So what do you do when a massive student loan bubble results in crippling leverage for an entire generation of your population rendering them financially unqualified to obtain mortgage financing and their ‘God-given right’ to a slice of the ‘American Dream’? Well, you simply change the rules to allow mortgage lenders to ignore all that pesky student debt…anything less would simply be evil and potentially racist, sexist and all sorts of other -ist words.
If you prefer fake news, fake data, and a fake narrative about an improving economy and stock market headed to 30,000, don’t read this fact based, reality check article. The level of stupidity engulfing the country has reached epic proportions, as the mainstream fake news networks flog bullshit Russian conspiracy stories, knowing at least 50% of the non-thinking iGadget distracted public believes anything they hear on the boob tube.
This stupendous degree of utter stupidity goes to a new level of idiocy when it comes to the stock market. The rigged fleecing machine known as Wall Street has gone into hyper-drive since futures dropped by 700 points on the night of Trump’s election. An already extremely overvalued market, as measured by every historically accurate valuation metric, soared by 4,000 points from that futures low – over 20% – to an all-time high. Despite dozens of warning signs and the experience of two 40% to 50% crashes in the last fifteen years, lemming like investors are confident the future is so bright they gotta wear shades.
The current bull market is the 2nd longest in history at 8 years. In March of 2009, the S&P 500 bottomed at a fitting level for Wall Street of 666. In a shocking coincidence, it bottomed on the same day Bernanke & Geithner forced the FASB to rollover like mangy dogs and stop enforcing mark to market accounting. Amazingly, when Wall Street banks, along with Fannie and Freddie, could value their toxic assets at whatever they chose, profits surged. The market is now 240% higher.
What do Vancouver, London, Stockholm, Sydney, Munich, and Hong Kong all have in common?
According to economists at UBS Wealth Management, these six cities all have the notorious designation of being the real estate markets furthest into “bubble” territory:
The major Swiss bank recently published the results of their 2016 Real Estate Bubble Index. The report found that since 2011, the six cities in “bubble” territory have seen housing prices soar at least 50% on average. Meanwhile, in other comparable markets, the average increase in prices was less than 15% over the same timeframe.
Continue reading “Real Estate Bubbles: The Six Cities at Risk of Bursting”
Guest Post by Harry Dent
The global real estate bubble is bursting.
After imposing a hefty 26% tax on foreign buyers, and a 12% to 16% surcharge for buyers who flipped their house between one and two years, Singapore real estate has declined 21.5%.
Vancouver has taken similar measures, and – surprise, surprise – its real estate is down 24% in just five months!
That’s what I mean when I say that when bubbles burst, they do so dramatically and rapidly.
But this is likely just the beginning…
I put Singapore into razor-sharp focus in February of last year when I noted it had some of the most expensive real estate in the world. It has the highest standard of living of any country in Asia – even higher than in the U.S.!
The problem is that the country is 100% urban and has limited land – making it incredibly susceptible to the kind of bubble that’s formed there.
And boy, has one ever.
Continue reading “The Global Real Estate Bubble Is OFFICIALLY Bursting”
Elites need to figure out how to understand the demands of those left behind
Getty ImagesLONDON (MarketWatch) — The pound is sailing up past $1.60. The FTSE-100 index is breezing past 7,000. The euro is strengthening, and business confidence is gaining ground across the continent.
A raft of M&A deals, and a few big initial public offerings are unveiled as the investment bankers push forward with deals that had been kept on hold until the uncertainty resolved itself. And British Prime Minister David Cameron is pictured disappearing off to the Mediterranean to enjoy a well-earned break.
Many investors must be hoping that somehow they can wake up from a very bad dream and get on with their lives in a world where the U.K. had decided to stay in the European Union.
That, as we now know, is not what happened. Instead, while the FTSE UKX, -1.52% has been surprisingly buoyant, sterling GBPUSD, -0.9675% has been plunging, and there is already plenty of evidence of deals being pulled, and a damaging hit to business confidence.
