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An Investment That Shares At Least One Thing In Common With A Ponzi Scheme

A report from the Durango Herald in Colorado. “Dave Bowman is starting to reconsider his choice to buy a home in Durango Hills. He and his wife bought the four-bedroom home at the end of September. It is nestled in a thinned stand of ponderosa pines at the toe of Missionary Ridge, not far from the southern edge of the 2002 fire. Wendy Most, a State Farm insurance agent in Durango, wrote the couple a quote for homeowners insurance. But six days before closing, the State Farm office called to inform the Bowmans that it could not write them a policy. ‘If I would have known it was gonna be this nightmare, I might not have bought this house,’ Dave said, as welders crackle behind him, rebuilding his wooden deck with fireproof metal.”

“Around September 2023, something – likely the maximum risk score the company was willing to insure – definitely changed. Suddenly, addresses in parts of Durango West, Forest Lakes, Edgemont developments and near Purgatory Resort could not be insured. William Borkett, the treasurer of the Cascade Village HOA, said American Family Insurance suddenly declined to renew coverage of the development’s condominium buildings and community center in June 2023. After an exhaustive search, he was able to find one option: a high-risk pool. The HOA’s annual property and liability premiums jumped from $57,000 annually to $569,000. The 10-factor increase caused HOA fees for condo owners to jump $3,900. ‘It’s significantly impacted the owners,’ Borkett said.”

“The way insurance brokers and Colorado Insurance Commissioner Michael Conway see it, there are a few escape valves still in place to protect consumers. The first may be changing economic trends. ‘If interest rates start to come down, reinsurers will want to employ their capital in riskier ways than they are right now,’ Conway said.”

The Pensacola News Journal. “Florida property owners have been struggling to cope with soaring home insurance premiums, and now they’re experiencing another rising cost: HOA fees. However, condo owners are experiencing the most significant jump in HOA fees. What’s driving those fees for condo owners is an ugly mesh of inflation, home insurance premiums and a law stemming from the collapse of the Champlain Towers in Surfside, Florida, in June 2021. In Altamonte Springs, residents of Lakewood Park Condos told WESH 2 that their HOA fees increased nearly 100%. Owners living in the complex’s smallest unit, a 649-square-foot condo, now pay $712.93 monthly for their HOA fees.”

“A Spectrum News report revealed that the Wekiva Country Club Villas Homeowners Association in Longwood similarly raised their HOA fees as their annual insurance premium rose from $91,000 in 2023 to a whopping $233,000 in 2024. For HOAs, the price of rising inflation hit from every direction: The rising cost of materials and labor means maintenance and services HOAs use increased in turn. Last year, the Insurance Information Institute (Triple-I) projected that insurance rates in the Sunshine State could increase by at least 40%. Mark Friedlander, the Triple-I’s director of communications, said that the average Florida homeowner is paying nearly $6,000, more than triple the U.S. average of $1,700 annually.”

WFAE in North Carolina. “After years of empty floors, ghostly parking decks and tumbleweed-esque sidewalks, the city of Charlotte’s economic development staff are prepping City Council members to give some kind of public assistance for uptown office tower owners. Last Monday, economic development director Tracy Dodson invited former Ballantyne real estate executive Ned Curran to talk about how work-from-home has crippled the office market. Curran ticked off office vacancy rates across the city: Ballantyne — 31%. University — 39%. SouthPark and uptown — 21%. Those numbers aren’t simply as bad as the 2008 Great Recession: They’re actually much worse. ‘We are in unprecedented times,’ said Curran, who is the former CEO of the company that built the Ballantyne Corporate Park.”

“He told council members that in five uptown buildings, half of the floors are empty. And over the next 18 months, 1.7 million additional square-feet leases will expire — many of which will not be renewed, Curran said. ‘We know it’s not going to get better,’ he said. ‘They will not renew at the same rate, if they renew at all.’ Curran told council members that ‘what has to happen here is a lot of these buildings just need to go away.’ By ‘go away,’ he means be demolished. He floated the idea of whether the city would want to ‘participate’ financially in tearing down old skyscrapers.”

CBS New on New York. “City office buildings are in trouble. For a century, the towers have been propped up by two pillars. One, workers filling the buildings all week. Two, money flowing freely in the form of loans to borrow, buy, and build. Those days are over. As hybrid work hardens from trend to new normal, office occupancy rates have hit all-time lows. Meanwhile interest rates have spiked to historic highs… and now the mortgage comes due: $1.5 trillion in commercial real estate loans expire in the next two years. It’s enough to make you rethink the future of cities. We criss-crossed Manhattan, talking to players big and small, about a sector rocked to its foundations.”

“What is New York City without its skyline? Monuments to commerce, standing proudly shoulder-to-shoulder. More office space than any city in the world. But peek inside all this vertical real estate and there’s a fundamental question. Where IS everyone? More than 95 million square feet of New York office space currently unoccupied – the equivalent of 30 Empire State Buildings. Scott Rechler is CEO of RXR, a New York real estate company with more than $20 billion in holdings. We walked through his property at 61 Broadway, near Wall Street. Every other floor—half the building—lies empty. Scott Rechler: ‘I think this is an existential moment. You know, I call it crossing the chasm.'”

