I Know What the Economy Did Last Summer Part 2: The Real Estate Rollover

In fact, I knew what the economy did last summer before summer even began. Since the beginning of the year, I have been writing that it appeared housing was reaching a new bubblicious peak and that the real estate market was getting ready to roll over. Just before the start of the summer, I confirmed that prediction by saying that it looked like that process had begun. I anticipate it will be a slow turnover at first, just as it was in 2007, which did not reach free fall until late in 2008. Likewise, I anticipate the present decline will not reach free fall until 2018.
While housing played out about as I expected this summer (see below), the more obvious collapse right now is developing in metropolitan commercial real estate, particularly in retail space due to the retail apocalypse. Even longtime commercial real-estate mogul Sam Zell warned last week that he would not consider investing any capital in retail real estate. In Zell’s words, the real estate landscape looks ‘like a falling knife.’
‘An area that’s in this much disarray, with so many weak players, is not an area where I would want to deploy capital at this time. And I’m generally a contrarian, and I generally rub my hands together at the opportunity for serious dislodgment, but I think what we’re dealing with here is very significant… It’s going to be very hard to take that shopping center land and redevelop it with all of these competing people having rights.’ (Newsmax)
Zell sees retail’s mortal throes as a violent struggle that is going to take a few years to play out.
A second problem the commercial real estate bubble faces (and Zell describes it as a bubble in that there is way too much space dedicated to retail in the US compared to other nations), is that Chinese investors are being forced to exit, and they have been a major support to that space. In Manhattan, for example, Chinese investors have made half of all commercial real estate purchases. The Chinese government decided this summer to squeeze that dry in order to stop the flow of yuan out of the country. In London and Australia, Chinese buyers accounted for about a quarter of commercial real-estate purchases. The Chinese government is pressuring Chinese banks to stay away from these deals.

This post was published at GoldSeek on Sunday, 8 October 2017.

Understanding The Results of Financialization – Part II – “Mationalization”

WHY A NEW FORM OF ‘NATIONALIZATION’ WILL OCCUR
The extended period of Quantitative Easing (QE) and ZIRP have now left the major global central bankers in an untenable position because of the Era of Unlimited Leverage which it has fostered. According to the Bank for International Settlements, central banks’ combined asset holdings in the major advanced economies (the US, the eurozone, and Japan) expanded by $8.3 trillion over the past nine years, from $4.6 trillion in 2008 to $12.9 trillion in early 2017. Yet this massive balance-sheet expansion has had little to show for it. Over the same nine-year period, nominal GDP in these economies increased by only $2.1 trillion.

This post was published at GoldSeek on Sunday, 8 October 2017.

Was Paddock an Anti-Trump Motivated Shooter?

A number of emails have come in about Paddock. There are pictures floating around of someone who looks like Paddock at anti-Trump rallies. This is by far not confirmed and is highly speculative. Nevertheless, the timing cyclically when someone would be triggered to act in this manner would be about January 12th. Targeting the Country Western rather than Pop music festival may also be a speculative indication that he was for some reason an anti-Trump advocate if one assumes the Country Music crowd voted for Trump rather than the Pop Music crowd. None of this is confirmed, but it is also doubtful anyone would provide such confirmation for it would be a political time-bomb.

This post was published at Armstrong Economics on Oct 8, 2017.

Eric Peters: “If Everyone Carried An S-400 To Work And Church, The World Would Be A Safer Place”

Unlike every other weekend, today One River’s Eric Peters has truncated his weekend notes following a knee arthroscopy (“it went fine, thanks for asking”) and to demonstrate the impact of opioids on American productivity, Peters “banged out an overall, some nerdy numbers and an old anecdote. Nothing more.”
Here is his latest “overall.”
‘I went to buy me another goddamn bump stock,’ shrieked the mentally retarded, Prozac-popping American on the Federal no-fly list, terrified it might be his last chance. ‘But the price jumped on me faster than you can say NRA.’
You see, bump stocks were quickly out of stock. That’s what happens when you threaten to regulate something, anything.

This post was published at Zero Hedge on Oct 8, 2017.

