Category: Uncategorized

Bloomberg writes ” Obama Focuses on Risk of New Bubble Undermining Broad Recovery”

 

President Barack Obama, who took office amid the collapse of the last financial bubble, wants to make sure his economic recovery doesn’t generate the next one.

Obama this month spoke four times in five days of the need to avoid what he called “artificial bubbles,” even in an economy that’s growing at just a 1.7 percent rate and where employment and factory usage remain below pre-recession highs.

 “We have to turn the page on the bubble-and-bust mentality that created this mess,” he said in his Aug. 10 weekly radio address.

Obama’s cautionary notes call attention to the risk that the lessons of the financial crisis, which was spawned by a speculator-driven surge in asset values, will be forgotten, widening the income gap and undermining a broad-based recovery.

“Clearly, this is a growing concern both in the administration and at the Fed,” said Adam Posen, a former member of the Bank of England’s monetary policy committee.

Not Imminent

That may explain why six years after the housing meltdown ignited the worst recession since the 1930s and vaporized $16 trillion in household wealth, bubble reminders are intruding on Obama’s speeches.

“It’s a legitimate concern from an economic perspective,” says Roberto Perli, a partner in Cornerstone Macro, a Washington economic-research firm, and a former Fed official. “But I don’t think it’s motivated by consideration of imminent risk.”

The U.S. recovery, outpacing Europe and Japan, has created 6.7 million jobs since February 2010. Claims (INJCJC) for jobless benefits fell last week to their lowest level in almost six years. And after a two-decade-long borrowing binge, households have pared their debt burden to mid-1980s levels.

Still, growth has been below historical trend for the past four quarters, according to the ChicagoFederal Reserve Bank’s National Activity Index, a blend of 85 indicators measuring employment, production, housing and consumption.

 

Are you F$&*% kidding me?  He “wants to make sure his economic recovery doesn’t generate the next bubble”

I don’t know if I should cry or laugh. I am sorry to break it to you Mr. Obama, but as we stand today, as of August of 2013 we are in the biggest financial bubble of all time. EVER. Bigger than 1929, bigger than 2000 and bigger than 2007/8.

That’s what happens when instead of letting defaults and previous imbalances (credit collapse and real estate) work through the system, you put the pedal to the metal and paper everything over with more money created out of thin air. 

The imbalances are so massive at this point in time,  that pain is simply unavoidable. We have never seen anything like that. The result?  Stagnated and a significant US Stock Market Decline into 2016-2018 bottom. Inflation thereafter.  

AMAZING, ARE YOU STUPID ENOUGH TO BELIEVE THIS HYPE…….AGAIN?

Business Week Writes:

The housing site Redfin measures what it calls “selling velocity,” or how briskly homes are finding buyers. The faster homes go under contract, the higher the selling velocity. In the 19 major markets in February, more than a third of houses sold within two weeks of being listed. In California, the velocity is even higher. In San Jose, 63.1 percent of homes sell within two weeks; in San Francisco, 56.8 percent do. Further south, in Los Angeles, Ventura, the Inland Empire, and San Diego, about half of homes went under contract within two weeks. This is the housing equivalent of “flying off the shelves.”

Part of the frenzy comes from a lack of inventory. Buyers have returned to the market while sellers sit on the sidelines, and Redfin says inventory is down 32 percent from last year in those top markets. But there are forces that may increase inventory. Chief among them are rising prices. Bank of America estimates that prices will increase 8 percent this year, stimulating a “positive feedback loop” to help the market pick up even more. “Someone say house party?” the bank’s analysts wrote earlier this month.

Wall Street Journal Writes:

More than half of all homes sold last year and so far in 2013 have been financed without a mortgage, according to an analysis by economists at Goldman Sachs Group.

The analysis estimates that around 20% of all homes sold before the housing crash were “all-cash” sales (or around 30% of sales by dollar volume). But over the past seven years, the all-cash share of sales has more than doubled, increasing by more than 30 percentage points, according to economists Hui Shan, Marty Young and Charlie Himmelberg.

OK, fair enough. So we have one fact straight. As of right now there is an insane amount of speculation in the real estate sector. Anyone who has studied finance and markets knows that cash buyers, foreign investors, begging people to sell you a house is the LAST stage of any mania.

No market goes straight up and down. The first stage of the bear market in the housing market has started in 2007. What you seeing now is the second leg up (rebound) that sucks people back in by making it look like the worst is over and the time to get in is now.

Of course, it is not. What’s next, might you ask? 

A massive 3rd leg down in the real estate market. It will take everyone by surprise and will put a final nail in the coffin that is the real estate market. No one will be able to do anything about it. Not the Fed and not this time. When will it start? Based on the market sentiment above, it should start fairly soon. 

“Someone say house party?” Wait a second, where did I hear that before? Oh yeah, 2001-2007.  Good laugh.