As I have been discussing recently, most of what appears to be a housing market recovery has been driven in price and volume by the big private money funds who were sitting on loads of uninvested cash and decided to try their hand in the real estate rental management business. This has lasted all of 18 months, as now several of these funds are looking to dump their equity into the hands of the public.
I wrote an article published on Seeking Alpha that discusses topic:
This is an investment trend that has only been in place for roughly the last 18 months but, incredibly, many of these "smart money" investment funds are already trying to cash out by selling equity in their rental portfolios. One can only conclude that this investment trend is coming to an abrupt halt as the "smart money" is trying to unload its investments on the greater investing public. In fact, it really reminds me of this same dynamic that occurred at the peak of the Internet bubble in 2000. In other words, the "smart money" is telling us that the housing market is going lower.You can read the entire article here: Smart Money Is Dumping Its Housing Investment
I was also interviewed by Kerry Lutz, proprietor of the Financial Survival Network - an internet-based radio program - about the housing market: LINK
The problems that created the housing market bubble, which led to the de facto collapse of the financial system in 2008, have never been fixed. In fact, they've been covered up by fraudulent accounting and a massive amount of money printing. Barring some kind of divine intervention, the next phase of the Great Financial Crisis is going to make 2008 look like an easy day at the beach.
I am really looking forward to this fall. Already in August I note that the market is down as big players head for the sidelines ahead of any taper in September QE.
ReplyDeleteNot only that but Obamacare premiums are horrible- am expecting every able bodied person to opt out for a 95 dollar penalty. If you can't afford to buy a house....just who in the fuck thinks you can afford a mortgage sized insurance premium?
Let's get some popcorn Dave. Funny shit about to happen.
There is a strong probability that we'll get a "monetary earthquake" sometime this fall that will blow peoples' minds.
DeleteYearning for the fall Of this evil Progressive agenda, in fact I welcome it with full on Glee. These Gate keepers think this is 1940's Germany, well they have another thing coming.
DeleteNo, Dave. There won't be any monetary earthquake this autumn. Ben Bernanke is going to step down. He is supposed to keep the status quo. It will be the next Fed chairdevil to give us something new.
DeleteBesides that, a monetary earthquake is irrelevant to precious metals. We are in summer and physical gold and silver are already tight. What will happen when we move into autumn and winter when we have the real peak season.
Monetary earthquake? What do you mean by that? You mentioned earlier that the Fed won't taper. So you have changed your mind?
Delete"Monetary earthquake?" I don't know - use your imagination given everything you know about what's going. G-20 meeting in Sept. We know China/Russia have been rattling the chains hard about de-emphasizing the dollar at the only reserve currency. Maybe they'll start shouting. We know China has been systematically removing use of the $ from its trade with Asia and other big counterparties. The writing is on the wall for the $ - just a matter of time.
DeleteTaper - have not changed my mind. Even if the cut $20 Billion in Sept, all it does is change the slope of the money supply curve and it will be very temporary. I also expect them to ramp up mortgage purchases at some point to try and get the spread between mortgages and treasuries to tighten, as the Treasury curce shifts higher.
A question/thought
DeleteI don't grasp the comment of gold bullion being "tight." So what if Comex inventories are declining even to zero. Gold is simply moving to the price premium locations--the Far East or China, etc.
All the gold (170,000 tonnes) that has been mined is still in existence. Gold isn't used up--it is money/a medium of exchange.
The price of gold will be determined by what price people who hold gold will be willing to sell for vs. price demanded not whether there is a "shortage" at the Comex.
Gofo rates may be indicating financial stress which may cause people to want to hold more gold vs other assets and thus the price may rise in order for those who hold the gold to sell.
If a trader offered to buy gold on the Comex at $500 to the current spot price, I bet he/she could get a huge shipment to the Comex.
Any bets? www.csinvesting.org
SEC Self-Indexing Ruling “Jeopardises ETF Brand”
ReplyDeleteOne London-based veteran of the ETF and index business, speaking on condition of anonymity, pointed to new opportunities for global regulatory arbitrage and to the influence of US fund firms’ lobbyists.
“[The SEC’s move] contradicts recent regulatory guidelines from not only ESMA but IOSCO,” said the observer. “A product that could not be built in Europe can now be launched in the US and marketed to professional (although not retail) investors in Europe.”
