How much would you pay for this this Pay Per View Event? I would pay quite a bit.
Ukranian Neo-Fascist Trying Their Best To Start A War. Obama & The US Media Buy It
The media war between Ukraine, Russian and the West is going into overdrive.Remember all of those innocent Ukrainians in Kiev wanting freedom, liberty and rainbows? Turns out, a lot of them are Neo-Fascist who hate Jews and Russians. Let’s take a closer look at who is trying to start this war.
Russia Government:
-
Russia dismisses Crimea ultimatum claims as ‘nonsense’: report
- Official: No Russian troops have entered Ukraine across northern border (interfax)
- Russian Duma Speaker: No need to send Russian troops to Ukraine now (interfax)
- Black Sea Fleet denies claims Ukrainian military in the Crimea will be stormed (interfax)
-OR- Ukraine’s Illegitimate Government Ran By Turchynov
- UKRAINE’S TURCHYNOV SAYS SHIPS THREATENED IF ARMS NOT LAID DOWN
- UKRAINE’S TURCHYNOV SAYS SHIPS THREATENED WITH SEIZURE
- UKRAINE’S TURCHYNOV SAYS SITUATION AROUND FLEET IS DANGEROUS
- UKRAINE’S TURCHYNOV SAYS RUSSIA INCREASING CRIMEA FORCES
- UKRAINE’S TURCHYNOV SAYS RUSSIAN BLACK SEA FLEET HAS BLOCKED UKRAINIAN NAVY VESSELS IN SEVASTOPOL BAYS
So, let me ask you. Who is beating the war drum here? Turchynov is begging the West to get involved at any cost. He doesn’t care what that cost is. Never mind that any involvement by NATO might lead to WW 3. It is my hope that the US Government and the US Media wake up, pull their head out of their collective ass and see who it is that they are dealing with. It’s never a good idea to do business with Neo-Fascist.
Here is my quick analysis. Russia is done. They have taken Crimea and they are more than satisfied with that. If no further provocation occurs, media hysteria will die down over the next few days and our financial markets will recover. Cheers!!!
CNBC: Russian officials: “Fascists in power now in Ukraine”
Russia’s Upper Council session on whether or not to approve President Vladimir Putin‘s request to send armed forces to Crimea was akin to traveling back in time, rhetorically speaking.
One Russian legislator said: “Look who came to power now in Ukraine—radicals, nationalists, fascists.”
(Read more: Parliament approves troops)
In fact, the word ‘fascist’ was used several times throughout the debate (though actual debate was limited since the legislators seemed to all be of the same opinion).
Another quoted a Russian poet and signaled that now, “it’s time to use weapons, not words.”
Though the White House said it was monitoring the situation in Crimea closely, Putin and most Russian officials see Obama as extremely weak.
A Russian business source with deep knowledge of Russia’s political, economic, and security situation, who requested anonymity, said morale in the Ukrainian army was low, giving Putin an upper hand.
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Ukranian Neo-Fascist Trying Their Best To Start A War. Obama & The US Media Buy It Google
Attention Everyone: Janet Yellen Declares Victory.
As per Bloomberg, just two weeks into her tenure, Janet Yellen has already declaring victory on bond vigilantes. Even though FED’s own minutes (from 2008 collapse) show that they are completely incompetent and don’t really know what is happening in our financial markets, the idiots in our media continue to believe that the FED can somehow control the markets or interest rates.
Again, don’t confuse cause and effect. It is the market and not the FED that lead the economy. While it might look like the FED can control the interest rates, the yield curve and the financial markets, that is never the case. Anyone believing in such absurdity will lose money. Case and point, interest rates are up over 100% in the last 1.5 years. Once this correction is over the interest rates will continue to surge higher (despite upcoming recession).
As a side note, the market likes to Baptize all income Chairman by fire. So was the case with Greenspan in 1987 and Bernanke in 2007-09. With my timing forecasts indicating a severe bear market and recession between 2014-2017, are you ready Janet Yellen?
Yellen Tames Bond Vigilantes With Volatility at Pre-Taper Levels
When it comes to monetary policy, Federal Reserve Chair Janet Yellen is doing all she can to ensure there’s little difference between herself and Ben S. Bernanke. The bond market is taking notice.
