- 15 Signs That We Are Near The Peak Of An Absolutely Massive Stock Market Bubble (Ecoonomic Collapse, Dec 1, 2013):
One of the men that won the Nobel Prize for economics this year says that “bubbles look like this” and that he is “most worried about the boom in the U.S. stock market.” But you don’t have to be a Nobel Prize winner to see what is happening. It should be glaringly apparent to anyone with half a brain. The financial markets have been soaring while the overall economy has been stagnating. Reckless injections of liquidity into the financial system by the Federal Reserve have pumped up stock prices to ridiculous extremes, and people are becoming concerned. In fact, Google searches for the term “stock bubble” are now at the highest level that we have seen since November 2007. Despite assurances from the mainstream media and the Federal Reserve that everything is just fine, many Americans are beginning to realize that we have seen this movie before. We saw it during the dotcom bubble, and we saw it during the lead up to the horrible financial crisis of 2008. So precisely when will the bubble burst this time? Nobody knows for sure, but without a doubt this irrational financial bubble will burst at some point.
Remember, a bubble is always the biggest right before it bursts, and the following are 15 signs that we are near the peak of an absolutely massive stock market bubble: Continue reading »
- Greenspan #Timestamped – “Dow 16,000 Is Not A Bubble” (ZeroHedge, Nov 27, 2013):
The maestro clarifies his ‘experienced’ perspective of spotting bubbles in the following quote from his interview with Bloomberg TV’s Al Hunt:
“This does not have the characteristics, as far as I’m concerned, of a stock market bubble,”
Of course, as we noted here, some would beg to differ; but perhaps what would be useful is for the former Fed head to explain what ‘characteristics’ do constitute a bubble…
Nope, no bubble here…
And here’s his explanation… Continue reading »
- Inflation is Raging – If You Know Where to Look (Dollar Collapse Blog, Nov 24, 2013):
Most people – certainly most governments and economists – define inflation as a general rise in prices. But this is wrong. Inflation is an increase in the money supply, of which a rising general price level is just one possible result – and not the most common one.
More often, excessive money creation shows up as asset bubbles, where the new money, instead of flowing equally to all the products that are for sale at a given time, flow disproportionately into the ‘hottest’ asset classes. Readers who were paying attention in the 1990s might recall that the consumer price index was well-behaved while huge amounts of money flowed into financial assets, producing the dot-com bubble.
The same thing happened in the 2000s, when excess currency flowed into housing and equities. In each case, mainstream economists and government officials pointed to modest consumer price inflation as a sign that things were fine. And in each case they were simply looking in the wrong place and completely missing the destabilizing effects of an inflating money supply. Continue reading »
- Marc Faber Blasts “We Are The Bubble… There Is No Exit Strategy” (ZeroHedge, Oct 21, 2013):
“The question is not ‘tapering’,” Marc Faber exclaims to his hosts on CNBC’s Squawk Box this morning, “the question is at what point will they increase the asset purchases to say $150 [billion] , $200 [billion], or a trillion dollars a month.” QE-4-EVA is here to stay, as Faber explained “every government program that is introduced under urgency and as a temporary measure is always permanent.” Simply put, “The Fed has boxed itself into a position where there is no exit strategy,” and while inflation may not be present in the ‘chosen’ indicators, Faber blasts, there’s been incredible asset inflation – “we are the bubble. We have a colossal asset bubble in the world [and] a leverage or a debt bubble.” There will be massive wealth destruction, he concludes, “one day this asset inflation will lead to a deflationary collapse one way or the other. We don’t know yet what will cause it.”
The Fed is Boxed In….
The world is in a gigantic bubble…
Back in April 2012, Faber said the world will face “massive wealth destruction” in which “well to-do people will lose up to 50 percent of their total wealth.”
In today’s “Squawk” appearance, he said that could still happen but possibly from higher levels because of the “asset bubble” caused by the Fed.
