May 212014
 
 May 21, 2014  Posted by at 1:25 pm Finance Tagged with: , ,


Toni Frissell Fashion model in dolphin tank, Marineland, Florida 1939

According to a new Zillow report, 40% of all US mortgage holders can’t afford to sell their homes. That is 20 million Americans homeowners, 10 million who are downright underwater and another 10 million who are so close to being there that they don’t have the money to cover the cost of selling. And those are still numbers across the spectrum; things are far towards the bottom. ‘30% of homes in the bottom price tier are in negative equity, while 18.1% of homes in the middle tier and 10.7% in the top tier are underwater’. If we assume that at the bottom, like across the spectrum, as many people are close to being submerged as those who already are, that would mean 60% of bottom tier borrowers are too poor to sell their homes (i.e. have less than 20% equity).

Pretty stunning numbers when you realize that this comes after 7-9 million homes were already foreclosed on (RealtyTrac lists 16.5 million foreclosure filings from 2006 through 2013), and millions more are still stalled in one or another step of the foreclosure process because banks don’t want to be forced to put the losses on their books. It also comes after 6 years in which many trillions of dollars were pumped into the top of the financial system to prevent it from crumbling. The problem is, of course, that those trillions were absorbed by the top. and never reached the bottom. It’s like watering a severely parched parcel of land.

A perhaps unexpected consequence of all this is that – potential – starters, a group already severely hindered by skyrocketing student loans and high levels of unemployment, find the starter home they might be able to afford remains occupied by people the market until recently would have penciled in for a move higher up the ladder. The US housing market is seriously congested. It could be opened with much lower prices, but that would significantly raise the number of underwater owners. As David Stockman writes: “Monetary central banking is an economy wrecker.” Just to make sure the market is eligible for awards in the absurd theater category, median prices have gone up by 11% since 2012. It should be obvious that such a market place in inherently self-defeating. Or should we really say American Dream-defeating?

Here’s what the Wall Street Journal takes away from the report:

Mortgage, Home-Equity Woes Linger

• At the end of the first quarter, some 18.8% of U.S. homeowners with a mortgage – 9.7 million households – were “underwater” on their mortgage, according to a report scheduled for release Tuesday by real-estate information site Zillow Inc. Z -3.19% While that is an improvement from 19.4% at the end of last year and a peak of 31.4% 2012, those figures understate the problem.

• In addition to the homeowners who are underwater, roughly 10 million households have 20% or less equity in their homes, which makes it difficult for them to sell their homes without dipping into their savings. Most move-up homeowners typically use their home equity to cover broker fees, closing costs and a down payment for their next home. Without those funds, many homeowners can’t sell.

• “It’s a sobering appreciation that negative equity is going to be with us for a while to come,” said Stan Humphries, Zillow’s chief economist. “Negative equity is central to understanding a lot of the distortions in the marketplace right now.”

• … prices have risen about 11% over the past two years, and several times that in rebounding markets like Las Vegas, Phoenix and much of California. Rising prices, combined with higher mortgage rates, have given sticker shock to buyers looking for a deal. This has been particularly hard on first-time home buyers who are usually in the market for a lower-priced home.

• Many underwater homeowners have gone into foreclosure or executed a short sale, where they sell the home for a loss. But many aren’t budging. “There are people who still have their jobs and they’re not late on their payment, but they can’t move,” said Vita Deveaux, a real-estate agent at Keller Williams Realty First Atlanta.

That’s essentially still just a bunch of numbers. But it’s not as if they’re some freak result of immaculate conception or spontaneous combustion. Therefore, David Stockman provides a wider perspective:

The Greenspan Housing Bubble Lives On: 20 Million Homeowners Can’t Trade-Up Because They Are Still Underwater

One of the most deplorable aspects of Greenspan’s monetary central planning was the lame proposition that financial bubbles can’t be detected, and that the job of central banks is to wait until they crash and then flood the market with liquidity to contain the damage. In fact, after the giant housing bubble crashed and left millions of Main Street victims holding the bag, Greenspan evacuated the Eccles Building, and then spent nearly a whole chapter in his memoirs explaining how this devastation wasn’t his fault.

Instead, he blamed Chinese peasant girls who came by the millions to the east China export factories where they lived a dozen at a time cramped in tiny dormitory rooms working 14 hour days. According to the Maestro, they “saved” too much, thereby enabling American’s to overdo it on the mortgage borrowing front. Yes, in so many words he said exactly that! Lets see. The Maestro was allegedly a data hound. Did he not notice that housing prices in the US rose for 111 straight months from late 1994 to 2006, and during that period increased by nearly 200% on average across US neighborhoods. How in the world could this giant aberration have escaped the notice of the money printers around Greenspan in the Eccles Building?

How in the world could any adult thinker blame this on factory girls in China – that is, a policy regime that caused excessive savings? In fact, it is plainly evident that the People’s Printing Press of China attempted to protect its exchange rate from appreciating against the flood of dollars emitted from the Eccles Building. It did this in mercantilist fashion by pegging the RMB exchange rate and thereby accumulating a massive hoard of US treasury notes and Fannie/Freddie paper. In short, China didn’t “save ” America into a housing crisis; the Greenspan Fed printed America into a cheap debt binge that ended up impairing the residential housing market for years to come. So the problem with central bank inflation of financial bubbles is that when they burst the damage is extensive, capricious and long-lasting.

It is no great mystery that historically trade-up borrowers have been the motor force that drove the US housing market. Selling their existing home for a better castle, trade-up buyers vacated the bottom-end of the market so that first time buyers could find a foothold. Now thanks to Washington’s eternal conviction that debt it the magic elixir of economic growth, first time buyers are few and far between because they are buried in student debt – about $1.1 trillion to be exact. Each graduating class has more students with loans to carry forward, and in higher and more onerous amounts. Fully 70% of the class of 2014 has student loans, and they average of about $30,000 each. Both figures are triple what they were just a decade ago.

As prices rise, and millions of homeowners and their families are drowning in the American dream, housing is a perfect reflection of what America has become: a nation in which the less affluent working men and women, those who were once known as the middle class, are sinking deeper, albeit slowly for the time being, along with the millions who abandoned the dream of homeownership as time went by.

That makes America already a radically different nation from what it once was, with only one way to go, but how many people fully acknowledge that change? I’m pretty sure most still think their dreams will return, and be fulfilled, at some point in the future. But that’s not going to happen, because all the credit that props up the top tier of society today was largely borrowed from the bottom tier, so things can only get worse when payback time comes. And it will, when interest rates rise. They can’t go any lower, unlike the fast growing contingent of less affluent Americans. Interest rates can only go up from here, and at some point it won’t matter anymore how skilled a swimmer you are.

9.7 Million Americans Still Have Underwater Homes, Zillow Says (Forbes)

A total of 9.7 million American households still have “underwater” mortgages, meaning they owe more on the home than it is currently worth. Homes in the lowest price tier are most affected, according to data released today from Zillow. 30% of homes in the bottom price tier are in negative equity, while only 18.1% of homes in the middle tier and 10.7% in top tier are underwater, according to Zillow’s Negative Equity Report. Homes are defined as top, middle, or bottom tier based on their estimated value compared to the median home price for that area. (Nationally, the median price in the top tier is $306,700; middle tier, $163,400; bottom, $98,400.) Overall, 18.8% of homeowners were underwater during the first quarter of 2014. And more than one-third of all homeowners with a mortgage were “effectively” underwater, meaning they have less than 20% equity in their home.

Zillow’s figures for homes with negative equity are higher than other recent reports looking at the same problem. This is in part because the Zillow report captures the current amount a homeowner owes on a mortgage via data from Transunion, while other reports estimate the current loan balance based on public records. But there are also differences in the way various data companies estimate a home’s current value. Different methodologies lead to different findings. For example, CoreLogic’s most recent report shows far fewer homes with negative equity than Zillow’s: nearly 6.5 million homes (13.3% of mortgaged propertes) were in negative equity at the end of 2013, according to CoreLogic. That’s 3 million less than the negative equity homes Zillow is counting.

What’s particularly significant about the Zillow report is that it underscores a reason for the low prevalence of first-time homebuyers in the market: many owners of less expensive homes can’t afford to sell. “The unfortunate reality is that housing markets look to be swimming with underwater borrowers for years to come,” said Zillow Chief Economist Dr. Stan Humphries via a release. “It’s hard to overstate just how much of a drag on the housing market negative equity really is, especially at the lower end of the market, which represents those homes typically most affordable for first-time buyers. Negative equity constrains inventory, which helps drive home values higher, which in turn makes those homes that are available that much less affordable.”

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20 Million Homeowners Can’t Trade-Up Because They’re Underwater (Stockman)

Here we are 96 months after the housing peak, yet there are still 20 million households which are either underwater on their mortgages or do not have enough embedded equity to cover the transaction costs and down payment needed to move. Since there are only 50 million households with mortgages, that means that as a practical matter 40% of mortgage borrowers are precluded from trading-up. It is no great mystery that historically trade-up borrowers have been the motor force that drove the US housing market. Selling their existing home for a better castle, trade-up buyers vacated the bottom-end of the market so that first time buyers could find a foothold.

Now thanks to Washington’s eternal conviction that debt it the magic elixir of economic growth, first time buyers are few and far between because they are buried in student debt—-about $1.1 trillion to be exact. Each graduating class has more students with loans to carry forward, and in higher and more onerous amounts. Fully 70% of the class of 2014 has student loans, and they average of about $30,000 each. Both figures are triple what they were just a decade ago. In any event, for those Millennials who do manage to accumulate a down payment by the time they are in their early 30s there is precious little starter home inventory available. The Greenspan mortgage debt serfs from the previous generation are blocking the way.

