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And Suddenly, The Math Doesn’t Work

A report from The Real Deal. “Bank OZK, one of the country’s most aggressive condo construction lenders, signaled in its most recent earnings report that its real estate lending growth is slowing down. ‘Lenders in certain markets are very aggressive on price,’ Bank OZK CEO George Gleason told analysts. ‘We’ve been clear without exception that we are not going to sacrifice our credit standards.'”

“Bank OZK is one of the largest and most aggressive condo construction lenders in Miami, Los Angeles and New York City, lending at a time when other banks are pulling back.”

From Miami Agent Magazine. “After a strong first quarter, Miami Beach sales hit a snag in Q2 2019. In almost all property categories, median sales prices fell compared to the previous year. Price cuts were particularly severe in Miami Beach’s luxury market, with high-end condo prices down 24.3 percent to a median of $2.55 million.”

From Mansion Global on New York. “While there were several record-breaking headline luxury sales in New York during the first half of 2019, the overall top-tier market, with a starting price point of $5 million, was considerably bleak, dampened especially by the co-op market, according to a report. The number of sales in luxury co-op buildings dropped to 84, down 21% year-over-year.”

“‘Very few people want to buy high-priced co-ops,’ said Garrett Derderian, managing director of market analysis at CORE. ‘The sales level is the lowest since 2013; while the annual decline is the highest in the past 10 years.'”

“The luxury market will likely experience more downward pressure in the second half of the year, considering a glut of inventory, the impact of the newly implemented mansion tax, and slowing demand, according to CORE. There are 15.4 months of supply of luxury homes, many of which are super-prime ‘shadow inventory,’ or units in new developments yet to come onto the market.”

“‘Buyers are keenly aware of this and all negotiating at all price points,’ Mr. Derderian said.”

The Detroit Free Press in Michigan. “In the wake of economic collapse, the city of Detroit saw a surge of new construction and redevelopment announcements between 2013 and 2017 as property developers rushed to benefit from the sudden revitalization momentum in and around downtown.”

“Yet some development projects have stalled out or barely progressed since their announcement. They exist only in archived news stories or colorful renderings of what would have been built if the construction financing came through. Many of these projects were announced with dramatic headlines, packed news conferences and group photos of beaming developers and elected officials.”

“Everyone grew excited for what was about to happen. But then, nothing happened. ‘People get caught up in the fever and the excitement, but a lot of these might be secondary sites at this point,’ said Steve Morris, managing partner of Axis Advisors real estate firm. ‘Financing has never been more available, and at a lower rate, but the lender may not approve a secondary site that is questionable.'”

“‘Somebody announces (the project) a year and a half before they’re ever going to get in the ground. Then when they start doing the numbers, their costs go up,’ said Dennis Bernard, president of Southfield-based Bernard Financial Group. ‘Rents continue to go up, but not the huge jumps that they did initially when everyone started (developing) downtown. And suddenly, the math doesn’t work.'”

“Announced in late 2016, The Ashton Detroit was to be a newly constructed 11-story luxury condos building at the western edge of downtown with floor-to-ceiling windows, elaborate penthouses and an indoor swimming pool, and be finished in 2018. But those dreams proved fantasy.”

“This March, one of the project’s developers said that they failed to meet lenders’ requirements to pre-sell at least 50% of the planned 83 condos to get construction financing. So they decided to drop the condos idea and build a 154-room hotel on the site instead, with a groundbreaking happening as early as this summer. So far, nothing has happened.”

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  1. “So they decided to drop the condos idea and build a 154-room hotel on the site instead, with a groundbreaking happening as early as this summer. So far, nothing has happened.”

    They have no money???

    1. “They have no money???”

      They never did, they never do. The LENDERS are the ones who have the money, or at least have access to the money, who control the money, thus it is the LENDERS who ultimately call the shots.

    2. What they should have done was build a small tower with 154 studio micro-condos ~350 sq ft instead of hotel rooms. I wonder if the math works out for that.

  2. ‘Lenders in certain markets are very aggressive on price…We’ve been clear without exception that we are not going to sacrifice our credit standards’

    If these idiots are talking this way you know it’s over.

  3. America’s Nationalist Awakening

    ‘Why has such an old idea suddenly become new again? Because progressive government has failed to keep its promises and broken the people’s trust’

    ‘The illusion of unlimited optionality has been especially damaging in government and politics. A dramatic recent instance came in the Democrats’ presidential primary debates, where many candidates favored both open borders and free health care for everyone who shows up. This would plainly amount to the abolition of the United States. Still, the proponents would say in all earnestness that they have ingenious plans to make it work.’

    https://www.wsj.com/articles/americas-nationalist-awakening-11563574717

    1. These Demorats are idiotic. Their pro-illegal immigrant stance is driving away more voters than they are capturing. I have no idea why they think the end result will be favorable to them, but it is having the opposite effect.

      1. As I’ve mentioned, I lived for years near the Mexican border in a place that basically had open borders. It was the zone between the Rio Grande and the border patrols checkpoint 150 miles north. It was the poorest county in North America. 85% of the health care delivered was paid by welfare. Job ads never mentioned pay because everyone knew it was minimum wage.

        Can you imagine what the unemployment rate would be with open borders?

        1. Have you seen how much Obamacare costs for a single individual these days? $750 per month and up in some states.

        1. It’s the globalists who own the media who are crafting the narrative. They want open borders to dilute the labor pool so they can enjoy the benefits of cheap wages. It’s not working. Every comments section I see is chalk full of people railing against the open borders situation. The few dissenters appear like paid trolls.

          2. Doesn’t Jeff Bezos own WaPo? I somehow take the impression that he is not Donald Trump’s biggest fan.

    2. “…many candidates favored both open borders and free health care for everyone who shows up.”

