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In The End There Will Be A Catastrophic Event And We’ll Say Why Didn’t We See That Coming?

A weekend topic starting with Morningstar. “Morningstar’s director of research defines an investment as ‘an expenditure that can reasonably be determined to have a positive expected return,’ whereas speculation ‘occurs when the return is too uncertain to be estimated, or if the estimate can be made, but is negative.’ At Morningstar, we think it is important to differentiate between speculating and investing. We generally emphasize the importance of diversified, low-cost, long-term investing, because that’s the surest way to accumulate wealth over time. But even we have to admit that there may be room in a portfolio for speculative investments that have the potential to generate extraordinary returns.”

“That is where ‘mad money’ comes in. Simply put, mad money is a small portion of your portfolio that you choose to invest in more-speculative but potentially high-returning investments–and it’s money you can afford to lose. The temptation of quick and large financial gains is difficult to resist, and mad money can possibly scratch this itch.”

From Wehoville in California. “I have been in real estate for almost 20 years, and I’ve learned that the number one way to build wealth in our country is through owning real estate. Simple as that. When I see that almost 80 percent of our city does not own real estate and is renting, that concerns me. If our citizens are not building wealth, over time they will be demanding more and more services to support them, putting more stress on our city.”

“A buyer does not need 20 percent down to purchase a home. There are programs that are available for certain income levels to purchase with zero percent down and zero closing costs.FHA loans are also very popular programs for first-time buyers where only 3.5 percent down payment is required. My passion is helping people build wealth, and I hope my Op-Eds will be a resource for the citizens of West Hollywood.”

The Los Angeles Times in California. “A glass-half-full, glass-half-empty sale recently closed in Beverly Park, where an Italian-inspired mansion called Villa Firenze sold at auction for $51 million. The deal makes it the priciest home to ever be auctioned off, but the final number is more than $100 million shy of its original price tag of $165 million.”

From AM New York. “RealtyHop released its monthly New York City price drop report, revealing that neighborhoods in Manhattan saw the highest number of price drops during March. Most of the neighborhoods that experienced the biggest price drops percentage-wise during March are located in the Bronx. Melrose South in Mott Haven North saw the largest price drops, with the median percentage price drop hitting 23.7%.”

“Neighborhoods in Queens, Manhattan, Brooklyn and the Bronx made it on the top five list for the highest median dollar price drops during March. Jamaica, Queens saw the highest median dollar drop of $250,000, translating to 8.1% of the property’s original asking price. East Harlem South saw the second-highest median price drop in dollar terms with a $156,000 drop which translates to 9.8% of the property’s asking price within the preceding 31 days.”

“RealtyHop’s report also includes the top five addresses still on the market with the highest percentage price drops and the highest dollar price drops in March. 59 John St., a penthouse condominium unit in Manhattan’s Financial District, had an enormous price reduction of 48.2% or $2,050,000 in dollar terms and is now listed for $2,200,000.”

From Bisnow New York. “The major players in the New York City coworking market have buckled under the stress of the coronavirus pandemic, giving back millions of square feet, needing cash infusions or restructuring. Across the country, 20% of all coworking space, or 25M SF, has closed. WeWork has been operating at a massive loss for years. It lost $3.2B in 2020 after a $3.5B loss in 2019 and a $1.9B loss in 2018. Its majority owner, Japanese investment giant SoftBank, has pumped billions in cash into the company to keep it solvent. Knotel, once valued at over $1B, filed for bankruptcy in late January.”

“Each of these major companies is poised to survive, but the effect their boom and bust has had on the market still lingers, said Neil Carlson, founder of a 20K SF coworking outlet in Gowanus, Brooklyn. ‘I think that even before the pandemic, there were a lot of people in business with unsustainable business models,’ he said. ‘They were overpaying for the core real estate … a lot of that was due to the distortion that WeWork created. They had billions of dollars of funny money on the consumer side, but also on the investor side. That’s a bigger structural problem, the venture capital and investment side impacted the startup and real estate side of things, too.'”

The Globe and Mail in Canada. “Archegos, which managed US$10-billion of client money, collapsed last week. It is the second major disruption fuelled by margin trading in as many months. ‘Leverage has created a large number of fortunes,’said George Ball, chief executive officer of Houston-based Sanders Morris Harris, a money manager. ‘Leverage has also created almost an equivalent number of economic debacles.'”

