Thursday, March 13, 2014

Today's links

   "The crimes of the United States have been systematic, constant, vicious, remorseless, but very few people have actually talked about them. You have to hand it to America. It has exercised a quite clinical manipulation of power worldwide while masquerading as a force for universal good. It’s a brilliant, even witty, highly successful act of hypnosis…It’s a scintillating stratagem." Harold Pinter, Nobel Acceptance Speech

1---Buyer demand rising but housing market conditions worsen, HW

Market conditions remain mixed, though – inventory is up 11.1% nationally compared to a year ago, but it remains well below optimal levels, and has fallen year-over-year in eight of the 20 metro areas surveyed.

“Several of these drivers of overall housing confidence registered negative or only marginally positive readings in some cities,” said Pulsenomics founder Terry Loebs. “These data confirm that real estate recovery and economic healing are relative, local phenomena, and in some instances, likely reflect the lingering psychological impact of the housing bust.”

Recent data from the Census Bureau also indicates that builders are currently building more multifamily rental housing, rather than the entry-level homes today’s renters will likely be looking to buy in coming months.
Mortgage interest rates are also starting to creep upwards, standing at about 4.2% nationally, well above 2013 lows of roughly 3.3%.

2---Poll Shows Why QE Has Been Ineffective, Lance Roberts

Bloomberg National Poll found:
"More than three-quarters of Americans say the five-year bull market in U.S. stocks has had little or no effect on their financial well-being."..
"Seventy-seven percent of respondents dismissed the 176 percent rise in the Standard & Poor's 500 Index (SPX) since its March 9, 2009 financial crisis low, according to the poll, taken March 7-10. Barely one in five -- 21 percent -- said the market's gains have made them 'feel more financially' secure."

The poll also showed that most Americans still think the country is on the wrong track economically particularly as it relates to employment.  The poll showed that:

"Thirty-eight percent anticipate hiring prospects to pick up compared with 24 percent who say jobs will be tougher to find. A year ago, poll respondents by 43 percent to 26 percent predicted labor market improvement."

The poll also showed this is still the single worst economic recovery ever.


The "wealth effect" only works if the positive shock is deemed to be permanent as opposed to transitory 

3---Warning signs, Roberts

Furthermore, the cyclically-adjusted P/E ratio suggests the S&P 500 is currently 30% overvalued in terms of Operating EPS and about 45% overvalued using As Reported earnings.
Reflecting on our recent client visits and conversations, the biggest surprise is how many investors expect the forward P/E multiple to expand to 17x or 18x. For some reason, many market participants believe the P/E multiple has a long-term average of 15x and therefore expansion to 17-18x seems reasonable.But the common perception is wrong. The forward P/E ratio for the S&P 500 during the past 5-year, 10-year, and 35- year periods has averaged 13.2x, 14.1x, and 13.0x, respectively. At 15.9x, the current aggregate forward P/E multiple is high by historical standards.
Most investors are surprised to learn that since 1976 the S&P 500 P/E multiple has only exceeded 17x during the 1997-2000 Tech Bubble and a brief four-month period in 2003-04. Other than those two episodes, the US stock market has never traded at a P/E of 17x or above.

A graph of the historical distribution of P/E ratios clearly highlights that outside of the Tech Bubble, the market has only rarely (5% of the time) traded at the current forward multiple of 16x.
Prof. Seyhun – who is one of the leading experts on interpreting the behavior of corporate insiders – has found that when the transactions of the largest shareholders are stripped out, insiders do have impressive forecasting abilities. In the summer of 2007, for example, his adjusted insider sell-to-buy ratio was more bearish than at any time since 1990, which is how far back his analyses extended.
Ominously, that degree of bearish sentiment is where the insider ratio stands today, Prof. Seyhun said in an interview.

Note carefully that even if the insiders turn out to be right and the bull market is coming to an end, this doesn’t have to mean that the U.S. market averages are about to fall as much as they did in 2008 and early 2009. The one other time since that bear market when Prof. Seyhun’s adjusted sell-buy ratio sunk as low as it was in 2007 and is today, the market subsequently fell by ‘just’ 20%.
That other occasion was in early 2011. Stocks’ drop at that time did satisfy the unofficial definition of a bear market, and the insiders’ pessimism was vindicated.”

4---German banks at risk, Testosterone Pit

5---Consumer Confidence Fades?, TI

6---Slow Realization of Low Wages & the Japanification of the US - angry bear

Our own contributor here at Angry Bear, run 75441 aka Bill, is signalling a concern for deflation, even as central bankers expect inflation to rise. I think his concern is very valid. It is very possible to have falling inflation as we hit full employment. One reason I agree with him is because consumption by capital income could pull back too much as financial instability increases. Consumption by capital income has recently reached levels far beyond those seen before the crisis. I estimate that capital income is consuming around $900 billion (real 2009 $). The highest level reached before the crisis was around $600 billion. So even if wages were to increase now, the effect could be more easily neutralized by capital income backing off some of their own consumption. -

7---Putin's approval rating has now reached 71.6%, which is the highest point in several years, a poll conducted by VTsIOM shows zero hedge

8--The people vs big brother, burning platform.

