www.news.com.au/finance/economy/australian-economy/australian-residential-land-value-to-gdp-ratio-now-higher-than-japan-at-height-of-1989-bubble/news-story/140872e9ed0fffb9e9a544d3ed68d1fd





“As a percentage of GDP, all residential land in Australia is now worth more than all Japanese land was in 1989 – and that was one of the great bubbles of all time, followed by one of the great crashes of all time.”

I am not saying housing prices will crash here though, it is impossible to predict what will happen when you are in the middle of an experiment too stupid to have ever been attempted before.
Two months ago I was depressed I couldn't find anywhere to invest my cash, now I am grateful to be mostly cash for my holdings.
Ain't life weird.

Play it safe with your cash. We all assume there will be a crash soon in the US, so holding the cash is the smart play. At worse you lose potential profit. Small price to pay in the event of a multimarket crash that may or not may not hit Australia. Does not take a genius either to get scared when you see slopes that are almost vertical lines in assets. See a slope higher than 1 (45 degree angle) and warning bells should be going off as that means price increases are speeding up over time. Currently looks like 4, so they are speeding up at a 4x rate. That has to be a bubble, and even if it not, that is an anomality, and you do not want to invest in anomalies because no one knows how they should behave.  

Who's afraid of the big bad wolf?

Inflation climbed 1% in the month of May topping all expectations and taking us to a rate of 8.6%
www.bloomberg.com/news/articles/2022-06-10/us-inflation-unexpectedly-accelerates-to-40-year-high-of-8-6

We are at a point where just about any piece of news could be the one that makes the market implode.
Just no way to know what that piece of information will be...



If these asset prices start unwinding rapidly...

Inflation right now is being driven solely by gasoline prices in the US. And that single commodity is set to cause a recession as it rises higher and higher.

I finally got around to reading the transcript of Biden's address on inflation, what a train wreck.

Now a couple of things before the partisan hacks here set about dismembering me.
I do not think inflation is the fault of the Biden administration.
My belief however is that the White House has at best it's head in the sand, at worst wearing their own anus as a headband.

Biden doubled down again with saying that this is Putin inflation.



I have no argument that Putin's invasion of Russia is adding fuel to the fire (pun intended).
You cannot in any good conscience say that this is inflation due solely to gas prices or Russia when it started in October.
The NASDAQ is slowly unwinding, down 25% this year, as I said many times, future PE is king when it comes to determining shares true intrinsic value.

As for Biden's diatribe on Exxon and the oil companies, absolutely laughable what he did.
It was blame shifting, it was in no sense an attempt at finding a solution.
Since Biden started running he has been preaching against fossil fuels, now he is demanding they use their revenue to dig new wells in an industry that he has sworn to destroy.
He is a stupid stupid man... But so has every President since Clinton been.

The world is waking up from it's green new deal fever dream and realised that there are NO alternatives that make sense for base load power, you want low emission you go small scale nuclear.

If Biden was serious, he would be having a chat with the American people about the fiscal policy that followed the GFC and how it was necessary to rescue the economy from bad debts whoever caused it and how the Covid crisis required more spending to stop the economy literally dying overnight and now, those debts are due and times are going to be hard for a few years.
He won't though, they keep saying they have given the Fed "a free hand" which is a pretty way of blame shifting.
The costs that are increasing are: fuel, food, shelter etc.
It doesn't matter whether rates are 2% or 3% people are still going to eat, sleep and drive to work.
I don't think you can reign this inflation in with interest rates alone, we are coming off too low a base and if we get enough moving to seriously affect spending, the economy is dead.

Ah yes, hard time for the people, record profits for the corporations, and record growth of asset for the rich. That is the way out of this surely. And we can blame the people for waiting to move away from fossil fuels for the sky high gas prices now. How dare those idiots think that they would not be the ones made to bear the costs.

Inflation rates will continue to rise until people cannot afford their rent and are only spending on transportation, rent and food. It is just good corporate pricing strategy when there is no competition due to trusts.

Real easy spending cut can be implemented, cut the 20 billion we give to oil companies annually.  