“As it stands, though, central banks have largely focused on unemployment, accepting higher leverage as a necessary consequence. Now is the time to rethink that, argued Gregg Gelzinis, associate director of economic policy at the Center for American Progress. ‘It’s important for financial regulators to lean against the wind,’ Mr. Gelzinis said.”

From Sunday Morning New Zealand. “A new documentary by building experts John Gray and Roger Levie has uncovered the shocking state of apartment buildings around New Zealand. ‘So more recently, it’s a whole plethora of building defects that we’re generally helping people to resolve – poor concrete, missing steel, it’s a long list,’ said Levie. His concern was that the problems would not be addressed until a disaster happened.”

“‘The big concern that we have is this one where a lot of investors buy into a building and they’re getting good returns. They’re really not motivated to understand how the building’s performing and in the end there will be a catastrophic event and we’ll stand up and look at that and say why didn’t we see that coming?'”

From Eternity News. “When it comes to Christians who rise and fall in a way that grabs the world’s attention, Bill Hwang is one of the most memorable. But you still might not have heard of Hwang, even though his meteoric plummet happened less than one month ago. Check out any financial website since late March, though, and ‘Bill Hwang’ appears. The reason is obvious when you discover that this wealthy Wall Street investor and son of a pastor might have lost somewhere between $US200 and $US100 billion. In a matter of days.”

“As The Wall Street Journal summarised: ‘The firm used borrowed money to buy substantial stakes in media and internet companies, including ViacomCBS. That position went south [in late March] after Viacom’s share price dropped, prompting Wall Street firms that had invested in Archegos to demand it make up some of those losses.'”

“Hwang moved to Las Vegas when he was a teen. He learned to speak English while working at McDonald’s and further studies in finance brought him to the attention of ‘hedge fund legend’ Julian Robertson in the late 1990s. Hwang helped Robertson break into Korean markets and things were going super-profitably until big losses in 2008. Then, in 2012, Hwang’s Tiger Asia firm pleaded guilty to ‘wire fraud.’ According to Bloomberg: ‘The [Securities and Exchange Commission] said the firm used inside information to trade in shares of two Chinese banks. Hwang and his firm ended up paying $60 million to settle the criminal and civil charges.'”

“Before the SEC ban ended, Hwang was able to return to Wall Street – as a trader for a family firm, not a major hedge fund. But his eye-watering loss a few weeks ago throw serious doubt about what sort of comeback Hwang might yet make in the world of high finance. ‘While reading the Bible, I realised that God likes setting a fair value,’ Hwang described his approach to investing, in 2019.”

This Post Has 98 Comments
  1. ‘mad money is a small portion of your portfolio that you choose to invest in more-speculative but potentially high-returning investments–and it’s money you can afford to lose’

    Interesting. In one pocket you’ve got can’t lose money and the other “can afford to lose” money. That’s why you make the big bucks Morningstar.

    1. Interesting. In one pocket you’ve got can’t lose money and the other “can afford to lose” money. That’s why you make the big bucks Morningstar.

      This is a common concept, no?

      Harry Browne advocates the same with his Permanent Portfolio — keep the money you “can’t afford to lose” in the PP, and then have a “variable portfolio” for more speculative investments. Separating things this way helps ensure you don’t gamble away your core savings.

      I personally just view things as one pile of money, but I’ve always been disciplined with savings so I’m unlikely to chase bad money with good.

      1. What about when you gamble with other peoples money? Just how much can they afford to lose? “Scratching that itch” might be a little more tempting.

        1. What about when you gamble with other peoples money?

          Well, that’s the ideal way to do it, for sure! However, when it’s people gambling with the taxpayer’s (my) money, I’m not a fan..I’m with you there.

    2. It seems like Morningstar’s investing advice is a mirror reflection of the investing landscape left behind by over a decade’s worth of extraordinary accommodation by the Fed and its companions in the international central banking community. What’s left are safe investments that either pay next to nothing or high risk gambles that do great until they blow up. There’s little safe ground for conservative investors to plough.

      1. What’s left are safe investments that either pay next to nothing or high risk gambles that do great until they blow up. There’s little safe ground for conservative investors to plough.

        My personal and foundation portfolios show otherwise.

