Bubble

NEWS!

This is the 'biggest bubble in the history of mankind and it's going to burst,'

 Ron Paul says

This market is in the “biggest bubble in the history of mankind,” and when it bursts, it could cut the stock market in half, he told CNBC’s “Futures Now” Thursday. 

“I see trouble ahead, and it originates with too much debt, too much spending,” Paul said. 

This isn’t the first time Paul has made such dire warnings. During a “Futures Now” appearance in August 2017, he predicted a 50 percent drop in the market, a call he has doubled down on a number of times since. Since that appearance, the S&P 500 has rallied 15 percent.

DYI:  At the very least from peak to trough the U.S. stock market will decline by 50%!  More likely a total decline of 60% to 75% is in store for this insanely overvalued market.  The difference this time is all stocks – with the exception of precious metals mining companies – have been pumped up to the moon as investors and speculators alike were on their quest for yield. The speculators pushed market values even higher by the use of massive margin debt which is now far greater than the secular top in the year 2000.

Trouble Ahead For The Housing Market

We're starting to see rising supply & flat/declining prices

by Adam Taggart

Monday, July 16, 2018, 3:27 PM 

Our good friend John Rubino over at DollarCollapse.com just released an analysis titled US Housing Bubble Enters Stage Two: Suddenly Motivated Sellers. 

He reminds us that housing bubbles follow a predictable progression: 

• Stage One: Mania -- Prices rise at an accelerating rate as factors like excess central bank liquidity/loose credit/hot foreign money drive a virtuous bidding cycle well above sustainably afforable levels.

• Stage Two: Peak -- Increasingly jittery owners attempt to sell out before the party ends. Supply jumps as prices stagnate.

• Stage Three: Bust -- As inventory builds, sellers start having to lower prices. This begins a vicious cycle: buyers go on strike not wanting to catch a falling knife, causing sellers to drop prices further.

Rubino cites recent statistics that may indicate the US national housing market is finally entering Stage Two after a rip-roaring decade of recovery since the bursting of the 2007 housing bubble: 

• the supply of homes for sale during the "all important" spring market rose at 3x last year's rate

• 30 of America's 100 largest cities now have more inventory than they did a year ago, and

• mortage applications for new homes dropped 9% YoY 

Taken together, these suggest that residential housing supply is increasing as sales slow, exactly what you'd expect to see in the transition from Stage One to Stage Two. 

If that's indeed what's happening, Rubino warns the following comes next:

Stage Two’s deluge of supply sets the table for US housing bubble Stage Three by soaking up the remaining demand and changing the tenor of the market. Deals get done at the asking price instead of way above, then at a little below, then a lot below. Instead of being snapped up the day they’re listed, houses begin to languish on the market for weeks, then months. Would-be sellers, who have already mentally cashed their monster peak-bubble-price checks, start to panic. They cut their asking prices preemptively, trying to get ahead of the decline, which causes “comps” to plunge, forcing subsequent sellers to cut even further. 

Sales volumes contract, mortgage bankers and realtors get laid off. Then the last year’s (in retrospect) really crappy mortgages start defaulting, the mortgage-backed bonds that contain their paper plunge in price, et voila, we’re back in 2008.

This makes even greater sense when considered along with the current trends of rising interest rates and quantitative tightening. 

Remember, home prices and interest rates have a mathematically inverse relationship: as rates go up, home prices must go down (all else being equal). 

And as central banks start withdrawing in earnest the excess liquidity that inflated property values to their current nose-bleed heights, expect further downward pressure on prices.

DYI:  U.S. real estate is heady but not insane as it was during the go go years when the number one home show was “Flip this House!” on HGTV.  However for those of you who had the good fortune or intelligence to purchase near or at the bottom of the real estate bust you are now sitting on [figuratively and literally] fantastic gains.  Real estate from here is either going to drop back as stated in the article or the gains will stagnate below the on going inflation rate which is nothing but a clever way to disguise a decline in value.

Which way to go if you are one of those with large gains?  Should you sell?  Only if it will not turn the family upside down which I’ll leave up to you to decide what is too much family turbulence.  If the family is Ok with the idea of selling, capture the gain either find a reasonable place to rent or purchase in a lower cost area.  Again I’ll leave the family issues up to you as there are so many variables making a list of rule of thumbs would be endless!

 DYI