San Francisco 2015 v/s Florida 2006

From 'Million Dollar Shack' documentary looks at Bay Area's insane housing market.

A realtor featured in the film named Ken DeLeon doesn't offer much hope. "As crazy as these prices might seem, I think you're going to see them double in the next six to 10 years. The amazing part — I don't think, it's going to end. I think the fundamental lack of supply and strong demand are going to drive this market forever."

Back then, in Florida:

In Miami, Ron Shuffield, president of Esslinger-Wooten-Maxwell Realtors, predicted that a limited supply of land coupled with demand from baby boomers and foreigners would prolong the boom indefinitely.

"South Florida," he said, "is working off of a totally new economic model than any of us have ever experienced in the past."

Note the similarities:

1. Limited supply of land. CHECK.
2. Then "foreigners" now "Chinese". CHECK.
3. Prolong the boom indefinitely. CHECK.

My prediction: BLOODBATH.

The Grand Summary

This blog has pretty much lived out its purpose. It was to document the sheer unabated insanity of journalism in the era of the World's Largest Bubble™.

It's done. It's on the record and its (semi-?) permanent.

Let us summarize everything that has been learnt so far:

Journalists are complete fuckin' idiots when it comes to finance. Let's explore all the reasons:

1. They are bound at the hip to their paycheck as are most humans. They serve the powerful advertising lobbies — in this case it would've been the Real Estate lobby. (On a related note, the NAR has its massive office nearest to the Senate entrance in DC and there are a ton of wonderful fancy restaurants there. One wonders why!)
2. They are numerically illiterate and proud of it! They understand fuck-all about Statistics. They think that three anecdotes and two quotations consist an article.
3. The entirely idiotic idea that one must give credence to the "opposing view". One can almost feel the headline: Earth is Round? Opinions Differ!
4. They fail to understand the importance of self-interest when they seek quotations. Someone who benefits from a certain situation is guaranteed to be biased and will spin the situation in their favor and their "opinion" must be severely discounted if not ignored altogether. Which leads us to:
5. Complete lack of critical thinking. English majors — what can one do? They are not the type to ask forceful follow-up questions which tend to be pretty obvious.

Virtually all financial media is complete and utter tripe. Within three sentences, it is obvious whether to stop reading or not. Heck, sometimes it's so bad that you'd be better served by reading "50 Shades of Gray" or surfing for porn rather than read financial headlines.

The most important point is there is no fix. Why would that be?

The reason is pretty clear.

Analytic, statistically-minded types with penetrating insight are much better served by doing the analysis and profiting from it not documenting it for other people with passive intellects that want to consume data not generate it.

There is smart financial media to be found. It's suitably obscure and it serves the author not to reveal since it acts as a form of IP (Intellectual Property.)

So the world will continue to spin as it always does but this blog will die a slow (passive) death.

It's been FUN though!

Candy Crush

This blog is basically dead but it behooves to write about the economics of a pretty stupid (and addictive) game called Candy Crush.

The idea is simple:

1. You have a few lives.
2. The game is pretty difficult or gets so at specific levels.
3. You can either get more lives by getting "timed out" or "paying for more lives".

(It's a little more complex but this axiom system will work as a first-approximation.)

The idea seems to be that:

1. The game is addictive. (TRUE.)
2. People are stupid. (TRUE.)
3. Some people will "pay" rather than "sit out the timeout".

Remember the firm that makes this only gets paid if Rule [3] is true. Otherwise, they get paid jack diddly-squat for doing all this work and that's not much fun in the real world.

The logical conclusion is that if someone gets too frustrated they will stop playing which brings us to:

1. If they stop playing, you don't get a single fuckin' penny.

Which brings us to the equally logical conclusion:

1. If you sit out long-enough, they will dumb down the game so you can get to the next level.

Once you figure this out, the game is not that interesting any more.

Incidentally, this is what Las Vegas slot-machines do. They are designed to be frustrating but not "too frustrating". They will give you a payout precisely when you are about to walk away forever. Turns out humans are pretty much designed the same way.