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Mortgage, Home-Equity Woes Linger (WSJ)

Nearly 10 million U.S. households remain stuck in homes worth less than their mortgage and a similar number have so little equity they can’t meet the expenses of selling a home, trends that help explain recent sluggishness in the housing recovery. At the end of the first quarter, some 18.8% of U.S. homeowners with a mortgage—9.7 million households—were “underwater” on their mortgage, according to a report scheduled for release Tuesday by real-estate information site Zillow Inc. While that is an improvement from 19.4% at the end of last year and a peak of 31.4% 2012, those figures understate the problem. In addition to the homeowners who are underwater, roughly 10 million households have 20% or less equity in their homes, which makes it difficult for them to sell their homes without dipping into their savings.

Most move-up homeowners typically use their home equity to cover broker fees, closing costs and a down payment for their next home. Without those funds, many homeowners can’t sell. “It’s a sobering appreciation that negative equity is going to be with us for a while to come,” said Stan Humphries, Zillow’s chief economist. “Negative equity is central to understanding a lot of the distortions in the marketplace right now.” Those distortions include the inventory of homes for sale, which, while rising, is low by historical standards. It also helps explain why first-time home buyers are having such a hard time cracking the market. Real estate is in some ways like a ladder, Mr. Humphries notes, so when underwater homeowners don’t trade up it makes it harder for newcomers to get in.

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Blackrock CEO Says US Housing “Structurally More Unsound” Now (Bloomberg)

BlackRock CEO Laurence D. Fink said the U.S. housing market is “structurally more unsound” today than before the financial crisis because it depends more on government-backed mortgage companies such as Fannie Mae and Freddie Mac. “We’re more dependent on Fannie and Freddie than we were before the crisis,” Fink said today at a conference held by the Investment Company Institute in Washington, noting that he was one of the first Freddie Mac bond traders on Wall Street. Fink, who has built New York-based BlackRock into a $4.4 trillion money manager, said today that with strong underwriting standards, ownership of affordable homes can again become a foundation for American families.

The U.S. Senate Banking Committee is working to overhaul the housing-finance system, after casting a narrow vote this month to advance a bill that would wind down Fannie Mae and Freddie Mac. Current shareholders of Fannie Mae and Freddie Mac would be in line behind the U.S. for compensation from the wind-down. Restructuring the mortgage market is the largest piece of unfinished U.S. business from the 2008 credit crisis, when regulators seized Fannie Mae and Freddie Mac as they neared insolvency. The companies, which buy mortgages and package them into securities, were bailed out with $187.5 billion from the Treasury and backed a growing share of mortgages as private capital dried up.

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Traders asleep at the wheel?

An Incredible Explanation For The Relentless Stock Rally (Yahoo!)

Cal Ripken’s 2,632 consecutive starts. DiMaggio’s 56 straight games with a hit. Those streaks pale in comparison to what’s happening in the market right now. That’s because the S&P has gone 468 days since experiencing a correction of 10% or more. That’s the fourth longest streak on record, according to Newedge. Still not impressed? How about this: The S&P hasn’t closed below its 200-day moving average in over 18 months. Waiting for the correction has become an absurdist activity, the financial equivalent of “Waiting for Godot.” “We’ve been above trend for far too long. It’s been four years since we’ve had a close below the 150-day moving average. We have to go back to 2003 – 2007 to find a similar run,” said Rich Ross of Auerbach Grayson. “The stage is set for a serious 10% correction. Maybe even 20%”.

Of course, identifying the catalyst for said correction has been a near impossible task for most market participants. But some are starting to point to the composition of the recent leg of the run as a warning sign. “We’ve had a defensive rally all year long,” said Chantico Global’s Gina Sanchez. “Defensive stocks continue to be the better bets, and the rotation continues into value. I don’t know what will be the straw that breaks the camel’s back, but the pace of earnings can’t continue to be stronger than the pace of the economic recovery.” Still, just because history or logic says something should happen doesn’t mean it will. And to some investors, there could be a simpler explanation for this decade’s unstoppable rally.

“As more portfolios become passive in nature, less attention is paid to the daily ups and downs for the news cycle for a given asset class. Suppression of volatility is a symptom of this,” wrote Josh Brown, CEO of Ritholtz Wealth Management. “People who attribute this purely to the Fed probably have it half wrong.” According to Brown, assets under fee-based accounts have swelled to $1.3 trillion in 2013 from $200 billion in 2005. Most of this money is not being actively managed and is being put to work in a methodical, passive fashion each month. This provides a constant bid to the market as wealth managers become less incentivized to jump in and out of stocks and more rewarded to buy, and buy more. “This means a bias toward buying equities every day and almost never selling,” wrote Brown. “It means adding to stocks sheepishly on up days and voraciously on the (rarely occurring) down ones.”

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No, really?

Bank of England’s Bean Says Stimulus Exit May Be Difficult (Bloomberg)

Bank of England Deputy Governor Charlie Bean said policy makers face potential “potholes” when it comes to exiting the extraordinary stimulus measures they implemented during the recession, many of which put central banks into uncharted territory. “I do not expect central banks’ collective management of the exit from the present exceptionally stimulatory monetary stance will be easy,” Bean said in a speech in London yesterday. “Market interest rates are bound to become more volatile along the exit path, however well central banks communicate their intentions.”

The challenge of how and when to remove stimulus is one that Bean won’t have to face, as he retires at the end of next month after a 14-year career at the BOE. Governor Mark Carney said last week that while the U.K. is moving closer to a point that it will need tighter policy, the inflation outlook and the need to use up more spare capacity in the economy weigh against an immediate increase in the key interest rate. With the benchmark at record-low 0.5% and the recovery strengthening, U.K. policy makers are battling rate-increase expectations. Bean echoed language the BOE used in its Inflation Report last week, saying that when it comes time to begin rate increases, the Monetary Policy Committee will move “gradually.”

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Zzzzz.

Germany Finance Watchdog Finds Evidence Of Forex Manipulation (Reuters)

Germany’s financial watchdog has discovered clear evidence that market participants attempted to manipulate reference currency rates, widening the probe to include many more banks and saying international investigations into the matter were far from over. Regulators globally are looking at traders’ behaviour on key benchmarks, spanning interest rates, foreign exchange and commodities. Eight financial firms have been fined billions of dollars for manipulating reference interest rates, and the probe into the largely unregulated $5.3 tn-a-day foreign exchange market could prove even costlier. The head of banking supervision at German watchdog Bafin, Raimund Roeseler, said the latest discoveries in the forex probe were worrying and it was “much, much bigger” than the investigation into benchmark interest rates, such as Libor.

“There were clearly attempts to manipulate prices, that’s what was disturbing,” Roeseler said on Tuesday at the regulator’s annual news conference. Market participants had attempted to manipulate daily fixing rates for a number of different currencies, he said without specifying what evidence had been gleaned. “It’s not the really big currencies, not the dollar/euro, but several currencies were involved,” he said, noting the Mexican peso was one of the currencies involved. More than 30 foreign exchange traders at many of the world’s biggest banks have already been put on leave, suspended or fired as forex probes in various countries expand.

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The Germans are not entirely blinded yet. But they have 27 other nations they must lead.

Bundesbank Warns Market Calm Hides Risks Of Low Interest Rates (Bloomberg)

New risks to financial stability could emerge from the combination of generous central bank policies and investors’ search for yield in a low-interest rate environment, Bundesbank board member Andreas Dombret said. “We do see risks, despite the fact that the markets are calm,” Dombret said in an interview in Frankfurt yesterday. “Real-estate markets in some European countries are pretty high, corporate bond valuations seem stretched and high. The low volatility leads to market participants thinking that they don’t need to hedge.”

Record-low yields on debt from Spain to Ireland are adding to evidence that investors are leaving the euro area’s debt crisis behind them, and Germany’s DAX Index of stocks is near an all-time high. Even so, consumer prices are proving slow to pick up, prompting the European Central Bank to consider adding yet more stimulus as soon as next month. A risk measure that that uses options to forecast fluctuations in equities, currencies, commodities and bonds fell to its lowest level in almost seven years last week. Bank of America Corp.’s Market Risk Index dropped to minus 1.22 on May 14, the lowest level since June 2007. The measure was at minus 1.19 yesterday.

Dombret, 54, will this month take charge of banking and financial supervision at Germany’s Bundesbank, after previously leading the financial stability department. His new role gives him a seat on the ECB’s Supervisory Board, which will be responsible from November for overseeing about 130 euro-area banks. A challenge facing the ECB is bringing order to the array of models for assessing risk deployed by the region’s lenders. Dombret said regulators shouldn’t attempt completely to harmonize those models. “If we unify risk models this could lead to herd behavior, with all those negative effects, and would also exclude the institute-specific measures, which are important for diversity,” he said. “I am a big believer in continuing to use risk models, and counter-checking them with leverage ratios.”

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Europe’s faking it all the way.

Europe’s Debt Time Bomb (Bloomberg)

One of the consequences of the European debt crisis is that some of the region’s biggest borrowers will face big debt repayments sooner than they might have otherwise. In simple terms, Spain and Italy found it easier and cheaper to take out short-term loans, rather than longer-term funding. The result, though, is a repayment hump in 2015 that will need to be financed with fresh debt sales. Here’s a chart of the how the average length of time until Italy’s debts come due has changed year by year:

In the first quarter of 2011, Italy had an average of 7.25 years to repay its debts. As it sold more debt with shorter maturities, that average has dropped to 6.27 years.

Here’s the same chart for Spain:

In the first quarter of 2010, Spain had an average of 6.51 years to repay its debts. That figure is down to 5.76 years.