- Next “Subprime Crisis” Expands As Student Loan Defaults Hit $146 Billion, Highest Default Rate Level Since 1995 (ZeroHedge, Oct 1, 2013):
Almost exactly one year ago we wrote “The Next Subprime Crisis Is Here: Over $120 Billion In Federal Student Loans In Default” in which we took the latest (2009 three year cohort) loan default data on Federal Student Loans released by the Department of Education and applied it to the total amount of student loans outstanding, which back then was $914 billion. Yesterday, ED.gov provided its annual update - this time to the 2010 three year and 2011 two year cohorts – and to nobody’s major surprise, learned that things just got even worse. To wit: “The national two-year cohort default rate rose from 9.1 percent for FY 2010 to 10 percent for FY 2011. The three-year cohort default rate rose from 13.4 percent for FY 2009 to 14.7 percent for FY 2010.” Putting this in context, according to Bloombergdefaults have risen to the highest level since 1995. The irony that this is happening in the aftermath of Bernanke’s disastrous ZIRP policy is not lost on anyone.
Quantifying this percentage, recall the NY Fed reported in its second quarter household credit update that the amount of total outstanding student loans has now risen to $994 billion, or $80 billion more in just one year:
… one can calculate that the current amount of non-performing loans originated in 2010 is now a whopping $146 billion (the full total amount of student loans owed is $1.2 trillion when including private loans from the likes of Sallie Mae – this sum surpasses all other kinds of consumer borrowing expect for mortgages). Unfortunately, as the economic situation has only deteriorated since then especially for student-age Americans, the real blended amount of student loans in default is almost certainly substantially higher as of this moment.
The Education Department had this commentary: Continue reading »
- The Credit Bubble Is Not Only Back, It Is 94% Bigger Than In 2007 (ZeroHedge, Sep 23, 2013):
If the Fed was worried about ‘froth’ in the markets earlier in the year, then this chart should have them panicking. Of course, as Jim Bullard noted Friday, there is no bubble because everyone knows there is no bubble but judging by the massive surge in covenant-lite loan issuance, there is a bubble in forced demand for leveraged loans. At $188.7 billion, the 2013 issuance of these highly unsafe loans (which have seen huge inflows since the Fed started talking taper back in May) is almost double that of the peak of the last credit bubble in 2007 and is five times the size of 2012 YTD issuance at this time. As Reuters notes, Covenant-lite loans used to be reserved for stronger companies and credits, but are now so common in the U.S. leveraged loan market that investors are becoming wary of some credits with a full covenant package. With corporate leverage at all-time highs, what could go wrong? Continue reading »
- Prepare For Tough Times If Your Job Has Anything To Do With Real Estate Or Mortgages (Economic Collapse, Sep 11, 2013):
If you have a job that involves building homes, buying homes, selling homes or that is in any way related to the mortgage industry, you might want to start searching for alternate employment. Seriously. Interest rates are starting to rise dramatically, and mortgage lenders such as Bank of America, Wells Fargo and JPMorgan Chase are all cutting thousands of mortgage-related jobs. Last week, mortgage refinance activity plunged to the lowest level that we have seen since June 2009 and total mortgage activity dropped to the lowest level since October 2008. Unfortunately, this is only the beginning. Mortgage rates closely mirror the yield on 10 year U.S. Treasuries, the the yield on 10 year U.S. Treasuries has nearly doubled since early May. But it is still only sitting at about 3 percent right now. As I have written about previously, it has a ton of room to go up before it hits “normal” historical levels, and so do mortgage rates. As I noted the other day, some analysts believe that the yield on 10 year U.S. Treasuries is going to hit 7 percent eventually. If that happens, mortgage rates will be more than double what they are today. And we have already seen the average rate on a 30 year fixed rate mortgage go from 3.35 percent in May to 4.57 percent last week. If interest rates continue to rise we could be heading for a “housing Armageddon” that will make the last housing crash look like a Sunday picnic.
- Money Laundering Exposed As A Key Component Of The Housing Bubble’s “All Cash” Bid (ZeroHedge Sep 10, 2013):
In August 2012, when isolating one of the various reasons for the latest housing bubble, we suggested that a primary catalyst for the price surge in the ultra-luxury housing segment and the seemingly endless supply of “all cash” buyers (standing at an unprecedented 60% of all buyers lately as reported by Goldman) is a very simple one: crime. Or rather, the use of US real estate as a means to launder illegal offshore-procured money. We also identified the one key permissive feature which allowed this: the National Association of Realtors’ exemption from Anti-Money Laundering provisions. In other words, all a foreign oligarch – who may or may not have used chemical weapons in their past: all depends on how recently they took their picture with the Secretary of State – had to do to buy a $47 million Florida house, was to get the actual cash to the US. Well good thing there are private jets whose cargo is never checked.
