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The Only Way Out Is Through The Door

A weekend topic starting with Catalyst. “There’s an apparent contradiction in urban America’s real estate market. On one hand there’s a general housing shortage, namely of affordable workforce housing. But there are lots of luxury condos that get built and stay empty, unable to sell at their exorbitant prices. The New York Times recently cited a report stating that a quarter of condo units built in New York City since 2013 haven’t sold. Similar tales can be found in fellow superstar cities like Seattle and San Francisco.”

“Just because new luxury condos sit empty doesn’t mean there’s a housing glut, nor does it mean that the condos themselves are in low demand. The Times noted that some of the empty ones in New York had been sitting around since 2013. But many of them are vast Manhattan penthouses being listed at 7- and 8-figure sales prices. That kind of housing doesn’t play by the same rules as normal housing. Developers know there’s a strong but fluctuating market of foreign buyers who have vast resources, and can bite at any time. So developers purposefully bid up units, and keep them on the market for prolonged periods, in what is effectively an act of speculation.”

From the OCCRP. “Since 2012, hundreds of millions of dollars from Kyrgyzstan — one of the poorest countries on earth — have poured into bank accounts in Europe, the United States, and the Middle East on behalf of a single family. Much of that money ended up in an expansive real estate portfolio that stretches from the Persian Gulf to the shores of California.”

“That portfolio includes prestigious acquisitions, such as a mansion in one of London’s most exclusive neighborhoods and a $1.2 million home near Washington, DC. It also includes new real estate development projects, like a new 26-floor apartment tower in Dubai. But though some of the other projects occupy prime real estate, they have stalled for unknown reasons, prompting questions about who is behind them.”

From Business Insider. “A sense of gloom hangs in the air. ‘Bloodbath,’ ‘free fall,’ and ‘slump’ were just some of the choice idioms deployed by headline writers to describe the New York real estate market during the twilight of 2019. Across the pond, townhouses in central London — long the favored investment vehicle for billionaires from Bahrain to Belarus — have lost 20 percent of their value in a five-year nosedive. Worldwide, according to Savills, a global property consultancy, ‘everything is trending to zero.'”

“‘This is not a normal cycle,’ says Frederick Peters, CEO of Warburg Realty. Even after the global financial crisis, luxury property prices in the world’s capitals recovered fully within two years and went on to smash all records. This time round, brokers and analysts agree, it’s different.”

“One Manhattan Square, an 815-unit monolith that looms over the Lower East Side, has become a symbol of the city’s condo glut. Struggling to sell, it has offered a series of perks, including 10 free years of common charges for buyers and a lease-to-own scheme that deducts a year’s rent from a future purchase. Its lavish amenities, which include an adult tree house, a putting green, and a cigar room, now look like peak bubble.”

“Condo prices in the exclusive southern tip of Miami Beach fell by 18 percent in the third quarter of 2019, compared to the third quarter the previous year, according to Brown Harris Stevens, and condos on ultra-exclusive Fisher Island lost almost half their value. Ed Kaminsky, a realtor at Strand Hill in Southern California says: ‘Global and political uncertainty causes buyers pause. In Palo Alto and Silicon Valley, in 2016, any seller could put any price on any house and there would be five or six buyers. Now buyers come in low and don’t budge.'”

From The Tyee in Canada. “Another year of sliding home values in Metro Vancouver has wiped out $87 billion in home equity wealth, according to a calculation by a property assessment expert. To some, that’s an outrage. ‘People aren’t pleased. They’re very unhappy,’ said Paul Sullivan, a senior partner with BCS, a real estate appraisal company, who totted up the total loss.”

“To others, it’s easy come, easy go. ‘It seems a little bit like crocodile tears to put out a press release saying that all of these owners have lost $87 billion, when that’s just an evaluation based on BC Assessment,’ said Marc Lee, an economist with the Canadian Centre for Policy Alternatives who has argued governments should increase taxes on real estate wealth. ‘They’re not actually out $87 billion.'”

“A real estate price run-up like no other peaked in 2016 and made many Vancouver homeowners paper millionaires, especially on the increasingly pricey west side. But for the past few years home prices have been falling: single-family homes started to drop in value and have become harder to sell. At first, the drop didn’t affect lower-priced condos. But this year, the value of all types of housing has fallen, according to BC Assessment data.”