From Bisnow. “It was an uncharacteristically dreary day in Los Angeles County when a full-block Pasadena office property hit the auction block with a $114M opening bid — less than half its prior sale price. Despite the attractive price point and the many selling points of the Pasarroyo office complex, the results of the auction were equally glum. No one bid and the property remained with its lender, Heitman. It’s a scene playing out on courthouse steps and under awnings of municipal and county buildings in greater numbers across the country. With commercial real estate loan distress at a 10-year high, foreclosure auctions like these are growing increasingly common.”

“Office properties Houston, Miami and Washington, D.C., an apartment building in Atlanta, and one Margaritaville-themed hotel have gone to auction in the last five months, to name a few. No property type is immune from the kind of financial distress that can lead to a foreclosure auction, but with an estimated 44% of office properties nationwide underwater on their loans, they are the most likely to end up on the block right now. However, going to auction rarely means that a building will actually end up with a new owner. ‘At this point, there’s been a lot of room and willingness on the part of lenders to do workouts, forbearance agreements and work with the borrowers, rather than take over, especially with office buildings. I don’t know that lenders really want to take ownership in the current market,’ said Kathleen Muñoz, a Dallas-based partner at Hunton Andrews Kurth. But, ‘I think at some point, patience will start wearing thin and people will have to start moving forward with taking control of properties,’ Muñoz added.”

Mile High CRE. “The past year has seen office buildings across diverse markets, including Austin, Boston, Chicago, Denver, Houston, Los Angeles, San Francisco, Seattle, and Washington DC, experiencing significant value declines, with some areas witnessing more than 20% Y-o-Y declines. According to IRR’s report, nearly 63% of office markets are now in recession, highlighting a widespread downturn in the sector. Multifamily: Only 13% of markets are in recession, but a significant percentage (63%) are in hypersupply, mainly due to rapid capital deployment in 2021-2022, indicating a potential imbalance of supply and demand.”

“Multifamily housing starts are reaching decades-long highs, with projections of 1.5 million units delivered by 2025. This high rate of new unit delivery, especially in markets like Austin, Nashville, and Charlotte, is outpacing sustainable demand trends. In many of these high-supply markets, the rent-to-income ratio is already above 30%, posing affordability challenges, especially in Sunbelt metros that have traditionally boasted cost advantages.”

From Info News. “There’s been plenty of fear recently about people losing their homes because they can’t afford higher interest rates on their mortgages. The reality is the mortgage foreclosure rate in Kelowna, BC and the rest of the country, has been declining steadily for the past decade. ‘One of the things that has happened, over that period when the mortgage default rate was going down, was rising house prices’ Dean Prentice, licensed insolvency trustee with MNP LTD and a senior vice-president of the company that bills itself as the largest insolvency practice in Canada, told iNFOnews.ca. ‘That was an advantage to a lot of people because, if they had financial difficulties, they could go out and simply sell the house, pay the mortgage and then take care of some of their unsecured debt – or all their unsecured debt – their credit cards and all.'”

“‘The banks are doing everything they can not to foreclose,’ Prentice said. ‘Re-amortize. Stretch those amortization periods out to 30 years, to 40 years. Put the money towards the interest instead of the principal. It’s going to cost you a lot more to pay off your mortgage because now you’re just paying off interest and not getting the principal down but it’s preventing people from defaulting on their mortgages.'”

“‘In the last couple of years – especially in the last year with the change in the real estate market – that capacity to sell your house to get the equity out to pay off your unsecured debt, that’s gone away for a lot of people,’ Prentice said. ‘Some people are feeling stuck because they can’t sell their house or there are fears that, if they sell their house, they won’t have enough money for a down payment on a new home and that they won’t qualify because they will have to re-qualify for the stress test.'”

Stoke on Trent Live in the UK. “A homeowner with ‘244 snags’ at his new-build property is staging a one-man protest – on his garage door. Mark Webb-Johnson has paid £240 for a 12×7 foot sign listing some of his complaints about the four-bed Anwyl Homes property. The sign reads: ‘Buy Anwyl Home, over 200 snags. First floor not level, exterior walls out of NHBC tolerances, interior walls/ceiling out of NHBC tolerance, nine months and counting.’ Now the factory manager wishes he had never bought the £420,000 house on Alexandra Gardens, in Crewe. He remains in talks with the National House Building Council (NHBC) and Anwyl.”

“Issues highlighted included cracked mortar, damaged fascia board, cracked bricks, rattling doors, and a leaking shower – as well as scratches and paint stains. Mark said: ‘It’s just diabolical. I’m getting in touch with them constantly. Every time you say anything to them about a problem, they send someone round who tells me it’s not a problem. There appears to be no thought for how the house is affecting people. It’s causing a lot of issues.'”

7 News in Australia. “Another Victorian building firm looks set to be swallowed up by the state’s construction crisis, leaving the housing dreams of close to 100 customers in limbo. South Melbourne builder Montego Homes went into voluntary administration on Monday, with Sam Kaso and Shaun Matthews from advisory firm Cor Cordis appointed to restructure the business. Montego offers house and land packages and had 18 projects underway before Monday, on top of a ‘pipeline of future’ work. In all, 90 customers have been impacted and 11 Montego employees are now without a job.”

