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Bull Markets Have A Way Of Masking The Risks

A weekend topic starting with Fox Business. “Federal Reserve Chairman Jerome Powell downplayed significant price increases in the U.S. housing market, despite noting that activity in the sector is at its highest level since before the global financial crisis. Powell said there has been a ‘very strong rebound’ in the housing market – but some of the tightness that has led to price increases is a ‘passing phenomenon.’ ‘So there’s a one-time shift in demand that we think will get satisfied – also that will call forth supply and we think those price increases are unlikely to be sustained,’ Powell explained.”

The Waco Tribune Herald in Texas. “Ameritex, a Dallas-based company, has secured almost 90 permits to build homes and duplexes in Waco that critics say are too small, unattractive and overpriced and may become unoccupied eyesores in a few years. Mike Stone, the Grassroots Community Development chief, said he has concerns about foundation work, having visited dozens of Ameritex homesites locally. ‘I’m not an engineer, but I’m seeing slabs being put straight on the dirt, with no pad prep at all,’ Stone said.”

“Sammy Smith, president of the Brook Oaks Neighborhood Association, said he was dumbfounded when he learned Ameritex would charge $1,100 a month to lease a single unit in the duplexes it proposed for North Waco. ‘That’s a lot of money for one side of a duplex. It was really a jaw-dropping moment,’ Smith said. ‘Then there were quotes of $140,000 for houses to be sold, though I don’t know if that’s a standard house. Those with a garage may be more expensive.'”

From Hospitality.net. “The housing market crisis during the COVID-19 pandemic has caused more people to look at extended stay hotels as an attractive solution. Another economic factor is the ability to make a mortgage payment (or lack thereof). There were more than 10 million outstanding mortgages with a debt total over $2.4 trillion. As recently as early 2018, 25% of all delinquent borrowers nationwide had not made a mortgage payment in at least five years. In New York State, New Jersey, and Washington, D.C., that percentage was more than 40%.”

“Small landlords have been devastated by lockdowns, evidenced by the latest survey published by the National Association of Independent Landlords (NAIL). The survey revealed that the percentage of respondents who received a full rent payment from their tenants plunged to 55% in June 2020, down from 83% in February. On top of this, almost 20% had vacant rental properties due to the pandemic.”

“There has been an emptying out in Brooklyn and Los Angeles simply because people cannot afford the rent and have been threatened with eviction due to nonpayment. There are at least 15 million properties owned by these small landlords nationwide. Many were in precarious financial situations even before the lockdown. According to the HUD July 2020 report, 17% of 8 million insured mortgages are now delinquent. This percentage includes mortgages in forbearance as well as those not in forbearance. Hard-hit metropolitan areas include New York City with 27.2% delinquency, Miami with 24.4%, and Atlanta with 21%.”

The Press Democrat in California. “Even with the olive branch from the state, smaller landlords in Sonoma County are unhappy, calling this another regulation that will squeeze them. They are left questioning whether owning rental investment properties is still viable for them — especially since the county Board of Supervisors are considering further action next month to add to tenant protections. For almost 30 years, Jennifer Coleman has been a landlord renting two duplexes, two townhomes and three single-family homes. Most of them are in a partnership that she has with another investor, a rental portfolio rebuilt since the Great Recession in 2008.”

“She cited the list of expenses for each property: taxes, insurance, maintenance and more. She and her investor partner rely on cash flow from monthly rents to be sustainable. ‘We took what little money we had left (after the last recession) and with sweat equity put it into an investment property. So these are my semi-retirement earnings,’ said Coleman, who is also a renter. ‘I can’t afford to subsidize people.'”

“Bob Miller, who has owned three rental properties in Sonoma County for almost 20 years. One of his tenants in a southeast Santa Rosa unit has not paid rent since April. By December, Miller’s tenant was behind $17,000 in rent and that put him in a financial bind. ‘If you are asking my opinion, I suspect that we are at risk of reaching a tipping point,’ Miller said, noting the financial predicament for landlords who can longer shoulder property expenses when tenants don’t pay rent obligations.”

The Laguna Beach Independent in California. “A prominent Laguna Beach real estate investor is on the brink of foreclosure on a $195.5-million loan backed by a portfolio of 19 properties, including the Hive complex, Royal Hawaiian restaurant, and Holiday Inn on South Coast Highway. 4G Ventures CEO Mohammad Honarkar was supposed to pay the approximately $133 million remaining on the loan, held by Delaware-based LCC Warehouse, by Dec. 9, but he did not do so, according to a lawsuit.”

