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Something Smells Fishy
SOMETHING SMELLS FISHY
It’s always interesting to see a long term chart that reflects your real life experiences. I bought my first home in 1990. It was a small townhouse and I paid $100k, put 10% down, and obtained a 9.875% mortgage. I was thrilled to get under 10%. Those were different times, when you bought a home as a place to live. We had our first kid in 1993 and started looking for a single family home. We stopped because our townhouse had declined in value to $85k, so I couldn’t afford to sell. In 1995 I convinced my employer to rent my townhouse, as they were already renting multiple townhouses for all the foreigners doing short term assignments in the U.S. We bought a single family home in 1995 with the sole purpose of having a decent place to raise a family that was within 20 minutes of my job.
Considering home prices on an inflation adjusted basis were lower than they were in 1980, I was certainly not looking at it as some sort of investment vehicle. But, as you can see from the chart, nationally prices soared by about 55% between 1995 and 2005. My home supposedly doubled in value over 10 years. I was ecstatic when I was eventually able to sell my townhouse in 2004 for $134k. I felt so smart, until I saw a notice in the paper one year later showing my old townhouse had been sold again for $176k. Who knew there were so many greater fools.
This was utterly ridiculous, as home prices over the last 100 years have gone up at the rate of inflation. Robert Shiller and a few other rational thinking people called it a bubble. They were scorned and ridiculed by the whores at the NAR and the bimbo cheerleaders on CNBC. Something smelled rotten in the state of housing.
…click on the above link to read the rest of the article…
Get Ready for a “Zero Returns” World…
Get Ready for a “Zero Returns” World…
Dear Diary,
Where is that old and tattered “Crash Alert” flag?
Many times since the start of the rally in US stocks in 2009, we hoisted it. And many times has it failed to give us a useful signal.
But we will bring it out again, if a bit sheepishly… and let it wave, in the warm Argentine air.
Why? Do we know a crash is coming?
No, of course not.
Is our flag a good indicator of what will happen?
Apparently not.
But we regard it like the “Shark Alert” flags you see on the beaches of Australia. (Down Under is the only country in the world to have a chief of state who was eaten by a shark.)
The “Shark Alert” flag doesn’t mean you can’t go swimming. It means if a shark takes a bite out of you, it’s your own damned fault.
…click on the above link to read the rest of the article…
Paul Singer Warns “The Consequences Of Monetary Manipulation Are Unknowable”
Paul Singer Warns “The Consequences Of Monetary Manipulation Are Unknowable”
The world believes it is in a sweet spot. There is global consensus that central banks know what they are doing and are in control, and that if economies falter, a bigger dose of QE or ZIRP or NIRP (negative interest rate policy – we just made that one up) will keep it from getting out of hand. Additionally, there seems to be a universally held belief that the U.S. is unquestionably the safe haven for the foreseeable future, that its financial crisis and long recession are behind it and that China has complete control over its own destiny. It may not surprise you to learn that we either disagree with or remain unconvinced about every one of the foregoing propositions.
Conditions in the global economy are clearly abnormal. The policymaker response to those conditions is extraordinary, with minimal focus on an all-out push for higher growth. Instead, the primary focus is on boosting “inflation” with repeated doses of bondbuying, stock-buying and super-low interest rates. We cannot appreciate why policymakers are not jumping up and down clamoring for structural pro-growth reforms and policies, and why there is a compliant consensus that the only policy that is possible is more monetary easing. Apparently, most politicians are happy to leave the hard economic and policy decisions to their central banks instead of introducing legislation to properly address the world’s economic problems. It is impossible to assess what will change or destroy the consensus that current policies will hold the global economy and financial system afloat forever, but when assessing the scope and shape of risks to our assets, it is most useful to match them to the size of the aberrations which could cause reversal or surprise. Today, those potential changes are strikingly large.
We have frequently said that real deflation (price and credit collapse, not a tiny downturn in aggregate prices or “insufficient” inflation) is impossible. Governments are too alert to that possibility, have no compunction about debasing their currencies and will simply not stand for seriously-falling prices. The issue of real inflation, at the other end of the spectrum, is deemed by just about everyone but us, plus a few beleaguered stragglers and fellow travelers who “didn’t get the memo,” to be a non-issue into the future as far as one can peer.
…click on the above link to read the rest of the article…
Australian dollar skids to six-year low after RBA shock
Australian dollar skids to six-year low after RBA shock
(Reuters) – The Australian and New Zealand dollars weakened further in early trade in Europe on Tuesday after a sell-off following the Reserve Bank of Australia’s surprise decision to cut interest rates.
The outlook for both Antipodean currencies has worsened in recent weeks with concerns about growth generating expectations of generally looser monetary policy, but the RBA’s decision still came as a shock to many.
Another burst lower as Europe came on line brought the Aussie’s losses on the day to more than 2 percent. It hit an almost 6-year low of $0.7635 while the kiwi fell 1.5 percent to $0.7185, its lowest since early 2011.
“Its a big move and I think any bounce should be sold into,” said Graham Davidson, a spot trader with National Australia Bank in London.