  2. ‘the number one way to build wealth in our country is through owning real estate. Simple as that’

    End of story…

    ‘When I see that almost 80 percent of our city does not own real estate and is renting, that concerns me. If our citizens are not building wealth, over time they will be demanding more and more services to support them, putting more stress on our city’

    Ah, so now we got UHS virtue signalling about gambling on shacks with borrowed money. Nice.

    1. Renting is the definition of “building wealth”…. especially when it’s half the monthly cost like it is now.

    2. Forget about Nomadland. We have Nimbyland. People can be housed in trailer homes if push came to shove. But nobody wants that or space is at a premium we are told.

    3. I live in West Hollywood and see that joker’s face staring at me on the shopping cart ads at the supermarket.

  3. ‘So more recently, it’s a whole plethora of building defects that we’re generally helping people to resolve – poor concrete, missing steel, it’s a long list’

    Missing steel?

    1. There is no point in building carefully when the sole purpose is to provide a parking place for somebody’s “mad money” before they flip it in a year for a double digit gain.

      Shoddy construction seems like a natural consequence of central banks blowing a never-ending series of massive asset price bubbles.

      1. Is this the rhyming part now of the Chinese gypsum board defects era? Things getting done on the cheap because the cheap money is easy to churn?

    2. Missing steel?

      I was recently in a brand new DR Horton build to do some upgrades. The UAD quality rating, which is required by a lender before they fund it, was Q5 – the lowest score possible while still being habitable. Q6 is uninhabitable and no lender will touch it, nor will you even get an occupancy permit. These houses start at $599,000.

      Not only are all of the materials the cheapest available, the actual quality of construction is extremely poor. Nothing is plumb, level or square, and you can feel irregularities in the floor as you walk. You can see in the corners of the walls and ceilings that the framing is off, and so is the drywall. There is trim falling off cabinets, none of the doors and windows operate as they should, and there are large gaps in areas where different materials meet.

      From what I understand, there is a brand new one that is going to be torn down because the new “owners” moved in but the plumbing was backing up into the house with no fix possible. It sounds like the waste lines weren’t sloped properly, but you can’t access them without cutting into the engineered foundation which will then permanently compromise its integrity.

      These houses are built by people who have no business building houses (illegals). These are not carpenters or tradesmen, they are hacks who do slapdash work. It’s sickening. And they cannot build the houses fast enough. There is a waiting list. This, in my humble opinion, is much, much worse than the last bubble. I can’t tell you the insanity I am seeing from my own “boots on the ground” observations.

      1. +1000

        Here in Denver, the minimum building standard is make it last until one day after the warranty expires.

        1. make it last until one day after the warranty expires

          Aren’t warranty periods set by the expected longevity of the items rather than vice versa?

          1. I’m not talking about items, I’m talking about new construction, renovation, tenant finish, etc, specific to electrical. I’ve heard the phrase “walk away a winner” more than once after being told to ignore someone else’s hack work, because there wasn’t enough time to fix it.

      2. Who is in charge of issuing the UAD rating? It doesn’t seem like that is self-reported – or is it? Does an independent quality inspector issue that? Thanks for reply!

  4. ‘central banks have largely focused on unemployment, accepting higher leverage as a necessary consequence. Now is the time to rethink that…‘It’s important for financial regulators to lean against the wind’

    Question Gregg with two G’s: can central bankers lean against the wind if they have their heads up their a$$es?

    1. can central bankers lean against the wind if they have their heads up their a$$es?

      Arguably that posture is more aerodynamic, so perhaps they don’t need to 🙂

    2. The central bank is going to do what keeps its masters powerful and prosperous. And it will find whatever intellectual cover it requires as necessary.

    3. What the FED is doing can only be described as reverse Robinhood on steroids. It’s mind-blowing that they’re getting away with this.

  5. ‘‘I think that even before the pandemic, there were a lot of people in business with unsustainable business models,’ he said. ‘They were overpaying for the core real estate … a lot of that was due to the distortion that WeWork created. They had billions of dollars of funny money on the consumer side, but also on the investor side. That’s a bigger structural problem’

    Note that no one stepped in and pointed out these widespread “unsustainable business models” that’s left markets with way too much commercial real estate. “They’re renting f****g desks!”

    QE ends with deflation and tears. We’ve been watching this movie for decades. Some people remember the ending, some don’t. One thing that keeps appearing on my mind is, why do we look to guberments to “provide affordable housing?” The gigantic shanty loan backing racket produces – exactly the opposite! And somehow it’s perfectly acceptable for the REIC to say, “lets bring down prices by building more”. But yer some kind of monster if you suggest we simply end the guberment gravy and get them the hell out of the shack biz.