Jun 11, 2022 4:17:37 GMT c said:

Ah yes, hard time for the people, record profits for the corporations, and record growth of asset for the rich. That is the way out of this surely. And we can blame the people for waiting to move away from fossil fuels for the sky high gas prices now. How dare those idiots think that they would not be the ones made to bear the costs.

Inflation rates will continue to rise until people cannot afford their rent and are only spending on transportation, rent and food. It is just good corporate pricing strategy when there is no competition due to trusts.

Real easy spending cut can be implemented, cut the 20 billion we give to oil companies annually.  

It's the Fed Reserve policy that has spectacularly failed, this one isn't on Wall Street.
If you have noticed, the stock market is bleeding which is costing everyone money.
I don't ever support corporate welfare, but it's beyond crazy to talk about making energy more expensive in this market.

A smarter policy would be to give the oil companies a tax deduction equivalent to double the amount they would normally claim for bringing a well online.

It makes me annoyed how deliberately arrogant you are about the facts
In Australia we have a similar problem where our coal fired power stations are going to grind to a halt because no company is going to doaintenmace and upgrades on a system that one side of government has sworn to destroy.
The smart play for both parties would be to establish a bipartisan plan forwards that industry signs off on with a taper down for the dirtiest energy production methods with an agreed shut down date.

Ok facts then, what does the stock market have to do with the gas price in the US? It has become uncorrelated with the oil price, remaining high even when oil drops due to price memory. Core interest is down in acceptable levels. Likewise what does the fed policy have to do with gas prices?

Your solution is bipartisanship in a Senate where many Senator's personal income is related to dirty energy companies they own or are heavily invested in. You are not getting to 60 to pass any legislation. Also you are not seeing the GOP passing anything bills that will help the US economy, as they want the US economy to get as bad as possible for the 2024 election. They get market information before the public so can shift their own holdings before selloffs so the market collapsing happens after they get to make their moves.

And the majority of America has no wealth linked to the market. The rich are losing money but most people have nothing to lose from a market collapse. Particularly now with the labor market being so hot.

www.cherrycreekmortgage.com/lous-credit-news

Here's a scary one, after the CPI figures dropped the appetite for MBS to absolute zero. Monday will say whether this is a blip or the new normal, but it means the market has priced in a recession, an ugly one too.
Considering that a huge chunk of the QE was the Fed buying MBS, it also means they can't unwind their positipn, so they can stop the QE, but they can't unwind it with QT until the securities expire.

Of course the market is moving out of Mortgage Back Securities. That is the one area that will not get a bailout a second time. REIT's are surviving inflation so far though. Which are the investment that replaced most MSBs a decade ago.

If there is a crash or recession, the MBS market will be left to die this time which is why so are unwinding their positions. And the fed reserve has been selling off it's holding for months and announced months ago they would not reinvest them.

That said the REIT market has been buying the mortgages and attached MBS to convert them to REIT's when possible still.

Are we just in the weak men create hard times part of civilization's cycle?

Hard iron sharpens iron, it is ball tanning time!!!

Jun 12, 2022 2:24:31 GMT @ness said:

Are we just in the weak men create hard times part of civilization's cycle?

Absolutely correct @ness
Or perhaps it's the phase "Stupid people create avoidable times"

But hard times are what make hard men!!! We need high inflation to solve the male masculinity crisis. High gas prices are a good thing as it encourage men to men again, and chop wood for heat instead using gas, and to hunt for their food instead of buying another happy meal. If we are to go to mars to the moon as will need a generation of hard men to lead to the way!!!

Jun 11, 2022 23:57:08 GMT c said:

Of course the market is moving out of Mortgage Back Securities. That is the one area that will not get a bailout a second time. REIT's are surviving inflation so far though. Which are the investment that replaced most MSBs a decade ago.

If there is a crash or recession, the MBS market will be left to die this time which is why so are unwinding their positions. And the fed reserve has been selling off it's holding for months and announced months ago they would not reinvest them.