From ABC News. “According to a survey by financial comparison website Finder, nearly two-thirds of renters say housing costs are causing financial stress. But, as painful as the increase in rents has been, it’s still only just ahead of the increase in home values over those same three years from 2020-2023. Go back further and there’s no contest. For all but three of the past 11 years housing prices have grown faster than rents. Usually much faster. Even though most Australian landlords own just one investment property, there are still plenty with two or more. What’s the problem? Aside from the obvious one, that home ownership is becoming increasingly out of reach for the third of Australians who aren’t already there, there’s another huge problem with prices surging far above rents.”

“It’s indicative of a massive misallocation of capital … a waste of money. When professionals make an investment, they look at the return (or yield) and compare it to the risk they’re taking. The average gross rental yield on residential property nationally was 3.7 per cent in December, according to CoreLogic. That means the average Australian property investor who purchased a place in December 2023 is initially making a return of 3.7 per cent per annum — and that’s before any expenses, like interest costs, management fees and repairs. In Sydney, it was just 3 per cent.”

“According to the most recent RBA/APRA data for November, the average variable interest rate on new property investment loans was 6.5 per cent. In what financial universe is it a good investment to borrow a massive sum of money to receive a return that’s half what you’ll pay in interest? ‘Strayan property, apparently. She’ll be right, mate. No worries. Of course, through negative gearing, you can write off the losses against other income to reduce your tax bill. But you’ll still be making losses. So, in the end, basically what you’re betting on as an Australian landlord is capital gains, which will be taxed at half the rate of any income you actually work for.”

“Any investment that’s primarily reliant on capital gain rather than future income generation for its return shares at least one thing in common with a Ponzi scheme. Both rely on the next investors to pay out the profits of the earlier ones. In the case of real estate that means a new generation of buyers willing — and able — to stump up more cash to pay a higher price than the previous ones. That worked a treat while interest rates were falling, boosting borrowing capacity for any given income level. It’s much more challenging as rates rise.”

“We tie up the majority of our wealth in the value we put on land we’ve already occupied, and now buy and sell from each other to the tune of more than $400 billion each year. The biggest cliché of popular personal finance books is to avoid putting all your eggs in one basket. But, as a nation, that’s exactly what we’ve done with housing and, even without a major property crash in recent history, we’re already a lot poorer for it.”

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This Post Has 63 Comments

  1. ‘The way insurance brokers and Colorado Insurance Commissioner Michael Conway see it, there are a few escape valves still in place to protect consumers. The first may be changing economic trends. ‘If interest rates start to come down, reinsurers will want to employ their capital in riskier ways than they are right now’

    We can add one more major fook up you made while distorting markets Jerry.

  2. Scratches and paint stains, do they make for a bad house ? No, sounds to me like he has a dog ,or two,or three ,and is one of those always complaining picky picky folks, who turn into real cretains as renters…….

  3. SINT WILLEBRORD, The Netherlands (AP) — “Everyone is welcome,” reads the sign at the church door in this quiet Dutch village, where neighbors greet each other from tidy porches overlooking manicured lawns. But that declaration of tolerance seems oddly out of place.

    Triggered by economic and cultural anxieties that have whipped up fears about immigrants, people here and throughout the Netherlands have veered far to the right politically. It’s an extreme example of a trend being felt across the continent that could tilt the outcome of this year’s European Union parliamentary election.

    In Sint Willebrord, which has few immigrants among its 9,300 residents, almost three out of four voters chose a virulently anti-migrant, anti-Muslim party in an election last year that shattered the Netherlands’ image as a welcoming, moderate country.

    The Party for Freedom, led by a peroxide-haired firebrand named Geert Wilders, received nearly a quarter of all the votes — in a country where less than 5 percent of the people are Muslim — with slogans such as “no Islamic schools, Qurans or mosques” and “no open borders and mass immigration we cannot afford.”

    https://www.msn.com/en-gb/news/us/a-quiet-dutch-village-holds-clues-as-european-politics-veer-to-the-right/ar-AA1mYB0G

    2. “no open borders and mass immigration”

      Unpossible. Nothing stops the Great Replacement, because reasons.

    3. ” whipped up fears about immigrants”

      … which seems pretty justified, given what’s been going on in the rest of Europe.

      I have to wonder if all those writers and editors and desk bimbos at MSN and MSNBC actually believe what they are writing, or if they meekly just collect their paychecks wracked with guilt.

  5. If you are subject to an HOA, what do you “own” exactly?

    You will never fully “own” anything.

  6. “Wekiva Country Club Villas Homeowners Association in Longwood similarly raised their HOA fees as their annual insurance premium rose from $91,000 in 2023 to a whopping $233,000 in 2024.”

    But but but inflation is 3.4% they told me.

    1. “…annual insurance premium rose from $91,000 in 2023 to a whopping $233,000 in 2024….”

      The HBB and its readers have been warning for well over a decade now about the dangers of ever increasing holding costs.

      Of course, anyone in the REIConplex will tell you that they couldn’t see it coming.