“What's happening here? Perhaps it is a reflection of the lobbying dollars needed in the US to force through something that is clearly beneficial to issuers. The barriers to conflicts of interest are now paper-thin.”
And by allowing less transparent self-indexed ETFs to be created, the SEC has taken a risky step, putting the whole exchange-traded fund brand in jeopardy, argues S&P Dow Jones’s Matturri.
“If you make ETFs less transparent you’re going against what made these funds very successful. That is, you knew exactly what you were getting when you bought an ETF. You knew it was going to follow the index. Here, you don’t know that, as you don’t know what the index is doing, since it’s not disclosed.”
http://www.indexuniverse.eu/europe/features-a-news/9148-sec-self-indexing-ruling-jeopardises-etf-brand.html?fullart=1&start=2
Thanks for the good work, Dave. Read the piece on SA this morning. I don't know when it all catches up and how soon the party ends, but I think it's as certain as the sun rising tomorrow morning. Just can't believe how many people are joyfully whistling past the graveyard. I honestly thought Detroit's bankruptcy would be a wake-up call, but it's almost like Detroit is Cypress..."that's happening to them, not me", but to the extreme. This country is sound asleep, isn't it?
ReplyDeleteOh crap. ETFs suck again?!?!!!
ReplyDeleteHow will I make money on the real estate decline? Not ETFs, I'd posture. Remember what Embry said today (something like) "when the derivatives start to go, the loser won't be able to pay and the smart guy will still be holding a bag"
If ETFs become non-transparent, we'll never get paid on the wild ones in a crash.
Also, you had to be short early on real estate in 08... or you had to trick someone in NY to write a deriv for you.
Cyber Security Is Biggest Threat to Markets, DTCC Says
ReplyDeleteCyber security is the greatest threat to markets and governments around the world, according to the Depository Trust & Clearing Corp., which processes U.S. stock trades.
The New York-based clearinghouse cited eight key concerns to the financial industry such as new regulations, high frequency trading, the risk to counterparties defaulting, collateral requirements and natural disasters, according to a report published today titled “Beyond the Horizon.”
“Given the diverse and global nature of cyber-attacks, DTCC does not expect this risk to dissipate significantly in the near term,” the firm said in the report.
DTCC’s findings on computer security echo a July study co-authored by the World Federation of Exchanges and the International Organization of Securities Commissions. The two groups said a “significant” number of exchanges fought off sabotage via the Internet in the last year. About 53 percent of exchanges surveyed have been hit by a cyber-attack in the last year, the report said.
http://www.bloomberg.com/news/2013-08-07/cyber-security-is-biggest-threat-to-markets-dtcc-says.html
Great article, Dave. Enjoyed the comments with the discussions on the Florida real estate market.
ReplyDeleteLet's be careful about looking at the deck of cards from the viewpoint of US. This was true in the 1930's but the deck of cards today is global internationalism. This blowup affects every nation on earth and will be ugly. If the US blows up (the heart of the beast), it kills the rest of the organs in the global body. If one of the organs breaks down, it can cause the heart to have a heart attack. Things will blow up but from where in the world will the trigger point come from is anybody's guess. It can be the US or canada/china housing bubble as well. There are alot of factors all happening at once and it's all pointing negative.
I'm not a historian but I bet what we are facing is a historic event that has never happened before as the world has never been so globally tied together like before. I believe it will also be a different world afterwards with the US no longer a key player but a mere follower of international policies.
Bernanke’s Deposition: AIG, Goldman, Merrill and Bailouts
ReplyDeleteFor years before the 2008 financial crisis, I issued specific warnings about credit derivatives, mortgage backed securities, collateralized debt obligations, misrated structured financial products, and leverage.
I wrote books and published articles in professional journals. In 2007, I specifically warned risk managers at Merrill Lynch (among others), to get out. Risk managers had responsibility without authority, so why should they go down for malfeasance at senior levels in their organizations? (See: “Subprime Mortgages: The Predators Fall,” GARP Risk Review, March 2007)
My 2003 CDO book warned about the dangers of junk collateral—chiefly corporates at that time—and misrated CDOs. The warnings included the “Magnetar” CDO structure.