That said the REIT market has been buying the mortgages and attached MBS to convert them to REIT's when possible still.

I'm not sure what you are saying, Mortgage Backed Securities are still the backbone of the US housing market being 63%.
If nobody will touch the MBS packaged loans then liquidity for the housing market stops dead.

In the US that entire market chilled after the financial collapse when movies like the Big Short came out exposed how MBS were rated. They still sell, but they are not a hot investor market at all and mostly retirement funds and hedges are into them. And payouts are nowhere near what they used to be. 

The market that investors are all about are REITs or rent backed securities, which are backed by mortgages as well, but pay based off of rent payments instead of mortgage payments.  Pretty much the same thing as the old MBS were.  

Also the Dodd-Frank Act HEAVILY regulated the MBS market here. Or was, suspending the Volcker Rule did reopen the market for speculative trading of MBS again. More dangerously, opened the market without needing to cover it.

Jun 12, 2022 16:40:48 GMT c said:

In the US that entire market chilled after the financial collapse when movies like the Big Short came out exposed how MBS were rated. They still sell, but they are not a hot investor market at all and mostly retirement funds and hedges are into them. And payouts are nowhere near what they used to be. 

The market that investors are all about are REITs or rent backed securities, which are backed by mortgages as well, but pay based off of rent payments instead of mortgage payments.  Pretty much the same thing as the old MBS were.  

Also the Dodd-Frank Act HEAVILY regulated the MBS market here. Or was, suspending the Volcker Rule did reopen the market for speculative trading of MBS again. More dangerously, opened the market without needing to cover it.

Again, not the point.
I'm not saying the MBS market is speculative, I'm saying nobody wants to invest in them at the moment. This means analysts are nervous about either an expected rise in delinquency rates or collapsing house prices.
This means the banks will have to raise interest rates independent of the Fed, until there's an appetite for the securities... Or the mortgage market stops.

Or they do not trust the MBS bonds themselves. And after 2008, many think there is hidden risk in that market and treat it as such. It WAS a safe market, but now it is considered one with a slight to moderate risk as no one knows when they will start selling shit as AAA rated bonds again. And when staring down a bear market and possible recession you do not want to take on that risk.

Prior to 2008 this would have been a good measure, but not afterwards.  

Jun 13, 2022 3:51:39 GMT c said:

Or they do not trust the MBS bonds themselves. And after 2008, many think there is hidden risk in that market and treat it as such. It WAS a safe market, but now it is considered one with a slight to moderate risk as no one knows when they will start selling shit as AAA rated bonds again. And when staring down a bear market and possible recession you do not want to take on that risk.

Prior to 2008 this would have been a good measure, but not afterwards.  

What I'm saying is that the on sale of mortgages as prepaid investments are how the majority of mortgages are funded in the USA. No appetite for MBS then no liquidity for new mortgages.


In unrelated news, all the cryptos are crashing.

So much of the US market and what was considered the new normal was actually just massive inflation in the form of QE and low interest rates. Stop the flow of money and the assets collapse.

Yup, with 0 interest and loans companies did not need to pay back then went ham on the market removing shares from the market. Then investors saw numbers go up and joined the fun. Correction is going to be pretty rough as it likely just started. Still think companies are going to leverage for a bailout by going high risk during the bear market.

Chamber of commerce def is freaking the fuck out saying near total economic collapse if QE is reduced at all.  They should be your message of how bad things are, the more they oppose action against inflation, the more they have to lose from it.  But they been warning of mass layoffs if companies cannot continue to get their loans under 1%.  

Crypto lasted a LOT LONGER than anyone expected. Curious if it crashes for good, or it manages to recover.

Jun 13, 2022 6:10:03 GMT c said:

Yup, with 0 interest and loans companies did not need to pay back then went ham on the market removing shares from the market. Then investors saw numbers go up and joined the fun. Correction is going to be pretty rough as it likely just started. Still think companies are going to leverage for a bailout by going high risk during the bear market.