Measures of volatility based on interest-rate swaps have plunged this year and are now approaching levels not seen since before the Fed first signaled in May its intention to reduce the unprecedented bond buying that’s supported the U.S. economy, according to data compiled by Bloomberg.
More from Bloomberg.com: Putin Crimea Grab Shows Trail of Warning Signs West Ignored
The relative calm underscores the strides Fed officials have made in reassuring investors that its pullback won’t automatically lead to higher interest rates. After yields on 10-year Treasuries reached a 29-month high at the start of the year, they have since retreated as Yellen pledged to maintain her predecessor’s tapering policy in “measured steps” and keep borrowing costs low to support the U.S. labor market.
“Bond markets understand that Bernanke and now Janet Yellen are talking from the same song sheet,” Neil Mackinnon, a global macro strategist at VTB Capital Plc and former U.K. Treasury official, said in a telephone interview from London on Feb. 24. “The market has bought into the idea that Fed tapering is not tightening.”
More from Bloomberg.com: Winter Storm to Strike New York to Washington Later Today
Treasuries have returned 1.9 percent this year, rebounding from a 3.4 percent annual drop that was the worst since 2009, index data compiled by Bank of America Merrill Lynch show.
Taper Tantrum
Yields on 10-year government bonds, a benchmark for everything from mortgages to car loans and corporate bonds, decreased to 2.65 percent last week from a high of 3.05 percent in January, which was the highest since July 2011. The yield was 2.6 percent as of 11:58 a.m. in New York.
More from Bloomberg.com: Russia Gas Threat Shows Putin Using Pipes to Press Ukraine
Because of the Fed’s quantitative easing, economists including Michael Feroli, the chief U.S. economist at New York-based JPMorgan Chase & Co., warned policy makers last week that a financial-market convulsion similar to the “tantrum” that occurred in 2013 may be unavoidable when the central bank does raise interest rates.
“Whenever the decision to tighten policy is made, then the instability seen in summer of 2013 is likely to reappear,” Feroli, a former Fed economist, and his co-authors Anil Kashyap of the University of Chicago, Kermit Schoenholtz of New York University’s Stern School of Business and Hyun Song Shin of Princeton University, said a Feb. 28 gathering.
In the debt markets, volatility gauges provide a more sanguine outlook.
Anxieties Diminish
The Chicago Board Option Exchange Interest Rate Volatility Index, a measure that reflects the cost for contracts to protect against sudden losses by locking-in fixed rates, tumbled last week to the lowest since May.
Normalized volatility on options for 10-year interest-rate swaps due in six months, a gauge of swings of yields (USGG10YR) on similar-maturity Treasuries, dropped as low as 73.99 basis points last month, the least since May 30.
The lack of skittishness stands in contrast to the surge of volatility set off by Bernanke’s comments in May, when he said policy makers could scale back the Fed’s $85 billion in monthly bond purchases in the “next few meetings.”
That month, implied volatility on the contracts known as swaptions surged by the most since Lehman Brothers Holdings Inc. collapsed in September 2008. Yields on 10-year Treasuries, which fell to a low of 1.61 percent on May 1, eclipsed 3 percent by September and sparked losses in fixed-income assets.
Seasonal Effect
“Much of the 2013 rate volatility was driven by uncertainty in the outlook for Federal Reserve policy,” Jake Lowery, a money manager in Atlanta at ING U.S. Investment Management, which oversees $200 billion, said by telephone on Feb. 25. This year, “the relative certainty in the near-term direction of Fed policy has had its own suppressive effect.”
Although the harsh winter weather contributed to retail sales, manufacturing and housing data that fell short of economists’ estimates, Yellen reiterated on Feb. 27 that the central bank is likely to keep curtailing its stimulus.
The Fed has reduced its purchases of Treasuries and mortgage-backed securities by $10 billion at each of its past two policy meetings and economists surveyed by Bloomberg estimate the central bank will maintain that pace until it stops buying bonds in December.
At the same time, she signaled the Fed is moving away from a year-old commitment to lift interest rates from close to zero once the jobless rate falls below 6.5 percent and will instead provide investors with qualitative guidance on its intentions.
Numerical Threshold
Joblessness (USURTOT) in the U.S. fell to 6.6 percent in January, the lowest since October 2008. Economists surveyed by Bloomberg predict the unemployment rate for February, set to be released on March 7, remained unchanged from the previous month.
