Urgent Warning: 6 Signs the Great Crash Is Upon Us! – David Stockman’s Contra Corner -7-16-15

Salient to Investors:

Harry Dent writes:

  • All the signs point to the end of the global bubble. The greatest trigger will be the bursting of the massive, unprecedented China bubble. China’s stock market loss of 35% in less than 30 days signals its stock bubble has peaked: a drop of 30% to 40% in short order is a clear sign of the first wave down in a major bust and the greatest sign that the next great global crash is imminent.
  • China’s stock market will bounce in the coming weeks and then crash again, with real estate and its economy to follow.
  • The Greek default proves that endless quantitative easing idiocy has proved unable to create sustainable long-term recoveries in highly indebted developed countries with poor demographic trends. Greece did the wrong thing by again kicking the can a little further down the road.
  • US stocks could be the last major market to make a new high before rolling over.
  • Oil prices will fall, killing the fracking industry, a $1 trillion investment with $600 billion of junk bonds and leveraged loans – much larger than Greece.
  • Emerging markets have led the global slowdown and are about to break to the downside out of a 4-month trading range.
  • Long-term rates for sovereign and Treasury bonds are rising despite governments stimulating and guaranteeing their economies. Rising long-term, risk-free rates hurt stock valuations and real estate even harder due to higher mortgage costs.
  • Gold will continue to fall but will have a minor bounce.

Read the full article at http://davidstockmanscontracorner.com/urgent-warning-6-signs-the-great-crash-is-upon-us/?utm_source=wysija&utm_medium=email&utm_campaign=Mailing+List+Mid+Day+Friday

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Sales of U.S. Existing Homes Rise to One-Year High – Bloomberg 10-21-14

Salient to Investors:

  • Cash transactions accounted for 24% versus 33% a year ago. Investors, 63% of whom paid cash, were 14% of the market last month versus 19% in September 2013. Foreclosures and short sales were 10% of the total. First-time buyers accounted for 29% versus the historical average of 40%.
  • The average 30-yr, fixed-rate mortgage is at the lowest since June 2013.
  • Brittany Baumann at Credit Agricole sees upward trajectory over the next few months, but said it will take further strengthening in the job market, low mortgage rates, and a special importance on easing of mortgage lending standards.
  • Lawrence Yun at NAR said the market a year from now, 2 years from now, will be better, and the share of first-time buyers will steadily increase with an improving economy and job creation.
  • Robert Stein at First Trust Portfolios said the traditional buyer will continue to grow in strength.
  • Chris Rupkey at Bank of Tokyo-Mitsubishi UJF said unemployment is plummeting in many formerly problem states as the recovery spreads – California and Nevada, most hurt by the meltdown in residential real estate, have had the biggest declines in joblessness over the past year.

Read the full article at http://www.bloomberg.com/news/2014-10-21/sales-of-existing-u-s-homes-rose-in-september-to-one-year-high.html

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Malls Offer Discount That’s Not for Customers: Real M&A – Bloomberg 10-01-14

Salient to Investors:

  • DJ Busch at Green Street Advisors said the Washington Prime/Glimcher Realty Trust deal may spark further consolidation among owners of “B” malls as there are many benefits to scale.
  • Jerry Bruni at J.V. Bruni said lower-tier malls are a better bargain than pricey luxury properties, and owning the dominant mall in a smaller area insulates you from competition.
  • Jonathan Litt at Land & Buildings said something will break one way or another what with B-mall operators trading at discounts, as we saw with the Glimcher transaction.
  • Rich Moore at RBC Capital Markets said no large mall operator is going to buy operators with lower-quality properties, while B-mall REIT share prices are low and they don’t have the currency to make deals for each other. Moore said the Washington Prime/Glimcher deal was unique because Washington Prime needed a management team, which it gained with the acquisition – it is not a trend.