    1. One thing that keeps appearing on my mind is, why do we look to guberments to “provide affordable housing?

      Because too many people believe that the high prices are caused by the free market. They don’t have a clue that it’s because of guberment policies.

      1. “Because too many people believe that the high prices are caused by the free market.”

        Seems like that went away during Clinton’s time in office, when the GSEs were pushed to provide big loans as an affordable housing strategy for low income households and people of color. The housing market has been financially unstable ever since, and remains so.

        Kudlow’s Corner
        Are the Clintons the real housing crash villains?
        Published Sat, May 28 2016 12:50 AM EDT
        Updated Sat, May 28 2016 9:06 AM EDT
        Lawrence Kudlow and Stephen Moore, chief economist at the Heritage Foundation

    2. I saw a headline the other day that the Creeper In Chief issued another edict and solved the housing crisis. Something about dangling a carrot that will magically bring more inventory to the market, you know, so more poor suckers can hang a lifetime debt anchor around their necks. See, the crisis isn’t the high prices to these jackwads, it’s the lack of inventory.

  6. ‘a penthouse condominium unit in Manhattan’s Financial District, had an enormous price reduction of 48.2% or $2,050,000 in dollar terms and is now listed for $2,200,000’

    Now that’s some wealth building right there! Although they did avoid the dreaded half off.

    1. A press release:

      ‘By purchasing one of these luxury properties, you can take the family to Disney World and use your vacation dollars that would otherwise be spent on hotels to build wealth. ‘An investment at the luxurious resort in Orlando, Florida is already a good deal. It’s even better now with our exclusive offer of an extra 10% discount off a limited number of two or three-bedroom condominiums. Units start at $337,000 before the discount,’ said Ideal Homes International President Chris White.’

      ‘When you’re not there, management will rent it out to pay your mortgage costs with maybe some extra money in your pocket depending on how often you use it. Now, you don’t have to sacrifice your retirement savings for a Florida dream. It’s a hands-off investment. The management takes care of everything for a cut of the rental income. You don’t have to worry about any bookings, maintenance, insurance or upkeep. If something goes wrong with your unit, it’s all covered and part of the management’s guarantee.’

      https://techbullion.com/discounted-properties-on-a-luxury-condo-lets-you-visit-disney-and-use-florida-vacation-dollars-to-build-wealth-at-the-same-time/

      Even condotels never went away. And they just fooked previous buyers by 10%.

      1. “‘When you’re not there, management will rent it out to pay your mortgage costs with maybe some extra money in your pocket depending on how often you use it.”

        Man, there were a couple of shysters who had a daily show on AM radio back in 2005 in this part of Region IV who were peddling a similar scheme.

      2. Now, you don’t have to sacrifice your retirement savings for a Florida dream.

        So now a Disney vacation is so expensive that you have to sacrifice retirement to take them.

        I’m sure the management company takes a healthy cut from your rental fees and is the only winner in this scenario. Plus, with the perma-pamdemic, will they really be able to rent them out?

    2. Goldman is asking some of their bankers to come back onsite. In monkey-see-monkey-do banking – I am sure that others will as well.

      Also Amazon, Google, Microsoft pushing for back to onsite work – Microsoft is calling it Hybrid work (50% remote, 50% onsite). What was seemingly promising last fall – is now starting to fall away. I am not sure what the cause is: managers need their sycophant close, they dont trust people to work out of sight …

      Goldman Sachs CEO David Solomon said that working from home was “not a new normal” for the investment banking giant, calling it an “aberration.”

      In New York, Solomon said Goldman had up to a quarter of its employees working onsite and had managed to get the same number back into its London offices last summer and in the fall, when U.K. public health restrictions had briefly eased.

      “I do think for a business like ours which is an innovative, collaborative apprenticeship culture, this is not ideal for us and it’s not a new normal,” Solomon said.

      “It’s an aberration that we’re going to correct as quickly as possible,” he added.
      https://www.cnbc.com/2021/02/25/goldman-sachs-ceo-solomon-calls-working-from-home-an-aberration-.html#:~:text=Goldman%20Sachs%20CEO%20David%20Solomon%20said%20that%20working,the%20investment%20banking%20giant%2C%20calling%20it%20an%20%E2%80%9Caberration.%E2%80%9D.

