Comments on a Seeking Alpha article, “No Housing Market Bubble”

It’s difficult to imagine any protracted housing slump when inventory remains low

I came across an article earlier today that was posted on Seeking Alpha titled, No Housing Market Bubble, and wanted to pass it along to the reader.

I won’t comment much on it, except to say that most of the observations the writer enumerates are exactly what we have been discussing for the past three-plus years on this blog.

Real house prices have been rising, but we need to consider that the real rate of inflation is higher than what BLS publishes. Thus, the growth in real house prices is lower than what the chart shows

While the national housing data in aggregate have pointed to slowing price growth, the underlying fundamentals remain favorable. Restricted supply and favorable demographics (mass immigration) continue to support prices and rents. It remains to be seen if home builders can keep ramping up inventory over the next couple of years to meet the latent demand.

House price growth, when viewed through the growth in rental rates, seems more tame

The conclusions of the author of the Seeking Alpha article mirror what I have been observing. While there are a number of areas around the country that I think are somewhat hot (e.g. San Francisco, Denver, Seattle), the overall market is fairly balanced. In some respects I think the majority of the markets are very reasonably priced, especially with respect to rents.

Any types of quantitative easing operations will only work to enhance the support of the housing market over the longer-term.

September 24th Update – Massive QE is needed to reliquify a system that the governments are sucking dry

As sovereign funding needs spiral higher, the governments are crowding out private investment and sucking all the liquidity out of the banking system. Only massive QE operations can restore longer-term liquidity

To download the podcast – Right mouse click here

-The governments are sucking the banking system dry and the unprecedented need to reliquify the system remains. The pressures are mounting, despite dropping longer-dated yields.
-The Fed cannot yet admit this, but eventually the Fed will have to begin more massive rounds of QE. I estimate that bond purchases will have to rise to about $50 billion a month. Prepare for what is coming.
-The Fed is regularly providing upwards of $75 billion in short-term liquidity in the repo market. The only solution will be massive QE. The repo operations didn’t work last decade and they won’t work now.
-The dollar continues to firm as the demand for dollars grows.
-Gold is rising as more people see impending potential crisis. It reminds me of 2005-2006.
-60-70% of the population have been left behind this decade. They made the worst financial decisions at the wrong time. They relied on ZeroHedge and the other alt-financial “analysts.” These writers couldn’t make it in the big-time, so they turned to their blogs. many listened and lost out.
-The elites chose this route. They could have taken a number of other avenues, but chose to perform QE and buy up the world instead. They will pursue this route until the bitter end, and this can last for years.

Alt-media outlets like ZeroHedge not only give poor advice, but demoralize their readers

Outlets like ZeroHedge are designed to demoralize and impoverish

Once a population is demoralized, the rebuilding process can begin

On a long enough timeline, your net worth will be (less than) zero, and you will hate your own country

Note: This post comes on the heels of the alt-financial media’s apocalyptic “news” analysis regarding the Saudi drone attacks and their initial calls for $100 oil, skyrocketing gold prices, crashing stocks indexes, and economic crisis.

Last decade’s manufactured financial crisis achieved a number of objectives for the new world order elites. First, it helped to consolidate their power, wealth, and control over the population. Second, it left many financially demoralized. Third, the population became vulnerable to solutions that humans would not normally accept.

THE THREE LEVELS OF DEMORALIZATION

The process of demoralization operates simultaneously on all three levels, which I call for the sake of simplicity:

1) the level of IDEAS (consciousness);
2) the level of STRUCTURES (socio-political set up of a nation); and
3) the level of LIFE (which includes all the areas of MATERIAL existence of a nation, the ‘fibre of life’ so to say).

Yuri Bezmenov – LOVE LETTER TO AMERICA

With respect to those who identify with what I consider the former truth movement, the financial demoralization process has been led by the anti-American/anti-Western outfit, Zerohedge. Its narrative has effectively won out and its influence cannot be overstated.