“The receiver also argued that Honarkar’s businesses were severely lacking in cash on hand. He wrote in court filings that they were hampered by several lawsuits, a state tax audit and the specter of looming debts, including an estimated $150,000 in back taxes to Laguna Beach. In another sign of financial distress, Honarkar’s lease for Hotel Laguna, which he acquired in 2018 in the hopes of restoring it to its former grandeur, could face termination following a reported failure to pay its owners $7 million in unpaid rent by Jan. 1, according to court documents.”

“‘When I took over the Business there was woefully inadequate infrastructure, staff, and systems in place to profitably run all of the various business segments, many of which had already failed by the time I took control,’ Beverly Hills-based attorney Blake Alsbrook wrote in the final receiver’s report to the court. He described the enterprise as having ‘woefully insufficient’cash on hand to make the payroll, creditor and settlement payments, ‘let alone the luxury yacht and Lamborghini payments [Honarkar] was making monthly.'”

The Puget Sound Business Journal. “The manager of an Everett call center pleaded guilty Tuesday in U.S. District Court in Seattle to conspiracy to defraud approximately 1,000 distressed homeowners facing foreclosure. U.S. Attorney Brian T. Moran said Edwin Josue Herrera Rosales, aka Josh Herrera, 34, pleaded guilty to one count of conspiracy to commit wire fraud in connection with his operation of call centers.”

“According to records filed in the case, Herrera Rosales conspired with others in Southern California. Each week the operation sent approximately 4,000 mailers to distressed homeowners across the country. Herrera Rosales oversaw a staff of call center operators. When homeowners called, Herrera Rosales had operators follow a script designed to make it appear as if each caller’s mortgage was being reviewed by the company’s ‘underwriting’ and ‘legal department’ to make sure the homeowner qualified for the supposed federal program.”

“Operators were instructed to put each caller on hold for a set amount of time, to make it appear a review was underway. Operators returned to the line and told each victim that they were among the ‘very select few’ who qualified for the program — but only if the they paid the call center a $3,000 fee.”

From Fox 5 New York. “An Internal Revenue Service agent was arrested after allegedly stealing someone’s identity and using it to purchase a co-op apartment on the Upper East Side of Manhattan. Yong Hee Cho, 49, faces 10 counts of possessing a fake foreign passport; aggravated identity theft; making false statements during a background check and wire fraud, according to the U.S. Attorney’s Office for the Eastern District of New York.”

“Cho also allegedly forged tax returns and bank statements that inflated his income and assets to gain approval for the purchase of the co-op. He also funneled hundreds of thousands of dollars from a foreign bank account to pay for the apartment.”

From Bisnow New York. “HFZ Capital Group’s pandemic problems have continued to mount. Westbrook Partners, the developer’s partner on an Upper West Side condominium conversion at 225 West 86th St., took control of the project sometime between September and this week, The Real Deal reports. Plans for the building include 95 new units, New York YIMBY reported in 2018, when development first began. The designer for the project was Robert A.M. Stern Architects. HFZ bought the building for $575M in 2015, and it later brought in Westbrook as a partner.”

“This is the latest in a series of financial and legal problems for HFZ this month alone. The company was sued the first week of the year by its lender, Children’s Investment Fund, for allegedly failing to pay $160M of its loan payments on The IX, the company’s billion-dollar condominium project near the High Line in Chelsea.”

“HFZ founder and CEO Ziel Feldman was sued by his lender, W Financial REIT, earlier this month for reportedly failing to make payments on a loan for some of the development firm’s Upper East Side properties, TRD reported. One of the company’s former executives, John Simonlacaj, pleaded guilty to submitting a false tax return in a case that tied him to the Gambino crime family, the U.S. Department of Justice announced Jan. 15. Simonlacaj allegedly accepted free work on his home by a mob-related contracting company while the company billed HFZ for it.”

Two reports from the Globe and Mail. “One of the most amusing bits of the 2008 financial crisis, for me anyway, was seeing the US$1-billion-plus that British billionaire Joe Lewis had sunk into Bear Stearns, some of it just hours before the Wall Street firm collapsed, vaporize in seconds. Rich guys who live as tax exiles in the Bahamas generally do not garner our sympathy.”