Continue reading “Trapped in a privileged bubble, markets can’t feel winds of political change”
A zoom into the Hubble Space Telescope photograph of an enormous, balloon-like bubble being blown into space by a super-hot, massive star. Astronomers trained the iconic telescope on this colorful feature, called the Bubble Nebula, or NGC 7635.
Last year ended with a whimper on Wall Street. The S&P 500 was down 1% for the year, down 4% from its all-time high in May, and no higher than it was 13 months ago at the end of QE3. The Wall Street shysters and their mainstream media mouthpieces declare 2016 to be a rebound year, with stocks again delivering double digit returns. When haven’t they touted great future returns. They touted them in 2000 and 2007 too. No one earning their paycheck on Wall Street or on CNBC will point out the most obvious speculative bubble in history. John Hussman has been pointing it out for the last two years as the Fed created bubble has grown ever larger. Those still embracing the bubble will sit down to a banquet of consequences in 2016.
At the peak of every speculative bubble, there are always those who have persistently embraced the story that gave the bubble its impetus in the first place. As a result, the recent past always belongs to them, if only temporarily. Still, the future inevitably belongs to somebody else. By the completion of the market cycle, no less than half (and often all) of the preceding speculative advance is typically wiped out.
Hussman referenced the work of Reinhart & Rogoff when they produced their classic This Time is Different. Every boom and bust have the same qualities. The hubris and arrogance of financial “experts” and government apparatchiks makes them think they are smarter than those before them. They always declare this time to be different due to some new technology or reason why valuations don’t matter. The issuance of speculative debt and seeking of yield due to Federal Reserve suppression of interest rates always fuels the boom and acts as the fuse for the inevitable explosive bust.
Janet Yellen will increase interest rates for the first time in nine years on Wednesday. She isn’t raising them because the economy is strengthening. The economy just happens to be weakening rapidly, as global recession takes hold. The stock market is 3% lower than it was in December 2014, and has basically done nothing since the end of QE3. Wall Street is throwing a hissy fit to try and stop Janet from boosting rates by an inconsequential .25%. Janet would prefer not to raise rates, but the credibility and reputation of her bubble blowing machine is at stake. The Fed has enriched their Wall Street benefactors over the last six years, while destroying the real economy and the middle class.
The quarter point increase will be reversed in short order as soon as we experience market collapse part two. It will be followed with negative interest rates and QE4, as these academics have only one play in their playbook – print money. They created the last financial crisis and have set the stage for the next – even bigger collapse. John Hussman explains how their zero interest rate policy has driven speculators into junk bonds as the only place to get any yield.
Despite all the propaganda and cheerleading by CNBC and the rest of the MSM faux journalists, the stock market has been stuck in neutral for the last year. The S&P 500 stood at 2,089 on December 26, 2014. It presently stands at 2,089 on November 22, 2015. It is trading 2% below its all-time high, reached in July. It’s up a measly 3.5% since the day the Fed turned off the QE spigot in October 2014. And that’s the good news.
Without the ridiculous “internet bubble like” ascension of Facebook, Amazon, Netflix, and Google, the stock market would be deep in the red this year. Three of these companies barely make money. They are all overvalued by at least 70%. Most of the stocks in the S&P 500 are trading in the red this year. When the breadth of advancers narrows to a few over-hyped Wall Street superstar stocks (think Cisco, Dell, Microsoft, Enron, Worldcom in 2000) the bull market is on its last legs.
Wall Street is luring more muppets into these FANG stocks before the slaughter commences. These stocks will be trading at least 50% lower in less than two years. Book it.
In the sixth year of the bull run, the U.S. large cap market has had its ups and downs. The S&P 500 peaked at 2134.7 in the early summer months, and promptly collapsed to 1867 points during the August flash crash.
