Sunday, February 16, 2014

Today's Links

1---Foreclosures SUDDENLY Jump 57% in California (And Soar In Much Of The Country) , Testosterone Pit
(Banks strap on 'chutes and head for the exits before housing Hindenburg slams into power polls and explodes in sheets of flames) beloved state of California. Housing has been booming, and prices in coastal areas have been soaring – along with rents, to the point that mini-rebellions are breaking out. In this hyped and glorified housing market where the Big Money rules and where first-time buyers have been shoved aside unceremoniously, where foreclosure starts in 2013 had plunged 60% from 2012, and had declined year-over-year for 17 months in a row, or with the exception of five months, had declined four years in a row, well, in this wondrously recovered housing market, foreclosures starts in January suddenly jumped 57%.

It’s not just in California. Foreclosure starts rose 10% from December to hit 57,259 properties across the country. That they on average were still down 12% from a year earlier obscured major annual increases in certain individual states, and not just in one or two, like us crazies out here in California, but in 22 states! And California with its 57% jump in foreclosure starts now suddenly seems tame: In New Jersey, they soared 79%, in Connecticut 82%, and in Maryland 126%!

2--Source of stagnation: Stagnant wages, NYT

Wages have fallen to a record low as a share of America’s gross domestic product. Until 1975, wages nearly always accounted for more than 50 percent of the nation’s G.D.P., but last year wages fell to a record low of 43.5 percent. Since 2001, when the wage share was 49 percent, there has been a steep slide.
“We went almost a century where the labor share was pretty stable and we shared prosperity,” says Lawrence Katz, a labor economist at Harvard. “What we’re seeing now is very disquieting.” For the great bulk of workers, labor’s shrinking share is even worse than the statistics show, when one considers that a sizable — and growing — chunk of overall wages goes to the top 1 percent: senior corporate executives, Wall Street professionals, Hollywood stars, pop singers and professional athletes. The share of wages going to the top 1 percent climbed to 12.9 percent in 2010, from 7.3 percent in 1979. ...

From 1973 to 2011, worker productivity grew 80 percent, while median hourly compensation, after inflation, grew by just one-eighth that amount, according to the Economic Policy Institute, a liberal research group. And since 2000, productivity has risen 23 percent while real hourly pay has essentially stagnated.
Meanwhile, it’s been a lost economic decade for many households. According to the Center for Budget and Policy Priorities, median income for working-age households (headed by someone under age 65) slid 12.4 percent from 2000 to 2011, to $55,640. During that time the American economy grew more than 18 percent.
Emmanuel Saez, an economist at the University of California at Berkeley, found that the top 1 percent of households garnered 65 percent of all the nation’s income growth from 2002 to 2007, when the recession hit. Another study found that one-third of the overall increase in income going to the richest 1 percent has resulted from the surge in corporate profits.

Just in terms of your current circumstances, are you currently living at home with your parents, or not? August-December 2013 results

4---"The first downleg of a new bear market"....Felix Zulauf Warns Of "Another Deflationary Episode" As "The Mother Of All Bubbles" Pops, zero hedge

Research on private sector credit booms over the last 20 years show that whenever credit to the private sector expanded by 30% or more within a 10-year period, a banking crisis and recession resulted without any exception. The following countries are all far above that danger level today and candidates for a banking crisis: Hong Kong, China, Thailand, Brazil, Turkey and Singapore. And recently even Korea, Romania, Ukraine and even Russia have broken the danger level. This is quite a long list, and the big EM economies are all part of it except India that has other deficiencies.
Now, these economies differ from each other, of course, but they share a common disease, namely a previous economic boom built on excessive credit
Smaller deficits by the largest economy have unpleasant implications for many other nations. Of course, foreign oil producers will earn less income, but foreign exporters selling to U.S. markets are also being hurt. Simply speaking, what once was ever-increasing economic stimulus provided to the world is now turning into restraining factors for the rest of the world....

For the U.S., it means she is now losing less growth to the rest of the world and keeping more for herself, which is growth positive. That is one of the reasons why the U.S. is performing relatively better than other economies, although still well below an average recovery. While I completely disagree with the consensus about the “normalization” of the world economy and the reacceleration thesis, if one economy can achieve the forecasts, it will be the U.S.