In the need to develop a capacity to know what potential enemies are doing, the United States government has perfected a technological capability that enables us to monitor the messages that go through the air. Now, that is necessary and important to the United States as we look abroad at enemies or potential enemies. We must know, at the same time, that capability at any time could be turned around on the American people, and no American would have any privacy left such is the capability to monitor everything—telephone conversations, telegrams, it doesn’t matter. There would be no place to hide.
If this government ever became a tyrant, if a dictator ever took charge in this country, the technological capacity that the intelligence community has given the government could enable it to impose total tyranny, and there would be no way to fight back because the most careful effort to combine together in resistance to the government, no matter how privately it was done, is within the reach of the government to know. Such is the capability of this technology.

I don’t want to see this country ever go across the bridge. I know the capacity that is there to make tyranny total in America, and we must see to it that this agency and all agencies that possess this technology operate within the law and under proper supervision so that we never cross over that abyss. That is the abyss from which there is no return.”Frank Church on Meet the Press regarding the NSA – 1975

An uptick in interest rates brought early March mortgage applications down, the Mortgage Bankers Association (MBA) reported.
MBA’s Market Composite Index, a weekly released measure of mortgage loan application volume, fell 2.1 percent on a seasonally adjusted basis for the week ending March 7. On an unadjusted basis, the index dropped 1 percent.

Refinance applications were down 3 percent week-over-week, representing about 57 percent of total applications—the lowest share since April 2011, according to MBA.
In purchase loan activity, applications fell 1 percent (both adjusted and unadjusted) on a weekly basis. Compared to last year, purchase loan applications were down 17 percent.
Meanwhile, the average rate for a 30-year fixed-rate loan rose to 4.52 percent, with points coming up to 0.29 (including the origination fee) for 80 percent loan-to-value mortgages.

10----Total Foreclosures Fall; ‘Zombie Foreclosures’ Pose Challenges, Ds News

As of the first quarter of 2014, a total of 152,033 properties in the foreclosure process had been vacated by the homeowner. These “zombie foreclosures” represent 21 percent of all properties in the foreclosure process.
Owner-vacated properties have been in the foreclosure process an average of 1,031 days, nearly three years.
“One in every five homes in the foreclosure process nationwide have been vacated by the distressed homeowner, but it is closer to one in three foreclosures in some cities,” Blomquist added. “These properties drag down home values in the surrounding neighborhood and contribute to a climate of uncertainty and low inventory in local housing markets.”

11--Inventory up, but sales drop, Redfin

SEATTLE--()--Home sales continued to be sluggish in February, and decreasing affordability is holding back would-be buyers, according to Redfin (, the technology-powered real estate brokerage. Slow sales have been largely attributed to low inventory for months, but many markets have now seen inventory rise while sales continue to fall. Several markets along the West Coast have seen sharp increases in inventory, yet home sales in the West fell 13.4 percent year over year, hitting their lowest point in five years in the first two months of 2014, while prices rose 19.1 percent year over year. Across 19 markets nationwide, prices rose 13 percent over last year, while home sales dropped by 10.3 percent.
“Many first-time home buyers couldn’t compete in the bidding wars of 2013”
“It’s likely that many people are doing a double-take when they calculate mortgage payments on homes they are considering buying. Home sales in the coming months will be a test of buyers’ tolerance when it comes to changing affordability, particularly for first-timers,” said Redfin economist Ellen Haberle....

West Coast Sales Hit Lowest Point in Five Years
  • In Redfin’s West Coast markets, sales fell 13.4% from February 2013, and hit a five-year low in the first two months of 2014. Sales fell most dramatically in Las Vegas (-22.7%), Sacramento (-21.8%) and Ventura (-20.8%). Across 19 markets, sales fell 10.3%, with markets east of the Rockies taking a less dramatic hit and a few even seeing modest increases.
  • Home prices were up 13% year over year, with the largest gains seen in West Coast markets such as Las Vegas (25%), Sacramento (22.2%) and Riverside, Calif. (21.7%).
  • Inventory of homes for sale overall fell 5.6% from last year, but picked up notably in several West Coast markets, including Phoenix (38.5%), Sacramento (23.9%) and Riverside, Calif. (22.8%).
Homebuyers Hesitate in February; Lower Home Sales Expected in March
  • The number of customers requesting tours in Redfin’s markets grew just 1.9% from January, compared with a 6% increase during the same period last year.
  • Offers picked up 17.8% month over month, compared with a 20% increase last year.
  • This year’s sluggish demand is likely a result of both the scarcity of homes for sale and dramatic increases in home prices from last year. Redfin analysts expect demand to pick up over the next two months as more inventory comes on the market


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