  7. Big topic of conservation at
    current Davos meeting is preparing for “Disease X”.
    They predict it will be worse than worse, with high death rate of course.
    So, the Health Authorities must prepare for a disease of epic Doomsday, but they don’t know what it would be. So, they have to do gain of function research, so they can prepare a vaccine remedy ahead of time in 100 days and save the globe from disease X, that they won’t accidently release from a lab, or terrorist won’t get their hands on.
    Also, they are going to save us from Climate Change.
    What’s wrong with this picture?

    1. Disease X

      I saw that in a black and white 1950’s sci-fi movie once. They can’t even come up with plausible words anymore. I’m not wasting one more minute of my life thinking about those clowns.

    2. What’s wrong with this picture?

      From their perspective: that you and I are still alive.

      And as I have said before, my concern is that the second bioweapon (disease X) will actually be deadly and not a dud like the mild respiratory disease. And after the first round with the mRNA jabs, they now know which variations/batches of the jab cause the most harm, as the whistle blower in New Zealand showed, before he was arrested.

      2. “…actually be deadly and not a dud like the mild respiratory disease.”

        Politics aside, one of the perplexing aspects of COVID-19 was that the experience of having it was mild for some, severe for many, and deadly for an unlucky few. All of my immediate friends and family members who had it survived, though some with fairly severe symptoms. A couple of more distant acquaintences were unlucky.

        I suspect the same range of severity, from asymptomatic to deadly, describes the effects of influenza and the common cold, though we have learned to ignore the tens of thousands who die from these less charismatic viruses every year as politically uninteresting.

        1. The murdering rat bashtard fauci admitted he pulled social distancing out of his smelly a$$. Oh and the lab ‘theory’ wasn’t a conspiracy theory.

          If you are lamenting the people who died from minor respiratory illness, take it up with fauci. He spent millions of our money to genetically make it MORE deadly. 300 million people don’t worry about the flu (nor wear masks) because we’ve got lives to live. There are weird bugs all around us all the time, and yet we trudge on to put food on the table and the heat on. Maybe we have different priorities.

          Every day we are watching these big sh$thole cities die on this blog. This is a direct result of anti-science, stupid guberment overreaction to minor respiratory illness.

          2. +1 to Mr. Jones’ reply on this.

            There will NEVER be a “pandemic amnesty” for those guilty of medical genocide.

        2. right from the beginning lots of obese people were dying but it was kept quiet. you know fat shaming discrimination, bullying to lose wight,

        3. Some possible causes for the variation severity were tossed around, but I doubt you’ll ever see a true trend study on it. Off the top of my head:

          1. Age and interferon in the immune system. Kids have more interferon.
          2. Obesity/diabetes, likely related to the amount of available Vitamin D.
          3. Straight-up inconsistent record-keeping. For example, a lot of asymptomatic cases could be false positives.
          4. Inoculation; that is, how much initial dose you were exposed to. If you breathed in only a few particles, your immune system could ramp up before the viruses multiplied to far. If you got a facefull of virus from close-up, the virus got a huge head start. This is where masking and social distancing may actually help.
          5. Whether you had been exposed to a coronavirus cold shortly before encountering the COVID virus.
          6. Variable symptoms for wild-type and Alpha COVID was random because the virus could cross the air-blood barrier in the alveoli and enter the bloodstream to be transported anywhere. Omicron stayed in the top of the lungs and did little damage anywhere else.
          7. There were studies on how different blood types reacted to coronavirus.

        4. There was excess mortality from Covid. I won’t deny that. Whether or not the vax or a natural weakening of the virus played a role is up for debate. I didn’t vax but I have my doubts about it’s effectiveness. On the other hand, I got really sick during a period of the worst variant. Doc at the hospital told me every sick patient there was vaxxed but that seems to conflict with the data repeated by the media that sickest patients were the unvaxxed. It was such a weird time and really not buy from that era is to be belived much.

  8. Canada’s Core Inflation SURGES in December: November Revised Upward
    Mark Mitchell – Mortgage Broker London Ontario
    31 minutes ago

    Canada’s core inflation rate came in hotter than expected in December, with Stats Canada also revising November’s core inflation numbers upward. Bond yields surged higher, as the Bank of Canada may hold off on cutting rates well into the spring.

    https://www.youtube.com/watch?v=LnNeJ65ckIA

    6 minutes.

  9. ‘If I would have known it was gonna be this nightmare, I might not have bought this house,’ Dave said, as welders crackle behind him, rebuilding his wooden deck with fireproof metal’

    Probably a killer deck and now it will be clang clang.

  10. ‘He told council members that in five uptown buildings, half of the floors are empty. And over the next 18 months, 1.7 million additional square-feet leases will expire — many of which will not be renewed, Curran said. ‘We know it’s not going to get better,’ he said. ‘They will not renew at the same rate, if they renew at all.’ Curran told council members that ‘what has to happen here is a lot of these buildings just need to go away.’ By ‘go away,’ he means be demolished. He floated the idea of whether the city would want to ‘participate’ financially in tearing down old skyscrapers’

    That’s what I’ve been saying Ned. Rip off the band-aid.

    1. He floated the idea of whether the city would want to ‘participate’ financially in tearing down old skyscrapers.”

      And, As I have been saying, these building have negative value. He is suggesting Public money is going to be needed to get rid of these buildings

  11. ‘City office buildings are in trouble. For a century, the towers have been propped up by two pillars. One, workers filling the buildings all week. Two, money flowing freely in the form of loans to borrow, buy, and build. Those days are over’

    The problem here was the ‘money flowing freely in the form of loans to borrow, buy, and build’ thing.