“I had the same reaction this week, when an army of amateur traders derided – or celebrated – as ‘basement dwellers’ or ‘trolls’ drove the shares of GameStop Corp into the exosphere, shredding the massive short positions of the Wall Street funds that were betting the shares of the struggling U.S. video-game retailer would collapse.”

“The hedge funds exposed to GameStop lost billions, effectively triggering a massive transfer of wealth from undeserving billionaires and millionaires to taco-stuffed kids armed with the Robinhood mobile-trading app and accounts on Reddit message boards. Justice, revenge, retribution! What’s not to like?”

“Here’s what one Redditor said: ‘We have a once in a lifetime opportunity to punish the sort of people who caused so much pain and stress a decade ago … Your ilk were rewarded and bailed out for terrible and illegal financial decisions that negatively changed the lives of millions.'”

“Never mind that the hedgies and their private equity fund brethren had little to do with the 2008 financial meltdown – it was a lovely narrative, but also entirely fanciful. The losers in this romantic little romp were not the Wall Street biggies; the losers were the investors, notably the pension funds, that backed them.”

“The bull, it seems, has gone berserk. What had been a relentless but mostly orderly rise in stock prices since last spring has given way to a riotous new phase of the bull market, fuelled by frenzied trading among the growing ranks of small investors and rookie day traders. But the retail investing movement that set the whole episode in motion has actually been building for several months, fuelling concerns about frothy stock valuations in the process.”

“Since the COVID-19-induced market crash started nearly a year ago, a once-unfathomable volume of monetary and fiscal stimulus has provided a steady supply of adrenaline to revive financial markets. ‘When your teenaged cousin living in the basement starts talking about trading stock options, that is usually the sign of a market bubble,’ said Jason Del Vicario, a portfolio manager at HollisWealth in Vancouver. ‘There are just crazy amounts of speculative interest in the market right now. The last time we saw this was in 1999 and 2000. Nobody cares about valuation. It goes up, so you buy it.'”

“But powerful bull markets have a way of masking the risks of investing. With most stocks on the rise, many new entrants are rewarded with big gains. Investing forums have been full in recent days of users posting screenshots of their brokerage accounts, showing off six-figure gains on paper. As was seen during the dot-com boom two decades ago, mom-and-pop investors can easily get fooled into thinking they can trade like the pros. “

“To stimulate a global economy trounced by the pandemic, central bankers around the world slashed short-term interest rates to near-zero, and bought trillions of dollars’ worth of bonds to try to keep longer-term interest rates down. While markets may be frothy, and the risk of a correction rising, the needs of the economy remain paramount so long as the pandemic rages on, according to Tobias Adrian, director of the International Monetary Fund’s capital markets division. ‘We do not believe we are anywhere close to the point where policies should be tightened,’ Mr. Adrian said.”

“Assuming policy makers take that advice and stay the course, investors big and small will effectively be encouraged to take on risk. ‘It’s a culture of fast, easy money,’ said Mr. Del Vicario, ‘and I can guarantee you, it will not end well.'”

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This Post Has 75 Comments

  1. ‘that has led to price increases is a ‘passing phenomenon.’ ‘So there’s a one-time shift in demand that we think will get satisfied – also that will call forth supply and we think those price increases are unlikely to be sustained’

    He’s saying shack gamblers are fooked.

    2. those price increases are unlikely to be sustained?

      Wait a minute, I think he is saying prices will stay at the high point but there will not be further increases. That’s no consolation. This is what that damn crook wants.

  2. ‘As recently as early 2018, 25% of all delinquent borrowers nationwide had not made a mortgage payment in at least five years. In New York State, New Jersey, and Washington, D.C., that percentage was more than 40%’

    Shadow inventory is a conspiracy theory.

    ‘the percentage of respondents who received a full rent payment from their tenants plunged to 55% in June 2020, down from 83% in February. On top of this, almost 20% had vacant rental properties due to the pandemic’

    OK, so how many can stand up to this? None. BTW, when hotels are poaching tenants with extended stay, the sh$t has hit the fan.