Read the full article at http://www.bloomberg.com/news/2014-10-01/malls-offer-discount-that-s-not-for-customers-real-m-a.html

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James Says Use Buyouts to Shoot Lights, Not Hedge Funds – Bloomberg 09-18-14

Salient to Investors:

  • Tony James at Blackstone said hedge funds are a way to play the stock market with lower volatility and lower returns – shoot-the-lights-out returns are best left to private equity and real estate.
  • Neil Chriss at Hutchin Hill Capital said Calpers’ hedge-fund allocation was not big enough to move the needle but big enough to require real resources.
  • Wilshire Trust Universe Comparison Service said pensions with more than $5 billion in assets had an average of 1.35% in hedge funds as of June, versus 0.85% in 2008. Public retirement plans with $1 billion or more in assets generated a 5.1% annualized return from hedge-fund investments in the 3 years ended June 30 versus 5.3% from fixed-income holdings, 11.5% from private-equity, and 12.7% from stocks.

Read the full article at  http://www.bloomberg.com/news/2014-09-18/james-says-use-buyouts-to-shoot-lights-not-hedge-funds.html

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Boomer Wealth Dented by Mortgages Poses U.S. Risk – Bloomberg 08-28-14

Salient to Investors:

  • The Consumer Financial Protection Bureau reports the share of Americans 65 and older with mortgage debt rose to 30% in 2011 with a median debt adjusted for inflation of $79,000,  from 22% in 2001 with a median debt of $43,400.
  • The increase in mortgage debt makes these households more susceptible to economic swings, increasing the risk of inability to recoup losses.
  • John Gist at George Washington University said reasons include the surge in refinancing in the early 2000s and in the post-recession years, the ability to buy with smaller down payments during the housing boom, and the acquisition of vacation homes. Gist said the highest rates of refinancing occurred among boomers – over half in 2004 and 2007.
  • The median duration of joblessness for adults 65 years and older was 17.8 weeks in July, versus 13.5 weeks for those 25 to 34.
  • Julia Coronado at Graham Capital Mgmt said a mortgage is a source of risk for older households, particularly given the labor market experience.
  • Barbara Butrica and Nadia Karamcheva at Urban Institute said 65% of homeowners with mortgages are still working at age 64, versus 54% of those without housing debt.
  • Greg Frost at Frost Mortgage Banking said boomers will be the first generation to take advantage of reverse mortgages on a large-scale.
  • Donald Frommeyer at the National Association of Mortgage Brokers said boomers do not have the same desire to pay off mortgages as the WWII generation.
  • Sam Khater at CoreLogic said as millennials delay buying homes, they may prolong the trend.
  • Homeownership for Americans 35 years old and younger fell to 35.9% in Q2, 2014, the lowest quarterly level since 1994, and versus the high of 43.6% in 2004.

 

Read the full article at http://www.bloomberg.com/news/2014-08-28/boomer-wealth-depressed-by-mortgages-poses-u-s-spending-risk.html

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Slowing Home Sales Show U.S. Market Lacks Momentum: Economy – Bloomberg 08-25-14

Salient to Investors:

  • Thomas Simons at Jefferies said new-home sales have no traction whatsoever but overall housing data is encouraging, with everything moving in the right direction, though a little more slowly.
  • New-home sales are tabulated when contracts are signed, and so are a more timely barometer than transactions on existing homes.
  • The average 30-yr, fixed-rate mortgage is 4.1% versus 4.53% on January 1, 2014.

Read the full article at  http://www.bloomberg.com/news/2014-08-25/sales-of-new-u-s-homes-unexpectedly-fall-to-four-month-low.html

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Default Risk Rises on 20% of Boom-Era Home-Equity Loans – Bloomberg 08-07-14

Salient to Investors:

  • TransUnion said as much as 20% of home equity lines of credit are at increased risk of default as they switch from interest-only to include principal, causing monthly payments to rise more than 50%.  Ezra Becker at TransUnion said more than half of the outstanding HELOCs have a balance above $100,000,  but most debtors can refinance or absorb the payment increases.
  • Mark Fleming at CoreLogic said an impactful risk to the mortgage finance system or our housing market is harder to see.
  • Ira Rheingold at the National Assn of Consumer Advocates said HELOCs are not sold to investors, so banks have more flexibility to ease terms and have little incentive to foreclose or force a short sale for a loss. Rheingold said settlements between banks and regulators often require lenders to forgive debt or modify mortgages, which borrowers can use to strike better deals.

