patrick.net

But of course stocks are already in 'stupid territory'. I'd rather take my chances in Vegas.

The sheep thinks that today's interest rates are the norm and housing has bottomed. Let's see how home prices hold up when rates are above 8%. That might be the true bottom.

chanakya4773 says

There is a reason why smart money is moving in to stocks.
the story for next 10 years : Stock market moves up significantly and consistently.
Money will exit bonds and many people will lose money wrt to other investments.
gold bubble pops and many people will be left holding the bag.

If US bond market "collapses", the stock market may collapse at the same time (see Greece, Italy, Spain, etc.) My understanding is: the money/credit supply is NOT a zero sum game, i.e., money exiting bonds does not neccesarily mean they will enter stock markets. It could mean the money just disappear (and/or money velocity drops) so prices of (almost) everything drop at the same time. For example, US 10 yr bond interest rate increases gradually from 2003 to 2008 before everything went to hell. So, you might have a good run in stock while bond interest rate pick up. But 10 years? I would not bet on that.

I've been heavy on bond funds since the housing crash.

Dumped all of my bond funds last month.

well remember 'the sheep' are in charge.
8% mortgages 'should' have been here since the 06 crash. But instead we got 2%-3% mortgages. clearly this is the bizzarro univers - risk and defaults go up 100 fold and rates crash down not up. thank you feds.

Low rates sure look permanent to me. Remember you are talking about endless supply of zeros and ones. You saying 'rates must go up' is like a kid in world of warcraft predicting the 'monsters will become extinct - too many are being killed'. lol. Our system is as real as a video game.

PockyClipsNow says

Low rates sure look permanent to me

The dollar will be destroyed if they keep this up. This will be great for home prices. Pick your poison

chanakya4773 says

I don't think there will be a collapse, just a gradual exit

I don't think the bursting of a bubble is ever gradual. The spike in interest rates when bonds burst will surprise many. ALL economic bubbles bursts so I think the probability of much higher rates is promising.

Billybigrig says

Someone is building a new Titanic.
http://www.usatoday.com/story/travel/cruises/2013/02/26/titanic-ii-will-be-built/1948935/

Jealous losers who missed the bottom will always be pessimistic. My home went from 43.5k to an appraised price of almost 80k in 1 year to the day. And, it's still going up, probably for another solid year or two, maybe three. Welcome to American capitalism. Be happy you're in America. The train always goes around and around, Don't miss the next opportunity to make some real $$$. O, and be happy for those who took a chance and killed on the last bubble-pop.

chanakya4773 says

Your statement is true only when the Money exists as a result of fear or
risk. In this case, it will not be due to that, it will be due to more
returns
elsewhere compared to bonds. the money supply will not change much,
just the asset allocation.

I don't think there will be a collapse, just a gradual exit

Understand your point, the gradual exit could happen. But borrow again the example of 2003-2008, the stock bull market probably won't last for 10 more years.

I doube the next RE crash will be anywhere near as severe. The feds have like 12 programs in place not counting state programs. All to slow price declines/print money/buy loans. It took them a while to get all this in place and it will always be super managed like now. Big gov only gets bigger right?

robertoaribas says

HousingBoom says

The sheep thinks that today's interest rates are the norm and housing has bottomed. Let's see how home prices hold up when rates are above 8%. That might be the true bottom.

lets see, where have i heard this before?? oh yeah, the last two years on here!!!

meanwhile, prices in my town are up 80% or something since the bottom...

I heard your song and dance over and over again before the last housing crash.

I was wondering why I didn't see Roberto's comment. I blocked him awhile ago.

HousingBoom says

The sheep thinks that today's interest rates are the norm and housing has bottomed. Let's see how home prices hold up when rates are above 8%. That might be the true bottom.

Today 30y interest rate went up 4.7% vs. last week; Dow is getting new highs every week. Yep...We had this in previous cycle. Bank doesn't hold mortgages now. If inflation will go 4% and up (interest rate accordingly) banks have nothing to lose.

is there way to short bond market? what code?

I've been trying to figure out how to short the bond market for several years now.

chanakya4773 says

If only the relationship between Dow and interest rates was that straight forward

Nothing is straight forward. That’s the beauty of open/manipulated market.

and therein lies the key.
It must be 'played' as a video game.

PockyClipsNow says

Our system is as real as a video game.

I've been trying to figure out how to short the bond market for several years now.

http://www.bondetf.net/short-bond-etf.htm

robertoaribas says

meanwhile, prices in my town are up 80% or something since the bottom...

And incomes have gone nowhere. Real sustainable. And something to hope for, right sharecropper?

robertoaribas says

buy a home with a great price/rent and take a 30 year mortgage... Instant long short of the long bond.

No loading though right, no taxes, no repair costs, nothing. Its like minting money.

I've been trying to figure out how to short the bond market for several years now.

Cash!

If the bond market is truely a bubble and it pops think of the mathematical implications.

