China’s Current Economic Crisis Is The One It Refused To Have In 2008
A weekend topic starting with Reuters. “As developer China Evergrande Group lurched from one crisis to another over the past two years, Beijing avoided directly intervening to rescue what was not too long ago considered one of the country’s ‘too big to fail’ enterprises. Despite a growing number of Chinese property developers having defaulted on debt obligations since a liquidity crisis hit the sector in 2021, Beijing has not directly stepped in to bail out any firm so far. Because of the massive debt pile, worsening cash flow, and the scale of unfinished homes, some analysts wonder whether Evergrande has now morphed from too-big-to-fail to too-complicated-to-exist.”
“‘Evergrande is large enough that its collapse needs to be managed. Partly because of size, (and) partly because of managing expectations,’ said Antonio Fatas, INSEAD professor of economics. In China, ‘because of the political/economic system and because of the large interference of the government and state-owned enterprises…there will always be a political question on how to share the losses associated with events like this one.'”
From The Hill. “After German Foreign Minister Annalena Baerbock referred to Chinese President Xi Jinping as a ‘dictator’ in a September 15 interview, Beijin called in the German ambassador and emphatically and publicly complained. This tantrum was no mere semantic complaint, but a paradoxical revelation of both China’s fragility and its global authoritarian aspirations. One might imagine that the Chinese Communist Party would be less concerned about a foreigner’s description of its leader and more concerned with the many challenges facing China: a slowing economy, unsustainable debt, a housing glut, endemic corruption, a shrinking and unbalanced population, massive youth unemployment and lethal levels of pollution.”
“One would be wrong. Those developments do not threaten the CCP’s legitimacy. Words do. Beijing reacted so harshly to Baerbock’s speech because, to the CCP, contradicting the party line anywhere challenges the legitimacy of its rule. China is hardly unique among dictatorships in its hypersensitivity to perceived criticism. But it differs in terms of scale, economic power and ambition. It wants to control speech everywhere.”
“For the CCP, its institutionalized and prickly paranoia generates three significant harms to regime effectiveness: reality distortion, resource depletion, and negative reaction. Reality distortion skews decision-making. The CCP cannot solve problems that it denies exist. One might argue that Xi is well aware of the problems he faces, but this is unlikely. No one inside China risks telling the emperor that he is naked for fear of giving offense and suffering dire consequences. Furthermore, foreigners who ask the wrong questions, or simply do normal financial due diligence, are branded as spies.”
“Finally, the party’s policy of aggressively responding to what the democratic world considers normal economic, social and political discourse provokes reactions that unify antagonists and start the cycle anew. The CCP’s paranoid lashing out may seem appropriate and effective inside China, but outside it is now proving counterproductive.”
From Time. “Ignominy comes quickly in China. Just a few years ago, Evergrande Group was the pride of the nation. The real estate giant was for a time China’s biggest constructor with more than 1,300 projects in 280 cities to date. And through sport, specifically soccer, it became the poster child for a new era of Chinese dominance. Guangzhou Evergrande soccer club won eight Chinese Super League (CSL) titles, including seven back-to-back between 2011 and 2017, as well as two Asian Champions Leagues, thanks to a galaxy of handsomely remunerated European and Latin American stars. It also ran the world’s biggest soccer school, whose ‘goal is to revitalize Chinese soccer and cultivate soccer stars, not only for the Evergrande group, but also for our country,’ principal Liu Jiangnan told TIME in his office in 2016.”
“Back then, investment in soccer was smart politically. In 2015, Chinese President Xi Jinping unveiled a 50-point reform plan to develop grassroots soccer with the aim of China hosting and ultimately winning the World Cup. Evergrande even paid the bulk of former Italy manager Marcello Lippi’s salary as China coach from 2016 to 2019. In April 2020, Evergrande broke ground in Guangzhou on a new $1.8 billion, state-of-the-art 100,000-capacity stadium, which would be ‘a world-class new landmark comparable to the Sydney Opera House and Dubai Burj Khalifa,’ Chairman Xu Jiayin told reporters.”
“In August, Evergrande filed for bankruptcy protection in the U.S. and last week Xu was arrested in China on suspicion of ‘illegal crimes’ related to his firm’s precipitous collapse. Since a high in July 2020, the shares of Evergrande—the world’s most indebted developer—have plummeted 99%, wiping out almost $47 billion in market value, owing to a housing slump and regulator crackdown on excessive liabilities. Xu remains under investigation at an undisclosed location. That half-completed ‘landmark’ stadium, meanwhile, has been seized by the local government toward servicing the firm’s estimated $300 billion of debt.”
“Meanwhile, the recent high-profile purge of top-ranking officials, bankers and generals has decimated the confidence of investors already reeling from the punitive investigations of consulting and accounting firms, bankers forced to do ideological study sessions rather than productive work, executives at foreign companies barred from leaving the country, and new draconian controls on exporting data. In the second quarter of the year, foreign direct investment into China was just $4.9 billion, down 94% compared with the same period in 2021, according to the Nomura financial services group.”
“Chong Ja Ian, a China specialist at the National University of Singapore, says that a problem is the Chinese leadership’s impulse to address every problem by increasing control. ‘That might work in terms of a Leninist system and the individuals within an organization,’ he says, ‘but it doesn’t quite apply to the market.'”
“Evergrande’s woes leave an estimated 1.5 million customers with unfinished homes, but the problem goes much deeper. As real estate accounts for some 30% of national GDP, as well as up to 80% of household wealth, the crisis is cascading through the wider economy. China’s property developers collectively owe more than $390 billion to various suppliers, according to Gavekal Research. ‘We’re really only at the very beginning of the fallout of what’s happening in the property sector,’ says Dinny McMahon, head of China markets research at Trivium China policy research group. ‘Real pain and real stress will be caused to ordinary people and firms.’ Ultimately, China’s soccer ambitions were built on the same real estate bubble as four-fifths of its people’s wealth. It’s a big problem if the latter goes the same way.”
From Barron‘s. “China’s property crisis is a mixed picture with overwhelmingly dark shading, yielding benefits in a few areas but threatening far broader damage. Liu Jianguo, a 46-year-old teacher in the second-tier city of Guiyang, just bought a new apartment with help from his parents. He says that in his province, Guizhou, prices are low and that the time had come to buy. But Liu is a rarity. Over recent months, numerous homeowners have expressed frustration to Barron’s over declines in the value of property, the main investment vehicle for most families. Only in second-tier cities, such as Guiyang, are sales actually growing, according to data from Wind, a provider of financial information.”
“That is critical because real estate plays a central role in the Chinese economy. It is where most citizens choose to invest their savings—70% of household wealth lies in the sector—and property accounts for close to 30% of the country’s gross domestic product, according to independent estimates. Car salesman Zhong Weiyi, 58, pins diminished housing sales—and weak consumption across the economy—on low confidence about financial security. ‘If housing prices and pensions keep shrinking, I wonder what kind of security I will have in my 70s,’ he told Barron’s from the first-tier city of Chengdu.”
“That China’s property market is experiencing one of its worst periods in modern times is quite a feat considering how turbulent the enormous sector has been. The distress has dragged on for years at varying levels of intensity. Defaults have plagued developers, most notably in 2021, when China Evergrande, the world’s most indebted developer, lost 476 billion yuan ($65 billion) and failed to make interest payments to international investors. The next year, two other big players defaulted—Sunac China Holdings and CIFI Holdings. All eyes are now on developer Country Garden, which missed a $15 million interest payment on an offshore bond two weeks ago and has a grace period of another few weeks to avoid default. The consensus among observers is that it won’t come up with the funds.”
