patrick.net

Logan Mohtashami says

Obesity charts look awful. Our entitlement problem in terms of payouts looking long term can be broken down to this. In roughly 13-18 years staying at current pace all Mandatory payouts will exceed government revenue. Which means every cent will go to people 62 and over and net interest payments. Globalization, technology, debt and demographics will limit capacity growth here in the U.S. This century. We are at best a 2-3 percent GDP country and starting 2022 and on our demographic aging boom will kick in and payouts wil rise.

Logan Mohtashami says

I'll take that be that long term rates ( 30 year fix on the conforming side)
can't stay below 4% for the next 10 years.

Fed has already indicated that they are starting to get concerned with their
balance sheet. It will be north of 4 trillion dollars next year

If your prediction does come true then we have just become a bigger version
of Japan. They just started the Godzilla of QE over there. I believe I saw their
10 year at 0.34%

You are totally contradicting yourself. Low growth means rates can and probably will stay low.

yup1 says

You are totally contradicting yourself. Low growth means rates can and probably will stay low.

The Fed has been more than 70% of the market place in term of purchasing assets.

Well over 3 Trillion dollars already and with MBS going at 85 Billion a month they are heading well past 4 trillion by next year

Fed members themselves are saying they are concerned with the Fed's balance sheet and they are thinking about unwinding process.

At some point they will stop. If you looked at the fund flows last year that intra 10 year note low came after the Spanish Default fear trade pushed a lot money into our bonds.

Looking at a 1.35 ish intraday level then we saw a move up above 2%

How many times historically has the 10 year note yielded lower than the GDP level. Doesn't happen often historically here in the US. However, if GDP growth estimated between 2-3% and the yield at 1.71 .. that metric can't stick. Something has to give. Either growth needs to reduce or yields have go higher because the Fed's intervention is coming to and end. I still believe by the 2nd quarter of next year the Fed calls it quits on QE

Now in regards to ZIRP. Fed has been clear on that. They want to see 6.5% unemployment rate before they start to raise short term rates. However, that is a different ball game than long term rates. We have already seen long term rates rise and mortgage rates have made a move higher since the lows put in last year

USA IS JAPAN! 20 years ago

What we are missing here in the US now is the dollar collapse like what the Yen is doing now. The dollar has been acting stronger lately and while risk on asset rising.

Still we are the safety trade, our bonds and dollars. If that ever really goes away which I have see it in the numbers to believe then it's a different story.

Still, looking out long term our long term budget looks awful. It's just that the run away budgets don't happen until years 2022 and out so like D.C. does they will wait until very end to try to fix our mandatory payout problem.

KarlRoveIsScum says

USA IS JAPAN! 20 years ago

Look what they did today?

The majority of western countries will all be like Japan.

it's called being FUCKED!

Western economic model you can see being questioned at this point. The growth is coming from the eastern countries.

50 Trillion of debt on the books

200 Trillion dollars of unfunded liabilities

This is a major sovereign/government debt bubble out there

Net interest payments years 2034-and out look horrible on any budget CBO, OMB, GAO.

Logan Mohtashami says

Doesn't happen often historically here in the US.

And how often historically has the Fed had a 3.5 Trillion dollar balance sheet and ZIRP? NEVER.

KarlRoveIsScum says

USA IS JAPAN! 20 years ago

Exactly, and not understanding this is where Logan and others FAIL!

I am more of a 3 financial bubble thesis guy

To have 3 different financial bubbles with in a 17 year period hasn't happened before.

It shows economic stress. We have no choice here but to believe in a economic principle of inflating assets to get out of our financial mess.

This isn't a good long term model we have seen what it does in Japan. Our economic profile is much different that Japanese by nature we aren't savers we spend. We don't have a problem spending beyond our means where the Japanese, you can't get them going.

Their new QE over there is epic in it's size. It will be interesting to see if household spending picks up there

Logan Mohtashami says

We have no choice here but to believe in a economic principle of inflating
assets to get out of our financial mess.

In fact we should see that Japan did NOT inflate asset prices, even with all the QE.

yup1 says

In fact we should see that Japan did NOT inflate asset prices, even with all the QE

I believe off the top of my head the Nikkei 225 is still down 30% from the year 2000

All that QE and not even the inflated asset in equities. You can see why they want to de value the Yen and inflate the Nikkei. Desperate times calls for desperate measures but for them it's the same old act

Logan Mohtashami says

Desperate times calls for desperate measures but for them it's the same old act

Why do you believe that for US it isn't the same old act.