      Do they have a plan to pay for all of this? Let me guess: According to Modern Monetary Theory, the Fed can just electronically print whatever it costs for free.

      1. At breakfast in a cafe I overheard someone in a small group ask, “Does the fed have a plan to get us out from under all this debt?” Another guy said, “The problem is they don’t have a plan.”

        1. They actually do have a plan – reward themselves and their wealthy buddies financially with all the capital needed to acquire every last asset worth owning in this country and abroad.

          1. They actually do have a plan – reward themselves and their wealthy buddies financially with all the capital printed money needed to acquire every last asset worth owning in this country and abroad.

            They don’t need capital like the rest of us. All our capital are belong to them.

        2. Under the assumptions of MMT, couldn’t the Fed theoretically just print all the money needed to pay off the debt, then wipe the sleight clean with a single lump sum payment?

          1. Come to think of it, isn’t this how they made all the bad subprime mortgage debt magically disappear?

          4. The Fed used seignorage to pump money into the financial sector. MMT’ers are saying to use seignorage to pump money into other sectors of the economy.

            Here’s the question I think people need to ask, because the “often wrong but never in doubt” economists will never ask it:

            Question X: “How much money could Ghana print before it goes into hyperinflation and destroys the currency? How much money could the US print before it goes into hyperinflation and destroys the currency? And how – exactly – do you determine these two numbers?”

            There will be resistance against MMT in the halls of power. The formula for the Fed and government is quite simple: “No matter how blatantly risky the activity is, as long as Wall Street is making money now, we’ll tolerate it because there is the remotest possibility that it might not blow up. And if it does, we can “clean it up” (i.e. print money to give to bail them out (and tell the country it’s for their own good)).”

            There’s a purported debate in economic circles, about “cleaning versus leaning” – do you try and prevent economic debacles or do you simply go in and clean up the mess (i.e. bail out Wall Street) afterwords? But there’s no real debate.

            If you look at the diagram of the economy, you have three objects arranged in a triangle: The Fed; The government; The Financial Sector. The financial sector is how the Fed injects cash into the economy and influences the economy. And the Fed buys government debt. The Fed is the lackey of the government and Wall Street. It’s a small department, and the amount of pressure on the chairman from the government and Wall Street is immense. There is the impression that the Fed is in control but relative to Wall Street, but at best it’s a decoy, a simulacrum created to appear to be all powerful. Special effects, while the true Wizard of Oz is elsewhere.

            So while the Fed and government are content to let Wall Street do any crazy thing, and the Fed is willing to seize vast amounts of purchasing power and redistribute it to Wall Street, their willingness to allow this for other sectors is very limited. But this comes around to Question X above – just exactly how much can they print before they destroy the currency?

            OTOH, they’re puzzled about inflation, but IMO they shouldn’t be: They print all this money, put interest rates at the zero bound, so vast amounts of money flows into assets, from the economy at large, and vast amounts of debt are created – debt and asset markets are soaking up the printed money, and yet more and people try to chase the path to riches via the asset markets and debt. That seems to be deflationary. MMT – giving printed money directly to people to spend, would almost certainly be inflationary.

            And then this further illustrates the complexity of the economy: how much could you print and pump into financial markets before destroying the currency via hyperinflation, vs how much could you print and distribute directly to the populace before destroying the currency?

          7. “…debt and asset markets are soaking up the printed money, and yet more and people try to chase the path to riches via the asset markets and debt.”

            Anticipating inflation, many snapped up assets, thereby initiating the inflation of the Everything Bubble.

            Once prices reached a level where few new buyers could afford to compete, the Everything Bubble began to unravel.

            Bubble unraveling is one of the most powerful deflationary forces.

          8. Once prices reached a level where few new buyers could afford to compete, the Everything Bubble began to unravel ??

            Are we there yet ??

    3. “Why has such an old idea suddenly become new again”

      Because Americans are tired of pressing 1 for English? Or seeing the public schools, emergency rooms, and once-nice affordable ranch houses fill up with the poor and illiterate?

      1. It’s not even “press 1 for English” anymore. That’s for Spanish speakers. Illegal immigrants are now working for state, county and local governments in CA.

        1. And in many states they can get a drivers license with no verifiable form of identification. Try that at the DMV as a US citizen and see what happens.

          1. I prefer drivers to have something on their person that professes that they passed some basic tests as to the operation of their vehicle and their basic knowledge of the Vehicle Code in their state. The Feds got this part right, at least, in passing “Real ID”. In CA you can get a non-Real-ID DL or a Real-ID-compliant one. The former doesn’t require much more than a completed, signed application and a thumbprint. The latter requires some significant documentation, almost like getting a passport.

            I’ve always been of the opinion that a DL should be just, that, a license. Yes, there should be some way to tie the license to the individual but it should not be a proof of identity.

          2. And in many states they can get a drivers license with no verifiable form of identification. Try that at the DMV as a US citizen and see what happens.

            In CA my wife couldn’t get a license without an SSN. And couldn’t get an SSN without a green card. And green cards are way backed up these days. So it’s been a challenge. She drives on her Chinese driver’s license (Enterprise will even rent to her on it) and we have to have a specialty insurance policy for her. She’s specifically excluded from driving my car by my insurance once they realized I had a spouse without an American license.

          3. “…Enterprise will even rent to her on it…”

            While full coverage car rental insurance is expensive it covers just about anything caused by nearly anyone.

    4. Globalists and their stooges like Frau Merkel promote a system that benefits only a corrupt and venal .1% in the financial sector, then warn of the rise of “extremism” as the screwed-over proles, recognizing they and their children have no future under the current neoliberal system, turn to nationalist and far-right parties.

      https://www.bbc.com/news/world-europe-49056973

  4. ‘Yet some development projects have stalled out or barely progressed since their announcement. They exist only in archived news stories or colorful renderings of what would have been built if the construction financing came through’

    And this in a time when practically anything can get financed. Detroit got lucky. They don’t need any more $600,000 airboxes like in yesterdays post. New York City, Los Angeles and Miami however, went whole hog. And they are fooked because of it.