“Sullivan said that far from being just a ‘paper’ loss, the value drop has had dire effects on younger homeowners who bought at the peak of the market and now owe more than their house is worth, meaning they can’t get refinancing or a home equity line of credit. It’s also affected older homeowners who have lived in their homes for 20 years or more, and planned to use the proceeds of selling their home to fund their retirement.”

“‘So that old couple that’s been living in that house for 30 or 40 years thought they had $5 million to retire, sell the house, live off the money for the rest of their lives,’ Sullivan said. ‘Instead of having $5 million, now they have $3 million and out of that $3 million they have to buy a home, and then retire.'”

From Domain in Australia. “For the past three years, Alyssa Onorato and Max Vernon have been saving for a deposit on their first home but were unable to get a foot in the door. The couple have finally caught a break, nabbing a spot in a new federal government scheme for first-time buyers. Buyers agent Paul Wilcox said the scheme would push up prices in an already tight market that has seen a shortage of homes for sale and rising values towards the end of 2019.”

“‘It’s probably going to inflate prices again like the government did when it introduced the first-home buyers allowance,’ Mr Wilcox said. ‘Value will go out the window because they’ve got the safety of the 5 per cent deposit. I see too many buyers upping their budget during the search, which is not good as the market moves quickly so any increase in deposit and/or budget is funded by net savings.'”

“AMP Capital chief economist Shane Oliver said conditions for Sydney first-home buyers were better than at the market’s 2017 peak, but affordability was still ‘very poor.’ The government’s scheme will help ‘at the margin,’ he said. ‘Only a small number of first-home buyers will be able to participate in the first place,’ he said. ‘Some may be a little bit wary, because it does involve borrowing a lot more money.'”

“Demand-driven schemes that help buyers borrow more can have the effect of pushing up prices, he said. Laing+Simmons Parramatta, Granville and Carlingford group principal Ray Fayed said there was a lot of interest in the unit market, where prices are below $700,000.”

From India Legal Live. “There are now enough episodes in economic history to find similarities and to allow for causal interpretations. One such episode is the uncanny similarity between India’s current economic environment and the Asian crisis that started in Thailand in 1997, a crisis that within a very short period plunged stock markets and currencies across seven East Asian countries. Hundreds of banks, builders, and manufacturers went bankrupt. The Thai baht, Indonesian rupiah, Malaysian ringgit, Philippine peso and the South Korean won depreciated by between 40 percent to 80 percent.”

“All this happened despite the fact that Asia’s fundamentals looked good. But these fundamentals painted a false picture. The unwinding of the 1990s boom and the eventual crisis suffered by the East Asian countries were a complicated and multifaceted process. And there is an eerie similarity to conditions that currently exist in India and maybe a harbinger of things to come in 2020.”

“Moral hazard is a term used to describe a tendency to take on more risk than is warranted, given the knowledge that one is protected against any loss. This was at the heart of the Asian crisis. The governments in the affected countries directly or indirectly controlled the commercial banking system, and this allowed the banks to operate injudiciously with the knowledge that the state would protect the downside. The South Korean government, for example, directed the banking system to lend to companies that it viewed as economically strategic.”

“As a result, financial institutions were encouraged into funding risky projects with little regard for their profitability. This problem was compounded by crony capitalism, where people favourably connected with the government were able to borrow large amounts of money without proper due diligence. Without the discipline that free capital markets impose on bank lending, the result was overinvestment and inflation in the prices of assets in short supply such as real estate.”

“Excessive state intervention in the capital allocation process and the associated policies of implicit guarantees combined with crony capitalism and lax banking supervision were significant factors in the 1997 Asian crisis. These same conditions exist in India and have led to poor credit decisions and a massive misallocation of resources. This reckless lending has created a large stock of non-performing loans, posing a high risk to the banking system.”