Credit Booms Are Followed by Busts

As Chart 1 shows, China’s surpluses are declining and therefore trade data for many other economies are deteriorating. At the same time, many of the EM economies have gone through a tremendous boom in recent years, driven by their previous success story and large capital inflows

The problem with credit booms is that they always end badly, although they usually go further and last longer than rational minds expect. The weakest links are breaking first, as always. Completely mismanaged economies like Argentina and Venezuela are already in deep crisis, but that was no surprise. Next follow the deep and chronic deficit countries like Turkey or South Africa, which have already seen their currencies declining sharply...

While the timing of this described process is open as is the way the Chinese will choose, we must expect it to begin at any time and last many quarters if not years. The message is that problems in emerging economies are not over, and weakness in currencies, bonds and equities are in general not an opportunity to buy, yet. What investors should be aware of is that the problems in Turkey, South Africa or Russia are only sideshows compared with what’s out there in China and its implications for the world, which in our view are still not understood and not priced in by markets.

As we don’t live in an isolated world, there will be knock-on effects
The mechanism, in simple terms, has been QE in the developed world leading to capital flows into emerging markets, triggering an investment and consumption boom built on cheap credit. The boom led to rising wages, reduced competitiveness, less household income after inflation, taxes and rent (which rose sharply due to the real estate boom). Now, domestic and external demand is weakening while inflation is high and external accounts are imbalanced. Hence, the world will see the next chapter of the unintended consequences of QE, namely many economies going through a balance-of-payment crisis leading to recessions and banking crises and hurting global economic growth. The U.S. will be hurt too, but is the least exposed....

Risk aversion will rise again, once investors find out the world has entered another deflationary episode, with many balance-of-payment crises that are only now beginning. Yes, it may look far away in the emerging world, but it will have knock-on effects and slow down the global economy much more than expected and hurt particularly multinationals’ revenues and profits. Nowadays, the emerging world is half of the world economy, and the world economy is more intertwined than ever before...

I am expecting their tapering to continue and to be complete later this year, provided no major accident happens in the financial markets in between. This is equivalent to raising interest rates from minus two percent to zero. And while zero is still low, it is in my view a step by step removal of stimulus and therefore a regime shift in monetary policy at the most important central bank of the world. This is a strong message. Unfortunately, we have no experience with “tapering” and therefore do not know when and how it impacts markets. However, such a change in combination with frothy markets has now triggered a serious correction that in our view has more to run. ...

In our reading, the current weakness is led by emerging equity markets, and most of them are already deep in their second downleg of this cyclical bear market, while for most equities in developed markets it is only the first downleg of a new bear market...

The big surprise for the world will in our view be a temporary strengthening of the yen. ...
, we are expecting another deflationary episode and see in particular U.S. Treasuries with maturities of 10 years and longer as offering attractive trading opportunities over the next 6-12 months, whereby 10-year yields could decline to around 2%. ....

In general, we expect another deflationary episode leading to systemic risks and economic disappointments. Hence, it is time to structure portfolios much more conservatively and put capital preservation ahead of aggressive return strategies. In contrast to last year, 2014 will hardly be a year with a powerful and easy trend to ride. Instead, it will bring much more volatility but also plenty of trading opportunities for flexible investors.

The emerging markets problems Cisco /quotes/zigman/20039/delayed /quotes/nls/csco CSCO spoke of last quarter are still there, and it’s hard to say when they will go away, Chief Financial Officer Frank Calderoni said Wednesday.
“Clearly, there’s been a slowdown and it’s been very abrupt,” he told MarketWatch after the company’s earnings call. “It’s difficult to determine how long it will last.”

6---Phoenix home sales single-family home sales were down 17 percent year-over-year (down 47% in some areas), biz journal

Despite the fact that there were 36 percent more homes on the market Valleywide in December than a year earlier — thanks to double-digit boosts in home prices all last year that pulled many homeowners out of negative equity — demand has continued to fizzle since July. That’s according to the latest Arizona State University housing report released today.