In December 2007, WSJ’s Serena Ng and Carrick Mollenkamp quoted me in a story: “Wall Street Wizardry Amplified Credit Crisis.” It was about a CDO called Norma, one of the infamous “constellation” deals named after stars, a classic situation for fraud, and a deal in which Magnetar invested. Merrill Lynch was the underwriter and seller.
“Only nine months after selling $1.5 billion in securities to investors, Norma is worth a fraction of its original value. Credit-rating firms, which once signed off approvingly on the deal, have slashed its ratings to junk status.”
“‘It is a tangled hairball of risk,” Janet Tavakoli, a Chicago consultant who specializes in CDOs, says of Norma. ‘In March of 2007, any savvy investor would have thrown this…in the trash bin.’”
http://www.tavakolistructuredfinance.com/2013/08/bernanke-deposition-aig-goldman-merrill-bailouts/
Members Only
ReplyDeleteHow the White House is weaseling Congress out of ObamaCare.
How the White House is weaseling Congress out of ObamacCare. The White House on Wednesday released the legal details behind its ObamaCare bailout for Members of Congress and their staffs, and if anything this rescue is worse than last week's leaks suggested: Illegal dispensations for the ruling class, different rules for the hoi polloi.
Millionaire Senators and the affluent professionals who are chiefs of staff, legislative directors and the like were supposed to go on the exchange and abide by its rules. There are only three insurers offering public utility-type plans on the Washington, D.C. ObamaCare exchange. The FEHBP sponsors 21 plans in metro D.C. and 24 in Virginia. Perhaps as a new perquisite the White House will entice a plan to the exchange that only Members can choose.
It would have been fairer and less corrosive to the rule of law had Congress simply passed a bill giving their workers a raise to make up for the lost compensation of dropping out of the FEHBP. But that would mean an ugly political fight that voters might notice. It's so much easier to slip through this political fix in August when Congress is out of session and the press corps can't wait to hit the beach.
http://online.wsj.com/article/SB10001424127887324522504578654193173779414.html?mod=WSJ_hpp_sections_opinion
In India, An Old Profession Is Fashionable Again: The Gold Mule
ReplyDeleteIt’s back to the 1980s in India. The government’s effort to rein in gold imports to ease a yawning trade deficit has led to the revival of an old-fashioned Indian profession: the gold courier. A mule arriving at the Delhi airport was caught with 9 kgs of gold, another in Chennai with 16 kgs and a third in Bangalore with 3 kgs of gold, all in the past few days.
Last week, the managing director of a Singapore-based jewelry store was intercepted at the Mumbai airport with $400,000 worth of jewelry concealed in her lingerie. The authorities said Vihari Poddar had tried to smuggle it in on behalf of a local jeweler and had made several similar runs previously. Poddar, who belongs to the illustrious Mumbai industrial family that owns fabric maker Siyaram Silk Mills, is now in judicial custody.
Poddar’s arrest illustrates that the gold mule is back in business.
http://www.forbes.com/sites/saritharai/2013/08/08/in-india-an-old-profession-is-fashionable-again-the-gold-mule/?
Dave,
ReplyDeleteWould SRS be a good play at this point?
Sure. But I like shorting the individual homebuilders better. Any of them trading in double-digits. NVR is too difficult to trade - it's a corrupted stock and is highly manipulated. It doesn't even have options on it. Go figure that one out.
DeleteNew Bank Investigations: Real Action, or More of the Same?
ReplyDeleteBy Matt Taibbi
POSTED: August 8, 11:30 AM ET
The government may very well decide to go after Chase in what it considers a big way. It may do the same for Bank of America, and then it may keep going on down the line to other banks, until it has collected a billion dollars or so from all the usual suspects, who were virtually all engaged in the same kinds of schemes, gathering and selling to customers radioactive mortgage bonds they knew were likely to explode, or were ridden with fraud and faulty underwriting.
But to me, these investigations will be meaningless unless one of two things happens, once they reach the inevitable stage of concluding painstakingly-crafted settlements with the inevitable teams of high-priced lawyers for the offending firms:
1) Someone goes to jail.
2) The company is ordered to break itself up into smaller pieces.
As to point one, here's the thing. If criminal laws were violated, then the government certainly has discretion to exercise mercy and seek non-criminal sanctions against the individuals responsible. But they can really only do that and not be total hypocrites if they also simultaneously implement leniency programs for ordinary street criminals at the same time.
