The Doomsday Scenario for the Stock and Housing Bubbles

Charles Hugh-Smith
Washington's Blog

The Doomsday Scenario for the stock and housing bubbles is simple: the Fed’s magic fails. When dropping interest rates to zero and flooding the financial sector with loose money fail to ignite the economy and reflate the deflating bubbles, punters will realize the Fed’s magic only worked the first three times: three bubbles and the game is over.

So what happens when punters realize there won’t be a fourth bubble? They sell. Bids disappear because who’s dumb enough to bet (with Japan and Europe as lessons) that more liquidity and negative interest rates will magically work when zero interest rates didn’t move the needle?

Who’s foolish enough to catch the falling knife (i.e. buying plummeting assets on the way down) on the unsupported assumption that the next dose of Fed magic will reverse a bidless market?

And should the Fed start buying stocks, mortgages, housing and bonds to prop up those bidless markets, what’s the message it will be sending? Desperation.If the only buyer is the money-printing central bank, that’s pretty good evidence that your economy and markets are in free-fall.

The loss of faith in central bank magic will be gradual at first, as magical thinking dies hard. It’s oh so comforting to believe the central bank will rescue every overleveraged mal-investment and bail out every high-risk speculation, but the funny thing about the Fed’s magic is it only works in liquidity crises–in every other condition, it only makes matters worse.

Does making it cheap to borrow improve the productivity of capital investments? You must be joking. The poster child of Fed magic is corporate buybacks, which 1) create no goods 2) create no services 3) do nothing to improve real wealth creation, i.e. higher productivity and 4) burden the company with higher debt loads, inhibiting future capital investment in actual productive capacity.

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THE SUBPRIME U.S. ECONOMY: Disintegrating Due To Subprime Auto, Housing, Bond & Energy Debt

SRSrocco Report

The U.S. financial system continues to disintegrate even though most Americans hardly notice.  The system is being gutted from the inside out... much the same way a chronic disease weakens a patient even before any symptoms are felt.  However, we are already experiencing painful symptoms as U.S. economic indicators continue to weaken.

Here are just a few of the recent headlines:

Energy Giant Schlumberger Fires Another 8,000 As "Market Conditions Worsen" in Q2

The Financial System Is Breaking Down At An Unimaginable Pace

Potential Crisis Triggers Continue To Pile Up In 2016

Just In Time—–Big Wall Street Housing Investors Cashing-Out On Housing Bubble 2.0

Corporate Bond Defaults Hit Highest Rate Since Financial Crisis

These are just some of the recent headlines pointing to BIG TROUBLE AHEAD.  However, the U.S. financial system is in dire shape due to the SUBPRIMING of the entire economy.  Today, anyone can purchase a car for little or nothing down and finance it for 84 months.  The U.S. housing market is also in the same predicament.

According to the article, Are We Heading for Another Housing Crisis?, published on May 12th this year:

While the economy and home prices have both rebounded, some people have expressed concern we are headed for a repeat housing bubble. As of January 2016, home prices were rising at a rate twice that of inflation, according to the S&P/Case-Shiller U.S. National Home Price Index.

What's more, Fannie Mae and Freddie Mac have unveiled programs to allow first-time homebuyers to make a purchase with only 3 percent down. Plus, some lenders are using alternate credit scores, which may make loans available to those who can't get one under conventional credit scoring methods.

So, here we are heading down the same path as we did prior to the 2008 U.S. Investment Banking and Housing collapse.  However, this time around its both a Subprime Auto & Housing problem.  But, that is just part of the Subprime mess.

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Big Banks Busted Massively Manipulating Foreign Exchange, Precious Metals … And Every Other Market

Washington's Blog

Currency Markets Are RiggedCurrency markets are massively rigged. And see this and this.

Reuters notes today:

Regulators fined six major banks including Citigroup (C.N) and UBS (UBSN.VX) a total of $4.3 billion for failing to stop traders from trying to manipulate the foreign exchange market, following a year-long global investigation.
HSBC (HSBA.L), Royal Bank of Scotland (RBS.L), JP Morgan (JPM.N) and Bank of America (BAC.N) also face penalties resulting from the inquiry that has put the largely unregulated $5 trillion-a-day market on a tighter leash, accelerated the push to automate trading and ensnared the Bank of England.
In the latest scandal to hit the financial services industry, dealers shared confidential information about client orders and coordinated trades to make money from a foreign exchange benchmark used by asset managers and corporate treasurers to value their holdings. Dozens of traders have been fired or suspended.