Chamber of commerce def is freaking the fuck out saying near total economic collapse if QE is reduced at all.  They should be your message of how bad things are, the more they oppose action against inflation, the more they have to lose from it.  But they been warning of mass layoffs if companies cannot continue to get their loans under 1%.  

Crypto lasted a LOT LONGER than anyone expected. Curious if it crashes for good, or it manages to recover.

It's going to come out that most of what the QE went to pay for is junk.

Today the Celsius network which is a large crypto house offering staking has blocked all withdrawals, they haven't said why but it looks like no liquidity. A whole lot of people who thought they were super smart are going to end up losing everything. That's the thing about unrealistic returns, there's always a catch.. and there's no regulation.

Powell is so asleep at the wheel, he has said nothing or done nothing to show he has any idea of what's going on. You get a couple of bad reports in a row and spook the market... It's a black Monday.

Not Powell to blame most likely. He believes interest rates should be high, and raised them before COVID. Likely it is Trump and Biden pressuring him to focus on jobs and unemployment, without realizing that the dangers for keeping interest rates at a near minimum and to rise the price of the stock market fast. He did a fantastic job for unemployment and did rise the stock market. But he recovered the market using Greenspan puts and the Fed model which resulted in artificial asset prices.

The irony is all investors knew this, so they also knew it would correct, but still invested. Goldman been saying this created an everything bubble for ages now but still are playing in it. And the downside of the Fed model is it is unpredictable and falls apart when you move interest rates.  

The entire model that Powell used relies on nothing more than investor habits of reacting to certain numbers.  Stop and think about the logic of the investments, and it falls apart extremely fast.

Any time someone talks about the new normal or new paradigms..
Run to the exits!

It seems it doesn't matter how much money your print, eventually everything returns to a reasonable multiple of its PE ratio... And then there's Crypto with no earnings, staking it seems is essentially a Ponzi.

THE MARKETS!

OMG the market is going to drop below 30k panik!!!

I loved they were advising people to buy the dip until today. The market going from 30k from 20k in a five year period that included a pandemic where millions were out of work should have been a sign that maybe it was overpriced a little.

Bear time though, should get interesting for investing world. Let's see who is a genius now.

Now all eyes are on the Fed, will they go 0.75 or 1.0 for the next rate hike?
I think the only way to cool the market is to rip the plaster off quickly and shock the asset prices into rapidly contracting.
The problem with that is that all these bankers who made bank along the way, are doing it with peoples pension funds... So the outcome is going to be that Boomers don't retire and hang onto their fat checks holding down the next generation.

Expected they will do .75, but would not be shocked to see .5 either. Chamber of Commerce is really shoring up that higher rates will mean mass layoffs.

And that absolutely is my problem with this. Banks are using their commercial banking to fund their investment banking. This is what the Glass-Steagall act was designed to stop, as we see time and time that when the investment side takes a loss, they pass that onto the commercial side. And they have the balls to increase their personal compensation for their performance as investors while they do it.

This was what ultimately caused the great depression too, banks got too greedy and when people realized it and tried to withdraw their cash, they found the banks no longer could cover. With all the changes that were made, banks now make it nearly impossible to convert your accounts to cash. Can get a few thousands only per day tops and cannot settle a large account into cash without special permission from bank management. They see the cash as theirs to invest. Even the option to opt your savings out of being used for investing has been taken away from most consumers.

And this is why today investors are too big to fail. They fail, the American people find their savings vaporized. And likely try to regulate banks and it will create mass panic as it is revealed just how little banks can currently cover should consumers try to get their cash out in a rush.

///

If you not seen it, Rogue Trader about the collapse of Barings Bank was a fun film about this sort of situation.

The market is predicting some awful times ahead.
This is a normal looking yield curve for bonds:



Notice the orderly progression from 2yr to 30yr yields.

This is where we are at now:

Feds rose the rates .75. Should hear people screaming next week about that a recession is here to keep rates below 2.

Rather than make a new thread for it right since, will just toss it here. The recession is here. Spending is starting to drop across the board by consumers. Only a matter of time before we start to hear bailout talk as those CEO bonuses do not pay themselves.