      1. I don’t think I’ve ever seen office buildings at full capacity in the past 30 years. Always always always there was some Class B+ office space with giant FOR LEASE signs on them. Maybe not in prime locations, but they were nice buildings. I often wonder why they even built any more.

  12. ‘At this point, there’s been a lot of room and willingness on the part of lenders to do workouts, forbearance agreements and work with the borrowers…But, ‘I think at some point, patience will start wearing thin and people will have to start moving forward with taking control of properties’

    When the trustees face getting sued for holding too long is when they dump loans Kathleen.

  13. ‘The banks are doing everything they can not to foreclose,’ Prentice said. ‘Re-amortize. Stretch those amortization periods out to 30 years, to 40 years. Put the money towards the interest instead of the principal. It’s going to cost you a lot more to pay off your mortgage because now you’re just paying off interest and not getting the principal down but it’s preventing people from defaulting on their mortgages’

    ‘In the last couple of years – especially in the last year with the change in the real estate market – that capacity to sell your house to get the equity out to pay off your unsecured debt, that’s gone away for a lot of people,’ Prentice said. ‘Some people are feeling stuck because they can’t sell their house or there are fears that, if they sell their house, they won’t have enough money for a down payment on a new home and that they won’t qualify because they will have to re-qualify for the stress test’

    Dean, this is still sound lending, right?

  14. ‘Now the factory manager wishes he had never bought the £420,000 house on Alexandra Gardens, in Crewe…‘It’s just diabolical. I’m getting in touch with them constantly. Every time you say anything to them about a problem, they send someone round who tells me it’s not a problem. There appears to be no thought for how the house is affecting people. It’s causing a lot of issues’

    I can see yer having a bad day Mark, but let us not forget: it is still cheaper than renting.

  15. ‘Another Victorian building firm looks set to be swallowed up by the state’s construction crisis, leaving the housing dreams of close to 100 customers in limbo’

    Last I heard it was 6 a day. They don’t do the FB stories anymore.

  16. ‘In what financial universe is it a good investment to borrow a massive sum of money to receive a return that’s half what you’ll pay in interest?’

    That sums up the CRE bubble and the apartment bubble especially. The apartments will still be there but there will be new owners.

  17. from “People also ask” Google

    What does smoke over the water mean?

    Ian Gillan wrote the lyrics after the band witnessed a fire during a Frank Zappa concert at the Casino at Montreux, Switzerland. The smoke on the water was the smoke over Lake Geneva.

    Why is Smoke on the Water so famous?

    The song’s lyrics are based on true events, chronicling the 1971 fire at Montreux Casino in Montreux, Switzerland. It is considered the band’s signature song and its guitar riff is considered one of the most iconic in all of rock music.

    https://youtu.be/zUwEIt9ez7M?si=xgCBcf028B3CeSAG

  21. Does it seem like everything in China is CR8Ring, including stocks, housing, and even the population itself!?

    Watch out for falling knives!!!

    1. Financial Times
      Chinese economy
      China’s economy faces ‘critical year’ to dispel deflation and revive confidence
      Beijing forecast to exceed 2023 growth target but outlook is tougher as consumers remain cautious
      China’s economy is under sustained deflationary pressure
      Joe Leahy in Beijing and Chan Ho-him in Hong Kong yesterday

      As the head of China’s biggest jewellery retailer, Kent Wong has his finger on the pulse of consumers in the world’s second-largest economy — and they are wary.

      Wong, managing director of Chow Tai Fook, said the chain’s customers have been pivoting from diamonds and other gemstones to gold, a store of wealth in tough times. “In the short term, people will continue to be more cautious no matter [whether it’s] consumption or investment,” he said, adding though that he expected consumer confidence to return in a year or two.

      Wong’s subdued outlook for 2024, shared by many analysts, comes as policymakers in Beijing brace for a decisive year in their battle to restore the economy’s animal spirits and escape the threat of a debt-deflation spiral.

      In a speech at the World Economic Forum in Davos, Premier Li Qiang said on Tuesday that China’s gross domestic product grew an “estimated” 5.2 per cent last year. While that would slightly exceed the official target of 5 per cent, economists said 2024 was likely to be more challenging, with a Reuters poll of analysts predicting growth will slow to 4.6 per cent.

      A property downturn is well into its third year, exports are weak, wary investors are steering clear of China’s financial markets and policymakers are fighting what Morgan Stanley analysts say is the country’s longest run of deflationary pressure since the 1997-98 Asian financial crisis.

      “I think it’s a critical year for the Chinese economy in the sense that deflation could be entering a vicious cycle,” said Robin Xing, chief China economist at Morgan Stanley.
      …

    2. Financial Times
      Asia-Pacific equities
      Beijing tells some investors not to sell as Chinese stock rout resumes
      Traders say process of easing and then reimposing informal curbs is undermining market confidence
      A woman walking past a screen showing stock exchange data in Shanghai, China
      The China Securities Regulatory Commission and stock exchanges in Shanghai and Shenzhen have turned to issuing privately the ‘window guidance’ to restrict share sales
      Hudson Lockett in Hong Kong and Joe Leahy in Beijing yesterday

      Chinese authorities have in recent days told some institutional investors not to sell stocks, as regulators face renewed pressure to stabilise share prices following the steep decline in the first weeks of the new year.