“We do want to give markets as much of an indication of how we expect to conduct policy as we can,” Yellen said.
Implied yields on federal funds futures traded on the CME Group Inc.’s exchange now show a 58 percent chance the Fed will boost its benchmark rate, which has been in a range of zero to 0.25 percent since December 2008, in July. That’s seven months after economists predict the Fed will end its bond buying.
As recently as September, traders were pricing in the likelihood that the Fed will lift rates by the start of 2015.
The decline in volatility is evidence that debt investors are underestimating the risk yields will jump as the effects of the weather-related slowdown on the U.S. economy pass, said Vincent Chaigneau, global head of rates and foreign-exchange strategy at Societe Generale SA, one of the 22 primary dealers that are obligated to bid at U.S. government debt auctions.
American Optimism
“The economic data has been very distorted,” Chaigneau said in a Feb. 24 telephone interview from Paris. “By spring, when the data improves again, we’ll get some significant market action. Rates will increase and volatility will increase.”
The U.S. economy will expand 2.9 percent this year, according to forecasters in a Bloomberg survey released on Feb. 13. That’s higher than their projection for 2.6 percent growth at the start of the year and would be the fastest in a decade.
Consumer confidence improved in February from a month earlier as more Americans grew optimistic about the outlook for the economy, according to a Thomson Reuters/University of Michigan sentiment index released last week.
Even with the prospect of more robust economic growth, greater clarity by the Fed will help temper any increase in government bond yields, according to Charles Diebel, fixed-income strategist at Lloyds Banking Group Plc in London.
Fiscal Restraint
Yields on 10-year bonds fluctuated within a 0.22 percentage-point range in February, the narrowest since April 2007, data compiled by Bloomberg show.
“The last thing Yellen wants to do is be unpredictable,” Diebel said in a telephone interview on Feb. 24. “She wants to be as predictable as she possibly can be.”
The $11.8 trillion market for Treasuries may also benefit from a stronger fiscal balance in the U.S. and less political discord, according to Erik Schiller, a Newark, New Jersey-based money manager for Prudential Fixed-Income, which oversees $405 billion.
Faster growth and spending cuts will help narrow the U.S. deficit to 3 percent of the economy this fiscal year, the lowest in seven years, the Congressional Budget Office projected last month. The estimated gap would compare with 9.8 percent in 2009, the widest since at least 1974, and is close to the average of the past four decades, the agency said.
Lawmakers in December passed the first bipartisan budget from a divided Congress in almost three decades, just two months after a political stalemate caused a government shutdown and pushed the U.S. toward its first default. Last month, Congress suspended the nation’s debt limit until March 2015.
We have “relatively stable long-term deficit projections, very low potential policy risk,” Schiller said in a telephone interview. “Both of those are helping to keep things muted.”
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What Does China Think About Ukraine?
Russia and China go way back and have a wonderful working relationship. This was evident at the beginning of Sochi Olympics when Putin and Jinping had a great time together at the opening ceremony and beyond.
Where was Obama? Oh, that’s right, Obama had tried to prove a point by sending an irrelevant “Gay Delegation”.
Of course, China is watching this situation very carefully, but not for the reasons that you might think. China could care less about Ukraine and at the end of the day is likely to stay out of it. What China is looking for is the level of international response. If Russia is able to get away with Ukraine (as I believe it will), China will be further emboldened to push its agenda in South China Sea and Japanese’s Islands.
Will this have an immediate impact on the US Economy and financial markets? NO. However, all of this will have a significant impact on the overall macroeconomic picture, a picture that will in time impact all of the above.
BEIJING: China, which consistently says it opposes interference in other countries’ internal affairs, is looking to “maintain principles” on Ukraine, it said Monday after Russia insisted the two were in broad agreement.
Moscow has appeared keen to stress that it has a major international ally on its military intervention in Ukraine, and Beijing frequently backs its positions against Western powers on thorny issues, such as the protracted conflict in Syria.
But analysts say China is torn between wanting to support Russia and keeping to its longtime opposition to foreign intervention, especially given its own separatist issues in the far-western region of Xinjiang.
When asked about Ukraine at a regular press briefing on Monday, Chinese foreign ministry spokesperson Qin Gang answered indirectly.