    1. I do not agree with IMF analysis no surprise it is pro globalist and I am anti but I think the graph speaks to the trouble China is in and it started before the trade war but is certainly has been aggravated by it. If all the additional tariffs are enacted it looks like the current account will fall into deficit. So does China really have a surplus to invest in overseas housing? The capital controls are important but without a surplus the money really isn’t there anyway for continued massive investment. I think there are a lot of housing markets which are going to miss them but soon the Chinese will need to bring capital home never mind not adding new investments:
      https://www.marketwatch.com/story/china-not-a-trade-villain-imf-says-2019-07-17

      1. Wait, what happened to the China cheerleading, ADan? I’m not frying any crow for you, I’m just genuinely curious. Did something change your mind?

        1. The weight of the evidence probably got a little too crushing even for ABQ Dan not to recognize that China is a collapse waiting to happen.

          3. the perfect woman:

            I started following her a few days ago due to all the media attention. She doesn’t come off as a genius but still seems a lot smarter than the average beauty contestant. In China she wouldn’t be considered beauty contest material but it’s cool she’s able to make a splash here just by being honest and not caving to pressure.

          4. “Did you know the majority of black deaths are caused by other blacks? Fix problems within your own community before blaming others.” —Kathy Zhu

            You go girl…tell ’em what they need to hear!

  5. Oregon vowed not to become California — and passed sweeping housing crisis legislation
    LA Times
    Liam Dillon
    July 19, 2019

    “PORTLAND, Ore. — When Oregon’s political leaders debated solutions to a housing crisis that was forcing renters from their homes and sending prices through the roof, they had a central goal in mind: avoid the fate of their neighbor to the south.
    “In Portland, we’re just trying not to become San Francisco,” said Tina Kotek, the speaker of Oregon’s House of Representatives.”

    “This year, Kotek and her colleagues advanced the most ambitious response to housing affordability challenges in the country. Lawmakers passed a first-in-the-nation cap on rent increases and, in an effort to spur new homebuilding, became the only state to eliminate single-family-only zoning in many of its residential neighborhoods.”

    https://www.latimes.com/california/story/2019-07-19/oregon-lessons-california-housing-crisis

    1. It’s too late. Have you seen the prices in Oregon? When one considers incomes, OR is in worse shape than CA.

        1. I’ve been all around Portland and Seattle. It’s been awful for years, and just when you think it couldn’t get any worse, it does.

  6. How many housing units is CA short by?

    California’s housing shortage is somewhere between 2.5 million … and zero
    OC Register
    Jonathan Lansner
    July 19, 2019

    “Nobody can argue California’s homebuilding has dramatically slowed both in number and its slice of the nation’s new homes. My trusty spreadsheet found the statewide residential construction pace, as measured by building permits, is down 43% from the 1963-91 boom years. In that era, the state was 14% of U.S. homebuilding. Since 1992, California’s created just 8% of the nation’s new residences.”

    “If California kept building at the boom-level rate, we’d have another 2.4 million homes today. But would that construction have been appropriate for a state that’s seen its annual growth in new residents slow 26% from the boom years?”

    “Would — or should — California’s building industry keep its businesses humming at a historic building pace when population growth — a key driver of demand — is dramatically slowing?”

    https://www.ocregister.com/2019/07/19/californias-housing-shortage-is-somewhere-between-2-5-million-and-zero/

    1. If prices stop going up like gangbusters and investors cash out, California will have an affordable housing glut out the wazoo.

      2. When you think about polling errors of +/- 5%, you think small differences. But a difference between 0 and 2.5 million homes needed is massive. Seems like it would be important to figure this out as it has huge implications on public policy.

    2. Sorry, Oregon and California, but until you’re chasing down the last of the progressives with bloodhounds, you are in a terminal decline.

      1. The average cost of a new home dropped 4.5 percent from a week earlier to 52,487 yuan (US$7,613) per square meter, Centaline data showed.

        1 sq meter = 10.76 sq foot. So if my math is right, that would be

        $7,613 / 10.76 = $707 per sq foot in Shangai in USD

        For perspective, Zillow says that price per sq foot in San Francisco is $1078.

        1. Thanks but it was not really my question, I am not asking for a conversion of the price, I am asking MB and the other names he is presently going by today to tell me what it would cost him to build.

  8. It interesting that in the old days of lending, if a property went up to much in one year the buyer had to come up with more money down, or the seller had to lower the price to be in accordance with the conservative appraisal. This practice was a protection against fraud also. In addition a buyer had to prove where their down payment was coming from.

    Speculators had to put more down, pay a higher interest rates and points, because it was considered a higher risk loan. As a result non owner occupied loans where way under 10% of the entire market.

    This total discarding of good lending practices in favor of “real estate always goes up” is bizarre, or not giving a loan is racist is bizarre.

    They discovered after the 1929 stock market crash that the main culprit of the crash was faulty lending and buying on margin. They enacted laws that separated
    Lending from investment.
    Lending is the practice of qualifying for a loan and Investment is the act of hoping the investment increases in value.

    The laws enacted after 1929
    That separated lending from investment served this country well for over 70 years. Wall Street didn’t like it because it limited their ability to get funds going to the investment sector.

    Wall Street finally got their way around 1998 when Clinton eliminated the Glass-Steagal Act. It only took about 7 years for the entire financial markets to crash, mostly due to faulty lending creating false markets in real estate.

    Instead of a meaningful correction of this crash that was epic, the culprit banks and investment houses got bailed out . So we still have casino markets, and nothing that Is stable.