      Since October, market regulators have been providing private instructions — known as “window guidance” — to some investors, which prevent them from being net sellers of equities on certain days.

      Such restrictions on selling helped to spur a rebound of about 3 per cent for the benchmark CSI 300 stock index in the final week of 2023, traders said. But as the curbs on some smaller mutual funds and on brokers were eased in the new year, the index completely reversed those gains and is down more than 4 per cent this month.
      …

    3. Financial Times
      Chinese economy
      China’s population fell by 2mn in 2023 as economy grew 5.2%
      Policymakers face deepening property sector crisis along with deflationary and demographic pressures
      A container ship passes tourists in Xiamen in China’s south-east Fujian province
      Chinese policymakers are seeking to engineer a stronger economic recovery in 2024
      Joe Leahy in Beijing and Eleanor Olcott, Hudson Lockett and Andy Lin in Hong Kong 19 minutes ago

      China’s economy grew 5.2 per cent in 2023 while its population fell by 2mn, pointing to persistent challenges for the world’s second-largest economy from a property slowdown and demographic pressures.

      Gross domestic product growth for the year met a forecast of 5.2 per cent from an analyst poll by Reuters and was above the government’s official target of around 5 per cent. It also outpaced growth of just 3 per cent in 2022, when the economy was hit by Beijing’s draconian zero-Covid restrictions.

      But analysts said the data release on Wednesday highlighted the challenge for President Xi Jinping, who began an unprecedented third five-year term in power last year, in engineering a stronger economic recovery in 2024.

      The National Bureau of Statistics said investment in property development fell 9.6 per cent last year compared with a year earlier, while new home prices in December declined 0.4 per cent on the previous month, the sharpest fall since February 2015.

      Chinese equities lost ground following the data release. The Hang Seng China Enterprises index in Hong Kong declined as much 3.1 per cent to be down about 10 per cent this month, while the Hang Seng Mainland Properties index fell 4.5 per cent. The CSI 300 index of Shanghai- and Shenzhen-listed stocks shed 1 per cent.

      China’s population fell for the second year in a row to 1.4bn, statistics showed on Wednesday, as 11mn deaths outstripped 9mn births. The country’s population declined for the first time in 60 years in 2022 and demographers forecast further falls as China rapidly ages.

      Wang Feng, an expert on Chinese demographics at the University of California, Irvine, said the accelerating population decline showed the “footprint of Covid-19”.

      The number of deaths reported last year was almost 600,000 more than in 2022, exceeding the increase of more than 200,000 between 2021 and 2022. “It is very likely that the rapid increase in number of deaths comes from the chaotic ending of zero-Covid, which led to many excess deaths,” he said.
      …

    4. Updated 50 minutes ago
      Live news: Chinese equities decline following release of soft housing data
      Today’s top headlines:

      – China’s population falls by 2mn as deaths outpace births

      – Chinese economy beats forecasts to expand 5.2% in 2023

      3 hours ago 18:09
      Chinese equities decline following release of soft housing data
      William Sandlund in Hong Kong

      Chinese equities on the mainland and in Hong Kong opened down on Wednesday following the release of official housing data for December, highlighting weak sentiment due to an ongoing property downturn.

      Hong Kong’s Hang Seng index fell 2.1 per cent in early trading, while the CSI 300 dropped 0.9 per cent. The Hang Seng Mainland Properties index, which tracks large listed developers, shed as much as 3.4 per cent following the release of official housing price data for December.

      The National Bureau of Statistics said new home prices in first-tier cities declined 0.4 per cent from the previous month. An index for secondary housing prices in first-tier cities showed home values fell 1.1 per cent.
      …

    5. China Economy
      China misses fourth-quarter GDP estimates, resumes posting youth unemployment data
      Published Tue, Jan 16 2024 9:07 PM EST
      Updated 2 Hours Ago
      Evelyn Cheng

      Key Points

      – GDP for the last three months of 2023 rose by 5.2%, missing analysts’ estimates of 5.3% in a Reuters poll. GDP growth for the full year was also 5.2%.

      – Retail sales grew by 7.4% in December from a year ago, also missing expectations for 8% growth.

      – China resumed reporting the unemployment rate for young people.
      …
      https://www.cnbc.com/2024/01/17/china-misses-fourth-quarter-gdp-estimates-resumes-posting-youth-unemployment-data.html

    6. Jan 16, 2024
      China 2023 GDP, Population and Key Economic Data

      – China fourth-quarter GDP grows 5.2% versus 5.3% estimate

      – Jobless rate rises to 5.1% and home prices fall

      – Chinese stocks drop as overseas investors sell

      -Analysts say authorities need to act to revive growth

      – China’s recovery momentum to continue, government says

      An employee produces automotive parts for export at the workshop of Jiangsu Xinhua Auto Parts.

      An employee produces automotive parts for export at the workshop of Jiangsu Xinhua Auto Parts.