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Could get nice if the elections this week turn sour.

Are European Bonds Signaling Trouble? (CNBC)

The quick move higher in the yields of Europe’s weakest sovereigns from historic lows may be just the beginning and on the edges it could start to affect other low-rated credits where investors have hunted for yield—such as U.S. junk bonds. Driven by speculation about the European Central Bank and selling by major investors, the prices of peripheral European bonds have been weakening since last week. As a result, the yields of sovereigns—Spain, Italy, Greece, Portugal and Ireland—have all moved higher, while the core German bund yield has edged just slightly higher. The 10-year Spanish bond, for instance, was yielding 3.008% Tuesday, after reaching a low of 2.832% last Thursday, its lowest level in 20 years. As investors sell, Greece’s 10-year yield is creeping back toward 7%, after making a four-year low of 5.85% in April.

“I think this has more room to go. It’s been about a year in the making. We’ve barely seen much of it yet,” said Marc Chandler, chief currency strategist at Brown Brothers Harriman. “Some large funds like BlackRock have indicated they are beginning to take profits on it. Then the EU and IMF expressed concern that those bond market rallies were not going to be sustainable.” Trader chatter has increased about the fact the selloff in Europe could lead to more caution about risk exposure in other areas of global fixed-income markets. “While there’s not been wholesale selling and aggregate index performance has turned in solid results, underlying trends suggest a consolidation in risk exposure,” said Adrian Miller, director fixed-income strategy at GMP Securities.

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Moody’s Turns Negative On China Property (CNBC)

Moody’s joined the drumbeat of pessimism on China’s property industry, cutting its outlook to negative from stable, but it still expects most rated developers’ finances will remain on an even keel. “We expect a significant slowdown in residential property sales growth, high inventory levels and weakening liquidity over the coming 12 months,” Moody’s said in a report Wednesday. “A differentiation in the credit quality of developers will become more apparent.” Concerns that China’s property market is a popping bubble recently moved to the front burner, with home sales in the four months ended April down 9.9%, after slumping 7.7% in the first quarter. Property is estimated to account for around 20% of the mainland’s gross domestic product (GDP).

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Money Won’t Come Cheap For China Banks’ $120 Billion Funding Spree (Reuters)

Chinese banks are poised to raise a record $120 billion in the next two years to shore up their balance sheets in the face of slowing growth and rising bad debts, but the funds could prove expensive and hurt earnings as investors demand a premium. For the first time, banks will raise capital by issuing preference shares and other so-called hybrid securities, a funding technique that avoids the need for issuing ordinary shares into a badly hit stock market. Just in the past two weeks, Agricultural Bank of China and Bank of China announced plans to raise about $29 billion in preferred shares between them. As growth slows and bad debts build up, the banks are rushing to replenish their balance sheets to meet new global capital rules known as Basel III.

The Chinese government has been rigorously enforcing these regulations in its efforts to ward off a financial crisis following a huge run-up in debt since 2008 and a marked slowdown in the economy. Analysts say the flood of regulatory capital will help investors diversify their portfolio, but they are expected to drive a hard bargain given the concerns about transparency in China’s opaque financial system and the worrying rise of toxic debt in recent years. “Given the size of the proposed capital issues and the concerns about transparency in the Chinese banking system, it may be hard to price aggressively versus the western structures currently out there,” said Ivan Vatchkov, chief investment officer of Algebris Investments (Asia).

The first few deals should give banks an idea of returns that investors will demand on hybrid capital securities. China CITIC Bank International, a Hong Kong-based affiliate of China CITIC Bank , in April sold capital securities in the offshore market at an interest rate about 100 basis points over the same bank’s subordinate bonds. Benchmark five-year subordinate debt from China’s top-rated banks currently trades at a yield of 5.25%, suggesting banks will have to price yields at around 6.3% for preferred shares to lure investors – a side effect of an economy growing at its slowest pace in decades. Some analysts warn that forcing banks to pay hefty yields on new hybrid capital instruments would not only pressure their profitability, but also threaten their ability to continue lending aggressively as bad loans rise in a slowing economy. Chinese banks’ non-performing loan figures rose to a two-year high at the end of 2013, according to official data.

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The amount means nothing. Trading restrictions are the clincher.

BNP Falls as US Probe Said to Cost More Than $5 Billion (Bloomberg)

BNP Paribas fell to a seven-month low in Paris on concern U.S. authorities will seek more than $5 billion from the bank to settle a probe into alleged violations of U.S. sanctions. The stock fell as much as 3% and was down 2.7% at 50.39 euros as of 9:03 a.m., the lowest since Oct. 1. U.S. authorities are seeking the penalty to settle federal and state investigations into the lender’s dealings with countries including Sudan and Iran, according to a person with knowledge of the matter. The amount sought has escalated and now far exceeds the $2.6 billion that Credit Suisse agreed to pay in a settlement with the U.S. for helping Americans evade taxes. Discussions are continuing and the final number could change, the person said.

Last week, four people with knowledge of the matter told Bloomberg News that U.S. authorities were asking for at least $3.5 billion to settle the BNP case. As they did with Credit Suisse, U.S. prosecutors are seeking a guilty plea from BNP, which said last month it may need more than the $1.1 billion it has set aside to settle the case. The settlement, which would be the largest penalty for sanctions violations, could be announced as soon as next month, said the person, who asked not to be identified because a final decision hasn’t been made.

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Wall Street getting rid of the competition?

BNP Paribas Risks Client Flight as Ban on Transfers Looms (Bloomberg)

Credit Suisse Group emerged from a guilty plea this week relatively unscathed. The punishment that prosecutors are now holding over BNP Paribas’s head could have more severe consequences. A temporary ban on transferring money into and out of the U.S., floated by New York’s Superintendent of Financial Services Benjamin Lawsky, would be in addition to more than $5 billion in fines and a guilty plea to criminal charges for violating U.S. sanctions, according a person with knowledge of the talks. No similar punishment targeting a business was imposed when Credit Suisse’s main bank subsidiary admitted helping U.S. citizens evade taxes.

Regulators haven’t determined how harsh the BNP Paribas prohibition would be, according to one of the people who asked not to be identified because the negotiations are private. If the French lender isn’t allowed to pay another bank to provide the service, it could push some customers to competitors. “When your client has to go to a rival bank to get the most basic banking service, even for a few months, you’ll lose them,” said Fred Cannon, New York-based head of research at Keefe, Bruyette & Woods Inc. “Not all, but some will take their business completely to that rival and not come back.”

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German Unease With ECB Simmers as Anti-Euro Party Gains (Bloomberg)

Lawmakers from Chancellor Angela Merkel’s party are criticizing European Central Bank policies as a German anti-euro party gains support before elections across Europe this week. Misgivings by Finance Minister Wolfgang Schaeuble about the ECB’s threat of unlimited bond-buying and Merkel’s warning of “deceptive calm” in financial markets are the latest signs that German policy makers and economists don’t want to discount the lingering risk to taxpayers from the debt crisis.

As polls suggest the anti-euro Alternative for Germany may win as much as 7% of the German vote for the European Parliament on May 25, members of Merkel’s Christian Democratic Union in the Bundestag, or lower house, questioned the underpinnings of ECB President Mario Draghi’s pledge in July 2012 to do “whatever it takes” to save the euro. “The Bundestag would certainly have major concerns to clear the way for unlimited bond purchases by the ECB,” Norbert Barthle, the budget spokesman for the Christian Democrats in parliament, said by phone. “I said back then that the ECB is making itself strongly dependent on political decisions” because lawmakers in Berlin would have a say in the process if the central bank ever decided it wants to buy a euro-area country’s bonds as part of an aid package, he said.

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This is presented as a good sign?!

Lower Consumer Spending, Imports Shrink Japan Trade Deficit (Bloomberg)

Japan’s trade deficit shrank in April as imports rose the least in 16 months after the first sales-tax increase in 17 years crimped consumer spending. Inbound shipments rose 3.4% from a year earlier, the Ministry of Finance said today in Tokyo. Exports increased 5.1%, leaving a deficit of 808.9 billion yen ($8 billion), down 7.8% from a year earlier. Reductions in the nation’s trade deficits, which extended their record run to 22 months, would help Prime Minister Shinzo Abe’s efforts to drive a sustained economic recovery and an exit from deflation. So far, the nation’s export gains have been limited, even with a 17% slide in the yen against the dollar since he took office in December 2012.

“Imports boosted by front-loaded demand before the sales-tax hike dropped off in April,” Yoshiki Shinke, chief economist at Dai-ichi Life Research Institute in Tokyo, said before the report. “We have to wait for exports to recover strongly before we will see a real drop in the trade deficit and that situation is still way out of sight,” said Shinke, the most accurate forecaster of Japan’s economy for two years running in data compiled by Bloomberg. [..] Abe increased the sales levy to 8% in April from 5%, as he tries to contain the world’s biggest debt burden. An environmental tax on energy, which also took effect from April 1, undercut imports of oil and coal, according to Nomura Holdings Inc. economists led by Minoru Nogimori, writing in a research report before the data.

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What if Chinese demand plunges?

Russia, China Sign Long Awaited $400 Billion Mega Gas Deal (Reuters)

Russia’s state-controlled Gazprom signed a long-awaited gas supply agreement with energy-hungry China today. There were no pricing details on the deal, which is believed to involve Russia supplying 38 billion cubic metres of gas per year to China via a new eastern pipeline linking the countries. It has been unofficially valued at over US$400 billion. Alexey Miller, chief executive officer of OAO Gazprom, Russia’s biggest company, signed the contract with Chinese officials in Shanghai during a two-day visit to China by President Vladimir Putin, according to a Bloomberg report. The move comes as Moscow diversifies away from the European market – but the price for the deal has been a sticking point. In return, it would help to ease Chinese gas shortages and heavy reliance on coal.

