Thursday, April 11, 2013

Today's links

1---Housing Juggernaut Seen Spurring 500,000 New U.S. Workers, Bloomberg

2---Money Spigot Opens Wider, Big Picture
Source: WSJ

3---U.S. Stock Market Is ‘Overvalued, Overbought and Overbullish’: John Hussman, yahoo finance

According to Hussman, corporate profits are near 11% of GDP and 70% above the historical norm. (Hussman agrees with Warren Buffett that one has to be wildly optimistic to believe corporate profits -- as a percent of GDP -- can hold above 6% for a sustained period.)

So what’s the catalyst that will drive corporate profits over the cliff?

"Even marginal improvements in the federal deficit and in household savings, which are necessary because of the debt burdens households have taken on…we are likely to see -12% earnings growth annualized over the next three to four years - in other words substantial weakness in corporate profits," Hussman tells The Daily Ticker. 

Here’s Hussman’s rationale. He says the deficit of one sector has to emerge as the surplus of another sector. Record deficits for households and the government combined have to show up as a surplus somewhere. Hussman argues that we see a mirror image of record deficits for households and the government, and record surpluses at the corporate level as a fraction of GDP.
Hussman describes the current stock market as “overvalued, overbought, and overbullish" -- an environment where stocks can creep higher but crash for no good reason.

4---Irrational exuberance? zero hedge

 David Rosenberg, who clarifies the insanity that engulfs US equities, explaining in wonderment that it is "not surprising the market rises even in the face of bad ISMs, worse jobs, and worst NFIB data, because Japan and the US are embarking on a gargantuan quantitative easing that is the lynchpin behind the stock market." It is not about being bullish, or bearish, or agnostic, it is understanding the driver of this market - and that is not the economy, not earnings, "it is the mother of all liquidity-driven rallies."

5----KEITH JUROW: The US Housing Recovery Is A Mirage And A Serious Delinquency Crisis Is Coming, Business Insider

I’ve emphasized repeatedly in previous articles that the banks have severely curtailed the number of foreclosed properties (REOs) which they have put on the active MLS market. For example, in the spring of 2009, 2/3 of all homes sold in the Greater Phoenix area were foreclosed properties. In December 2012, a mere 10% of the homes sold were foreclosures.
Since foreclosed properties are normally the lowest-priced homes on the market, the sharp reduction in sales of these inexpensive homes will almost always raise the median price of sold homes. Yet a higher median price does not necessarily indicate that homes prices would be rising without this market manipulation by banks

The Looming Crisis of Seriously Delinquent Mortgages
Throughout the country, banks have severely reduced their foreclosure activity. If you doubt this, take a look at these statistics.
Latest foreclosure statistics for January 2013
Keith Jurow

The effect of this severe reduction in foreclosing activity by mortgage servicers is to artificially increase the median price of homes sold in just about every major metro.
I have reported in several previous articles that delinquent homeowners are continuing to walk away from their underwater properties. Nowhere is this done with more worry-free abandon than in the NYC metro. Take a look at these shocking new statistics that I have obtained from the NY State Division of Banking. They show the cumulative totals for pre-foreclosure notices sent to delinquent owner-occupants in New York City and Long Island.
90-day pre-foreclosure notices filed with department of financial services
Keith Jurow

Let me carefully explain these statistics. They show pre-foreclosure notices which mortgage servicers have been required under a NY statute to send to all delinquent borrowers in owner-occupied properties. The law did not compel the servicers to send notices to delinquent owners of investment properties. One of the nation’s most reputable foreclosure attorney has assured me that there are no duplicates in these numbers because servicers were not required to send a follow-up notice....
I have solid figures from the Federal Reserve Bank of New York on the number of first mortgages in both NYC and Long Island. So the latest figures from the NYS Division of Banking indicate that roughly 30% of all owner-occupied properties in NYC are now seriously delinquent. For Long Island, it is an incredible 35%....
Take a look at reliable figures from The borough of Queens has 2.2 million residents. On April 1, 2013, there were a total of 91 foreclosed and repossessed properties actively listed for sale. That’s right – 91. With more than 101,000 delinquent owner-occupants having been sent a pre-foreclosure notice since early 2010, only 91 repossessed properties are on the market. 

The Plunge in Homes Listed for Sale
Much of the media has focused its attention on the sharp decline in homes for sale over the last year. They claim that this is another sign that the housing market is improving.
Take a look at these terrific statistics on inventory for sale in 21 major metros by the online brokerage firm, Redfin.
Redfin year over year change in active property listings
Keith Jurow

You can see that total home listings are down largely because of the huge drop in both repossessed properties and short sale homes on the market. In these 21 major metros, the number of foreclosed properties for sale dropped nearly in half in the past year....
What are people around the country doing? In January 2013, Redfin published the results of its second home seller survey. Questioning potential sellers in 20 metros around the country, it found that 81% of them believed that prices would rise in the next 12 months. A mere 3% thought prices would decline. One of the biggest concerns of potential sellers was that prices would rise after they sell. Because of this, 21% of those considering selling had decided to wait and rent out their home instead. 
The authors of the Redfin survey stated one conclusion without hesitation. One main cause of the shrinking inventory of homes for sale is this view of most homeowners that they would be better off waiting at least a year before putting their house on the market.
As I see it, homeowners have been greatly influenced by those in the media who have been asserting that the bottom has been reached and prices are clearly heading higher.
After five bitter years of economic crisis and social regression, the working class is being brought face to face with an imperious reality: the ruling class cannot be pressured or reformed; it must be overthrown
   Fifty-five years after the founding of the European Economic Community in 1958, the project of unifying Europe and bringing it lasting prosperity on a capitalist basis has been irrevocably shattered by the global capitalist crisis.
With the recent bailout of Cyprus and new austerity measures announced against Greece and Portugal, the European Union (EU) is emerging nakedly as an instrument for crushing workers’ social rights, as competing ruling elites ruthlessly fight for dominance in Europe
The bailout aimed to eliminate a rival of major European banks and precipitate an economic collapse facilitating attacks on the working class. In Cyprus, the economy is expected to decline by 25 percent in the coming years as a result of the bailout. The EU is insisting that the Cypriot government implement the type of mass layoffs, wage cuts and privatization which have already led to a social catastrophe in Greece.

The broader aim of such bailouts, as Greek EU Commissioner Maria Damanaki recently said, is to cut wages and working conditions in Europe in line with levels in the most exploited countries of Eastern Europe and Asia.

All the social rights formally enshrined in law after World War II—when the European bourgeoisie felt it had to make social compromises to prevent a resurgence of the kind of mass revolutionary struggles that followed the October Revolution in Russia—are being smashed. Driven by the world crisis, the bourgeoisie is tearing up its own laws and the social gains of an earlier period, aiming to throw the working class back decades





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