      1. I am not sure what the cause is: managers need their sycophant close, they dont trust people to work out of sight …

        I think, at least for tech, a lot of it is that in-person collaboration provides something that can’t be done well virtually. Whiteboarding, brainstorming, ad-hoc conversations coming out of meetings.

        There’s a good video here/interview with Andy Jassy.

        My experience is this is true, but I still don’t want to go back to the office.

        1. “…in-person collaboration provides something that can’t be done well virtually.”

          I agree. And I would welcome the chance to return to the office for this reason. But I don’t miss spending over ten hours a week sitting in traffic while my blood pressure and stress levels ramp up. It would be nice to have the option to come in to work for meetings or stay home to work undistracted as needed, but control freaks who assume managerial roles tend to not understand the potential of empowering employees to structure their workday to find optimal balance.

          1. I’ve found the distractions at home to be close to equal those at the office, not to mention unlimited access to snacking! At the office,if I don’t bring it i cant eat it.

            I’ve been going to the office 3days a week through lunch, then come home. I’ll probably shift to a 3 day (T, W, Th) week at the office, M and F @ home.

          2. Same here, ibbots. Maybe it’s different for people with massive commutes or a squished condo, but I’ve always needed the separation between work and home.

  7. “A glass-half-full, glass-half-empty sale recently closed in Beverly Park, where an Italian-inspired mansion called Villa Firenze sold at auction for $51 million.”

    That mansion is fit for a king…like Newsom. He could run the country from there when he wins the next presidential election. There’s even room for the Marine 1 to land in the backyard.

    1. Does it seem like Podesta is grooming Nuisance for a presidential run? I have had the displeasure of living in the Bay Area when he was mayor of San Francisco. and in the state whilevhe is governor. Based on this pattern, it would only make sense that he may some day lord over the entire country as president.

    1. “If you wish to learn who rules over you, simply find out who you are not allowed to criticize.” — Voltaire

      The FED’s press conferences and media appearances come to mind. Nothing but softball questions, prearranged.

    2. Appearing Thursday on “Fox News Primetime,” Carlson said Democrats are coordinating a “replacement” of current US voters with immigrants from the “Third World.”

      Why would the democrats need to do this if they won both houses and the presidency by popular vote?

  8. WeWork has been operating at a massive loss for years. It lost $3.2B in 2020 after a $3.5B loss in 2019
    Looks to me like 2020 was a massive success for WeWork with Net Income increasing $300 Million! Way to go! 11 more years to profitability.

    1. What’s sickening is that all of these billions could have actually made a real difference if they were put to good use. Instead, they had to be wasted on rampant speculation thanks to the reckless FED and .gov.

      1. While doing traffic pattern studies for CalTrans, I learned that 80% of a project’s budget went for planning…you know, the meetings at the nicest hotels with the office’s cuties in tow, etc., and 20% for labor and materials to do the real work.

        1. and my pet peeve NO money to paint the roads so you can see the road when some idjut has not only his high beams but the 2 low light too….or in a thunderstorm or fog….

    1. Head of NYC BLM chapter calls for probe into organization’s co-founder

      Isn’t that Raycis?

    1. Last night in Portland:
      I just can’t believe that this crap is allowed to go on for 10+ months.
      Kick ass take names and solve the F***ing problem. i think the solution is well known & pretty damn easy to make happen. If they wanted it taken care of.

  9. I was wondering about “debt deflation” which is a major justification for current monetary and economic policy. It’s term coined by Yale economist Irving Fischer, of “stocks have reached a permanently high plateau” fame ( https://www.bis.org/publ/work176.pdf ):

    =============================
    The world-wide decline of inflation over the last decades has renewed concerns about the threat of deflation, a decline in the price level. But why should we fear deflation? A historically informedanswer will certainly include financial distress. DeLong reminds us that during the Great Depression “almost every analyst placed general deflation, and the bankruptcies it caused, at or near the heartof the worst macroeconomic disaster the world had ever seen” (DeLong 1999 p. 231).