From Newsweek. “China’s current economic crisis is the one it refused to have in 2008. Now, the problems are far larger than they were two decades ago, and they cannot be solved without a crisis of historic proportions. The country avoided a downturn in 2008 only by embarking on one of history’s largest and longest spending campaigns. First, there was a $586 billion, two-year stimulus plan. Second, Beijing ordered state banks to go on a lending spree. In the five years starting in 2009, Chinese banks extended an amount of credit that was roughly equal to that in the entire U.S. banking system, even though at the end of 2008, the Chinese economy was less than a third the size of America’s. And the lend-a-thon continued long afterwards.”
“Beijing technocrats had long dictated outcomes, so that was the approach they adopted in 2008. As they overpowered market forces in China, they prevented the corrections that swept market economies beginning that year. Yet because Chinese officials were determined to avoid a downturn at home, the underlying imbalances in China’s economy became larger.”
“‘Going back to the stimulus in 2009, it was clear that the reliance on property, land sales, and debt for growth was unsustainable,’ Andrew Collier, now managing director of Hong Kong-based Orient Capital Research, told me. ‘I witnessed this on numerous trips to various provinces starting in 2006 for Bank of China where the overbuild in property in rural areas was quite obvious along with the ignorance of local officials about basic economics. Beijing ignored these problems until around 2016 because it was too hard to control and too convenient to use.'”
“The result is that China now has far too much debt—almost certainly in excess of the generally accepted 280 percent of gross domestic product—and is far too overbuilt. Last month, He Keng, a former deputy chief of the statistics bureau, said China had enough vacant apartments to house its entire population of 1.4 billion people. Some think the vacant apartments can accommodate 3 billion people.”
“Chinese ruler Xi Jinping believes he can determine economic outcomes. As powerful as he is, however, he cannot overcome the law of supply and demand. Yes, that iron law works differently in China than elsewhere, but try as he might, he has not been able to change human nature—meaning the law still applies in the People’s Republic of China. ‘I think the problem is just too big to resolve,’ J Capital Research’s Anne Stevenson-Yang, also author of Wild Ride: A Clear and Sharp History of the Opening and Closing of the Chinese Economy, told Radio Free Asia. ‘I have no idea what their plan is other than to hide head in sand. I actually think they are bureaucratically stuck.’ China has too much property, and there is no solution short of either short-term crisis or long-term catastrophe, or perhaps both.”
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‘Meanwhile, the recent high-profile purge of top-ranking officials, bankers and generals has decimated the confidence of investors already reeling from the punitive investigations of consulting and accounting firms, bankers forced to do ideological study sessions rather than productive work’
The ADV China guys covered this when it recently started. They are mandated to spend something like 2 hours of the work day reading a book of ‘Xi thought’. This dictator is just as dumb as he looks. One of the China video channels I follow says the military purge was because of an assassination plot to shoot down Xitlers plane coming back from South Africa. Of course like so much there, we’ll probably never know the truth unless someone finally picks him off.
‘Reality distortion skews decision-making. The CCP cannot solve problems that it denies exist. One might argue that Xi is well aware of the problems he faces, but this is unlikely. No one inside China risks telling the emperor that he is naked for fear of giving offense and suffering dire consequences. Furthermore, foreigners who ask the wrong questions, or simply do normal financial due diligence, are branded as spies’
‘Finally, the party’s policy of aggressively responding to what the democratic world considers normal economic, social and political discourse provokes reactions that unify antagonists and start the cycle anew. The CCP’s paranoid lashing out may seem appropriate and effective inside China, but outside it is now proving counterproductive’
The Hill editorial is worth reading in full. Only the most ideologically pure globalist scum media are standing by this failed state. And don’t forget the Chinese mafia (which is the police, believe it or not, we learned that from Canadian money laundering trials) are behind the fentanyl production. In cooperation with Mexico’s drug and human trafficking cartels. That has to be state sanctioned. These are nasty, deadly people we are dealing with here.
‘China’s current economic crisis is the one it refused to have in 2008’
The ultimate can kicking exercise bites them in the arse. Because the globalist scum media has no unapproved memory, let’s revisit a few things: this was the beginning of the 100 years of concrete in 3. (Give up yer gas stove though!) But less noted is China followed that dog bernakes lead and issued multiples of QE compared to the US. Last I saw it reported it was 20 times as large. Then they quit talking about it altogether. Along those lines:
‘According to Investopedia, “A boom illustrates a period of elevated or increased growth within a business, market, industry or economy”. A company or industry boom results in an increase in output, jobs and investment in it. On a more aggregate level, a boom is a period of rapid economic expansion indicated by increasing output and income, employment, prices, profit and inflation rate.
Throughout the 1920s in the USA, a long boom took stock prices to peaks never seen. From 1920 to 1929, stocks in the US more than quadrupled in value. The same scenario played out in Nigeria between 1999 and 2008 when The Nigerian Stock Exchange, now the Nigerian Exchange Limited (NGX), enjoyed a decade long boom which peaked at All Share Index (ASI) of 66,371.20 and market capitalization of N15.64 trillion on 5th March 2008.
During any boom, stupendous fortunes are made. Many investors become convinced that stocks are a sure thing and borrow heavily to invest more in the market. In boom periods, investor’s confidence is high and no one wants to miss out on profits. Investors get carried away in their optimism, sometimes borrowing a lot of money to invest even in risky companies and ignoring warning signs.
When a boom extends beyond its reasonable life or if prices extend far beyond the fundamental growth trend where buyers become irrationally exuberant, it can turn into a bubble. Bubble, in an economic context, generally refers to a situation where the price for something, whether an asset, an entire sector or market exceeds its fundamental value by a wide margin. Speculative demand rather than intrinsic worth usually fuels the inflation of prices that precipitate bubble formation. Behavioral finance theory attributes stock market bubbles to cognitive biases arising from “herd behavior” which is doing something because everyone else is; ‘Short term thinking” which is just looking at the immediate returns, or thinking that you can beat the market and time a quick exit; and “cognitive dissonance” which is only accepting information that confirms an already held belief, and ignoring anything that does not. The stock market exemplifies suspension of disbelief mostly by market participants when the spectacular price surge is occurring. It is only in retrospect, after the bubble has burst, that they are recognized in regret. Other theoretical explanations of stock market bubbles have suggested that they are rational, intrinsic and contagious.
There are five stages in the life cycle of asset bubbles depicting the pattern to their rise and fall which can guide the unwary investor from getting entangled in their deceptive web. These are:
1) The “Displacement Stage” which occurs when investors get enamored by a “new paradigm” , e.g a huge decline in interest rate can sow seeds for a housing bubble.
2) In “Boom Phase”, the precursor triggers a frenzy which draws more and more speculators thereby orchestrating and transforming demand into a boom.
3) The “Euphoria Phase” is when caution is thrown to the wind, as asset prices skyrocket. New valuations are touted to justify the relentless rise.
4) In the “Profit Taking Phase”, the “smart investors” heeding the warning signals that the bubble has popped to the point of bursting, starts selling positions and taking profits. However, predicting the exact time a bubble will burst can be futile because markets can stay irrational longer than you can stay solvent.
5) In the “Panic Phase”, it only takes a relatively minor event to prick a bubble but once it bursts, the bubble cannot inflate again. In the panic stage, asset prices reverse course and descend as rapidly as they had risen.
When a bubble bursts, it can trigger a stock market crash, a general economic recession or even a depression. The damage caused depends on the economic sectors involved, whether the extent of participation is widespread or localized and to what degree debt is involved in inflating the bubble. Debt fueled equities bubble have been found to cause longer and more severe recessions.
The bursting of equities and real estate bubbles in Japan in 1989 – 1992 led to a ten year period of Stagflation often referred to as the “Lost Decade”. In the US, burst of the “dotcom bubble” in 2000 and the residential real estate bubble in 2007/2008 led to severe recessions.