This is how we framed the problem last August:
- China, Japan Sell Most US Paper In Years; Foreign Treasury Holdings At 2013 Lows (ZeroHedge, Aug 15, 2013):
And the bid hits just keep on coming.While previously we reported the foreigners as an aggregate class sold the most gross US securities ever in the month of June, we also learned that in June the biggest selling came from America’s two largest creditors: China and Japan (excluding the Fed of course, whose P&L losses are now approaching $300 billion in the past 3 months, or would if the Fed marked to anything but unicorns).
In June, the two countries combined sold $42 billion, with each selling over $20 billion: the most in years.
What is interesting is looking at the composition of the selloff: the bulk of was in the form of short-term Bills, as both countries were actually buyers of coupon securities. Net of coupon purchases Bill sales were even worse, or over $50 billion for the two countries alone.
- Billionaire Issues Chilling Warning About Interest Rate Derivatives (Economic Collapse, Aug 5, 2013):
Will rapidly rising interest rates rip through the U.S. financial system like a giant lawnmower blade? Yes, the U.S. economy survived much higher interest rates in the past, but at that time there were not hundreds of trillions of dollars worth of interest rate derivatives hanging over our financial system like a Sword of Damocles. This is something that I have been talking about for quite some time, and now a Mexican billionaire has come forward with a similar warning. Hugo Salinas Price was the founder of the Elektra retail chain down in Mexico, and he is extremely concerned that rising interest rates could burst the derivatives bubble and cause “massive bankruptcies around the globe”. Of course there are a whole lot of people out there that would be quite glad to see the “too big to fail” banks go bankrupt, but the truth is that if they go down our entire economy will go down with them. Our situation is similar to a patient with a very advanced stage of cancer. You can try to kill the cancer with drugs, but you will almost certainly kill the patient at the same time. Well, that is essentially what our relationship with the big banks is like. Our entire economic system is based on credit, and just like we saw back in 2008, if the big banks start failing credit freezes up and suddenly nobody can get any money for anything. When the next great credit crunch comes, every important number in our economy will rapidly start getting much worse.
- The Most Important Number In The Entire U.S. Economy (Economic Collapse, Aug 1, 2013):
There is one vitally important number that everyone needs to be watching right now, and it doesn’t have anything to do with unemployment, inflation or housing. If this number gets too high, it will collapse the entire U.S. financial system. The number that I am talking about is the yield on 10 year U.S. Treasuries.
When that number goes up, long-term interest rates all across the financial system start increasing. When long-term interest rates rise, it becomes more expensive for the federal government to borrow money, it becomes more expensive for state and local governments to borrow money, existing bonds lose value and bond investors lose a lot of money, mortgage rates go up and monthly payments on new mortgages rise, and interest rates throughout the entire economy go up and this causes economic activity to slow down.
On top of everything else, there are more than 440 trillion dollars worth of interest rate derivatives sitting out there, and rapidly rising interest rates could cause that gigantic time bomb to go off and implode our entire financial system. We are living in the midst of the greatest debt bubble in the history of the world, and the only way that the game can continue is for interest rates to stay super low. Unfortunately, the yield on 10 year U.S. Treasuries has started to rise, and many experts are projecting that it is going to continue to rise.
- Barclays Warns “End-Of-QE.. Would Make 2000 Bubble Look Like A Day At The Beach” (ZeroHedge, July 22, 2013):
“It’s hard to make the case that [US stocks are up 17% on a 2.5% earnings rise] based on fundamentals alone – it’s money in motion,” is how Barclays’ CIO Hans Olsen describes the unreality occurring in US asset markets currently. He noted in last week’s interview with CNBC that Bernanke’s experimentation has created asset-inflation “that would make the stock market bubble of 2000 look like a day at the beach. It’s really quite remarkable.” Critically, as many have noted, he notes “let the market start to price things based on fundamentals again rather than money printing. The sooner we get back to a market pricing, the more sustainable it becomes.” What is ironic is that Olsen is overweight stocks in spite of all this – but like everyone else in the status quo – is hoping Bernanke keeps the house of cards from collapsing. Olsen appears to be among the very few career bankers willing to tell the truth – the fear being, of course (as we showed here) that it would mean their “skills” are completely meaningless.