    In this paper we explore the concept of debt-deflation. We propose a stylised model to illustrate its key features, including unexpected losses, distress selling, and distributional effects. These features reflect the central place that financial distress occupies in traditional accounts of deflation. The term debt-deflation was coined by Irving Fisher (1933), and refers to the way debt and deflation destabilise each other. The issue of stability arises because the relation runs both ways: deflation causes financial distress, and financial distress in turn exacerbates deflation. The former was known for centuries, but the latter was, in our view, a key insight of the debt-deflation literature. This‘feedback’ from financial distress to deflation can occur through several channels:

    Fisher (1933) argued that borrowers attempting to reduce their burden of debt (‘indebtedness’)engage in distress selling to raise money for repaying debt. But repayment in aggregate causes a contraction in the money supply and price level deflation.

    Minsky (1982) elaborated the concept to incorporate the asset market. He recognised that distress selling reduces asset prices, causing losses to agents with maturing debts. This reinforces distress selling and reduces consumption and investment spending, which deepens deflation.

    Bernanke (1983) observed that debt-deflation involves wide-spread bankruptcy, impairing the process of credit intermediation. The resulting credit contraction depresses aggregate demand.

    Note that these channels involve features that are quite uncommon in today’s mainstream macroeconomics: among them are losses and distress selling, the idea that debt and deflation destabilise each other, and the notion that the quantity of money endogenously contracts through the re-payment of debt. Note also that some standard methods, including the representative agent and log-linearisation, are not well-suited for exploring this territory. This may explain the shortage of formal work on debt-deflation.

    =============================

    We’ve always noticed that despite vast amounts of money printed to be injected into the system by buying debt and lowering interest rates which both encourage yet more debt, Japan and Europe continue to flirt with deflation which many economists consider the bane of prosperity.

    As precarious as debt is, the PTB still push it with gusto. I remember reading 10-some years ago that “bad debt is better than no debt” by famous economists.

    Yet they continue to push debt. I think the problem is that if the only tool you have is a printing press, every problem looks like lack of money for your desired parties.

    “Expert allocations of printed money” will save the economy, no doubt. Or it could just be that money and debt are power and control.

    1. “Or it could just be that money and debt are”…very effective and poorly understood wealth redistribution tools.

      By contrast, everyone gets taxes and hates on them.

    2. I don’t agree with this idea that debt and inflation is good.
      The thing is when they inflate, income and wages never go up in accordance with the inflation, taking more buying power out of populations hands decreasing prosperity, so how can they say inflation insures prosperity.
      For instance, earlier Baby Boomers were only paying 25 % of income toward housing costs, while it averaging 40 to 55 % of income now or more. Income did not rise in accordance with the higher payment of debt because of the inflation on price of shelter.
      So inflation is a bad thing , if wages don’t keep up with the inflation. I mean who benefits from inflation?

      Deflation that is in sink with wages Is better. I mean who benefits from price fixing Monopoly prices? Who benefits from wealth creation from Wall Street casinos?
      They always like to say the deflation of the Great Depression , crash of the stock market, was the great evil because the stock market crashed and didn’t start rising again until the fifties. But something that is false is not sustainable, as giving loans on margin to buy stock proved.

      What’s sustainable about the high price of health care? Income has not risen to be able to pay for the unbelievable average costs of about 12 thousand a year per head for health care insurance, with bigger deductibles.

      Oh, everything is rigged now and it doesn’t follow wages or capitalism or any rational economic market. All it has done is killed prosperity and taken a formally productive Nation under capitalism and turned it into a whatever this is that we got now.

      1. Oh, everything is rigged now and it doesn’t follow wages or capitalism or any rational economic market. All it has done is killed prosperity and taken a formally productive Nation under capitalism and turned it into a whatever this is that we got now.

        There’s the way we predict things to be, the way we want things to be, and the way things are. The government serves society, and the society serves government, in this current system.

        The election of Obama and Trump rather than the conventional wisdom shoe-ins for those elections indicates to me people wanted change, probably economic change. They never got it. We’ll get cultural change. But economic change is something both sides agree on and don’t typically discuss publicly.

        I don’t know why the current economic system would change. It serves all the shot callers quite nicely.

        I realize the economy is a competition for resources. Unexpected results can arise from competitions which are serving the reptilian brainstems of the shot callers, as they collect resources.