The “Great Depression” in the US that lasted for several years emanated from bursting of asset bubble that occurred in 1929. History is replete with incidents of bubble in global financial markets, from the Dutch “Tulipmania” of the 17th century which was the first major financial bubble to the Nigerian stock market bubble and crash in 2008. When the bubble burst in Nigeria, the devastation wreaked incalculable havoc on the banking and real estate industries. It also completely wiped out retail investors from the market.
What resembles a boom is currently going on in the Nigerian stock market. It commenced in 2020 when the expansionary macroeconomic policy of the Federal Government to combat Covid19 – induced stagflation, misfired. Instead of the expanded money supply to flow into the productive sector as targeted by policy, it inundated the equities market, causing an unexpected bonanza. The equities market defied sour economic fundamentals in that year to appreciate by 50.03%, with ASI advancing from 26,842.07 it opened on 1st January 2020 to close at 40,270.72 on 31st December 2020.
That year, equities market capitalization grew from N19 trillion to N21.1 trillion. Growth continued in 2021 with ASI appreciating by 6.07% to close the year at 42,716.44 and market capitalization at N22.297 trillion. The surging equities market again beat every postulation attendant to the penultimate election year to appreciate by 20%, closing at 51,251.06 at end of 2022. Between 1st January 2023 and 30th May 2023, ASI grew moderately by 3.06% to end the month at 52,822.93.
Thereafter, it proceeded on a galloping race which took it to 68,143.34 on 8th September 2023, thus shattering its 15 years old record of 66,371.20 attained on 5th March 2008. Market capitalization advanced to N37.3 trillion on that day. Since the rally started in 2020, the ASI has advanced from 26,842.07 to 68,143.34 as of 8th September 2023, resulting in 154.5% appreciation. This is the 4th year of sustenance of the current rally which has metamorphosed into a boom.
Paradoxically, the boom is occurring when the economy is gripped by galloping inflation which started rising steadily from 11.02% in August 2019 and now trending around 25.8% according to August 2023 figures released by NBS. Can this boom therefore be a fall out from the attribute of equities to always match up with inflation or it is purely a speculative attack aimed at pecuniary gains.
When compared to the earlier stock market boom in Nigeria, the equities market caved in under the weight of a market capitalization of N15.64 trillion but current market capitalization is N37.3 trillion which some analysts believe can withstand further weight if the rally continues.
Another opinion is that this meteoric rise may be indicative of continued shallowness of the equities market despite the new stocks and commodities investment outlets.
While watching how the market plays out, retail investors who may not have access to hedging through derivatives can diversify beyond equities. In spite of everything, the cycle of boom and bust may not materially hurt a long term investor since with time, another boom will certainly come which can restore what had diminished.
https://www.vanguardngr.com/2023/10/boom-and-bubble-in-capital-markets/
‘It commenced in 2020 when the expansionary macroeconomic policy of the Federal Government to combat Covid19 – induced stagflation, misfired. Instead of the expanded money supply to flow into the productive sector as targeted by policy, it inundated the equities market, causing an unexpected bonanza’
Home prices in Gaza still holding up!
“There’s never been a better time to buy in Gaza.” — Gaza NAR.
🇦🇷 BREAKING – Israel Attacked with US Funded Weapons from UKRAINE 👹🇺🇲👹
https://www.bitchute.com/video/nSTzGLDEhNWy/
24 seconds.
Awkward…wonder when the $80 billion weapons stockpile Biden bequeathed the Taliban is going to start showing up in the hands of Islamist militant & terrorist groups worldwide.
Hubby’s telling me that’s a lie; they’re from Afghanistan. Like that’s any better. We disagree on the Ukraine situation so I suspect his comment is more “I follow better sources than you.” He’s in the “look how bad the Russian army looks, they can’t win” camp.
I was wondering how they were able to destroy IDF tanks.
Those developments do not threaten the CCP’s legitimacy. Words do. Beijing reacted so harshly to Baerbock’s speech because, to the CCP, contradicting the party line anywhere challenges the legitimacy of its rule.
Watch & learn, kids. As the increasingly pauperized middle and working class taxpayers in the FUSA start pushing back against globalist agendas, the oligarchy’s Democrat-Bolshevik Quislings and Deep State Chekists will move to criminalize free speech and non-Narrative Compliant BadThink. Forward, Soviet!
Don’t forget the re-education camps!
Crooked Hillary has ordained that 75 million “MAGA Republican extremists” are in need of “formal deprograming.” That’s quite a logistical feat to pull off, especially since most Deplorables know exactly how they got that way and have no intention of recanting.
In the second quarter of the year, foreign direct investment into China was just $4.9 billion, down 94% compared with the same period in 2021, according to the Nomura financial services group.”
Maybe offshoring our manufacturing base to a totalitarian Communist dictatorship that hates us wasn’t such a hot idea after all, regardless of its bipartisan support from the globalists’ Republicrat duopoly uniparty.
Not regardless. The CCP effectively greased palms.
An Israeli lawmaker speaks truth to power. People with nothing left to lose are the most desperate & dangerous opponents of all.
https://www.aljazeera.com/news/2023/10/8/israeli-lawmaker-blames-pogroms-against-palestinians-for-terrible-attacks
If Hezbollah & Iran join Hamas in attacking Israel, get ready for $10 a gallon gas (thanks, Joe, for draining the SPR which was supposed to be a reserve for national emergencies such as an oil shock)
https://news.yahoo.com/now-missiles-lebanon-threaten-blow-095441373.html
“get ready for $10 a gallon gas”
That was my first thought after hearing about this latest phony war.
That, and that my gut feeling tells me United States taxpayers will be on the hook for another $3 trillion, $5 trillion, $10 trillion of deficit spending to pay for it all.
I thought it was supposed to be for emergency national defense, not a hedge on price shock.
Does the growing number of MSM comparisons to the 1987 financial situation worry you?
Why Britain is on the verge of a cataclysmic financial crisis
Worrying parallels emerge between 1987’s stock market crash and 2023’s bond sell-off
By Matthew Lynn and Melissa Lawford 8 October 2023 • 6:00am
Britain Black Monday
Even almost four decades later, it remains an event scarred into the memory of the financial markets. After a violent storm had ripped across the country, knocking down trees and shuttering roads, trading systems that still relied on brokers shouting at each other across open floors had closed early for the weekend as the damage was cleared up.
As London trading re-opened on Monday, after closing jitters in New York the Friday before, the reaction was swift and brutal. The FTSE-100 fell 11pc in a single session, while in the United States the Dow Jones ended the day down by a terrifying 20pc.
…
https://www.telegraph.co.uk/business/2023/10/08/britain-heading-another-black-monday-stock-market-crash/
Here are all the ways market history is repeating itself amid panic over surging bond yields
Aruni Soni
Oct 7, 2023, 5:45 AM PDT
Recession
Virojt Changyencham/Getty Images
– In recent weeks, stocks, bonds, and housing have all drawn comparisons with previous episodes in US market history.
– Stocks are reminding some analysts of the late 1980s and 2008, while bond vigilantes are reliving the 1990s.
– The housing market also looks eerily like the early 1980s, when mortgage rates soared.
…
https://markets.businessinsider.com/news/bonds/stock-market-selloff-treasury-bond-yields-housing-market-mortgage-rates-2023-10
A reader sent these in:
Only the Treasury bond bear market from almost 200 years ago was longer than the one we are going through right now 😉
https://twitter.com/patrick_saner/status/1710267393933512898
Very interesting, is current bond bear market the longest in history? Bond data from 1830s is sporadic at best. 1835-1839 bond bear market occurred as Second Bank of U.S. ended in 1836 and state governments began a debt-financed internal improvements boom (i.e. infrastructure spending).