Talks on the proposed 30-year contract between Gazprom and state-owned China National Petroleum Corporation began more than a decade ago. A tentative agreement signed in March last year calls for Gazprom to deliver the 38 billion cubic metres per year of gas beginning in 2018, with an option to increase that to 60 billion cubic metres. Analysts have previously said the agreement would give advantages for both sides and tie the two countries closer together. The gas deal would mean China would be in a “de facto alliance with Russia”, according to Vasily Kashin, a China expert at the Centre for Analysis of Strategies and Technologies in Moscow. In exchange, Moscow might lift restrictions on Chinese investment in Russia and on exports of military technology, Kashin said. “In the more distant future, full military alliance cannot be excluded.”

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As I said. 1000 times.

Green Cars Won’t Save the Planet(Bloomberg)

A massive polar ice cap seems to be melting. What are we going to do to stop it? The answer, as I’ve often posited in this space, is “likely nothing.” Oh, I don’t mean literally “nothing”; I’m sure people will continue to write angry editorials and buy “green” consumer products. But I don’t think we’re likely to do much in the way of actually reducing greenhouse-gas emissions, which contribute to the climate change that is melting the ice caps. A few weeks back, this drew a censorious e-mail from a longtime commenter who noted that he was making a serious commitment to emissions reduction by, among other things, buying a Chevrolet Volt. My response to him is that “buying a Volt” does not constitute getting serious about carbon emissions. The idea that we can save the planet while barely changing our consumption patterns is one of the reasons that we are not going to actually “get serious” about global warming.

Read more …

Shell’s desperate defense from reality. Well, it’s a cover up mostly. Climate rules don’t matter, they’re simply running out of reserves.

Shell Hits Back At ‘Carbon Bubble’ Claims (Guardian)

Shell has hit back at claims that its multi-billion dollar investments in tar sands, fracking and other unconventional oil and gas exploration will create a “carbon bubble” which may backfire catastrophically because of expected global climate change legislation. Previous research by economists, campaigners, and MPs has suggested that the majority of coal, oil and gas reserves of publicly listed companies, including Shell, are “unburnable” if the world is to have a chance of not exceeding global warming of 2C, the level governments have agreed to limit rises to. That is leading to a so-called carbon bubble, an overvaluation of oil companies’ financial value, they have said. But in a 20 page response to its shareholders who are meeting on Tuesday in The Hague, Netherlands, for the company’s annual meeting, Shell strongly refutes the criticism that it is vulnerable to such a bubble.

“Shell believes that the risks from climate change will continue to rise up the public and political agenda. We are already taking steps to minimise our emissions and we are preparing the company for when legislation and markets will support a more significant action to mitigate CO2,” said JJ Traynor, vice president of investor relations at Royal Dutch Shell. “We do not believe that any of our proven reserves will become stranded. While the ‘stranded asset’ notion may appear to be strong and thought-through, it does have some fundamental flaws and there is a danger that some interest groups use it to trivialise the important societal issue of rising levels of CO2 in the atmosphere,” he wrote.

Shell claimed that the methodology used by its critics was wrong because it failed to acknowledge that global energy demand was likely to increase with population growth and with increasing global prosperity. “As GDP rises in China and India… energy demand will increase on this journey,” said Traynor. “Energy demand growth, in our view, will lead to fossil fuels continuing to play a major role in the energy system – accounting for 40-50% of energy supply in 2050 and beyond. The huge investment required to provide energy is expected to require high energy prices and not the drastic price drop envisaged for hydro carbons in the carbon bubble concept”.

Read more …

Nice piece.

Just Imagine… If Russia Had Toppled The Canadian Government (RT)

Just imagine if the democratically-elected government of Canada had been toppled in a Russian-financed coup, in which far-right extremists and neo-Nazis played a prominent role. That the new unelected ‘government’ in Ottawa cancelled the law giving the French language official status, appointed a billionaire oligarch to run Quebec and signed an association agreement with a Russian-led trade bloc. Just imagine… If Russia had spent $5 billion on regime change in Canada and then a leading Canadian energy firm had appointed to its board of directors the son of a top Russian government politician.

Just imagine… If the Syrian government had hosted a meeting in Damascus of the ‘Friends of Britain’- a group of countries who supported the violent overthrow of David Cameron’s government. That the Syrian government and its allies gave the anti-government ‘rebels’ in Britain millions of pounds and other support, and failed to condemn ‘rebel’ groups when they killed British civilians and bombed schools, hospitals and universities. That the Syrian Foreign Minister dismissed next year’s scheduled general election in the UK as a ‘parody of democracy’ and said that Cameron must stand down before any elections are held.

Just imagine… If in 2003, Russia and its closest allies had launched a full-scale military invasion of an oil-rich country in the Middle East, having claimed that that country possessed WMDs which threatened the world and that afterwards no WMDs were ever found. That up to 1 million people had been killed in the bloodshed that followed the invasion and that the country was still in turmoil over 10 years later. That Russian companies had come in to benefit from the reconstruction and rebuilding work following the ‘regime change’.

Read more …

Cool!

Santa Cruz Becomes First California County To Ban Fracking (RT)

Santa Cruz County has become the first county in California to implement a “permanent” ban on hydraulic fracturing, or fracking, in addition to all other onshore oil and gas development. The county’s Board of Supervisors voted 5 to 0 on Tuesday to pre-emptively outlaw fracking in the county. “Some would say this is a symbolic gesture,” said Supervisor Bruce McPherson, according to KQED. “But I think it’s a message that needs to be sent out and listened to, especially on our quality of life and particularly about the impact it might have on our water supply, whether it occurs inside this county or in adjacent counties.”

Injection wells used to dispose of highly-toxic fracking wastewater have contributed to heightened earthquake activity across the nation. The wastewater – riddled with hazardous and often undisclosed chemicals and contaminants – has been linked to a host of human and environmental health concerns. A recent study found that some of the most drought-ravaged areas of the US are also heavily targeted for oil and gas development using fracking, which exacerbates water shortages. In California, 96 percent of new fracking wells were found to be located in areas where competition for water is high. A drought emergency for the entire state – which has traditionally dealt with water-sharing and access problems – was declared in January. The city of Santa Cruz instituted mandatory water rationing for residents last month.

Read more …

Oh mother …

French Rail Company Orders 2,000 Trains Too Wide For Platforms (Reuters)

France’s national rail company SNCF said on Tuesday it had ordered 2,000 trains for an expanded regional network that are too wide for many station platforms, entailing costly repairs. A spokesman for the RFF national rail operator confirmed the error, first reported by satirical weekly Canard Enchaine in its Wednesday edition. “We discovered the problem a bit late, we recognize that and we accept responsibility on that score,” Christophe Piednoel told France Info radio. Construction work has already begun to reconfigure station platforms to give the new trains room to pass through, but hundreds more remain to be fixed, he added.

The mix-up arose when the RFF transmitted faulty dimensions for its train platforms to the SNCF, which was in charge of ordering trains as part of a broad modernization effort, the Canard Enchaine reported. The RFF only gave the dimensions of platforms built less than 30 years ago, but most of France’s 1,200 platforms were built more than 50 years ago. Repair work has already cost €80 million ($110 million). Transport Minister Frederic Cuvillier blamed an “absurd rail system” for the problem, referring to changes made by a previous government in 1997. “When you separate the rail operator (RFF) from the user, SNCF, it doesn’t work,” he told BFMTV.

Read more …

Home Forums Debt Rattle May 21 2014: Drowning in the American Dream

This topic contains 27 replies, has 11 voices, and was last updated by  Nicole Foss 4 years, 10 months ago.

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  • #13042

    Toni Frissell Fashion model in dolphin tank, Marineland, Florida 1939 According to a new Zillow report, 40% of all US mortgage holders can’t afford to
    [See the full post at: Debt Rattle May 21 2014: Drowning in the American Dream]

    #13046

    Cory
    Participant

    Ilargi – pulling forward the discussion of the other day:

    “Ilargi said…Everything we said, including the timing, would have already come to fruition if not for the absolute insanity unleashed by the Fed and its peers, and the propaganda that accompanied it. We have said multiple times in the intervening years that we did not see that coming. But what could we be accused of in that regard, that we didn’t accurately predict insane behavior? I think unpredictability tends to be an inherent trait in that sort of behavior.”

    To be fair, one of the reasons that the insanity was not predicted on TAE was that alternative scenarios were not worthy of consideration because they were largely deemed impossible (metaphors of “pushing on a string” and “laws of thermodynamics come to mind”) for example 5 years ago when some anon @12:26 asks the question why dont we consider alternatives, the response:

    “Stoneleigh said…
    Anon @12:26,

    Why do you insist that your point of view on what is happening and what will happen will not be de-railed by some new, never before seen method to ‘keep the dream alive’.

    However much we may want to keep the dream alive, some things are simply not possible. Can you stop a ponzi scheme from hitting a brick wall at some point, where most people lose everything? Ponzi schemes can only grow so far before the entire world is involved and no more buy-in is possible. Remember that each generation of a ponzi scheme has to be significantly larger than the last. Eventually we run out of people to fleece, and at that point the whole structure collapses, albeit not all in one go.

    This rally is giving us a temporary respite from something that is inevitable. It is making people hopeful that something can be done if only the powers-that-be do this or that, but that is just grasping at straws.

