Market crash: are we there yet ?

[Bene505]

So I did a wordle of posts 5001 to 5100 on this thread. Here's what I got.
(I left out poster's names and sig files.)



See it here: Wordle - Market Crash

[kootenay]

A couple of interesting articles this morning,

From The Globe and Mail

Risk-averse Canadian households are sitting on up to $1-trillion of cash and “near-cash” holdings, earning next to nothing, Scotia Capital Inc. says in a new research report.

This caution is justified, to a certain extent, given the financial shocks of recent years, economist Derek Holt said in releasing his analysis.

“Large cash holdings at a particular point in time may make sense if one is bearish, but sustained over a number of years it is difficult to justify,” he said.

From Bloomberg.com

Sept. 28 (Bloomberg) -- Americans holding $3.5 trillion in cash are giving money managers increasing confidence that the stock market rally under President Barack Obama will continue through the end of the year.

Even after reducing money-market accounts by 11 percent this year, investors have cash equal to 73 percent of Standard & Poor’s 500 Index companies’ net assets, according to data compiled by the Investment Company Institute and Bloomberg. At the peak of the bull market in 2007, the measure of buying power was 62 percent.............A broader measure of reserves that includes cash, bank deposits and money-market funds has climbed to $9.55 trillion this month, based on data compiled by the Fed. That’s enough to buy all of the companies in the S&P 500, which have a combined market value of $9.22 trillion, Bloomberg data show. Since 1999, so-called money at zero maturity has on average accounted for 62 percent of the stock index’s worth.

Obama Stock Advance Persists on Money Fund Hoarding (Update1) - Bloomberg.com

Families sitting on up to $1-trillion - The Globe and Mail

[fjon]

From the Housing bubble blog:

A poster on housingbubbleblog.com said a dozen of his work colleagues are still living in their homes, haven't made a mortgage payment for over a year and there has been no contact from their lenders. Seems like there's a lot of shadow inventory out there...


Another regular poster on housingbubbleblog.com chimed in with an even more extraordinary story:

Comment by Neil
2009-09-25 11:58:10

Somewhat on thread:

A coworker and I have been amazed at the number of people who are not paying their mortgage but there is no foreclosure notice. His sister was supposed to be foreclosed upon this month… there is a paperwork SNAFU, so their file has been put into a new que for processing. They’ve been told to expect an eviction notice in 4 years.

I’m not kidding, that is not a typo. FOUR years of further rent free living. The processor (working for this Countrywide mortgage) gave them that estimate.

Where? Riverside California So far, 18 months mortgage/rent free for the sister and hubby. There were contacted 9 months ago to be aware that foreclosure proceedings could occur in April. In February it was pushed to September due to ‘paperwork questions.’ Now they’ll pick up the file again in 2013.

When do squatters rights kick in?

Got Popcorn?
Neil

The Housing Bubble Blog » An Egregious Error

As to the mountains of sidelined cash, there is a lot of speculation as to why Treasury's Timmy Geithner dropped the MMF (money market funds) guarantee. You'll remember last year, in Sept. '08, several MMF "broke the buck", that is their assets were worth less than the money deposited, sparking the Govt. guarantee. The MMF and the big banks still hold mountains of toxic assets that will never be worth more than dimes on the dollar, if a market can even be reestablished for them again. The speculation goes, in order for the PD's (primary dealers who work with the FED) can 'control' markets, they need more cash and the elimination of the guarantee will once again, cause money to flee the MMF and go into bank accounts.

The problem with this remains that MMF's will have to sell somethings in order to fund redemptions and that will put pressure on markets. The Fed and Treasury, with tax receipts falling off a cliff, are once again between a rock and a hard place. I would not be surprised by Panic over the MMF's within a few months. I don't believe that the side-lined same as cash "money" is there at all.

One other point. When the goobermint abandoned the new requirement for financial institutions to "mark to market" their assets, the capitalist structure may have had it's fate sealed. Most banks hold their toxic paper Off balance sheet in fantasy constructs called SIV's. Accounting trickery may keep your stock price up for a while but it precludes the economic system from having the cleansing of failed enterprises so necessary to it's long term health.

[kootenay]

Are MMF's different in the US? In Canada an MMF is a very fluid instrument that one can get out of within 48 hrs and the investments in the fund are limited to a 364 day maturity. They also generally invest in Canadian insrtuments due to the currency risk.

Its still a ton of cash sitting out there. If you look at the numbers in cash and bank deposits there is close to 6 trillion in the US. Which would fit Canada's 1 trillion.

[TropicCat]

This article is positively chilling. it's the simple math needed to reduce unemployment to 5%.

The Automatic Earth: September 28 2009: A Quicksand Quagmire

Simple math, dismal conclusion. Essentially the article shows that it simply can't be done. Not in 5 years and probably not in 10 years.

The July S&P/Case-Shiller 20 city Home Price Index was just released and said prices fell 13.3% this month year over year. This makes perfect sense as foreclosures are at an all time high and that shadow inventory of 7 million foreclosures is still out there.

Our economy is "what you see is what you get" for the foreseeable future. Let me qualify this: This is a BEST case scenario. If I've read the Chinese wrong, things could get much , much worse.

[kootenay]

Tropic an article from the globe and mail that supports your link above.

Deflation taking root in global economies - The Globe and Mail

The spectre of a crippling bout of deflation is hanging over the global economy.

