None of this has kept individuals, companies and governments from ramping up debt levels. Leverage abounds, everywhere. Grant’s Interest rate Observer writes, “companies are tapping credit lines to compensate for shortfalls in cash flow.”
Las Vegas Apartments: Gambling on the Future, Using Today's Numbers
Apartment developers’ tea leaves tell them Millennials will always be renters, willing to pay handsomely for cool creature comforts: climbing walls, coffee bars, and concierge service. Average rents in Las Vegas rose from $900 in Q3 2016 to $1,059 in Q4 2018. On Sunday, the local paper featured a new mid-rise project with successful Millennial written all over it.
The Trouble with Complacency
Everything is A-OK and warm and fuzzy for the investing public. “Social optimism is evident everywhere,” writes Prechter. “Optimistic investment in stocks and junk bonds remain at historically high levels. Indebtedness is also historically high. Student loans are at a record. Auto loans--many of them for SUVs, muscle cars and tricked-up trucks--are at a record.”
“Profit is an Opinion; Cash is a Fact”
Stephen Grocer points out these same analysts last October had projected earnings to surge 6 percent from a year ago. Then at the start of this year, the analysts trimmed their guesses to a 3.3 percent increase. Now, they’ve caught up with Ms. Pomboy.
The Transportation Boom Ends
Less shipping means less buying, selling, and producing. Government interference in the form of low interest rates and the threat of tariffs pulled economic activity forward. However, now the economy is digesting that bubble of activity.
Central Banks Buy Gold, Baltic Dry Index Sinks
Central Bankers never seem to get the timing right in buying and selling gold.
Synthetic Danger, Again
The whole idea of capital relief, as the name would imply, is to lower the amount of equity required and increase leverage. What’s a banker to do when a pension or hedge fund rep stops by and offers to unlock some of his or her bank’s idle capital?
CTE, the New Asbestos
What could go wrong? Insurance? Or, lack of it? Insurers are leaving the football market fearing Chronic Traumatic Encephalopathy (CTE) is the new asbestos.
Freddie Mac Economist: Housing Dip is a 'Mental Recession'
“We’re in a mental recession,” chief economist at Freddie Mac Sam Khater told the Journal (presumably with a straight face). “It’s a constant stream of negative headlines for a couple of months…it wears on you.”
The Value of Work
Gill’s book, “How Starbucks Saved My Life: A Son of Privilege Learns to Live Like Everyone Else” is a love letter to Starbucks’ employees and customers in between ruminations about his childhood, career, and past mistakes that left him an unemployed, broke white man in his early 60’s.
Already Bloated with Real Estate, Blackstone Bellies Up for More
Real estate fortunes rise and fall with interest rates. Low rates equal high values, high rates the opposite. If rates begin to rise as Mr. Grant’s father, Jim Grant of Grant’s Interest Rate Observer, believes, BX’s timing couldn’t be worse. Or, it may be possible, Blackstone will be fishing for distressed deals when the RE shit hits the fan.
Housing Affordability Down, Inventory Up
For those believing this is the pause that refreshes, James Stack thinks otherwise. “Housing could be heading for its worst year since the last housing crash," Stack, 67, said told Bloomberg in a phone interview. “Expect home sales to continue on a downward trend in the next 12-plus months. And there’s a significant downside risk to housing prices if a recession takes hold.”
End This “Expansion” Now Chairman Powell!
The central bank creates expansions and then murders its darlings, to borrow a phrase. Austrian economists say booms are the problem, with low interest rates breathing life into ill-conceived ventures and, once hatched, keep them from death’s door, wasting capital to the detriment of society. Recessions and depressions cleanse the economy of these malinvestments, re-aligning production with society’s collective time-preference.
Trump's Gut Feeling
The fact is, our bodies react to news and risks quicker than our brains do. Conscious thought is left in the dust when we react and especially when we take risks. Of course neoclassical economists would poo-poo the notion of our bodies reacting to threats and risks, after all, we’re all rational beings, doing what’s rational at all times. Yeah, right.
The Old Fashioned Fed Chair
Trump would like Volcker’s height, 6 foot 7 inches, as opposed to Janet Yellen, who was fired for her lack of it, at 5 foot 3 inches. However, while Trump has his eye on the stock market, Volcker always kept his on the price of gold. The ex-Fed Chair mentions the yellow metal often in “Keeping at It: The Quest for Sound Money and Good Government.”
Can Raiders Arrive Fast Enough to Save Housing Market?
Vegas was the hottest market in country two months ago, now, not so much. But home sellers are telling their realtors to check the paper for the business section headline, “Las Vegas home prices rising fastest in country, still.” Those kind of headlines have sellers listing their properties for $20,000 to $40,000 too much, realtors tell me.
Less Fed, Less Bubble
We often hear that rich are getting richer and everyone else is being left behind. However, it is only the Austrians who point to the Fed’s policies as creating this great divide in wealth and incomes.
Low CAPs, Clear Crystal Balls
Can rental rates keep climbing? Will interest rates remain low forever? Griffin Capital seems to think the answer to both questions is ’yes’.
California Housing Funk Crosses Boarder to Nevada
With California being Nevada’s primary feeder market, what happens in California won't stay there, but migrate to Nevada.
Tariff Man Breaks Windows
Boehm points out that the 300 hundred jobs came to life after “American companies have paid about $690 million in tariffs to the federal government.” That works out to $2.3 million per job we know about or $300,000 per possible job.