Economy
For many, the collapse of the housing bubble was the trigger that began the era of economic slowdown Americans find themselves mired in.
But recently there have been growing reports in the media of a housing "recovery." So we've invited Patrick Killelea, founder of the popular housing site Patrick.net and author of The Housing Trap: How Buyers Are Captured and Abused and How to Defend Yourself, to clarify the situation.
The short answer is this: While there are some markets where home prices are back in line with both fundamental and historic norms, buyers still need to exert caution when making a purchase.
Patrick Killelea: What Every Homebuyer (and Homeowner) Should Know Now
by Adam TaggartFor many, the collapse of the housing bubble was the trigger that began the era of economic slowdown Americans find themselves mired in.
But recently there have been growing reports in the media of a housing "recovery." So we've invited Patrick Killelea, founder of the popular housing site Patrick.net and author of The Housing Trap: How Buyers Are Captured and Abused and How to Defend Yourself, to clarify the situation.
The short answer is this: While there are some markets where home prices are back in line with both fundamental and historic norms, buyers still need to exert caution when making a purchase.
With the US elections approaching next week, as well as the threat of another fiscal cliff showdown looming, we asked contributing editor Charles Hugh Smith to revisit his eariler work on how the expansive Central State has come to dominate both private society (i.e., the community) and the marketplace, to the detriment of the nation’s social and economic stability.
Anticipating the Devolution of Big Government
by charleshughsmithWith the US elections approaching next week, as well as the threat of another fiscal cliff showdown looming, we asked contributing editor Charles Hugh Smith to revisit his eariler work on how the expansive Central State has come to dominate both private society (i.e., the community) and the marketplace, to the detriment of the nation’s social and economic stability.
Executive Summary
- Adapting our behavior is a must at this point. We really don't have the option not to.
- The number of claims on real wealth is increasing. How much of the "real wealth" do you own?
- Our economy is now truly a confidence-based system. What will be the fallout when that confidence falters?
- What are the key knowns & unknowns we need to be addressing now?
If you have not yet read Part I: In a Bad Spot, available free to all readers, please click here to read it first.
What is completely unknown at this point is what will happen to our very complex and interwoven financial system when it finally comes to grips with the idea that old-style growth is never coming back. One worrisome idea is that it will experience something akin to cardiac arrest and simply break down one day.
Maybe this will happen, maybe not. I will note that the degree to which the central banks have set themselves up as the ultimate saviors of the system has both an upside and a downside, and it is the downside that worries me the most at this point.
While all the trillions of dollars of intervention have stabilized the system, which I consider to be a good thing, the downside is that the central banks have placed themselves in a position where they had better succeed. If not? Then we discover just how important confidence is to a monetary system built, owned, and operated on trust. My guess is "very."
If We’re Ever Going to Take Control of Our Destiny, the Time is Now
PREVIEW by Chris MartensonExecutive Summary
- Adapting our behavior is a must at this point. We really don't have the option not to.
- The number of claims on real wealth is increasing. How much of the "real wealth" do you own?
- Our economy is now truly a confidence-based system. What will be the fallout when that confidence falters?
- What are the key knowns & unknowns we need to be addressing now?
If you have not yet read Part I: In a Bad Spot, available free to all readers, please click here to read it first.
What is completely unknown at this point is what will happen to our very complex and interwoven financial system when it finally comes to grips with the idea that old-style growth is never coming back. One worrisome idea is that it will experience something akin to cardiac arrest and simply break down one day.
Maybe this will happen, maybe not. I will note that the degree to which the central banks have set themselves up as the ultimate saviors of the system has both an upside and a downside, and it is the downside that worries me the most at this point.
While all the trillions of dollars of intervention have stabilized the system, which I consider to be a good thing, the downside is that the central banks have placed themselves in a position where they had better succeed. If not? Then we discover just how important confidence is to a monetary system built, owned, and operated on trust. My guess is "very."
Executive Summary
- Why household balance sheets are worse off than advertised
- Why the recent rosy BLS jobs numbers actually mean bad news
- How the Fed is squeezing investor capital out of other traditional asset pools and into the stock market
- Expect to see the stock market moving higher in 2013; that is, until QE3 fails
- What to expect if QE3 fails sooner than anticipated
If you have not yet read Part I: The Future of Gold, Oil & the Dollar, available free to all readers, please click here to read it first.
Market historians have recently started to point out that the current advance in the S&P500 is now 40 months old and has made gains of over 115% since the March 2009 lows. In other words, the doubling from the lows in price and the duration of the advance now late in its third year together suggest that a cyclical top is near. Furthermore, despite some noise in U.S. macro data – which has been briefly more hopeful, yet remains well within the phase of stagnation – earnings estimates have been coming down as the world economy continues to shift into lower gear.
Perhaps for the first time in a while, we can actually say that the Fed's decision to start QE3 was moderately anticipatory, in contrast to its ad-hoc and reactive policymaking over the past five years. It is not merely that the Fed soberly accepted that the economy was not getting better. The stagnant, tractionless macro data over the past year has spoken quite loudly to that fact. Indeed, the U.S. economy is merely treading water, and the Fed's move to QE3 serves as a sharp retort to those who would relentlessly attempt to portray stagnation as recovery.
