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Rogers: “Volume Is Not Going To Come Back. We’ve Had A Great 30 Years. That’s Finished!”
Jim Rogers is hedging his gold (and silver) positions reflecting that this is normal, following such a tremendous run, and that this is good for the precious metal in the long-run. In his discussion with Maria Bartiromo this afternoon, he notes India’s anti-gold ‘protectionism’ (and its potential balance of payments issues) that are trying to force the hoarding into risky ‘productive’ assets (as others might say). The immutable commodity maven suggests JPMorgan (and its peers) could be behind the drops in the overall commodity complex as the uncertainty of their positions (and liquidation potential to raise cash as bank examiners begin their forensics) becomes more important. He holds the USD, which he hates; has a number of equity shorts; and is most fearful of banks – specifically admitting he is a serial seller of calls on JPMorgan. His advice, and perhaps Maria should look into it given their ratings recently, is to become a farmer; own farmland; and speculate on agriculture. On the dismal ‘ethical’ state of our leaders and management, the thoughtful Rogers opines, “You can read world history for decades. There are always people doing things wrong. We have not changed our human nature… Continue reading
Peak Dow, Peak GDP and Peak Oil
Peak Oil and Peak Credit do not exist in a vacuum; they’re why we have Peak GDP, Peak Dow and peak Income.
You don’t get Peak Oil and cheap abundance in everything else: you get Peak X, Y and Z, for example Peak Oil, Peak Dow and Peak GDP. Peaks come in causal series, one such series: Peak Housing, Peak Fraud, Peak Suburbia and Peak Property Taxes.
Would we really be surprised if Peak Oil was associated with Peak GDP and Peak Dow Jones stock market average? Let’s start with a chart of global oil production and the Dow Jones Industrial Average (DJIA), courtesy of Chartist Friend from Pittsburgh.
This chart suggests the Dow may track oil production on the downside, just as it tracked it on the upside.
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Student Loan Debt Slaves In Perpetuity – A True Story Of “Bankruptcy Hell”
The numeric implications as well as the magnitude of the student loan bubble have been discussed extensively before. Yet just like most people’s eyes gloss over when they hear billions, trillions or quadrillions, so seeing the exponential chart of Federal Student debt merely brings up memories of a math lesson from high school, or at best, makes one think of statistics. And as we all know statistics are faceless, nameless and can never apply to anyone else. It is the individual case studies that have the most impact. Which is why we would like to introduce you to Devin and Sarah Stang – student loan debt slaves in perpetuity.
First, for those who are still unfamiliar with the brush strokes, here is the big picture, courtesy of AP:
The Federal Reserve Bank of New York estimates 37 million Americans have student loan debt, totaling $870 billion. The average balance is around $23,000 (though that partly reflects a relatively small number of very large balances; the median is $12,800). Only 39 percent are paying down balances. An estimated 5.4 million borrowers have at least one student loan account past due.
Roughly 85 percent of outstanding student loan debt is owed to the federal government. The remaining 15 percent that’s counted as private student debt is owed to various non-federal lenders, ranging from banks to loan companies like Sallie Mae Corp. to non-profits and state-affiliated agencies (under the Durbin bill, loans from any government-funded entity still wouldn’t be dischargeable, only those from truly private lenders).
Generally, it’s these private loans that bring borrowers to the door of bankruptcy lawyers like Barrett. Private student loans often lack the protections of federal ones, and have rates that typically start higher and can shoot up. A recent survey of bankruptcy attorneys found 81 percent reporting more clients with student debt in recent years, and roughly half reporting a significant increase.
And, also by way of background to those unfamiliar, student debt has a very peculiar feature:
Virtually any other kind of debt — including medical bills, mortgage, credit cards and car loans, even gambling losses— can be discharged in bankruptcy, allowing the “honest but unlucky” a chance to restore their footing through an arduous restructuring overseen by a court.
But under a 2005 law passed by Congress to protect lenders, private student loans fall under the same nearly-impossible-to-clear category as child support payments and criminal fines.
“It’s a huge part of why the younger generations are here now,” said the Stangs’ bankruptcy lawyer, Matthew Barrett, whose busy office in Amherst, west of Cleveland, belies stories about the improving economy. He estimates half his clients have problems with student debt.