It’s easy to demoralize a population when they don’t know

You may think that this conclusion sounds harsh, but I must strongly disagree with any view to the contrary. As sobering as this may sound, I have observed that these alt-financial sites have forever rewired the minds of their readers and rendered them unable to make successful long-term financial decisions.

They told their readers to stay out of stocks and housing all decade, the dollar was toast, bonds would collapse, Russia and China would take over the world, etc. They recommended assets that ended up punishing their followers. I can think of commodities, Chinese stocks, silver, and all things that rise with a weak dollar. Although they correctly recommended bitcoin, their disingenuous shilling destroyed the wealth of more people than it built.

When I see ZeroHedge readers denigrating their own nations, I know the demoralization process is complete.

Now, much of their analysis is highly credible and that’s what makes these sources so sinister. But this was the end result; The followers of the alt-financial media stayed on the sidelines all decade as ZeroHedge offered up one reason after another that collapse was just around the corner. It really is heartbreaking to see, and believe me when I tell you; this was not by accident. A broke and spiritually demoralized resistance poses no threat to the new world order.

There is an overabundance of alt-media and alt-financial sites that parrot and mirror the anti-American propaganda that emanates from the toilets of ZeroHedge. If you are a fan of one of the many blogs that get picked up on ZeroHedge or regularly quote ZeroHedge, odds are you have been victimized by this demoralization. Most alt-financial bloggers are not intentionally demoralizing their readers, but will write whatever it takes to get picked up on the gold shill sites or ZeroHedge. It is an unconscious conforming.

This is the problem I see with the internet. Everyone is an expert with economics, finance, and politics, yet the average person gets poorer every year. I pray to God that there will be a turnaround, but I know there won’t be. When I see ZeroHedge readers denigrating their own nations, I know the demoralization process is complete.

I warn the reader to stay away from the sites that trash Western civilization and who call the United States satanic. The editors and writers of these sites know nothing about Jesus and are often not Christian, yet they seem to know so much about the devil. These stories work to externalize the hierarchy that has existed since Nimrod, as well as demoralize the reader.

An email asks; How can the U.S. military spend $900 billion fighting in Afghanistan and not have inflation?

How can the U.S. waste so much money [$900 billion] fighting in Afghanistan and elsewhere and not have hyperinflation? Wouldn’t the U.S. be better off spending $900 billion building its highways?

John

Interesting questions. Let’s answer them, but we need to keep in mind that not every dollar is the same.

Any nation with the reserve currency has certain obligations
  1. That nation must run perpetually structural Balance of payments and current account deficits

As we detailed in the past, any nation whose currency is the reserve currency must run consistent balance of payments and trade deficits. This is clearly the case with the United States, as most industry has been purposely off-shored, so the dollar could be spread far and wide.

2. Countries, whose currency serves as the global reserve currency, must fight wars all over the world. This works to spread that currency to all areas of the globe, while helping to sterilize them from the domestic economy.

Nations with the reserve currency must “waste” money fighting overseas

Any nation, whose currency serves as the global reserve currency, must be able to develop a formidable military to fight outside its borders on an ongoing and permanent basis. This requires that nation to possess the manpower, economic might, and military technology to pull it off. Currently, only one nation can perform this task; the United States.

The U.S.’s military might and the dollar reserve status are a function of one another. It’s not as if the U.S. must develop a military to defend the dollar’s role in global trade. Rather, they both support each other in an organic matter, by definition, and once the relationship is established it functions as naturally as the sun setting in the west every evening.

When it comes to federal government spending, not every dollar is the same. A dollar spent on the domestic economy bids up goods and services in that nation. If the United States earmarked $900 billion towards infrastructure improvements this would be highly inflationary, as these dollars would immediately bid up materials and labor costs inside its borders. This would place the entire domestic debt-backed monetary system in jeopardy; inflation and interest rates would rise to the point that they would eventually place government spending at risk of default.

Instead, the U.S. must spend these dollars outside its borders. This will allow the domestic general rate of inflation to remain subdued, while at the same time, this military spending will supply the world with the dollars it needs.