Plus, Andrew Jackson paid off debt in full in 1835 (base effects?). So “bear market” occurred in corporates & municipals I imagine
Surprised the 1960s / 1970s don’t make a bigger appearance here. I guess maybe because of intermittent rallies (1970, 1976), and because yields are so high drawdowns from total return are blunted?
https://twitter.com/JackFarley96/status/1710277149976899815
A jobs market so great, the likes of which you have never seen… 🤡
NY State and Metro
https://twitter.com/INArteCarloDoss/status/1710704251100385528
Latest Jobs Report looks good w/ headline numbers blowing away expectations, but the devil is in the details – here’s a plain-English thread on why this is a very troubling report🧵…
https://twitter.com/RealEJAntoni/status/1710301675234234566
TLDR: people supplementing incomes w/ part-time jobs are goosing the headline numbers while underlying economic fundamentals remain weak; people absent from workforce pushing down unemployment rate; earnings not keeping up with inflation; don’t expect the job gains to last…
https://twitter.com/RealEJAntoni/status/1710301699292749842
The lowest September gasoline demand in 23 years suggests all these new workers hired in September are really environmentally conscious. All 336,000 new workers taking a bike or walking to work apparently (or spent their signing bonus on an EV.)
https://twitter.com/LukeGromen/status/1710313209649828292
If equities were down 50% everyone would be freaking out. Long duration bonds are down 50% and everyone is relaxed and dreaming of soft landing. What is driving that?
https://twitter.com/MichaelAArouet/status/1710242520657956943
Anyone else feeling pressure at work? I’m feeling it big time. Sales down. Budgets slashed. Restructuring seems imminent by year end. I can’t remember a time in my industry that’s been this bad and I worked through the tech and housing bubbles.
https://twitter.com/StealthQE4/status/1710502306670690541
I co own a family business , this is as stressed as I’ve been in 27 years , August begin a pretty noticeable down turn , and I’m very short handed , probably have 8 jobs to fill company wide , pretty much work and insomnia. That’s about it these days. It’s getting bad all over.
https://twitter.com/TheFreeSpeechR1/status/1710503287764508881
The interest rate on a 30y fixed-rate mortgage is on course to 8%, highest level in 23yrs. By contrast, the yield on 30y US govt bonds is only at ~5%, which is the highest level since 2007. The main reason mortgage rates are so much higher than other long-term rates is that US mortgages can be prepaid w/o penalty, Axios’s @felixsalmon
writes: ‘Prepayability is bad for lenders, who are now charging a lot of money to cover their prepayment risk.’
https://twitter.com/Schuldensuehner/status/1710686474159390742
“The Fed hikes until something breaks.” The thing the Fed broke in this cycle is real estate liquidity. There are so few existing homes on the market that 28% of the current home supply is from builders, and those are expensive.
https://twitter.com/JeffWeniger/status/1710365016149401918
The longest duration bond ETF ($ZROZ) is down over 60% from its peak in 2020 and now has a negative return over the last 10 years. Bond ETF Returns…
https://twitter.com/charliebilello/status/1710660230621594052
The 3-Month Treasury Bill Yield has moved up to 5.63%, its highest level since January 2001. Two years ago this yield was 0.04%. The market is currently pricing in a 43% probability of another Fed rate hike (to 5.50-5.75%) at the December FOMC meeting.
https://twitter.com/charliebilello/status/1710646925064597881
The average US family health insurance premium has increased from $6,000 in 2000 to $21,000 in 2022. That’s a 249% increase, or 5.8% per year, more than double inflation. The biggest beneficiaries of this massive increase in costs: health insurance companies. UnitedHealth (largest US insurer) is up 4,120% since 2000 vs. 340% gain for the S&P 500.
https://twitter.com/PeterMallouk/status/1710370771359424841
The Fed’s balance sheet is now over $1 trillion lower than its peak in April 2022. How much more QT to unwind the massive QE from March 2020- April 2022? $3.8 trillion.
https://twitter.com/charliebilello/status/1710300250559127769
“My shoes are ridiculously slippery”
https://twitter.com/NoCapFights/status/1709370320325632263
“If equities were down 50% everyone would be freaking out. Long duration bonds are down 50% and everyone is relaxed and dreaming of soft landing. What is driving that?”
I have some simple answers to that one, plus one complicated one.
1) Mainly wealthy people own bonds, while the masses speculate in stocks.
2) Since stock market moves are of wide punlic interest, the MSM heavily covers it, and cheerleads stock market gains. Conversely, stock market losses are portrayed as a national tragedy. Stock market crashes are a leading indicator of recessions and job loss, also making them newsworthy.
By contrast, nobody but a few rich folks suffer in a bond market crash (except for anyone who needs a mortgage), so the MSM ignores it.
3) There is an idea in financial economics called The Equity Premium Puzzle, which tries to explain why stocks have outperformed bonds over decades. I don’t personally claim to understand this form of irrationality in market behavior: Why would anyone stay in bonds if they were a guaranteed way to lose money?
I last read about this before Quantitative Easing started; however I note that QE is a good explanation for stock market ooutperformance in the recent decade. Whether Quantitative Tightening will reverse the effect remains TBD.
It’s not just stocks – high bond yields are also laying waste to commodities, currencies, and housing
Filip De Mott
Oct 8, 2023, 5:15 AM PDT
New York stock exchange
(Photo by Mario Tama/Getty Images)
– The Treasury bond market sell-off marks one of the worst crashes in history.
– High yields are hitting stocks, but other assets across financial markets are also reeling.
– Commodities, crypto, housing and foreign currencies have been slumping too.
…
https://markets.businessinsider.com/news/bonds/treasury-bond-yields-stocks-oil-gold-copper-crypto-dollar-mortgages-2023-10
It stands to reason that the lowest rates in history (think negative rates) would be followed by a historic reaction in the opposite direction. Things could easily get a lot worse. Apparently we are now adding a trillion a month to the debt. It will all be fine, right?
“This one joke is enough to give you all the life lessons you need” –
Sadhguru-The Mystic
Aug 17, 2023
https://www.youtube.com/watch?v=dhIkLozpN6o
1:29.
Ha!
But…but…compassion!
https://dnyuz.com/2023/10/07/migrant-crisis-tests-new-yorkers-who-thought-they-supported-immigration/
Let he who has never raided his daughter’s college fund to buy drugs & hookers cast the first stone.
https://nypost.com/2023/10/06/irs-sought-charges-for-hunter-biden-raiding-40k-from-his-daughters-college-fund-for-drugs-hookers/
There wasan old Warren Zevon song that fortold of this, all you have to do is swap “Lawyers, Guns and Money” for ” crack cocaine and hookers.”.
“The IRS considered hitting first son Hunter Biden with felony tax charges over his removal of nearly $40,000 from his daughter’s college fund and failure to report it as additional income on his 2019 returns — while still using much of the windfall to pay for crack cocaine and hookers.”
Lawyers, Guns and Money · Lyrics Warren Zevon
I went home with the waitress, the way I always do
How was I to know, she was with the Russians, too?
I was gambling in Havana, I took a little risk
Send lawyers, guns and money, dad, get me out of this, ha
I’m the innocent bystander
Somehow I got stuck between the rock and a hard place
And I’m down on my luck, yes I’m down on my luck
Well, I’m down on my luck
And I’m hiding in Honduras
I’m a desperate man
Send lawyers, guns, and money
The shit has hit the fan
Alright, send lawyers, guns, and money
Huh, yeah
Lawyers, Guns and Money · Warren Zevon
https://youtu.be/F2HH7J-Sx80?si=PkKwutgf7pvi7iR_
Docking myself for spelling error.