“Financial excesses inevitably lead to asset bubbles. Typically, a financial cycle is generated by waves of optimism (greed) that result in the underestimation of risk, overextension of credit, excessive price inflation in real assets and buoyant consumer expenditures. Real estate plays a central role in this cycle because it allows banks to lend larger amounts against increasing property values. With rising prices, the value of bank capital increases commensurate with their holding of real estate denominated assets, allowing them to lend even more.”

“India has also experienced a large real estate bubble that started around 2003 with massive investments by developers in housing projects. Rising real estate prices kept feeding into this, and both the regulated and the unregulated banking system poured increasing amounts of capital into this sector. But as with every asset bubble, the underlying fundamentals did not support the run-up in prices. Incomes did not match asset valuations and soon the real estate bubble burst.”

“When an asset bubble bursts, it starts the dominoes falling. As asset prices fall, so do their collateral values. NPAs begin to increase and when investors realize that the government does not have the resources to bail out banks, confidence drops. As confidence declines, foreign capital starts to flee, the currency depreciates, exports drop and growth slows down dramatically. All these are now beginning to happen in India.”

“The only way out as Confucius put it, ‘is through the door.’ The strategy the East Asian countries adopted was to quickly and methodically restructure their financial systems by shutting down and selling failing state-run banks and disposing the collateral underlying the bad loans. The key to India’s recovery is also a massive institutional shakeup of the financial system. Merging failing public sector banks will only aggravate systemic risk. These banks need to be shut down, and government intervention in, and regulation of, capital markets should immediately be reduced to a minimum.”

“Without bold and immediate action to restore confidence in the financial system, India faces a 1997 Asian crisis of its own in 2020.”

This Post Has 90 Comments
  1. ‘A sense of gloom hangs in the air. ‘Bloodbath,’ ‘free fall,’ and ‘slump’ were just some of the choice idioms deployed by headline writers to describe the New York real estate market during the twilight of 2019. Across the pond, townhouses in central London — long the favored investment vehicle for billionaires from Bahrain to Belarus — have lost 20 percent of their value in a five-year nosedive. Worldwide, according to Savills, a global property consultancy, ‘everything is trending to zero’

    Hear that? It’s the sound of the REIC MSM having to admit they’ve been lying for years.

    ‘This is not a normal cycle…This time round, brokers and analysts agree, it’s different’

    ‘One Manhattan Square, an 815-unit monolith that looms over the Lower East Side, has become a symbol of the city’s condo glut…Its lavish amenities…now look like peak bubble’

    You don’t say…

    ‘Condo prices in the exclusive southern tip of Miami Beach fell by 18 percent in the third quarter of 2019, compared to the third quarter the previous year, according to Brown Harris Stevens, and condos on ultra-exclusive Fisher Island lost almost half their value. ‘In Palo Alto and Silicon Valley, in 2016, any seller could put any price on any house and there would be five or six buyers. Now buyers come in low and don’t budge’

    Now I was saying back then statements like ‘put any price on any house and there would be five or six buyers’ were crazy talk and proof that some a$$-pounding this way comes.

    ‘Another year of sliding home values in Metro Vancouver has wiped out $87 billion in home equity wealth, according to a calculation by a property assessment expert. To some, that’s an outrage. ‘People aren’t pleased. They’re very unhappy’

    You can always stamp your little feet. All bubbles pop. And there ain’t a gotdam thing anyone can do to stop it. Yes, they can play around the edges, making things worse. But ALL bubbles pop.

    1. There are some irrefutable timeless truths:

      -All bubbles pop
      -Houses depreciate rapidly
      -Land is generally worthless. There is a globe full of it afterall.
      -If you have to borrow for decades, you can’t afford it nor is it affordable
      -realtors are liars
      -every closing is a crime scene

      1. If the Democrats can bring in 600 million people into the country as was proposed a few weeks ago, they can keep land prices up. However it will keep something that absurd to keep the bubble going.

          1. No, but they rent houses owned by speculators. It has to be stopped if the average American is going to be able to buy a house.

    2. “Hear that? It’s the sound of the REIC MSM having to admit they’ve been lying for years.”

      You use what works. If lies work then you use lies.

      Lies would not work if the general public wasn’t so dumbed-down.