Logan Mohtashami says

I believe off the top of my head the Nikkei 225 is still down 30% from the
year 2000

Try Dec 1989 Nikkei 225 = 38916, today = 12833

Nikkei just totally busted through July 1985 levels, FUCK YA!

28 years 0% growth. DEFLATION!

But you go ahead and keep thinking all this QE shit is gonna work.

I will tell you the solution.

Massively increase the minimum wage.
Make it easier for workers to unionize.
Convert corporate profits to worker pay and benefits.

If you do all those things and punitively tax those that think their days labor is worth 50 times or more than their workers labor, and maybe just maybe we might exit this financial HELL that we are in.

yup1 says

Why do you believe that for US it isn't the same old act.

It's the same act for us, it's just a different dance partner. That's why I question the real core long term GDP growth here in the US

We have low taxes, low interest rates and spent trillions of dollars to try to inflate our way out and we are 2 - 2.5% GDP country even with all that.

Jobs average monthly in 2011 and 2012 roughly 150,000 -155,000 a month

We have had a recovery from the bottom of 2009 in a lot economic numbers but look at what we had to do to get there.

1989 Nikkei ... wasn't that a bubble over there... What an Epic Disaster since then.

yup1 says

But you go ahead and keep thinking all this QE shit is gonna work.

QE is a flawed concept, it's just inflates asset prices without relationship to real time incomes. I don't believe in an economic principal that is based around the Fed's wealth factor model.

KarlRoveIsScum says

AT WHAT COST! TRILLIONS UPON TRILLIONS UPON TRILLIONS

Just to reach the avg from 6 years ago

8 Trillion dollars of liquidity for all that

yup1 says

Massively increase the minimum wage.

Agree, We do need massive rise in incomes,

Still I believe

Globalization
Technology
Debt
Demographics

will limit capacity growth here in the US this century

Logan Mohtashami says

Some get what I am trying say!

Logan Mohtashami says

Housing Inventory Crisis

The problem is the term Housing Inventory Crisis.

There is plenty of inventory all over the country. The crisis, if you want to hype that, is in the mind of the buyers, Real Estate agents, and Mortgage Brokers.

You made some good points about the economy, but it all has to do with debt. The consumer is cash strapped, and in debt.

The consumer needs to step back and figure out how to pay off the debt they have, and get more cash.

You can do that with Real estate, but you need to be willing to play a different game, than crisis inventory.

Logan Mohtashami says

will limit capacity growth here in the US this century

Man, you have a knack for hyteria.

The United States has an unlimited growth capacity, because we have been idled by the financial market distractions. We have a rust belt for God's sake. We have a manufacturing base in Detroit that is in ruins.

We have cheap labor to the South, Trade with Asia in the West, a growing need for government in the East, New York Financial markets, and a Paradisio in Florida. All of that adds up to a haven for foriegn investment while capital flight drains out of China, and India.

We are set for growth.

David Losh says

You can do that with Real estate, but you need to be willing to play a different game, than crisis inventory.

Have you taken a look at the national inventory levels here in the US. It has been awful

3 Big Reasons

-5.1 Million loans in either foreclosure or delinquency

-10 million plus homes underwater

- Housing Starts have had their worst 4 year period dating back to 1959. We simply aren't building enough homes

This is why we have less than 5 months of on sale supply in the market place today

David Losh says

Man, you have a knack for hyteria.

Really, so do you think we can hit GDP levels over 4% like we did in the economies of the 50's and 60's on a consistent basis for a 2 decade period without the Fed being so involved?

We are at best a long term GDP capacity 2-3% the days of growing 4% with globalization, technology, debt and demographics in the works are over with. We had our time of expanded growth and we are slowing down

Even the Fed's long term capacity growth rate is at 2.5%, CBO, OMB, GAO none of financial think tanks has us growing at 4% GDP. Those days are over.

What we need to do is desperately innovated here in the US. We need to make something here in the US where we have supply and pricing power against the world.

The world has too many people that produce goods and that is why the economies of the 50's and 60's are dead to us

yup1 says

Nikkei just totally busted through July 1985 levels, FUCK YA!

This one is for you Yup, The Epic disaster of Japan and QE to infinity and beyond

Godzilla QE no good

Logan Mohtashami says

Have you taken a look at the national inventory levels here in the US. It has been awful

3 Big Reasons

-5.1 Million loans in either foreclosure or delinquency

-10 million plus homes underwater

- Housing Starts have had their worst 4 year period dating back to 1959. We simply aren't building enough homes

This is why we have less than 5 months of on sale supply in the market place today

Number one, builders are concentrating on apartments that they ignored for ten years while they over build residential housing unit. Evey under water property is salable with the right price, terms, and conditions, that goes especially for foreclosures.

