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An Investment Thesis Predicated On The View That Values Would Continue To Rise Indefinitely

A report from Fortune. “The top 1% is pumping the brakes. Weak auction sales at this year’s Monterey Car Week is just the latest example of how spending at the top of the economic pyramid is shrinking, as many of the highest-priced cars went unsold. From high-end New York real estate, to fine art, to now, classic cars, the ultra-wealthy have curbed their profligate spending in a big way this year, sending asset prices tumbling across the board.”

“This obsession with perfection has become far more profound in recent years as the classic car market has morphed from a niche hobby to a legitimate stand-alone asset class, with cars selling for tens of millions of dollars. As such, many classic car enthusiasts have found themselves priced out of the market in recent years by investment groups and speculators hoping to make a quick buck flipping the cars back into a hot market.”

“This investment thesis was predicated on the view that both the market size as well as the value of these super cars would continue to rise indefinitely, which, of course, is never a great idea. ‘The reserves are too damn high,’ one major car collector, who didn’t wish to be identified, told Fortune. ‘I held the high bid on a lot of cars today but I didn’t win any of them because of these crazy reserves. I’m not going to bid against myself, so the car goes unsold.'”

“When you step back and look at the broader asset market, it is clear that the rich are curbing their spending for nearly everything. For example, sales at fine arts auctions are down 20% in the first half of 2019 compared with the same time last year, according to artprice.com. Housing prices in London fell 4.4% in May compared to the previous year, marking the lowest annual drop since August 2009 at the height of the Global Financial Crisis, according to the UK Office of National Statistics. Prices for high-end Manhattan real-estate fell 5% in the second quarter of 2019 compared with the same time last year, with sellers offering their largest discounts in nine years, according to Brown Harris Stevens.”

From Palo Alto Online in California. “Total transaction volume dropped close to 30%, along with a 6% decline in the median price of homes sold in Palo Alto, which is now $2.9 million, according to the Multiple Listing Service. The most recent peak of Palo Alto’s median home price was in April 2018, at $3.1 million, which dropped quickly to $2.79 million by the end of 2018.”

“While $2.9 million in the first half of this year appears to be a minor rebound from the end of last year, with seasonality factored in—i.e., we normally see higher prices in spring—it’s logical to conclude that home prices in Palo Alto are heading south.”

“There have been many other indicators of a softening real estate market. For instance, 70% more homes listed in the first half of this year dropped their prices, compared to the same period last year. Average days on the market for homes sold also increased from 14 in the first six months of last year to 21.5 this year. Among the 63 active listings in Palo Alto as of July 24, there were 13 properties that have been on the market for more than 100 days. Homes have been selling much more slowly across all price segments, and especially at the high end. Sixteen homes were sold above $5 million in the first half of this year, compared with 35 last year.”

“Lack of inventory was the main driver of the strong sellers’ market for a very long period and was the main reason for seemingly ever-higher home prices in Palo Alto. However, shrinking demand has led the market since the latter half of last year. In my column dated July 12, 2018, I predicted that the ‘U.S.-China trade war could impact home sales.’ The prolonged trade war appears to have finally started to affect our local property market.”

“Since the trade war kicked off, I’ve heard from many of my Chinese buyers that they have been forced to reconsider whether to continue operations in the U.S. or not. Silicon Valley had been the ultimate destination for Chinese capital, especially after the 2008 financial crisis. High home prices in Palo Alto, unfortunately, were an unwanted byproduct of it. But at least for now, Silicon Valley seems to be losing its attractiveness to Chinese capital. The low enrollment of overseas students at our local summer camps is another sign of the drastic change.”

From Patch New York. “The Sands Point estate often cited in reports as the mansion that inspired the East Egg in F. Scott Fitzgerald’s novel ‘The Great Gatsby’ is still on the market. The stunning 14-bedroom home, located at 235 Middle Neck Rd. on Long Island’s ‘Gold Coast,’ is going for $13.89 million.”