There wasan old Warren Zevon song that foretold.
Don’t be hard on yourself. Here’s a “t” for you.
“Don’t be hard on yourself. Here’s a “t” for you.”
Muchas gracias.
If I get any worse I’ll sign the Biden/Harris adult invader ESOL classes. Who knows I might even get a free phone, a debit card with $500 on it and a free bus ticket to the city of my choosing.
If I get any worse
A buddy of mine sold his cabin cruiser after trying to get up to speed while still at anchor. Twice. He has a kayak now.
“He has a kayak now.”
Tell him not to use it for fishing. 🙂
Shark attacks fisherman on kayak off the Hawaii coast
https://youtu.be/jZQJv5gW27I?si=p-lnBVGOUsi9XFOQ
Or a space: “was an”
The dry humor of Patrick Boyle. The Inevitable Decline of WeWork
https://www.youtube.com/watch?v=n3Q_4vjPMSE
War as an “Investment”
The Bizarre Business-Speak of Mass Killing
https://bracingviews.substack.com/p/war-as-an-investment
Did you know the Russia-Ukraine War is a great “investment” for the United States? A terrific opportunity to kill lots of Russians and to destroy lots of their military equipment at a relatively cheap cost to us? (Just don’t mention the price paid by Ukraine.) It gives new meaning to the expression “making a killing” on the “market.”
To Gordon Gekko’s infamous “greed is good” speech we must now add “war is good.” That war is “right.” That it “works”—at least for America, allegedly.
War as an “investment” truly symbolizes the moral bankruptcy of conventional discourse in the U.S. political mainstream. Instead of war being a calamity, a catastrophe, a realm of death and destruction, dare I say even a mortal sin of grievous evil, we’re told that instead it’s an investment that’s paying dividends, especially in that growth stock known as Ukraine.
Even body counts and truck counts from the Vietnam War era are being brought back to show what a great “investment” the Ukraine War has been for the U.S. In her latest, Caitlin Johnstone cites war-lover Max Boot for his advocacy of the Russia-Ukraine War as a continuing investment opportunity for the U.S., including the use of body and truck counts as a measure of progress:
“Russia has lost an estimated 120,000 soldiers and 170,000 to 180,000 have been injured,” [Max] Boot writes [in a Washington Post op-ed]. “Russia has also lost an estimated 2,329 tanks, 2,817 infantry fighting vehicles, 2,868 trucks and jeeps, 354 armored personnel carriers, 538 self-propelled artillery vehicles, 310 towed artillery pieces, 92 fixed-wing aircraft and 106 helicopters.”
“The Russian armed forces have been devastated, thereby reducing the risk to front-line NATO states such as Poland and the Baltic republics that the United States is treaty-bound to protect,” Boot continues. “And all of that has been accomplished without having to put a single U.S. soldier at risk on the front lines.”
“That’s an incredible investment,” gloats Boot.
At no time in his masturbatory gushing about how many Russians this war has helped kill does Boot make any mention of the immense toll this deliberately provoked and completely unnecessary war has taken on Ukrainian lives. Their deaths and dismemberments and displacement are the largest price being paid into this “investment” by far, but Boot doesn’t deem them worthy of even a footnote.
We’ve been seeing this “investment” line being promoted with increasing frequency by US empire managers and their apologists. In an article published in the Connecticut Post last month, Senator Richard Blumenthal assured Americans that “we’re getting our money’s worth on our Ukraine investment.” A few days prior to that Senator Mitt Romney had described the proxy war as “the best national defense spending I think we’ve ever done,” because “We’re diminishing and devastating the Russian military for a very small amount of money… a weakened Russia is a good thing.” In December Senate Minority Leader Mitch McConnell said that funding the proxy war is “a direct investment in reducing Vladimir Putin’s future capabilities to menace America, threaten our allies and contest our core interests.” Last November the imperial war machine-funded think tank Center for European Policy Analysis published a report arguing that “US spending of 5.6% of its defense budget to destroy nearly half of Russia’s conventional military capability seems like an absolutely incredible investment.”
Imagine the vacuity, the bankruptcy, the venality, the sinfulness of writing about war and killing as “an absolutely incredible investment.” And what is our ROI, our return on investment? A lot of dead and wounded Russians and Ukrainians, a devastated and poisoned landscape, millions of war refugees, and an increasing likelihood of a wider war that could possibly go nuclear. ROI, indeed.
War is many things, but it is not an “investment.” People who talk and write like this have no moral center. They are soulless. They are automatons of war.
“People who talk and write like this have no moral center. They are soulless. They are automatons of war.”
+1
World’s Oldest Profession: Prostitution
World’s Second Oldest Profession:
Arms sales
Another died of suddenly:
Shawna Trpcic, Costume Designer for ‘The Mandalorian’ and ‘Ahsoka,’ Dies at 56
My understanding is that this woman was the top costume designer for recent Star Wars stuff. From pictures she didn’t look obese.
She’s not the only person involved with the recent Ahsoka series who suddenly died. Ray Stevenson, who portrayed dark Jedi Baylan Skoll, collapsed on set while working on another project.
Safe and effective.
Do you want to be imprisoned in a 15 minute city?
Then vote D.
LOL@ I’ve been in a “15 minute town” since Thursday afternoon.
40 minutes to the nearest Wal-Mart and an hour to the nearest Home Depot.
The One World Order peops are coming after your comfortable suburban home!
My guess is Biden will back up this movement, and Trump will oppose it.
https://www.npr.org/2023/10/08/1203950823/15-minute-cities-climate-solution
SFHs are rayciss, yo!
https://nypost.com/2023/02/07/democrats-from-biden-to-hochul-targeting-suburban-homeowners/
Owning anything is racist, unless you’re a billionaire
As long as The Squad served as wrecking balls against Heritage America, their globalist patrons were happy to sponsor them, but if they commit heresy by failing to Stand with Israel, color them gone.
https://www.foxnews.com/politics/rep-rashida-tlaib-critic-israel-silent-hamas-terror-attacks-israeli-death-toll-climbs-600
Visitin a wealthy church in Poway. Getting a budget report: Costs are up (inflation), revenues are down by 1/3, staff attrition or more contributions are the way forward.
Attendance is unisually low
Maybe the members knew today was Pledge Drive Sunday?
Charlie Daniels Long Haired Country Boy Live Perfomance
“Long Haired Country Boy”, is a song written and performed by the Charlie Daniels Band and released on their 1974 album Fire on the Mountain. It was first released as a single in April, 1975 and was re-released as a single in January, 1980.
https://m.youtube.com/watch?v=CgGncrM_5dk
Maybe the members knew today was Pledge Drive Sunday?
A lot of pressure in those ecclesial communities to tithe. Those jumbotrons don’t pay for themselves.
I also get hit up by teens trying to fundraise a “missionary” trip to someplace like Ecuador.
One thing I have noticed about Protestant Megachurches (or not so mega) on their websites is that they have huge full time staffs:
Pastor
One or more associate pastors
One or more “couples pastors”
Young adult pastors
Childrens pastors
Music ministry
A small army of supp.rt staff,
And fine clothes and cars had by all.
Such so called churches are a construct of man.
I got in trouble for suggesting something to that effect in my parochial grade school religion class.
And in California: LGBTQ clergy
Has the “oh sh!t” moment arrived for the housing market?
Fox Business
REAL ESTATE
Published October 7, 2023 7:00am EDT
Redfin CEO issues dire warning on US’s ‘rock bottom’ real estate market: The ‘American dream’ is in trouble
Interest rates are ‘very unlikely to ease’ by the end of 2023, Redfin CEO warned
Comments
By Kayla Bailey FOXBusiness
Redfin CEO Glenn Kelman: Have to figure out how the next generation can buy into our society
Redfin CEO Glenn Kelman discusses the current state of the housing market, issues in the industry, Zillow offering 15% down payment loan program and why the company left the National Association of Realtors.
