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As the Band Played on the Crowd Called for an Encore


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2013 Jun 24, 8:42pm   3,660 views  16 comments

by smaulgld   ➕follow (4)   💰tip   ignore  

Update 9/18/2013-The Fed decides to keep QE in place:

It’s raining horrible economic news, yet the real estate and stock markets had been staying dry and heading higher. Until last week.

It has been nearly five years since the financial crisis of 2008. That crisis, caused by a meltdown in the housing market, devastated the stock markets, took down a couple of large banks (Bear Stearns and Lehman Brothers) and but for bank bailouts via the Troubled Assets Relief Program (“TARP”) would have taken down a few more.

Today after TARP, the American Recovery and Reinvestment act (the $831 billion “Stimulus’) and many rounds of quantitative easing (“QE”) by the Federal Reserve involving billions of dollars of purchases of US Treasuries and Mortgage Backed Securities, with dollars created out of thin air, the economy remains at best stuck in neutral.

But don’t tell that to the stock and housing markets or to hedge fund manager David Tepper.

Even though most economic indicators – employment, personal income, average work week, manufacturing, durable goods, GDP, CPI/PPI, manufacturing, mortgage applications, industrial production and housing starts are all down, the stock and housing markets are roaring. Consumer sentiment also seems to be improving -especially for those in the top 1/3 who own stocks and homes.

A frothy stock market and “recovering” real estate market are proof to P. Krugman, assorted central bankers and Keynesian central planners that stimulus and quantitative easing work wonders for an economy.

Indeed, lately there has been a lot of self congratulating from the Keynesian camp that all this spending of someone else’s money at their direction or printing and taking on ever more debt has created economic recovery. Pundits have crowed “Krugman won” ... http://smaulgld.com/as-the-band-played-on-the-crowd-called-for-an-encore/

#housing

Comments 1 - 16 of 16        Search these comments

1   David Losh   2013 Jun 25, 2:25am  

I like your website a lot.

My favorite saying in Real Estate is good news, is bad news.

Today the stock market got a lot of good news, mostly from the housing sector. The Case Shiller Index is up 1.7%, new home sales are at a five year high, and durable goods orders are up. All of this lead to the Consumer Confidence level being at a five year high.

Well, with interest rate at 4.5%, up a point in less than a month, some of that rose will pale off the blooms here.

Short, and sweet, we would need a killer July of home sales not to have all of this data collapse next month. July is traditionally a slow month, but last year we saw an increase in pricing and good sales.

I just don't see this ending well for those remaining Real Estate market places that have held up since 2008.

2   varmint   2013 Jun 25, 2:47am  

This article was pretty good, but the Ayn Rand quote at the beginning is a major turn off.

3   smaulgld   2013 Jun 25, 3:00am  

Varmint
Thanks-not a big fan of her either, but thought the quote was appropriate. Like your Caddy shack icon!

4   smaulgld   2013 Jun 25, 3:11am  

David
Thanks
Not sure there is much juice left in the real estate market other than a final rush by some buyers to get in before rates rise further.

5   smaulgld   2013 Jun 27, 7:57pm  

The rush to buy real estate before rates rise further may already be over
Unless of course the fed tapers the taper talk and rates come down

6   smaulgld   2013 Sep 18, 4:32am  

The song remains the same-
From the anchor post
http://smaulgld.com/as-the-band-played-on-the-crowd-called-for-an-encore/
and many others
http://smaulgld.com/tag/no-fed-exit/

NO FED EXIT

The Fed and now the Bank of Japan have a dilemma on their hands. Once they deemed to have cured the economic patient with massive doses of stimulus, can they keep the patient alive with out it? Faced with this they will delay a final diagnosis for a long time.

It seems they have painted themselves into a corner. If they pull the stimulus, the economy will collapse. If they continue with quantitative easing eventually they will finish blowing up the biggest sovereign debt (along with real estate and stock market) bubble in history, certain to burst with even more devastating consequences than the consequences of the last housing bubble. The former option would be a brave move; a self inflicted wound that would allow the economy to restructure naturally and probably more quickly than pumping the bubble until it bursts.

Its seems there is No Exit for the Fed that will end nicely. Here are a few illustrations for music and architecture that highlight the bind the Fed is in.

Hotel California -”You can check out any time you’d like, but you can never leave”

7   mell   2013 Sep 18, 4:40am  

This is an utter joke - the Fed is destroying this economy.

8   smaulgld   2013 Sep 18, 4:41am  

mell says

This is an utter joke - the Fed is destroying this economy.

A sick obvious joke

9   mell   2013 Sep 18, 4:47am  

smaulgld says

mell says

This is an utter joke - the Fed is destroying this economy.

A sick obvious joke

It's very effective though in keeping the shorts scared and at bay. Nobody would dare to short into a Fed announcement and obviously this fear keeps lingering ;)

10   smaulgld   2013 Sep 18, 4:51am  

Call it Crazy says

The 10 year is heading south.... will mortgage rates follow??

Yes temporarily THEN faith will be lost and the Fed will lose control of interest rates no matter how much they print

11   Cheeseus Sonofdog   2013 Sep 18, 5:14am  

Today will go down in the history books as when the world markets lost confidence in America. We have lost all credibility. Nobody will believe our future lies. They will punish us with a collapsing dollar and skyrocketing rates. Your government allowed the federal Reserve to do this terrorism that created our end.

12   smaulgld   2013 Sep 18, 6:36am  

Cheeseus Sonofdog says

Today will go down in the history books as when the world markets lost confidence in America. We have lost all credibility. Nobody will believe our future lies. They will punish us with a collapsing dollar and skyrocketing rates. Your government allowed the federal Reserve to do this terrorism that created our end.

Cheeseus sonofdog- thoughts on this one
http://smaulgld.com/why-the-end-of-quantitative-easing-may-be-bad-for-the-dollar/

13   retire59   2013 Sep 18, 7:39am  

The Fed is stuck as you say. And it is there own doing. It was time to slow down QE, but the banks and the 1% cried out and they kept feeding them candy.....if they had did this gradually, it would have forced some of the money being held by the banks and the 1% to start putting it into the economy in jobs etc so that it would slowly start to return. Instead, they have now continued this 'slog' into a worse crash than before.....this may go on for another 10-20 years...with the 1% continuing to 'play' with the 'play money'...oh well, just pay attention and you will survive this.

14   smaulgld   2013 Sep 18, 7:49am  

retire59 says

this may go on for another 10-20 years...with the 1% continuing to 'play' with the 'play money'...oh well, just pay attention and you will survive this.

I have been surprised how long they have got away with this. But they may just may be able to keep rates low.
I have advocated for the past few years that irrespective of price gains on your home getting a low interest rate for 30 years will be a winner because there will be inflation and your mortgage rate will remain the same.

15   retire59   2013 Sep 18, 7:51am  

Agreed. As I have stated in other posts, we are looking for our retirement home which we plan to stay until we cannot...and the low interest rate will serve us well; and the prices are coming down right now, so hopefully, paying attention to all this may have served us this time. Wish us luck!

16   smaulgld   2013 Sep 18, 7:58am  

retire59 says

Wish us luck!

Goodluck are you east coast/west coast?

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