We really can't handle the laws of REAL probability which can be endlessly frustrating. Even after extensive training and endless rounds of losses, we are still human and handling tons of losses in a row is hard on the human psyche.

So is the game bogus? YEP.

Are most humans retards? YEP.

Oh well! The game was fun while it lasted.

Oh, Canada!

Population: 34 million.

Size: Second largest country in the world.

Real Estate: pricier than Central Park West apartments.

Land: Frozen as far as the bleedin' eye can see.

Bubble: Definitely, darlings!

Collapse: Guaranteed.

Timeline: Imminent.

Future: DARK.

The Commodities' Producers Meltdown

Most of "genius" is predicting the timing of meltdowns (even though most rational financial participants know that it's not that important.)

Goodbye, Australian and Canadian housing bubbles. It was lovely knowing you.

Australia is in full-on meltdown mode as we speak. Canada is lagging a little by about six months but that's neither here nor there.

(On a related note, goodbye Chinese investors in Vancouver. And goodbye, Mrs. Watanabe in the currency markets for yield. ありがとう, ありがとう! Your clocks are gonna get cleaned.)

No, you weren't terribly different. Sucks to be you!

Ireland Returns to Traditional Economy - Exporting Irishmen!

Bloomberg reports: Irish Urge Children to Leave as Export Gain Masks Lost Jobs.

Anthony Roche is urging his unemployed son to emigrate to Australia from Ireland to escape joblessness stemming from the country’s economic collapse.

Unemployment may climb to 14.6 percent this year, the central bank forecast on Feb. 2, as companies such as Royal Bank of Scotland Group Plc and Allied Irish Banks Plc prepare to shed more workers.

Irish unemployment tripled to an average 14.2 percent last year from 4.5 percent in 2007, as the economy shrunk by about 15 percent as a real-estate bubble collapsed. Emigration rose to the highest since the 19th century in the 12 months ended last April, with about 76,400 people leaving Ireland during the period, according to the Central Statistics Office.

Worse, over half have been jobless for more than a year and with 30 percent of people aged 24 and under are out of work, the office said in its quarterly employment survey.

When 30% of your younger force is out of work, you are basically doomed.

The correct solution for the Irish would've been to default on the debt as we have talked about many many many many many times but if you're a junior Irishwoman (or Irishman), conditional on the fact that your politicians are fuckin' retards, the best option is to leave.

Which makes the problem bigger, and of course, the default more likely. Which they should've done in the first place!!!

Oh well!

Death Spiral?

Bad mojo in Hungary: EU Says Hungary’s Central Bank Law Holds Key to Aid Talks.

The EU and the International Monetary Fund broke off negotiations on the aid package last month after Hungarian Prime Minister Viktor Orban refused to abandon the central-bank law, which came into force on Jan. 1 as part of a new constitution. The Budapest-based Magyar Nemzeti Bank has said the new law undermines its independence.

“We will decide whether the independence of the Hungarian central bank is fully in line with EU treaties and then of course we will be ready to open the formal talks with the Hungarian authorities on the financial assistance they requested last November,” Olivier Bailly, a spokesman for the EU, told reporters in Brussels today.

Almost every sign screams hyperinflation, and a failed state.

If you were Hungarian, what would you do?

The "Chinese" Manhattan

Bloomberg reports: China Debts Dwarf Official Data With Too-Big-to-Finish Alarm.

A copy of Manhattan, complete with Rockefeller and Lincoln centers and what passes for the Hudson River, is under construction an hour’s train ride from Beijing. And like New York City in the 1970s, it may need a bailout.

Debt accumulated by companies financing local governments such as Tianjin, home to the New York lookalike project, is rising, a survey of Chinese-language bond prospectuses issued this year indicates. It also suggests the total owed by all such entities likely dwarfs the count by China’s national auditor and figures disclosed by banks.

Bloomberg News tallied the debt disclosed by all 231 local government financing companies that sold bonds, notes or commercial paper through Dec. 10 this year. The total amounted to 3.96 trillion yuan ($622 billion), mostly in bank loans, more than the current size of the European bailout fund.