In fact, single-family home sales were down 17 percent year-over-year, the report said. Even with a 12 percent increase in listings priced below $150,000 — where the supply shortage had been most severe and demand highest — sales in that range plunged by a whopping 47 percent....

Demand has been falling for several reasons. Rising interest rates and poor consumer confidence, largely ignited by the government shutdown, are among them. On top of that, many wannabe buyers don’t have the money for a down payment or have poor credit from a previous foreclosure or short sale. This comes as lending standards remain tight.

Additionally, Wall Street-backed investors have been losing their interest in the Valley as home prices rebound and foreclosures lessen. Institutional investors made up 19.3 percent of Valley home sales in December — less than half their peak market share in July 2012, Orr said.
Household formation is also working against the market. Orr pointed out the nation had negative household formation last year for 205,000 homes, according to the U.S. Census Bureau.
“A larger portion of the population is simply choosing to rent, instead of buy,” Orr said.

7---Vegas home sales crater, 8news now

While prices rose, sales fell.  2,067 homes sold last month - a drop of 13.7 percent from December 2013 and a decrease of 9.5 percent from January 2013.
GLVAR President Heidi Kasama says January is typically a slow month for home prices and sales.
"For the most part, I think these stable prices are an indication of a fairly healthy housing market. At the same time, we're still dealing with some challenges," she said

8---Bay Area home sales tumble last month; prices fall from December , LA Times

San Francisco Bay Area home prices took a seasonal dip in January from a month earlier, while sales plunged to a six-year low for the month as high prices and tight inventory handcuffed buyers.
The median sales price in the Bay Area fell 4.3% from December, to $525,000 in January, research firm DataQuick said Thursday. Still, compared with January of last year, prices are up 26.5%.
Across the nine-county region, 4,696 new and resale houses and condos sold in January, the lowest level for the month since 2008, as buyers struggled with higher prices and few homes for sale. Sales fell 14.6% from January 2013....

Absentee buyers, mostly investors and some second-home buyers, purchased a greater share of properties last month -- 24.2% of homes sold, compared with 22.5% in December

9---Home sales crash and burn, calif, merced sun star

Sacramento County, where 1,321 home sales closed in January, hit a six-year low for the month. Sales volume was down more than 19 percent from January 2012. The last time fewer houses sold in the month of January was in 2008, during the depths of the recession and housing crash, the San Diego-based real estate information service said.
The Bay Area and Southern California markets also experienced strikingly low sales volumes in January, the firm said.

January is typically a month when closings fall, but this year’s sharp drop was exacerbated by a lack of homes for sale coupled with higher prices and higher interest rates than a year ago, said DataQuick analyst Andrew LePage.
“Sales have been falling (compared with the same months last year) for four consecutive months,” LePage said. “We’re still looking at inventory constraints. Inventory is up, but not up enough to make a difference.”

10---Bay Area home sales hit seasonal dip, SJ Mercury
Sales of existing single family homes across the nine-county Bay Area fell 28.5 percent from December and were off by 16.1 percent from January 2013, the San Diego company reported....
There's plenty of pent-up demand, especially at prices under $1 million, said Tom Hart of Empire Realty Associates in Danville....

Absentee buyers, typically investors, made up 24.2 percent of home sales in January, down from 28.3 percent a year ago, DataQuick said.

Read more here:

11---Xi's Tinkering Risks China Hard Landing, zero hedge

12-Abenomics: --The fraud of the century: Japan GDP grows in Q3 a measly and a tiny 0.3% Q/Q change (or 1.0% annualized) ,Bloomberg

(it was the double whammy, because the news pushed the yen higher)

Japan’s gross domestic product rose an annualized 1.0 percent in the fourth quarter, the Cabinet Office said today in Tokyo. Economists surveyed by Bloomberg had expected a 2.8 percent advance. ...

The index jumped 51 percent in 2013 as the BOJ’s unprecedented monetary easing to beat deflation weakened the yen. The central bank is set to keep policy on hold at the meeting ending tomorrow, according to a Bloomberg News survey of 34 economists. Thirty-five percent of analysts in a separate Bloomberg poll forecast the BOJ will expand monetary stimulus in the July-Sept. quarter, while 12 percent estimate it to happen in the January through March quarter.