Annual Increase in debt payments for a 1% rise in interest

Federal Government debt 160 Billion
Business debt 127 Billion
Household debt 128 Billion
Fiancial sector debt 138 Billion
State and local Government debt 29 Billion

Annual debt payment increase for a 1% change in interest.......

582 Billion dollars

roughly 3.5% of GDP

robertoaribas says

your normal, "collecting rent s bad... morally wrong... crap.." go move to Cuba you [. . .] communist

While it's beyond the scope of this thread, it is, at least theoretically, a regression from capitalism to feudalism to proclaim the sovereignty of land ownership and rentiering over actual production. There is a middle ground; it's not just Commies versus 'Merikans.

roberto sounds more and more like a little dick with a big mouth.

there! i’ve said it.

coriacci1 says

roberto sounds more and more like a little dick with a big mouth.

there! i’ve said it.

Be gentle he has had the "entire weight of this site argued against him"

Philistine says

robertoaribas says

your normal, "collecting rent s bad... morally wrong... crap.." go move to Cuba you [. . .] communist

While it's beyond the scope of this thread, it is, at least theoretically, a regression from capitalism to feudalism to proclaim the sovereignty of land ownership and rentiering over actual production. There is a middle ground; it's not just Commies versus 'Merikans.

Feudalism refers to attachment of people to land. Modern housing service providers do no such thing. Renting a house is a too-way market, just like a longer term stay at a hotel, only the guest actually having more right! The only thing somewhat feudalistic in the process is the town collecting property tax.

Back to the original topic...

Real estate, especially here in CA, is a very localized phenomenon. While it is subject to interest rates like anywhere else, you don't have all price levels driven by low interest in all areas.

I don't think it's low interest rates driving up prices near, say, downtown Palo Alto or downtown Mountain View. In the Palo Alto case, it's where lots of tech wealth concentrates, and you have enough tech millionaires wanting to live there that high demand creates high prices. Downtown Mountain View is filled with Google people who don't want to drive, and train commuters from other wealthy companies. The new condos on Evelyn Ave sold out instantly, and we're talking $800k for small condos!

What we have in some little pockets of cookie-cutter sprawl here is a self fulfilling prophecy, where people believe that housing prices in those areas will never drop, so they buy in those areas, driving up the prices, until they reach an absurd level. Having been looking around, I know many of these houses go for cash offers. Some are bought by locals, some are bought by investors, some are bought by foreigners (especially Chinese and Taiwanese with money given their belief that real estate is investor utopia. Our prices are cheap compared to what they're used to) There's a bidding frenzy for condos, etc, etc. Right now it's clear that demand outstrips supply, so prices go up.

If the bond market crashes, which will likely take the stock market with it and which should in a free market cause interest rates to go up, we will undoubtedly see house prices crash in most of the area. People on ARM's will once again be screwed when they readjust, and this will eventually concentrate again in the banks, requiring more bailouts, requiring more money printing BS to keep them solvent, so I think we'll see more money printing and more of these misguided attempts to "fix" the economy by propping up asset values.

My belief is that we will see this bubble pop; exponential growth curves can't exist in the physical world forever. However it's very difficult to time the popping (it should have several times over already, but each time either the central bank or the state intervened). In the meantime, some people, such as myself, need housing. Condos and apartment complexes aren't right for everyone, and house rentals in lots of neighborhoods are almost on par with mortgage costs at these ludicrously low rates despite ludicrously high prices. I'm not willing to lose two hours of my day to a commute, so I'm buying in bubble land, near where the wealth concentrates, by getting the crappiest house in a desirable area with a nice lot. My thinking being, if I have to sell when underwater, I'll do least badly this way.

Will the Fed print more? Will bonds force interest rates to rise? Will the stock market pop and drive up bond prices, dropping interest? All these are possibilities.

the one thing I know for sure is when everyone is doing the same thing, it reeks of bubble. When everyone leaves bonds to buy stocks, it means the peak might be near. In a healthy, balanced market, there's a balance between different forms of investment.

postbubblesucess says

Jealous losers who missed the bottom will always be pessimistic. My home went from 43.5k to an appraised price of almost 80k in 1 year to the day. And, it's still going up, probably for another solid year or two, maybe three. Welcome to American capitalism. Be happy you're in America. The train always goes around and around, Don't miss the next opportunity to make some real $$$. O, and be happy for those who took a chance and killed on the last bubble-pop.

Nice try Roberta.

chanakya4773 says

There is a reason why smart money is moving in to stocks.

the story for next 10 years : Stock market moves up significantly and consistently.

Money will exit bonds and many people will lose money wrt to other investments.

What planet are you living on? This market is unsustainable. There are no institutional investors. Only retail suckers are throwing their $$$ into the casino's pot.

http://www.zerohedge.com/news/2013-03-12/kyle-bass-warns-aig-world-backAlthough much to my chagrin, he doesn't foresee cannibal anarchy. A boy can dream, however.

Reality says

Feudalism refers to attachment of people to land

You're being deliberately literal. And it's not a two-way market when investors with all cash are by far winning out over the first-time home buyer who can only compete with a mere 10% down/30 year mortgage for the same house.