appone

Why GDP Stats Are Still Ugly

On Jul 31 07:42 PM FB5000 wrote:

> "Media lies". "Chinese Recovery Lies". Blah, Blah, Blah.
>
> What a lot of emotional nonsense. You seem to have a real axe to
> grind with CNBC and "mainstream media". You sound like Rush Limbaugh.
> You folks just can't stand to see an improvment. You just want/need
> things to be terrible or to get worse. Sorry. You are wrong.
>
> Forget for a moment that Q2 GDP is ancient history. April/May/June
> is an age past. ALL THE NUMBERS - ALL THE NUMBERS ARE TRENDING BETTER.
> It is a simple fact. The recession moderated drastically in Q2 and
> is now over.
>
> The leading indicators are flashing green. The market is up. Recovery
> is here. The question now is how strong. All the rest is beating
> a dead horse and kind of boring.
>
> That's all.
>
> The real stimulus which has directly affected the average Joe has come from him refusing to pay the mortgage, property taxes and (with condos) the maintenance. The money saved on a monthly basis is substantial. With banks slow or reluctant to foreclose and an entire cottage industry designed to delay the foreclosure process, a family can occupy their home, practically free, (or collect rent from an investment property) for a long time. All one has to do is refuse to pay and hire a law firm to delay any attempt at foreclosure. It is likely that at least two years will pass before the property has to be vacated, and possibly a lot longer.
This phenomenon is spreading like wildfire. It is no longer about those who cannot afford to pay. It’s about all those that, for many reasons, decide they just don’t want to pay.
There isn’t a lot of talk about this in the media, but it seems to me that it is becoming an epidemic. Anecdotal evidence: of the people with mortgages, that I personally know enough about to be certain, 10 are no longer paying, and 6 are paying. At the beginning of the year, the number of those not paying was 6.
This behavior is not without a lot of consequences, some short term some long term. I can list a great number, but they are quite evident.
My fear is that if this behavior becomes the norm, there will be political pressure for leniency or complete amnesty. The “delinquent” voters will overrule those that have abided by their contractual commitments. I’m afraid the government has already set a precedent. If most don’t pay, eventually the money will be taken from all by taxes, in order to “right the system”. Not paying may feel good for a while, but in the longer run it will mean the abdication of power and rights.

>

GDP: Here's a More Realistic Look

The real stimulus which has directly affected the average Joe has come from him refusing to pay the mortgage, property taxes and (with condos) the maintenance. The money saved on a monthly basis is substantial. With banks slow or reluctant to foreclose and an entire cottage industry designed to delay the foreclosure process, a family can occupy their home, practically free, (or collect rent from an investment property) for a long time. All one has to do is refuse to pay and hire a law firm to delay any attempt at foreclosure. It is likely that at least two years will pass before the property has to be vacated, and possibly a lot longer.
This phenomenon is spreading like wildfire. It is no longer about those who cannot afford to pay. It’s about all those that, for many reasons, decide they just don’t want to pay.
There isn’t a lot of talk about this in the media, but it seems to me that it is becoming an epidemic. Anecdotal evidence: of the people with mortgages, that I personally know enough about to be certain, 10 are no longer paying, and 6 are paying. At the beginning of the year, the number of those not paying was 6.
This behavior is not without a lot of consequences, some short term some long term. I can list a great number, but they are quite evident.
My fear is that if this behavior becomes the norm, there will be political pressure for leniency or complete amnesty. The “delinquent” voters will overrule those that have abided by their contractual commitments. I’m afraid the government has already set a precedent. If most don’t pay, eventually the money will be taken from all by taxes, in order to “right the system”. Not paying may feel good for a while, but in the longer run it will mean the abdication of power and rights.

Thursday Outlook: Commodities, Global Markets

FAZ 1 for 10 reverse split set it up for continued failure. IMO, FAZ could see the teens before too long. Many ETFs are turning out to only be good for very short trading

'The Crash of 2008 and What It Means' by George Soros

“ If the market believes that the long-run interest rate is 1%, the
present value perpetuity of the stream of rent income is $1,680,000.”


Why I agree with your conclusion, your first word explains exactly why “irrationality “ is at the base of bubble building.
It all hinges on the “IF” part. The irrational behavior is in believing such nonsense (as interest rates will stay at 1%).
The “fair” value analysis only applies in a theoretical vacuum or in an “irrational” bubble, as the main ingredient has to be the belief part.
IF the market can believe that “long-run” interest rates will be 1% the market also believe that prices will only go up for the “long-run”. Thus they behave “irrationally”.