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Britain’s Financial Conduct Authority (FCA) fined five lenders $1.77 billion, the biggest penalty in the history of the City of London, and the U.S. Commodity Futures Trading Commission (CFTC) ordered them to pay a further $1.48 billion.

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The U.S. Office of the Comptroller of the Currency, which regulates banks, also fined the U.S. lenders $950 million and was the only authority to penalise Bank of America.

 

Gold and Silver Are Manipulated

Today, Switzerland’s financial regulator (FINMA) found “serious misconduct” and a “clear attempt to manipulate precious metals benchmarks” by UBS employees in precious metals trading, particularly with silver.
Reuters reports:

Swiss regulator FINMA said on Wednesday that it found a “clear attempt” to manipulate precious metals benchmarks during its investigation into precious metals and foreign exchange trading at UBS …

Gold and silver prices have been “fixed” in daily conference calls by the powers-that-be.
Bloomberg reported last December:

It is the participating banks themselves that administer the gold and silver benchmarks.

So are prices being manipulated? Let’s take a look at the evidence. In his book “The Gold Cartel,” commodity analyst Dimitri Speck combines minute-by-minute data from most of 1993 through 2012 to show how gold prices move on an average day (see attached charts). He finds that the spot price of gold tends to drop sharply around the Londonevening fixing (10 a.m. New York time). A similar, if less pronounced, drop in price occurs around the London morning fixing. The same daily declines can be seen in silver prices from 1998 through 2012.

For both commodities there were, on average, no comparable price changes at any other time of the day. These patterns are consistent with manipulation in both markets.

 

Derivatives Are Manipulated

Runaway derivatives – especially credit default swaps (CDS) – were one of the main causes of the 2008 financial crisis. Congress never fixed the problem, and actually made it worse.

The big banks have long manipulated derivatives … a $1,200 Trillion Dollar market.
Indeed, many trillions of dollars of derivatives are being manipulated in the exact same same way that interest rates are fixed (see below) … through gamed self-reporting.
Reuters noted in September:

A Manhattan federal judge said on Thursday that investors may pursue a lawsuit accusing 12 major banks of violating antitrust law by fixing prices and restraining competition in the roughly $21 trillion market for credit default swaps.
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“The complaint provides a chronology of behavior that would probably not result from chance, coincidence, independent responses to common stimuli, or mere interdependence,” [Judge] Cote said.
The defendants include Bank of America Corp, Barclays Plc, BNP Paribas SA, Citigroup Inc , Credit Suisse Group AG, Deutsche Bank AG , Goldman Sachs Group Inc, HSBC Holdings Plc , JPMorgan Chase & Co, Morgan Stanley, Royal Bank of Scotland Group Plc and UBS AG.
Other defendants are the International Swaps and Derivatives Association and Markit Ltd, which provides credit derivative pricing services.
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U.S. and European regulators have probed potential anticompetitive activity in CDS. In July 2013, the European Commission accused many of the defendants of colluding to block new CDS exchanges from entering the market.
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“The financial crisis hardly explains the alleged secret meetings and coordinated actions,” the judge wrote. “Nor does it explain why ISDA and Markit simultaneously reversed course.”

In other words, the big banks are continuing to fix prices for CDS in secret meetings … and have torpedoed the more open and transparent CDS exchanges that Congress mandated.

 

Interest Rates Are Manipulated

Bloomberg reported in January:

Royal Bank of Scotland Group Plc was ordered to pay $50 million by a federal judge in Connecticut over claims that it rigged the London interbank offered rate.
RBS Securities Japan Ltd. in April pleaded guilty to wire frauda s part of a settlement of more than $600 million with U.S and U.K. regulators over Libor manipulation, according to court filings. U.S. District Judge Michael P. Shea in New Haventoday sentenced the Tokyo-based unit of RBS, Britain’s biggest publicly owned lender, to pay the agreed-upon fine, according to a Justice Department Justice Department.
Global investigations into banks’ attempts to manipulate the benchmarks for profit have led to fines and settlements for lenders including RBS, Barclays Plc, UBS AG and Rabobank Groep.
RBS was among six companies fined a record 1.7 billion euros ($2.3 billion) by the European Union last month for rigging interest rates linked to Libor. The combined fines for manipulating yen Libor and Euribor, the benchmark money-market rate for the euro, are the largest-ever EU cartel penalties.
Global fines for rate-rigging have reached $6 billion since June 2012 as authorities around the world probe whether traders worked together to fix Libor, meant to reflect the interest rate at which banks lend to each other, to benefit their own trading positions.