    So, ideas like Wall Street should be taxed more does not solve the problem of the the casino markets.

    For a while protesters were talking about bringing back laws that would put Wall Street in it’s place again. That movement got hijacked by identity politics and socialism and equality demands.

    1. Wall Street finally got their way around 1998 when Clinton eliminated the Glass-Steagal Act ??

      Wrong…Clinton is not stupid…If he vetoed the legislation it would have been overridden…Look at the votes…Then MOST importantly, look at the two sponsors of the legislation…Both Repubs…”Clinton eliminated it” is a bogus argument with all due respect…

      1. He did not veto it. You do not know how a veto vote is going to go until you take the vote. Had he made it an issue there is no way to know how it would have turned out. You are still playing the protect the globalist president because he was a Democrat games.

        1. Yeah sure Adan…The president did not know what the votes were going to be…LOL…Your a shammer…Kind of like someone you admire…

      2. scdave,

        I grant you that the elimination of Glass-Steagal Act, was supported by the Republicans. Usually when you talk about legislation you pin it to the president that passed it. I agree with you that this was a very republican supported bill.

        I wasn’t trying to be deceptive, just lazy in not looking up the sponsors of getting rid of this good law.

        You might say it was supported by both sides of the parties.

        So your point is clear. I’m not in love with any of the politicans and both sides have sold us down the river for years. I just don’t want socialism, or open borders, so I will vote in accordance with stopping that.

    1. They’re going to cut rates and inject steroids into the already impossibly big everything bubble. Go long homelessness and self-opening “smart” cardboard boxes which count how many crackers you eat, because nobody has the time to open a box and the data on average consumption and consumer habits will be worth trillions of dollars.

      1. How will Amazon keep up its Prime shipping program if fewer and fewer people have permanent addresses to deliver goods to?

  10. ‘Lenders in certain markets are very aggressive on price,’ Bank OZK CEO George Gleason told analysts. ‘We’ve been clear without exception that we are not going to sacrifice our credit standards.’”

    Sounds like someone’s circling the drain.

  11. Beautiful weather this afternoon and I’m going to get out of the house for the first time in nearly 2 weeks and do a few things. Temps are foing to get into the upper 70s here.

    One of the more interesting things I’ll be doing is checking out a specific RV for a friend to move into fulltime. I’ve been brainstorming with her on her plans/situation for a couple months now, and it’s the most practical path for her, given some unusual factors. There, but for the grace of $RANDOM_CHANCE go I…

      1. I’m not a religious man in the normal sense. My feelings on the matter are… complex.

        It feels good to be helping out someone who is deserving of it today.

        1. Seems like a pretty good act, religious or not.

          “My religion is very simple. My religion is kindness.” – Dalai Lama

    2. When you consider the out of pocket cost of an RV (and tow vehicle), maintenance, repair, fuel, insurance, depreciation, and then you look at the hyperinflation in RV park rates, RV living makes zero sense from a financial standpoint. It’s cheaper to rent a room somewhere.

      1. Agreed. Craigslist is full of divorcees and others renting out rooms to help pay the mortgage and make ends meet. As Housing Bubble 2.0 implodes, millions of basements and spare bedrooms are going to be rented out for competitive prices. A friend of mine took in roommates for awhile after his divorce, and it was mutually beneficial for both him and his roommates.

      2. hyperinflation in RV park rates ??

        Not sure with the hyper part but no question they have increased a lot…

      3. RV living makes zero sense from a financial standpoint. It’s cheaper to rent a room somewhere.

        This is completely true. I know a bunch of travel RNs who tried to make this work and got huge, expensive RVs or 5th wheel trailers to hook up to their truck. In the end it was pennywise and pound-foolish because the RV associated fees are not insignificant. I think a more nimble sprinter van is a better solution because it sticks out less if you choose not to park it at an RV resort.

        1. Sprinter vans are for rich people. How many people do you know who can legit afford over $100,000 for an RV? I know zero.

          1. What I meant was: How many people WHO CANNOT AFFORD HOUSING can legit afford over $100k for an RV? If you can afford that, you can afford to live in an apartment in any city in this country.

          2. I agree, sprinter vans are expensive. I’m not suggesting it is a solution to housing crises.

            I’m talking about a special case in which travel RNs move about every 13 weeks to a new hospital to work and need temporary housing. Hotels are pretty pricey for 3 months at a time and Airbnbs don’t always work either, hence the RV solution.

            The agencies that pay these travel RNs usually pay generously for housing, but you can roll it into your stipend if unused. The RN that I just hosted at one of my Airbnbs is getting $1k a week just in housing allowance. She makes $60/hr for her wage. Also, she has a house in SLC but doesn’t live in it; she rents it to a pair of medical residents at the hospital and it more than covers her mortgage. I think she blows a lot of her money on whatever, but she has a really high income.

      4. Well, I’m going to disagree for her circumstances. Looks like my longer post with details got eaten, and I need to run for a bit.

        tl;dr -The RV we looked at today was a used MS Sprinter diesel – a Winnebago View 24J. It was in pretty good shape – one owner, 50k miles. It looks like that specific model will get the job done.

          1. ugh.. meant to say MB Sprinter.. not MS 🙂

            I’ve been pushing the knee rather hard today.

            The ones she’s looking at are in the 40-50k range. one slide out. Separate Bed/dry bath/dinette, 24 ft, decently equpped: Generator, Solar, along with the standards (fridge/freezer, galley with stovetop, convection microwave, backup cam, AC/Furnace, water heater, decent tank sizes for a 24 foot RV, etc)

            I can see it doing the job for a single person with very few possessions (which she is) for a few years, especially given an likely itinerary of rotating between a half dozen ish places to stay in a given year. And it has just enough room for a certain particular hardware setup.