        As long as they provide bread and circuses, and allow crumbs to trickle down, and in return, the same politicians in the House and Senate and local governments keep getting re-elected… nothing will change. And… even if there are changes from time to time (AOC, Obama, Trump) … don’t expect debates on economic policy. Both sides generally agree on how to implement that. My eyes were opened when Elizabeth Warren had an opportunity to talk about root causes of why education costs were so high (government pumping huge amounts of money to prospective students), but instead she lamely championed lower interest rates on those loans. She’s a professor, and knows which side her bread is buttered on.

      2. Since you enjoy questioning things above your pay grade (like many of us) try listening to Jeff Booth on YouTube whose thesis is, “Deflation is the key to an abundant future” and “Technology is deflationary.”

        This is a good starting point:
        The Fed’s Losing Battle with Deflation
        youtube.com/watch?v=F8lfLqnhuGs (45-min)

        1. I’m assuming your talking to me about ” questioning things above my pay grade.”

          Common Sense is the greatest Authority, as well as just life experience. But I’m open to any theory , especially if its time tested, and not la la land BS from shills from Big Business and the Universities.

    3. FYI, apologies for the large format font. I wanted to use some quote delineator and >blockquote< seemed to fit but it didn’t quite do what I wanted. I’m still a bit unclear on what formatting works in this “new” site. I found this site: https://wordpress.com/support/code/

      Does pre work? I’ll know after I press submit.

      How about code? Here goes.

  10. ‘While reading the Bible, I realised that God likes setting a fair value,’

    Religon and scam artistry often go hand in hand.

    1. Religion and Scam artistry (often) always go hand in hand. No bigger tell than a cross or a fish on a business card

  11. One of the advantages DFW used to have was a reasonable COL, not so much anymore.

    From the DMN (paywalled):

    North Texas home prices rose at the fastest clip in more than a decade in March. The median price of a single-family house sold by area real estate agents jumped by 16% to $312,000 last month. That’s the highest price ever for property sales in North Texas.
    Only 6,085 single-family homes were listed for sale with local real estate agents in March — less than a one-month supply at current sales rates. There were 71% fewer houses on the market in North Texas than a year ago.

  12. This paper was a good find – thanks. Excerpt from the conclusions below. Thats why the wonks keep talking about liquidity supply – they are worried about credit crunch (& margin constraints) – and believes this causes debt-deflation.

    They outwardly say that monetary policy itself does not cause deflation. I just dont buy this.


    The main finding was that several channels of debt-deflation are active, but none is destabilising, even when large shocks, high indebtedness, and wide-spread default are considered. Stability is
    largely due to the optimal policy of user cost spending, and the presence of agents without any prior debt or losses. Their ability and willingness to take on more debt and purchase assets stabilises the asset market which we found to be central to the debt-deflation process. By contrast, when margin constraints or a credit crunch prevents agents from following this course, debt-deflation can become unstable.

    Debt-deflation does not develop when agents forego distress selling and refinance their assets instead, as Minsky conjectured. But refinancing requires accommodation, an expansion of the banking system. This is certainly feasible in our frictionless inside money model, but may no longer be so when reserve or capital requirements bind, or when the economy is subject asymmetric information and frictions.

    In the absence of such complications, the idea that monetary contraction directly produces deflation receives little support. It is the price of assets, rather than the quantity of money, that drives
    deflation.

  13. A weekend topic starting with Morningstar. Morningstar’s director of research defines an investment as ‘an expenditure that can reasonably be determined to have a positive expected return,’ whereas speculation ‘occurs when the return is too uncertain to be estimated, or if the estimate can be made, but is negative.’ At Morningstar, we think it is important to differentiate between speculating and investing. We generally emphasize the importance of diversified, low-cost, long-term investing, because that’s the surest way to accumulate wealth over time. But even we have to admit that there may be room in a portfolio for speculative investments that have the potential to generate extraordinary returns.”

    – I’m so old I remember when savings accounts paid a reasonable rate of interest, and by the “magic” of compound interest, one could generate retirement income without speculating in various, risky asset classes, but that’s so “20th Century.”
    – The Fed and Gov’t. polices are encouraging speculation and by doing so, asset bubbles, and with all of the consequences associated with them when the (inevitably) burst.
    – The speculation is a result of loose financial conditions, with the moral hazard risks borne by “we the taxpayer.”
    – The Fed has no moral compass or fiduciary responsibility. This will go on until the whole mess blows up.