    2. some more stats at the link below. Of interest (I think):

      Number of properties that are 90 or more days past due, but not in foreclosure: 2,146,000
      Month-over-month change: -47,000
      Year-over-year change: 1,719,000

      Top 5 States by Non-Current* Percentage (NY and HI are a surprise to me)
      Mississippi:10.79%
      Louisiana:10.25%
      Hawaii:9.02%
      West Virginia:8.38%
      New York:8.31%

      And yet there were only 40K foreclosures in the entire country

      https://finance.yahoo.com/news/black-knights-first-look-2020-140000903.html

      1. “And yet there were only 40K foreclosures in the entire country”

        – Forbearance = Extend and Pretend
        – Forbearance is being extended into 2021 now, because the mortgage market “can’t handle the truth.”
        – Nothing to see here. This is normal. It’s fine. /s

        1. – Forbearance isn’t forgiveness.
          – At some point, just as the past rent for those tenants in deferral, all of the missed mortgage payments become due at the end of the forbearance period.
          – Does anyone really believe that either of these will situations will result in full payment when the balance is due?
          – Tick-tock.

          2. In other words, anyone who paid their bills is a sucker.

            Not so sure about those with mortgages. If they’re lucky, they will have their unmet payments rolled back into the loan, and if not lucky it will be pay up or be foreclosed.

            I’m surprised Biden hasn’t signed an executive order forgiving all federally backed student loans. Or did I miss that?

    3. ‘As recently as early 2018, 25% of all delinquent borrowers nationwide had not made a mortgage payment in at least five years.”

      – This is pre-COVID, pre-forbearance.
      – It’s almost if somebody was “foaming the runway” for the lenders in order to keep foreclosures off the market, artificially limiting supply, and prices elevated or something.

      “Shadow inventory is a conspiracy theory.”
      +1

      – All of this can continue for a while, but at some point, the SHTF, but until then “everything is awesome” in our Potemkin villiage economy.

    4. ‘the percentage of respondents who received a full rent payment from their tenants plunged to 55% in June 2020, down from 83% in February. On top of this, almost 20% had vacant rental properties due to the pandemic’

      https://www.gov.ca.gov/2021/01/29/governor-newsom-signs-legislation-to-extend-eviction-moratorium-and-assist-tenants-and-small-property-owners-impacted-by-covid-19/

      Governor Newsom Signs Legislation to Extend Eviction Moratorium and Assist Tenants and Small Property Owners Impacted by COVID-19
      Published: Jan 29, 2021

      “Legislation extends statewide eviction moratorium through June 30, 2021 and protects tenants’ credit“

      “Creates State Rental Assistance Program to allocate $2.6 billion in federal rental assistance dollars to assist struggling tenants and small property owners”

      – Clownifornia: Circus Maximus –> Clown Show; h/t Sven Henrich speaking of equity markets, but the concept equally applies to the housing markets. All of this, BTW courtesy of massive liquidity infusions from the Fed.

      – “Extend and pretend forever.”

      “Politicians are the lowest form of life on earth. Liberal Democrats are the lowest form of politicians.” – General George S. Patton

      “Everything a government touches, turns to crap.” – Ringo Star

  3. ‘Each week the operation sent approximately 4,000 mailers to distressed homeowners across the country’

    Wa? But the red-hotcakes say this is unpossible. Every single shack and airbox in USAian receives multiple offers sight unseen, creating buckets of sweet equity for no work?

    Was somebody a lion?

  4. ‘He described the enterprise as having ‘woefully insufficient’cash on hand to make the payroll, creditor and settlement payments, ‘let alone the luxury yacht and Lamborghini payments [Honarkar] was making monthly’

    There’s a divorce in there too. One would think a California RE mogul would be rolling in the dough?

    1. “There’s a divorce in there too.”

      Likely unable to support her in the manner in which she has become accustomed. What a terrible guy! 🙂

  5. I’m not an engineer, but I’m seeing slabs being put straight on the dirt, with no pad prep at all’

    ‘he was dumbfounded when he learned Ameritex would charge $1,100 a month to lease a single unit in the duplexes it proposed for North Waco. ‘That’s a lot of money for one side of a duplex. It was really a jaw-dropping moment’

    Financed by, wait for it – low down FHA loans!

    1. “I’m not an engineer, but I’m seeing slabs being put straight on the dirt, with no pad prep at all’”

      Usually they’ll pour the slab on top of 18-24″ bed of pea gravel for drainage. Expansive soils require a slab on footings w/piers, but it’s not usually the case for cheap spec homes.

