but it is definitely a good trend to watch closely.

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Derailed Recovery

Forbes Writes: Mixed Messages For Bernanke Shouldn’t Derail QE Taper, Despite Lower Inflation

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As investors intensify their scrutiny of the Federal Reserve, economic indicators continue to send out mixed messages.  Inflation, as measured by the CPI, eased once again in August, according to theBureau of Labor Statistics, but remains relatively anchored, indicating Chairman Ben Bernankeand the FOMC could be closer to tapering quantitative easing, possibly on Thursday.

Mixed economic indicators continue to baffle a market that seems to have prepared for a reduction in the Fed’s supportive asset purchases, or QE.  Inflation, one of the main monetary factors observed by Fed officials, has been consistently low, yet not alarmingly so.  Over the past 12-months, CPI is up a meager 1.5%, down from 2% in July.

While the U.S. economy has remained relatively resilient, with GDP growing 2.5% in the second quarter, it is by no means out of the woods, as the labor market remains weak and financial conditions have tightened, particularly in mortgage markets which are closely scrutinized by the Fed, Goldman Sachs’ economics research team said.

The Federal Reserve, which is in the midst of a transitional period as Chairman Bernanke’s term expires early in 2014, is looking to reduce its level of asset purchases to avoid inflating asset bubbles and creating further imbalances.  Investors are looking for the FOMC to cut down on QE on Thursday, possibly reducing asset purchases by $5 to $10 billion to $75 to $80 billion a month.

In order to continue with the plan laid out by Bernanke in his previous conference, in which the Fed expects QE to end by mid-2014, Fed officials will want to see a pickup in inflation that strengthens their view that deflation is not a looming problem.  “While the stabilization in core [CPI] is likely sufficient for Fed officials to start the tapering process [Thursday], officials are counting on some acceleration in coming quarters,” explained Jim O’Sullivan, chief economist at High Frequency Economics, who added, “such acceleration will likely be needed for a full wind-down of QE and will almost certainly be needed before the tightening cycle begins.”

Read The Rest Of The Article Here

A very good overall summary of the existing US Economic and Financial Market state that comes to a wrong conclusion.  It somehow assumes that the Fed and US Government are in control of the US Economy and will direct it into whatever direction they wish to improve existing metrics and to maintain the course.

However, that is a fools assumption.  They are not in control of anything. The 2007-2009 meltdown was a clear example of that. No matter what they have tried,  the market kept going down until it hit its March 2009 technical bottom and reversed itself. If that doesn’t convince you of the fact that they have no control, nothing will.

Now, the article states that the policies the Fed has instituted are design to avoid future financial asset bubbles and volatility associated with it. What it fails to mention is that we are ALREADY in the largest financial credit bubble of all time. Bigger than 2007.  And guess what, it was done on purpose by the Fed to avoid a deeper recession.

As Fed cut back on QE, interest rates will go up and in doing so will collapse the real estate market, the stock market and the overall economy.  Oh, I forgot to mention something. It will not be fast and will most likely take years. However, the process itself has already started. Get your affairs in order.  

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US Auto Sales Are About To Crash

Bloomberg Writes: American Auto Sales Seen at Annual 16 Million With Profit

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The U.S. auto market is poised for a fifth straight year of growth for just the second time since World War II. The recovery from the recession has been so robust that the debate is now whether sales will reach 2000’s record levels — and whether that would even be a good thing. 

Deliveries of new cars and light trucks may rise to 16.1 million next year, the average estimate of 13 analysts in a survey by Bloomberg News. That’s about 500,000 more vehicles than automakers are on pace to sell this year and while it’s within reach of 2007’s 16.15 million, it’s well short of the 17.4 million peak.

Since the annualized pace of auto deliveries in August exceeded 16 million for the first time in six years, analysts have been looking back at the last time sales were so brisk. Six years ago, while sales were still above 16 million, Detroit was losing billions, saddled with high costs and poor cars.

“It’s not just the number 16 that’s amazing,” George Magliano, chief economist for IHS Automotive, said by telephone. “It’s the fact that it’s coming effortlessly. We’re not dumping cars and trucks into the fleets. We’re not using humungous incentives to move them. It’s a reflection of people’s willingness to buy and the strength of the product out there.”

Read The Rest Of The Article Here

Listen, I don’t know why this was so difficult to understand.  All improvements in the US Economy over the last 5 years were caused by a massive infusion of credit and money supply at ridiculously low interest rate. Nothing else. The recovery is an artificial one and is coming to an end.  

It is not different for auto sales. As a matter of fact, today it easier to get an auto loan than to get a doctor’s appointment. I am once again hearing things like, “If you got a pulse, you will get an auto loan”. Well, that’s great, but didn’t we already see this in the real estate sector just 7 years ago. We all know how that ended.

It’s essentially the same situation with car sales. The recovery from the recession has NOT been robust as the article states. This is a simple matter of a Financial bubble that the FED has once again blown. It is massive and it will blow up. When it does, car sales will collapse along with everything else.  

It will be great to be a used (excuse me, “pre-owned”) car buyer over the next few years with all of the repossessions that are surely to flood the market. 