Futures on the Standard & Poor’s 500 Index lost 0.2 percent today. The equity measure added 0.5 percent on Feb. 14, capping its best weekly gain since December, amid better-than-forecast earnings and continued confidence in the strength of the world’s largest economy.
Of the 287 companies on the Topix that reported quarterly earnings from the beginning of January through Feb. 14 and for which estimates are available, 66 percent beat analysts’ profit estimates, according to data compiled by Bloomberg.

13--Abenomics; Bad beyond belief, Reuters

the Nikkei helped by data showing Japan's economy grew just 0.3 percent in the fourth quarter of last year, compared to the previous quarter, confounding forecasts of a 0.7 percent gain.

The disappointing result will keep pressure on the Bank of Japan to support the economy once an increase in the sales tax goes through in April. The central bank's latest policy meeting ends on Tuesday and the market will be keen to see what it makes of the growth figures.

"We still have to see how much last-minute domestic demand ahead of the sales tax hike boosts January-March GDP before pondering whether extra fiscal and monetary stimuli are needed," said Junko Nishioka, chief economist at RBS Securities in Tokyo.

14---‘Ambassadors for Dummies’: Obama’s payback diplomatic posts make mockery of foreign service, RT

15---Politics, Fed could whip up new emerging markets storm, Reuters

The Federal Reserve's winding-down stimulus, which began in December, has so far not significantly driven up U.S. bond yields, which remain below levels seen in May-June last year.
But it may simply be that the real effect of tapering has not kicked in yet, because as the economy recovers and the U.S. budget deficit shrinks, the Treasury is issuing less debt.

Stephen Jen, managing partner of SLJ Macro Partners says that until the Fed's monthly bond-buying falls below $55 billion, tapering will not have a real impact, relative to total bond sales.
"The Fed's tapering will only catch up to the Treasury's tapering by April or so," Jen said. "This may help explain why equity prices have been so well supported in Q4 2013 and early 2014, despite the Fed's decision to taper."

16---JPMorgan Vice President’s Death in London Shines a Light on the Bank’s Close Ties to the CIA , wall street on parade
(Creepy. JPM and G sax in bed with gov spooks)

Just when the public was numbing itself to the endless stream of financial malfeasance which cost JPMorgan over $30 billion in fines and settlements in just the past 13 months, we learned on January 28 of this year that a happy, healthy 39-year old technology Vice President, Gabriel Magee, was found dead on a 9th level rooftop of the bank’s 33-story European headquarters building in the Canary Wharf section of London.

The way the news of this tragic and sudden death was stage-managed by highly skilled but invisible hands, turning a demonstrably suspicious incident into a cut-and-dried suicide leap from the rooftop (devoid of eyewitnesses or  motivation) had all the hallmarks of a sophisticated covert operation or coverup.

The London Evening Standard newspaper reported the same day that “A man plunged to his death from a Canary Wharf tower in front of thousands of horrified commuters today.” Who gave that completely fabricated story to the press? Commuters on the street had no view of the body because it was 9 floors up on a rooftop – a rooftop that is accessible from a stairwell inside the building, not just via a fall from the roof. Adding to the suspicions, Magee had emailed his girlfriend the evening before telling her he was finishing up and would be home shortly.

If JPMorgan’s CEO, Jamie Dimon, needed a little crisis management help from operatives, he has no shortage of people to call upon. Thomas Higgins was, until a few months ago, a Managing Director and Global Head of Operational Control for JPMorgan. (A BusinessWeek profile shows Higgins still employed at JPMorgan while the New York Post reported that he left late last year.) What is not in question is that Higgins was previously the Senior Officer and Station Chief in the CIA’s National Clandestine Service, a component of which is the National Resources Division. (Higgins’ bio is printed in past brochures of the CIA Officers Memorial Foundation, where Higgins is listed with his JPMorgan job title, former CIA job title, and as a member of the Foundation’s Board of Directors for 2013.)
According to Jeff Stein, writing in Newsweek on November 14, the National Resources Division (NR) is the “biggest little CIA shop you’ve never heard of.”

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