Redfin CEO Glenn Kelman reacts to the U.S. real estate market, warning homebuyers that relief from the “rock bottom” economic conditions remains uncertain in 2024.
EXPERT SAYS ‘SOME KIND OF MIRACLES’ NEEDED IN ‘WORLD OF REAL ESTATE’ TO REVERSE TRENDS
“You’ll have to ask the Fed when the market’s going to get better, because it seems very unlikely that interest rates will ease by the end of this year. So, the only real question is whether we’re going to catch a break entering the home buying season of 2024. But I think most people have written off the 2023 home buying season,” he said earlier this week.
…
https://www.foxbusiness.com/real-estate/redfin-ceo-issues-dire-warning-uss-rock-bottom-real-estate-market-american-dream-trouble
Say…isn’t Turkey a NATO “ally”?
https://twitter.com/WarMoniitor/status/1711083962511032598
Ok, the 15 minute cities arent going to be like those charming cities built 150 years ago before cars.
The 15 minute cities will be more like surveillance prisons, you can’t get out without permission , dictated consumption and austerity, no freedom or rights. Small spaces, probably the size of a pod.
Do you really think the One World Order , who wants the masses to own nothing, eat bugs, hacked and injected, surveillance 24/7 is going to create nice 15 minute cities. Ugly prison like , small space.
How are your crypto HODLings holding up to the Fed’s higher-for-longer interest rate policy shift?
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‘Did Mark Cuban’s wallet just get drained?’: Billionaire loses nearly $1M through crypto scam. What happened and how can you avoid Cuban’s costly mistake?
You likely can’t afford to lose as much as the investing juggernaut.
Dallas Mavericks owner Mark Cuban reacts during a timeout in a game against the Golden State Warriors at the American Airlines Center in Dallas, Texas, March 22, 2023
Tim Heitman / Getty Images
We adhere to strict standards of editorial integrity to help you make decisions with confidence. Please be aware that some (or all) products and services linked in this article are from our sponsors.
Bethan Moorcraft
By Bethan Moorcraft
Oct. 06, 2023
4 min read
|
Listen
Dallas Mavericks owner Mark Cuban lost nearly $1 million in cryptocurrency — and it’s possible he fell prey to a common scam that all Americans need to be wary of.
The possibility of a sizable theft was first flagged on Sept. 15 by a blockchain observer on X (formerly known as Twitter).
“Did Mark Cuban’s wallet just get drained? Wallet inactive for 160 days and all assets just moved,” user WazzCrypto posted on the platform along with a screenshot showing a string of transfers — all within a few minutes — out of a digital wallet bearing Cuban’s name.
Cuban confirmed his misfortune to crypto news outlet DL News. The billionaire businessman and investor believes he downloaded a dodgy version of the popular crypto wallet software MetaMask “with some s— in it.”
He told the outlet: “I went on MetaMask for the first time in months. They must have been watching.”
Altogether, approximately $870,000 across 10 cryptocurrencies was taken from Cuban, according to DL News.
…
https://moneywise.com/news/top-stories/mark-cuban-loses-nearly-1m-in-crypto-scam
Unpossible! Crypto is safe and effective!!
But…but…muh secure wallet!
CRYPTO WARS
Binance Founder CZ Says SBF’s Decision to “Bad-Mouth” Him to US Authorities Was “Not Smart”
In a new podcast, Changpeng Zhao tells the coauthor of Billion Dollar Whale about his tumultuous relationship with rival cryptofinance founder Sam Bankman-Fried—and his key contribution to the fall of FTX.
By Tom Wright
September 18, 2023
…
https://www.vanityfair.com/news/2023/09/binance-founder-cz-says-sbfs-decision-to-bad-mouth-him-to-us-authorities-was-not-smart
Image file for the LOLZ, Hot Mess Edition:
https://ibb.co/frsvTn4
I wear a N95 mask for when I’m working with this, never for a minor respiratory illness with an infection fatality rate of 0.00000000001%
I wear a N95 mask
Not to offend, but a P100 would be better.
That’s a lot of work for one guy to get that dumpster looking like that.
I had a lot of debris staged and in place before this weekend, so I didn’t have to move it very far.
The soot/sludge I raked and shoveled by hand into a wheelbarrow all this weekend, and I’ll be back again this Friday for more…
Image files of interest to follow…
“The soot/sludge I raked and shoveled by hand into a wheelbarrow all this weekend,”
That makes for a well earned good nights sleep.
I miss my head hitting the pillow after a long hard days work, very few things in this world feel better or more rewarding.
‘Fear trade’: What Israel-Hamas war means for oil prices and financial markets
Provided by Dow Jones
Oct 8, 2023 12:12 PM PDT
By William Watts
Analysts say conflict could put end to growing Iranian crude exports, tightening supply
Oil traders braced Sunday for a potential “fear trade” that could push up crude oil prices, at least in the short term, after a surprise attack on Israel by Palestinian militants in Gaza threatened to put added scrutiny on rising Iranian oil exports.
The conflict may also hold consequences for talks aimed at normalizing relations between Saudi Arabia and Israel.
“There is definitely going to be a fear trade put in place. While in the short term there is no impact directly on supply, it’s obvious how things play out over the next 24 to 48 hours could change that,” Phil Flynn, analyst at Price Futures Group in Chicago, told MarketWatch.
Movements in oil prices, meanwhile, will also serve as a gauge for broader market worries around the conflict, analysts said.
…
https://www.morningstar.com/news/marketwatch/20231008186/fear-trade-what-israel-hamas-war-means-for-oil-prices-and-financial-markets
Does it seem odd that the US stock market had a blowout Friday in the face of a blowout jobs report, with hints of higher inflation and more Fed rate hikes to follow?
Yahoo
Business Insider
US stocks drop as blowout jobs report sends Treasury yields soaring
Filip De Mott
Fri, October 6, 2023 at 2:34 PM PDT·2 min read
A trader at the New York Stock Exchange puts his hand on his face in September 2008.
Richard Drew/AP
– Stock futures fell Friday after the blowout September jobs report sent US bond yields soaring.
– Last month, 336,000 new positions were added, well above estimates for 170,000.
– Bonds extended their sell-off, with the 10-year Treasury yield jumping as much as 14 basis points.
US stocks fell Friday as the September jobs report came in much stronger than estimated, blunting hopes for a more dovish Federal Reserve.
The Labor Department reported that 336,000 new jobs were added, well above forecasts for 170,000. However, wage growth did slow, and unemployment held at 3.8%.
The report added fire to the ongoing Treasury market sell-off, causing the 10-year yield to spike as much as 14 basis points to 4.85% before easing back a bit. Meanwhile, the 30-year bond rate surged past 5%.
“Not only does today’s report indicate the economy is almost too hot to handle and the Fed will need to respond with more rate hikes, it reinforces the higher-for-longer narrative that has been spooking bond markets for the past few weeks,” Principal Asset Management’s Seema Shah said. “Markets want the perfect landing and instead they are facing an upward sloping path.”
…
https://finance.yahoo.com/news/us-stocks-drop-blowout-jobs-213403925.html
DOW 30 +0.87%
S&P 500 +1.18%
NASDAQ 100 +1.70%
Legendary investor Jeremy Grantham warns the S&P is likely to crash by 30% — and could nosedive 50% if ‘a couple of wheels’ fall off
Theron Mohamed
Oct 6, 2023, 3:53 AM PDT
Jeremy Grantham
Alison Yin/AP Images for DivestInvest
– The S&P 500 will most likely plunge by 30% and could even be cut in half, Jeremy Grantham says.
