Greenspan on housing: 'Stagnation' here to stay

"We are in a position now, of secular stagnation..."

Greenspan on housing: 'Stagnation' here to stay

Link

"Fannie Mae: Loan-To-Value Ratio Now Higher Than During Housing Bubble"

"At last. Residential mortgage (1-4 unit) lending is almost back to zero percent growth!

...

...At least for 4% coupon Fannie MBS, the average LTV is higher now than during the housing bubble! So much for the story that Fannie and Freddie are “too tight” with mortgage credit.

But...how low should Fannie and Freddie expand (drop) their FICO box?

It is like a raccoon riding on the back of an alligator.

The raccoon hopes that the economy doesn’t tank and home prices fall (again)."

Ref: Raccoon Econ 101

1937 Redux?

"...But no episode is more notable than what happened in the US in 1937, smack in the middle of the Great Depression. This is the only time in US history which is analogous to what the Fed will attempt to do, and not only because short rates collapsed to zero between 1929-36 but because the Fed’s balance sheet jumped from 5% to 20% of GDP to offset the Great Depression.

Just like now.

the impact of higher Fed rates will be far less predictable than normal, that historical comparisons may be less powerful, and that volatility across both credit & equity markets should continue to be owned.

Actually, the main reason is one, and it is very simple. It is shown in the chart below.

Here are some other reasons why the Fed's rate hike will lead to a period of, to put it mildly, volatility...

• Central banks now own over $22 trillion of financial assets, a figure that exceeds the annual GDP of US & Japan
• Central banks have cut interest rates 577 times since Lehman, a rate cut once every three 3 trading days
• Central bank financial repression created $6 trillion of negatively-yielding global government bonds earlier this year
• 45% of all government bonds in the world currently yield <1% (that’s $17.4 trillion of bond issues outstanding)
• US corporate high grade bond issuance as a % of GDP has doubled to almost 30% since the introduction of ZIRP
• US small cap 5-year rolling returns hit 30-year highs (28%) in recent quarters
• The US equity bull market is now in the 3rd longest ever
• 83% of global equity markets are currently supported by zero rate policies

...the manager of the world's biggest hedge fund...This is what Ray Dalio says ahead of the upcoming rate hike:

... in our opinion, inadequate attention is being paid to the risks of a downturn in which central bankers' abilities to ease are significantly impaired. Please understand that we are not sure of anything but, for the reasons explained, we do not want to have any concentrated bets, especially at this time.

Source: 1937 Redux

"...nothing has changed [from] the pre-crash status quo…only…relative/absolute debt has never been higher."

"...Or, as Italy's economy minister called it, "boring"... until such time as the Troika decided to yank its guarantees and the next Greece emerges. Only then does it get "exciting."


Source: http://www.zerohedge.com/news/2015-06-16/there-one-problem-europes-so-called-austerity

"...when the easy money dries up (making massive buybacks and blockbuster M&A more expensive), corporate America may wish it had invested a little less in chasing an equity rally and a little more in growth, efficiency, and productivity."

The Death Of Capex In 8 Charts

"...Of course, if leverage is going up today because it’s funding tomorrow’s growth that might not be a bad thing. Unfortunately, that’s not what’s going on.

Read more: http://www.zerohedge.com/news/2015-06-14/death-capex-8-charts

DEBT: "The plan worked... Iceland took hit…[now] 1st European...to beat its pre-crisis peak of economic output."

Iceland Imprisoned Its Bankers And Let Banks Go Bust: What Happened Next In 3 Charts

This year, Iceland will become the first European country that hit crisis in 2008 to beat its pre-crisis peak of economic output. In spite of its total 180-degree treatment of nefarious bankers, the banking system, and the people of its nation when compared to America (or The UK), Iceland has proved that there is a different (better) option that western dogma would suggest. As abhorrent as this prospect is to the mainstream's talking heads and Keynesian Klowns who bloviate wildly on macro-economics and endless counterfactuals, Iceland came to that fork in the road, and took it...

As The Independent reports,

While the UK government nationalised Lloyds and RBS with tax-payers’ money and the US government bought stakes in its key banks, Iceland adopted a different approach. It said it would shore up domestic bank accounts. Everyone else was left to fight over the remaining cash.

It also imposed capital controls restricting what ordinary people could do with their money– a measure some saw as a violation of free market economics.

The plan worked. Iceland took a huge financial hit, just like every other country caught in the crisis.

This year the International Monetary Fund declared that Iceland had achieved economic recovery 'without compromising its welfare model' of universal healthcare and education.

Other measures of progress like the country’s unemployment rate, compare just as well with countries like the US.

Rather than maintaining the value of the krona artificially, Iceland chose to accept inflation.

This pushed prices higher at home but helped exports abroad – in contrast to many countries in the EU, which are now fighting deflation, or prices that keep decreasing year on year.

With the reduction of capital controls – tempered by the 39 per cent tax – it continues to make progress.

"Today is a milestone, a very happy milestone," Iceland’s finance minister Bjarni Benediktsson told the Guardian when he announced the tax.

*  *  *

But apart from the economics... Iceland also allowed bankers to be prosecuted as criminals – in contrast to the US and Europe, where banks were fined, but chief executives escaped punishment. The chief executive, chairman, Luxembourg ceo and second largest shareholder of Kaupthing, an Icelandic bank that collapsed, were sentenced in February to between four and five years in prison for market manipulation.

"Why should we have a part of our society that is not being policed or without responsibility?" said special prosecutor Olafur Hauksson at the time. "It is dangerous that someone is too big to investigate - it gives a sense there is a safe haven."

http://www.zerohedge.com/news/2015-06-11/iceland-imprisoned-its-bankers-and-let-banks-go-bust-what-happened-next-3-charts

"The [new] "if we build it (and offer credit to anyone who can fog a mirror), they will come" economy."

There has never been more cars in inventory than now...!

Where the World's Unsold Cars Go To Die (courtesy of Vincent Lewis' Unsold Cars)

More: http://www.zerohedge.com/news/2015-06-11/channel-stuffing-economy-there-has-never-been-more-cars-sidelines