There is tons of inventory for sale around the country, it's just not as appealing as those 18% appreciation market places.

So, it isn't inventory. We over built inventory in the go go years of 1998 to 2007, even 2008. Now we are rebuilding our lagging rental market to drive those prices down.

Logan Mohtashami says

without the Fed being so involved?

What? Here's a little primer on those 1945 to 1960 years. http://economics.about.com/od/useconomichistory/a/post_war.htm

Sure we can hit GDP, and employment goals, there is nothing stopping that. People have always manufactured around the globe. We just started buying from Japan, then China, but they don't have anything that we need.

We don't need anything from anywhere any more. We don't even need to procalim protectionism, we have the goods they need globally.

We exported our financial markets business model, which they have used to bankrupt most other countries, including China, and Europe. We can comfortably sit back and pick up the pieces.

We have bankruptcy, it's in the Constitution.

We got the game rigged, and to our benefit.

David Losh says

We don't need anything from anywhere any more. We don't even need to procalim protectionism, we have the goods they need globally.

That is just complete nonsense.

David Losh says

There is tons of inventory for sale around the country

robertoaribas says

Well, I'm a mathematical economist. That is how I see it, now let's see how someone that mommy and poppy gave a job filing out loan docs see it...

Like I said, they poured in 8 Trillion dollars ( 8T numbers included everything not just QE and operation twist) to reflate the economy and they got what they paid.

Fed is doing exactly what congress has mandated it to do with the 2 mandates that it has

Commodity prices looked ugly back in October 2008, deflation was everywhere.

Velocity of QE hasn't been great but the 4 big of the economy have gotten better from the bottom of 2009

- Industrial production
- Job creation
- real retail sales
- real income

However, what metrics would you use to qualify enough GDP growth and avg monthly job creation to say enough of QE.

I project 2nd Quarter of next year because the Fed is showing some concerns of their balance sheet size.

Now for their metric on raising short term rates. I still believe they will revise their 6.5% unemployment rate metric to reflect the participation factor. That again is a 2015 or beyond story

Bigsby says

That is just complete nonsense.

How so? The big thing we needed was oil, and we have that beat.

What else to we need. The operative word there is need.

We are still the single most desirable consumer economy, and much more so now than before, but what do we need.

Those manufacturers need us.

Now if you have an argument, you can make it with me, but random comments aren't productive.

Logan Mohtashami says

David Losh says

There is tons of inventory for sale around the country

Your chart is showing a new normal in inventory by going back to 2001.

In 2003 we saw the greatest housing unit construction boom I have ever seen. Millions of single family housing units were constructed, and sold with some very creative financing options.

Those millions of housing units are still being bought, sold, and traded outside of the Multiple Listing Services. Some are investors, but people have also found that there are still some creative ways to buy property.

We have two attorneys here in Seattle that have a discount Brokerage. They have found a larger niche of people doing direct contract transactions without the use of the Multiple.

All anyone has to do is put a for sale sign in front of the house, or mention at a cocktail party they are thinking of selling.

What you may be responding to is that the Real Estate Brokers have become a joke.

No one wants to listen to a Real Estate Broker. This market place has more hype, and BS than I have ever seen in my life.

Even Brokers I've know for forty years are just talking smack.

David Losh says

Your chart is showing a new normal in inventory by going back to 2001.

So, even with household formation and population growth, you believe the natural flow of inventory on sale is going to under 5 month supply from now on.

What about the 5.1 million homes that are either in delinquency or in foreclosure process

Isn't that inventory that needs to come to market

Also, the 10 million plus homes that are underwater, isn't some of those homes not being put to market because the owner can't sell

I agree we had a major excess in housing but I can't agree that the new normal of on sale homes will be under 5 month supply. That would assume that none of the zombie homes will ever come to market and traditional homeowners won't sell their home.

Call it Crazy says

Total house sales have been bouncing around at the lowest they have been in decades??

Your chart only goes back to 2004.

We built millions of housing units that were for sale at crazy financing options. Those are the sales you are seeing.

Those millions of housing unit sales between 2003 to 2008 are like comparing the prices paid then to what we pay today. Every one of the millions of housing units that get above water, adds to available inventory, because those people will sell. They just may not be able to pay a Real Estate commission, or want to.

David Losh says

Your chart is showing a new normal in inventory by going back to 2001.

Clearly you can see we had a excess bubble in housing as shown in the sales numbers. We just still have the massive overhang from the housing bubble in regard to delinquent, foreclosed and underwater homes.