    ‘Solutions’ like printing money or handing out money that must be spent or lost are not real solutions. They postpone rather than prevent, and for a very short time at great cost. They do nothing whatsoever to address the essence of our predicament. They are desperate gambles that a day of reckoning can be postponed for long enough that our descendants will suffer rather than ourselves. Is this eally what we want – to make the mess worse by digging humanity into an even deeper hole, so long as we aren’t the ones who suffer personally? IMO the is the essence of the kind of short term thinking that got us into this mess in the first place.

    We have known for decades that our way of life was not sustainable, and we are about to find out what that actually means. The opposite of sustainable is terminal.

    JULY 10, 2009 AT 1:53 PM

    https://theautomaticearth.blogspot.com/2009/07/july-9-2009-obaminable.html?showComment=1247248404857#c8264568280711509369

    Then 2 posts later, you address him too:

    Ilargi said…
    “The reason this keeps coming up, is because you never seem to want to address this real possibility that there will be some very real, extreme measures taken to prevent what you say will happen, from actually happening.”

    No, the reason it keeps coming up is not our failure to talk about them, it’s that there’s an endless reservoir of “ideas” that people fail to think through and then call “real possibilities”. There is neither reason nor need for us to address them all, there’ll always be a next one and we’ve so far covered all of them without the need to go into specifics, even if that doesn’t satisfy the minds of those who think up the “real possibilities”.

    The origin of most of these grandiose yet superficial theories lies in people’s ideas about the power of the Fed or government, which many seem to view as unlimited. And no matter how many times we say it is not, there’s always a new bright light that comes-a-shinin’.

    From my point of view, the more extreme the theory, the more desperate its proponents. As you may have noticed, we’ve so far also failed to discuss the consequences of a meteor hit.”

    JULY 10, 2009 AT 2:03 PM

    https://theautomaticearth.blogspot.com/2009/07/july-9-2009-obaminable.html?showComment=1247249036198#c5853180694405004392

    The sad part is, among all the trolls like Cheryl, there really were people with sincere questions, yet I too bristled when these things were asked – my strength in the inevitibility of it happening soon was your strength in the inevitibility of it happening soon. One of the reasons I am still here – a full 5 years later…

    #13047

    But Cory, what is really important in all this, in what you quote, in where we are, in where we think this will lead us? Do you yourself see a way available to our ‘leaders’ to lead ‘us’ out of the gutter? Assuming even that they would want to? And if you don’t, then what are the options? In what fashion can we, given that we don’t have a crystal ball, do anything else than to tell our readers to get out because the risk is so high? Do you feel that risk has gotten smaller, on anything but a temporary basis? I sure don’t.

    #13048

    dkopriva
    Participant

    Maybe someone can explain the modern obsession of ” moving up” when it comes to houses. it wasn’t too long ago when families lived in a 1200 sq.ft bungalow for 30 years and then retired in that same home for another 10-15 years. Am I missing something or had the culture gone that far off the rails?

    #13049

    Diogenes Shrugged
    Participant

    With the title, the photograph, and all the talk in the first paragraph about being underwater, I was sure this article must be about global warming. But then I realized it was referring to mortgages (huge sigh of relief).

    Nobody renting an apartment for thirty years expects to be awarded with full title to the place. An underwater mortgage is akin to a rental agreement if the buyer assumes he’ll never pay it off, and expects to be walking away someday. If the house provides a much better lifestyle than an apartment would, and if apartment rental payments are roughly comparable to full-in house payments, then why not “rent” from the bank? After all, the chances of hitting the lottery so you can pay the mortgage off are probably about the same as the chances that inflated home prices will come roaring back, so there’s still an itty-bitty, teensy-weensy reason for optimism.

    Ilargi, in your response to Cory you wrote, “Do you yourself see a way available to our ‘leaders’ to lead ‘us’ out of the gutter? Assuming even that they would want to?”

    An alarmingly large number of pundits have been warning for a long time now that our ‘leaders’ intend to wage a world war. They’re also accused of laying plans for radical reductions in our populations via vaccines, GMOs, plagues, and surreptitious geo-engineering that promises to extend polar ice sheets to the equator in places. There is also talk about guillotines, FEMA camps, fields of stacked coffins, billions of hollow-point cartridges, armies of foreign soldiers on American military bases, gun confiscation and genocide. No way to predict with certainty what all this means, but it suggests that our ‘leaders’ MIGHT already have longstanding, well-developed plans to lead ‘themselves’ out of the gutter. To whatever extent that’s true, ‘we’ probably don’t figure into the outcome of those plans. Not something TAE should address, but just sayin’.

    #13050

    bluebird
    Participant

    @dkopriva – Sometimes, one has to ‘move up’, because the house is running out of room to hold all the stuff that people buy and collect nowadays.Guess that indicates one has too much stuff.

    #13051

    Diogenes Shrugged
    Participant

    dkopriva, you wrote, “Maybe someone can explain the modern obsession of ” moving up” when it comes to houses. it wasn’t too long ago when families lived in a 1200 sq.ft bungalow for 30 years and then retired in that same home for another 10-15 years. Am I missing something or had the culture gone that far off the rails?”

    Might you have been forgetting ‘wives?’

    Indirectly related:
    I purchased and watched a DVD recently that pretty much blew my mind in spite of my extensive, first-hand familiarity with the subject.

    Home


    So many imminent disasters, so little time, so little awareness. Add that to the growing list.

    #13053

    dkopriva
    Participant

    O.K. Diogenes, the response about the wives is just funny.

    #13054

    Cory
    Participant

    “Ilargi said…But Cory, what is really important in all this, in what you quote, in where we are, in where we think this will lead us? Do you yourself see a way available to our ‘leaders’ to lead ‘us’ out of the gutter? Assuming even that they would want to? And if you don’t, then what are the options? In what fashion can we, given that we don’t have a crystal ball, do anything else than to tell our readers to get out because the risk is so high? Do you feel that risk has gotten smaller, on anything but a temporary basis? I sure don’t.”

    I dont either, not at all. However, I have been known to have a bit of an alarmist streak. For the last few years, my spouse has been listening to someone who fully agrees it will all collapse because its unsustainable. However, his favorite saying is just because it is “inevitable” does not mean it is “imminent”.

    For years I railed against him too, thinking he was delusional, and that no way this lasted more than a few months. Well “a few months” became “a few more months” became a year, and well, you know the rest.

    It was thus that in the middle of one of our shouting matches and why we should wait just a bit more, my spouse wisely noted “how do I know we wont be having this EXACT same conversation in 3 years”, hence I came up with an absolute outside date of 2015.

    At the end of the day, here is what I know…in 2008, I was 4 years into a mortgage with another 21 years until freedom. I found TAE, became terrified, and sold, rented, because it was IMPOSSIBLE that it would all hold together another 21 years – let alone 2.

    It is now 6 years later, I am now paying MORE in rent than i did to buy, and prices have moved up such that I couldnt afford to buy back even if I want to. If nothing changes, I have become a perpetual rent slave, with another 50 years of ever increasing payments ahead of me.

    So here I am, with another 6 years of waiting under my belt, I now realize, had I done nothing to prepare, I would now be coming up on year 11 of my mortgage, with another 14 years til freedom. Who is to say it cannot last that long?

    #13057

    khiori
    Participant

    Cory, I have seen your story on here, and I feel for you. It’s so hard to know what is correct and what is just conjecture on the web. Everyone and his brother gets the chance to lay out their ideas and after a while you don’t know who to believe. Checking all of them out to the nth degree is hard too. There is only so many hours in the day. But I would tell you to BUY a house. Buy it and own it. Pay it off. The safest way to live. Sorry Raul I like your website, but I would buy over rent any day!

    #1 – buy the neighborhood. Go the best location and buy the smallest house. A condo in the best neighborhood is better than a big house in the ghetto. My neighborhood is one of the best in our county, and houses here did not drop all that much. Not like NV or CA. A stable older neighborhood that doesn’t change. The best schools. It will still be worth something. Make it a place you want to live for 30 years and you’re fine even if it does drop. It will come back up! Just be aware they are making it harder these days credit-wise to get a mortgage. Get a 30-year FIXED rate. Nothing else!

    If you are staying in it, and you have the income to afford it, so what if it drops in value? The only problem is if your job causes you to move frequently, in that situation I would not buy. Otherwise I cannot begin to imagine why you would rent.

    If you have cash there are foreclosures out there. It takes patience but I know regular people who buy them so it is possible. You don’t have to be Black Stone. You need to read Zillow religiously, and KNOW the value of property in your area. LEARN IT. You also need a list of the top 10 things you and your wife want in a house, 5 each. You will NOT find a house that has everything, It’s best to decide beforehand what you can give up and what is Paramount to each of you.

    Last but not least, be prepared to walk away when they won’t meet your price.
    Good luck and happy house hunting! 🙂

    #13059

    Cory,

    Who is to say it cannot last that long?

    And at the same time who is to say it can? It would seem to be a good idea to get the guessing part out of this as much as possible. Risk assessment.

    All US asset markets are seriously bubbling right now due to QE, a situation that cannot last because public debt would get too high. It already is. That means either we will achieve escape velocity and a real recovery in the real economy, or asset prices must fall. Since all that seems to go up does so to a large extent on the back of QE, I have no idea where a real recovery could possibly come from. There’s simply nothing there.

    The articles on the Zillow report that I referenced in my article above show that 20 million American mortgage holders can’t sell their homes, because they have too little or even negative equity. At 3 persons per household, that means 60 million, or 20% of the population, are stuck. They cannot move. Had they rented, they wouldn’t have had that problem. When asset prices begin to fall again, which I think is inevitable given that QE is the sole factor out there that has pushed them upward, the number of people stuck will rise, and not by a little bit.