Q3 Earnings Season Begins This Week: Here Are The 3 Things Goldman Clients Are Focusing On

It’s that time in the quarter again: 3Q earnings season begins this week with Wall Street consensus expecting S&P 500 EPS growth of just 5% (3% ex-Energy), a sharp drop from the last two quarters (Q1 was+14% and Q2 +11%). According to Goldman’s Davis Kostin, “solid economic activity coupled with a weak USD will support sales growth of 7%, consistent with the past two quarters.” The Goldman strategist also expects margins to slip slightly to 9.7% but remain near record highs, and that “investors will ignore the EPS slowdown given one-time hurricane effects and the focus on benefits from corporate tax reform.”
Before we summarize the three main issues Goldman’s clients are most focused on, here is a quick backdrop of the bank’s overall outlook on the market:
S&P 500 notched another all-time high this week. Optimism for tax reform has pushed stock prices up despite bond yields rising to 2.4%. Our political economist assigns a 65% likelihood that tax legislation will be passed in 2018, which is consistent with market pricing. In late August, the S&P 500 traded at 2450, 17.6x our 2018 EPS estimate of $139. Details of tax reform are uncertain, but we estimate that EPS could rise to $148 depending on the final legislation. Applying a constant P/E multiple to the higher EPS would suggest an index level of 2610. The current S&P 500 level of 2550 implies a roughly 60% probability of corporate tax reform.
Incidentally, Goldman still expects the S&P 500 to end 2017 at 2400, 2018 at 2500 and 2019 at 2600, which means that the US stock market is just shy of Goldman’s 2019 price target.

This post was published at Zero Hedge on Oct 8, 2017.

Martin Shkreli: “Prison Life Isn’t That Bad”

Martin Shkreli says prison life at the notorious ‘Club Fed’ jail in Brooklyn isn’t all that bad.
The former Turing Pharmaceuticals CEO and recently convicted felon, whose bail was revoked last month after prosecutors successfully argued that Shkreli’s Facebook post offering $5,000 for a strand of Hillary Clinton’s hair represented a credible threat of violence. Shkreli argued that the post was satire, but the judge said that Shkreli’s history of harassing people on the internet cast doubt on his intentions.
Shkreli has described his prison experience in a letter to a friend that was shared with the New York Post.
The 34-year-old is spending his time mentoring fellow inmates, reading, playing chess – and learning to deal with sharing a small, cramped cell with a snoring roommate, pal Lisa Whisnant told The Post.
‘Things are not THAT awful here,’ inmate 87850-053 wrote to Whisnant, underlining ‘THAT’ three times. ‘There are some bright sides. I am teaching these prisoners some new things and hopefully some ways to change their lives.’
Shkreli has been passing his time shooting hoops with his fellow inmates. Though he apparently complained that his bed is small and cramped and that his sleep quality has been ‘very low.’

This post was published at Zero Hedge on Oct 8, 2017.

The NFL Is Now The Least Popular Professional Sports League In America

While mainstream media outlets like the New York Times have continued to assert that the dip in NFL ratings that began last season is in no way connected to the controversy surrounding players kneeling during the National Anthem, yet another poll has reaffirmed what many football fans have suspected for weeks: The protests have transformed the NFL into the least popular professional sports league in America.
From the end of August to the end of September, the favorable ratings for the NFL have dropped from 57% to 44%, and it has the highest unfavorable rating – 40 percent – of any big sport, according to the Winston Group survey provided exclusively to Secrets.
Worse for football, which was already seeing lower TV ratings and empty stadium seats, the month of protests and calls from President Trump for fans to boycott the league or ‘walk out’ of games if they see players taking a knee has apparently turned off men aged 34-54 – one of the league’s most important demographics and a troubling sign that the league isn’t in touch with its fans. The Winston Poll from the Washington-based Winston Group found that the attitude of those fans went from an August rating of 73 percent favorable and 19 percent unfavorable to 42 percent favorable and 47 percent unfavorable, a remarkable turn against the sport.

This post was published at Zero Hedge on Oct 8, 2017.

California’s Housing is Bleeding Out and We Apply Band-Aids

Insider view on how to deal with the Housing Crisis in California.
Governor Jerry Brown just signed fifteen affordable-housing bills into law. A few might do a little good. Two senate bills will raise a bit of money. Senate Bill 2 will charge you a recording fee of up to $225 on any transaction not already subject to a transfer tax (e.g. a mortgage refinance). Senate Bill 3 is a $4 billion housing bond. Most of the money raised from these two efforts will go toward funding low-income housing.
Assembly Bill 1505 will allow cities to once again require an affordable housing component in new residential projects, a requirement that had been ruled unlawful by the Court of Appeal in 2009. Jerry’s other new laws are, in a word, fluffy, well-intentioned but toothless efforts to spur cities on to do the right thing.
About the money. According to the Los Angeles Times, San Francisco’s 700 unit Hunters View low-income housing project cost $450 million or $643,000 a unit. While appallingly high, that number sounds about right. Thus, if SB2 actually raises $250 million a year, California could add another 388 low-income units annually. And the whole $4 billion from SB 3 would be gone after 6220 new units. In a state which needs to add 100,000 new dwellings a year just to keep up with its population growth – and not allow the housing crisis to worsen – this is truly spitting in the ocean.