      Plywood flooring on stringers are “creaky noisy” waking the light sleepers when someone has to satisfy nature’s call. The concrete slab design while quiet means no basement, no “in floor” HVAC ducting and cold feet in the winter while sitting at rest.

  6. ‘She and her investor partner rely on cash flow from monthly rents to be sustainable. ‘We took what little money we had left (after the last recession) and with sweat equity put it into an investment property. So these are my semi-retirement earnings’

    Yip yip yip yip yip yip yip yip
    Sha na na na, sha na na na na
    Sha na na na, sha na na na na
    Sha na na na, sha na na na na
    Sha na na na, sha na na na na
    Yip yip yip yip yip yip yip yip
    Mum mum mum mum mum mum
    Get a job, sha na na na, sha na na na na

      1. or it could be an ‘informal sabbatical’. Seeing a bunch of people in their 50’s starting to do that – but dont want to say they are not employed.

        1. ‘informal sabbatical’.
          Could be laid off too. Know 2 people who will be retiring once their unemployment runs out, so they are “semi-retired.”

  7. ‘We have a once in a lifetime opportunity to punish the sort of people who caused so much pain and stress a decade ago … Your ilk were rewarded and bailed out for terrible and illegal financial decisions that negatively changed the lives of millions’

    Still sawin’ on the vampire squid tiny violin I see. Believe this horsesh$t if you want.

  8. Sad Panda Steve Cohen deleted his Twitter account last night.

    So far this month WallStreetBets has made these hedge fund pigs lose over $70 billion.

        1. 12:59 – 13:48

          “There will always be anxiety and stress, that’s the human condition. But the problem today is we prepare the road for the kid and not the kid for the road”

    2. ‘So far this month WallStreetBets has made these hedge fund pigs lose over $70 billion.’

      Is that a lot?

  9. ‘the developer’s partner on an Upper West Side condominium conversion at 225 West 86th St., took control of the project sometime between September and this week, The Real Deal reports. Plans for the building include 95 new units, New York YIMBY reported in 2018, when development first began’

    But YIMBY is virtue signalling? Now they done fooked a Children’s investment fund (more virtue signalling). No wonder Larry’s in a frozen soup line.

  11. BlueSkye
    January 23, 2021 at 4:25 am
    Now they are only 32,000.

    This morning only 31,000.

    oxide
    January 23, 2021 at 4:30 am
    They must be slowing down their removal of downvotes to make it less obvious. In a world where victors write the history books over a period of years, spreading a lie over a month makes little difference.

    Downvotes on the utube White House Presser now rolled back to 29K. Just as Oxy said, slow enough that short attention spans won’t notice. And eventually it never happened. Just a small example.

    1. I think the downvoting frenzy will pass away too — that is, T supporters will just skip the videos entirely and won’t bother to downvote anymore.

      The liberals probably think they won. But from what I can tell, the conservatives (and center-rights) are mounting a very quiet resistance by generally prepping: buying land and stocking guns and building bunkers and similar. I think they’re just waiting for Biden to do something very visible and substantial like raise taxes or take guns away.

      1. quiet resistance by generally prepping

        I’m not building any bunker thing. I live in a house or on a boat depending. I’m not hiding from my neighbors, I’m living like an American. There’s work to be done, not hiding to be done.

      2. You sound like you’ve been reading too much fear porn in the New York Times and Washington Post.

        1. I’ve read the NYT articles you post. WaPo went too extreme so I stopped and I don’t miss it. I wouldn’t say conservatives are hiding. But they aren’t out in the streets either.

  12. This sounds very 2005 and I remember what happened when that “phenomenon” passed.

    “but some of the tightness that has led to price increases is a ‘passing phenomenon.’ ‘So there’s a one-time shift in demand that we think will get satisfied – also that will call forth supply and we think those price increases are unlikely to be sustained,’ Powell explained.”

  13. “Many were in precarious financial situations even before the lockdown. According to the HUD July 2020 report, 17% of 8 million insured mortgages are now delinquent. This percentage includes mortgages in forbearance as well as those not in forbearance. Hard-hit metropolitan areas include New York City with 27.2% delinquency, Miami with 24.4%, and Atlanta with 21%.”