“The home last sold in May 2012 for $6.7 million. After some renovations, it was put up for sale in December 2016 for $19.8 million. The price dropped to $16.9 million in August 2017, then was relisted again for $13.9 million in June 2018.”

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  1. ‘I’ve heard from many of my Chinese buyers that they have been forced to reconsider whether to continue operations in the U.S. or not’

    Operations?

    ‘Lack of inventory was the main driver of the strong sellers’ market for a very long period and was the main reason for seemingly ever-higher home prices in Palo Alto’

    These manias are a self licking ice-cream cone on the way up.

    1. “Silicon Valley had been the ultimate destination for Chinese capital, especially after the 2008 financial crisis. High home prices in Palo Alto, unfortunately, were an unwanted byproduct of it. But at least for now, Silicon Valley seems to be losing its attractiveness to Chinese capital.”

      Why are we allowing our enemies to buy up our housing stock – shelter – and price out our own citizens?

    2. I was more disturbed by the “low enrollment of overseas students at our local summer camps.” How can a summer camp be local if you’re allowing foreigners to invade?

      1. The Asiana jet that crashed in San Francisco in 2013 was carrying 70+ Chinese kids to summer camp in the US, and that the three passengers who died were going to summer camp.

    3. “Operations?“

      This is so true. Operation, experiment, invasion, trial, money laundering, piggy banking, what ever it is, it’s not buying up our land for shelter. They have been successful in this “operation” of pricing out people who need the “product” they have turned into a prize possession that’s either used as a piggy bank or a trophy. Our US enablers surely haven’t helped stop this either.

  2. ‘The stunning 14-bedroom home, located at 235 Middle Neck Rd. on Long Island’s ‘Gold Coast,’ is going for $13.89 million’

    It’s going alright.

  3. ‘just the latest example of how spending at the top of the economic pyramid is shrinking, as many of the highest-priced cars went unsold. From high-end New York real estate, to fine art, to now, classic cars, the ultra-wealthy have curbed their profligate spending in a big way this year, sending asset prices tumbling across the board’

    Nobody could see this coming…

    Exact same thing happened last decade.

  4. In my column dated July 12, 2018, I predicted that the ‘U.S.-China trade war could impact home sales.’ The prolonged trade war appears to have finally started to affect our local property market.”

    Are we supposed to be impressed by your predictive powers, REIC Boy? A glance at the HBB postings for July 12, 2018 shows Ben and the HBB regulars have been running rings around the REIC “experts” when it comes to forecasting what’s in store for local, national, and global housing markets.

    Try to keep up, REIC Boy.

    1. It’s a woman. This same UHS reported last year (summer IIRC) that just after a prolonged period of multiple offers over asking, Palo Alto shacks were suddenly seeing million peso cuts and still not selling. She’s more realistic than most.

      1. I stand corrected. In general, even the more realistic UHSs nonetheless are bound by Always Be Closing to push the “There’s never been a better time to buy” dogma and to willfully disregard indications and warnings of a bursting housing bubble. Whereas in here, few if any posters (other than the occasional trolls) have a vested financial interest in prevaricating about the true state of the housing market, and quite a few are insightful and well informed observers of market forces. So when these UHSs or REIC “experts” want to award themselves a gold star for reminding us that their predictions of the blindingly obvious are turning out to be accurate, I can’t resist a “way ahead of you, UHS Girl” dig or two.

  5. “…From high-end New York real estate, to fine art, to now, classic cars, the ultra-wealthy have curbed their profligate spending in a big way this year, sending asset prices tumbling across the board.”

    – The everything bubble looks to be in, well, everything, and not just limited to stocks, corp. bonds and real estate.

    – The tide is turning; some are still in denial, but the facts can’t be ignored.

    BTW, this is an excellent article from one of your previous post links:

    https://www.stuff.co.nz/national/politics/opinion/114956556/easier-access-to-cheap-money-isnt-going-to-save-us-from-a-financial-crash
    Easier access to cheap money isn’t going to save us from a financial crash
    Damien Grant
    05:00, Aug 18 2019

    “We’ve had ten years of loose monetary policy. Governments, businesses and households have been induced to take on unprecedented levels of debt.”