On Jul 12 11:11 PM Arthur Hau wrote:

> I don't know why people still think that a bubble is necessarily
> built by people's irrationality or some sort of disequilibrium in
> the financial market.
>
> When you have a prolonged period of low interest rate, the so-called
> real estate market bubble (similarly stock market bubble) is actually
> RATIONAL!
>
> Suppose you have an apartment that can be rented out at $1,400 a
> month and hence $16,800 a year.
>
> If the market believes that the long-run interest rate is 1%, the
> present value perpetuity of the stream of rent income is $1,680,000.
> That is the apartment's "fair" value is about $1,680,000.
>
> If the market believes that the long-run interest rate is 5%, the
> present value perpetuity of the same stream of rent income is worth
> only $336,000. That is the apartment's "fair" value is only about
> $336,000.
>
> If the Fed keeps the interest rate low for a long while, any so-called
> bubble is only the result of rational computation from some FIN 101
> theory in finance.
>
> Mr. Greenspan correctly contained the internet bubble by flushing
> the stock market with liquidity and low interest rate. However, he
> did not have any exit plan. The right time for raising the interest
> rate steadily back from 1% to 5% should have been the period of 2003-2006.
> Instead, it waited until Dr. Bernanke finally realized that there
> was a possible bubble. Bernanke tried to correct the bubble by raising
> the interest rate, but It was already too late!
>
> The U.S. should have a minor bubble burst in 2006, instead of a major
> bubble burst in 2008. Thanks to Mr. Greenspan, a small financial
> crisis had turned into a financial tsunami.
>
> Now, the interest rate is back to historical low. Is there an exit
> plan? The real estate prices in NYC was down but not by a sufficient
> amount. What will happen when the interest rate rises again?
>
> Monetary policy can only contain a bubble, not correct it. You want
> the bust to go away? You better improve the productivity of the economy.
> Promoting speculative activity by lowering interest rate further
> won't work!

No One Saw This Economic Crisis Coming?

It is entirely possible that the government advisors saw this coming. In fact, looking at the entire crisis, and the way it has been handled from the beginning, it is hard to deny that is has offered Washington a great opportunity to strengthen its grip and control. Look back and see that every opportunity has been used first to downplay the potential for a negative event. Then when it became obvious that an event is occurring, it was quickly paraded as a potential catastrophe, and it was dealt with by throwing money (that Washington did not have) at the problem. With that money came control. With control came power and authority.
This is not over, not by a long shot (read “The Forth Turning” by Neil Howe, and understand that a crisis was in the making, and those that study history could see it more than a decade ago).
The government is using this crisis, in fact it’s feeding the flames. They cannot stop now, nor do they want to. The roller coaster of history has gone over the tip of the hill and there is a long way down.
For now, Washington is enjoying the moment and crafting the New “New Deal” in a self serving march toward supreme power. The population becomes more helpless and hopeless and continues to ask Washington for advise and help. The politicians (practically the same people who have presided over the entire road to the crises) are all too eager to pontificate and oblige.
“We the people” may have lost the battle, for now. The future economic condition will continue to deteriorate in complete unison with the government’s actions, which appear designed to control the Crisis. They will not control the Crisis but will control he population.
History’s lessons teach us that events taking this course have, almost always led to some major conflict, such as war.

The Escalator of Life Is Going Down (Part 2)

I advise everyone to read the entire article, not just the sanitized version published here. Much more fun and it includes some decent advice.theburningplatform.com...

Indians Are Selling Gold - Is Their Thinking Right?

And how exctly are the poor being ripped off?
Are the "rich" forcing the "poor" to sell the gold at these record prices?
If your numbers are correct, the "poor" have sold 12.20 tonnes of gold.
If my calculation is correct, that is 392,239 troy ounces of gold. At $950 per troy ounce, the "poor" have received $372,627,000 (rounded).
IMO, the statement about the poor is gratuitous and adds absolutely nothing to this article.

Obama's Housing Plan - What Will It Really Accomplish?

The way this was "leaked" out was clearly intended to stop a market that was declining to test the lows on November. It worked perfectly. It generated a worldwide short squeeze, it stopped the decline, and, if the general mood remains hopeful, it would have created a trend reversal.
If last year's political interventions are a guide, this too will fail, and after a few days, the market will finalize that down move.

Banking Is Tanking Worse Than Ever

"On the bright side the bank index bottomed doesn't have much farther to fall given the historical comparison"

unless the banking system is nationalized, then the bank index could fall 100% from here

Is the Long Bond Cracking?

QE should stand for "Quantitative Easing"

Are Big Banks Too Big to Fail?

Simple, and to the point. Unfortunately, the government likes big institutions and the trend appears to favor the same.

Commodity Collapse

Deflation?

Coordinated Rate Cuts: Too Little, Too Late? The Forex Angle

USD/JPY the carry trade is far from completely unwounded, long term, short this pair seems like the clear winning trade

Bailout 1.1 Passed. Will We Have to Go Back to the Well for v2.0?

"Inflation or deflation?
For investors, we come back to the key question of inflation or deflation."
With all the G7 governments doing their best to inflate, the question is who is going to win, the governments (inflation) or the natural economic tendencies of the markets (deflation).
Temporary rallies not wthstanding, deflation is the natural solution and I believe it will prevail. It won't be a nice experience.

ECRI Future Inflation Indexes Indicate That Worldwide Inflation Is Receding

We are on the way to a world wide deflationary period. The commodity boom has ended. Despite massive liquidity infusions from the major central banks, the money supply is shrinking as the credit crunch continues. Great article, it clearly illustrates the change in direction. I believe all the central bank efforts to hyper inflate will eventually fail. Then, Bernanke’s theory that The Great Depression could have been avoided if only more money was thrown at the problem, will be proven wrong. Unfortunately, it appears that the need for credit is so great, and growing, that the central banks are falling behind. For now the problems are primarily contained within banking and corporate borrowing arenas. When city, county and state governments start defaulting for lack of financing, probably sometime in 2009, we will likely face a choice between either “the mother of all bailouts”, or something much more sinister.