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Peak Housing, Peak Fraud, Peak Suburbia and Peak Property Taxes
Peak Housing reflects not just a credit bubble but Peak Fraud and Peak Suburbia.
Once again pundits are claiming that housing is “finally recovering.” But they’re overlooking three peaks: Peak Housing, Peak Financial Fraud, and Peak Suburbia, all of which suggest years of stagnation and decline, not “recovery.”
Here is the latest Case-Shiller index, which has traced out a nearly textbook bubble and a return to the mean that has been artificially restrained by trillions of dollars of Federal subsidies and backstopping of the housing market:
Here is a classic bubble and pop. Note that the “recovery” to bubble heights never arrived: 12 years later, the NASDAQ is around 3,000. If we adjust that by the 33% inflation since 2000 calculated by the BLS (Bureau of Labor Statistics), then the NAZ is around 40% of the 2000 peak.
Note that there were several “recoveries” that fizzled before the index finally round-tripped to pre-bubble prices. On the Case-Shiller, that suggests an eventual drop from 130 to 75, the pre-bubble level.
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Delaying Foreclosure: 62 Years to Repossess New York Homes at Current Pace
More troubling data on real estate and foreclosures as a whole from the NYT:
In New York State, it would take lenders 62 years at their current pace, the longest time frame in the nation, to repossess the 213,000 houses now in severe default or foreclosure, according to calculations by LPS Applied Analytics, a prominent real estate data firm.
Clearing the pipeline in New Jersey, which like New York handles foreclosures through the courts, would take 49 years. In Florida, Massachusetts and Illinois, it would take a decade.
In the 27 states where the courts play no role in foreclosures, the pace is much more brisk — three years in California, two years in Nevada and Colorado — but the dynamic is the same: the foreclosure system is bogged down by the volume of cases, borrowers are fighting to keep their houses and many lenders seem to be in no hurry to add repossessed houses to their books.
“If you were in foreclosure four years ago, you were biting your nails, asking yourself, ‘When is the sheriff going to show up and put me on the street?’ ” said Herb Blecher, an LPS senior vice president. “Now you’re probably not losing any sleep.”
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How the Servant Became a Predator: Finance’s Five Fatal Flaws
Bill Black is the author of The Best Way to Rob a Bank is to Own One and an associate professor of economics and law at the University of Missouri-Kansas City. He is a white-collar criminologist who has spent years working on regulatory policy and fraud prevention as Executive Director of the Institute for Fraud Prevention, Litigation Director of the Federal Home Loan Bank Board and Deputy Director of the National Commission on Financial Institution Reform, Recovery and Enforcement, among other positions.
Originally published at New Deal 2.0
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What exactly is the function of the financial sector in our society? Simply this: Its sole function is supplying capital efficiently to aid the real economy. The financial sector is a tool to help those that make real tools, not an end in itself. But five fatal flaws in the financial sector’s current structure have created a monster that drains the real economy, promotes fraud and corruption, threatens democracy, and causes recurrent, intensifying crises.
1. The financial sector harms the real economy.
Even when not in crisis, the financial sector harms the real economy. First, it is vastly too large. The finance sector is an intermediary — essentially a “middleman”. Like all middlemen, it should be as small as possible, while still being capable of accomplishing its mission. Otherwise it is inherently parasitical. Unfortunately, it is now vastly larger than necessary, dwarfing the real economy it is supposed to serve. Forty years ago, our real economy grew better with a financial sector that received one-twentieth as large a percentage of total profits (2%) than does the current financial sector (40%). The minimum measure of how much damage the bloated, grossly over-compensated finance sector causes to the real economy is this massive increase in the share of total national income wasted through the finance sector’s parasitism.
Second, the finance sector is worse than parasitic. In the title of his recent book, The Predator Statehttp://books.simonandschuster.com/Predator-State/James-Galbraith/9781416566830, James Galbraith aptly names the problem. The financial sector functions as the sharp canines that the predator state uses to rend the nation. In addition to siphoning off capital for its own benefit, the finance sector misallocates the remaining capital in ways that harm the real economy in order to reward already-rich financial elites harming the nation. The facts are alarming:
