Friday, November 29, 2013

Today's Links

1---Robert Shiller on housing: Don't trust momentum, cnbc (repeat)

2--"We are in a massive bubble", cnbc

Marc Faber editor and publisher of The Gloom, Boom & Doom Report, told CNBC on Friday he believes a "massive speculative bubble" has encroached on everything from stocks and bonds to bitcoin and farmland. He attributed the vast bubble to "symptoms of excess liquidity."

Faber said the markets, which have reached record highs, could still rise before the bubble bursts, if stimulus programs such as the Federal Reserve's massive monthly bond purchases and super-low interest rates continue.

"Now can the market go up another 20 percent before it tumbles?" Faber said on "Squawk Box". "Yeah, it can go up even more, if you print money

3---Watch out! Worrisome housing signs appear in West, cnbc

4---Pending home sales fall again, cnbc

5---Dow, S&P 500 Close At Record Highs, Reuters

6---Japan to spend about 1 trillion yen on public works for stimulus: sources, Reuters

(Abe uses traditional fiscal stimulus to boost economy revealing the sham of monetary stimulus which only inflates asset prices.)

Japan will spend around 1 trillion yen ($9.86 billion) on public works in a stimulus package to be finalized next month, sources said, to help offset the impact of an increase in the sales tax.
Prime Minister Shinzo Abe's cabinet is expected to approve the stimulus package, which will total around 5 trillion yen, on December 5.
The government plans to raise the sales tax in April to 8 percent from 5 percent currently to pay for growing healthcare spending.

Abe wants to use short-term stimulus spending to counter the blow to consumer spending from the tax hike.
The package is likely to contain around 200 billion yen for a temporary expansion of payments to families with children, sources with direct knowledge of the matter said.
The package will also spend about 300 billion yen on payouts to low-income earners and around 150 billion yen on subsidies for new home purchases, sources said.

7---The Forth Reich? German grand coalition to intensify austerity policies in Europe, wsws

(The beatings will continue until morale improves)

the coalition parties are committed to continuing a course that has led to a social disaster virtually without precedent in peacetime.
The Christian Democratic Union (CDU), Christian Social Union (CSU) and Social Democratic Party (SPD) have agreed to drive ahead with austerity policies that have wrought indescribable misery in Greece, Spain, Portugal and other countries, with unemployment soaring to record levels, an entire generation of youth robbed of a future, and millions of livelihoods destroyed.
Most of the 185-page coalition agreement is characterized by vague formulations, but on this issue the document is crystal clear. “The policy of fiscal consolidation must be continued,” it states. The agreement goes on to declare that “structural reforms to increase competitiveness” and “strict, sustained fiscal consolidation” are indispensable preconditions for “exiting the crisis.”

The agreement rejects “any form of pooling sovereign debt” and rules out joint government bonds (euro bonds) and other mechanisms that could reduce the interest burden of indebted countries. Emergency loans from European financial funds must continue to be tied to draconian austerity measures. They must be granted only “as a last resort,” and in “exchange for strict conditions, i.e., reforms and consolidation measures, by the recipient countries.”
To ensure that there be no let-up in the pressure on indebted countries, the deal calls for an expansion of the “surveillance of national budgetary planning by the EU Commission.”
In plain English, this means intensifying the policy of social impoverishment with which the German chancellor is associated across large swathes of Europe, including in Germany itself.

8---The Rajoy Horror Picture Show Lumbers On, Testosterone Pit

the Rajoy administration’s brutal, ideologically driven austerity program.
It is a program or, better put, pogrom that targeted the weakest and most vulnerable in society, including the terminally ill, disabled and pensioners, while leaving completely unscathed the wallets of the country’s burgeoning political class ....

that most of the continent’s banks are already as insolvent as Enron, the company whose wildly dysfunctional business model became the business model of our times. As Zerohedge recently noted, “unlike the US, where the banks raised capital to address their problems, EU  banks have not raised capital nor have they reduced their leverage (of 26 to 1 by the way). Instead, they’ve simply swapped garbage assets as collateral to the ECB,  which counts this garbage at 100 cents on the Euro, and issues liquidity to the banks.”

- World-beating unemployment. Unemployment in Spain continues to hover above 25 percent and youth unemployment remains well above 50 percent. While Rajoy’s administration is not exclusively to blame for the level of unemployment, it is largely responsible for the destruction of more than one million jobs over the last two years. And that despite – some might say because of — the government’s much-lauded labour reforms last year.

- Plummeting living standards and internal demand. Disposable incomes for those lucky enough to have kept their jobs have shrunk significantly as a result of rising income and sales taxes, not to mention the addition of 40 new taxes during Rajoy’s mandate. In the private sector, meanwhile, salaries continue to fall precipitously. As such, is it any wonder that internal demand in the country has fallen off a cliff?

- An epidemic of small business closures. More than 250,000 small and medium size enterprises (SMEs) have closed since the crisis began. Many of those have perished in the last two years and more than a third of them due to late payment of invoices, the biggest offenders of which are Spain’s local and regional government institutions and large corporations...

According to a recent report by UNICEF, following the imposition of successive austerity measures by the country’s main two parties, the social conditions of post-civil war are returning with a vengeance. Poverty is spreading like liquid wildfire and over a quarter of under-16-years-olds — some 2.3 million — are now at risk of malnutrition.