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46.5 Million Americans Live In Poverty. Blame The US Government.

Associated Press Writes: Poverty rate stuck at 15 percent; record 46.5 million

 poverty in the us investwithalex

WASHINGTON — The nation’s poverty rate remained stuck at 15 percent last year despite America’s slowly reviving economy, a discouraging lack of improvement for the record 46.5 million poor and an unwelcome benchmark for President Barack Obama’s recovery plans. 

More than 1 in 7 Americans were living in poverty, not statistically different from the 46.2 million of 2011 and the sixth straight year the rate had failed to improve, the Census Bureau reported Tuesday. Median income for the nation’s households was $51,017, also unchanged from the previous year after two consecutive annual declines, while the share of people without health insurance did improve but only a bit, from 15.7 percent to 15.4 percent.

“We’re in the doldrums, with high poverty and inequality as the new normal for the foreseeable future,” said Timothy Smeeding, an economics professor at the University of Wisconsin-Madison who specializes in income inequality. “The fact we’ve seen no real recovery in employment and wages means we’ve just flatlined.”

Read The Rest Of The Article Here

I am not sure why anyone would be surprised with this. Over the  last decade US has instituted policies that basically benefit the rich or those involved in the financial sector at the cost of the middle class and the poor.

Cutting interest rates close to ZERO basically provides an unlimited money supply to those already in power or with money and allows them to speculate on financial or real estate assets without risk. That in turn makes them even more money.  Since the working poor don’t have such an access they are left behind by default. I don’t see anything in the US Economic policy that would change that any time soon.

Weather this is an economic, social or political issue is for you to decide. However, I would just mention that the US Economy cannot perform well if so many people are left behind. It might work for a while, but eventually it catches up to the rest of the US Financial system.  In this case, as the US Financial Asset Bubble (the bubble that is basically artificially keeping the US Economy afloat) implodes, there will be hell to pay. 

Maybe it’s a good idea for someone to open a Guillotine manufacturing company in the US. 

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Hey China, What Is That On Your Balance Sheet

Reuters Writes: Analysis: China eyes private funds to tackle bad-debt buildup, avoid bailout

chinese conundrum

(Reuters) – Faced with a chorus of warnings that China risks choking on bad debts, Beijing is pushing banks to raise private capital in an effort to head off the need for a second government bailout in as many decades.

The hangover from a credit binge that powered China’s swift recovery from the global financial crisis, combined with the economy’s slowdown, has prompted expectations of a repeat of the early 2000s, when Beijing shored up its major banks with hundreds of billions of dollars.

Right now, however, authorities appear focused on pushing banks to bolster their balance sheets by aggressively enforcing new international bank capital requirements, known as Basel III.

Some analysts say warnings of an impending crisis are overdone.

Goldman’s analysts calculate that China’s total debt-to-GDP ratio has surged by 60 percentage points since the global financial crisis. It says such a rapid increase is often associated with financial crises, even if the absolute level of debt is not excessive.

“China must get to a point where it can get back on a healthy growth path that is not dependent on massive amounts of credit every year,” said Fitch’s Chu last month.

Read The Full Article Here

As I have written many times before. I believe China is in big trouble. The article above clearly illustrates the fact.

Basically, no one really knows what is on the balance sheet of Chinese Banks. Not the government, not bondholders, not investors and in many cases not even the banks themselves. However, the nonperforming loan numbers being thrown out by some analyst are downright scary.

Does Chinese Government sees/understands that and by pushing banks to raise private capital trying to “Scam” outside investors while minimizing impact on Chinese economy in case of a collapse?

I believe so. What they are trying to do is recapitalize the banks before Credit Time Bomb in Chinese financial system goes off.  Mind you, any collapse can happen very fast in China. Just as it happened for Lehman Brothers in the US in 2008. Once nonperforming loans truly blow up and liquidity dries up, most Chinese banks might fight themselves insolvent literally overnight (just as Lehman did). Be aware and beware of this.  

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University Education. Another Massive US Financial Bubble.

Bloomberg Writes: Google’s Boss and a Princeton Professor Agree: College Is a Dinosaur

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Colleges and universities are indecisive, slow-moving, and vulnerable to losing their best teachers to the Internet.

That’s the shared view of Google (GOOG) Executive Chairman Eric Schmidt and Anne-Marie Slaughter, a former Department of State official and until this month a tenured professor at Princeton University. They explored the problems of higher education on Friday in a one-on-one conversation sponsored by the New America Foundation, where Schmidt serves as chairman and Slaughter is the new president.

Colleges have the luxury of thorough, democratic deliberation of issues because “they never actually do anything,” Schmidt said during the event. He cited Princeton, where he graduated in 1976 and once served as trustee, which spent six years deliberating over whether to change its academic calendar—and in the end did nothing. “Don’t get me started on that,” Slaughter laughed.

Slaughter agreed that traditional colleges and universities, with their high fixed costs, are at risk. “They’re going to lose their top talent,” she said. “We can become global teachers. The best people can become free agents.”

Read The Rest Of The Article Here

It is unbelievable how much College Education costs today. The cost of education has gone up by  7-8% per year over the last decade. Some colleges increased their tuition 50-100%  during the same time. Basically the costs of educations has skyrocketed.   

