Is Economy Doing Well?

[Terrel L. Shields]

The FED is politically tied and they have been called out.

One CNBC commentator called it "pseudoscience settled" . At some point the Fed has to admit they are owned by Wall Street and they are making them filthy rich at the expense of savers. And the true state of our nation will be exposed if we have to start paying substantial interest upon our own borrowing. Look for inflation long term and not even 2% Fed rate will stop it. In fact, it will be a perverse form of stagflation which we had in the 70s, where 5% inflation is worse than the 10% inflation of the past. And that has to precipitate a roll back in housing prices or a plain old fashion crash.

 

[miktay]

No rate increase.

 

[Big ole Boy]

No rate increase.

Gee wiz I'm shocked (sarc). They would have called Yellen a racist if she raised rates ... making the economy dump and showing that our emperor had no clothes.

.... sometimes I get upset at all the shenanigans going on ..... been watching it all my life ...... but you just have to look at it as "late cycle empire" shuffle .....

 

[Meandering]

The Fed can't find inflation,

Yet somehow they miss the $10,000 tube of acne cream that "may work" according to the FDA.


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[Randolph Kinney]

The San Francisco housing bubble – locally called “Housing Crisis” – needs a few things to be sustained forever, and that has been the plan, according to industry soothsayers: an endless influx of money from around the world via the startup boom that recycles that money into the local economy; endless and rapid growth of highly-paid jobs; and an endless influx of people to fill those jobs. That’s how the booms in the past have worked. And the subsequent busts have become legendary.

The current boom has worked that way too. And what a boom it was. Was – past tense because it’s over. And now jobs and the labor force itself are in decline.

The chart shows how the Civilian Labor Force (black line) and Civilian Employment (red line) soared from January 2010. As employment soared faster than the labor force, the gap between them – a measure of unemployment – narrowed sharply. But now both have run out of juice:

http://wolfstreet.com/2016/07/05/san-francisco-jobs-labor-force-decline-crush-housing-bubble/

Don't look now but the bubble has reached its limits.

 

[Michael S]

The San Francisco housing bubble – locally called “Housing Crisis” – needs a few things to be sustained forever, and that has been the plan, according to industry soothsayers: an endless influx of money from around the world via the startup boom that recycles that money into the local economy; endless and rapid growth of highly-paid jobs; and an endless influx of people to fill those jobs. That’s how the booms in the past have worked. And the subsequent busts have become legendary.

The current boom has worked that way too. And what a boom it was. Was – past tense because it’s over. And now jobs and the labor force itself are in decline.

The chart shows how the Civilian Labor Force (black line) and Civilian Employment (red line) soared from January 2010. As employment soared faster than the labor force, the gap between them – a measure of unemployment – narrowed sharply. But now both have run out of juice:

http://wolfstreet.com/2016/07/05/san-francisco-jobs-labor-force-decline-crush-housing-bubble/

Don't look now but the bubble has reached its limits.

I feel bad for one of my best friends. He bought a condo in San Francisco that’s still under construction for about $1,000 per square foot. Construction has been delayed about a year now and I suspect by the time he finally moves in prices will have started to drop. The builder has agreed to pay his closing costs but meanwhile his rent is more than his mortgage payment would have been and he’s running the risk that the developer will go bankrupt and not finish the project. He showed me some nearby units in existing projects going for as much as $1,200 per square foot but they were also superior (top floor with a deck, etc.). He makes very good money as an executive at a technology company but he works in Portland and LA and flies around a lot so it doesn’t make a lot of sense in my mind.

 

[Randolph Kinney]

My neighbors are just now above loan value from the crash. Lots of people in my development sold once that happened. We are at new highs here. I expect the top has been reached, here, and in other California markets. All it takes is for one of these new homeowners to lose their job, and that means they can't make the mortgage payment.

 

[Randolph Kinney]

Dangerous Bubbles In Plain Sight


Relative to disposable income, the value of household financial assets now far exceeds the last two bubble peaks. And that has happened in an economic environment which suggests just the opposite. To wit, valuation multiples and cap rates should be falling owing the fact that the productivity and growth capacity of the US economy has been heading south ever since the turn of the century.

What is even more striking about this chart is what’s hidden behind the denominator. Since the eve of the financial crisis in 2007, a rapidly increasing share of DPI (disposable personal income) has been accounted for by the explosive growth of transfer payments.

Needless to say, transfer payments do not represent newly produced income that can be capitalized into the value of aggregate societal wealth. By definition, transfer payments are extracted via taxation from the incomes of current producers—–or via taxation of future incomes if they are funded with increased government debt.

 

[Randolph Kinney]

For Every Homeowner That Moves To California, More Than 2 Leave

 

[Randolph Kinney]

Some Big U.S. Cities See Apartment Rents Fall for First Time in Years

Declines in San Francisco, New York and San Jose suggest the beginning of a downturn

“San Francisco and New York are leading the way in the downturn,” said Ken Rosen, chairman of the Fisher Center of Real Estate and Urban Economics at the University of California at Berkeley. “People are going to be surprised that this is happening but they shouldn’t be. It’s been too far, too fast.”

Could this be the final warning before the economy collapses into recession?