      Don’t place all the blame on the REIC MSM, they are merely catering to their audience, to their customers. If these customers had any sense they would laugh the REIC and the MSN out of business. Instead these dumb-assed customers make these REIC and MSN guys filthy rich.

      1. This is in Clownifornia. I wouldn’t be so quick to write off the squatters. They will probably eventually be evicted, but don’t be surprised if it takes a loooong time.

  2. ‘There’s an apparent contradiction in urban America’s real estate market. On one hand there’s a general housing shortage, namely of affordable workforce housing. But there are lots of luxury condos that get built and stay empty, unable to sell at their exorbitant prices. The New York Times recently cited a report stating that a quarter of condo units built in New York City since 2013 haven’t sold. Similar tales can be found in fellow superstar cities like Seattle and San Francisco’

    Zandi? Zandi?

    Bueller?

    1. “Just because new luxury condos sit empty doesn’t mean there’s a housing glut, nor does it mean that the condos themselves are in low demand. The Times noted that some of the empty ones in New York had been sitting around since 2013. But many of them are vast Manhattan penthouses being listed at 7- and 8-figure sales prices. That kind of housing doesn’t play by the same rules as normal housing. Developers know there’s a strong but fluctuating market of foreign buyers who have vast resources, and can bite at any time. So developers purposefully bid up units, and keep them on the market for prolonged periods, in what is effectively an act of speculation.”

      Then they need to have the living **** taxed out of everything they are hoarding.

      1. “Then they need to have the living **** taxed out of everything they are hoarding.”

        The phrase ‘don’t hate the player, hate the game’ comes to mind when interpreting your response. Yeah, let’s have the enabler of the problem solve it with higher/more taxes. Brilliant.

        As has been enumerated here countless times, inflated land prices and infinite (and cheap) Yellen-bux are the problem, but I’m sure that higher taxes would instantly and magically convert those ultra-lux apartments into affordable housing lickety-split.

        1. Yeah, let’s have the enabler of the problem solve it with higher/more taxes. Brilliant.

          Way to completely miss the point. State and local tax assessment has absolutely zero to do with federal monetary policy.

          Affordable housing is disappearing from the market because flippers and speculators are being shielded from the true carrying costs of the property.

          1. But is that because property owners arent taxes enough or because some more-equal-than-others property “owners” have access to the Fed’s discount rate and a too-big-to-fail historically verified implicit government guarantee?

    2. “But there are lots of luxury condos that get built and stay empty, unable to sell at their exorbitant prices.”

      At a certain point, it’s more expensive to carry them empty than to sell them at a loss upfront. I don’t understand the math and how these people are able to hold them for so long.

      1. Plus, what about the local property taxes? Those fire, medics, police and other utility personnel need their paychecks.

      2. It’s the new common core math. The same math that has made stock in companies with negative book value out perform the market for the last decade.

  3. ‘the value drop has had dire effects on younger homeowners who bought at the peak of the market and now owe more than their house is worth, meaning they can’t get refinancing or a home equity line of credit’

    And they need this money for:

    ‘It’s also affected older homeowners who have lived in their homes for 20 years or more, and planned to use the proceeds of selling their home to fund their retirement’

    ‘So that old couple that’s been living in that house for 30 or 40 years thought they had $5 million to retire, sell the house, live off the money for the rest of their lives…Instead of having $5 million, now they have $3 million and out of that $3 million they have to buy a home, and then retire’

    What’s funny about this last statement (well, one of many things) is this is Canadia. We’re talking about old shacks you might mistake for Pittsburgh. $5 million Canadia pesos for that?

    1. ‘the value drop has had dire effects on younger homeowners who bought at the peak of the market and now owe more than their house is worth, meaning they can’t get refinancing or a home equity line of credit’

      True dat, but they get the keep the participation trophy on the mantle for being winners in the recent bidding wars.

    2. It’s funny to think that somebody is borrowing multiple millions to fund somebody’s entire retirement.

    3. I weep for older people in this predicament. $4.95 million that they didn’t do a thing to earn – more than they would ever earn over their entire lives based on salary alone – magically accrues to them simply for being alive and having shelter over 40 years. Now, through no fault of their own, they find out they only have $2.95m in magic unearned retirement money. How can anyone be expected to live on only $3million?? Oh, the humanity!