      Photographer: VCG/Getty Images
      31m ago 20:25

      Thanks for joining us. Here are the key takeaways from China’s release of wide-ranging data on growth, retail sales, industrial output and other key metrics for the world’s second-biggest economy.

      – The economy expanded 5.2% last year compared with 2022, when rolling pandemic lockdowns slammed activity. That beat a target of “around 5%” growth, which when released in March was seen as a conservative estimate until China hit a mid-year slowdown

      – The biggest drag remains the housing sector. New apartment sales last year fell 6%, investment in property dropped 9.6% and the slump in prices deepened in December. On the bright side, industrial output expanded 4.6% last year, while annual retail sales grew 7.2%

      – In a danger sign for both long-term housing demand and the pension-funding situation, the population shrank for a second year as people had fewer kids and more folks died. Some of those 11 million deaths are likely due to the massive wave of Covid in December 2022 and January 2023, but there were no details on that

      – Premier Li Qiang had presaged the GDP data at the World Economic Forum in Davos, where he pitched China to foreign investors and pledged to address the problems seen by foreign businesses in the country

      – Analysts and financial markets were underwhelmed by the data: the HSCEI gauge of Chinese stocks traded in Hong Hong fell as much as 3.1%, the most since Oct. 3, and property-related stocks also declined

      James Mayger
      Asia Economy Team
      …
      https://www.bloomberg.com/news/live-blog/2024-01-17/china-s-gdp-key-data

    7. China
      China’s Growth Slows to Three-Decade Low Excluding Pandemic
      A festering property-market meltdown offsets much of the benefit of economy’s postpandemic recovery
      By Stella Yifan Xie
      Updated Jan. 16, 2024 10:25 pm ET
      China’s export demand is softening as the global economy is projected to slow this year.
      Photo: Andy Wong/Associated Press

      HONG KONG—China’s growth rate finished at one of the lowest levels in decades last year, underscoring the heavy toll that a property-sector collapse and weak consumer confidence have taken on the world’s second-largest economy despite the lifting of all Covid-19 restrictions.

      Gross domestic product in China expanded 5.2% in the fourth quarter and for the full year in 2023, according to data released by the National Bureau of Statistics on Wednesday. The reading confirmed a number uttered by Premier Li Qiang a day earlier at the World Economic Forum in Davos, Switzerland—an unusual disclosure of a high-profile data point by a senior leader before its formal release.
      …
      https://www.wsj.com/world/china/chinas-growth-slows-to-three-decade-low-excluding-pandemic-93d61487

    8. People like to worry about China’s military buildup, but given their demographic implosion, it seems like a historically bad time for them to send young men off to battle.

      1. Fear & Greed Index
        Business / Economy
        China’s population declines for second straight year as economy stumbles
        By Laura He and Simone McCarthy, CNN
        2 minute read
        Updated 9:42 PM EST, Tue January 16, 2024
        A parents pushes a stroller with a baby in a park in Shanghai, China, April 2, 2023.
        REUTERS/Aly Song
        Families walk through a park in Shanghai last year.
        Aly Song/Reuters

        Hong Kong CNN —

        China’s population shrank for the second year in a row in 2023, marking a deepening of a demographic challenge set to have significant implications on the world’s second largest economy.

        The population fell in 2023 to 1.409 billion, down some 2.08 million people from the previous year, China’s National Bureau of Statistics (NBS) announced Wednesday.

        The NBS confirmed that China’s economy grew by 5.2% last year, compared to a government target of around 5%. While this expansion marks a significant pick-up over 2022, when China’s economy grew by just 3%, it is still one of the country’s worst economic performances in over three decades.

        China’s birth rate also dropped to a new record low of 6.39 births per 1,000 people, down from 6.77 a year earlier and the lowest level since the founding of Communist China in 1949. Some 9.02 million babies were born, compared with 9.56 million babies in 2022.

        The country’s work force, composed of people in the 16 to 59 age group, dropped by 10.75 million from 2022, while the number of elderly people above 60 increased by 16.93 million from 2022.

        The latest figures come after China’s population declined for the first time in decades in 2022 in what analysts said was the country’s first drop since the 1961 famine triggered by former leader Mao Zedong’s Great Leap Forward. Last year, China was surpassed by India as the world’s most populous country.

        The slowing birth rate comes despite a push from the government to encourage more married couples to have children following decades of restrictive birth policies.

        Beijing scrapped its decades-long and highly controversial “one child” policy in 2015, after realizing the restrictions had contributed to a rapidly aging population and shrinking workforce that could severely distress the country’s economic and social stability.
        …
        https://www.cnn.com/2024/01/17/economy/china-population-gdp-decline-2023/index.html

      2. China’s slow lurch back from COVID
        China’s millennial and Gen Z workers are having to lower their economic expectations
        January 16, 2024 5:01 AM ET
        Emily Feng at NPR headquarters in Washington, D.C., March 19, 2019. (photo by Allison Shelley)
        Emily Feng
        3-Minute Listen
        Jackie Lay /NPR

        China’s youth came of age during a time of huge economic growth. But now, a sense of gloom is hanging around them as the country’s economy plateaus.