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

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

    “We’re essentially continuing a system where profits are privatized and…losses socialized,” – Nouriel Roubini

    “In the short run, the market is a voting machine, but in the long run, it is a weighing machine.” – Benjamin Graham

    An investment operation is one which, upon thorough analysis promises safety of principal and an adequate return. Operations not meeting these requirements are speculative. – Benjamin Graham

    “Confronted with the challenge to distil the secret of sound investment into three words, we venture the motto, Margin of Safety.” – Benjamin Graham

    “The individual investor should act consistently as an investor and not as a speculator.” – Benjamin Graham

    “The essence of investment management is the management of risks, not the management of returns.” – Benjamin Graham

    – So, where is all of this going?

    https://files.stlouisfed.org/files/htdocs/publications/page1-econ/2019/11/01/making-sense-of-the-national-debt_SE.pdf
    Making Sense of the National Debt
    Scott A. Wolla, Ph.D., Economic Education Coordinator Kaitlyn Frerking, Economic Education Intern
    Federal Reserve Bank of St. Louis | research.stlouisfed.org
    November 2019

    “This circumstance raises important questions: How much debt can an economy sustain? What are the long-term risks of high debt levels?”

    “Although governments may endure indefinitely, that does not mean they can accumulate unlimited debt.”

    “However, if debt grows at a faster rate than income, eventually the debt might become unsustainable.”

    “The Government Accountability Office (GAO) suggests that the U.S government debt is currently on an unsus- tainable path: The federal debt is projected to grow at a faster rate than GDP for the foreseeable future.”

    “Economist Herb Stein once said, “If something cannot go on forever, it will stop.” In other words, trends that are unsustainable will not continue because the economy will adjust, sometimes in abrupt and jarring ways.”

    A solution some countries with high levels of unsustainable debt have tried is printing money. In this scenario, the government borrows money by issuing bonds and then orders the central bank to buy those bonds by creating (printing) money. History has taught us, however, that this type of policy leads to extremely high rates of inflation (hyperinflation) and often ends in economic ruin. Some of the better-known examples of such polices are Germany in 1921-23, Zimbabwe in 2007-09, and Venezuela currently.

    …if a government prints money to solve its debt problem, history warns that hyperinflation and financial ruin will likely result.

    “The four most dangerous words in investing are: ‘this time it’s different.'” – Sir John Templeton

    1. (hyperinflation)

      For some reason, the public doesn’t seem to understand fraud, rigged markets and fixed prices but when see any of these, by default, they begin blurting “hyperinflation” and flapping their arms.

      I’ll ask anyways….. when can we expect this tripling and quadrupling of wages and salaries you speak of?

    2. An investment operation is one which, upon thorough analysis promises safety of principal and an adequate return. Operations not meeting these requirements are speculative.

      Once upon a time, it was reasonable for an investment, if successful, to return twice (maybe thrice) what the bank would have paid in interest. Any expectation beyond that was speculative.

      1. In 2008 I was getting 5.25% APY on savings from AmTrust Bank (a physical bank with deposits protected by the FDIC).

        Credit Union of Colorado is paying 0.10% APY.

  14. “I have been in real estate for almost 20 years, and I’ve learned that the number one way to build wealth in our country is through owning real estate.

    If all these debt donkeys are “building wealth,” it’s due almost solely to the gusher of Fed funny money pumped into the financial system since 2008. It also means a bunch of younger people are forever priced out of affordable housing.

  15. “As it stands, though, central banks have largely focused on unemployment, accepting higher leverage as a necessary consequence.

    We will not have sound money, honest markets, or a production-based economy as long as the criminal private banking cartel called the Federal Reserve controls our money issuance.

  16. Anyone remember the talk of minting trillion dollar coins during the Obama admin, as a way to circumvent the Fed? Of course, that isn’t necessary anymore, as the Fed seems more than happy to finance all the multi-trillion dollar boondoggles the Swamp desires.

  17. West Hollywood is all rent controlled. Many semi-famous and just normal people live in apartment they have had for decades and pay LOW rent.

    To buy and overpriced condo when you could go rent a nicer apartment that is rent controlled even at market rents probably makes sense.

    Also most LA realtors are failed actors with high school diplomas.

    1. “Also most LA realtors are failed actors with high school diplomas.”

      SoCalJim seemed to have his schitt together.

      1. SoCalJim

        I’m fairly confident he’s a longtime San Diego resident. I followed his blog closely before and while selling the Encinitas house.

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