Saturday, December 7, 2013

Today's links

1---The rise of real estate feudalism, Dr Housing Bubble

us homeownership rate
How
higher:
GS-housing-cash

Low inventory is a symptom of market manipulation.  Too many odd incentives and banking shenanigans have created a distorted market.  The Fed now owns 12 percent of the mortgage market and is essentially the only buyer of mortgage backed securities.  Look at all the above data.  Who do you think is really winning here?  Rents are higher.  Home prices are higher.  Yet the menu of good employment opportunities is limited.  Incomes are hardly increasing.  The younger generation is massively in student debt and they are having a tough time finding good work.

2---Forget jobs: Here's why the Fed isn't tapering yet, Housingwire

Jobs numbers alone simply aren't strong enough

The Federal Reserve Bank of New York released the fourth and final results of its consumer expectations survey and the results predict anything but an improving economy. For most Americans, the economic world is still flat.

And by measuring expectation of credit availability the Fed analysts reveal that the nation exhibits a certain apathy toward the capital markets.
"While 42% of households reported somewhat or much harder credit access (relative to a year ago) in June, the corresponding proportion was roughly 50% in September and in October," they report. "Similarly, the proportion of households reporting somewhat or much easier credit access declined from 21% in June to 16% in October."

More importantly, the analysts appear to make the argument that these economic indicators, taken together, should do more to impact Fed monetary policy going forward. It is entirely possible that jobs numbers simply aren't a strong enough indicator to make a taper bet as early as December.

"By monitoring expectations for future outcomes, such as income and credit access, the Survey of Consumer Expectation will provide important insight to policymakers to formulate effective policy," they say. "Furthermore, the ability to track expectations and outcomes for specific demographic groups will help them design more precisely targeted policies."

3---This is a startling reversal.  Student debt is now the most delinquent debt class.  11.8 percent of all student debt is now 90+ days past due. , Dr Housing Bubble

Student debt
Only a decade ago student debt was the smallest non-mortgage related debt in the country.  In 2004 $260 billion in student debt was outstanding.  Today?  Student debt is now up to $1.03 trillion:
...
Today, you make this mistake and you enter debt servitude.  It is clear that many are unable to pay their student debt:
student debt non-payment
This is a startling reversal.  Student debt is now the most delinquent debt class


Percent living at home
Many young people are living at home given the current economic conditions at hand:
young-living-at-home
This is a major shift.  Yet we are seeing a repeat of history.  ...

the young have a hard time saving given their heavy debts and lower incomes so lenders are just dropping the amount needed to buy.  In SoCal FHA insured loans with a 3.5 percent down payment are still 20 percent of the market.  So you have the large investors buying with all-cash and then you have regular households stretching their budgets to get in.  It is no surprise then that affordability has fallen dramatically even in the last year.  The answer to this as it was during the last bubble is simply to increase the amount of debt shouldered by households.  This continues to work so long as prices keep going up.

4--- Mandela was only removed from the U.S. “terrorist” list in 2008., Washington's Blog

But the New York Times reported in 1990:
The Central Intelligence Agency played an important role in the arrest in 1962 of Nelson Mandela, the African National Congress leader who was jailed for nearly 28 years before his release four months ago, a news report says.
The intelligence service, using an agent inside the African National Congress, provided South African security officials with precise information about Mr. Mandela’s activities that enabled the police to arrest him, said the account by the Cox News Service.
retired South African intelligence official, Gerard Ludi, was quoted in the report as saying that at the time of Mr. Mandela’s capture, the C.I.A. had put an undercover agent into the inner circle of the African National Congress group in Durban.
Newsweek confirmed this story yesterday.
The Daily Beast notes:
In the 1980s, Ronald Reagan placed Mandela’s African National Congress on America’s official list of “terrorist” groups. In 1985, then-Congressman Dick Cheney voted against a resolution urging that he be released from jail. In 2004, after Mandela criticized the Iraq War, an article in National Review said his “vicious anti-Americanism and support for Saddam Hussein should come as no surprise, given his longstanding dedication to communism and praise for terrorists.” As late as 2008, the ANC remained on America’s terrorism watch list, thus requiring the 89-year-old Mandela to receive a special waiver from the secretary of State to visit the U.S.
…In South Africa, for decades, American presidents backed apartheid in the name of anti-communism. Indeed, the language of the Cold War proved so morally corrupting that in 1981, Reagan, without irony, called South Africa’s monstrous regime “essential to the free world.”
Indeed, Nelson Mandela was only removed from the U.S. “terrorist” list in 2008.
Mandela was highly critical of U.S. foreign policy.  And anyone – even U.S. citizens – critical of U.S. policy may be labelled a bad guy.

5---Why The Jobs Report Is Worse Than You Think, In 2 Charts , Mark Gongloff

6---Soaring new home sales: Not what they seem, cnbc


Both household income growth and spending expectations are basically flat-lined in the report. Sure, some say they think it will go up and some say down, but the takeaway is that there is no expectation of things getting any better or any worse.

It was the sharpest jump in more than three decades, but housing watchers are already poking holes in the new home sales numbers. After delays due to the government shutdown, data for both September and October were released together, in addition to a large downward revision for August. Follow the numbers, and the gains are not quite what the headline seems.

Contracts signed to buy newly built homes jumped 25.4 percent in October month to month, after falling 6.6 percent in September from August. The seasonally adjusted annual rate went from an originally reported 421,000 units in August, which was revised down to 379,000 units, and to 354,000 units in September. The number for September was a 10 percent drop from September of 2012. It then rose to 444,000 units in October. There is a nearly 20 percent margin of error on all these numbers.

The October 'preliminary' report released this morning, along with the terrible August and September data, is the outlier and will be revised lower next month in line with the new trend lower that began in July," noted housing analyst Mark Hanson.
August sales estimates were revised down by 15 percent on an unadjusted basis and September sales dropped from there.

7---The Output Gap: Cumulative Losses, 2013Q3, econbrowser

Today, I gave a presentation in the Wisconsin Alumni Association's Global Hot Spot series, entitled America's Macroeconomic Policies and the Global Economy. One figure from the presentation bears highlighting.

hotfig4.jpg
 8---Emerging bubble in corporate bonds, sober look
Of course as corporate spreads come in, there is increasingly less cushion to compensate investors for the losses due to rising yields. And yields are likely to rise in 2014. There is no question that at least within corporate credit we are moving into "bubble" territory.



 9---Consumer expectations and household finances, NY Fed

10--From Comments section economists view anne said:


The bond market reflects the decisions of thousands and thousands of careful knowing investors, and is a proper reflection of the relative strength or weakness of the economy. The bond market is reflecting a relatively weak economy as has been the case since the beginning of 2008.

December 6, 2013
Employment Loss & Growth Summary
December 2007 - November 2013
Total Nonfarm Private Employment Loss = (- 758,000)
Total Nonfarm Government Employment Loss = (- 519,000)
Total Employment Loss = (- 1,277,000)
Where the severe Reagan recession of 1981-1982 had given way to complete employment recovery in 28 months from the beginning of the recession, we are 71 months from the beginning of the recession in December 2007 and there are 1.28 million fewer jobs now than there were at that time.

Where we should have created 21.07 million jobs these last 155 months simply to keep up with population growth, we created 4.19 million jobs. This leaves us short an astonishing 16.88 million jobs.

11--Israel’s Netanyahu weakened by US shift on Iran/Syria, wsws
(A significant split between US and Israel)-

No sooner had the ink dried on the Geneva agreement than international diplomats from the Gulf, Turkey and Britain were booking their flights to Tehran. The energy corporations were dusting off their plans for investment and the US was said to be in talks with Hezbollah, the Lebanese Shia militia closely allied with Iran. Israel’s business leaders clearly felt that the deal opened up opportunities, with the Tel Aviv stock exchange hitting a new high.

Washington’s abandonment of its long anticipated air strike against Syria, Iran’s chief Arab ally in the region, and the Geneva agreement with Iran do not represent a turn away from militarism. Rather, they express US imperialism’s drive to utilize its military strength to more effectively dominate the world’s most important oil and gas-exporting region.

While Obama tried to signal a more conciliatory approach to US foreign policy in the Middle East in his Cairo speech in 2009, he continued the military policies of the previous Bush administration, most recently using NATO to back Islamist forces to topple the Gaddafi regime in Libya in 2011. He gave every indication of doing the same in Syria.

But the widespread public opposition at home and in allied states such as the UK finally convinced the White House of the necessity of changing tack. The Obama administration calculated that it could pressure Tehran into granting its energy corporations privileged access to Iran’s oil and natural gas, aiding in suppressing opposition to US foreign policy throughout the region from Afghanistan to Lebanon.
This would underpin the broader strategy of its “pivot to Asia,” since by shoring up the region against its rivals Russia and above all China, the US would better able to encircle and confront China and ensure its hegemony across the Eurasian landmass....

Israel’s 2006 war on Lebanon was conceived by the Bush administration as the means of destroying Hezbollah militarily and politically and installing a more pliant pro-US government, and it had even called on Israel to attack Syria as part of a broader plan of taking on Iran.
To the extent that the 8-million-strong Israel is today a strong regional player, this is a product both of US aid and the economic, technical, political and military weakness of the other Middle East states.

12---Obama prepared to drop jobless benefits as part of budget deal, wsws

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