Tuesday, October 28, 2014

Today's Links

1---Banks accept derivatives rule change to end 'too big to fail' scenario, Reuters


A plan to stop redemptions, and thus a run on the banks.


2---The  Gaping Difference Between Asia And America In One Depressing Chart, zero hedge


As Pew Research notes,
As they continue to struggle with the effects of the Great Recession, publics in advanced economies are pessimistic about the financial prospects for the next generation. Most of those surveyed in richer nations think children in their country will be worse off financially than their parents. In contrast, emerging and developing nations are more optimistic that the next generation will have a higher standard of living.

Asians are particularly optimistic about the next generation’s financial prospects. Fully 94% of Vietnamese, 85% of Chinese, 71% of Bangladeshis, and 67% of Indians think today’s children will be better off than their parents. Africans and Latin Americans are also on balance optimistic, while Middle Easterners tend to be pessimistic. And in Europe and the United States, pessimism is pervasive.
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3---Stock markets threatened by collapse in Chinese consumer demand, Telegraph
A shocking slump in Chinese consumer demand will undermine World economic growth and stock markets


4---In Cross Asset Research last week, Albert Edwards at Societe General did just that. Emphasis in italics is mine. Mish
Fragile and vulnerable in itself, the US recovery now battles against the rest of the world, which like a horror movie is dragging it down into a hellish Ice Age underworld. The problem is that at these stratospheric valuations, the market does not need to suffer an ACTUAL recession to see a crash. Like October 1987, just the fear of recession will be enough to trigger a massive market move.

On these pages we have a very simple thesis as to what will bring an end to this grotesque, QE-fueled market overvaluation. Simply put, the central banks for all their huffing and puffing cannot eliminate the business cycle....



I have always thought that this would all end the way Christopher Wood explained in his GREED and fear publication last November: “The key issue is what might trigger a market correction . The market consensus continues to focus on the tightening in financial conditions triggered by “tapering”. Still such a hypothetical correction is not so big a deal to GREED & fear, since any real equity decline caused by tapering is likely to lead, under a Fed run by Janet Yellen, to renewed easing. The real threat to US equities is when the American economy fails to re-accelerate as forecast”. Certainly, in my view , at these elevated valuations, it will not take much to bring down the entire ‘pyramid of piffle’



The higher costs and concerns about buybacks are driving the decline in mortgages for home purchases. It will slow to $635 billion this year, a 13% drop from 2013, according to MBA estimates. Banks have constrained home lending to many borrowers deemed creditworthy by mortgage finance companies Fannie Mae and Freddie Mac. Applicants approved for mortgages to purchase homes had an average FICO credit score of 755 in August, according to Ellie Mae, a company that makes software used to process mortgage applications. In contrast, Fannie Mae and Freddie Mac guidelines allow for credit scores as low as 620 for fixed-rate mortgages in some cases. Lenders reported a 30% median increase in compliance costs this year from 2013


7--7 things the middle class can't afford anymore, USA Today


New vehicles
Very few people who earn the median income can afford to buy a new car or truck. Interest.com recently analyzed the prices of new cars and trucks, as well as the median incomes across more than two dozen major cities, and found that new cars and trucks were simply not affordable to most middle-earners.
"Median-income families in only one major city [Washington DC] can afford the average price Americans are paying for new cars and trucks nowadays." As of 2013, new cars are priced at $32,086, according to the study. Mike Sante, Interest.com's managing editor reminds us, "just because you can manage the monthly payment doesn't mean you should let a $30,000 or $40,000 ride gobble up all such a huge share of your paycheck."


8---Federal spending lowest since recession began, marketwatch


Call it the anti-stimulus.


Real spending by the federal government has fallen for seven consecutive quarters and has now declined to the lowest level since the recession began more than six years ago, according to the Bureau of Economic Analysis.


While the level of real gross domestic product has increased by more than $1 trillion since the beginning of 2008, spending and investment by the federal government in the second quarter of 2014 was essentially unchanged (adjusted for inflation) from the level in the first quarter of 2008, the BEA reported in its revision to the GDP statistics.
Federal spending and investment has declined in 13 of the past 15 quarters, falling 13.2% since the third quarter of 2010. Investment outlays have dropped 20% and are now as low as they were in 2005.....The economy is growing, but Washington is still a drag on growth.


9--Why a stock-market selloff won’t crash the economy, Rex Nutting


10--The $2 billion Congress, wsws


11---MH17 might have been shot down from air – chief Dutch investigator, RT


12--Here's why renters in America feel trapped, yahoo

13---The housing bust deeply impacted people in a way economists can’t grasp with their macro-economic models; people no longer feel certainty that owning is stable and permanent. The Millennial generation, the generation that witnessed the housing bust but were too young to participate, the Millennials don’t view housing as the bedrock of their lives, and they correctly perceive the enormous weight imposed by a mortgage. To Millennials, the debt is large, real, and permanent, whereas the house is transitory, a complete reversal from the attitudes of previous generations.


 
pugy 27-10-2014, 09:09
For a lot of us the housing bubble had a large negative psychological impact on home ownership. I graduated college in the height of the bubble and was lucky enough to find irvinehousingblog and didn’t buy a house right after I got my first job. Currently, where I live it’s much cheaper to rent all things considered over say a 5-7 year time period. However, I’ve become so averse to the whole system behind home loanership that it would require housing to be much cheaper than renting for me to even consider it. Historically , I feel like emotional motivations have leaned towards buying, for many of us that has distorted towards renting instead now.


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