        China’s slower-than-usual economic growth has put pressure on the country’s millennials and Generation Z. Reared by a generation of Chinese who made their wealth during nearly four uninterrupted decades of explosive economic growth, they face much lower expectations for economic dynamism and their own prospects going forward.

        “China’s golden years, the two decades or so after our country’s reform and opening-up policies, are over. There’s nothing I can do about this. I can only accept it,” says 20-year-old Jeffrey An, who is starting a master’s degree.
        …
        https://www.npr.org/2024/01/16/1217223941/china-youth-unemployment-slow-economic-growth

    9. China’s Stock Market Is in Free Fall
      Jan 16, 2024 at 7:22 AM EST
      By Giulia Carbonaro
      US News Reporter

      After a rocky couple of years for the Chinese economy, the country’s stock market appears to be in free fall now, with authorities asking institutional investors not to sell stocks in an attempt to stabilize share prices as foreigners are pulling out.

      On Monday, Chinese equities dipped after the country’s central bank decided to keep its medium-term policy rate unchanged at 2.5 percent, failing to cut interest as was widely expected by investors. The country’s CSI 300 was at its lowest level since 2019, a record only previously beaten in October 2023.

      Today, the index was up by 0.006 percent compared to Monday, while it was down by 25.64 percent compared to a year before. The global markets, on the other hand, have surged in the past year, with the S&P 500 skyrocketing 24 percent in 2023, hitting an all-time high.

      While the CSI 300 consistently sank through the past year, the MSCI World index—which covers large- and mid-cap representation across 23 Developed Markets (DM) countries—started steadily rising from the beginning of the second quarter of 2023.

      The FTSE China 50 index—a real-time tradable index comprising 50 of the country’s largest and most liquid stocks—has plunged by 1.77 percent between Monday and Tuesday as part of a long-term large decline over the past six months. Compared to one year ago, the index is down by 29.24 percent.

      China’s market regulators have tried to stabilize the market by imposing restrictions that stop some investors from being net sellers of equities on certain days. This strategy—with authorities offering what’s known as “window guidance” in an attempt to help the country’s stock market bounce back—was first introduced in October.
      …
      https://www.newsweek.com/china-stock-market-free-fall-1860933

      1. …with authorities asking institutional investors not to sell stocks in an attempt to stabilize share prices as foreigners are pulling out.”

        Good luck, Chinese HODLerz. You’re on your own now, as ‘stiff the Gringos’ debt repayment strategy backfired badly.

      2. “Today, the index was up by 0.006 percent compared to Monday, while it was down by 25.64 percent compared to a year before. The global markets, on the other hand, have surged in the past year, with the S&P 500 skyrocketing 24 percent in 2023, hitting an all-time high.”

        I heard that China has been dumping US Treasurys. I wonder if you would have done better in Treasurys or Chines stocks over recent months?

    10. Humpty Dumpty
      By Mother Goose

      Humpty Dumpty sat on a wall,
      Humpty Dumpty had a great fall;
      All the king’s horses and all the king’s men
      Couldn’t put Humpty together again.

  22. Is the Fed pivot going to lead 30-year mortgage rates back down to 3% any day now, making the rate daters seem like the smartest folks in the room?

    1. BONDS
      10-year Treasury yield jumps above 4% after Fed official indicates rate cuts may take time
      PUBLISHED TUE, JAN 16 2024 3:09 AM ESTUPDATED TUE, JAN 16 2024 4:12 PM EST
      Hakyung Kim
      Matt Clinch

      Treasury yields rose on Tuesday to kick off a shortened trading week after Fed commentary indicated the central bank may lower rates at a slower rate than the market had anticipated.

      The yield on the 10-year Treasury
      note gained nearly 12 basis points to 4.066%. It had been hovering around the 4% mark for much of last week. The 2-year Treasury yield rose by around 10 basis points to trade at 4.228%.
      …
      https://www.cnbc.com/2024/01/16/bonds-us-treasury-yields-in-focus.html

    2. The Tell
      Beware of ‘pricey’ U.S. stocks as inflation may ‘roller-coaster back up,’ warns BlackRock
      Published: Jan. 16, 2024 at 2:55 p.m. ET
      By Christine Idzelis
      BlackRock strategists are monitoring earnings season ‘for any signs of cracks given pricey valuations’ in the U.S. stock market after last year’s megacap rally
      …
      https://www.marketwatch.com/story/beware-of-pricey-u-s-stocks-as-inflation-may-roller-coaster-back-up-warns-blackrock-256b4968

    3. Markets
      Mortgage Rates Start The Week Back Near Recent Highs
      By: Matthew Graham
      Tue, Jan 16 2024, 3:36 PM

      The last few weeks have seen mortgage rates move in a far narrower range compared to the month and a half leading up to December 14th. That said, the general trend has been higher.

      Mortgage lenders tend to publish rates only on non-holiday business days. As such, today was the first day of the current week. Global markets were open on Monday, however, and Monday’s trading led to U.S. rates starting out with headwinds before the day began.

      Tuesday’s key calendar event–a Q&A with the Federal Reserve’s Christopher Waller–put additional upward pressure on rates. The result is the average lender moving back up near the highest levels of the past several weeks, but not quite as high as the middle of last week.
      …
      https://www.mortgagenewsdaily.com/markets/mortgage-rates-01162024

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