    Mortgages are already a noose around the necks of 60 million Americans, according to Zillow, and with new home sales and mortgage originations falling as much as they are, which means markets are shrinking because there are far fewer buyers, how can prices not fall and hang more nooses around more necks? There is no functioning real economy out there, in the sense that it exhibits a “healthy” growth rate, and without such a rate things can only get worse, there’s no such thing as a stable economy without growth in our system.

    It all makes having a large mortgage debt, or any other kind of debt, a big risk. If you rent, you pay someone to take that risk for you. You don’t get the profit of rising home prices either, but how can prices rise when sales are plummeting (new homes -14.5%) and the economy is artificially kept alive through borrowing from our children?

    Khiori

    Buying a house if you can pay it off without getting into debt is fine, but a 30-year mortgage is a huge gamble. It’s not unlike getting into a casino betting you can beat the house. If people think this is really a recovering economy, it might make sense to them, but since Q1 GDP growth was negative, and that is with an ongoing QE, I wonder where they would see that recovery. China is struggling, Japan is worse, Europe is an increasingly divided experiment gone awry.

    And the US has bad numbers everywhere but in stock markets and assets available only to the rich – who are getting richer -. This means your “if you have the income” is also an added risk factor. What is you lose – part of – it? If for instance a substantial drop in the S&P drains a few trillion out of the market, or China sells a good chunk of its US Treasuries, events that are not at all unlikely, volatility and risk will surge. Running an economy on borrowed virtual money is inherently unstable. But it’s all we got right now, and I can’t see myself recommending people dive into debt in that situation. There’s too much out there that is entirely fake, not grounded in people working with their hands so to speak, and too much that can go ‘poof’ in an instant. But if you think central banks will keep this up for years to come, or even if you think they’re able to, I guess your risk assessment might be different.

    #13069

    khiori
    Participant

    Raul, Now don’t get mad at me, but buying property should not be a hugely risky gamble. It is quite a normal part of life. It takes education and good planning. The photos which grace your site are historic mementos, but not indicative of America today by a long shot. I love Zillow, however the numbers sound far worse than they are in reality. Was all that constant “moving up” that was taking place necessary? NO!

    Several coworkers bought in the run up, just because it was the right time (marriage, young family, moved into the area, etc.). They are as you say “under water”. None have lost their job, none want to move, and no one is bothered by it. These are not starter homes, rather permanent ones. You do not want an adjustable rate mortgage, but a fixed one. It can always be changed to a 15 year, when you get further ahead, as we did. 3 years and mine is paid off, and we have not been in it 30 years.

    America is BIG and varied. In my neighborhood only 3 foreclosures from ’09, 2 of which I knew well. One couple quit good jobs in law in the city (tired of rat race), then put savings and equity into an art shop and a coffee shop! Crash, all lost. Had they kept ONE job, and bought ONE shop, their house probably could have been saved. Poor planning. Lack of prudence.

    Another was self employed and his business partner sadly died suddenly. HOWEVER, when his wife [close friend] told me of the profligate spending of all their income, plus savings, plus taking out a huge second mortgage, all on trips to EU, fancy dinners, etc. I was stunned. Literally dinner in Paris and worse it went on. No, we are not in the 1%, which is WHY these people were so foolish. Grasshoppers get slaughtered, ants rule.

    In ’09 4 in my family lost jobs, husband, son, BIL, nephew. All are now employed. Both men found good replacement jobs, albeit longer commutes. Husband saw it coming and through hard networking and luck managed to transition literally in the last week! It took 3 of us 6 months of pounding on hundreds of doors to get my son a job. Both young men have since moved on to 2nd jobs, better ones. We were never in danger of losing our house though because ONE salary can carry it. Planning and frugality. I’ve never had dinner in Paris but I’m solvent.

    #13070

    bluebird
    Participant

    Life is a gamble. Do what makes you happy. Because, in the end, we are all dead anyway.

    #13071

    Variable81
    Participant

    @bluebird,

    “Life is a gamble. Do what makes you happy. Because, in the end, we are all dead anyway.”

    +1

    I might also add that, as a rule of thumb, people should do what they believe in. Those who come here every day to read TAE, agree with what it has to say only to then turn around and take on a 30-year mortgage (deeply entrenching themselves in debt) are incredibly hypocritical as that seems to fly in the face of the message of sustainability TAE tries to promote.

    @khiori,

    You sound like my friend’s wife when we all sat down over a bottle of wine and talked collapse. She was adamant that no matter what, she and her husband (my friend) would always find work because they weren’t quitters and they were winners, not losers. No matter what I said she couldn’t comprehend the idea that there could be a time that no matter how hard she tried and no matter what she did there wouldn’t be a job (or at least a job that pays anything substantial) for her or her husband to get.

    Don’t get me wrong – it’s not an insult, but a compliment in so much that I do appreciate her strong spirit and belief in herself and her husband. It’s the kind of attitude we need more of to be sure. That being said, she was also naive to think that no matter what happens she’ll always be in control of her life – that kind of thinking suggests she has the blinders on and isn’t at all prepared for the future and how much worse it could be.

    Some of your arguments may be true about buying homes with cash, living frugally, etc. But at the end of the day you’re basically arguing that you’re solvent now, so you will continue to be solvent. Your prudence and planning may all be for naught if you’re not looking to the horizon and seeing that changes for the worse could be heading your way.

    Lastly, even if you and your family do hold onto jobs, consider all those you had to step over to secure those jobs. People will be going hungry while you get whatever little you can. I think part of the message at TAE is to disconnect from our current “rat race” social system and to start living a sustainable existence in sustainable communities… which I’m not sure is compatible with a hyper-competitive fight to the bottom of who can live the most frugally while trying to maintain our unsustainable system.

    @cory,

    What are you actually looking for here at TAE?

    Nobody knows exactly how the future will play out, but we’re all accountable for our own decisions. Nobody forced you to do anything, though I would recommend you read bluebird’s post above and follow that advice.

    Basically, do what you *believe* is right and take ownership of the choices you make. Nobody can help you otherwise.

    Cheers,
    -Variable

    #13077

    Cory
    Participant

    @cory,

    What are you actually looking for here at TAE?”

    Variable – its a great question. What I am really looking for (deep breath here as I spill my guts) is answers on how so many of the things that Stoneleigh predicted were so wrong. Please understand, in 08/09 I came across TAE and was stunned by what Nicole was saying. In the early days, her track record was impeccable and she responded directly to posters with specifics on timing and everything. Morover, she was so incredibly certain of everything she said, like nothing I had ever seen before or since. I am not the only one who saw this either, witness the “Stoneleigh Effect”

    https://transitionvoice.com/2010/11/peak-ocalpyse-now/

    After the event where we saw her in person, a few of us who took her advice seriously wondered when the time came, if things arent working out as planned, will she “own up” to it. The general summary was, yes, of course she will. She knows many of us are making absolutely life altering choices based on what she was saying – so if any of that goes wrong, she will very quickly change course, tell us what happened/why it didnt happen, and (perhaps) even apologize. In sum, we all assumed she would be willing to held accountable for what she said.

    Thus, in the 2011-2012 timeperiod as things were starting to look like they werent going to happen as she said, I would log on expecting to see something like:

    In 2008-2009 I told many of you XYZ would happen. Well, it now turns out that XYZ is looking increasingly unlikely, largely because I did not anticipate ABC could do DEF…Therefore, I now think that…

    You get the general idea here. Unfortunately, this did not happen. To be honest, I was afraid to say something before now because I was afraid of Ilargi. I was fearful of being banned or censored as others were for questioning her. I still am.

    So with that in mind, I come here now, a broken and battered person, asking for some measure of accoutability from the one person who has affected me like few others have, and that person is Stoneleigh. Unfortunately, I now come and ask her the hard questions (as I did in that other thread) and her answer was…silence…

    Look, the long and short of it is that I did this to myself. I didnt have to listen to her, but my god, seeing as you were so willing to help people make life altering decisions, why do you suddenly clam up when they (understandably) come back asking for some rationale for why things went nowhere near what you expected?

    Stoneleigh, I very much want you to see this, and if you can find it in your heart, I want an honest and sincere answer. And what I mean on that is nothing like your generalized almost robotic responses where you talk in absractions – if that is all you are going to do, please make me feel better by staying silent. However, if you so happen to find it in your heart to give an honest act of contrition and answer along the lines of:

    I was wrong because…
    At the time I was thinking…
    What I totally did not consider was…
    When they did _____ I was shocked because _____

    You get the general idea here. You know you have the capacity to do this – the question is, do you have the courage to do so? At the end of the day, it would do nothing to help my fate. However, it would help me go to my grave with a better sense of peace for how so many of my choices 2008-2014 went so horribly wrong…

    #13090

    Cory,

    “Horribly wrong”? Isn’t that perhaps a bit much? Where is the horror?

    Nicole directed several comments directly at you in the Atamai thread, still you say her answer was silence. I don’t quite follow that.

    As for your continuing questions, I think I tried to respond to them at some length.

    #13091

    dkopriva
    Participant

    Folks, This level of frustration shouldn’t be directed at Nicole Foss or her supporters. Nicole takes a macro view on this subject and has also stated several times that she is not timing these events she is bringing understanding to the state of affairs in the big picture which many believe has crested. if anyone has made life changes due to the finding of Nicole Fox, that’s good. She has advocated a simpler more independent lifestyle. I think that if the economy was booming it is still fantastic advise. Buyers remorse is not uncommon and we need to go back to the original intent of why we make life changing decisions. it is based on a conviction of doing something right. We often have to be reminded that we are not following the crowd which means we will be constantly scrutinized for our perspective. This does not mean your decision to move or live a sustainable lifestyle is wrong. Living a sustainable lifestyle takes hard work, discipline and `courage. Based on what I hav experienced these past few years in city living is mind bending. The risk taking is incredibly high and the rewards are fleeting. This will continue and to be at the cutting edge of sustainable, slower lifestyle is simply a great experience. I am preaching to myself and giving myself a boost as I am going through the transition to sustainable living.