– The bubble expert said there would probably be a recession next year and house prices would slump.
– Grantham also dismissed bitcoin as an “elaborate scam.”
…
https://markets.businessinsider.com/news/stocks/grantham-spx-stock-market-outlook-crash-house-prices-recession-bitcoin-2023-10?utm_medium=referral&utm_source=yahoo.com
DOW 30 +0.87%
S&P 500 +1.18%
NASDAQ 100 +1.70%
US stocks drop as blowout jobs report sends Treasury yields soaring
Filip De Mott
Oct 6, 2023, 6:34 AM PDT
A trader at the New York Stock Exchange puts his hand on his face in September 2008.
Richard Drew/AP
– Stock futures fell Friday after the blowout September jobs report sent US bond yields soaring.
– Last month, 336,000 new positions were added, well above estimates for 170,000.
– Bonds extended their sell-off, with the 10-year Treasury yield jumping as much as 14 basis points.
…
https://markets.businessinsider.com/news/stocks/stock-market-news-today-jobs-report-treasury-bond-yields-dow-2023-10
The collapse in Treasury bonds now ranks among the worst market crashes in history
Filip De Mott
Oct 5, 2023, 2:28 PM PDT
A bond trader shouting on the phone.
The bond market has been suffering as yields continue to climb. The 30-year Treasury surpassed 5% for the first time in decades, with experts seeing a similar path ahead for the 10-year note.
Scott Olson/Getty Images
– Since March 2020, Treasury bonds with maturities of 10 years or more have plummeted 46%, Bloomberg says.
– That’s just under losses seen in the stock market when the dot-com bubble burst.
– The bond rout is worse than the one seen in 1981 when the 10-year yield neared 16%.
…
https://markets.businessinsider.com/news/bonds/treasury-bond-yields-market-selloff-market-crashes-dot-com-bubble-2023-10
‘The bond rout is worse than the one seen in 1981 when the 10-year yield neared 16%’
We should call him brown spot Jerry.
Nobody seems willing to acknowledge just yet that:
1) the bond market CR8R extends to the mortgage market, and the mortgage market underpins housing prices;
2) Treasurys and stocks are substitute assets in investor portfolios. Maybe the price of one asset class can CR8R indefinitely while the other soars without limit. But count me as skeptical, particularly since I am old enough, but also young enough, to remember witnessing Black Monday first hand.
witnessing Black Monday first hand.
I was at work and kids at home like little birds with their beaks open. Didn’t really notice.
It was Ben Bernanke who instituted Quantitative Easing as the Fed’s primary bailout strategy to escape the economic consequences of the Great Recession. It just so happens that Powell was chair when it all unraveled.
My sources tell me that long-term US Treasury bonds have crashed by 46% over the same period when the S&P 500 has risen by 55%.
Can anyone offer insights on how long this valuation anomaly can persist?
Investor’s Business Daily
Crash In Long-Term Treasury Bonds Now One Of Worst Implosions Ever
MATT KRANTZ 10:46 AM ET 10/06/2023
It’s time to face the facts: The crash in long-term Treasury bonds is reaching epic proportions. It’s right up there with the tech bust of 2000 and housing debacle of 2009.
The SPDR Portfolio Long-Term Treasury ETF (SPTL), which owns U.S. government debt maturing in at least 10 years, plunged more than 49% in price from its high in March 2020. That’s an unnerving drop even for stocks, which are expected to be volatile.
It’s downright devastating for bonds, which investors generally buy in large amounts for stability and income. Making the Treasury crash hurt more is the fact the S&P 500 is up nearly 55% in that time.
The pain is relentless. The yield on the 10-year Treasury rose from 4.6% to 4.8% just this week, sending the bonds’ prices lower. But such seemingly small rises in yield mask a brutal drop in the prices of the bonds going on for years. Bond prices fall as yields rise.
“U.S. Treasury bonds (the biggest and deepest market in the world) that mature in 10 years or more have slumped 46% since peaking in March 2020,” said Charles Schwab (SCHW) strategist Jeffrey Kleintop in a Tweet. “That’s just shy of the 49% plunge in U.S. stocks in the aftermath of the dot-com bust at the turn of the century.”
…
https://www.investors.com/etfs-and-funds/sectors/bonds-crash-in-long-term-treasuries-is-now-bonafide-epic-meltdown/
These 4 charts show how the bond meltdown stacks up against some of the worst-ever stock-market crashes
George Glover
Oct 6, 2023, 4:41 AM PDT
Longer-term bond prices have cratered in one of the worst collapses in market history.
Lewis Krauskopf/Reuters
– Longer-duration Treasury prices have plunged in recent weeks, driving benchmark 10-year yields toward 5%.
– The collapse now ranks among the worst in history.
– These charts show how the meltdown compares to previous market crashes, including the 2008 financial crisis.
US bond prices have plummeted in recent weeks, turning what had already been a bad stretch into one of the market’s worst-ever routs.
Yields on 10- and 30-year US Treasurys are approaching 5% for the first time since 2007 with investors fretting that the Federal Reserve will keep interest rates at their current level well into 2024 in a bid to kill off inflation.
Long bonds have never had a run this bad, according to data from Bloomberg – with the losses the asset class has racked up since March 2020 even exceeding a dreadful period during the 1980s, when the Fed raised borrowing costs as high as 16%.
Over the past three-and-a-half years, iShares’ 20+ Year Treasury ETF, which trades under the ticker TLT and tracks longer-duration government bond prices, has tumbled a staggering 44%.
To capture the magnitude of that sell-off, bondholders right now are probably feeling even worse than stock traders did in 2022.
…
https://markets.businessinsider.com/news/bonds/treasury-bond-yields-crash-2008-financial-crisis-dot-com-bubble-2023-10
Dumb question of the day: Given the Fed is reducing its Treasury bond HODLings through Quantitative Tightening, why doesn’t at least a 46% CR8R show up in this chart?
https://fred.stlouisfed.org/series/TREAST
I most certainly don’t claim any expertise in central bank accounting procedures.
Their balance sheet is recorded at cost.
Thanks.
To reveal my ignorance of accounting principles, at what point does a cost basis get reconciled with market reality?
My somewhat educated guess: unrealized losses become realized at sale.
Losses are realized at the grocery checkout.
Fun comparison: Indexing both stocks (S&P 500 Index) and Treasury bonds to 1.00 before the recent market ructions, their relative values after a respective 55% increase in stock valuations and 46% decrease in Treasurys are 1.55 and 0.54. So the loss in Treasury values relative to stocks is 1- 0.54/1.55 = 65%.
I’m no expert, but I suspect this may eventually look like a tremendous arbitrage opportunity when viewed through the rear view mirror.
‘because of the political/economic system and because of the large interference of the government and state-owned enterprises…there will always be a political question on how to share the losses associated with events like this one’
Aka fook the gringo first and mostest, but every body is getting a bite of this sh$t sandwich.
“…every body is getting a bite of this sh$t sandwich.”
Don’t forget that communism is all about leveling the economic playing field.
‘Ignominy comes quickly in China. Just a few years ago, Evergrande Group was the pride of the nation. The real estate giant was for a time China’s biggest constructor with more than 1,300 projects in 280 cities to date. And through sport, specifically soccer, it became the poster child for a new era of Chinese dominance’
I blogged all about this sorry soccer episode. Like the vast majority of what China touches, it died in the arse.