Hans Olsen, Chief Investment Officer, Americas at Barclays explains why his group has been engaged in the deliberate retreat and rotation from and within fixed income.
- A Nightmare Scenario (Economic Collapse, July 17, 2013):
Most people have no idea that the U.S. financial system is on the brink of utter disaster. If interest rates continue to rise rapidly, the U.S. economy is going to be facing an economic crisis far greater than the one that erupted back in 2008. At this point, the economic paradigm that the Federal Reserve has constructed only works if interest rates remain super low. If they rise, everything falls apart. Much higher interest rates would mean crippling interest payments on the national debt, much higher borrowing costs for state and local governments, trillions of dollars of losses for bond investors, another devastating real estate crash and the possibility of a multi-trillion dollar derivatives meltdown. Everything depends on interest rates staying low. Unfortunately for the Fed, it only has a certain amount of control over long-term interest rates, and that control appears to be slipping. The yield on 10 year U.S. Treasuries has soared in recent weeks. So have mortgage rates. Fortunately, rates have leveled off for the moment, but if they resume their upward march we could be dealing with a nightmare scenario very, very quickly.
Tags: Bank of America, Barack Obama, Ben Bernanke, Bond Bubble, Bonds, Bubble, Collapse, Debt, Derivatives, Derivatives market, Economy, Fed, Federal Reserve, Global News, Goldman Sachs, Government, Great Depression, Greatest Depression, JPMorgan, Politics, Quantitative Easing, U.S.
- Fed’s Plosser Admits Fed Was Responsible For Last Housing Bubble, Doesn’t Want To “Create Another” (ZeroHedge, July 12, 2013):
The “mutinying” half of the Fed – that which the FOMC minutes indicated wanted an end to QE by the end of 2013 - is not going to take Bernanke’s Wednesday steamrolling lying down. Enter Charles Plosser, who becomes a voting member next year:
- PLOSSER SAYS FED SHOULD HALT QE BY END OF THIS YEAR
Good luck there. But here is the punchline: Continue reading »
.- Mother Of All Bubbles Pops, Mess Ensues (Testosterone Pit, July 9, 2013):
The asset bubbles the Fed’s money-printing and bond-buying binge has created are spectacular, the risk-taking on Wall Street with other people’s money a sight to behold. Among the big winners were mortgage Real Estate Investment Trusts – and those who got fat on extracting fees. But now the pendulum is swinging back, and the bloodletting has started.
Mortgage REITs are highly leveraged. They borrow short-term in the repo market at near-zero interest rates, thanks to the Fed, then turn around and buy long-term government-guaranteed mortgage-backed securities issued by bailed-out Fannie Mae, Freddie Mac, and Ginnie Mae. Along the way, they issue more stock and borrow even more. By distributing 90% of their profits, they avoid having to pay income taxes. Hence double-digit dividends. A phenomenal business model. Instead of getting their hands dirty in the real economy, they manufacture dividends, fees, and all sorts of goodies for insiders – while the party lasts.
But now the Fed, leery of the risks these drunken partiers were taking on, knocked on the door of that party and threatened to crash it. Annaly Capital Management, the largest mortgage REIT with $126 billion in assets as of March 31, dropped 34% from its September high to $11.53 on Wednesday; most of it since mid-March. American Capital Agency, the second largest, is even better: its entire history is linked to the Fed’s zero-interest-rate policy and money-printing binge.
- Stage Two of the Housing Bubble Begins: Blackstone to Lend to Others for “Buy to Rent” (Liberty Blitzkrieg, July 8, 2013):
As we all know, any good ponzi scheme needs a continued stream of new investors in order to keep it going otherwise the whole thing falls apart. We also know that the current rebound in the U.S. housing market is a centrally planned monster, led by private equity firms with access to cheap money and laundered foreign capital flooding into depressed markets, crowding out American families looking to purchase a home. Well now that Blackstone has spent more than $5 billion in its “buy-to-rent” scheme, it wants others to be able to “participate” in this wonderful investment opportunity (after them of course). Oh and by the way, one of the most common ads on the local radio here in Boulder as of late explains to people how they too can “get in” on the buy-to-rent trade. Best of luck.
Blackstone Group LP, the private-equity firm that has spent $5 billion on more than 30,000 distressed houses, is preparing to expand its bet on the housing recovery by lending to other landlords.