9---Stock market gains fuel speculation about bubble, SF Gate

The Dow Jones industrial average finished above 16,000 for the first time Thursday and on Friday the Standard & Poor's 500 index notched its first close over 1,800. The Nasdaq composite index just missed breaking the 4,000 barrier, but is still 21 percent below its all-time high of 5,048.62 set in 2000.
This year, the Dow is up 22.6 percent, its best performance since 2003. The S&P 500 is up 26.5 percent and the Nasdaq 32.2 percent.
When Janet Yellen, President Obama's nominee to become Federal Reserve chairwoman, was asked by a senator this month if the Fed's expansive monetary policy was inflating a stock market bubble, she acknowledged that stocks have risen "pretty robustly. But I think that if you look at traditional valuation measures ... you would not see stock prices in territory that suggests bubble-like conditions."....

One development that has experts concerned is the return of individual investors, who are known for getting into the stock market near peaks. Although they came back in a big way this year, they have not put in as much as they withdrew over the past five years.
One way to measure their activity is to look at net inflows into stock mutual funds (excluding exchange-traded funds). When investors put more into stock funds than they take out, it's called a net inflow. When they withdraw more than they invest, it's a net outflow.

This year, net inflows totaled $176 billion through Nov. 20, according to Lipper.
That followed net outflows of roughly $200 billion in 2008, $13 billion in 2009, $94 billion in 2011 and $130 billion in 2012. In 2010 there was a small net inflow of $6.3 billion.
If you add up all those flows, we are still about $255 billion in the hole, says Lipper senior analyst Tom Roseen.
Most of that money is coming from bank accounts and money market funds, he adds. Only a small portion appears to be coming from bond funds

10---Tech Bubble? No revenues? No problem, NYT

Since the dark days of 2008, the Nasdaq has risen more than 150 percent, twice as much as the old-school Dow industrials. Money has been pouring into social media stocks. As of Friday, Twitter had risen nearly 60 percent since it went public only a few weeks earlier.
Once again, new “metrics” are being applied to justify stratospheric valuations. Twitter is losing money. A price-to-earnings ratio? There is no E in the P/E. But its stock is trading at 20-odd times the company’s annual sales. Good enough.

There is more. Technology companies have become the takeover bait du jour. A report issued by Ernst & Young last week said that mergers and acquisitions in the global technology industry have rebounded to “a new post-dot-com bubble high.” Roughly $71 billion in deals were made during the third quarter.
And then there is Kozmo.com, the poster child of the dot-com bust. Kozmo is back. Last time, its couriers would deliver just about anything at any hour — CDs, Milky Way bars, you name it. It burned through $280 million before going bust.

“Remember us?” a banner on the Kozmo.com reads now. “We’re relaunching soon.”
Many technology entrepreneurs and venture capitalists say there is little to worry about. Which tells you something about bubbles and Silicon Valley. It is difficult to know when any bubble is going to pop until it does. And in Silicon Valley, with its inherent optimism in brighter tomorrows, the view tends to be that the way is always up.

“I’m not going to say there is a bubble or there isn’t a bubble,” said Naval Ravikant, co-founder of AngelList, a website for raising money for start-ups. “But I lived through the first bubble, and I was in disbelief the entire time, and I don’t see anything of that magnitude or scale here today.”
Such assurances aside, the numbers are sobering. Eight months ago, Snapchat was valued at $70 million. Today, it is valued at $4 billion, even though it has zero revenue. Six months ago, Pinterest was valued at $2.5 billion. Today, it is valued at $3.8 billion — and no revenue there, either. And last week news broke that Dropbox was said to be seeking a new round of funding that would value the company at $8 billion, up from $4 billion a year ago.

11---Bubble Trouble, Barron's

One of the biggest coming challenges for stocks is the likely curtailment of the Federal Reserve's aggressive bond purchases during 2014. When Federal Reserve Chairman Ben Bernanke raised the prospect of "tapering" in the spring -- an action that the Fed has since postponed -- stocks stumbled. But Auth argues stocks can appreciate in 2014 in the face of higher bond yields.

THERE ARE PLENTY of reasons for caution. Margin debt has risen to record levels, investor complacency is high with the VIX index -- a gauge of volatility known as the "fear index" -- near a 10-year low, and many professional investors are raising cash or hedging their portfolios. Warnings about bubble-like conditions are coming from the likes of BlackRock CEO Larry Fink and longtime bull Warren Buffett who said two months ago, when the S&P was 5% below current levels, that he's "having a hard time finding things to buy." That said, last week Berkshire Hathaway (BRKA) disclosed that it had taken a $3.45 billion stake in ExxonMobil (XOM).

12--More on Bubble, WSJ

Against that confidence, an equities strategist is warning of a major bubble in global stock prices. In a research note, Nomura Securities strategist Bob Janjuah is warning that over the final three quarters of next year and into 2015, there “could be a 25% to 50% sell off in global stock markets.”
Mr. Janjuah, who is co-head of macro strategy research at Nomura, sees a lot to worry about, and he sees central banks, including the Fed, at the center of the factors that eventually will bring woe to stocks.
“The major themes are unchanged–anaemic global growth/mediocre fundamentals, what I consider to be extraordinarily and dangerously loose monetary policy settings, very poor global demographics, excessive debt, an enormous misallocation of capital driven by the state sponsored mispricing of money/capital, and excessive financial market/asset price speculation at the expense of any benefit to the real economy,” the analyst says.

Mr. Janjuah says markets are now priced entirely for good news, leaving them vulnerable to adverse developments. But the main driver of the coming bursting of the stock market bubble, as the Nomura analyst sees it, is a much delayed rebalancing of the global economy as central banks pull back from all of their aggressive stimulus activities.
“The next five years has to be about a rebalancing towards the ‘real economy’ and the bottom 90%, at the expense of the top 10%,” Mr. Janjuah writes. “This shift in policy emphasis will not be a happy time for financial markets and speculators while the transition happens,” he says

13---5 signs the stock market is in a bubble, CBS

14---The Sum Of All Stock Market Fears In One Epic Chart, B Insider
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