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If Everything’s So Awesome, Why Did This Happen Yesterday?

September 12, 2017 Tyler Durden 0

Monday saw US equities ramp exuberantly on the back of a one-way street in USDJPY as the narrative proclaimed that “the world didn’t end” and therefore we should buy stocks. There’s just one thing…

The biggest bond ETF in the world saw the biggest inflow of funds in its history at the same time.

In fact, TLT – BlackRock’s 20+ Year Treasury Bond ETF has seen no outflows for 12 days.

Inflows have averaged over $150 million per day for the last week, which, as @SentimentTrader explains has led to significant gains 3-, 6-, and 12-months later…

 

And just in case you were wondering what these ‘crazy’ bond-buying freaks are seeing that the ‘smart’ equity investors are not…

It’s the collapse in actual ‘hard’ economic data – as opposed to the survey-based ‘soft’ data that remains full of hope.

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How One Blockchain Startup Is Combatting Centralization of the Credit Industry

Startup company Bloom seeks to take advantage of blockchain technologys perks to create a platform where the participants will have global access to credit services.According to Bloom, the traditional methods of credit checking leaves billions of pe…

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Russian Finance Minister: Bitcoin Regulation Will Arrive by Year’s End

September 12, 2017 BitNewz.net 0

TheMerkle Russia Bitcoin RegulationNot a day goes by, it seems, without an update from the Russian government about Bitcoin and cryptocurrency. Legislators in this particular country have historically had issues getting on the same page when talking about cryptocurrencies. In the latest update, Russian Finance Minister Anton Siluanov claims that cryptocurrency will be regulated by the end of 2017. Yet Another Plot Twist Involving Russia Anyone who has kept a close eye on the state of Bitcoin in Russia will have noticed there is no unified message whatsoever. Some officials have claimed Bitcoin will not be legalized or recognized in the country, whereas others have stated

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New Gas Discovery Offshore Cyprus Not Commercially Viable

September 12, 2017 Tsvetana Paraskova 0

Eni and Total have discovered gas while drilling in Cyprus waters close to the giant Zohr gas field discovery offshore Egypt, but the estimated quantity of the newly discovered field is too small to develop on its own, Cypriot Energy Minister Yiorgos Lakkotrypis said on Tuesday. The field contains less than 0.5 trillion cubic feet of gas, but the drilling proved that the Zohr-type geological model works, Lakkotrypis told reporters, as carried by Associated Press. “We’re not disappointed with this drilling,” the minister said,…

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Housing Bubble Symmetry: Look Out Below

September 12, 2017 Tyler Durden 0

Authored by Charles Hugh Smith via OfTwoMinds blog,

Housing markets are one itsy-bitsy recession away from a collapse in domestic and foreign demand by marginal buyers.

There are two attractive delusions that are ever-present in financial markets: One is this time it’s different, because of unique conditions that have never ever manifested before in the history of the world, and the second is there are no cycles, they are illusions created by cherry-picked data; furthermore, markets are now completely controlled by central banks so cycles have vanished.

While it’s easy to see why these delusions are attractive, let’s take a look at a widely used measure of the U.S. housing market, the Case-Shiller Index:

If we look at this chart with fresh eyes, a few things pop out:

1. The U.S. housing market had a this time it’s different experience in the 2000s, as an unprecedented housing bubble inflated, pushing housing far above the trendline of the Case-Shiller National Home Price Index.

2. It turned out this time wasn’t different as this extreme of over-valuation collapsed.

3. For a variety of reasons (massive central bank and state intervention, the socialization of the mortgage market via federally guaranteed mortgages, historically low mortgage rates, massive purchases of mortgage backed securities by the Federal Reserve, etc.), the collapse in prices did not return to the trendline.

4. There is a remarkable time symmetry in each phase of expansion and collapse; each phase took roughly the same period of time to travel from trough to peak and peak to trough.

5. The Index has now exceeded the previous bubble peak, suggesting this time it’s different once again dominates the zeitgeist.

6. Those denying the existence of cycles have difficulty adequately explain away the classic cyclical nature of the 2000-2008 bubble rise and its collapse, and the subsequent expansion of housing prices in a near-perfect mirror-image of the first housing bubble’s steep ascent.

Claiming that this painfully obvious time symmetry is mere randomness/coincidence is not an explanation.