    “Most can service their loans only because of the artificially low rates, and central banks are reluctant to raise the cost of borrowing, fearing mass defaults and recession.”

    “Orr, and his fellow central bankers, have created an economic bubble with a decade of cheap money.”

    “They are desperately trying to keep it afloat with ever larger amounts of more cheap money.”

    “It is possible that they can keep this going for a while longer, but they cannot keep it going forever.”

    Humpty Dumpty.

    1. If the super-wealthy who have been the exclusive beneficiaries of the Fed’s “No Billionaire Left Behind” monetary policies are reining in their spending, what’s happening to the tapped-out proles on Main Street?

      1. Well, in my view, anyone owning stocks and/or real estate has benefited from the Fed’s cheap credit/easy money policies. This includes probably the top 25+% of wage earners in the U.S., maybe more. Since many/most in (what’s left of) the U.S. Middle Class haven’t benefited from this, they’ve been trying to keep up with higher cost of living via debt. Stagnant wages + higher prices = deficit spending, else, austerity, which nobody wants, since “keeping up with the Jones’ “. That’s why many are in a precarious financial position. At this point in the credit cycle, we’ve reached credit/debt saturation. Credit cards are maxed out. No more expansion via cheap credit and debt. It’s all downhill from here, IMHO.

        Somewhere along the way, we’ve forgotten basic sound economic principles as a nation.

        “The rich rule over the poor,
        and the borrower is slave to the lender.” – Proverbs 22:7

        Globalism has been one of the main economic drivers as cause and effect. The Fed’s attempts at an artificial “wealth effect” are no replacement for actual organic wealth and prosperity. I can’t say where we go from here.

        https://www.paulcraigroberts.org/2019/08/21/what-globalism-did-was-to-transfer-the-us-economy-to-china/
        What Globalism Did Was To Transfer The US Economy To China
        August 21, 2019
        Paul Craig Roberts
        “The main problem with the US economy is that globalism has been deconstructing it. The offshoring of US jobs has reduced US manufacturing and industrial capability and associated innovation, research, development, supply chains, consumer purchasing power, and tax base of state and local governments. Corporations have increased short-term profits at the expense of these long-term costs. In effect, the US economy is being moved out of the First World into the Third World.”

        2. I agree with Boo – that was well put.

          This includes probably the top 25+% of wage earners in the U.S., maybe more. Since many/most in (what’s left of) the U.S. Middle Class haven’t benefited from this, they’ve been trying to keep up with higher cost of living via debt.

          Even some of that group didn’t get to join the party. I remember in 2009 telling my coworkers that AMD @ $2 was way undervalued and to buy some. By the end of the year it was breaking $10. I couldn’t partake despite making 185 that year due to the $100k of debt and $5k/mo alimony+CS from my divorce just months earlier.

          But my co-workers who could… some of those guys (and gals) made out really nicely.

          No more expansion via cheap credit and debt. It’s all downhill from here, IMHO.

          Now I’m finally looking at having some significant spare investable money and once again my timing is less than great.

        3. Not much “benefit” there considering everyone paid a grossly inflated price…..

          Now prices are cratering.

          Unless you have a different understand of what is beneficial.

      2. Main St. got a big fat ZERO out of the everything bubble. In fact, the returns were NEGATIVE because their cost of living hyperinflated. Shelter is the single largest monthly expense in every household budget, and the Fed and the pols more than doubled that. Do you think wages increased to help with that? Pfffft……

        1. And by the way, THIS is why we’re headed for Socialism. When the wealthy rape the country like they just have, you get major blowback. Now we have to deal with “The Squad” and all the associated ills.

          3. I’m sorry.

            I took…

            “Main St. got a big fat ZERO out of the everything bubble”

            and

            “And by the way, THIS is why we’re headed for Socialism.”

            The wrong way.

          4. Q: Why did the REALTOR cross the road?

            A: To lie to the used house buyer on the other side of the road.