      1. they only have $2.95m

        You may hate them, but it is not just their fault for having a paid off house. It is the fault of the central bank(s) constantly debasing the currency. Without that, plus the ensuing housing mania, the house might be worth $100,000, which the old folks actually paid for in earned money. 40 years ago, retiring with a $100,000 nest egg (earning interest) was quite adequate.

        1. “is not just their fault for having a paid off house.”

          Plenty of older people enjoy paid-off houses without expecting that house to fund a retirement they could not otherwise afford. Old or young, people do have a choice whether or not to liberate that temporary – and it IS only temporary – bubble equity. Those that choose to do so perpetuate the massive distortions of a bubble economy that the rest of us have to live in, and certainly make life harder and more expensive for other retirees trying to get by on savings alone.

          “Without [the central bank], plus the ensuing housing mania”

          Those retirees expecting the $3m house they bought for $50k to fund their retirement are PART of the mania, not victims of it.

          “You may hate them”

          That is unworthy of your normally excellent comments.

          1. That is unworthy

            Well, thanks I guess. My comments are colored by my experience. Our “family house” was built by my maternal grandparents after WWII for $10K. Grampa was impressed by the US while attempting to pass through the Panama Canal on business. He was a Scottish Engineer and they needed help maintaining the locks. He sent his paychecks home and “Nana” banked every cent. Built the house cash. She lived there until the age of 102, a widow for 50 years.

            Later we sold the home for $200K to go toward my mother’s elder care. It later might have sold for $500K, I haven’t followed. My mother and her parents were not speculating. They never borrowed to leverage up an “investment”. Would you call them greedy? Would you be angry and hate them? Would it be their doing if the house went to $5M like in Vancouver? Would you wish they were transported barefoot to the African Savannah?

            My personal opinion is that the central bans(s) and their partners in crime, those who take out mortgages to climb the “ladder” are to blame, not people who shelter in place fo 40 years in what they could actually pay for, are to be despised.

          2. “Built the house cash. She lived there until the age of 102, a widow for 50 years.”

            Love what you shared here, it is very similar to my grandparents story. Grandfather was in the navy, sent home money and grandmother bought to buy a home in La Jolla CA. My grandpa passed away a few years ago and grandma is still living there. It likely cost around 10-15k back when they bought it

          3. For them to retire with 3 millions, some young folks have to be in debt for that amount. Sound like a win lose situation for the younger generations. Might as well rent or get the hell out of dodge!

          4. “For them to retire with 3 millions, some young folks have to be in debt for that amount.”

            Well, economically speaking, there have been substantial productivity gains and vastly improved working conditions. Some of our younger workers are in the right jobs at the right time, and they’re reaping the windfall.

          5. “Well, economically speaking, there have been substantial productivity gains and vastly improved working conditions. Some of our younger workers are in the right jobs at the right time, and they’re reaping the windfall.“
            The marketing jobs around here beat the salaries for the software engineer jobs. The holders of these jobs are mostly working for the funding rounds and selling sizzle, the engineers working out UI variations or ways to attach better location service data to app-based behavior to maximize advertising revenue—these “right jobs at the right time “
            Are made possible by the obscene money printing of central banks just like the financialist jobs themselves— reaping benefits indeed.

          6. Once again I am disappointed. I’m not angry, I don’t hate or despise anyone. I never called anyone greedy. And I certainly never said anything about walking barefoot on a Savannah.

            Your grandparents are exactly the kind of people I admire. Staying in the same house for 40 years, not using the house to pay for cruises and luxury golf or ritzy retirement resorts. Only selling the house in order to rent in a nursing home when needed. That’s exactly how it is supposed to work when there is a bubble and when there’s not.

            But this (albeit fictional) example of a retiree feeling entitled to $5 million they didn’t earn and being disappointed at only getting $3 million? That’s the opposite of your grandparents. Those people in this fictional example became speculators the minute they realized the house would pay for a better retirement than their savings ever would.