            Get ready for a blender salad of details:

            In the post that got eaten, I explained that she is a recently divorced woman in her mid-30s trying to get out of a bad situation. She has applied for disability, due to hashimotos and a couple other auto-immune disorders (hereditary, so no real question about them) and it looks like she’s going to receive it. She has the means to pay cash for an RV, and receive a small passive income from some investments, but won’t be able to earn very much active income (I think $18k yr is max). She’s not really capable of full-time work anyway – she finds herself getting sicker for a while and puking her guts out pretty much daily right now.

            The investments came about from a settlement from a IP theft lawsuit with one of the FAANG companies from when she was in her PHD program (involved with the IP in question). The lawsuit was dragged out for almost 8 years before they offered a settlement to make her go away. During all that time is when her health when to crap, and she was unable to finish her PHD program or work full time. The details are under heavy NDA.

            She is currently living with her very toxic / psycho parents (in their basement) because she had no where else to go when her husband (now ex) dumped her (literally) and went back to Canada alone (not true – he took her dog). Her parents are trying to get their hands on her investments via all sorts of behaviors, so she can’t stay with them (among other reasons).

            Her finances and disability rule out getting an apartment in anything but the lowest of COLs, and no home or condo. An upside to the disability ruling is that if she doesn’t earn any active income for 3 years, her quite substantial (buys a house in many places) student loans from her masters and PHD years can be discharged…

            So yeah.. a complicated story. I directly a know a couple people working in the division under one of the main players (let’s call him “Professor Hathaway”) on the other side of the misappropriated IP in question, which also somewhat relates to my main line work no less, but we got introduced before I knew any of that because I was considered an “RV guru” and she almost bought a true POS from the dealer closest to her… It was after finding out we are in the same line of work, and about the IP mess in question, that I felt it was a moral imperative to help her make a good decision, given that she really has only (good) shot to re-establish her autonomy and independence in a living situation where she can focus on physical recovery (and work on developing some new IP/projects for after the 3 year period elapses).

            How’s that for freaking convoluted/soap opera plot worthy?

            And what do I get out of it? Just knowing that I helped someone.

          2. Wow MGSpiffy, that is quite the situation for this friend. I am glad you helped. It seems like this will work as a solution.

            I knew a lady who did this for 2 years. She was from So Cal and she sold her condo for a ridiculously high amount and didn’t want to spent several thousand a month on rent. So she got sprinter van and did a conversion with some outfit in Idaho. She lived in it for 2 years (she even showed me some charcoal toilet, since it didn’t have plumbing). It sounds very eccentric, but she had plenty of money. She recently got a job making I think over $100k for a medical device company in the greater Salt Lake company.

            I wonder your friend is going to park the RV?

          3. Sorry. If she has $50k cash, she can easily find a rental. I know, I’ve been self-employed for years and try to show as little income as possible. I have never had a problem renting. The math doesn’t add up, Spiff.

          4. PS – She is a debt junkie trying to stiff creditors. She’s the reason tuition prices went up. She has more liquid assets than most Baby Boomers who are set to retire, yet she’s trying to burn people rather than pay what she agreed to. Not feeling the tears for this one. Divorce? Call the WHAAAAmbulance.

          5. If she has $50k cash, she can easily find a rental.

            Probably, but I am guessing that rentals in that area are probably in the $2k range. So in 2 years of renting she will have paid for the sprinter van. It is true that the sprinter van will depreciate in that time period, but probably only $10k since the bulk of its depreciation already has hit. Buying and living in an RV might be a nice way of funneling her money towards an asset (albeit a depreciating one). Plus, sprinter vans are nimble enough to be primary transportation, so you have your vehicle cost included.

          7. OMG am I paying for overdoing the knee yesterday…

            Oh the Pain. The pain. https://www.youtube.com/watch?v=EbnQD9MVw5Y

            You could make the argument for her staying put in an apartment somewhere, and she made it herself, but it’s a giant question mark if she will ever be able to return to significant/full-time employment again. That all depends on making some major health improvements.

            She’s currently in the Boston-NYC corridor – and rents aren’t cheap there. Also, she’s wanting to visit several of her grad school friends scattered around the country, a couple of which have offered to provide RV parking for a few months at a time. The RV solution with the smaller sprinter setup solves the transportation + visiting around the country + somewhere to live + get the heck away from family problems while still leaving her with residual value if things take a turn for the better and she finds herself ready to move into a fixed location, but makes the cost case better if she stays in it for a few extra years.

            As for the whole student loan cancelling situation – I am of a split mind on that, thinking you signed on the dotted line on one hand, but on the other I’ve seen more than couple people close to me get screwed by them, given their non-dischargable status, and I’m convinced they’ve been engineered the way they are primarily to enrich the elites while moving college costs out of reach for many, so I’m not exactly crying tears there. Either way I might lean, I have to recognize the personal dilemma she’s facing with them and the possibility that she never will be working significantly again, so I can’t fault her for wanting to get them discharged. She’s playing the game the way it’s setup.

            I feel like Chinbabwe is being a bit too harsh as though I don’t know the exact numbers, I’m aware she’s used the settlement to clear all of her other debts like the divorce, not to mention attorney fees first.

            After seeing the little Sprinter RV in person, which was fun thing to do in of itself (though I’m still partial to a 5th wheel) I’m an agreement with OneAgainstMany – it won’t depreciate much while providing a huge shelter and transportation value, with a much more extendable future timeline than renting a traditional place would allow – in this specific case.

            It’s not my money, and not my decision, but I’m glad to have helped someone to make a better decision than they would have alone and lower their risk of winding up in a worse situation.

            rms – ok, that’s funny.

          8. She’s playing the game the way it’s setup.

            I’m in agreement on that. With that many health problems I’m ok with her taking advantage of any program available that forgives the loans. I’m not hearing you say anything that suggests that was her plan all along.