          5. You sure did take it the wrong way. In fact, you read like just another partisan hack. I was just stating the facts as to why we’re seeing this Socialist movement. It started off with Populism, but is now morphing into Socialism as the living conditions within this country deteriorate for the masses. It’s very unfortunate, but real. When policies favor none but the wealthy, you get massive blowback. We are there.

            I said nothing about my own political beliefs, you just jumped to some wild, inaccurate conclusion. I voted for Trump. No chance I vote for one of these Socialist hacks. But it looks like you see a bogeyman around every corner.

          6. “as the living conditions within this country deteriorate for the masses.”

            Is this a prediction or a statement?

          7. It’s a fact. I don’t know where you’ve been, but we have the worst homelessness crisis in history, and the highest debt levels in history. People are broker than they’ve ever been. When there’s no money, there’s no happiness, only misery.

          8. “People are broker than they’ve ever been.”

            A co-worker said, “I’m so broke I can’t pay attention.”

          9. 329 million people and the last I saw there were 550,000 homeless in the U.S.

            The cities homeless is what I see but if your going to let one million people enter the country illegally I would think that’s going up.

            But 50% of that 329 million are middle class, higher where I live and around here they are doing pretty well.

            “People are broker than they’ve ever been.”

            I know a bunch of middle class people who are making more than they ever have.

            “When there’s no money, there’s no happiness, only misery.”

            Your window must look out over one of those homeless encampments because there are a lot of people who are working, making money and happy.

          10. So you think you can cite personal anecdotal evidence to deny the reality which is supported by the articles Ben Jones posts every day? Wow. And I thought you had given up the drugs, Jeff.

          13. “This whole eCONomy is one giant lie built on debt. You’ll learn that in the coming crash, Jeff.”

            Coming crash?

            Your posts would indicate it already happened.

            But when it does, I will deal with it just like the last one.

            “but we have the worst homelessness crisis in history”

            So you would be wrong,

            553,000 homeless is like the 80s and nothing like the 2 million during the Great Depression.

            Great Depression of the 1930s caused a devastating epidemic of poverty, hunger, and homelessness. There were two million homeless people

            In 2009, there were about 643,000 sheltered and unsheltered homeless persons nationwide.

            Homelessness in the United States

            The number of homeless people grew in the 1980s, as housing and social service cuts increased and the economy deteriorated. The United States government determined that somewhere between 200,000 and 500,000 Americans were then homeless.[27]

            In 2009, there were about 643,000 sheltered and unsheltered homeless persons nationwide.

            https://en.wikipedia.org/wiki/Homelessness_in_the_United_States

          15. In 2009, there were about 643,000 sheltered and unsheltered homeless persons nationwide.

            I think homeless people are a bit like zombie houses: the official stats might not capture the true number. NPR did a story on why the “official” number of homelessness keeps getting revised higher and higher. I don’t think we really know what the true number is because the data isn’t robust enough.

            https://www.npr.org/2019/05/17/724462179/episode-913-counting-the-homeless

          16. You sure did take it the wrong way. In fact, you read like just another partisan hack. I was just stating the facts

            Ahem, I think you were just making an argument by insult, again.

    1. “A ban on negative rates might be attractive for savers, but then we have to also think of how we’d support unprofitable but systemically-relevant banks,” said Ingrid Arndt-Brauer, a lawmaker for the Social Democratic Party, Angela Merkel’s junior coalition partner.

      Save the banks…the retirees will fend for themselves!

      1. “systemically-relevant banks”

        I like that. Helps me with my identity crisis. Allows me to think of myself as a Systemically-Relevant Banker instead of a cold-hearted blood-sucking parasite.

        As an aside: I looked up the evil Lex Luthor (my idol and Superman’s arch enemy) in Wikipedia and ran across this interesting tidbit:

        “In 1944 Lex Luthor was the first character in a comic book (and one of the first in fiction) to use and atomic bomb. The United States Department of War asked this story line to be delayed from publication, which it was until 1946, to protect the secrecy of the Manhattan Project. The War Department later asked for dailies of the Superman comic strip to be pulled in April 1945 which depicted Lex Luthor bombarding Superman with radiation from a cyclotron.”

        https://en.m.wikipedia.org/wiki/Lex_Luthor

  8. Remember that when real estate brokers or those in the circle, such as Yun and Olick, opionate in media, they should not be expected to be unbiased.