    But but but renter just paid the mortgage while owner has sweet sweet equity. What’s this precarious financial situation nonsense?

  15. Arrogance oozes from his pours as the lies ooze from his mouth.

    Cuomo Defends His Nursing Home Orders: “Who Cares” Where People Died

    6,683 views•
    Jan 29, 2021

    Dangerdan
    22 hours ago
    Lol he doesn’t care about elderly people. That’s what happens when you vote for Democrats

    Kathy Beickert
    23 hours ago
    Typical leftist response. “At this point, what difference does it make?”

    246 Comments

    Rick V
    23 hours ago
    Cumo you intentionally put them people in the nursing home with the virus. You murdered them people and you r trying to cover it up.

    https://youtu.be/OIYzoT7IehE

  16. Brennan at 6:50 tells you what’s coming.

    Tucker: The American government is at war with its own people

    714,123 views
    •Jan 29, 2021

    https://youtu.be/xdA-4eiCIe8

    Infowars.com
    January 30th 2021, 11:47 am

    “Within hours [of Joe Biden taking office], Democrats begin crushing even the mildest dissent. They shut down an entire social media company called Parler not because they did anything wrong, but similar because they couldn’t control it,” Carlson said.

    “They couldn’t take the chance that somebody on Parler might criticize them so they eliminated it. They arrested a man, threw him in handcuffs because he made fun of Hillary Clinton on Twitter. That man is facing ten years in prison,” he said, referencing the case of a social media influencer in Florida arrested by the FBI earlier this week.

    “Democrats then declared war on their rival political party, not a metaphorical war, but an actual one — with soldiers and paramilitary law enforcement in the world’s most dominant powerful intelligence agency.”

    “They denounced Republicans … as dangerous terrorists, likened them to ISIS and Al Qaeda,” Carlson continued. “And, anyone who complained about this or fought back in any way was threatened with expulsion from Congress,” Carlson said.

    “Nothing like that has ever taken place in this country before. This is the most sweeping and audacious assault on civil liberties in American history…The Democratic Party doesn’t exist to serve abstract principles of liberty or justice or the Bill of Rights.”

    Carlson noted that the left’s irrational fear of Republicans seems to have only escalated since Donald Trump left the White House.

    “Here’s the really interesting thing,” Carlson said. “They seem much more afraid now that Donald Trump has left office. With Donald Trump gone, they sense that a period of actual populism has begun, real populism, and they may be right.”

    1. I would like to see the total amount of real estate taxes Bill Gates pays on his land holdings. Most likely as a non-resident, he doesn’t get to vote on the tax assessments.

        1. I have friends who did that. They bought 10 acres, and got some chickens and a few goats and had some conifer trees planted and presto, ag-rate taxes.

        2. In SC ,the ag rate for land or woods is about a dollar an acre, grassland over 5 acres,and woods of over 10 acres qualifies

          1. In SC ,the ag rate for land or woods is about a dollar an acre And who sets the “rate” for this land, regardless other adjective? That’s the weak point in land ownership, a point that seldom gets mentioned.

      1. Jesus threw the moneychangers out of the temple for a reason, because they are speculative parasites.

        Parasites. Leeches. Tapeworms. Diseased mosquitoes. All blood sucking parasites.

        1. 13 When it was almost time for the Jewish Passover, Jesus went up to Jerusalem. 14 In the temple courts he found people selling cattle, sheep and doves, and others sitting at tables exchanging money. 15 So he made a whip out of cords, and drove all from the temple courts, both sheep and cattle; he scattered the coins of the money changers and overturned their tables. 16 To those who sold doves he said, “Get these out of here! Stop turning my Father’s house into a market!”

        2. Jesus threw the moneychangers out of the temple for a reason, because they are speculative parasites.

          Jesus was righteously angry because the money changers had defiled God’s temple by turning it into a “den of thieves.” Now someone needs to take a whip to the much larger den of thieves called the Federal Reserve.

  21. Looks like the FAA is giving SpaceX a hard time with licenses and permits for its Starship test launches and landings. I guess they don’t want Starship to launch into orbit before the perennially delayed Space Launch System finally gets off the ground (one of these decades, I’m sure).

    I wonder if Musk saw this coming and that is why he is planning on converting offshore oil rigs in international waters into launch platforms for Starship.