Read more: http://www.rollingstone.com/politics/blogs/taibblog/new-bank-investigations-real-action-or-more-of-the-same-20130808#ixzz2bOpOp6dE
Is it even possible? What does Mother Nature think?
ReplyDeleteJP Morgan reported their trading results for the first half of the year yesterday which included 128 trading days. Lo and behold…they were a perfect 128 for 128 days where they made money, not one day did they lose even a dime. Is this even possible? I mean with the bond volatility that we saw… not to mention the currencies, commodities and precious metals. Did they actually “time” every single move perfectly or at least close enough so that winning trades outdid any losers (were there even any losers) EVERY SINGLE DAY?
I can still remember going to college during the caveman days of the early 80′s and listening to professors and then beginning a Wall Street career where I was told that anyone who traded and had a “win” ratio of 55-60% would be considered the equivalent of Babe Ruth in baseball. This current feat by JP Morgan is like Babe Ruth, Michael Jordan, Wayne Gretzky and Tiger Woods all wrapped up into one. I would have included God on that list but Goldman Sachs already chose him for their team they now say they are “doing God’s work.”
So, does anyone want to tell me that the market, ALL markets are not a bit (totally) rigged? Is it statistically possible for a firm to win …all day…every day…day after day? Without inside information? Or without being so big that they can push, pull or force markets to react how they wish? Of course, not “marking” assets (liabilities) to any “market” other than “fantasy” certainly helps their cause but…there is such a thing as “Mother Nature.”
http://blog.milesfranklin.com/is-it-even-possible-what-does-mother-nature-think
Illogical Economics – Guest post by Hawkeye
ReplyDeleteMoney as debt
The first pillar of Soddy’s argument surrounds the very nature of money. Everyone uses money, yet few people truly understand what it actually represents. The extent of monetary relations back in Soddy’s day is probably a lot less frequent than now, as many transactions and means of subsistence probably lay outside of market transactions. However, Soddy gave a cogent explanation of money:
“We thus come to look upon money – quite irrespective of whether it is specie or paper – as a token certifying that the owner of it is a creditor of the general community and entitled to be repaid in wealth on demand.” Wealth, Virtual Wealth and Debt (1926) p134
Money is more than just a more advanced substitute for barter, declared Soddy. In barter, all transactions cancel each other out, but with money, there must at all times be someone left holding tokens, rather than real goods or services. Money is therefore a form of negative inventory. As negative objects are not physically possible, we must be dealing with a fabricated construct. A holder of money forgoes actual ownership, instead deferring his purchasing power. It will then require a further social arrangement for this token to get converted back into real goods. Up until it is handed over, it is not a real asset at all, but wider society’s liability. As Soddy quipped:
“Money is the nothing you get in return for something, before you can get anything”.
Therefore, it is not a harmless veil over barter. It is a token of indebtedness, and a claim over the real inventory of goods and services in society. Standard economic models on the other hand declare that the money system is completely neutral. In their worldview society’s mutual indebtedness cancels itself out. If that is the case in their economic models, then why can’t the debts be cancelled out in practice? Mainstream economists refuse to contemplate this very obvious logical contradiction. To them, the money system is absolutely essential for a functioning economy (i.e. it must be preserved at all costs) yet at the same time is unneccessary to model!
No standard macroeconomic model takes into account the burgeoning balance sheets of individuals, banks, companies or Governments. They are obsessed with liquidity, for sure, but have no interest in the liquid!
Soddy, however, was also perceptive enough to understand that the source of most circulating money was through private bank credit creation. He was highly critical of this unearned priviledge, as in his eyes a bank undertook no genuine forfeiture when creating a loan [1]. In reality the debts are simply an accounting entry. But far from harmless, they help to enforce a power relation within society, and Soddy was well aware of this situation citing a 19th barrister and expert on the subject of credit:
“The merchants who trade in debts – namely bankers – are now the rulers and regulators of commerce; they almost control the fortunes of states.” H.D.MacLeod quotation in Wealth ……. p77
http://www.golemxiv.co.uk/2013/08/illogical-economics-guest-post-by-hawkeye/
“We thus come to look upon money – quite irrespective of whether it is specie or paper – as a token certifying that the owner of it is a creditor of the general community and entitled to be repaid in wealth on demand.”