    They are promoting. Plain and simple. Some for purposes of supporting their industry. Others like Olick and CNBC feel a responsibility to not create a panic. Their goal is not factual accuracy. That is why this blog is useful. Ben collects from a wide variety of sources, including some sincere folks in the real estate industry who will actually say what is going on in their local markets because they feel strongly. The nationwide media appears to have the highest level of fact twisting and you really cant show market performance this way. Individual markets are different. I had friends in the Carolinas who told me that reductions were not catastrophic back in the last downturn. Here is SW Florida we were ground zero.

    Fortunately the cheerleaders are easy to identify as the BS alarm goes off loudly when they speak and intentions are obvious. In the end, markets do what they do regardless.

  9. “When you step back and look at the broader asset market, it is clear that the rich are curbing their spending for nearly everything.”

    This is not a good thing if your income depends on this spending.

    People piss and moan because they believe the trickle down concept does not work; now we are perhaps being presented with the opportunity to see if these beliefs are correct.

    Stay tuned.

    1. “This is not a good thing if your income depends on this spending.”

      Honestly, I do not believe that the rich spending more on fine art produced centuries ago, really does create a lot of jobs now in America. Asset spending is different from consumptive spending, not a lot of evidence that the rich have drastically cut back on that type spending.

      1. “Asset spending is different from consumptive spending, not a lot of evidence that the rich have drastically cut back on that type spending.’

        Asset spending pumps up the prices of assets. These pumped up asset prices are seen to be created wealth.

        The wealthy, because they are wealthy, can and do spend lots of money. Take away their wealth and this spending will be curtailed.

        This spending trails, as measured in time, the creation of asset wealth. It also trails, as measured in time, the destruction of asset wealth. IOW spending of wealth tends to lag both the creation of wealth and the destruction of wealth.

        IMHO.

        1. Long ago I read of a man who rejoiced at the 1929 stock market crash because “Those rich bastards got what they deserved”.

          Six months later he was laid off from his job.

          1. As the saying goes, “A recession is when your neighbor loses his job. A depression is when you lose your job.”

        2. “The wealthy, because they are wealthy, can and do spend lots of money. Take away their wealth and this spending will be curtailed.”

          Yes, but how you take their wealth matters. If their wealth is diminished because they cannot bring in cheap Chinese junk and sell it at American prices or if it is because due to a curtailment in immigration they have to pay higher wages it actually can be good for the economy. The average American spends everything he or she earns. The paradox of savings is while on the individual basis, the higher the savings rate the better on the macro level higher savings rate can depress economic growth. More money in the hands of the working class will actually increase growth.

          1. “The average American spends everything he or she earns.”

            And then some.

            “The paradox of savings is while on the individual basis, the higher the savings rate the better on the macro level higher savings rate can depress economic growth.”

            Agree, but it’s irrelevant because, as you said, “The average American spends everything he or she earns.”

            “More money in the hands of the working class will actually increase growth.’

            More money in the hands of the working class will actually increase spending.

            If you equate spending with growth then you are correct. But if you equate spending with the creation of wealth then we are now back to where this conversation began.

          2. People who spend make other people wealthy. If the people who spend are pissed that the wealthy are wealthy then they should stop sending their money to the wealthy. But instead these continue to send money to the wealthy because, for one reason or another, these people benefit from whatever it is that the wealthy end up providing for them.

          3. I agree with you on this ABQDan. This is why the dramatic drop off in RV sales cited in WSJ a few days ago is a lot more alarming than the dud classic car auctions. When money is in the hands of the poor, it is a lot more likely to make it into circulation. In any event, ABQDan, you are basically restating the econ principle of “The Paradox of Thrift” and it is similar to the professors babysitting collective lesson.