    It does seem that Musk has made himself a pariah of the Left, what with his complaints about California being business unfriendly and building his next Tesla factory in Texas. Being pals with Larry Ellison probably doesn’t help either.

  23. “Federal Reserve Chairman Jerome Powell downplayed significant price increases in the U.S. housing market, despite noting that activity in the sector is at its highest level since before the global financial crisis.”

    It seems like Alan Greenspan was saying similar things circa 2004, back around the time Ben Jones established this blog. The onset of the 2007-2009 financial crisis was only a couple of years off, and Sir Alan Greenspan was assuring anyone who would listen to his opinion that there was ‘no national housing bubble, although there are some pockets of froth.’

    I’m curious about how managing interpretations of macroeconomic housing price movements became part of the Fed’s scope of concerns, and what purpose this serves in the central banking policy domain.

    1. “I’m curious about how managing interpretations of macroeconomic housing price movements became part of the Fed’s scope of concerns, and what purpose this serves in the central banking policy domain.”

      – The Fed is an unelected and unaccountable 4th branch of Federal Government. There are no checks and balances. They continue to gain and consolidate power by the direct monopoly of currency (Federal Reserve Notes and the e-printing press) and by a vice-like grip on the U.S. financial system. The Fed is a private entity; owned by the banking cartel. 2019 data: Over 22k employees. Fed budget (directly from U.S. Treasury interest payments, and thus bypassing funding by taxes, which could be a political minefield) of over $4.5B, Top employees (12 regional Governors) salary ~$500k ea.

      “What has been will be again,
      what has been done will be done again;
      there is nothing new under the sun      .” – Ecclesiastes 1:9

      “When a government is dependent upon bankers for money, they and not the leaders of the government control the situation, since the hand that gives is above the hand that takes. Money has no motherland; financiers are without patriotism and without decency; their sole object is gain.” – Napoleon Bonaparte

      “I have had men watching you for a long time and I am convinced that you have used the funds of the bank to speculate in the breadstuffs of the country. When you won, you divided the profits amongst you, and when you lost, you charged it to the Bank. … You are a den of vipers and thieves.” – Andrew Jackson, 1834, on closing the Second Bank of the United States; (unabridged form, extended citation)

      “Permit me to issue and control the money of a nation, and I care not who makes its laws.” – Mayer Amschel Rothschild, International Banker

      “The process by which banks create money is so simple the mind is repelled.” – John Kenneth Galbraith, Economist

      “I am afraid that the ordinary citizen will not like to be told that banks can and do create money…And they who control the credit of the nation direct the policy of Governments and hold in the hollow of their hands the destiny of the people” – Reginald McKenna, past Chairman of the Board, Midlands Bank of England

      “Thus, our national circulating medium is now at the mercy of loan transactions of banks, which lend, not money, but promises to supply money they do not possess.” – Irving Fisher, economist and author

      “That is what our money system is. If there were no debts in our money system, there wouldn’t be any money.” – Marriner S. Eccles, Chairman and Governor of the Federal Reserve Board

      “At this juncture, the impact on the broader economy and financial markets of the problems in the subprime market seems likely to be contained.” – Fed chairman, Ben Bernanke, Congressional testimony, March, 2007

      “Would I say there will never, ever be another financial crisis?” “You know probably that would be going too far but I do think we’re much safer and I hope that it will not be in our lifetimes and I don’t believe it will be,” – Janet Yellen, London, June 27, 2017

      “The issue which has swept down the centuries and which will have to be fought sooner or later is the people versus the banks.” – Lord Acton

      “And remember, where you have a concentration of power in a few hands, all too frequently men with the mentality of gangsters get control. History has proven that. All power corrupts; absolute power corrupts absolutely.” – Lord Acton

  24. “Ameritex, a Dallas-based company, has secured almost 90 permits to build homes and duplexes in Waco that critics say are too small, unattractive and overpriced and may become unoccupied eyesores in a few years.”

    California housing comes to Waco!

    1. ‘I’m not an engineer, but I’m seeing slabs being put straight on the dirt, with no pad prep at all,’

      This is in Tornado Alley, right?

      1. Rather than have a basement, don’t houses in Tornado Alley sometimes have a “Tornado Shelter”?

          1. My sister’s family has some king of reinforced structure in the garage, made out of concrete and rebar, with a metal door. They purchased it and it wasn’t cheap. But yeah, for many it’s just a bathroom.