    #13092

    Variable81
    Participant

    @cory,

    I had the privilege of seeing Nicole speak at Georgian College in Barrie, I believe in 2011. I was a big TAE follower going into that session, so I knew what I would likely hear, but was blown away by the manner in which Nicole presented the material (and have since bought the World of Change download, though it is not nearly as moving as an in-person Nicole lecture).

    While I can understand your frustration that things haven’t “fallen apart” yet, I don’t recall Nicole ever putting a fast and hard date on any of this. In fact, I believe she’s maintained that collapse is imminent but will likely take place over a long period of time in a period of stops and starts. See here:
    https://fromalpha2omega.podomatic.com/entry/2013-07-12T16_35_32-07_00

    This is very much in alignment with The Long Descent by John Michael Greer of The Archdruid Report fame. Other great writers also touch on collapse, whether societal or from an energy perspective, such as Richard Heinberg, James Kunstler and Dmitri Orlov. Nicole was a great “jumping off” point or “inoculation” of what is to come – an incredible overview of the system in which I exist, how it functions, and where it is starting to fail – but there are a lot of others out there with similar narratives that are worth looking at as no one person is an oracle and see the future completely.

    None of these individuals, Nicole in particular, promised anyone they would wake up one morning and find houses for cents on the dollar for their disciples to buy up (particularly without huge ramifications to the system/society in which we live). Nor did they promise anyone could live a lavish lifestyle of luxury for their financial prudence and/or delaying gratification of owning a home. All they have said is that collapse is imminent (or underway), and that those who don’t prepare will be far worse off than those that do. By taking this time now to make ourselves more sustainable, we can proactively address problems that are on their way and can no longer be avoided (a few more can kicks here and there may happen, as they likely have since 2009, but each kick has cost society something and those costs are mounting).

    You seem to be waiting for something that quite frankly isn’t going to happen. Worse, you sound like you have people who you care about also waiting for something you have promised them. I’m not sure if there is any solution to your predicament, as the way you’ve managed those loved ones (and perhaps your own?) expectations has pushed you into a corner where something has to happen *NOW* or else you have to change the path on which you are on.

    We all likely suffer from something similar to what you are going through. Even now I find myself struggling to hold onto the job I have that allows me to continue to be a “functioning” member of society and afford its extreme costs. I’ve put off major milestones in my life – relationships and marriage are particularly difficult when all you can promise a perspective spouse is 20 years of less, not more – and I’ve foregone the profits I’ve seen friends make off their homes, rental homes and the stock market because in the long term I believe what TAE has presented and I know these are all short-term solutions and will not be sustainable.

    Nobody gets anything for free in life. Either you accept that you can enjoy life now and pay up in the future, or you can sacrifice now to hopefully offset future hardships.

    As stated before, do what you believe. Regardless if Nicole promised anything or not, she can’t help you at this point. You have to help yourself.

    -Variable

    #13094

    gezelle
    Participant

    @ Cory….
    I haven’t posted here in a while, but felt the need to respond to your posts about your dilemma after “doing what Nicole told you to do”
    . Other than selling your house, what other things did you do in the list of things that were put forth? Did you downsize/modify your lifestyle and expenses [even modestly] … have a store of cash built up and handy…have additional sources of income or barter.. look at the larger employment/unemployment situation in your area and the country as a whole…enlarge your skill set ….extrapolate costs going up down the road????
    I ask this as someone who lives in a very modest 1950’s house on an extremely modest 1950’s income in the North East…not a cheap area to live….I am also a landlord. I have downsized, consolidated expenses to a minimum, built extensive local contacts
    Although my mortgage is paid for, since the year that you have sold your house and the beginning of the economic slide my RE taxes will be 35% higher next quarter, house insurance was rising steadily them jumped to 40% more after the hurricanes, floods in this area and other disasters across the country.
    So, where would you be now if you were still paying your mortgage and these things occurred??? Did you sell and then rent for much less than your mortgage and related house expenses? Did you downsize your life along with shedding the house? did you take what ever you made from the house and keep it in cash and easily accessed?
    Your rent has gone up.. yes I understand this. As landlord,. I was able to keep my tenant in place with a minimal increase due to my lifestyle and the skills and value my tenant brings to the table. People who bought to let on high mortgages and without other resources and skills have have to raise their rents…just as you would have had to shell out more cash if you still had your mortgaged house.
    Heating, electric and water bills have risen 30 to 40% despite the fact that I have curtailed my usage BY THE SAME PERCENT! This winter was noted for it’s harshness, ice and prolonged cold. My roof, which needed to be replaced before the winter and for which I had already received a quote from a local roofer cost much more due to the fact that not only did the cost roofing material go up in general but the hugh amount of end of winter repairs in the area caused a shortage of supplies and drove the price up even further. I was still able to negotiate a good discount due to the fact that I used a local person with whom I had a working and community relationship and I paid in cash from my ready and easily reachable stash…… but it was still thousands $$$.
    Why do I tell you this? Because if I still lived an “average” 2014 lifestyle and had a mortgage to pay as well as these extra bills I would be in straightened circumstances right now…just like a number of my neighbors…. just like you would be if you too were still paying a mortgage with no other lifestyle changes.

    Additionally I might add that it took me several years to effect my descent, starting way before the TAE came onto my horizon. You cannot read the words “sell Your House” and jump ship without any further planning and adjustments and you very never told to do so here….read the primer section again….in full….with an eye to the big picture it presents.

    #13097

    Cory
    Participant

    Horror as in the degree of “wrongness” of what you expect versus what actually happened. For example, expecting it to become so bad that Obama wont be able to finish his term:

    https://theautomaticearth.blogspot.com/2009/07/july-22-2009-posers-and-losers.html?showComment=1248370973944#c450422310366780906

    Or perhaps (one month after we had hit a bottom), remarking:

    “If I had to say when we might see a bottom that could last a few years instead of days weeks, or months, I wouldn’t suggest such a thing would be possible before the middle of the next decade at the earliest. This does not preclude largish rallies within that timeframe though.

    I terms of what the world might look like by then, Denninger and Weiss and other purely finance types seem to think that recovery is possible to something at least vaguely resembling business as usual. That isn’t our position. We would say that the combination of capital and energy scarcity will preclude a return to anything most of us would recognize (with the possible exception of those almost a hundred years old or who grew up in a war-torn third world country).”

    https://theautomaticearth.blogspot.com/2009/04/april-8-2009-2-weeds-growing-through.html?showComment=1239306060000#c638489408715616391

    In any event, Ilargi, while I appreciate your responses, I found very little of what you ever said terrified me the way Nicole did. You always were a bit more cautious in what you said, wisely hedging your bet here and there. No one ever coined “the Ilargi Effect” Thus, you cannot be held responsible for things you never said, nor ever thought.

    Nicole however can. Thus, the one question which I asked (twice) which she refused to answer was what happened to make this statement so wrong:

    “Stoneleigh said…
    Arnold,

    Housing starts are not making, nor will they make, a new bottom. Your 90% price decline in real estate will not pan out Ilargi.

    Housing is not even close to a bottom, ergo it has much further to fall. I think it’ll be down 90% on average within 5 years. Watch this space.

    JULY 19, 2009 AT 9:41 AM”

    https://theautomaticearth.blogspot.com/2009/07/july-18-2009-reality-is-in-eye-of.html?showComment=1248010913971#c6632856359848749068

    And again, what I was hoping for was some sort of honest and sincere accounting of what (in her words) caused this statement above not to be true. Not her more standard mecnanistic answer, or some semantic parsing – just some true and honest heartfelt account which includes an answer along the lines of:

    What I missed was…
    I was wrong because…
    At the time I was thinking…
    What I totally did not consider was…
    When they did _____ I was shocked because _____

    In any event, dont worry Ilargi about me sticking around here and bothering her much longer. For me the die is cast and my fate sealed. I just hope to see one human act of contrition from Nicole before I log off for good.

    #13099

    Variable81
    Participant

    @cory,

    From that same thread in the comments section:

    —————————————————————————————————————

    Stoneleigh said…
    Anon @5:46,

    “You and Stoneleigh started TAE with some interesting ideas. It’s now become dogma. Your minds and your breadth of intellect are as closed and shallow as the powers-that-be you continually rant against.”

    The ideas have not changed because our predicament has not changed. We are still trying to warn people as we have always done. Are the ideas less interesting than they used to be? They certainly conflict with received wisdom at the moment, which some people interpret as us being impervious to evidence. Actually it’s us not swinging with the herd in its endless tug-of-war between fear and greed, panic and complacency

    “And you wonder why TAE is an also-ran in the financial blogosphere?”

    If we are also-rans it would be because we don’t pick out investment suggestions for people. We tell people to get out of the markets and stay on the sidelines in cash unless they’re aggressive speculators. That doesn’t make commissions for anyone and it doesn’t provide an outlet for predatory greed. Rather than being structured as an investment site, we are a public service trying to help ordinary people to hang on to what they have, in order to minimize suffering as much as we can.

    “You are not prophets. You are not psychics. You are doing what all of us in this space do: projecting your best guess as to what lies before us.”

    We have never claimed to be prophets. We are simply sharing what we know as a result of years and years of reading and analysis. Feel free to disregard our worldview if you think it too dogmatic. There are many sites that will offer contrasting views, along with specific investment advice. Bear in mind that every one of those sites is trying to sell financial services of some kind.