      2. I suppose that their appetite for classic cars did help create a cottage industry for car restorers. Of course, now that prices for old classic muscle cars are falling those restorers will have to focus more on performing collision repairs on ordinary cars.

    2. “When you step back and look at the broader asset market, it is clear that the rich are curbing their spending for nearly everything.”

      This is not a good thing if your income depends on this spending.

      I would assume the rich are also ignoring the MSM as we do.

      I’m a bit curious – when you get to the top 0.25% and up segment – where are they getting their advice from? and/or how do they gauge the situation?

      My experience having a private wealth manager at Merrill Lynch (back in ’02 when I had a ~500k portfolio) was horrific – not only did it seem the firm was interesting in bleeding me dry via fees, but that their own advisors were being given tainted and deliberately inaccurate information from their own research departments (no where clearer than in 2005-2007) that favors other parts of the firm.

      Now maybe I was just a small fry, and maybe the whales get taken care of in a completely different manner (i.e. like the officers of firm surely were), and have access to information that’s not tainted or available to others, but… I don’t know.

      I’d think that many of them rely on several different sources to gauge the economic winds and plan their moves, but that seems like a awful lot of work for someone who doesn’t have to work.

      1. I had an Airbnb guest this past weekend who was a hedge fund manager of a small group of private clients. He had about $30M of assets under management, so nothing large. We had a good discussion on DJT, the yield curve, fed independence, etc. The thing that struck me about him is that he asked tons of questions about the local area. He was intently interested in the feel of the economy and the business climate here. It was almost as if he was doing boots on the ground type research of some sort of some of the tech companies at the point of the mountain.

        1. “It was almost as if he was doing boots on the ground type research of some sort of some of the tech companies at the point of the mountain.”

          Seems like an ArcGIS map of age distribution and college degrees would help. I saw one of these due diligence ArcGIS maps 20-yrs ago that was very detailed, and it depicted the college degrees firmly distributed along the east and west coastal regions. I imagine the high costs today have pushed many of these folks inland to specific areas.

      2. “I’m a bit curious – when you get to the top 0.25% and up segment – where are they getting their advice from? and/or how do they gauge the situation?”

        Because you are not in the top 0.25% chances are good you will never know. Think: It’s a private club and you are not a member.

        “My experience having a private wealth manager at Merrill Lynch (back in ’02 when I had a ~500k portfolio) was horrific …”

        A 500K portfolio. Now we are back to “It’s a private club and you definitely are not a member”.

        Ask yourself this question: If a member of this private-club-of-which-you-are-not-a-member had a WHOLE BUNCH of stock he wanted to unload, who would he contact in order to do so? Merrill Lynch, perhaps? A brokerage that has hundreds of thousands of small customers? If yes, then ask yourself, who would the brokers at Merrill Lynch contact in order to get the stock sold? Those with portfolios of 500K portfolios perhaps?

        ” … – not only did it seem the firm was interesting in bleeding me dry via fees, but that their own advisors were being given tainted and deliberately inaccurate information from their own research departments (no where clearer than in 2005-2007) that favors other parts of the firm.”

        And there it is.

        “Now maybe I was just a small fry, and maybe the whales get taken care of in a completely different manner (i.e. like the officers of firm surely were), and have access to information that’s not tainted or available to others, but… I don’t know.”

        Hopefully, now you do.

          1. If any of you readers are into doing stand up comedy you might find a lot of good material in that link.

        2. Years ago, (perhaps 40 – maybe more) I ran across this tale:

          A young, honest guy, chomping at the bit to succeed, hires on at Merrill Lynch. He is advised to work hard to garner clients and this he does. A year or two into his job he has a morning briefing and is told that he and all the other brokers are to be given allotments of shares of a company that is to be sold – sold as in dumped.

          Dumped to whom? Dumped to his clients which he spent so much time and energy garnering.

          He protested, stating the stock was not in the client’s interest in buying. The response went something like this:

          Merrill Lynch provides you with a desk and a telephone. Either you do what you are told to do or you will need to go look for another job. He was also provided with a “story” about the stock to be used in convincing his clients.