‘Liu Jianguo, a 46-year-old teacher in the second-tier city of Guiyang, just bought a new apartment with help from his parents. He says that in his province, Guizhou, prices are low and that the time had come to buy’
via GIPHY
‘Beijing ordered state banks to go on a lending spree. In the five years starting in 2009, Chinese banks extended an amount of credit that was roughly equal to that in the entire U.S. banking system, even though at the end of 2008, the Chinese economy was less than a third the size of America’s. And the lend-a-thon continued long afterwards’
via GIPHY
‘Beijing technocrats had long dictated outcomes, so that was the approach they adopted in 2008. As they overpowered market forces in China, they prevented the corrections that swept market economies beginning that year. Yet because Chinese officials were determined to avoid a downturn at home, the underlying imbalances in China’s economy became larger’
‘Going back to the stimulus in 2009, it was clear that the reliance on property, land sales, and debt for growth was unsustainable,’ Andrew Collier, now managing director of Hong Kong-based Orient Capital Research, told me. ‘I witnessed this on numerous trips to various provinces starting in 2006 for Bank of China where the overbuild in property in rural areas was quite obvious along with the ignorance of local officials about basic economics. Beijing ignored these problems until around 2016 because it was too hard to control and too convenient to use’
It’s been a long strange trip blogging about all this.
I didn’t think the PBOC would be able to kick the can for so long.
The longer the day of reckoning is postoned, the deeper the eventual CR8R when markets correct.
“As they overpowered market forces in China, they prevented the corrections that swept market economies beginning that year.”
This is an example of what I mean by ‘postponed’.
Much can be postponed with debt, but little can be improved.
‘Going back to the stimulus in 2009, it was clear that the reliance on property, land sales, and debt for growth was unsustainable,’
In fairness, hasn’t real estate bubble stimulus been a key part of US economic policy going back at least to 1992?
been a long strange trip blogging about all this
We’ve been following along.
Stolen elections have consequences.
https://twitter.com/StealthQE4/status/1711023272240751036
The end game: serfdom.
Stolen elections have consequences.
The message from the clip is that it’s because of corporate greed, not because of trillions in government spending and deficits. These people are all going to pull the D lever again next year.
The message from the clip is that it’s because of corporate greed, not because of trillions in government spending and deficits. These people are all going to pull the D lever again next year.
The folks behind the R lever spend spend spend as well.
Yes, they do.
Florida couple saves $100,000 after deciding to ‘go bare’ by not purchasing wind and flood coverage
ABC Action News
2 days ago
In our ongoing series “Price of Paradise,” we focus on the rising costs of living in Tampa Bay. Some residents are choosing to go without homeowners insurance rather than pay double-digit rate increases. A St. Pete Beach couple made that decision years ago, but an industry expert warns taking on that high level of risk isn’t for everyone.
https://www.youtube.com/watch?v=zCZBA2k5Ey0
4:40.
Remind me again what we gained from the neocon invasion of Iraq.
https://twitter.com/leslibless/status/1710814280247849148
How can investors afford to hold investment properties vacant, especially when housing prices are falling in many parts of the US? Don’t they have loans that have to be repaid out of rental income?
The Real Deal Logo
National
Millions of homes are vacant despite squeezed U.S. housing market
A housing crisis within a housing crisis
Housing Starts Dip to 3-Year Low: Census Bureau
(Getty)
Oct 8, 2023, 3:00 PM
By TRD Staff
The U.S. is in the midst of a housing crisis, but there’s still plenty of millions of empty homes.
Indeed, a recent analysis of the 2022 American Community Survey by LendingTree Inc. has unveiled a perplexing phenomenon in the United States — an estimated 5.5 million vacant housing units in the nation’s 50 largest metro areas, amounting to an 8 percent housing vacancy rate, the San Francisco Business Times reported.
This is at a time when the housing market is grappling with dwindling inventory and soaring prices, with the median price of new homes sold in August hovering around $430,300.
The reasons behind the vacancy glut are multifaceted: about 26.6 percent of these homes are empty because they are available for rent, while 17 percent remain vacant as they are used only part-time, like vacation or second homes. Another 8 percent are in a state of repair or renovation.
…
https://therealdeal.com/national/2023/10/08/millions-of-homes-are-vacant-despite-squeezed-u-s-housing-market/
I ask a similar question about everyone who seems have dropped out of the workforce. Even if they move into their parents’ basement they still have some bills to pay.
Based on recent experience, extra food is far cheaper to cover than another rent or mortgage payment.
Oct 7, 2023 – Economy & Business
Get ready for 8% mortgages
Felix Salmon, author of Axios Markets
Data: FactSet; Chart: Axios Visuals
The interest rate on a 30-year fixed-rate mortgage is the second most salient price in the American economy, after only the price of gas. And it looks like it’s going to hit 8% sooner rather than later.
Why it matters: A world of 8% mortgages is one Americans haven’t seen in over 23 years. The last time mortgage rates were that high, Bill Clinton was president, Brad Pitt married Jennifer Aniston, and Apple Computer was worth $15 billion — a mere 0.5% of its current value.
By the numbers: A $500,000 30-year mortgage would have cost $1,972 per month at the 2.8% mortgage rate that was available in early 2021. Today, with a 7.9% rate, that payment would be $3,488 — a 77% increase.
Between the lines: More than 100,000 Americans have taken out mortgages in 2022 and 2023 with an interest rate above 8%, per Black Knight, where a spokesperson tells Axios that “we expect that number could continue to press higher in coming weeks.”
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https://www.axios.com/2023/10/07/get-ready-for-8-percent-mortgages
“By the numbers: A $500,000 30-year mortgage would have cost $1,972 per month at the 2.8% mortgage rate that was available in early 2021. Today, with a 7.9% rate, that payment would be $3,488 — a 77% increase.”
There is another seldom mentioned perspective, which reflects that incomes don’t magically increase with interest rates. If my income stays the same, and I could only afford a $1,972 per month mortgage before rates increased, then I can no longer afford a $500,000 30-year mortgage afterwards. In fact, I now can only afford a $1,972 / $3,488 × $500,000 =
$282,683 mortgage, which is a
1 – $282,683 / $500,000 = 43% reduction in the amount of leverage I can apply towards a home purchase.
If everyone who wants to borrow money to buy a home is in the same boat, them you can see that mortgage rate increases have driven a lot of housing demand destruction which the likes of Mr. Salmon seem to persistently overlook.
Yahoo
Yahoo Finance
US futures tumble as Middle East conflict rattles markets: Stock market news today
Karen Friar
Mon, October 9, 2023 at 3:27 AM PDT·2 min read
In this article:
Stocks sank ahead of the bell on Monday as the Middle East conflict added a dose of geopolitical risk to the interest-rate and inflation concerns already facing markets.
Dow Jones Industrial Average futures dropped roughly 0.4% or about 130 points. S&P 500 futures lost about 0.5%, while contracts on the tech-heavy Nasdaq 100 fell almost 0.7%.
Islamist militant group Hamas launched a large-scale attack on Israel on Saturday, prompting a declaration of war in response. That has rattled markets, as investors worry that another full-blown conflict could join the war already being waged by Russia and Ukraine.
“Geopolitical risk doesn’t tend to linger long in markets, but there are many second order impacts that could come through in the weeks, months and years ahead from this weekends’ developments,” Deutsche Bank strategist Jim Reid said.
Oil prices jumped as much as 5% after the attack, amid speculation that key crude-producing countries in the region could be pulled into the fray. WTI crude oil futures and Brent crude futures were trading about 3% higher at last check as fighting enters its third day. Meanwhile, safe-havens gold and government bonds were in demand.
A sustained rally in oil could add to the inflationary pressures that already have investors bracing for another interest-rate hike by the Federal Reserve.
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https://finance.yahoo.com/news/us-futures-tumble-as-middle-east-conflict-rattles-markets-stock-market-news-today-102754346.html