Today, it’s back in black, but only trading just over 1% higher than it started the year.
The only reason that has made this possible is the legendary performance of four tech stocks: Facebook, Amazon, Netflix, and Google (now called “Alphabet Inc.”). Together, the “FANG” stocks have created an impressive $440 billion in market capitalization since January.
For comparisons sake: that’s over 2/3 the size of Apple’s current market cap.
Guest Post by Eric Peters
Bubbles are always obvious … in retrospect.
Here’s one you might not see coming.
The Car Bubble.
People are taking out eight-year car loans.
This is – or ought to be – alarming. The automotive equivalent of the zero-down, no-doc, adjustable rate mortgage on a $500,000 McMansion circa 2004.
You know – just before the housing bubble popped.
New car loans used to be 36 months (three years) and then 48 months (four years). Back when the economy was sane.
Today, the typical new car loan is 72 months (six years). This is almost double the formerly typical length of a new car loan.
But even that is not – apparently – enough to keep the music playing.
Enter the eight-year loan.
Which might be ok, if cars were not appliances.
Very expensive toasters, basically.
Guest Post by Jesse
I like Dean Baker quite well, and often link to his columns. On most things we are pretty much on the same page.
And to his credit he was one of the few ‘mainstream’ economists to actually see the housing bubble developing, and call it out. Some may claim to have done so, and can even cite a sentence or two where they may have mentioned it, like Paul Krugman for example. But very few spoke about doing something about it while it was in progress. The Fed was aware according to their own minutes, and ignored it.
The difficulty we have in the economics profession, I fear, is a great deal of herd instinct and concern about what others may say. And when the Fed runs their policy pennants up the flagpole, only someone truly secure in their thinking, or forsworn to some strong ideological interpretation of reality or bias if we are truly honest, dare not salute it.
Am I such a person? Do I actually see a fragile financial system that is still corrupt and highly levered, grossly mispricing risks? Or am I just seeing things the way in which I wish to see them?
That difficulty arises because economics is no science. It involves judgement and principles, and weighs the facts far too heavily based upon ‘reputation’ and ‘status.’ And of course I have none of those and wish none.
Continue reading “No Real Chance of Another Financial Crisis – ‘Silly’”
Mortgage applications fell 17.0% this week on a non-adjusted basis (following a 7.2% the previous week) for the biggest 2-week drop since January 2015. Even on a seasonally-adjusted basis the last 2 weeks have dropped 6.2% and 7% (the biggest 2 week drop since Feb 2015). However, just as Sept 2014 was notably seasonally weak for mortgage applications, for this time of year, mortgage applications have not been weaker since 2000.
So we have mortgage rates still hovering near record lows. We supposedly have the lowest unemployment rate since 2007. Obama is tweeting about the 13 million jobs he has created. The economy has supposedly been growing for the last six years. Consumer confidence is back to pre-recession highs. And home prices have risen by 30% since 2012. The National Association of Realtors reports price wars and tremendous demand for homes.
One question. In a normal, non-manipulated, market based housing market, wouldn’t homes be bought by families who obtained a 30 year mortgage? Does the chart below present a strong recovering housing market?
Mortgage applications to purchase a home are at 2009 recession lows. They haven’t gone anywhere in five years. The peak was 2005 and the housing market was in full collapse mode in 2008. Mortgage applications are 40% below 2008/2009 levels. They are 50% below 2001/2002 levels. There is no housing recovery. Tolls Brothers and Hovnanian are reporting lower sales versus last year.
The entire housing recovery meme is bullshit. Wall Street, the Fed, the Treasury and the White House have colluded to drive home prices up to benefit the Wall Street shysters and to use as propaganda in their game to convince Americans the economy is great. Chinese and Russian billionaires, hedge funds, and flippers have been the major buyers driving up prices to unaffordable levels for most Americans.
This shitty recovery is all we’ve gotten with mortgage rates at all-time lows. Imagine the shitstorm headed our way with mortgage rates headed higher.