          So he unloaded the stock using the “researched” story provided by Merrill Lynch.

        3. Hopefully, now you do.

          What can I say. I was young and dumb.

          The portfolio came about because of stock options and purchase of the company I was working for. As it went down, they organized a parade of people to come in, some from the ‘preferred brokerage’ of the purchasing company (as many people had additional stock options yet to vest, and that firm ‘handled them’). We didn’t know what we were doing.

          In the long run, it probably wouldn’t have made a difference for me – my ex- wife would have found a way to spend it all (gun to my head if necessary… literally).

      3. You should never let another human being “manage” your wealth. Hopefully that much was learned.

        1. Remember, these guys come in with slick sales pitches and silver-tongue promises and try to convince you they know much better than you do.

          It should be a part of the MISSING mandatory financial education we give our teenagers before they go off on their own that they will encounter these individuals and firms who will promise anything to manage, er, get their hands on, their money, and that the advisors and firms have their best interests way ahead of their own.

        2. I remember asking my uncle what I should invest in when I was 15. He gave me some sage advice: “Remember, you will never find anyone who cares about your money as much as you do. That includes me.”

          I never forgot that piece of wisdom. He taught me that while there are outsider experts who can lend advice (sometimes even good advice), at the end of the day they don’t have near the skin in the game when it comes to outcomes of investing.

  12. ‘Two of Neil Woodford’s star investments are now almost worthless, months after he put in money — the latest embarrassment for the beleaguered fund manager.’

    ‘Days after Woodford’s double blow from a huge write-down for Industrial Heat, an energy start-up linked to Brad Pitt, and a suspension of shares in Eddie Stobart Logistics, it has emerged that two early-stage healthcare companies he ploughed new money into in February have dropped in value to almost zero.’

    ‘Precision Biopsy, which focuses on prostate analysis, and SciFluor Life Sciences, a drug developer, were once worth a total of $226m. They are held by the listed Woodford Patient Capital Trust (WPCT), which is separate from the stock-picker’s frozen Equity Income fund.’

    ‘It is understood that WPCT decided to write off millions of pounds after the technology incubator Allied Minds said it would no longer invest in the loss-making start-ups. While Allied Minds — which Woodford Equity Income has a 21.6% stake in — no longer reports the value of individual companies, the stockbroker Numis says it has assumed “zero value” for the two assets.’

    https://www.thetimes.co.uk/article/neil-woodfords-worthless-tech-bets-ptllqm8b9

    1. Joe Walsh from the Eagles would have a better chance. All these bought and paid for Koch “employees” are coming out of the woodwork as Trump dismembers globalism.

  18. Moves in gold, silver and related equities, ETFs, streams and other devices can tell you where investor sentiment is going. Somewhat predictive of future economy. One exception is China trade war. If good resolution comes out expect a temporary reversal then time to buy these again. If not then $20 silver and $1,700 gold.

  20. “‘The reserves are too damn high,’ one major car collector, who didn’t wish to be identified, told Fortune. ‘I held the high bid on a lot of cars today but I didn’t win any of them because of these crazy reserves. I’m not going to bid against myself, so the car goes unsold.’”

    Stamp your little feet. Stamp ’em!

    1. The Financial Times
      Opinion The Long View
      The great global bond rally has turned investors into traders
      – As coupons shrivel and investors rely on rising prices, bonds are becoming stock-like
      Michael Mackenzie
      The European Central Bank: an entrenched world of negative yields upends the important role played by government bonds © AP
      Michael Mackenzie
      August 23, 2019

      August has once again delivered on its reputation for providing a profound market shock. And for once, the flightier areas of equities and currencies are not the culprits. Instead, the foundation blocks of global financial markets — safe and boring government bonds — have slumped to new record-low yields, many of them below zero.

      The apparently frictionless expansion of negative yielding debt, and indeed its acceptance as part of the current financial system, compounds the asset allocation problems facing investors in the future. Above all, it heightens the worry that a major accident is around the corner.

