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October 18, 2018 | Implosion of Stock Market Double-Bubble in China Hits New Lows, Authorities Busy Elsewhere Keeping China Miracle from Unraveling

Bigger issues than propping up the stock market beckon. Today, the Shanghai Composite Index dropped another 2.9% to 2,486.42. In the bigger picture, that’s quite an accomplishment: Lowest since November 27, 2014, nearly four years ago Down 30% from its recent peak on January 24, 2018, (3,559.47) Down 52% from its last bubble peak on […]

October 10, 2018 | How Will 6% Mortgage Rates Deal with Housing Bubble 2?

What many in 2016 thought would never happen again is now reality. It finally happened – a line in the sand has been breached. The average interest rate for 30-year fixed-rate mortgages with conforming loan balances ($453,100 or less) and a 20% down-payment did what people had thought in 2016 we’d never see again: It […]

October 3, 2018 | Powell Explains Just How Hawkish the Fed is Getting

“But we’re a long way from neutral at this point.” When asked how much he worried about another “financial crash,” Fed Chairman Jerome Powell told PBS News Hour that the “next set of problems” wouldn’t “look a lot like the last set of problems we had.” It would be “something else, a cyber-attack, some type […]

September 26, 2018 | What Will Surging Mortgage Rates Do to Housing Bubble 2?

5% is here, 6% beckons as the next target. The average interest rate for 30-year fixed-rate mortgages with conforming loan balances ($453,100 or less) and a 20% down-payment jumped to 4.97% for the week ending September 21, the Mortgage Bankers Association (MBA) reported this morning. A week ago, it was still at 4.88%. This is […]

September 20, 2018 | HELOCs in the US & Canada: As “Scarred” Americans Learned Bitter Lesson, Canadians Went Nuts

Home-equity-loan balances in Canada per capita are now 3.3 times what they were in the US during HELOC peak before it all collapsed. Home Equity Lines of Credit – the infamous HELOCs Americans used as endless ATMs to draw equity out of their homes before home prices collapsed – played a role in the US […]

September 17, 2018 | Meanwhile in China, Implosion of Stock-Market Double-Bubble

Bubbles don’t end well for those who don’t get out in time. US tariffs and threats of more tariffs have not been particularly well received in China, which is already being rattled by corporate credit problems, quakes in the shadow banking system, a peculiar Enron-type phenomenon at provincial and municipal governments called “hidden debt,” and […]

September 6, 2018 | The Fed’s QE Unwind Hits $250 Billion

Here’s my math when this “balance sheet normalization” will end. In August, the Federal Reserve was supposed to shed up to $24 billion in Treasury securities and up to $16 billion in Mortgage Backed Securities (MBS), for a total of $40 billion, according to its QE-unwind plan – or “balance sheet normalization.” The QE unwind, […]

August 27, 2018 | US Yield-Curve Looks Hell-Bent on Inverting, “Flattest” Since Aug 2007

How does it compare to German, Japanese, and Chinese yield curves? On Friday, the US Treasury 2-year yield rose to 2.63% and the 10-year yield remained at 2.82%. This squeezed the spread between them to just 19 basis points, the lowest since August 2007. This is a further step in the “flattening yield curve,” where […]

August 24, 2018 | My Inner Contrarian Wakes Up: Gold Short Positions Hit Record

Speculators in gold price futures are short 670 tonnes – the biggest bearish position in 25 years. First things first: I want to thank the many readers who have expressed their interest in an article about my views and theories on gold and silver. In fact, the response has been so strong that I decided […]

August 18, 2018 | Toxic Mix in Canada: Spiking Inflation, Variable-Rate Mortgages, and a Housing Bubble

What will the Bank of Canada do? The Bank of Canada has nudged up its target rate four times, starting July a year ago, from 0.5% to 1.5%. It last hiked on July 11. But now it is facing inflation that suddenly and unexpectedly jumped at twice the Bank of Canada’s current target rate. Canada’s […]

August 16, 2018 | “Asia Will Be the Next Source of Downside Systemic Risk for Financial Markets”

Emerging Markets turmoil: The price of cheap debt & misallocation of capital. “Excess liquidity usually leads to the misallocation of capital, masking any balance sheet constrains. As this tide of excess liquidity recedes, it reveals the misallocation of capital and the mispricing of risk,” Nedbank CIB strategists Neels Heyneke and Mehul Daya write in a […]

August 9, 2018 | What’s Going On in the Used Car & Truck Market?

As “affordability challenges” hit new vehicles, consumers switch to used, prices spike to record, inflation psychology sets in. For a brain-twisting phenomenon, amuse yourself for a moment with the Consumer Price Index for used cars and trucks. It shows that there has been 0% inflation since 1994 in used cars and trucks, despite actual prices […]

August 1, 2018 | Tesla Discloses Worst Quarterly Loss Ever, But Where Are the 17,000 Model 3 Cars it “Produced” But Didn’t “Deliver”?