The firm, which already owns more rental homes than any other investor, has set up B2R Finance LP to offer loans starting at $10 million, according to four people who reviewed the terms. B2R is reaching out to landlords with portfolios of properties seeking to grow in the burgeoning industry for single-family homes to rent, said the people, who asked not to be identified because the discussions are private.
At least five rental companies have received non-binding term sheets from B2R, according to the people. Jeffrey Tennyson, the former chief executive officer of mortgage originator EquiFirst Corp., is running the firm, which stands for buy-to-rent. He previously led EquiFirst to become the 12th-largest wholesale subprime lender in the U.S. by 2007, when Barclays Bank PLC bought it. The London-based bank closed the business two years later after the market collapsed.
- You Are In The Ponzi Scheme Whether You Realize It Or Not (Monty Pelerin’s World, July 2, 2013):
The reasons for continuing to participate in stock markets are discussed in this video from Gordon T. Long and John Rubino. It all comes down to liquidity (and little else).The liquidity fraud is well advanced and likely will continue. This worldwide Ponzi scheme, engineered by governments, provides massive risks and opportunities. For those who don’t understand what is occurring, there is much to be gained from this presentation.
Mr. Rubino describes the problem the Fed’s liquidity has created. Bubbles are re-inflating just as they did prior to the 2008 collapse. Why shouldn’t they? The exact same scam is being perpetrated by government. Another collapse will eventually occur, but its timing and form can only be speculated on.
Rubino does a good job of explaining Ludwig von Mises’ ”crack-up boom” which will ultimately destroy fiat currencies. That end leads to extremely high, probably hyper, inflation. The pieces are already in place for this outcome. All that has to happen is for banks to begin normal lending or for people to understand what is happening (or going to happen) to the value of currency. Something will ignite the timber.
Charles Ponzi and Bernie Madoff had to lure marks into their scams. People joined them by choice. The Ponzi scheme operated by governments is mandatory. You are in it whether you want to be or not. You are in it whether you realize it or not. The only issue is to decide is what the best way is to play this Ponzi scheme. Long and Rubino discuss your options.
- Controlling The Implosion Of The Biggest Bond Bubble In History (Testosterone Pit, June 22, 2013):
In theory, the Fed could continue to print money and buy Treasuries and mortgage-backed securities, or even pure junk, at the current rate of $85 billion a month until the bitter end. But the bitter end would be unpleasant even for those that the Fed represents – and now they’re speaking up publicly.
“Savers have paid a huge price in this recovery,” was how Wells Fargo CEO John Stumpf phrased it on Thursday – a sudden flash of empathy, after nearly five years of Fed policies that pushed interest rates on savings accounts and CDs below inflation, a form of soft confiscation, of which he and his TBTF bank were prime beneficiaries. That interest rates were rising based on Fed Chairman Ben Bernanke’s insinuation of a taper was “a good thing,” he told CNBC. “We need to get back to normal.”
A week earlier, it was Goldman Sachs CEO Lloyd Blankfein: “Eventually interest rates have to normalize,” he said. “It’s not normal to have 2% rates.”
They weren’t worried about savers – to heck with them. They weren’t worried about inflation either. They were worried about the system, their system. It might break down if the bond bubble were allowed to continue inflating only to implode suddenly in an out-of-control manner. It would threaten their empires. That would be the bitter end.
- Ron Paul: It’s Going to Get Much, Much Worse (Peak Prosperity, June 10,2013):
Dr. Ron Paul has long been a leading voice for limited constitutional government, low taxes, free markets, sound money, civil liberty, and non-interventionist foreign policies.
His last term in the U.S. House of Representatives ended earlier this year, so we caught up with the former Congressman to get his latest perspective on how successfully our national leadership is dealing with America’s economic challenges.
In Dr. Paul’s assessment, Washington is too committed to deficit spending and the debt-based economy – both operationally and philosophically – to expect it to embrace a more fiscally-responsible model without a forcing crisis (which he believes is coming): Continue reading »
Tags: Ben Bernanke, Bonds, Bubble, Collapse, Debt, Dollar, Economy, Fed, Federal Reserve, Global News, Gold, Government, Keynesianism, Paul Krugman, Politics, Quantitative Easing, Ron Paul, Silver, Society, U.S.