          9. @Carl Morris

            Her plan was to go into the industry. People normally don’t do 6 years of grad/post-grad work just for the lols and expecting not to use it. She shared with me some videos of her team’s work which were pretty cool and involve tech in my field. Imagine a group of researchers in 2005 working on button-less, all touch screen only interface, and then having the prof suddenly leave to go work for Apple while claiming ownership of everyone else’s work. (hence the ‘Real Genius’ reference and lawsuit)

            Mrs Spiffy actually talked with her a while about the health issues as she knows a lot about them (I know very little, Mrs Spiffy was a doula and studied being an RN like her mom before the siren’s call of SQL got her) and the kind of unspoken elephant in the room/conclusion is that she may never be able to work a ‘normal’ full-time job due to her health problems. The idea of getting back into what she was doing in school is something she needs to give her something to strive for and reason to keep pushing forward, but honestly I think there is a good chance she’ll be living fulltime in this situation for more than just that window of time, baring some big event like meeting a future spouse. So that makes renting more dangerous to exhausting her resources compared to owing something halfway decent outright.

          10. having the prof suddenly leave to go work for Apple while claiming ownership of everyone else’s work

            Did the professor donate money to the university and get a building in his name by any chance?

  12. It was not Chinese cheerleading it was warning about China rising and becoming a genuine danger to the US. It is now and was not when I first warned of it. The consensus was the imminent collapse of China without US policy changes needed. Now, we finally have the policies in place to contain China I can talk about it’s weaknesses. The MSM a number of years ago wanted to be dismissive of China so corporations could continue to move factories there. My role was to be a needed contrarian. Just like I was dismissive of AGW when the consensus was AGW. Used to talk about it all the time to be the contrarian not it is the consensus no need for my views on a regular basis. If you read my previous posts closely I have been consistently anti-globalism for the entire time I have been on this board. Vehemently both anti W and Obama. However people like to fit me into their view of the world. I do regret not spending more time explaining why it was important to understand China and it’s planning so I could not be labeled as a shill for China, but hind sight is 20/20.

    2. I know we are now a blog. We were a board when I first started posting over a decade ago.Contrarians are always a pain in the azz. I get why people only wanted to hear that China was going to collapse since it was and is needed to reduce housing prices. Good news Trump can do it within a few years and since the Fed does not have his back the Fed might not intervene aggressively to stop it.

      1. Contrarians are always a pain in the azz.

        Au contraire. Most of the regular posters probably self-identify as contrarians. When someone clings to flawed assumptions and persists in pushing a dogma long after it has been thoroughly discredited, then such individuals tend to be regarded as a pain in the a$$, as well as being viewed as an existential threat by the crow population.

        1. I’m not sure how he would do that. It sounds like something Congress would need to do. Or actually it sound more like a state issue per 10th amendment — unless the federal gov can shoehorn it vaguely under national defense or general welfare.

    3. Thank you for your post, Dan. So your role as a contrarian was on HBB, not some job you had, right?

      1. I have never received a penny for any post. I endured the abuse for free. But I am sure so have you.

        1. Sorry, I didn’t mean: were you paid to post.

          I was wondering if you had some in real life (IRL) job where you lobbied or advocated for China, or had a job paid for by the Chinese. If so, that kind of influence would have bled over into your posting on HBB in your free time.

  13. Does anybody have insight into how financial markets will adjust when the current record level of negative yielding bonds reverses?

      1. History has not dealt kindly with the aftermath of protracted periods of low risk premiums.

        — Sir Alan Greenspan

      2. Most likely but it really does depend on why they reverse and how fast. If it is due to real growth it may not be that bad

      3. No idea, but the word “badly” comes to mind…??

        Or the Abyss….

        PS..Nice to see you out on you new knees…

    2. Desmond Lachman
      July 17, 2019 3:48 pm
      Bond market madness wrought by the central banks
      International Economics

      When the history of the past decade of ultra-easy monetary policy by the world’s major central banks is written, there will be no shortage of candidates to illustrate how seriously those central banks distorted the world’s credit markets. My favorite pick for that dubious honor is the fact that around $4 billion in high-yield European corporate bonds are now trading with negative yields.

      Over the past decade, in an effort to boost their respective economies in a world where interest rates had reached their zero bound, the world’s major central banks engaged in a massive amount of bond buying. They did so with the dual objective of lowering interest rates and of encouraging markets to take on more risk.

      In the process, those central banks bought around $10 trillion in low risk government bonds and other highly rated assets. In the process they also managed to seriously distort credit markets by forcing down interest rates to levels that did not adequately compensate the lenders for the risk that the creditor might default.

      All too many examples of credit distortion created by easy global money are to be found in the emerging market economies. How much sense did it make for the market to lend on relatively favorable terms to countries with such dubious creditworthiness as Iraq, Kenya, Mongolia, Mozambique, and Tajikistan? Or how much sense did it make for the market to oversubscribe as it did in 2017 to a 100-year Argentine bond when that country had defaulted on its debt five times in the last one hundred years?

      Examples of credit market risk mispricing are to be found in the more developed countries as well. It is questionable how much sense it makes for a record $13 trillion of advanced countries’ government bonds to be now paying negative interest rates or for an emerging European country like the Czech Republic as well to have its government able to borrow money at negative rates.

      At a time that the world economy is slowing and economic risks are rising, it also seems to make little sense that in the US high-yield market the interest rates spreads over US Treasuries remain at close to their historic lows.
      …

      1. “Desmond Lachman” – he was the fellow (at AEI) to whom Bernanke first said that the economy was going to have a “Wile E. Coyote” moment and go off a cliff in 2020 due to some sort of after effects of government tax cuts and fiscal stimulus. This again gives the Fed intellectual cover for interest rate cuts, rather than being exposed as the lackey of the government and Wall Street, because apparently the perception of an august, technocratic, independent central bank is important theater for the public. Never mind that they have the predictive capacity of a carrot.