    We do make our arguments again and again, but that is because the same questions come up multiple times and the answers have not change despite the fluctuations of the market and the counter-productive government interventions.

    —————————————————————————————————————

    Wake up and smell what you’re shoveling, friend.

    -Variable

    #13100

    I still don’t see why you say you are ‘horribly’ wrong. You got rid of the risk of ow(n)ing a long term mortgage on a home, and that risk is high. That has little to do with a few years left or right. Nothing that brings words like ‘horrible’ or horror’ to mind. And I’m not sure if this is you speaking or people around you, who you are obviously letting you put under a lot of pressure. You seem to seek for Nicole to take the blame for your ‘horror’ onto herself and away from you, in order to relieve that pressure, without recognizing that Nicole doesn’t see it as a horror. Taking choice bits from what we have said through the years without acknowledging the big picture is of course never either a good nor a fair approach. And perhaps Nicole could have been more careful, or more vague, in her choice of words, but in the big picture that makes no difference: you still got rid of a big risk. Unless perhaps people think the US is actually recovering and they’ll have the time to pay off another 15 years on their loans.

    #13102

    bluebird
    Participant

    @cory – I think it is Chris Martenson that says that it is always better to be a year or more early, than a day late. The extra years gives more time for preparations and learning new skills. No one that I know has even read the Lifeboat primer. I want to think that what I have read at TAE and other forums, has increased my knowledge that will be able to help others when the time comes.

    Unfortunately, people have different priorities. I can’t change anyone else to be what I would like, I can only change how I relate to them. If that is so difficult now, what’s it going to be like in the future when we will need strong relationships to survive.

    #13103

    Cory
    Participant

    “I still don’t see why you say you are ‘horribly’ wrong. You got rid of the risk of ow(n)ing a long term mortgage on a home, and that risk is high. That has little to do with a few years left or right. Nothing that brings words like ‘horrible’ or horror’ to mind.”

    Its all a matter of expectations versus results. If someone makes a very high impact prediction, X will experience a meteoric rise from 1000 to 4000 by 2014 and instead it rises “only” to 3500, while they are technically “wrong” its not a big deal. If it rises only to 2000 then its pretty badly off the mark. If it doesnt rise at all but instead falls to 850, that is majorly wrong. If it makes a difference, strike the word “horribly” and substitute “very” or whatever similar adjective if you prefer.

    In my case, I was told (and I likewise told those around me) to see massive changes – 90% down pricing, obama forced from office, a landscape recognizable only to those 100 years old from war torn third world countries. I see none of those things, and neither do they, so the question is asked “where is all the massive upheaval you told us to expect? Why did you uproot the family and put us in a rental only to make us pay more and be priced out of ever buying again? You told me time, and time again, the upheaval is starting in 2009, 2010, 2014… and you were wrong, wrong, wrong. I never believed in any of this I was patient enough to give you SIX YEARS for what you said to pan out and none of it did – ENOUGH IS ENOUGH.”

    So yeah, plenty of pressure on me – so much so, my life is effectively over. And yes, while I do blame Nicole a bit, I recognize fully that I did this to myself, and I will bear those consequences. But what I am asking for now is a bit of humanity, a bit of closure, (and not from you Ilargi or any of the other posters whom I generally appreciate) why she cannot do this and answer for some things that went nowhere near what was expected, for the life of me, I simply cannot understand.

    #13105

    Variable81
    Participant

    😐

    “So yeah, plenty of pressure on me – so much so, my life is effectively over.”

    Well now… that seems overly dramatic. I’m sure your life is still continuing along, and likely better off than many people living in Greece, Ukraine, Thailand or very poor places like parts of China, India, the Philippines or all over the African continent. Even if your life was effectively over, well, consider the opportunity you have in front of you – the chance to build a new life rather than be trapped as a wage slave for whatever time left you do have remaining.

    My parents have been renting the last 3 years based on the information/warnings I’ve provided, much of which as been from the Automatic Earth. They pine for home ownership and regret not holding on to their property (it had a hot tub – so relaxing!) an extra year or two, but they also realize their bank balance has been growing since they downsized from a granite counter-top / stainless steel / vaulted ceiling monstrosity (complete with insane mortgage) to a simple townhouse closer to where they work. It also gave them the freedom to travel more, to pursue educational degrees they hadn’t finished, start to focus on health & wellness, and spend more time with family members – something I’m incredibly grateful for.

    “…why she cannot do this and answer for some things that went nowhere near what was expected, for the life of me, I simply cannot understand.”

    Yes, this has become abundantly apparent.

    For someone who claims they recognize they made their own decisions and will assume responsibility for their actions, you’re certainly very adamant to have someone other than yourself apologize for those actions.

    -Variable

    #13116

    Gravity
    Participant

    Hello again.
    Gravity has been an absent algorithm. As internet access permits I’ll visit more often. Still need to read up on two months of postings.

    The writing here is solid as ever, with due gravity concerning important topics. I appreciate the substantial volume of economic data and analyses illustrating the dire economic and financial sitiuation from complementary perspectives.I also find it encouraging how you’ve taken a strong political stance against the nasty business happening in Ukraine right now.
    The comment section is mostly populated by informed opinions too, allowing for proper discourse and exchange of equitable ideas.

    I managed to sleep right through the EUlection. Had intended to vote for whatever eurosceptic party with a coherent antifinancial program I could find, but I overslept and couldn’t make it to the voting office in time.
    Making an informed choice for any party would have required researching party programs, of all electable parties ideally, for effective comparison, which I also hadn’t bothered with.
    Such political party programs, although invariably dishonored by the elected, remain the most reasonable way of discerning the value of ideological arguments motivating party platforms. For the EUlection these programs are available on the internet but not disseminated by mass media at all, leaving the majority of voters who are only passively informed via mass media induction hopelessly ignorant and unable to make an informed choice for any party. If they did vote for any particular party it was for the wrong reasons, derived by comparing misleading media caricatures of various platforms, whether pro- or anti-EU.

    Those voters who did actively inform themselves about the available choices by seeking out sufficient information concerning electable parties and the EU’s governing bodies, naturally arriving at various eurosceptic positions, were preemptively disenfranchised by the media machinery’s derogatory rhetoric, portraying eurosceptic dissent as irrational and nationalistic.
    A little eurosceptic discourse had reached televised and printed media, allowing serious arguments exposing the unions disfunctionalities to be heard, but always lower in volume than the europhile side, which got preferential treatment again.

    I hadn’t heard about those criminal interferences by the union’s leading technocrats to displace eurosceptic sovereign goverments, if true, this offense would likely be a defined state crime against democracy perpetrated by a particular governing EU body, or a novel form of multinational sedition committed by particular officials within said body.

    For your consideration, I have prepared analytic and dialectic proofs that the human will is a gravitational potential. These utilise incontrovertible arguments by inductive and deductive forms to establish proper premise, followed by a unique recursive function wherein Gravity is a supervenient algorithm to enable practical experimentation and admission of transfinite empirical observables on this matter.
    Ill see you later.

    #13125

    Hircus
    Participant

    Cory,

    So, if instead of saying “in 5 years” Nichole had said “In 10 years,” you would have stayed in the house that “you owned” instead of going into a rental? And made no changes to your life? Really?

    I guess I’m the opposite of you — every year that the catastrophe is delayed for me, I’m happy. One more year to pay down debt, build my business, learn new skills and expand on old one, collect useful items, plant more fruit-trees, and expand my social network. And a bit more time to enjoy the finer things of life, like flying across the country to meet with friends, take a long weekend in the mountains, visit a museum, or dream about a European vacation.

    I’m sorry you’re unhappy with your life. But my guess is that if you had stayed in your house and ignored TAE, you would have an equal amount of stress and unhappiness.

    #13231

    Nicole Foss
    Moderator

    Cory,

    I have given you several answers fleshing out the scenario with regard to real estate prices. I am sorry if you consider these to be robotic. You ask me to repudiate my position on where we are headed, as if everything we have presented here is entirely wrong. It is not. The big picture worsens every day at the fundamental level. The desperate optimism is merely illusory window dressing attempting to lure people back into the market. It’s a giant pump and dump. Falling for that would be tragic. So many people are though. They’re becoming complacent again, just in time to lose whatever they didn’t already lose in 2008/09. So many people have learned nothing about their over-exposure to risk and desire for a free-lunch by participating in a ponzi scheme in which they will be the empty bag holders again.

    Real estate prices are going to collapse again. Just look at what’s happening already in the places on the leading edge of the curve, like Spain for instance. You are far better off on the sidelines in cash, provided you look after that cash. The cost of ownership has been skyrocketing, and when the market goes illiquid, people will be stuck with those costs, unable to extract themselves. Watch the property tax rates rise as local governments hit a wall over the next few years.

    Look at the unemployment rates in the places on the leading edge, where whole extended families are forced into tiny apartments because it’s all they can collectively afford. Where they walk today, many others will follow. This is not theoretical. It is already happening, just not at the same pace everywhere. The interventions by central bankers have done nothing but make the situation worse, so that the collapse will be worse when it occurs.

    I can understand the pressure you are under, but you did make the right decision to sell. You were at the very beginning of a mortgage, with many years to go. The freedom you speak of would have been unattainable, and you would have drastically overpaid for a depreciating asset in the meantime. Even if your home had been paid for, the cost of ownership could still have become an unsupportable burden under a situation of high unemployment, sharply rising taxes and rising interest rates on any other debts. What we try to do here is to help people extract themselves from unsustainable predicaments, so they are much less exposed to very large risks looming on the horizon. We stand by our record and continue to warn people, since the risks have only got worse in the intervening years.

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