Is there a reason for that? Not particularly. Schools are just getting way too greedy. On top of it all there is $1.2 Trillion of student debt out there. That is a truly staggering amount .  The worst part about this whole “college scam” is the fact that we are ending up with a generation of college graduates who are so deep in debt that it will literally take them decades to get back on their feet.  That in return puts a significant drag on the US Economy as major purchases such as cars and homes would have to be postponed.   

I will have a complete breakdown of this enormous problem in my future posts, but for now I do hope new technologies discussed in the article above blow this “College Monopoly” sky high.  It is a must for our future economic growth. We must find a way to provide affordable education to the masses. That would be a win-win for everyone.   

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US Congress and Senate Is Full Of Vomit

Yahoo News Write: U.S. lawmakers unite in fury over Putin’s op-ed in New York Times

crazy mccane

 

It’s not every day that an opinion piece in The New York Times simultaneously insults the Republican speaker of the House and nearly causes the top Democrat on the Senate Foreign Relations Committee to  “vomit.”

But that’s exactly what happened when Russian President Vladimir Putin penned an article calling for the U.S. government, which is considering launching a military strike on Syria for alleged war crimes, to use restraint in the Middle East. In his piece, Putin also took issue with part of President Barack Obama’s national address on Syria on Tuesday night, which made the case for military action and praised “American exceptionalism.”

“It is extremely dangerous to encourage people to see themselves as exceptional, whatever the motivation,” Putin wrote.

“I was at dinner,” New Jersey Democratic Sen. Bob Menendez said on CNN after he read the piece. “And I almost wanted to vomit.”

Other lawmakers were equally blunt.

“I was insulted,” House Speaker John Boehner told reporters on Thursday morning. “I’ve probably already said more than I should have said, but you’ve got the truth.”

Arizona Republican Sen. John McCain called Putin’s piece an “insult to the intelligence of every American.”

Read The Rest Of The Article Here

 

Yesterday, President of Russia, Vladimir Putin sent an open letter to the American people published by The New York Times.  You Can Read The Letter Here. As a matter of fact, I challenge you to read the letter before you continue. 

Let’s put away any sticking points or special interest between Russia and the US for a second. Yes, you can argue it is a divergence and Russia is playing their own game, but stick with me for a second.

Shockingly enough, Putins message is fairly simple. It is the message of peace and desire for reflection on what is really going on in Syria.  He is essentially asking American people to pause and really think about the situation and its ramifications on the whole region and the international community before getting into another mindless war.

What’s American response? “I was insulted”, “I wanted to vomit”, it is an “Insult to the intelligence of every American”. We want WAR and we want it NOW. We don’t even care if by doing so we are partner up with Al Qaeda.

What the hell is going on here? I am an American and I am not insulted. I think Mr. Putin brought up some very good points. I think the American Government has lost touch with reality and went completely off the rails.

I think it is our Senators and our Congressman that make most Americans want to vomit. The proposed strike on Syria has a 7% approval rating, yet these idiots are still pushing for war. While this is quite entertaining, I am watching this unfold in disbelief.   

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Germany Should Leave The European Union. Like Now!!!

BusinessWeek Writes:  German Euro Skeptics Could Give Merkel An Election Shock  

 investwithalex germany

German parliamentary elections are coming up on Sept. 22, and Chancellor Angela Merkel has a problem on her hands. A euro-skeptical political party known as AfD is rising in the polls and could deny her Christian Democratic Union and its coalition partners the majority they need to continue governing.

AfD, or Alternative for Germany, currently holds no seats in the Bundestag, and until recently it barely registered in public-opinion polls. But a survey released on Sept. 4 by the Forsa polling group showed it with 4 per cent support—just shy of the 5 per cent needed to win Bundestag representation. Peter Matuschek, Forsa’s chief political analyst, says the poll may have underestimated the party’s strength. Many supporters, he told Spiegel, “are too embarrassed to admit that they are planning to vote for the AfD,” which wants Greece, Spain, and other crisis-hit countries to leave the euro zone, and possibly break up the existing monetary union itself.

Read The Rest Of The Article Here

An important election in Germany is coming up on September 22nd.

So important in fact, that the future of European Union is at stake. While most believe that Chancellor Merkel will maintain control, there is an increasing number of observers (including myself) that believe CDU will lose control.

Why is this so important? It could spell the end of the European Union as we know it. German people are fed up with supporting Greece, Spain, Italy and the rest of the freeloaders.  European Union is a  mess on multiple levels. While it is a great idea on paper, culturally speaking there is just too many differences on both the economic and cultural level.

Germany is an economic powerhouse and it should act like it.  I believe German people feel the same way and will act accordingly in 12 days.  If Merkel losses control, I have a hunch that it will set Germany on the course to eventually leave the European Union and go back to the Deutsche Mark.  This would lead to a huge surge in German Economy and that is all that German people should care about.

As soon as that happens, European Union will collapse under its own weight. While most people believe that it would be a bad, I respectfully disagree. I think it would be a boon to all European countries for various reasons. All we can do now is wait and see.  

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