“China has always upheld the principles of diplomacy and the fundamental norms of international relations,” he said.
“At the same time we also take into consideration the history and the current complexities of the Ukrainian issue. It could be said that China’s position is to both maintain principles while also seeking to be realistic.”
Qin also referred to his statement posted on the ministry’s website a day earlier, which said on the one hand that “China has long maintained a principle of non-interference in internal affairs (of other countries), and respects Ukraine’s independence, sovereignty and territorial integrity”.
But it also noted that “there are reasons that the Ukrainian situation is what it is today”.
Niu Jun, a professor of international affairs at Peking University, said China wanted to maintain its relationship with Russia yet had strong concerns about foreign intervention.
“It’s all very inconvenient,” he said. “That’s why they came out with a statement nobody can understand.
“What this statement is really saying is, ‘what Russia did was not right and China does not want to support this military invasion’. But China also wants to support Russia, so it came up with excuses” such as Russia’s history with Crimea and Ukraine’s internal situation, he said.
“Yet at the same time they realise this excuse doesn’t hold water, so they also threw in a mention of sovereignty and territorial integrity.”
Earlier, Moscow’s foreign ministry said in a statement that minister Sergei Lavrov and his Chinese counterpart Wang Yi in a phone call noted “broadly coinciding points of view of Russia and China over the situation that has developed in the country and around it”.
Yet China’s account of the conversation was less direct, saying that the two men “thoroughly exchanged views on the matter” and agreed that “appropriately resolving” the situation was important to regional peace and stability.
Russia has found itself internationally isolated over its covert military intervention in Ukraine and on Monday its stocks and currency collapsed amid fears of a prolonged campaign.
The other members of the G8 on Sunday released a statement condemning Russia for violating international law and suspending their participation in a G8 summit set to be held in Sochi in June.
China is not a member of the G8.
China and Russia cooperated on vetoing three UN Security Council resolutions to put pressure on Syrian President Bashar al-Assad, although they voted through a resolution this month on allowing in humanitarian aid convoys.
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Russian Markets Plunge, Central Bank Moves To Increase Rates
Russian stock market crashed today, declining 13.5% today in a near panic selling. Russian central bank moved swiftly, increasing interest rates by 150bps, the highest hike since 1998 default. The Rubble didn’t fare any better with USDRUB rising to an all time high of 37.
Will this swift market action, gut punch to the Russian economy, threat of sanctions and capital flight be enough to stop Russia or Putin in his tracks in terms of Ukraine?
That wouldn’t be our bet. As a matter of fact, if anything it will make Russia even more determined to go ahead and resolve Ukraine’s situation as they see fit. At the end of the day, Putin doesn’t place as much of an importance on capital markets and the state of the overall economy as the US does. The more important question is, how will this action/reaction impact the US Market.
It’s very clear. Please check our timing section to find out exact what the market is going to do over the next few weeks.
Russian markets plunged Monday morning as investors reacted to the prospect of Western-led economic sanctions aimed at punishing president Vladimir Putin for Russian actions in Crimea.
The selloff prompted the Russian central bank to take aggressive action to try to stabilize the markets. As the ruble sank to new lows against the euro and the dollar, the bank raised interest rate by 150 basis points (1.5 percentage points), lifting it to 7 per cent.
Russia’s benchmark stock market index, the Micex, got battered by 13.5 per cent at one point by near panic selling. All of the big names on the index including Gazprom, the state-controlled natural gas company whose pipelines to Western Europe run through Ukraine, fell sharply. Gazprom was down in line with the market.
Yields on Russia’s 10-year sovereign bonds rose as high as 9 per cent, up sharply from Friday’s close of 8.1 per cent, as debt investors apparently took the view that that the Ukraine crisis could escalate even if there have been no clashes between Ukrainian and Russian troops in Crimea, the largely Russian speaking region in Ukraine’s far south which is the home to Russia’s Black Sea naval fleet.
The Russian selloff came as the leaders of the Group of Seven industrialized countries, Canada among them, released a joint statement “condemning the Russian Federations clear violation of sovereignty and territorial integrity in Ukraine.” On Sunday, the G7 countries halted preparatory meetings for the G8 summit scheduled for Sochi, Russia, the host city of the Winter Olympics, in June. Russia is the eighth member of that group.