        The actual reasons of course are because lower interest rates keep asset bubbles going – important for an election year, yet paradoxically destructive because I have a strong suspicion asset bubbles and low interest rates engender dissatisfaction amongst the populace – while also contributing to continued rude health for Wall Street.

        1. Reminds me of a movie scene, where 2 drivers race towards the edge of a cliff. Whoever got closest (but didn’t fly over the edge), won. The Fed is in a similar game of chicken. Once the slowdown hits, they have to run as close to the edge as they can, without going over.

          Once a slowdown is obvious, I believe they’ll start HM1 (helicopter money 1) by printing and giving to the Treasury, who will then mail checks. That will likely arrest the slowdown/ease the recession enough to prevent large scale bankruptcies. And just like with QE, they’ll think “wow, this works. Let’s do it again!” So after the effects of HM1 wear off and deflationary pressures re-emerge, there would be HM2.

          Just like QE before it, once HM starts, continue it must. Maybe they will have the restraint to stop before hyperinflation.
          But when have they shown restraint?

        2. Impressed by your use of the word “august” in your post!

          August
          adjective
          Respected and impressive

        3. “I have a strong suspicion asset bubbles and low interest rates engender dissatisfaction amongst the populace.”

          I agree with half of what you said.

          Asset bubbles create “wealth”. People like it when wealth is created.

          Low interest rates make for low to zero returns on saved money. People do like it when the return on their savings go to zero.

          People piss and moan when the return on their savings are miniscule but rejoice when the value (known in some circles as the price) of their house rises. Both of these happenings are related but the current dumbed-down population does not see it that way.

          1. “People do like it when the return on their savings go to zero.”

            Should be: “People do NOT like it when the return on their savings go to zero.”

          2. “Asset bubbles create “wealth”. People like it when wealth is created. Low interest rates make for low to zero returns on saved money. People do NOT like it when the return on their savings go to zero.”

            Riddle: “What makes you poorer as it makes you richer?” “An appreciating house.”

            The paradox, for appreciating real estate in particular, is that the net result of appreciation is a reduced incoming cash flow, due to increased property tax and insurance, even though one is house-rich. It is very difficult or impossible for an end user to monetize the wealth from an appreciated house (see the book, “Where Are The Customer’s Yachts?” to see who gets wealthy from asset bubbles).

            For assets that don’t have carrying costs – or at least carrying costs which aren’t indexed to price – I think the wealth effect can be more persistent.

          3. for appreciating real estate in particular, is that the net result of appreciation is a reduced incoming cash flow, due to increased property tax and insurance,

            Unless of course you can throttle property tax by passing something akin to Prop 13. Then asset values can really go haywire.

    3. We’re all Japanese now. NIRP and ZIRP forever. Those 4% CDs I purchased last December are looking like a very good move.

      1. Yes they were. My dad’s portfolio is similar padded with bonds that he bought before 2007 at yields that may never again be available for decades to come.

          1. 8% returns every year… ??

            The old money that came in they may be still achieving that if they went out long enough…Its the new money coming in that they are in real trouble with…

        2. I still have some iBonds in my portfolio purchased in the early 2000s that are getting over 5%!

      2. Unless MMT is adopted. Then you might have 4 percent inflation per day and the gold bugs can gloat.

    4. Chart of the week: Volume of negative-yielding debt rises sharply
      Home / Markets and central banks / Insights on market events / Chart of the week: Volume of negative-yielding debt rises sharply
      Post with image
      Investors’ Corner Team
      17 July 2019
      Insights on market events
      Exhibit 1: Volume of negative yielding debt in multi-sector global bond index rises sharply as G3 central banks prepare to cut policy rates

      (Graph shows the value (USD billions) of the Bloomberg Barclays Global Aggregate Negative-Yielding Debt Index (welcome to the new world order, where Global Bond indices exist for negative-yielding bonds)).

      Source: Bloomberg/BNP Paribas Asset Management, as of 12/07/19

      – From a low last October of just under USD 6 trillions the value of the Bloomberg Barclays Global Aggregate Negative-Yielding Debt Index has more than doubled, increasing in value by over USD 7 trillions over the last 8 months to establish an all-time record of USD 13.2 trillions earlier in late June.

      – The rise of the volume of negative-yielding debt instruments is explained by the recent ‘pivot’ by central banks away from a normalisation of monetary policy (i.e. the raising of official interest rates from the low levels associated with non-conventional monetary policy) to new cuts in official interest rates. The justification for this reversal in monetary policy includes factors such as the fears over the negative repercussions of trade tensions and the continuing absence of inflation pressures in developed economies.

      – The current situation is a manifestation of the inability of global financial markets to emerge from the era of ultra-low bond yields that central banks engineered in the wake of the global financial crisis.

      – Non-conventional policies pursued by central banks in recent years have lead neither to a rise in sluggish rates of economic growth nor to an end in the disinflationary trends within the global economy.

      – If non-conventional monetary policy has shown itself to be ineffective so far and is not without risk (e.g. misallocations of capital, fuelling of inequality), does it make sense to pursue it further? This question, dear reader, will be the subject of future posts on this blog.
      …

  14. Funny thing is that once the market shows decline, all these discussions about the affordable housing crisis, promoting high density housing zoning, supply shortage etc just go away. They start to look like a 1975 Gremlin in 1985.

    I remember in about 2008 or 9, seeing old web articles from around 2005 with same concerns. A replay of today basically. Those articles looked so antiquated and irrelevant that you wondered why they were ever written since they no longer applied.