Fuelled by continuing overcapacity, shrinking credit, reduced corporate spending and falling consumer demand, deflation is on the rise in its old stomping ground of Japan and taking root in the battered U.S. and European economies.

Consumer prices fell at their fastest clip ever last month in Japan, which has been fighting a losing war against deflation for much of the past two decades. Germany, Europe's biggest economy, has now suffered through four consecutive months of sliding prices, and the rest of the region that uses the euro is not faring much better.

That deflation should be such a threat may run counter to market fears that inflation will quickly follow the massive, and costly, global effort to fight the financial crisis. But many observers see deflation as the greater threat.

[fjon]

TropicCat, wow, that article was a long and sound summation of all that we've learned in the last few years. And Kootenay, the Japanese situation rounds out a picture of a stalling 747 with the global economy on board. The exports as I remember, began droping at a 35% yoy pace some months back. And along with the ghost fleet of bulk carriers parked in Singapore and elsewhere around the world, the slowing of the world econ machine is breathtaking and without precendent since the 1930's.

And the thing that kicked off this global synchronous recession with the securitized mortagages debacle and the $900 trillion derivative scam, a the big casino for the big banks and corporations, with untallied counter-party risk many times the whold planetary GDP. UFB.

Anyway, not to dwell on the whole macro mess too long, I was just gonna post a snip and link to the guy I've found to be the best RE analyst out there. He was talking about the RE bubble and coming bust more than two years ahead, and sold his own place in Florida at the exact peak in prices in July '05. Unfortunately for me, I didn't make his acquaintance until '04, 6 months after I'd sold my house for 100% gain in 5 years. If I'd have been plugged into Lee's work, I'd have waited another 18 months and would have realized a gain of 195%. Dang! I won't buy again until he does. Here's a piece he put out today. Disclaimer: No relation or profit by me.

Case Chiller – False, Phony, and Fictitious | The Wall Street Examiner

What’s here is the little chart and the point is that the Case Shiller Index (CSI for your real estate crime fans) is way behind the curve.




Now let me tell you why I think that’s the Case.

The real story of the market is in the new house sales prices. That data shows what happens when the time runs out to take advantage of Uncle Sam’s $8,000 first time home buyer credit. Since the program ends on November 30 and it takes at least 4 months to build a house from date of contract, new house sales prices started to tank in August, completely wiping out the March to May bounce. That bounce, in my view, was entirely due to the government fist time home buyer prop job.

As an old real estate appraiser the first thing I do when considering a sale price is to make sure that it’s a cash equivalent sale price. In this case, the March to May average sale prices should be adjusted down by some percentage of the $8,000 that buyers got from Uncle. That percentage would depend on just what percentage of all sales were impacted by the credit. One source I’ve read says it was 43%. So the credit would appear to account for about $3500 of the price gain that appeared last Spring. This doesn’t even consider the fact that demand was also artificially inflated. That probably had a bit of an impact as well.

[TropicCat]

Originally Posted by fjon

Case Chiller – False, Phony, and Fictitious | The Wall Street Examiner

Hang on here folks. I think any of us would take Yale University's report over that of an ex real estate appraiser.

The simple fact is that if this guy was correct, and Yale's Case-Shiller wrong, and houses were selling faster than the Yale report indicated, home prices would have stabilized. They didn't.

Guys this whole article is bogus. Made up graphs citing no source. And then ... In their own words..." Case Shiller slows its data even more by using only data reported in the public records, then time smoothing and lagging it."

Yeah, that's called a real estate closing. This is the one and only number anyone should use. Any other number is bogus.

What you're looking at is hype, and not even good hype. I can't believe any publication would publish this guy without checking his numbers. Unbelievable

Case Shiller is the definitive standard. They were the guys that blew the Whistle back in 2005 that the house of cards were about to collapse and they are the Gold Standard today.

[TropicCat]

Originally Posted by kootenay

Tropic an article from the globe and mail that supports your link above.

Deflation taking root in global economies - The Globe and Mail

This is exactly what Windy has been saying in this thread for over a year now. I was solidly in the 'get ready for hyper inflation camp' but Windy stuck to his deflation forecast and was correct.

What I'm saying is, go back in this thread a year and you'll discover that it was probably published here first.

[fjon]

Originally Posted by TropicCat

Hang on here folks. I think any of us would take Yale University's report over that of an ex real estate appraiser.

The simple fact is that if this guy was correct, and Yale's Case-Shiller wrong, and houses were selling faster than the Yale report indicated, home prices would have stabilized. They didn't.

Guys this whole article is bogus. Made up graphs citing no source. And then ... In their own words..." Case Shiller slows its data even more by using only data reported in the public records, then time smoothing and lagging it."

Yeah, that's called a real estate closing. This is the one and only number anyone should use. Any other number is bogus.

What you're looking at is hype, and not even good hype. I can't believe any publication would publish this guy without checking his numbers. Unbelievable

Case Shiller is the definitive standard. They were the guys that blew the Whistle back in 2005 that the house of cards were about to collapse and they are the Gold Standard today.

Uh, Lee Adler runs a trading site. doh! His point is not to discredit Case-Shiller, don't panic, he's looking for the edge in data. Anyone who trades regularly realized that some data is fabricated and abused with phony hedonic revisions and other data, because it uses trailing data is late. Lee is identifying the leading indicator based on state of the art liquidity analysis and chart price cycle analysis. I don't mean to step on your turf, just passing along what I use as state of the art analysis. Pay no attention, amigo.