The planned 15.2 million square meters (164 million square feet) of office space by 2020 in Yujiapu and across the Hai River in Xiangluo Wan, or Conch Bay, is more than one-third of the 450 million square feet in Manhattan.

One-third the size of Manhattan office space, and completely fuckin' empty! Completely!

Ponder that, fuckers, don't just sit there, ponder it.

How can this not end badly?

Anyone who is long the Chinese yuan in any form whatsover (and the EE is looking at you, Jim Rogers!) is going to get their fuckin' clock cleaned.

There is no China miracle. It's all the illusion of debt financing, and when it comes crashing down (no later than mid-2013 and most likely sooner), remember you heard it here a long time ago.

Ditto for India and Brazil. There is no "Indian miracle" or "Brazilian miracle". It's all the smoke 'n mirrors of a ton of debt.

PS :- It was obvious what drove commodities all along, wasn't it? Please maintain a moment of silence for both Canada and Australia. Ruthless ass-poundin's in technicolor await.

Hunger Bells, Hunger Bells, Hunger All the Time

Source: USDA.

Population Numbers: Census. 2011 data was interpolated.

The Zombiecalypse

Bloomberg reports: Wells Fargo Says 80 May Be the New 65 for Retirees.

Americans are prepared to work longer in order to save enough for retirement, according to a survey by Wells Fargo & Co.

“Eighty is the new 65,” Joseph Ready, executive vice president of Wells Fargo Institutional Retirement & Trust, said in an interview at Bloomberg headquarters in New York before the survey was released today. “It’s a real sea change.”

About 74 percent expect to work in retirement, according to the survey, with about 39 percent working because they’ll need to and 35 percent because they want to. And 25 percent of those surveyed said they expect they’ll need to work until at least age 80 because they don’t have sufficient savings.

Given that life expectancy is about 78 in the United States, there's going to be a lot of zombies walking around for at least two years afterwards!!!

George Romero, eat your heart out!

What is Happiness?

Happiness is a blast from the past.

In Miami, Ron Shuffield, president of Esslinger-Wooten-Maxwell Realtors, predicted that a limited supply of land coupled with demand from baby boomers and foreigners would prolong the boom indefinitely.

"South Florida," he said, "is working off of a totally new economic model than any of us have ever experienced in the past."

BWAHAHAHHAHAHHAHAHAHHAHAHAHAHHHHHHHHHHHHHHHHHHHHHHHHHHHH!!!!!

Europe

It can't be more appropriate that a band called "Europe" wrote this:



Just to be clear this refers to the EMU not Europe. Europe will still be around but will anyone care?

Reading Between the Lines

From the Shanghai Daily: Wen urges banks to support small businesses in trouble.

PREMIER Wen Jiabao has called for stronger financial support for China's small businesses and better regulation of the private lending market.

"Small enterprises should be a priority of bank credit support and enjoy more tax preferences from the government," Wen said during a visit to Zhejiang Province, east China's economic hub, on Monday and Tuesday.

He told banks to lend more to small firms and tolerate high levels of bad debt, while demanding a crackdown on high-interest private lending, Xinhua news agency reported yesterday.

Tolerate high levels of bad debt?

What kinda idiot tolerates high levels of bad debt? The whole purpose of banking is to make "good loans" not "bad ones".

One can read between the lines. The shadow banking system in China consists of private lending. If you trawl through the news items lately, you will read about a spate of suicides inside China.

There is incredible stress within the system.

China is going to have a very hard landing, and anyone that can't see that and keeps stoking the "China miracle" story is pretty much a fool.

The Continental Divide

The EU outlook on GD II: Hope springs eternal.

The US outlook on GD II: Hope dies last.

In Which the EE Scratches His Head

CNN reports: Thousands of protesters to 'Occupy Wall Street' on Saturday.

Egyptians did it for democracy. So did people in Tunisia, Yemen, Bahrain and Syria. Now, activist groups are hoping Americans will launch their own uprising -- in the form of thousands of protesters descending on Wall Street this weekend.

Occupy Wall Street is a "leaderless resistance movement" spearheaded by activist magazine Adbusters. Organizers want people to swarm into lower Manhattan on September 17 and set up camp for two months, then "incessantly repeat one simple demand."