A huge percentage of the trillions of dollars that are spent on military action around the world stays in the regions that serve as the hosts of these wars. Thus, a huge percentage of the dollars spent fighting in Afghanistan stays in Afghanistan and Middle East. They then trickle around the world to other nations and only a relative few find their way back into the United States. The more firm in value the dollar remains, the less dollars that flow back to the United States. Foreigners will wish to hold on to them.

The whole irony is this; the more wars the U.S. fights, the more the dollar will become the accepted reserve currency for all sorts of transactions.

So, if any nation wishes to possess the global reserve currency, they must run perpetual balance of payments deficits and fight wars all over the world. This will ensure their currency is spread far and wide. Like I said before, there is currently no other nation capable of being up to the task, nor would any other nation want to be.

Answering emails; Do you still believe shale oil is a scam?

Chris,
I think you are right. Shale oil is looking better and better all the time. Exxon, Chevron, and BP are on to something. The whole Saudi thing is a wake-up call

Doug

Domestic shale oil looking better all the time

We need to start contemplating the economic ramifications of a global conflict scenario, because the Anglo-American elites and their companies are already way ahead of us.

Where do you think the United States will procure its energy in a post-WW III world? They will get it right here at home, and when their firms, with their zero-cost borrowings, are done buying up all the choicest fracking acreage, they will soak us forever. The best part is that fracking offers some of the best energy opportunities in a post economically-collapsed environment, since the start-up costs are a small fraction of traditional methods. But according to the alt-financial media, fracking is a myth, built on cheap rates.

Chris Pirnak, August 30th

The message is clear; sell your far-flung international oil assets and move home

Regardless of whoever was responsible for the Saudi drone attacks that sidelined almost half its oil capacity, the message is clear. In a global environment that is becoming less certain by the day, it is incumbent on the nation-states to seriously contemplate how they will procure their necessary resources to maintain themselves in a post-global conflict scenario or post-economically collapsed environment.

As I have been saying for the past couple years, domestic shale oil production will become more important over time for the United States, especially as we begin to enter more treacherous and uncertain times. While the alt-media proclaim that shale oil is an illusion, built on cheap money, I have maintained that the technology has improved markedly over the decade, and the break-even price points continue to move lower.

Moreover, as the United States continues to build its massive domestic energy empire, look for the U.S. dollar to continue to firm in value. Don’t hold onto that petrodollar myth.

Large, well-connected, globalist firms like XOM, CVX, and BP know the timeline better than we do, and are acting now to unload their far-flung assets to concentrate on the lower-48 inland region, where their only opposition are environmentalists.

As I have been saying all along, we need to disregard how the XOP and OIH are performing over the long-run, and concentrate on who is spending the big money for onshore oil assets in the lower-48. The globalist firms are spending tens of billions here and are using the cheapest money in human history to consolidate their wealth and control over the entire vertically-integrated sector. These firms have enough resources to build out their own pipelines, refineries, and transportation systems.

Which nation will be most able to survive a protracted global war?

While I agree with Joel Skousen’s theory that the Anglo-American globalists wish to coax China and Russia into offensively attacking the United States, I have to conclude that the U.S. is actually in the best position over the long-term to survive any protracted global conflict scenario.

The United States is basically energy independent and has plenty of farmland to produce any foodstuffs. China is too dependent on commodity imports and its population is too large. This is why China is feverishly building a track-and-trace grid for its consumer debt-slave population. In a global conflict scenario, China will have a lot of internal problems controlling its population. Russia’s population is too low and its land mass is too large. Russia’s transportation system is also too primitive and it does not have the long-term economic capacity to survive over the long-term without allies. The United States could ramp up its military production on domestic soil if need be.

In addition, if you are a remnant Christian, The United States still has a sizable Christian population. China was too busy killing about 100 million Christians last century and it will never be allowed to control the world outside its direct sphere.

The United States may have problems defending itself without the support of NATO, which is in the process of being dismantled. The EU is preparing for this war and will further concentrate on building its own army at the expense of its NATO status.