This post was published at Wolf Street on Oct 8, 2017.

Isaiahs Job

Even the most stout-hearted libertarian occasionally despairs of saving freedom. At such times, this essay may afford encouragement.
One evening last autumn, I sat long hours with a European acquaintance while he expounded a politico-economic doctrine which seemed sound as a nut and in which I could find no defect. At the end, he said with great earnestness: ‘I have a mission to the masses. I feel that I am called to get the ear of the people. I shall devote the rest of my life to spreading my doctrine far and wide among the populace. What do you think?’
An embarrassing question in any case, and doubly so under the circumstances, because my acquaintance is a very learned man, one of the three or four really first-class minds that Europe produced in his generation; and naturally I, as one of the unlearned, was inclined to regard his lightest word with reverence amounting to awe . . . .
I referred him to the story of the prophet Isaiah . . . . I shall paraphrase the story in our common speech since it has to be pieced out from various sources . . . .
740 B. C.
The prophet’s career began at the end of King Uzziah’s reign, say about 740 B. C. This reign was uncommonly long, almost half a century, and apparently prosperous. It was one of those prosperous reigns, however-like the reign of Marcus Aurelius at Rome, or the administration of Eubulus at Athens, or of Mr. Coolidge at Washington – where at the end the prosperity suddenly peters out and things go by the board with a resounding crash.

This post was published at Mises Canada on OCTOBER 6, 2017.

“We Dodged A Bullet”: Hurricane Nate Misses New Orleans, Downgraded To Tropical Depression

Residents of coastal towns and cities across the Southeastern US are breathing a sigh of relief as Hurricane Nate is rapidly weakening after twice making landfall in the Southeastern US late Saturday into early Sunday. The NHC has downgraded it to a tropical depression as it moves inland over Alabama; NHC has also discontinued all storm-related warnings for coastal areas, though heavy rains and flooding continue in some areas. The storm’s maximum sustained winds have dropped to 40 mph, and as of late-morning Sunday, the storm was traveling near Birmingham, Alabama.
Many of the Hurricane watches and warnings issued before the storm made landfall have been discontinued.

This post was published at Zero Hedge on Oct 8, 2017.

Fed’s Monetary Tightening Could Become a Havoc-Wreaking Juggernaut

The price of gold has fallen four straight weeks, primarily driven down by anticipation of Federal Reserve monetary tightening. The kickoff of the Fed’s balance sheet normalization program and the expectation of rising interest rates have helped spark a dollar rally. But few people seem to be paying any attention to the pitfalls of quantitative tightening. In fact, the Fed’s policy to push interest rates higher could turn out to be a havoc-wrecking juggernaut.
We’ve already discussed the impact rising interest rates will have with the government more than $20 trillion in debt. Any substantial interest rate increase would crush the US budget under interest payments. Analysts have calculated that if the interest rate on Treasury debt stood at 6.2% – its level in 2000 – the annual interest payment on the current debt would nearly triple to $1.3 trillion annually.
But the Fed has an even more basic problem. It has inflated a stock market bubble. This attempt to shrink the balance sheet may well pop it. Peter Schiff pointed this out during his podcast earlier this month.
I don’t know why the markets are excited about the prospect of a plan to shrink the Fed’s balance sheet, because if the Fed actually shrunk the balance sheet, the markets wouldn’t like it because it would put dramatic upward pressure on interest rates which are not good for stocks.’

This post was published at Schiffgold on OCTOBER 6, 2017.