DeleteKinda disagree with this. This is what popular conception is, that your "money" is always good for what it is worth, but if you look at history it is until it aint... that is the thing, and the past 100 years have also had the insidious Fed induced inflation thus further reducing the "tokens" value... So money is something quite different than it used to be, it now lives and breathes based on those age old instincts and memories, but alas, today's money is only that, a memory. Soon it will be worth much less. Remember, debt is buying/consuming today what you must pay for in the future. With the overspending (high debt) today, that means in the future the ONLY way is to print tons more. If that does not happen then it will be a collapse of the current system due to an inability to pay obligations. And even after excessive printing, there will be a collapse as people realize that the printed money is worth less... and then refuse to use it. So we are screwed no matter what, the egg is cooked, cannot un-cook it, now only to decide how to eat it. Now, or later when it is cold and moldy...
JK
Trouble In Junk Bond Lala-Land
ReplyDeleteBut there is a quicker way to extract a big chunk of money – and shift the risk to someone else: have the portfolio company issue a pile of debt and then pay a dividend to the PE firm. It increases the leverage of the already highly leveraged portfolio company. Interest costs soar. So does the already significant risk of default. The company doesn’t take on the debt to improve processes, develop new products, conquer new markets, or build a new plant. The money is simply sucked out.
These recapitalizations, as they’re called euphemistically, set a phenomenal record in 2012: companies owned by PE firms sold $64.2 billion in bonds that were used as private-equity payouts, the Wall Street Journal reported. That was nearly double the amount sold in 2011. During the financial crisis, this sort of thing fizzled. But in 2006, during the LBO craze – including the largest LBO ever, the $48 billion buyout of TXU, which went bankrupt earlier this year – bonds issued for payouts peaked at $30 billion. Less than half of last year’s total.
So far this year, $47.5 billion in PE payout bonds have been sold – 62% more than at the same time in 2012. And yet, In May and June, bond markets swooned when they temporarily came to grips with the possibility that the Fed’s money-printing and bond-buying binge wouldn’t last forever. Junk bonds got slammed and yields soared [my take... Biggest Bond Bubble in History Is Turning into Carnage].
So in July, the Fed altered the tones of its cacophony with Chairman Bernanke’s wishy-washy backtracking on his May speech that had so rattled the markets. Or maybe it was just selling fatigue. At any rate, the pendulum swung back and reversed part of the damage on the ancient financial principle that nothing goes to hell in a straight line.
PE firms jumped into the lull. Historically, only 14% of the bonds that their portfolio companies sell are for payouts. They’re nauseatingly risky, and turned-off investors demand very high yields. Hence, they’re not that common. In July, that ratio was 60%.
And yields have been dropping! In 2012, the average interest rate on bonds sold for payouts was 9.8%, already low, considering the risks. The average so far this year dropped to 8.2%. Then came the buying panic of July.
PE firms BC Partners and Silverlake “noticed the shift and pounced, according to people familiar with the matter,” writes the Wall Street Journal. Their portfolio company MultiPlan sold $750 million of the riskiest kind of junk bonds in the universe, those with a “pay in kind toggle.” The PIK toggle would give the company the right to forgo making interest payments if it ran out of money; they’d be added to the principle. Investors would receive no yield, and the amount owed would grow. A horrible deal. PIK toggle bonds that fund payouts normally carry a big-fat interest rate to motivate investors.
But not in July. To fund a dividend of $838-million, MultiPlan sold $750 million in bonds with an interest rate of 8.375%. Then Michaels Stores, owned by Blackstone and Bain, sold $700 million in PIK toggle bonds to pay an $800 million dividend. The interest rate? 7.5%. Ha, not to be outdone, IMS Health sold $750 million in payout PIK toggle bonds, at 7.375%.
http://www.testosteronepit.com/home/2013/8/7/trouble-in-junk-bond-lala-land.html
http://online.wsj.com/article/SB10001424127887323838204579000712270877586.html
ReplyDeleteCaterpillar (CAT) has been forced to accept delayed payments or ease terms on many of the loans and leases it made to buyers of its marine engines in Europe, blaming a glut of commercial vessels and low cargo rates due to Europe's sluggish economy.
CAT's 10-Q filing last week revealed $436M of "impaired" loans and leases in its power-systems segment, up 52% Y/Y, concentrated among marine-engine customers in Europe.