Regardless of the eventual outcome, the globalists and their firms will always stand to benefit.

September 14th Update – Bond markets and the central banks; Thoughts on the direction of gold and silver, stocks, commodities, and real estate

UPDATE: This podcast was recorded before I learned of the Saudi Arabian drone attacks. Oil will definitely receive a bid, as will gold and silver. Dynamics are fluid going into Sunday night trading

To download the podcast – Right mouse click here

-Despite dovish monetary policy announcements, these are the three (four) reasons why bond prices tanked

  1. The ECB is encouraging profligate fiscal spending,
  2. The U.S. is not about to enter any type of recession and domestic inflation is running a little hotter than anticipated,
  3. Investment grade corporate debt issuance swelled over the past couple weeks
  4. It was only a matter of time, based on an extremely overbought condition

-After the demoralization of the global investor in the wake of the 2008 manufactured collapse, the global elite could have implemented a number of policies, but chose the current one. We have been running it for a decade and I look for it to continue for years.
-Gold and silver fall hard on historically overbought conditions. Where I think they will move.
-Stocks will be well supported as the one-way trade of buying bonds and gold and silver falls apart.
-Commodity analysis

Are Central Banks Losing Their Economic Clout?
Gold COT chart
Economic Calendar
Global rates and bonds

Real estate investing; As rents and prices rise, ownership restrictions and expropriation risks loom larger

As housing costs spiral higher, Soviet-style policies loom more likely

What Is Expropriation?

Expropriation is the act of a government taking privately owned property against the wishes of the owners, ostensibly to be used for the benefit of the overall public.

Governments may begin to control rents, restrict rental ownership, and expropriate from property owners.

When contemplating the merits of a particular investment class (e.g. stocks, metals, commodities, bonds, real estate), I often recommend that we take a “blank slate” approach, and determine the likelihood of various outcomes. If the outcomes are, on average, weighted favorably, I recommend investing. If the outcomes are slanted negatively, I usually stay away. This approach has served me well over the years and I relay my analysis to you.

With respect to real estate investing, the circumstances and conditions have been heavily weighted in its favor all decade. We have enumerated all these aspects in the past. But as this monetary system and new world order agenda move forward, it is becoming clearly evident that governments have been imposing more unilateral and capricious power over their populations. Thus, I see potential clouds on the horizon for real estate investors around the globe as housing costs continue climbing.

Specifically, I am predicting that we may eventually see a cap on rental ownership and more legislation to control rent growth. If the situations get more dire, we may begin to see a push for forced sales or outright expropriation.

A proposal to force Berlin’s largest residential landlords to hand over their properties in return for compensation wouldn’t violate German law, according to a professor at the University of Administrative Sciences.

“What this initiative wants to achieve would be feasible under the constitution and under federal law,” according to Joachim Wieland, who published his legal opinion Wednesday. The study was sponsored by the Left party, one of three ruling parties in the German capital’s administration.

A grassroots initiative to force the government to buy out large Berlin property owners would affect companies including Deutsche Wohnen SE, the city’s largest residential landlord, and Vonovia SE. Expropriate Deutsche Wohnen and Co., the organization that’s pushing for a referendum on the issue, needs to collect 170,000 signatures by February as a first step in the process.

If Berlin carried out the proposal to buy out all companies that own 3,000 apartments or more, it would need to pay compensation that balanced the interests of society as a whole with those of the landlord, Wieland said. “There’s absolutely no requirement to base this on market prices,” he said.

The Left party — which has roots in Germany’s former Communist Party — and its coalition partners are trying to introduce other measures to clamp down on landlords after a sharp increase in living costs led to mass demonstrations. Katrin Lompscher, Berlin’s housing senator and a Left party member, has proposed a five-year rent freeze and a plan to cap rents at levels that relate to the age of individual properties.

Berlin Landlord Expropriation Proposal Backed by Legal Expert – Bloomberg, September 11th

Many folk find cheap housing appealing and they don’t care who pays, as long as it’s not them.