What's that demand? They haven't decided yet. (emphasis: Ed.)

By the way, Wall St. is closed on Saturday.

The Fate of the Euro (with Music!)

Everywhere You Look, It's Sweet Baby-Jeebus!

The AP reports: Manifestation of Christ on Everyday Objects a Recurring Event.

When Jacob Simmons and his finance Gentry Lee Sutherland found a Wal-Mart receipt on the floor of their home, they were stunned to find that the receipt had the resemblance of Jesus Christ on it. KARE 11 News reported that when the couple asked Wal-Mart how this could image could have appeared, they were told heat was the only thing that could have cause the image.

Jesus' image has also appeared on food. Zimbio shows several images of Jesus on a potato chip, a cheese sandwich and a fish stick. According to the site, some of the people who found these images were comforted and inspired by the clear likeness of Jesus' image on the food. Realizing the opportunity to make money, Diane Duyser in 1994 auctioned the cheese sandwich on EBay for $28,000, reports Zimbio.

As we have clearly noted that in a depression, there is both a lack of cash and a rise in religious fervor.

If you see Jeebus on a tortilla then some of that sweet cash might flow your way.

This is entirely predictable and was both predicted and demonstrated a long time ago.

Now, with the rise of religious fervor, there will be a rise of people who will seek to cash in on that ("I'll pray to sweet baby-Jeebus so that some magic money will come your way.")

Why is this even surprising?

The Big-D Bites, Bitches!

From the SF Chronicle: Portion of men who work falling with wages.

Men who do have jobs are getting paid less. After accounting for inflation, median wages for men between 30 and 50 dropped 27 percent - to $33,000 a year - from 1969 to 2009, according to an analysis by Michael Greenstone, a Massachusetts Institute of Technology economics professor who was chief economist for Obama's Council of Economic Advisers.

"That takes men and puts them back at their earnings capacity of the 1950s," Greenstone says. "That has staggering implications."

Welcome to the DEFLATION, baby!

Oh, and incidentally, the "staggering implications" are only "staggering" to MIT professors with embedded "eternal inflation" assumptions twinkling in their statistical datasets.

The Irish Do Hunger Like No Others!

From the Independent: Families in modern Ireland skip food to pay the mortgage.

FAMILIES in modern Ireland are going without food to meet the demand of mortgage debt.

The arrival of the second wave of the economic crisis, giving rise for the first time in many decades to the spectre of hunger, has caused shock across the country.

The decision of homeowners to choose hunger over a fear of eviction helps expose as irrelevant the issue of "moral hazard", the defence of policymakers who resist calls for debt forgiveness.

In a letter to the Irish Times on Friday, MP Mac Domhnaill -- possibly a pseudonym -- an unemployed man from Tralee, wrote of the "anxiety and pain" the economic crisis had wreaked on his family.

The letter writer, who has chosen to use his dole payment to meet a €780 monthly repayment, told of how he had nothing to feed his children except bread and cereal.

One presumes that "mortgage" spells nothing like "potato" but the end result seems to be the same.

Incidentally, the word "mortgage" originates from French (via Latin) meaning "death pledge" which in this case seems to be taken quite literally.

Dude, hand the keys back, and walk away. What are they going to do?

Ironically, the same could be said for the entire nation of Ireland. Just default. What are they going to do?

Oh well, one would think that at rock-bottom, they would "get it".

Of course, it's not serious yet. For that, the Irish would have to stop drinking. Then, we'd be sure.

The Awful Truth

From Bloomberg: Biden Tells Wen ‘You Have Nothing to Worry About’ Over Debt.

Vice President Joe Biden told Chinese Premier Wen Jiabao his government doesn’t need to worry about the safety of Treasuries as the world’s biggest overseas holder of U.S. debt.

"You see here, Wen, good buddy," said Plugs, "we have this thing called an electronic printing press, and my old friend Greenspan assures me that we can never default, we just keep printing. It’s so very simple really, now lets get hammered on some huáng jiǔ, buddy, and forget all this BS."