Overall, CAT says its financing arm continues to "perform well" - its allowance for credit losses was $422M, or 1.46% of net finance receivables, as of June 30, vs. $393M, or 1.47%, a year earlier.
After booming from 2005 to 2008, global demand for ships has plunged, and shipyards are suffering from overcapacity. Orders have shown some sign of improving this year, said Natalie Burrows, an analyst at Clarksons Research Services Ltd. in London, but "we're still way below boom levels."
also http://seekingalpha.com/currents/post/1210282
Another One Bites the Dust: Silent Circle Shuts Down Encrypted Email Service
ReplyDeleteThere are some very high profile people on Silent Circle—and I mean very targeted people—as well as heads of state, human rights groups, reporters, special operations units from many countries. We wanted to be proactive because we knew USG would come after us due to the sheer amount of people who use us—let alone the “highly targeted high profile people.” So to protect everyone and to drive them to use the other three peer to peer products- we made the decision to do this before men on [SIC] suits show up. Now—they are completely shut down—nothing they can get from us or try and force from us- we literally have nothing anywhere.
- Michael Janke, CEO of Silent Circle
The recent big news in the tech world was that Lavabit, the encrypted email service used by Edward Snowden to communicate, was forced to shutdown by the U.S. government. In typical American gulag fashion, Lavabit was not permitted to tell the world about their six week battle with the “authorities” and the specifics related to the shutdown. While some of you may take this development negatively, I would argue it is all just part of the natural process of system change outlined by Gandhi, a master of the process. He said:
First they ignore you, then they laugh at you, then they fight you, then you win.
We are merely in the fight phase.
http://libertyblitzkrieg.com/2013/08/09/another-one-bites-the-dust-silent-circle-shuts-down-encrypted-email-service/
SAN FRANCISCO (Reuters) - "An encrypted email service believed to have been used by American fugitive Edward Snowden shut down abruptly on Thursday amid a legal fight that appeared to involve U.S. government attempts to win access to customer information.
ReplyDelete"I have been forced to make a difficult decision: to become complicit in crimes against the American people, or walk away from nearly 10 years of hard work by shutting down Lavabit," Lavabit LLC owner Ladar Levison wrote in a letter that was posted on the Texas-based company's website on Thursday.
Levison said he has decided to "suspend operations" but was barred from discussing the events over the past six weeks that led to his decision.
That matches the period since Snowden went public as the source of media reports detailing secret electronic spying operations by the U.S. National Security Agency.
"This experience has taught me one very important lesson: without congressional action or a strong judicial precedent, I would strongly recommend against anyone trusting their private data to a company with physical ties to the United States," Levison wrote."
http://news.yahoo.com/encrypted-email-thought-used-snowden-shuts-down-000606484.html
Will our Gold and Silver mean anything against Government dominance that says "it's ours, not yours, and we intend to take it, whether you like it or not"? Seems like it doesn't matter anymore.
read it...
ReplyDeleteEmail service used by Snowden shuts itself down, warns against using US-based companies
Edward Snowden: 'Google, Facebook, Microsoft, Yahoo, Apple, and the rest of our internet titans must ask themselves why they aren't fighting for our interests the same way'
What is particularly creepy about the Lavabit self-shutdown is that the company is gagged by law even from discussing the legal challenges it has mounted and the court proceeding it has engaged. In other words, the American owner of the company believes his Constitutional rights and those of his customers are being violated by the US Government, but he is not allowed to talk about it. Just as is true for people who receive National Security Letters under the Patriot Act, Lavabit has been told that they would face serious criminal sanctions if they publicly discuss what is being done to their company. Thus we get hostage-message-sounding missives like this:
I wish that I could legally share with you the events that led to my decision. I cannot. I feel you deserve to know what's going on - the first amendment is supposed to guarantee me the freedom to speak out in situations like this. Unfortunately, Congress has passed laws that say otherwise. As things currently stand, I cannot share my experiences over the last six weeks, even though I have twice made the appropriate requests."