Of course, in heavily socialized nations like Germany, the push to expropriate may be more advanced that say, Canada. But the conditions are being set as we move forward with QE and the like. I have to contemplate these scenarios, since these are legitimate exogenous threats to those who rely on  property management and rental investing for income.

It’s just common sense to assume that we will definitely see more of a concerted effort to socialize housing as time goes on. It will pick up first in the European Union nations and less in the former Commonwealth, but the threat is increasing everywhere. In the United States, the rules regarding eminent domain, even in the name of social good are clear. But if the nation-states threaten to clamp down on real estate investing and land-lording, prices could get pummeled. Cap rates could skyrocket as many may drop out, because of the uncertainty.

I own a number of properties in Maryland, and I see this outcome as much more likely than in Virginia. Already, Maryland requires rental licenses and other restrictions, as well as mandatory rental inspections. It doesn’t take a leap of faith to see where the potential may end up.

I am just sending this warning out to the many real estate investors who read my articles.

Long-term predictive accuracy; The key to successful investing

Understanding the conspiracy for global government can be profitable

-As longer-dated interest rates fall, small changes to bond yields results in magnified asset price changes

It all comes down to how bond yields change over time. With each tick lower, asset prices respond ever more strongly.

We need to keep in mind that the exceptional growth in domestic stock prices is only a direct result of the changes to interest rates along an ever lower yield curve. As interest rates move lower and lower over time, every drop in yields corresponds to greater and greater asset price increases.

Indeed, the plunge protection team may act from time to time to support asset prices, but the ever shrinking bond yield curve does most of the heavy lifting for TPTB.

-As long as the existing monetary system remains intact, and as debt levels rise, the U.S. dollar will be well bid

The dollar may be toast and the patriot radio blasts it. But most international loans are denominated in it, and as the global economy continues to weaken, demand for the USD should increase, especially as other economies underperform, and their interest rate differentials vs. the US widen. It is the global currency.

In order for commodity inflation to take place, money must reach the end user. This is just not happening. The overcapacity in the commodity sector is just too overwhelming. The large commodity producers bought into that idea of ever-growing BRIC nations. That was a costly mistake, and the alternative media bought into that as well.

Brazil’s debt is collapsing; Russia is doing worse than their official numbers say. Who even knows what is going on with China? The yuan will never be a reserve currency, because their govt numbers have less credibility and their debt market is too opaque. They are building up for the future war.

Chris Pirnak (pseudonym, Thom Beecham) henrymakow.com, September 21, 2015

What seems obvious now was not so to the alt-financial media in 2013 when I was predicting that that the dollar would keep rising
My prediction of Dow 20,000 when it was at 16,500 turned out to be profitable to those who listened. My thesis on henrymakow.com in 2015 is still valid today.

As this global agenda for falling sovereign bond yields continues to kick into high gear, I write this post as a reminder that we need to keep perspective on the large secular economic and financial trends.

Why stop at zero? I agree with Alan Greenspan; zero is just an arbitrary number to the new world order.

My experiences writing on Henry Makow’s website frustrated me, because the vast majority of his subscribers disagreed with my theories. Moreover, my articles were heavily edited for content, because the readers often found my unique conclusions unacceptable. These readers maintained that the system was crashing down and that a new dawn was soon to come.

Most alt-financial followers are too contaminated to make accurate predictions. Despite criticizing their unwashed brethren of possessing an inability to see the truth, these alt-media followers suffer from the same hardwired biases as well. In essence, these novice analysts either have a predetermined outcome in mind or another agenda, and disregard any evidence to the contrary.  This type of cognitive bias is a systematic error of inductive reasoning, which perpetuates poverty when it comes to investing.

To counter the erroneous advice and predictions of the alt-financial media, I started my blog in early 2016 to warn others

Early in the decade, I concluded that price growth and bond yields would continue falling despite rising debt levels. By function, QE is deflationary and lends itself to a self-perpetuating cycle of fading economic growth and consumer prices. The irony is that this all supports higher asset values.