Submitted by Tyler Durden on 09/06/2015 21:00 -0400
Having recently detailed the automakers’ worst nightmare – surging new car inventories – supply; amid rapidly declining growth around the world (EM and China) – demand;
Automakers just unleashed a massive production surge to keep the dream alive…
With inventories at record highs (having risen for 61 straight months)…
Continue reading “Why The New Car Bubble’s Days Are Numbered”
Submitted by Tyler Durden on 08/22/2015 11:43 -0400
Perhaps it’s all the talk about across-the-board debt forgiveness or maybe the total amount of outstanding student debt has simply grown so large ($1.3 trillion) that even those with no conception of how much money that actually is realize that it’s simply never going to paid back so there’s no point worrying about, but whatever the case, the general level of concern regarding America’s student debt bubble doesn’t seem to be at all commensurate with the size of the problem.
And it’s not just the sheer size of the debt pile that’s worrisome. There’s also the knock-on effects, such as delayed household formation and the attendant downward pressure on the homeownership rate, and of course hyperinflation in the rental market.
Of course one reason no one is panicking – yet – is that the severity of the problem is masked by artificially suppressed delinquency rates. As we’ve documented in excruciating detail, if one excludes loans in deferment and forbearance from the numerator in the delinquency calculation, but includes those loans in the denominator then the delinquency rate will be deceptively low. In any event, as WSJ reports, even if one looks at something very simple like, say, the number of borrowers who haven’t made a payment in a year, the picture is not pretty and it’s getting worse all the time. Here’s more:
Continue reading “7 Million People Haven’t Made A Single Student Loan Payment In At Least A Year”
Any article that starts with a quote from Jim Grant is guaranteed to be a fact based, common sense, reasoned analysis of our warped, debt saturated, over-valued, Federal Reserve rigged financial markets. John Hussman starts his weekly letter with this quote from Jim Grant:
“The way to wealth in a bull market is debt. The way to oblivion in a bear market is also debt, and nobody rings a bell.” – James Grant
We’ve been in a Fed QE and ZIRP induced six year bull market that has been sputtering since QE 3 ended in October 2014. Leveraging yourself to the hilt and piling into the stock market has been the road to riches for six years, just as leveraging to the hilt in real estate was the road to riches from 2002 through 2007, and leveraging to the hilt in internet stocks was the road to riches from 1998 through 2000. Of course, the dot.com and housing road to riches detoured into ditches that wiped out trillions of phantom wealth, just as the current road is leading to a grand canyon size ditch.
Total credit market debt has reached all-time highs. The de-leveraging of consumers, liquidation of insolvent Wall Street banks, and bankruptcies of zombie retailers, real estate developers, and mall owners was postponed by Federal Reserve intervention, changing accounting rules to hide bad debt, political shenanigans, and taxpayers paying for the extreme risk taking by bankers and corporate CEOs. Total credit market debt sits at $59 trillion, up from $52 trillion in 2009 at the depths of the recession. This increase has been entirely driven by a $5.3 trillion increase in government debt and a $1.6 trillion increase in corporate debt. The propaganda about corporations flush with cash is bold faced lie. Corporations have increased their debt load by 25% since 2009.
As Dr. Hussman points out, the Fed has encouraged this behavior by the biggest corporations on the planet with their suppression of market interest rates and their gift of $3 trillion to the Wall Street banks. Corporate CEOs are supposed to be the smartest guys in the room, but they haven’t been able to grow their businesses through innovation, creativity, new products, or new investments in plant and equipment. Their entire playbook consists of outsourcing jobs to foreign countries, keeping wages below the level of inflation, and borrowing cheaply from Wall Street banks to buyback their stock and boost earnings per share, so their stock price will go higher, enriching themselves.
Continue reading “CORPORATE DEBT – ROAD TO OBLIVION IN A BEAR MARKET”