Does that sound like a message coming from a citizen of a healthy and free country? Secret courts issuing secret rulings invariably in favor of the US government that those most affected are barred by law from discussing? Is there anyone incapable at this point of seeing what the United States has become? Here's the very sound advice issued by Lavabit's founder:
http://www.theguardian.com/commentisfree/2013/aug/09/lavabit-shutdown-snowden-silicon-valley
For the past few weeks I have been harping on JPMorgan’s massive long position in COMEX gold futures, stating that nothing comes closer in importance for the price. There has never been a case where a market corner wasn’t the prime price determinant. Preventing or eliminating market corners is the number one priority under commodity law. A market corner is the antitheses of how a free market is supposed to operate. A series of market corners and manipulation in the early part of the last century (the Jesse Livermore era) was what led to the formation of commodity regulation in the US in the 1930’s. It’s bad enough when entities such as the Hunt Brothers or the rogue copper trader from Sumitomo cornered markets; but it’s a whole different level of badness when the most important US bank corners a market, as JPMorgan has done in COMEX gold futures.
ReplyDeleteToday I would like to step back a bit and highlight how we got to the outrageous position of JPMorgan cornering the gold market. Regular readers know that I have pinpointed JPMorgan as being the prime manipulator in gold and silver for going on five years, following the revelation from the federal commodities regulator, the CFTC, that JPMorgan inherited the massive concentrated gold and silver short positions of Bear Stearns in March 2008. That, plus verifiable data from the CFTC, in its published Commitments of Traders (COT) and Bank Participation Reports, clearly confirm my allegations of a market corner by JPMorgan in COMEX gold futures.
http://www.tfmetalsreport.com/blog/4920/more-jpm-hoarding-gold
A new use for the odometer: determining tax you pay
ReplyDeletehttp://www.lasvegassun.com/news/2013/aug/09/new-use-odometer-determining-tax-you-pay/
"Electric cars and vehicles that get more miles to the gallon are more efficient for drivers but are causing a dip in money for roads in Nevada that is now primarily being filled by a tax on gasoline.
But the Nevada Department of Transportation is starting a study on alternate ways to pay for building roads in lieu of the gasoline tax.
Department Director Rudy Malfabon will brief the transportation board Monday about the agency's partnership with Washington, Oregon, UNLV and UNR to study the feasibility of collecting taxes on the miles a vehicle travels."
Criminal, Victim or Just Stupid??
ReplyDeleteSo Bruno Iksil will (apparently) not face charges. Hmmmm. I've had nothing to say on The Whale, mostly because the debacle (and its intricacies) have been covered rather well (particularly by Matt Levine) leaving little to add on the subject. But no charges? Really?
Why does this shock me? Because it appears obvious that with the size of the position and the persistence of accumulation and targeted activity in the market, that the objective of Mr Iksil was to paint a false and misleading picture of the market by intentionally manipulating the market price (hence marks) of his position and by not letting prices trade askew, (if he could do anything about it). Anyone who has traded size in squeezable markets will immediately know what I am saying.
I find it surprising that this behaviour is not the focus of attention. It is precisely this point which regulatory authorities should be focusing: the interference of market-determination of prices resulting from the creation of a false and misleading market. All interested in liquid functioning democratic markets determining prices should take note.
http://nihoncassandra.blogspot.com/2013/08/criminal-victim-or-just-stupid.html
The Tyranny of Forced Correlations
ReplyDeleteIn this case, it acts as a subsidy to leverage of all kinds, rewarding the rich, who are generally far more able to borrow large amounts than the middle classes. It also rewards hedge funds and private equity funds, who are only able to access returns comparable to those of investing in equities by using their access to cheap leverage. By rewarding certain groups of investors at the expense of the population as a whole (who find their income returns from investments ground down by year after year of cheap money), it forces correlations between asset classes that speculators find profitable.
One such correlation involves a massive effective subsidy to residential mortgage real estate investment trusts (REITs). Short-term interest rates are held down artificially near zero, while long-term interest rates are prevented from rising substantially by Fed quantitative easing (at least mortgage REIT sponsors think so). Thus for the last five years mortgage REITs have been able to leverage themselves in the short-term market and buy government-guaranteed home mortgages, leveraging the spread between the two interest rates. If that spread is 2.5%, and a mortgage REIT is leveraged 10 to 1, it can make a return of 25% on its capital, plus whatever return it gets on the mortgages purchased with its equity. That in turn allows it to pay dividend yields above 10%, and leads the shares to trade well above their book value—that in turn allows the mortgage REIT to carry out repeated stock issues, growing exponentially by doing so.