Despite calls to the contrary, long-term rental real estate investing continues to be very profitable. I always recommend direct ownership over passive REITs.

Conclusion

Despite the Cassandra calls in the alt-financial media to the contrary, I see an orderly and well-maintained global central bank monetary policy programme in place to keep the governments in business. The illusion of confusion is intentional, and all other things being equal, QE will work to support asset values to the chagrin of its critics. Since the manufactured crisis of last decade, this is how the elites have decided to act. If they stop now, they will get the blame.

I know this may seem counter-intuitive, but I warn all those who will listen to stay out of all debt that does not generate offsetting income. This includes personal loans, owner-occupied mortgages, student loans, etc.

If you or your child has to go to college, then commute to an in-state school and forget about all the other reasons to spend a lot of money for the college experience. That is hype perpetuated by the media and movies. If I were a high school student in Northern Virginia and contemplated going to college, I would commute to George Mason and get a cheap and decent four year degree. Perhaps I would get my associates degree first at NOVA for pennies and then transfer. I could skate by with less than 20k in total student loan debt.

Just because interest rates are going lower does not mean that debt is preferable to spending cash. To make matters worse, most alt-media followers have been left out of the asset price bonanza and have even less room to make any more financial mistakes.

Answer to an email – When compared to other countries, why is the cost of living in the U.S. so much cheaper for its residents?

Having the reserve currency does have its privileges.

Note to reader: Recall our discussion of the the Triffin Paradox.  Triffin pointed out that the country, whose currency is the global reserve currency, must be willing to supply the world with an extra supply of its currency to fulfill world demand, thus leading to a structural trade deficit. Thus, a  nation whose currency is the global reserve currency, will tend to have its industrial base gutted over time. The upshot; this nation will tend to enjoy a less expensive standard of living than most other nations. Those who cannot adjust to this economic transformation will be left behind. The enhanced demand that reserve currencies receive will tend to support their value in the marketplace.

In my travels to Eastern Europe, I can say that the standard of living has caught up to Canada and the U.S in some places. I’ve seen more homeless people in downtown Toronto in one day than my 3 week vacation [to Eastern Europe]. Parts of inner city Detroit, Cleveland and Toledo sadly look more like third world.

Talking to the people there, a lot of young people want to immigrate to the west. The reason; their costs of living are much higher than the U.S. Most items are roughly the same prices as here but their wages are a third in Poland to 10% in a country like Moldova.

Not sure how long the U.S will still be one of the cheapest countries to live as per income.

V – Toronto

Here was my response (edited for grammar)

Distribution of global reserve currencies

The U.S. is probably one of the cheapest places to live vis-a-vis resident household income and the reasons for this are actually fairly straightforward.

It all has to do with the dollar’s role as the global reserve currency. Imagine how costly items in the US would be if there were no places around the world to soak up the US treasury pile and dollar printing. The whole world desperately needs the USD to transact, so the United States can easily offshore its monetary inflation to all four corners of the globe. The US has the easiest time importing deflation from the lower cost nations.

The rest of the world does not have this luxury, so the residents in the other countries have to more directly bear the negative externalities of whatever fiscal and monetary policies their governments offer. Relatively speaking, their sovereign debt is trapped in their system, which bids up their assets, especially housing and the costs of living. Canada, New Zealand, Australia, do not have highly sought out currencies for global use like the USD, because they are relatively illiquid.

With respect to all the other developed and developing nations, these nations do not have effective avenues to sterilize their sovereign debt and currency printing.

That’s what it is all about; the U.S can effectively sterilize its currency debasement by shipping its treasury debt and dollars overseas, while the other nations cannot.

Any nation having the global reserve currency has a great luxury. Their costs of living on everything will be less onerous on their population than anywhere else around the world.

I have always maintained that as long as people in the US can stay out of personal debt, this nation still offers the best opportunity to get ahead financially and live comfortably.

Once the USD loses its global reserve status, it’s all over for the Americans. The US does not have much productive capacity anymore, and if the dollar loses its status, it’s lights out on America.