Where Stock Prices Are Headed Over the Next Year
PREVIEW by Gregor MacdonaldExecutive Summary
- Why household balance sheets are worse off than advertised
- Why the recent rosy BLS jobs numbers actually mean bad news
- How the Fed is squeezing investor capital out of other traditional asset pools and into the stock market
- Expect to see the stock market moving higher in 2013; that is, until QE3 fails
- What to expect if QE3 fails sooner than anticipated
If you have not yet read Part I: The Future of Gold, Oil & the Dollar, available free to all readers, please click here to read it first.
Market historians have recently started to point out that the current advance in the S&P500 is now 40 months old and has made gains of over 115% since the March 2009 lows. In other words, the doubling from the lows in price and the duration of the advance now late in its third year together suggest that a cyclical top is near. Furthermore, despite some noise in U.S. macro data – which has been briefly more hopeful, yet remains well within the phase of stagnation – earnings estimates have been coming down as the world economy continues to shift into lower gear.
Perhaps for the first time in a while, we can actually say that the Fed's decision to start QE3 was moderately anticipatory, in contrast to its ad-hoc and reactive policymaking over the past five years. It is not merely that the Fed soberly accepted that the economy was not getting better. The stagnant, tractionless macro data over the past year has spoken quite loudly to that fact. Indeed, the U.S. economy is merely treading water, and the Fed's move to QE3 serves as a sharp retort to those who would relentlessly attempt to portray stagnation as recovery.
The ability of reflationary policy to mute the worst risks of debt deflation has been a source of enormous frustration for stock market bears ever since the 2008 collapse. Yes, the initial moderate rally out of the S&P500’s black hole was perhaps not so surprising in 2009. Bombed-out stock markets can always manage some sort of rally. But the ability of the rally to continue through 2010, and then 2011, and now 2012 has been quite vexing and painful for bearish investors.
Indeed, the entire post-2008 market phase has now produced an era of consistently poor performance for hedge funds. Recent data, for example, shows that an incredible 90% of hedge funds are underperforming the S&P500 through mid-September.
Will the pain continue?
The Future of Gold, Oil & the Dollar
by Gregor MacdonaldThe ability of reflationary policy to mute the worst risks of debt deflation has been a source of enormous frustration for stock market bears ever since the 2008 collapse. Yes, the initial moderate rally out of the S&P500’s black hole was perhaps not so surprising in 2009. Bombed-out stock markets can always manage some sort of rally. But the ability of the rally to continue through 2010, and then 2011, and now 2012 has been quite vexing and painful for bearish investors.
Indeed, the entire post-2008 market phase has now produced an era of consistently poor performance for hedge funds. Recent data, for example, shows that an incredible 90% of hedge funds are underperforming the S&P500 through mid-September.
Will the pain continue?
Executive Summary
- Why pressures to the downside have less impact when the global economy is weak
- Why oil's new floor is $80
- The 'upside risk' story for oil prices
- Why prices will march up to the $150-175 range over the next 2-4 years (with increasing sensitivity to spikes of over $200+ per barrel)
If you have not yet read Part I: The Repricing of Oil, available free to all readers, please click here to read it first.
I encourage others to read the entire recent paper on Nominal GDP (NGDP) Targeting by Michael Woodford (recently delivered at Jackson Hole) or to simply read its coverage, either by Joe Weisenthal at Business Insider or Paul Krugman at the New York Times. In short, I take the appearance of the Woodford paper (link opens to PDF) as the inevitable next-step solution to the problem of unpayable debt and scarce resources. By loudly and flagrantly voicing a policy pursuit of inflation, Nominal GDP Targeting (which has been discussed for some time in economic circles) would be the next iteration of behavioral prodding in Western economies.
More importantly, the growing acceptance of NGDP targeting in policy circles simplifies the battle that began a decade ago: the struggle to counter emerging scarcity of natural resources with the provision of greater and greater amounts of cheap credit. Within the contours of this battle lies the answer as to whether oil’s next major move is downward, in a deflationary collapse, as global demand vanishes in a new economic crisis; or whether oil’s next major move is higher, as the five billion people in the developing world pull the OECD along in a new expansion.
Modeling the next move in oil prices is, of course, a very different task than it was ten years ago…
The March to $200+ Oil
PREVIEW by Gregor MacdonaldExecutive Summary
- Why pressures to the downside have less impact when the global economy is weak
- Why oil's new floor is $80
- The 'upside risk' story for oil prices
- Why prices will march up to the $150-175 range over the next 2-4 years (with increasing sensitivity to spikes of over $200+ per barrel)
If you have not yet read Part I: The Repricing of Oil, available free to all readers, please click here to read it first.
I encourage others to read the entire recent paper on Nominal GDP (NGDP) Targeting by Michael Woodford (recently delivered at Jackson Hole) or to simply read its coverage, either by Joe Weisenthal at Business Insider or Paul Krugman at the New York Times. In short, I take the appearance of the Woodford paper (link opens to PDF) as the inevitable next-step solution to the problem of unpayable debt and scarce resources. By loudly and flagrantly voicing a policy pursuit of inflation, Nominal GDP Targeting (which has been discussed for some time in economic circles) would be the next iteration of behavioral prodding in Western economies.
More importantly, the growing acceptance of NGDP targeting in policy circles simplifies the battle that began a decade ago: the struggle to counter emerging scarcity of natural resources with the provision of greater and greater amounts of cheap credit. Within the contours of this battle lies the answer as to whether oil’s next major move is downward, in a deflationary collapse, as global demand vanishes in a new economic crisis; or whether oil’s next major move is higher, as the five billion people in the developing world pull the OECD along in a new expansion.
Modeling the next move in oil prices is, of course, a very different task than it was ten years ago…