    Will be interesting to see in the future, if we will look back at 2019 news with that same degree of puzzlement. Same for seeing 2019 real estate ads 2 years from now. Saw many 2005 MLS records in 08 and 09 and it was just amazing the difference. “Wont last, only $495k for this 3/2 on small pond etc. The same property new MLS in 2009 showed an asking price of $190k. Like the old gold rush towns looked years after they dried up. Strange to see the old MLS in 2009. Will be strange to see today’s ads in 2021. Everyone says it cant happen again.

    Yes it can.

    1. +1…Best post I have read in quite some time on the current situation…

      BTW Jdog…What zip are you in ?? I thought you were in Florida…

    2. Funny thing is that once the market shows decline, all these discussions about the affordable housing crisis, promoting high density housing zoning, supply shortage etc just go away.

      As long as a house is a tradeable token via which one can make a profit, there will never be “enough” houses, any more than there can be “enough” stocks. If house prices plateau or decline, the available stock will miraculously increase IMO. If you google “lack of housing supply” and set the time frame (via the “Tools” option on the search page to be 2005 to 2006, you’ll see many of the same arguments you see today).

      The various lobbying groups out there have robust newsrooms themselves, via which they distribute professional news articles to journalists. When one starts seeing the same concept appearing in multiple places, that mechanism is likely the source. And when these press releases assiduously ignore obvious questions (“does anyone really want high density tenements everywhere?” or “Is building units shoddily and cheaply, i.e. “for rent” a desirable thing?”) one can be doubly sure of the source.

      As a side note, I’ve found the financial media to be a good indicator of future central bank actions. Remember the “triangle” layout of the economy I noted in a previous post. Wall Street and government dictate what the Fed’s actions should be, and they have the press-release and opinion-shaping apparatus the Fed department does not. I found it odd that the Fed would be doing interest rate cuts with Powell’s personal thoughts on persistent excessively low interest rates, plus the headline economic indicators being strong, yet here we are – they look like a done deal, they are priced in, and if they are not done, there will likely be a taper tantrum II.

      I think the fear is that bonds with very low interest rates (long term in particular) will suddenly become a lot harder to trade if interest rates rise or even stay flat.

      1. The bonds will not be hard to trade necessarily, but there price will decrease significantly.

        1. Sorry. Meant ” their”. And not “there”. Mom is rolling over in her eternity. Sorry mom. I do know better. Have just become careless!

          1. My wife is an English teacher. One of the best posters on her wall goes something like this: “Let’s eat, grandma. Commas: they save lives.”

            I type so fast and make so many mistakes, she’d be embarrassed of my grammar on this blog!

          2. It would be really, really nice, if the poster could edit a comment for up to 5 or 10 minutes after posting.

    2. Real Journalists will surely be tenacious in seeking to get to the truth of the matter.

        1. We should not impose our unjust laws or discriminatory cultural practices on unassimilable Third World migrants who come here.

    1. or to be grammatically and factually correct all reamed. It does not translate well, Reem is a Muslim baby name.

      1. My husband got news from the Bronx – his nephew’s wife just had a baby. They named him Muhammad Abdullah (wife is Muslim.) The family name is a typical Irish name so the kid’s full name is Muhammad Abdullah O’Shea (the exotic last name is not their real one.) I don’t think I’ve ever seen my husband’s face with that expression before.

        1. “I don’t think I’ve ever seen my husband’s face with that expression before.”

          Hehe…maybe when you’re edging him? 🙂

      1. All of these Congresscum continue to sell the American people down the river, pushed by their corporate masters. It’s time for serious campaign finance reform and to get rid of lobbying and take back this country.

        1. The good lord made fire accessible to even to most disenfranchised, and almost everything is combustible.

        2. Chinbabwe,

          + 1000.

          This is my position that the USA needs to be taken back
          I remember when the USA appeared to be protected for the best interest of the citizens.

          The fact that we felt we were the military watchdogs of the World however might of been a mistake post World War 2. All these foreign entanglements we seem to of gotten the short end of the stick repeatedly.

          Globalism wasn’t good for a big portion of Citizens of USA.

          What I find bizarre is that this Country spend a good bit of resources combating the spread of Communist, yet now it’s a political platform. It’s really shocking.

          The open borders talk is just simply self destruction.

  20. Business
    Bubble Watch: Foreigners dramatically shrink homebuying in California, U.S.
    30% of the 50,000 statewide drop in home purchase can be tied to foreign pullback
    STAFF GRAPHIC
    By Jonathan Lansner
    Orange County Register
    PUBLISHED: July 18, 2019 at 8:00 am | UPDATED: July 18, 2019 at 1:15 pm

    “Bubble Watch” digs into trends that may indicate economic and/or housing market troubles ahead.

    Buzz: Foreigners dramatically pull back their buying of U.S. and California homes.

    Source: National Association of Realtors

    Trend reported: My trusty spreadsheet says 22,000 foreigners bought homes in California in the 12 months ended in March, down 41% from 37,000 in the previous 12 months. Nationwide, 183,100 foreigners bought homes in the same period, down 31% from 266,800 in the previous year.

    The dissection

    Folks complain when foreigners — or any “non-traditional” house hunters — are buying. Others fret when they’re not.

    On one hand, buyers from out of the country are a small slice of California house hunters.

    Last year, the California Association of Realtors said 372,000 existing homes sold. If my calculations are correct, foreigners were 6% of last year’s statewide homebuying market. The previous year, 442,000 homes sold statewide — 8% of which were bought by foreigners.

    Now look at the foreign pullback this way: Non-U.S. buyers acquired 15,000 fewer California homes in the past year. That translates to 30% of the 50,000 drop in home purchase statewide. That’s impactful, especially in housing niches foreign-buyers often prefer — newer, pricier homes in many of the state’s ethnically diverse communities.
    …

    1. As my double post above shows (sorry about that) it is not due to lack of trying by the PTB to get buyers. So how much property does Nancy and her husband own in the bay area?

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