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The European Neutron Bomb Has Dropped

Central banks have gone insane!
Thursday, June 5, 2014, 11:25 AM

For anybody drinking the economic recovery Kool-Aid, today's historically unprecedented experiment by the European Central Bank (ECB) to impose negative bank interest rates should be like a bitter squeeze of fresh lemon on the tongue.

If things are so rosy then why exactly are such desperate measures necessary? » Read more

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Get Ready For Falling Home Prices

Don't be as vulnerable as you were in 2008
Tuesday, June 3, 2014, 1:15 AM

Executive Summary

  • The new drivers of the current housing price cycle
  • Why investment capital, not normal household formation, has become primary for pricing
  • What the implications of an investment-driven housing market are
  • Why prices will fall & what homeowners (residents & investors) can do now

If you have not yet read The US Housing Market's Darkening Data, available free to all readers, please click here to read it first.

The The New Drivers of The Current Housing Cycle

1. Cash

First, we are currently seeing something in residential real estate markets that has not occurred in our lifetimes – the magnitude of all-cash offers. 40-50% of residential real estate purchases have been for cash in recent years. This phenomenon has no precedent in recent economic history. Why is this happening?  We need to remember that a primary goal of the Federal Reserve in setting short term interest rates near 0% was to induce investors to buy “risk assets” – think real estate and common stocks.  By eliminating rate of return in safe securities such as Treasury bonds, CD’s, etc., the Fed essentially forced formerly conservative investors to purchase higher risk assets in order to get any acceptable rate of return.

In good part, the all-cash offers are coming from investor’s intent on buying to rent. Intent on obtaining an acceptable cash on cash rate of return as yield can no longer be found in safer investments. This crosses the boundaries between investors in the asset accumulation phase of life and retirees starved for yield, draining formerly CD-centric bank accounts in order to purchase income-producing rental properties... » Read more

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Off the Cuff: The Biggest Bubble

a.k.a.: Life as we now know it
Thursday, May 29, 2014, 11:31 PM

In this week's Off the Cuff podcast, Chris and Mish discuss:

  • The Beginning of the End of the Eurozone?
    • The disgruntled citizenry is voting its mind
  • Mal-investment Everywhere
    • But the bond market is likely to crack first
  • No Exit
    • After 5+ years, the Fed is as stuck as ever
  • The Biggest Bubble
    • A.k.a: Life as we know it
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Farther and Farther We Go

We've been down this sort of rabbit hole before
Tuesday, May 27, 2014, 7:20 PM

Anything and everything necessary to preserve the illusion that such a system is equitable and sustainable (when it is very much neither) is being and will be tried. Anything to continue to growth for as long as possible.

But obviously, we cannot continue to exponentially grow our claims on a finite planet without things breaking down somewhere along the line. I submit to you that, indeed,  they are breaking down today. » Read more

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Off the Cuff: Europe Is A "Train Crash In The Making"

The risks have only grown much worse since 2008
Friday, May 23, 2014, 12:57 PM

In this week's Off the Cuff podcast, Chris and Alasdair discuss:

  • The Insane UK Housing Bubble
    • Courtesy of central bank-driven low rates & hot money
  • EU Banks Are As Vulnerable As Ever
    • None of the issues from 2008 have been resolved
  • The Coming EU Energy Drought
    • Worsened by Russia's new gas deal with China
  • The Lack of Churchills
    • Strong leaders are needed, but nowhere in sight
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Central Bankers Acting Badly

Blowing bubbles blindly
Monday, May 19, 2014, 5:42 PM

One of the enduring mysteries about humans is their often startling ability to fail to learn from experience.

This is especially obvious when people are operating in groups; and never more certain than when we are talking about a bureaucratic, sclerotic institution. » Read more

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Off the Cuff: Treasurys On The Rise

Global capital is beginning to seek safe harbor
Thursday, May 15, 2014, 1:34 PM

In this week's Off the Cuff podcast, Chris and Brian discuss:

  • Treasurys On The Rise
    • Global capital is beginning to seek safe harbor
  • Mispricing Risk
    • The biggest failing of today's markets
  • The Ticking Sovereign Debt Timebomb
    • It's a questions of "when" not "if"
  • The Supremacy of Risk Management
    • Should be the #1 focus of the prudent investor
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What To Avoid When Relocating

Whether in or outside of your home country
Tuesday, May 13, 2014, 10:34 PM

Executive Summary

  • The math explaining why Ukraine was a predictable flashpoint
  • Why the IMF's "help" is about to make the Ukranian situation a lot worse
  • Implications for those considering relocating inside or outside of the US
  • Chris' "must have" ingredients that make a potential relocation destination worth considering

If you have not yet read Rising Resource Costs Escalate Odds of Global Unrest, available free to all readers, please click here to read it first.

Ukraine

Now back to Dave’s original series of questions. I think that Ukraine was primed and ready for a shove into instability.

There’s a well known psychology experiment where two male rats can be placed in a cage where they will live somewhat happily as long as they have sufficient food. However, if painful electric shocks are applied to the floor of the cage in such a way that the rats cannot escape, the two males will begin fighting.

Keep up the shocks long enough and the fighting will be severe, even to the death.

What’s happening? The rats lack the context to know that the shocks are coming from outside somewhere. The only thing they can project their discomfort onto is the only other living thing in their sight – the other rat.

So they fight.

Similarly, the people of Ukraine lack the context to know just who is to blame for the unpleasant conditions in which they live and seemingly cannot escape. So they blame each other and fight each other. They blame the President and so he’s gone. But the next one, and the ones following, will be just as bad; and eventually they will each be in turn ousted, too.

The problem is the shocks are not being caused by players they can see and blame. We’ll get to more on that in a minute.

By the numbers, the ...: » Read more

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Off the Cuff: Being Bullish Now Means Ignoring History

At least, if data matter anymore
Thursday, May 8, 2014, 12:00 PM

In this week's Off the Cuff podcast, Chris and Charles discuss:

  • Being Bullish Now Means Ignoring Market History
    • Learnings from the Wine Country Conference
  • Mainstream Media Blackout
    • Real news is hard to come by these days
  • Explaining Ukraine
    • Lots of smoke & shades of grey
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Promising Emerging Community Models

Real-world examples of success
Wednesday, May 7, 2014, 12:13 PM

Executive Summary

  • The "half farmer, half X" model
  • The "no middleman" model
  • The "15% commission" model
  • The key features of successful new community models

If you have not yet read The Rise of New Models of Community, available free to all readers, please click here to read it first.

In Part 1, we discussed the potential for new models of collaboration and community enabled by the Web and social media. I proposed a simple metric for differentiating between simulacrum community and the real deal: a community is only a “real community” if the collective actions of its members push the envelope of the material world.

In Part 2, we’ll examine some models that have arisen as people either abandon or are cut out of the Central State/Corporate Consumerism Status Quo and must create new social and economic arrangements to earn a livelihood.  This requires structures that enable self-organizing, voluntary communities to endure and grow.

As Zeus noted in Part 1, The new price of entry is production, meaning that parasitic layers of middlemen have no role in these new arrangements. To participate, one must be productive. i.e. create or add value.

As I mentioned earlier, social media doesn’t change a system’s incentives/benefits and costs/disincentives; the Web is a powerful tool for community building, once the incentives for participating far outweigh the costs.

Let’s start our survey with an example from... » Read more