Read the full article at http://www.bloomberg.com/news/2014-08-07/default-risk-rises-on-20-of-boom-era-home-equity-loans.html

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German Thrift Damps Lending as Cheap Money Is Distrusted – Bloomberg 07-25-14

Salient to Investors:

  • European countries including the UK, Denmark and Switzerland are enacting policies to stem housing bubbles, yet with German mortgage volumes at the highest in 16 years, Germans are taking out smaller home loans and repaying them faster as prudent borrowers and lenders bet that record-low interest rates and rising property values won’t last.
  • Nina Schrader at Deloitte & Touche said the craziness in other countries never took hold in Germany because of the way its banks operate and because Germans would not think of getting a 120 percent mortgage.
  • ECB report that mortgage interest payments comprise 12.8 percent of Germans’ incomes versus the average 15.9 percent in EU countries, while the loan-to-value ratio of German homes is 41.9% versus the EU average of 37.3%.
  • In Germany, average loans are 77.7% of purchase price versus 75% in the UK and 82% in the US.
  • House prices in Germany’s largest cities have risen more than 30% in the past 5 years.
  • The OECD reports that in Germany, private household debt equals 93% of net disposable income, versus 325% in Denmark, 150% in the UK and 151 percent in the US.
  • German households had a median net wealth of €51,400 in 2010, the lowest among Euro countries, partly because of a low home-ownership rate and comparatively inexpensive real estate,  and versus €115,800  in France and €173,500 in Italy.
  • Jochen Moebert at  Deutsche Bank said Germany has been less financially volatile than many other developed countries, with only 3 asset bubbles in 150 years.
  • Reiner Braun at Empirica said Germans don’t get a tax write-off for interest payments and have few incentives to borrow to buy a home in a rental-friendly culture that offers a diverse supply of apartments across all price levels. Only 53 percent of Germans are owners, versus 65 percent of Americans and 67 percent of Britons. Braun said Germans move less frequently and do not use second mortgages to pay for a vacation or a car, unlike in the US.
  • Helmut Straubinger at Bayerische LBS said German personal-liability laws means you cannot simply give back the key, like in the US. Straubinger said the low level of ownership could become a concern as Germany’s population ages and social security benefits are cut.

 

 

Read the full article at http://www.bloomberg.com/news/2014-07-24/german-thrift-damps-lending-as-cheap-money-is-distrusted.html

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Foreclosures Fall in U.S. to Pre-Bust Levels: Mortgages – Bloomberg 07-17-14

Salient to Investors:

  • RealtyTrac said properties with a default, auction or repossession notice are at the lowest since July 2006, a month before prices peaked and then collapsed. Daren Blomquist at RealtyTrac said foreclosures are more like a troublesome gnat than a mortal threat to the housing market.
  • Lawrence Yun at the National Association of Realtors said existing-home prices will keep climbing as the job market improves and foreclosures make up a declining share of inventory.
  • Jed Kolko of Trulia said bulk buyers and small investors have underpinned local markets after the crash and helped underwater borrowers in homes that may have otherwise stood empty. Kolko said housing is moving in the right direction with lots of favorable shifts from distressed to conventional sales.
  • Paul Willen at FRB Boston said the 70 percent decrease in foreclosures shows how constrained lending has become, and lenders have become much more uptight – a big problem for the starter home buyer.

Read the full article at http://www.bloomberg.com/news/2014-07-17/foreclosures-fall-in-u-s-to-pre-bust-levels-mortgages.html

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Construction of New U.S. Homes Declines on Plunge in South – Bloomberg 07-17-14

Salient to Investors:

  • Jay Morelock at FTN Financial said the ‘big recovery’ has turned out not to be, and expects a stabilization but not a crash or acceleration.
  • Brad Hunter at Metrostudy said starts in the South may have been hurt by a shortage of buildable lots as development was held up by the unusually harsh winter.
  • Mark Zandi at Moody’s Analytics said the magnitude of the slump in the South is too bizarre to put any weight on it.
  • Freddie Mac said the average 30-yr fixed mortgage rate is 4.13 percent versus 4.53 percent at the start of 2014. The median price of a new home sold in May increased 6.9 percent from a year prior.
  • Aneta Markowska at Societe Generale said the manufacturing data looks very good and better fits their economic outlook, and the reason businesses are getting more optimistic is because they know that households are getting healthier at the margin.

Read the full article at http://www.bloomberg.com/news/2014-07-17/housing-starts-in-u-s-unexpectedly-fall-on-plunge-in-south.html

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