Stock Market Crash 2018; will it prove to be another buying opportunity

I guess the definition of a lunatic is a man surrounded by them.
Ezra Pound
Since Trump was elected we noticed something interesting; economic news seems to have less of an impact than Geopolitical developments. Polarisation has had the effect it was intended to trigger; the masses and the markets are focusing on the wrong issues, and so we can expect a slew of legislation favouring the corporate world to be passed with little to no resistance. This, in turn, will help push stocks even higher as corporations will have even less to worry regarding being liable for using questionable methods to boost their earnings.
In the last Market update, we spoke of how the markets are operating in a way that appears to make no sense; how they are working more and more like an insane person. Ask a madman how he is, and he might respond by telling you that ‘ the road needs to be fixed’. The answer has nothing to do with your question and on the surface has no pattern whatsoever, but if you turned around and looked at the road, maybe you would notice that it is in need of repairs. All you had to do was alter the angle of observance, and in doing so, you spotted something that most would have missed.
What if you asked him another question instead of declaring him insane, for example, ‘ Are you hungry?’. To which he responds ‘ I hurt my toe yesterday’. You learnt something from the first question, so instead of trying to figure out the answer, you decide to look down, and you notice he is not wearing a shoe on the right foot and the toe is wrapped up in a bandage. What is the pattern here? The guy is not responding at all to your inquiries; maybe he is not as insane as he appears, maybe he thinks your questions are silly. The second thing to conclude is that he is more concerned with reality as opposed to a possibility. Thus the information is not useless; it appears to be useless because most would be ready to evaluate this person based on what they deemed to be a sane or insane response. In other words, they would be following SOP (standard operating procedure).

This post was published at GoldSeek on 6 October 2017.

Schuble: Another Financial Crisis Is Coming Due To Spiraling Global Debt, “New Bubbles”

Following the disappointing for Angela Merkel and her CDU German election results, which propelled the populist AfD into Germany’s political establishment with 92 members of parliament, the first casualty was Germany’s finance minister, Wolfgang Schuble, who in a few days will relinquish his long-held post and move on to the ceremonial role of Bundestag president. As part of his farewell tour, Schuble – like so many other former members of the establishment- took a parting shot at the system he helped create and warned that “spiraling levels of global debt and liquidity”, as well as “new bubbles” present a major risk to the world economy.
Speaking to the FT, the Europhile beloved in Germany for successfully steering one of the world’s largest economies for the past eight years, and who nearly led to Grexit in the summer of 2005, said there was a danger of ‘new bubbles’ forming due to the trillions of dollars that central banks have pumped into markets. Confirming another fear widely propagated by the Putin propaganda alternative media, Schuble also warned of risks to stability in the eurozone, particularly those posed by bank balance sheets burdened by the post-crisis legacy of non-performing loans, something we have warned about since 2012, and an issue which remains largely unresolved.
A strong advocate of fiscal rectitude and debt reduction, Mr Schuble dominated Europe’s policy response to the eurozone debt crisis and has been vilified in countries such as Greece as an architect of austerity. But he will mainly be remembered as the most ardently pro-European politician in German chancellor Angela Merkel’s cabinet, skilled at selling the benefits of the euro and of deeper European integration to an often sceptical German public.

This post was published at Zero Hedge on Oct 8, 2017.

Gold and Yen at Key Inflection Points; Watch for Possible Breakdown

Key trend changes in the yen have a close correlation with major moves in the price of gold Both yen and gold are at another major inflection point Diverging monetary policy between the Fed and BOJ suggest next move is to the downside Background: Moves in the Japanese yen have been a reliable indicator for gold due to the effects of the yen carry trade. Given ultra-low interest rates in Japan, its currency has been the funding currency for global speculators who borrow in cheap yen and then speculate in other assets. When the yen weakens, there is greater borrowing of the currency to chase financial assets all over the globe. This pushes financial assets higher and reduces overall market volatility, which decreases the allure for gold as a safe haven asset. A weak yen relative to a stronger dollar is also negative for gold since a stronger dollar is typically associated with lower overall inflation rates. Thus, when the Bank of Japan (BOJ) decided to embark on a massive money printing program in 2012 to end deflation in Japan, that effectively marked the end for the bull run in gold.
In this chart and those that follow, I show the yen inverted (in red) next to gold (in black) to illustrate the relationship over the key timeframes discussed. Here is the price of yen and gold from 2007-2012:

This post was published at FinancialSense on 10/06/2017.

The Last Time The Market Did This Was After Kennedy’s Assassination

There have only been eight moves of at least 1% for the S&P 500 Index so far this year – the least since 13 in 1995. The all-time record was an incredible three in 1963.
What about a big move? The last time the S&P 500 moved at least 4% was nearly six years ago.
In fact, the S&P 500 had four consecutive days with 4% (or greater) changes in August 2011. Other than 2008 and the crash of ’87, that is the only other time since the Great Depression to see four consecutive 4% changes.
That isn’t anything like today’s action…
As the chart below shows, so far in 2017, big moves have been nonexistent; and even 1% changes have been rare.

This post was published at Zero Hedge on Oct 8, 2017.