Logan Mohtashami says

I agree we had a major excess in housing but I can't agree that the new normal of on sale homes will be under 5 month supply.

Your making a leap by comparing sales to supply listed on the Multiple. We still have sales here in Seattle that do pace listed properties. We also have home buyers at the auctions, and dealing with the investor groups we have here.

Supply makes for good pricing hype, but it isn't the market place we have today.

Real Estate Brokerage gets to be more, and more of a joke every day. I think you are seeing a shift in the way properties are marketed.

Not every one is as thrilled with Real Estate Brokers as you might think. Real Estate Brokers burned a lot of bridges with consumers, and are continueing to do so.

David Losh says

I think you are seeing a shift in the way properties are marketed.

So what you're saying that there are more than 5 month supply of homes on sale nation wide, it's just not being represented in the numbers

David Losh says

Bigsby says

That is just complete nonsense.

How so? The big thing we needed was oil, and we have that beat.

What else to we need. The operative word there is need.

We are still the single most desirable consumer economy, and much more so now than before, but what do we need.

Those manufacturers need us.

Now if you have an argument, you can make it with me, but random comments aren't productive.

You've got to be joking. Yours is a mindless comment. Every economy in this day and age is reliant on other economies to survive and to say otherwise is just utter stupidity. There is no argument to make with you. You are just flat wrong. And by the way, you said that 'we have the goods they need globally.' Well yes and no, but you should also understand that the rest of the world supplies many of the goods you need.

Logan Mohtashami says

USA IS JAPAN! 20 years ago

I was responding to this.

Bigsby says

Every economy in this day and age is reliant on other economies to survive and to say otherwise is just utter stupidity

I have been saying for the past ten years that the United States is in no way like Japan, because Japan is a rock, surroundded by water, and they do NEED to import everyhting.

Japan is dependent on trade.

We are a consumer economy. We will continue to trade, especially with Asia. We are now exporting technology, the same as we exported our financial markets business model. We will dominate the global economy.

So, in my opinion we will have a period of deflation, but it will be much different than Japan. I call it an equalization, an equilibrium, but once we hit a stride our economy will see GDP growth.

robertoaribas says

In fact, only a blind idiot can't see that inventory is tight, cue David...

In our market place everything is selling.

The inventory comes, and goes, but our sales are robust.

This is the site you visited before, but this shows are sales are strong: http://seattlebubble.com/blog/2013/04/04/nwmls-sales-unfazed-by-still-scarce-inventory/

This is good news for you. It isn't just multiple offer stuff, it's everything.

This is the sopping up period of that shadow inventory the doom, and gloomers are screaming about.

We are rapidly coming to a point where everything is above water. As more places get bought, sold, and traded the market place will relax.

But me, I'm scambling to get a house on the market this month, because I don't know that this will last.

David Losh says

We will dominate the global economy.

So we will dominate the world economy but isn't our economy still based on a 70% consumption model and with anemic wage growth isn't that going to be problem to promote very strong GDP growth

Let me shorten the time line and just provide a few cities

http://www.movoto.com/blog/market-trends/prices-are-up-april-2013/

robertoaribas says

you just 100% contradicted yourself from dozens of your earlier posts, claiming there is plenty of inventory....

God you are dense.

Everything is selling, the good, the bad,and the ugly. There are plenty of sales, the Multiples don't reflect all of it.

Inventory is low, because things are selling.

Logan Mohtashami says

So we will dominate the world economy but isn't our economy still based on a 70% consumption model and with anemic wage growth isn't that going to be problem to promote very strong GDP growth

We have bankruptcy which clears people's debt. Our consumers just went through a phaze of bankruptcy in 2007, 2008, and are now again qualified buyers.

We lowered debt load for a lot of consumers, but not enough.

I persoanlly think there is a lot of work available, but for me, as an employer, I am choosey, and really concerned about these new taxes.

I was looking at the pay checks I was signing yesterday, and can see the differences.

We would need to raise our pricing again to pay our employees more. Our other choice is to continue to expand, but that means another layer of management, higher insurance, and more taxes.

Hiring is a mine feild that needs to be cleared. We'll get there, but it will take time.

The rules of Bankruptcies have changed and Chapter 7 is much different than Chapter 13 these days.

Majority of the de leveraging done on the household side has come through foreclosures, short sales and bankruptcies but the capacity on consumption for those who filed Chapter 7 is limited to a degree.

Not to mention the massive rise of student loan debt that taken place here in the US. Unless we get income growth in a big fashion the after tax/expense incomes of Americans for the bottom 90% isn't that great. The top 10% will be ok