          7. Re rms-
            “productivity gains and vastly improved working conditions.”
            Hardly. Office workers 30 or 40 years ago had things like a regular desk, maybe even a cubicle, possibly a break from your desk to eat lunch. 8 hour work days, and very few weekends worked for no pay. They also had reasonable job security, chances for promotion, regular raises. All of that would sound too good to be true to a modern office worker. Oh, and don’t forget an affordable home to go to at night.

            “Some of our younger workers are in the right jobs at the right time, and they’re reaping the windfall.”
            All these young people seem so rich! They must be if they can afford to pay me $3mil on my old shack. It probably has nothing to do with the fact that they’re borrowing more than 10x their yearly income when I borrowed only 2-3x my yearly income for thr same house. Or that their debt to income ratio is over 50%. Or that they have so little savings they can only put 3% down. Nah, they’re young so they must be well paid, they can afford it.

          8. “…right jobs at the right time…”

            I had a career in and around infrastructure, which has been running on fumes since the middle-east crisis erupted, and literally starved of funding for since the financial crisis! On the other hand I have friends who have enjoyed professional union employment in the medical world as their wages steadily increased ahead of the published CPI. They will enjoy a much better retirement too. The luck of the draw?

  4. ‘Since 2012, hundreds of millions of dollars from Kyrgyzstan — one of the poorest countries on earth — have poured into bank accounts in Europe, the United States, and the Middle East on behalf of a single family. Much of that money ended up in an expansive real estate portfolio that stretches from the Persian Gulf to the shores of California’

    This is an interesting article if you have time to read it.

    1. You cast a broad net to find that one.

      Particularly interesting that the article casually mentions that the money launderer who spilled the beans had since been murdered.

    2. I read it Ben…The man lost his life exposing it…And, as the article states, this kind of dark money distorts the marketplace…

      1. Re Post-Structuralist, I agree that young folks and even younger middleaged folks have a garbage stressful rat race worklife billed via corporate marketing as “exciting” but there are some folks with very high salaries and benefitting from the startup lotteries who, for instance, are bidding up prices in places like where I live, sometimes just via “investing” with their abilities to get loans. Two incomes marketing and software writing gets you 500 to 600k shacks with easy multiples of income and that buys you acceptable housing places like here and so shacks that cost 200k last year cost that now.

    1. “#Iran security forces using tear gas and live ammunition against protesters. A protester said: “Tehran looks like a battle field, they are shooting the people like animals”

        1. Numerous videos of protests in Iran over the government shootdown of a passenger jet over Tehran that killed 176 people have been posted online Saturday. Translations posted with the video say the protesters are demanding the resignation of Supreme Leader Ayatollah Khamenei. The protesters were also heard to be chanting, “Our enemy is here, they tell us lie by saying it is America.”

          1. Iran is an interesting study. It’s a bunch of oppressive old timers with jihadi mindsets running things, while the younger set wants to be more like America.

          2. Iran is modern these days, e.g., many are college educated, they go snow skiing, they’re women are pretty, dress with style and drive cars, etc., compared to our dear friends the backward Arabs of Saudi Arabia.

    1. So on one hand we have a real estate bloodbath where prices are down 20% over a 5 year period, yet on the other hand we have the highest price ever paid, all in the same town. Huh???

  5. https://www.msn.com/en-us/money/realestate/silicon-valley-billionaires-mega-mansion-wont-sell-so-it-gets-fully-restaged/ar-BBYP5Ca

    Now, the home is listed for $53.888 million, and the interior has an entirely new look and feel with revamped staging.

    Revamped staging? What did McNealy do? Throw out the IKEA furniture? And why is he trying so desperately to unload it? He allegedly has a net worth of 1 billion.

    Just how many potential buyers are there who can afford a $50 million house? I know Larry Ellison likes to collect houses, but he already has a Silicon Valley mansion. And now that Clownifornia is going to ration tap water (50 gallons a day per person), any large house without a well is a huge liability.

    1. The more expensive an item, the harder it is to sell. Doesn’t matter if it’s a house, a car, a piece of art, an instrument, clothing or otherwise.

    2. ” now that Clownifornia is going to ration tap water (50 gallons a day per person)”

      How Much Water Is Nestlé Pumping Out of California?