Pence Walks Out On Kneeling 49ers As Kaepernick Slams ‘Stand For Work’ Lies

Wanted to clarify one thing regarding @Kaepernick7. When I was asked about his whether or not he would sit or stand for anthem …
— Jason La Canfora (@JasonLaCanfora) October 8, 2017

Update 3: The CBS reporter who said that Colin Kaepernick had told him that he would stand for the National Anthem if he were to ever play professional football again has issued a “quick clarification” about his report: He made it all up. In a series of tweets, CBS’s Jason La Canfora said he had intended to paraphrase previous reporting on Kaepernick, and that the two didn’t discuss Kaepernick’s anthem stance during a recent interview. The reversal came after anchor James Brown asked La Canfora on ‘The NFL Today’: ‘And kneeling, he said?’ La Canfora responded: ‘He’s not planning on kneeling. He’s going to donate all his jersey sales and he’s planning on standing for the anthem if given the opportunity, J. B.’
While ESPN reported in March that Kaepernick would stand if given another chance to play, the former backup QB for the San Francisco 49ers hasn’t spoken publicly about it.

This post was published at Zero Hedge on Oct 8, 2017.

Feelings

Feelings have no place in a public-policy debate, and those who attempt to use such argument must be brought up on public fraud charges and imprisoned.
Yeah, I know, I’ll get hate mail for that statement — because it’s true.
Let’s just start with my recent post on Trump’s administration and birth control. The usual response to my argument is that “well, what do you with women who need the $200 pills instead of the $10 ones“?
My answer is simple: There are more options for birth control than pills, and it is precisely the obscuring of the price that allows someone to charge 20 times the going rate for a product that does the same thing.
In other words absent the “feelings” arguments there would be statistically zero $200/mo birth control pills sold because almost-nobody would pay that much money. Those who had some legitimate medical reason to not use the $10 or $20 options would choose some other form of birth control (e.g. Depo, an IUD, being involved only with a man who has had a vasectomy on a monogamous basis, etc.) The few who insisted on paying the $200 would be free to do so, but the lack of customers would cause the price to go down. In fact I suspect the cost of making such $200 pills is not much more than the cost of making the $10 ones, and it is precisely that they are patented that prevents someone else from copying them at 1/20th the price. That, in turn, means the only control on price is transparency and a market system where people pay out of their pocket what they think something is worth when examined against all the other alternatives.
Likewise, absent the “feelings” argument there would be no $500,000 cancer treatments either. This, however, doesn’t mean the treatment would not exist — only that the price wouldn’t. Cancer patients would have to take the various treatment options and their published and verified effectiveness ratings along with price into account and choose. Those who tried to gouge wouldn’t get away with it because there’s no market for that. Those who had a superior and more-expensive product would get away with it if individual cancer sufferers deemed the price to worth it. Again, patents make possible restrictions on duplication but a patent can’t force you to buy. If people have to write an actual check and can’t force someone else to pay then the cost:benefit analysis becomes both exposed and judged by the person most-impacted by the decision — the one with the cancer!

This post was published at Market-Ticker on 2017-10-08.

Kyle Bass Sounds Off On “Worthless” Puerto Rican Debt, The Crypto “Gold Rush”, And Guns

With the dollar’s recent post-Fed bout of appreciation providing some much-needed relief for Haymarket Capital’s P&L, its founder Kyle Bass sat for an interview on Friday with Bloomberg’s Erik Schatzker. During the 20 minute discussion, Bass expounded on the importance of holding gold, his cautiously optimistic view on digital currencies, the misguided notion that holders of Puerto Rican debt will someday be made whole – oh, and Bass’s next big call: Long Greece – particularly the stocks and debt of Greek banks.
***
A few weeks ago, Bloomberg view published a Bass-penned editorial in which the hedge fund founder and CIO called on the IMF to stop bullying Greece – publicizing the fact that he is now effectively long Greece. Greek government bonds have performed reasonably well so far this year: They’re up about 16%.

This post was published at Zero Hedge on Oct 7, 2017.

Market Report: Lower in declining volume

Gold and silver drifted lower in declining volume. On Tuesday, the day of tonight’s Commitment of Traders report, gold’s Comex turnover fell to 211,897 contracts, compared with more normal days of 300,000 to 450,000. When turnover drops like this, it often indicates downside exhaustion and precedes a technical rally.
Gold fell a further $12 from last Friday’s close to $1268 in early European trade this morning (Friday), and silver by 10 cents to $16.59.
These are holiday numbers, and probably reflect China’s annual Golden Week holidays, which are this week. Ironically, it is the one week that’s not golden for markets, removing the largest source of physical demand for gold for a whole week. This is likely to be a big part of the reason why precious metal trading has ground to a halt.

This post was published at GoldMoney on October 06, 2017.