  25. “The hedge funds exposed to GameStop lost billions, effectively triggering a massive transfer of wealth from undeserving billionaires and millionaires to taco-stuffed kids armed with the Robinhood mobile-trading app and accounts on Reddit message boards. Justice, revenge, retribution! What’s not to like?”

    Can’t wait for the movie. For a title, how about “The Big Hedge Trimming”? Is Michael Lewis still in the business of telling financial collapse tales in print and film?

    This rapidly evolving story, and related cratering in selected risk asset prices, makes me wonder if a broader market swoon might be soon to unfold.

    3. Run away, run away!

      The Financial Times
      Hedge funds
      Hedge funds retreat in face of day-trader onslaught
      Investment firms pull back from equity market as wild price swings increase their risks
      The retrenchment by hedge funds comes as retail day traders set their sights on a growing number of stocks
      © Getty Images
      Ortenca Aliaj, Colby Smith, Eric Platt and Michael Mackenzie in New York
      January 27 2021

      Hedge funds have scaled back the size of their bets in the stock market in recent days after volatility caused by groups of amateur traders pushed up shares in companies such as GameStop and inflicted heavy losses on some high-profile firms.

      The unwinding of positions has been noted by brokers and may have contributed to the sharp moves in some shares, according to market participants.

      Morgan Stanley said in a note to clients that Monday and Tuesday were among the top five heaviest days for so-called de-grossing over the past decade. Funds have not only been covering their short positions — the bets they placed against individual shares — but also selling shares in companies to cut their leverage and reduce their gross exposure to the market.
      …

  26. Or not?

    Stock Market Today
    Dow Jones Futures: What To Do Before Monday’s Stock Market Open; GME Stock, Nio In Focus
    ED CARSON 07:07 AM ET 01/31/2021

    Dow Jones futures will reopen Sunday evening, along with S&P 500 futures and Nasdaq futures, with investors looking for signs that the stock market rally will find support or keep retreating. Last week the major indexes broke through key levels, with leading stocks also struggling.

    The stock market rally may be undergoing a character change. Investors need to be more cautious, perhaps reducing exposure, especially if they haven’t already done so.

    The GameStop (GME) saga is likely far from over. GME stock, AMC Entertainment, Koss (KOSS), Express (EXPR) and other short-squeeze plans had another mammoth week of ultra-volatile swings. But the risks are extremely high. Investors are better served following a consistent strategy and trading rules, not taking wild bets.
    …

    1. “…signs that the stock market rally will find support or keep retreating.”

      Is it still called a ‘rally’ if it ‘keeps retreating’?

      Or would terms like crash, crater, collapse, or comeuppance be more suitable for the situation underway?

  28. – This behavior applies to both housing and equity markets, and is in fact the foundation of “the everything (central bank) bubble.”

    https://www.wsj.com/articles/whats-driving-everything-from-a-market-frenzy-to-an-embrace-of-u-s-deficits-magical-thinking-11611982830
    Economy | Capital Account
    What’s Driving Everything From a Market Frenzy to an Embrace of U.S. Deficits? Magical Thinking.

    “Traders and politicians are making new, risky arguments about low interest rates to justify their actions”

    By Greg Ip
    Updated Jan. 30, 2021 11:51 am ET

    “The Wall Street bulls embracing sky-high stock values and the Washington pols embracing big deficits may be ideological opposites, but they have something important in common. Both draw sustenance from near-zero interest rates which make stocks more valuable and debt more supportable. And both risk taking this basically sound logic to extremes.”

    “Finally, how much debt the U.S. can carry depends not just on interest rates but on GDP. Indeed rates were low even before the pandemic because GDP growth had been trending down, perhaps due to aging populations world-wide. To be sure, well targeted stimulus now should speed up recovery, helping the economy’s debt-carrying capacity. On the other hand, the U.S. has also experienced two economic disasters within 12 years of each other, which pushed down the path of GDP and pushed up debt. However much fiscal space the U.S. has, responding to those disasters has consumed quite a bit of it: Federal debt has risen from 35% to over 100% of GDP since 2007.”

    “It might want to keep some fiscal space in reserve in case of another [the next looming] disaster .”

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