      BY: PIERCE NAHIGYAN
      APRIL 9, 2015

      How much water is Nestlé pumping out of California’s aquifers? The short answer is, we don’t really know. The longer answer is, before the drought, no one thought it was important enough to ask.

      In 2012, Nestlé Waters North America, earned $4 billion in revenues. The fact that a portion of that money comes from selling water taken from California aquifers to Californians – water that Californians could otherwise get for free – is somewhat mind-boggling, but so is the concept of bottling water in general (at least in the United States).

      What had Sacremento protesters so up in arms was the fact that Nestlé is allegedly paying 65 cents for every 470 gallons it drains from California. “This corporate welfare giveaway is an outrage and warrants a major investigation,” said “Crunch Nestlé” spokesperson Andy Conn.

      http://www.planetexperts.com/how-much-water-is-nestle-pumping-out-of-california/

      Seems like I haven’t heard a peep out of Pelosi except Russia Russia Russia and impeach impeach impeach.

      Meanwhile back at the ranch…

      Nestlé is still taking national forest water for its Arrowhead label, with feds’ help

      Janet Wilson, Palm Springs Desert Sun
      Published 6:00 a.m. PT June 13, 2019

      The company reported piping 139 acre-feet — or 45 million gallons — of water from the springs and slopes of the popular national forest last year as part of its Arrowhead brand operations. They were required to pay about $2,000 for a new federal permit, but no fees for the water, which is theirs to use for retail sale.

      https://www.desertsun.com/story/news/environment/2019/06/13/nestle-still-taking-public-forest-water-its-arrowhead-label-feds-help/1362211001/

      1. Nestlé is still taking national forest water for its Arrowhead label, with feds’ help”

        Not just California they are all over the country pumping water for almost free.

        1. But, if you walk out of there with a pebble stuck to your shoe sole, BLM will fine you 2000$ for taking material out of the park.

  6. “‘So that old couple that’s been living in that house for 30 or 40 years thought they had $5 million to retire, sell the house, live off the money for the rest of their lives,’ Sullivan said. ‘Instead of having $5 million, now they have $3 million and out of that $3 million they have to buy a home, and then retire.’”

    Gee, maybe they should’ve saved more money instead of thinking their house was an ever-appreciating asset. What did they buy it for, like $120,000CAD three decades ago?

    1. “‘Instead of having $5 million, now they have $3 million and out of that $3 million they have to buy a home, and then retire.’”

      Wish I could snap my fingers and relocate these greedheads to the Serengeti, barefoot, where they can wander around among the wild animals and the Maasai to gain a little perspective on their first world problems.

      1. relocate these greedheads

        It does bring up a point. Having gone through this exercise I figure I can ask, how much cash do you think you’d need to buy a house and retire? Consider that your cash won’t earn anything and that the prices of what you need/want will keep going up perpetually.

        1. Consider that most people will not earn $3 million in their entire lives.

          If they want to stay in Vancouver, it will cost them.

        2. “Consider your cash won’t earn anything and that the prices of what you need/want will keep going up perpetually.”

          This is not a problem exclusive to retirees.

  7. – So much cratering. Where to begin?

    A weekend topic starting with Catalyst. “There’s an apparent contradiction in urban America’s real estate market. On one hand there’s a general housing shortage, namely of affordable workforce housing. But there are lots of luxury condos that get built and stay empty, unable to sell at their exorbitant prices.

    – How did this obvious mismatch in market vs. developers happen? Due to a fawed business model based on false economic signals (e.g. ultra-low interest rates and easy money) from central banks leading to gross misallocation of capital and related malinvestment perhaps?

    From Business Insider. A sense of gloom hangs in the air. ‘Bloodbath,’ ‘free fall,’ and ‘slump’ … “‘This is not a normal cycle,’ says Frederick Peters, CEO of Warburg Realty.”

    – There hasn’t been a “normal” cycle since central banks have grabbed control of the global financial system and completely mucked it up. Their answer has always been (and will always be) more of the same.

    From The Tyee in Canada. “Another year of sliding home values in Metro Vancouver has wiped out $87 billion in home equity wealth, according to a calculation by a property assessment expert. To some, that’s an outrage. ‘People aren’t pleased. They’re very unhappy,’ said Paul Sullivan, a senior partner with BCS, a real estate appraisal company, who totted up the total loss.”