“Generally when the RBA move, they tend to cut a handful of times. The feeling is of aneconomy where there is no source of growth, almost of despair.”
…click on the above link to read the rest of the article…
More To Ruble’s Collapse Than Meets The Eye
More To Ruble’s Collapse Than Meets The Eye.
The ruble is dying, and fast. In what is now being dubbed ‘Black Monday’ the ruble’s value to the dollar dropped nearly 15 percent. Tuesday brought no respite and the ruble fell another 10 percent. The ruble’s collapse follows a similar – though by no means as extreme – slump in oil prices. Still, the Russian economy’s troubles are deeper than that and President Vladimir Putin will be hard-pressed to find an easy out. With a recession looming, state energy companies are struggling to stay afloat, if not directly contributing to the country’s woes.
On the year, the ruble has lost more than 55 percent of its value against the dollar, breaking psychological barrier after psychological barrier. Tuesday’s low of 80 marks a new record and harkens back to the period of hyperinflation that characterized post-Soviet Russia. Then, as now, citizens are seeing their material wealth disintegrate amid rising costs domestically.
Related: Sanctions, Oil Prices Push Russia Into Currency Crisis
Source: QZ
Will Putin’s Next Step Be To Sell Gold? | Zero Hedge
Will Putin’s Next Step Be To Sell Gold? | Zero Hedge.
“Russia is at a critical juncture and given the sanctions placed upon them and the rapid decline in oil prices, they may be forced to dip into their gold reserves, if it happens it will push gold lower.” That is what, according to some people Bloomberg has quoted, is in the cards.
Russia’s surprise interest-rate increase failed to stop the plummeting ruble. Another tool available to repair economic havoc caused by sanctions and falling oil prices: selling gold.
Russia holds about 1,169.5 metric tons of the precious metal, the central bank said last month. That’s about 10 percent of its foreign reserves, according to the London-based World Gold Council. The country added 150 tons this year through Nov. 18, central bank Governor Elvira Nabiullina told lawmakers. The Bank of Russia declined to comment on its gold reserves.
Russia’s cash pile has dropped to a five-year low as its central bank spent more than $80 billion trying to slow the ruble’s retreat. The currency’s collapse combined with more than a 40 percent tumble in oil prices this year is robbing Russia of the hard currency it needs in the face of sanctions imposed after President Vladimir Putin’s annexation of Crimea. A fall in gold prices signals that traders are betting that the country will tap its reserves, according to Kevin Mahn, who oversees $150 million at Parsippany, New Jersey-based Hennion & Walsh Asset Management.
“Russia is at a critical juncture and given the sanctions placed upon them and the rapid decline in oil prices, they may be forced to dip into their gold reserves,” Mahn said. “If it happens it will push gold lower.”
But others are less convinced.
Russia Shocks With Emergency Rate Hike, Boosts Interest Rate From 10.5% To 17%
Russia Shocks With Emergency Rate Hike, Boosts Interest Rate From 10.5% To 17%
Following the biggest rout to the Ruble in ages, Russia – unlike Mario Draghi – instead of talking the talk decided to walk the bazooka walk and shocked all those long the USDRUB by unleashing an emergency rate hike (at 1 am in the morning) from the recently raised interest rate of 10.50% to… hold on to your hats… 17.00%, a 650 bps increase!
From the press release:
The Board of Directors of the Bank of Russia has decided to increase from December 16, 2014 the key rate to 17.00% per annum. This decision was driven by the need to limit significantly increased in recent devaluation and inflation risks.
In order to enhance the effectiveness of interest rate policy loans secured by non-marketable assets or guarantees for a period of 2 to 549 days from 16 December 2014 will be granted at a floating interest rate established at the level of the key rate of the Bank of Russia increased by 1.75 percentage points (Previously these loans for a period of 2 to 90 days, provided at a fixed rate).
In addition, to enhance the capacity of credit institutions to manage their own currency liquidity was decided to increase the maximum amount of funds to repurchase auctions in foreign currency for a period of 28 days from 1.5 to 5.0 billion. US dollars, as well as on similar operations for a period of 12 months on a weekly basis.
And for the Russian-speakers, the full breakdown of rates.
…click on the above link to read the rest of the article…
Markets and reality disconnected » The Cobden Centre
Markets and reality disconnected » The Cobden Centre.
The behaviour of financial markets these days is frankly divorced from reality, with value-investing banished.
Markets have become distorted by Rumsfeld-knowns such as interest rate policy and “market guidance”, and Rumsfeld-unknowns such as undeclared market intervention by the authorities. On top of these distortions there is remote investing by computers programmed with algorithms and high-frequency traders, unable to make human value-assessments.
Take just one instance of possible “market guidance” that occurred this week. On Thursday 16th October, James Dullard of the St Louis Fed hinted that QE might be extended. In the ensuing four trading sessions the Dow rallied over 5%. Was this comment sparked by signs of slowing economic growth, or by a desire to buoy up sliding equity markets? Then there is the vested interest of keeping government funding costs low, which raises the question whether or not exceptionally low bond yields, particularly in the Eurozone, are by design or accidental.
…click on the above link to read the rest of the article…