The strongly worded G7 statement indicates that the Western countries may be on the verge of launching sanctions of some sort against Russia, though no formal plan had been announced by Monday morning. On Sunday, U.S. secretary state John Kerry, who is to travel to the Ukrainian capital Kiev on Tuesday, said the Western countries are “prepared to put sanctions in place, they’re prepared to isolate Russia economically.”
In a note, Kit Juckes of the French bank Société Générale said: “This weekend’s events will be followed by a lot of uncertainty and further risk aversion as a diplomatic solution is sought….wider scale capital flight from Russia must be a risk. Russia is unlikely to back down on its support of the regional government in Crimea. The important of Ukraine as a line in Europe’s energy supply line and as the point were Russia and the European Union meet, makes the idea that either side just backs down hard to imagine, but equally, provides plenty of incentives to work towards a diplomatic solution.”
The Russian sell-off triggered a smaller selloff of equities in Europe, where the FTSE-100 and the Eurofirst 300 indexes fell by more than 1 per cent. Investors sought safety in commodities rose. Brent crude was up 1.6 per cent and gold rallied strongly, gaining 1.8 per cent, taking its value to almost $1.346 (U.S.).
Economists doubted that the Ukraine crisis would trigger a full-blown emerging market crisis because of the small size of the Ukrainian economy. It is worth 0.2 per cent of global gross domestic product. Still, some countries, notably Russia and Poland, have significant trade ties to Ukraine and Russia has the power to make or break Ukraine’s energy supplies. Ukraine depends on Russia for half of its natural gas supplies and about 20 per cent of the gas consumed in the European Union is delivered through pipelines that cross the Ukraine.
The fear among Ukrainians is that Russia will use gas supplies as a geopolitical threat. Russia has reduced out outright eliminated supplies to Russia several times in the last decade over gas pricing and contract disputes.
The Financial Times reported that, over the weekend, Russia signalled that it might use gas exports to apply pressure on the interim government on Kiev. Gazprom, the world’s biggest gas supplier, hinted that it may raise gas prices to Ukraine. In December, Mr. Putin gave Ukraine a big discount on gas supplies as part of a $20-billion bailout package (of which only a few billion dollars has been delivered). The price, however, must be renegotiated every three months.
Russian Markets Plunge, Central Bank Moves To Increase Rates Google
The United States of Hypocrisy
Over the weekend the US Administration and the US Media, went into overdrive condemning Russia with the Secretary Of State John Kerry calling it an “incredible act of aggression” and stating “you just don’t in the 21st century behave in 19th century fashion by invading another”. Yet, let’s do a quick comparison.
RUSSIA:
- Entered into Ukraine to stabilize the country and protect ethnic Russian’s from fascist illegitimate government now in Kiev.Not a single shot fired. Zero casualties.
- Russian soldiers are met with excitement and flowers. Entire Army divisions and the Ukrainian navy defects to the Russian side.
- Millions of Ukrainians are thankful for Russia trying to stabilize the region.
USA:
- Enters Iraq under false pretenses. The US Government falsifies intelligence reports and the US media sells is to the American people like gospel.
- Causes approximately 500,000 deaths in Iraq as direct or indirect result of the war (2003-2011)
- Kills 4,486 U.S. soldiers in Iraq between 2003 and 2012. Tens of thousands are sent home wounded.
So, let me ask you. Who is acting like a proverbial “Caveman” here. Oh yeah, I forgot, the US killed all of those Iraqis to bring piece, happiness, freedom and rainbows to the region.
LONDON (Reuters) – The rising threat of war between Ukraine and Russia sent investors scurrying for relative safety on Monday, pushing stocks down sharply – the Moscow market fell 11.5 percent – and lifting gold to a four-month high.
U.S. investors were set to add their weight to the move at the open, with stock index futures all down around 1 percent and benchmark U.S. Treasury yields down 5.5 basis points.
With Russian troops already on Ukrainian soil after an incursion into Crimea, comments over the weekend from President Vladimir Putin that he had the right to invade the rest of the country were treated as a declaration of war by Kiev.
Geopolitical ripples from those statements, which included condemnation from the Group of Seven major industrialized nations and the threat of sanctions, spread through markets, hitting Russian assets the hardest and forcing the Russian central bank to aggressively raise interest rates.
