Tag: Econolypse

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Don’t Believe Housing Market Lies

I once again see disturbing trends rearing their ugly heads in the U.S. housing market. Twelve years ago, I warned about the housing bubble long before it burst—then living in the Washington, D.C.-metro area. Now my vantage point is San Diego, where home prices soar and sales (finally) start to stagnate.

Justification, set against measurable trends, often is a fantastic measure that something is amiss.

Metaphor: In film “The Big Short“, set during last decade, a Florida real estate agent drives around a group of Wall Street investors trying to discern whether or not there is a housing bubble. As they pass property after property for sale, she explains: “The market is in an itsy-bitsy little gully right now”. Eh, yeah. That gully later became a giant sinkhole. This morning, I received a newsletter from a local realtor that claims: “Pending home sales were sluggish in April as low supply reared its head”. Crazy thing, I see plenty of inventory for sale—and for increasingly longer times today than four or five months ago. The newsletter’s assertion rings like a justification worth concern. 

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Perpetual Prosperity Psychology and the Housing Bubble

Something about the housing bubble narrative bugs me: Conspiracy. Evil bankers conspired to bilk Americans by financing home loans to people who could never pay, to then repackage bad mortgages as good investment products. While I lauded Matt Taibbi news analyses in 2010 and 2013 for exposing financial institution malfeasance, the blame game always seemed to ignore one other party’s culpability: Borrowers.

New research paper “Changes in Buyer Composition and the Expansion of Credit During the Boom” is a fascinating post-bubble autopsy. Its conclusions, if they survive the test, rewrite the bubble narrative, which revision makes more sense to me. 

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The Underemployment Crisis

When I worked as an analyst for Jupiter Research a decade ago, the editorial philosophy was “data-driven analysis”. But sometimes single stories—one or a few individuals—define a trend. That’s my renewed feeling today meeting Tim in the alley behind our apartment.

I measure San Diego’s economy, and in some respects that of America, by the people who dumpster dive our alley. We moved to the city seven years ago yesterday and were taken aback by the number of people who pull redeemable bottles and cans from recycle and trash bins. But the collectors’ character changed in 2009, following the financial crisis of late 2008. No longer did we see just clearly weather-worn homeless, but paler and better-dressed folks not long laid off from office jobs. Professionals. 

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Should Barack Obama Bail Out Americans?

My answer is yes. Artificially created debt is cholesterol clogging the arteries of consumer spending. The economy that created the debt is gone. Only by surgically removing debt can Americans freely spend, thus pumping fresh blood to the heart of the U.S. economy. But, hey, I’m no economist, although in 2005 I rightly predicted the housing bubble’s collapse and much of the aftermath. Surely such insight is worth something.

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‘The China Question’ Revisited

In March 2009, I asked “The China Question,” highlighting shocking parallels between the 1920s and `00s (the “Noughties”). Both decades similarly started off and ended, with boom and bust. Other parallels show how quickly an empire collapses—the Brits during early last century and quite possibly the yanks during this decade.

I resurface the post in context of incessant chatter about China’s increasing global economic dominance and America’s growing mountain of debt. Additionally, the United States is close to entering a double-dip recession, if it’s not there already. Recent economic indicators are disconcerting. China has largely exited the global recession fairly unscathed, while the United States is an economy divided: Public companies are reporting record profits, while the American public struggles to relieve record debt.

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Masters of the Econolypse

While I was flu-snookered last week, Rolling Stone issue 1099 arrived. It’s the third issue received since my resubscribing after more than 25 years. Amazon made an offer I couldn’t refuse: Half-year subscription for a buck. The writing is better than ever, although a contributing editor wrote the best story—”Wall Street’s Bailout Hustle“.

That best story is simply amazing. Matt Taibbi puts the mortgage crisis and subsequent government bailout in grifter terms (Seven different cons). Matt’s storytelling is exceptional, and he gives the crisis the rip-off context it deserves.

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Why the Dow is So High But Consumers are So Low

Yesterday, I warned that signs of economic recovery are nothing more than a mirage. Today, I’m freaking out because Robert Reich has got an explanation so simple and so obvious. If the former US Labor Secretary’s analysis is correct, as I believe it is, the economy’s in deeper doo doo than even my worst warnings about it.

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Recession and the Recovery Problem

I sit outside the auto repair shop waiting for the brake light switch on my aging Toyota Corolla to be fixed. I type on the Nokia N97 smartphonne, on which I also have been reading news. I had blogged that the N97 would get a second chance. The iPhone 3GS is on ice, so to speak. But my N97 experience is topic for another post.

My interest here is the news I was reading in the New York Times about an analyst report suggesting that the economy is starting to recover. It’s not. But first, the Times asserts: “A measure of supplier deliveries, rising stock prices, an increase in consumer expectations, a jump in building permits and the ‘interest rate spread’ bolstered the index in August.”

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Reich’s Right: No Economic Recovery in Sight

U Cal Berkley prof Robert Reich astutely and concisely sums up the prospects for economic revival in commentary “When Will the Recovery Begin? Never.” I saw it today at Salon, but Robert posted to his blog on July 9.

Other economic observers who talk about a recovery underway go oddly together with reality. There is no recovery now, and there isn’t going to be one in the foreseeable future. 

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Pop!

The Dec. 19, 2005, Business Week piles on more worrisome indications that the housing bubble is deflating. The story focuses on Loudon County, Va., once one of the hottest real estate markets in the country that is now cooling off. As sales slow, sellers are cutting prices. According to Business Week, “From August to October, the median sales price for houses dropped from $506,100 to $480,000”. I expect falling selling prices and rising days on the market to be the norm in most housing markets, if not now within a short time.

I first blogged on the housing bubble in August, a year after I started warning people trouble was coming. Coincidentally, not a week following the post, a good friend asked me about real estate as an investment. She had come into inheritance money and looked to help another friend, who had been successfully speculating on houses in Pennsylvania. I strongly recommended against real estate as an investment. I hope she took the advice.