    – ($87B) – Is that a lot?

    “At first, the drop didn’t affect lower-priced condos. But this year, the value of all types of housing has fallen, according to BC Assessment data.”

    – Yup. It’s a bubble alright. Starts at the top and works its way down.

    From Domain in Australia. “AMP Capital chief economist Shane Oliver said conditions for Sydney first-home buyers were better than at the market’s 2017 peak, but affordability was still ‘very poor.’ The government’s scheme will help ‘at the margin,’ he said. ‘Only a small number of first-home buyers will be able to participate in the first place,’ he said. ‘Some may be a little bit wary, because it does involve borrowing a lot more money.‘” “Demand-driven schemes that help buyers borrow more can have the effect of pushing up prices, he said.

    – “The government’s scheme…” – Well, there’s your problem.

    From India Legal Live. Moral hazard is a term used to describe a tendency to take on more risk than is warranted, given the knowledge that one is protected against any loss. This was at the heart of the Asian crisis. The governments in the affected countries directly or indirectly controlled the commercial banking system, and this allowed the banks to operate injudiciously with the knowledge that the state would protect the downside.

    As a result, financial institutions were encouraged into funding risky projects with little regard for their profitability. This problem was compounded by crony capitalism , where people favourably connected with the government were able to borrow large amounts of money without proper due diligence. Without the discipline that free capital markets impose on bank lending, the result was overinvestment and inflation in the prices of assets in short supply such as real estate.

    Excessive state intervention in the capital allocation process and the associated policies of implicit guarantees combined with crony capitalism and lax banking supervision were significant factors in the 1997 Asian crisis. These same conditions exist in India and have led to poor credit decisions and a massive misallocation of resources. This reckless lending has created a large stock of non-performing loans, posing a high risk to the banking system.”

    Financial excesses inevitably lead to asset bubbles. Typically, a financial cycle is generated by waves of optimism (greed) that result in the underestimation of risk, overextension of credit, excessive price inflation in real assets and buoyant consumer expenditures. Real estate plays a central role in this cycle because it allows banks to lend larger amounts against increasing property values. With rising prices, the value of bank capital increases commensurate with their holding of real estate denominated assets, allowing them to lend even more.

    “But as with every asset bubble, the underlying fundamentals did not support the run-up in prices. Incomes did not match asset valuations and soon the real estate bubble burst.

    When an asset bubble bursts, it starts the dominoes falling. As asset prices fall, so do their collateral values.”

    The key to India’s recovery is also a massive institutional shakeup of the financial system. Merging failing public sector banks will only aggravate systemic risk. These banks need to be shut down, and government intervention in, and regulation of, capital markets should immediately be reduced to a minimum.

    – The Indians seem to have a firm grasp of the problem at hand and are willing to write about it in the press. This in uncommon in today’s MSM most everywhere else. The indian description could be applied to virtually any country with a housing (or stock) bubble; the U.S., for instance. Is it any wonder that these bubbles and manias are now systemic in the global financial system?

  8. Spoke to property manager about getting our one year lease extended to two (same rent.) He seemed happy to hear it and didn’t think it would be a problem.
    If 👍🏻, I will sit back, relax and be fabulous as the kitchen’s avocado sink and appliances come back into fashion.

  9. “‘So that old couple that’s been living in that house for 30 or 40 years thought they had $5 million to retire, sell the house, live off the money for the rest of their lives,’ Sullivan said. ‘Instead of having $5 million, now they have $3 million and out of that $3 million they have to buy a home, and then retire.’”

    Oh the humanity.

    1. The good news is their houses are worth four times what they were in 2009, the bad news is that is only $40,000 on average. I see LA as the next Detroit. Laugh if you want, but 50 years ago Detroit was still riding high and had high housing prices.

      1. “Laugh if you want, but 50 years ago Detroit was still riding high and had high housing prices.”

        Indeed, an incredible fall from grace that accelerated in earnest due to the OPEC oil embargo following our support for the Yom Kippur war.

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