Russia’s stock market nosedived at the open and the ruble fell 2 percent to record lows against the dollar and the euro before recovering to trade up 1.4 percent after the central bank dramatically lifted its key lending rate by 1.5 percentage points to 7 percent at an unscheduled meeting.
The country’s sovereign dollar bonds were also hit, down more than 2 points, while the cost of buying 5-year swaps to insure against a Russian debt default jumped 33 basis points.
“Investors had underestimated the risks of an escalation in Ukraine, so the events over the weekend are a wake-up call for the market,” said David Thebault, head of quantitative sales trading at Global Equities in Paris.
The escalating tensions sent Ukraine’s hryvnia to a record low against the dollar and pushed the country’s dollar bonds down 6 points on Monday, in contrast to a jump in safe-haven German Bund futures, which rose 87 ticks.
No major regional stock bourse escaped the aggressive selling, with all down more than 2 percent and Germany’s DAX particularly hard hit, tumbling 3.1 percent and heading for its biggest daily fall in eight months.
That had followed overnight weakness in Asia, with MSCI’s broadest index of Asia-Pacific shares outside Japan down 0.9 percent and Japan’s Nikkei 225 skidding 1.3 percent.
“We can expect some very sharp moves in the ensuing couple of days as markets and world leaders look to establish just how much of a threat there is to not only to stability in the area but stability across Europe,” said James Hughes, chief market analyst at Alpari UK.
Among those leading regional stock fallers were the many companies, from banks to retailers, with heavy sales exposure to Russia and Ukraine.
Chief beneficiaries of the market-wide flight from risk were gold, German debt, the Japanese yen and other currencies perceived as safe havens in times of heightened volatility, while oil was supported by the demand outlook.
Concern about China’s economy also weighed on markets after a purchasing managers’ index showed China’s vast factory sector contracted again in February.
Spot gold hit a four-month intraday high of $1,350 an ounce and the dollar hit a near one-month low against the yen and approached Friday’s two-year low against the Swiss franc before recovering to trade slightly higher.
The euro, meanwhile, shed 0.3 percent against the dollar to $1.3763, slipping from Friday’s two-month high as the euro zone economy is seen as vulnerable because of its dependence on gas supplies from Russia, part of which go through Ukraine.
Worries that Putin could act to restrict those gas supplies if the situation escalates further, and the prospect of a typical run-up in demand should war break out, boosted crude prices across the board.
Brent crude, the European oil benchmark, rose as much as 3 percent to a two-month high of $112.07 per barrel, while U.S. crude futures hit a five-month high of $104.75.
“But… if it actually comes to war. U.S. crude could easily surpass $110 and a $120 target is not out of the question,” said Ben Le Brun, market analyst at OptionsXpress.
Ukraine said, however, that it was pumping Russian gas as normal.
On top of concerns about a military confrontation, it was not clear if Ukraine’s new interim government, formed about a week ago after pro-Russian former President Viktor Yanukovich was ousted, can secure funds to avoid default.
Kiev has said it needs $35 billion over two years to avoid default, and may need $4 billion immediately. But Ukrainian Finance Minister Oleksander Shlapak said on Saturday the country was unlikely to receive financial assistance from the International Monetary Fund before April.
Elsewhere, with the yield on 10-year U.S. debt off its one-month low of 2.592 percent, focus will be on the release of important economic data this week including payrolls numbers on Friday and manufacturing data later on Monday after mixed data from Asia and Europe.
A private survey of the latter in China found factory activity shrank again in February as output and new orders fell, reinforcing concerns about a slowdown in the world’s No. 2 economy.
That offset a more upbeat survey from the Chinese services sector and pushed copper down to a three-month low. China is the world’s top metals consumer and the market is already concerned about growing copper stockpiles in China.
In Europe, meanwhile, data from the euro zone showed output rose in all of the bloc’s four biggest economies for the first time in almost three years.
Real Estate Collapse 2.0 Why, How & When – Infographic
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Real Estate Collapse 2.0 Why, How & When – Infographic Google
Real Estate Collapse 2.0 Why, How & When
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.
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.
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.
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. 
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.
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.
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.
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,[email protected]%)
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.
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.
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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.
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?
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Warning: George Soros Is Shorting The Market. Should You? Google
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.
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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.
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Economic Survey Proves, Most Economists Are Worthless Google