SEC, are you checking into this? Tesla never ceases to astound with its hype and promises and with its results that are just mindboggling, including today when it reported its Q2 “earnings” – meaning a net loss of $718 million, its largest net loss ever in its loss-drenched history spanning over a decade. It was […]

July 27, 2018 | The Big Adjustments in “Real” GDP

A  $1-trillion job. What the Bureau of Economic Analysis released today as part of its GDP report was a huge pile of revisions and adjustments going back years. It included an adjustment to the tune of nearly $1 trillion in “real” GDP. And it lowered further its already low measure of inflation. Based on this […]

July 20, 2018 | Which Yield Curve “Inverts” First? US, Japan, Germany, or China?

How the “Yield Curves” Stack Up in central-bank manipulated bond markets. So we had a little bond-market upheaval this morning. After President Trump successfully manipulated bond yields down yesterday and today by griping about the Fed’s rate hikes, an inveterate Fed dove (who has also been griping about the Fed rate hikes) responded by brushing […]

July 12, 2018 | Stock Markets See the US Winning the Trade War, Defying Corporate Lobby & Media Propaganda

Moody’s chimes in.  The trade war talk has been going on since the presidential campaign but markets just brushed it off and rallied. In 2018, the trade war verbiage moved to the foreground. But until June 14, the administration vacillated between thinking about tariffs and putting the trade war “on hold,” depending on who was […]

July 5, 2018 | As the Yield Curve Flattens, Threatens to Invert, the Fed Discards it as Recession Indicator

This Fed is getting seriously hawkish: It revealed that instead of thinking about backing off rate hikes, it’s replacing the yield curve. In the minutes of the FOMC meeting on June 12 and 13, released this afternoon, there was a doozie, obscured somewhat by the dynamics of the rate hike plus the indication that there […]

June 30, 2018 | Update on the Rental Bubbles & Crashes in US Cities

Rents in Southern California go nuts. Bay Area & Seattle “mixed.” Chicago & Honolulu in free-fall. New York City sharply lower. Washington DC loses grip. But rents soar 10-15% in many markets. Median asking rent for one-bedroom apartments across the US rose 4% in June compared to a year ago, to $1,209. And for a […]

June 20, 2018 | Why a US-Style Housing Bust & Mortgage Crisis Can Happen in Canada, Australia, and Other Bubble Markets

Despite persistent and false memes to the contrary. When a housing downturn gets big enough, there will be a mortgage crisis, and it will hit banks, shadow banks, and mortgage insurers no matter what the mortgage laws are: that’s what the US mortgage crisis has demonstrated. Yet many industry organs and media outlets in Canada, […]

June 17, 2018 | Next Mortgage Default Tsunami Isn’t Going to Drown Big Banks but “Shadow Banks”

As banks pull back from mortgage lending amid inflated prices and rising rates, “shadow banks” become very aggressive. In the first quarter 2018, banks and non-bank mortgage lenders – the “shadow banks” – originated 1.81 million loans for residential properties (1 to 4 units). In the diversified US mortgage industry, the top 10 banks and […]

June 3, 2018 | Visa Goes Down in the UK, Chaos Ensues, Cash is Suddenly King

For over 12 hours on Friday, shopping centers in the UK and other parts of Europe were plunged into chaos as millions of consumers were unable to use their Visa debit or credit cards at points of sale. The credit card company, which was finally able to restore normal service early Saturday morning, said it […]

May 29, 2018 | Update on the Most Splendid Housing Bubbles in America

Some beautiful spikes too. Prices of houses and condos across the US surged 6.5% from a year earlier (not seasonally-adjusted), according to the S&P CoreLogic Case-Shiller National Home Price Index for March, released today. The index is now 7.8% above the crazy peak of “Housing Bubble 1” in July 2006 just before it all came […]

May 26, 2018 | Is This the Next Big Retailer to Melt Down? Its Bonds Crashed

The PE-firm-owned brick-and-mortar retailer grapples with its fate. PetSmart, the largest brick-and-mortar pet supply and services retailer in the US and Canada, with 55,000 employees, 1,600 big-box stores, 200 pet boarding facilities, and $8.7 billion in revenues in fiscal 2017, has a little problem: $8.1 billion in debt. And you guessed it: Half of this […]

May 15, 2018 | US Treasury 10-Year Yield Breaks Out, Mortgage Rates Jump to Highest in 7 Years

But no blood in the streets. Just a rate-hike cycle at work. Today the US Treasury 10-year yield broke out of its recent range and surged 8 basis points to 3.08% at the close, the highest since July 2011. The price of a bond falls when its yield rises. The odds have been stacked against […]

May 10, 2018 | Consumer Price Index Rises Fastest since February 2017

But What’s Going on with Used Vehicle Retail Prices? Been reading misleading headlines about low inflation again? That is was “softer than expected” or whatever? So here are the numbers: The Consumer Price Index (CPI) for April, which the Bureau of Labor Statistics released this morning, was 2.5% higher than a year ago. That increase may […]

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