http://www.prudentbear.com/2013/08/the-tyranny-of-forced-correlations.html#.UgfJA38phIF
Nice analysis Dave. Housing misconceptions have been overlying so much malinvestment and olicy miscoordination. Russ Winter may be overextending a bit here, but these developments in his summary have to have many interpretations, and ultimate implications should not be too far off the mark: http://www.zerohedge.com/contributed/2013-08-11/g20-showdown-dollar-hedgemony
ReplyDeleteThe problems that created the housing market bubble, which led to the de facto collapse of the financial system in 2008, have never been fixed. In fact, they've been covered up by fraudulent accounting and a massive amount of money printing. Barring some kind of divine intervention, the next phase of the Great Financial Crisis is going to make 2008 look like an easy day at the beach. Cheap LOL Boost
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ReplyDeleteFlipping Frenzy Full Frontal: Bought In December for $1.5 Million, For Sale At $3.3 Million Eight Months Later
ReplyDelete"People will come in here and fall in love," Ryan said, with a house flipper's standard issue optimism. "This is an emotional sale. If it takes a week to sell, I will be surprised. There are a lot of young, wealthy people here, and a lot of money out there."
Eighteen months ago Brzeski and his firm, Arixa Capital Advisors, were lending investor money to flippers on very different properties: $250,000 single family homes in southern California's up-and-coming lower- to middle-class blue-collar neighborhoods. Most of the deals involved foreclosed homes that were totally refurbished, and then sold quickly.
No more. Brzeski now focuses on developers working on high-end flips of mansions and townhouses in exclusive neighborhoods, such as the Hollywood Hills and Bel Air.
And he is not alone. There has been a surge in high-end and luxury flipping nationwide. Between 2011 and today, flips of homes valued at $1 million or more have risen almost 40 percent across the United States, according to RealtyTrac, the housing data company.
...
"These Wall Street guys employed huge dollars," Brzeski said. "These firms came to the courthouse steps and bought everything in sight. So the low- to mid-market dried up."
http://www.zerohedge.com/news/2013-08-12/flipping-frenzy-full-frontal-bought-december-15-million-sale-33-million-eight-months
Blackstone Said to Acquire GE Apartments for $2.7 Billion
ReplyDeleteBlackstone Group LP, the largest manager of private-equity real estate funds, agreed to buy 80 U.S. apartment properties from General Electric Co. for about $2.7 billion, a person with knowledge of the deal said. The firm is acquiring the properties from the conglomerate’s GE Capital unit, said the person, who asked not to be identified because the transaction isn’t public. GE has been paring its real estate holdings as part of a strategy to shrink its finance division.
http://www.bloomberg.com/news/2013-08-12/blackstone-said-to-acquire-ge-apartments-for-2-7-billion.html
Are there any educated market predictors here who would be willing to say when they believe housing rates, particularly the rental rates, will show a significant fall in Florida?
ReplyDeleteAs of now, 8/17/2013, an average 3 bedroom home @ 1900sq/ft in a decent (but not gated or beachfront) home in Bradenton, Florida is listed for about 1800$-2000$ per month. When looking at rental listings for gated communities or homes with high-end features such as granite, spa tubs, caged pools, etc... rent easily goes from 2200-2900$
I am no economists, mathematician, or probability and statistics student (haven't taken a class above Algebra actually) but I do not see how these rates can be self-sustaining.... more like the "wishful" thinking that made a house worth 80k magically worth 200k in 2005.
I am no expert. But, I have been trying to tell people this for awhile now. The housing "recovery" was about big money investors thinking they could get distressed houses on the cheap, fix them up in minimum fashion and rent them out. They are now bailing out on this concept. And think about it. If there were such a housing "recovery" - then why would regular folks not be buying in droves. This is what fuels a REAL recovery - and it simply is not happening. The TV financial reports have their own agenda that wants to make everything seem rosy. It's smoke and mirrors.
ReplyDeletePlus, when the Fed starts to taper the artificial stimulus it will get even worse. There is going to be another crash. Ask mom and pop home improvement businesses and see if their business is improving with the so-called recovery. My guess is that it is getting worse, if anything. The "recovery" is a bunch of hype predicated on phony psychological factors induced by the media. That psychology will come crashing down with the so-called "recovery", which was never a recovery to begin with.