      An entrenched world of negative yields upends the important role played by government bonds in providing insurance or ballast for portfolios that generally favour equities and credit. As fixed-rate coupons shrivel, and as bond investors rely ever more on price appreciation to hit return targets, holding bonds becomes little different from holding stocks.

      The bond-market milestones reached this month are truly stunning. US Treasury yields out to 30 years fell below 2 per cent for the first time as about $16tn of negative-yielding debt around the world acts as a powerful magnet towards the long end of the curve. The entire German Bund market went one step further and dropped below zero. Bond markets in Japan, Switzerland and Sweden sit in negative territory, alongside half of global investment-grade debt sold by companies (outside the US).

      The distorting influence of negative yields across global fixed income has emerged in recent years as central banks have become major holders of bonds as they try to boost economic growth and inflation. But such activities have failed to offset long-term trends depressing bond yields such as ageing populations and rapid technological change, which respectively boost savings rates and dampen inflationary pressure.

      What the August bond shock reveals is that a key part of the financial system expects no relief from these secular forces, well into the next decade and beyond.
      …

  25. No need to worry about falling Asian markets, as U.S. stock futures are up. We are clearly winning the trade war, and with Keynesian money printers standing at the ready, U.S. stocks can only go up.

        2. True dat
          Mean while US manufacturing and that is without Boeing’s help:
          https://www.census.gov/manufacturing/m3/adv/pdf/durgd.pdf
          Come 4th quarter Boeing should have undone the damage caused by its 9 dollar an hour Indian “engineers” and our economy really should be rocking. The Democrats by crying wolf for three years increased savings in the US, by helping to pass a wish list US budget they ensured lots of stimulus in 2020. Of course, Trump has also played to our strength and promoted fossil fuels. All these factors have greatly reduced the chance for a recession in 2020, which at this point even the Democrats seem to believe is necessary to beat Trump.

    3. PPT got up early to ensure we are green at kick off. My guess is we will be flat by end of day

  26. Are sovereign bond yields in a death spiral?

    In a world of negative yields, Singapore sovereign bonds still pay interest
    – Singapore’s July 2029 debt that’s been sold in the past yielded 1.83 per cent in the secondary market on Aug 22. That compares with 1.64 per cent for 10-year US Treasury notes.
    ST PHOTO: KELVIN CHNG
    Published
    Aug 25, 2019, 12:46 pm SGT

    TOKYO (BLOOMBERG) – Singapore is offering a rare opportunity to buy positive-yielding quality bonds in a world that’s rapidly turning negative.

    The city state, which pays the highest returns among economies that have AAA credit ratings from all three major agencies, will sell reopened July 2029 government debt worth US$2.9 billion (S$4 billion) on Wednesday (Aug 28), the second-largest amount on record for 10-year tenors.

    Investors fleeing risk on escalating trade wars and fears of a global recession have jumped into the safety of bonds, driving up their prices and pushing down their yields, given that bonds have fixed coupon rates or interest payments. Yields are also cascading lower as global central banks rush to cut interest rates, a factor feeding the downward spiral in yields.
    …

  27. Try to follow the logic …

    “Her voyage has however sparked controversy after a spokesman for Herrmann, the yacht’s co-skipper, told Berlin newspaper TAZ that several people would fly into New York to help take the yacht back to Europe. Hermann himself will also return by plane, according to the spokesman.

    “Team Malizia’s manager insisted however that the young activist’s journey would be climate neutral, as the flights would ‘be offset.'”

    Greta Thunberg’s yacht due in New York on Tuesday
    https://news.yahoo.com/greta-thunbergs-yacht-due-york-tuesday-094135678.html

        1. “[S]he is the daughter of a famous opera singer and an actor. Thunberg also has Asperger’s syndrome, obsessive-compulsive disorder, and selective mutism.”

          Quite the collection of diagnoses.

    2. climate neutral

      This is Tesla Logic. The Malizia II racing yacht burned 100,000 barrels of oil in its manufacture ($5M). If anyone explained that to the 16 year old, would she have played her part in the drama?

      Sad, she doesn’t know how she will get home.

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