7. This time symmetry suggests that the current housing bubble is close to its zenith and will likely collapse over a time frame similar to Housing Bubble #1.

The basic arguments for ever-higher housing prices forever and ever are:

A. central banks completely control all markets, including housing, and they will never let the housing market decline ever again.

B. Foreign buyers paying cash (even if the “cash” was borrowed in Asia) will continue flooding into North America, elevating markets for the the foreseeable future.

The omnipotence of central banks is a matter of near-religious certainty among the faithful, but skeptics note that central banks have played major roles in markets for decades, yet every asset bubble eventually pops despite central bank/state management of markets.

True believers note that the central state/bank interventions have greatly expanded, and that there are no limits on future interventions; central banks can create trillions of dollars, yuan, yen, euros, etc., and use this “free money” to buy assets, propping up markets indefinitely.

In this line of thinking, central banks/states “learned their lesson” in the first housing bubble and will never let the housing market collapse again.

As for foreign demand: the number of buyers from China who are desperate to turn their cash into North American real estate holdings is practically limitless.

The counter-arguments are:

1. Despite the federal guarantees on mortgages, the housing market is still dominated by private-sector borrowers and lenders. As my colleague Mish has often pointed out, central banks/agencies cannot force people to borrow money to buy homes, vehicles, etc.

If everyone who is qualified to buy a house and wants to buy a house has bought a house, then demand is limited to new households and foreign buyers.

New household formation has recovered a bit but is still at historically low levels. New households burdened by student loan debt, high rents and stagnant wages are not qualified to borrow hundreds of thousands of dollars to buy homes at current nose-bleed valuations.

While the number of foreign buyers may appear to be limitless in specific markets, counting on marginal buyers with cash to prop up markets across the board is an iffy proposition, given the potential for conditions to reverse due to global recession, capital controls, higher taxes imposed on foreign owners of vacant homes, etc.

I would argue that this time is different, but not in a healthy way. Central bank/state interventions in the market have drawn in marginal borrowers who are a few paychecks away from default, and speculators who are leveraged to the hilt to buy homes to “flip for quick profits–a strategy that collapses if qualified buyers become scarce.

Globally, housing has become a flight-to-safety asset for the global elites, a development with disastrous consequences for residents. Housing owned for investment often sits empty, effectively withdrawing much-needed housing units from the market for shelter. This investment buying reduces the pool of available housing, driving up rents and home prices, pushing shelter out of reach of the bottom 95% of wage earners in desirable urban areas.

In response, municipalities are aggressively imposing fees on investment ownership of empty dwellings. At some point, these fees reduce demand for housing in “hot” markets. Once marginal cash purchases evaporate, markets fall back to what domestic demand can support.

Housing markets are one itsy-bitsy recession away from a collapse in domestic and foreign demand by marginal buyers. This time is different isn’t always bullish.

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SBI Ripple Asia Brings Blockhain-Based Cross-border Payments to South Korea

September 12, 2017 BitNewz.net 0

Big changes are coming to the way how cross-border funds are transferred. SBI Ripple Asia plans a major blockchain experiment […]

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OPEC’s Output Drop: Saudis Overcompensate While Compliance Slides

September 12, 2017 OilPrice.com 0

Confirming Monday leaks that OPEC production had dipped last month, the just released OPEC report for the month of September confirmed that OPEC produced 32.755mmb/d (according to secondary source data), a drop of 79,100 bpd, and the first monthly decline in 4 months. According to the underlying data, in the last month output increased in Nigeria (+138.3Kb/d), while declining in Libya, Gabon, Venezuela Saudi Arabia, and Iraq. (Click to enlarge)While secondary sources pegged Saudi production in August at 10.022mmb/d, a drop of 10.3kb/d…

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OPEC Unfazed By Falling U.S. Oil Demand

September 12, 2017 Tom Kool 0

Despite the turbulence in the oil markets due to the previous weeks’ hurricanes, OPEC’s latest report has painted a reassuring picture, indicating that the rebalancing of the oil market may be underway. (Click to enlarge)  (Click to enlarge) (Click to enlarge) (Click to enlarge)• Data related to Hurricane Harvey is starting to come together. For the week ending on September 1, refinery inputs fell by 3.2 million barrels per day (mb/d), or 34 percent, according to the EIA. • It was the largest week-on-week decline…

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