To put the Libor interest rate scandal in perspective:

• The big banks have conspired for years to rig interest rates … upon which $800 trillion in assets are pegged

• This was the largest insider trading scandal ever … and the largest financial scam in world history

• Local governments got ripped off bigtime by the Libor manipulation

• Even though RBS and a handful of other banks have been fined for interest rate manipulation, Libor is still being manipulated. No wonder … the fines are pocket change – the cost of doing business – for the big banks

 

Energy Prices Manipulated

The U.S. Federal Energy Regulatory Commission says that JP Morgan has massively manipulated energy markets in California and the Midwest, obtaining tens of millions of dollars in overpayments from grid operators between September 2010 and June 2011.

Pulitzer prize-winning reporter David Cay Johnston noted in May that Wall Street is trying to launch Enron 2.0.

 

Oil Prices Are Manipulated

Oil prices are manipulated as well.

 

Commodities Are Manipulated

The big banks and government agencies have been conspiring to manipulate commodities prices for decades.
The big banks are taking over important aspects of the physical economy, including uranium mining, petroleum products, aluminum, ownership and operation of airports, toll roads, ports, and electricity.
And they are using these physical assets to massively manipulate commodities prices … scalping consumers of many billions of dollars each year. More from Matt Taibbi, FDL and Elizabeth Warren.

 

Everything Can Be Manipulated through High-Frequency Trading

Traders with high-tech computers can manipulate stocks, bonds, options, currencies and commodities. And see this.

 

Manipulating Numerous Markets In Myriad Ways

The big banks and other giants manipulate numerous markets in myriad ways, for example:

• Engaging in mafia-style big-rigging fraud against local governments. See this, this and this

• Shaving money off of virtually every pension transaction they handled over the course of decades, stealing collectively billions of dollars from pensions worldwide. Details here, here, here, here, here,here, here, here, here, here, here and here

• Charging “storage fees” to store gold bullion … without even buying or storing any gold . And raiding allocated gold accounts

• Committing massive and pervasive fraud both when they initiated mortgage loans and when they foreclosed on them (and see this)

• Pledging the same mortgage multiple times to different buyers. See this, this, this, this and this. This would be like selling your car, and collecting money from 10 different buyers for the same car

• Cheating homeowners by gaming laws meant to protect people from unfair foreclosure

• Pushing investments which they knew were terrible, and then betting against the same investments to make money for themselves. See this, this, this, this and this

• Engaging in unlawful “frontrunning” to manipulate markets. See this, this, this, this, this and this

• Engaging in unlawful “Wash Trades” to manipulate asset prices. See this, this and this

• Otherwise manipulating markets. And see this

• Participating in various Ponzi schemes

• Charging veterans unlawful mortgage fees

• Cooking their books (and see this)

• Bribing and bullying ratings agencies to inflate ratings on their risky investments

 

The Big Picture

The experts say that big banks will keep manipulating markets unless and until their executives are thrown in jail for fraud.
Why? Because the system is rigged to allow the big banks to commit continuous and massive fraud, and then to pay small fines as the “cost of doing business”. As Nobel prize winning economist Joseph Stiglitznoted years ago:

“The system is set so that even if you’re caught, the penalty is just a small number relative to what you walk home with.
The fine is just a cost of doing business. It’s like a parking fine. Sometimes you make a decision to park knowing that you might get a fine because going around the corner to the parking lot takes you too much time.”

Indeed, Reuters points out today:

Switzerland’s regulator FINMA ordered UBS, the country’s biggest bank, to pay 134 million francs ($139 million) after it found serious misconduct in both foreign exchange and precious metals trading. It also capped bonuses for dealers in both units at twice their basic salary for two years.

Capping bonuses at twice base salary?  That’s not a punishment … it’s an incentive.
Experts say that we have to prosecute fraud or else the economy won’t ever really stabilize.
But the government is doing the exact opposite. Indeed, the Justice Department has announced it will go easy on big banks, and always settles prosecutions for pennies on the dollar (a form of stealth bailout. It is also arguably one of the main causes of the double dip in housing. And there is no change in the air.)
Indeed, the government doesn’t even force the banks to admit any guilt as part of their settlements.  In fact:

“The banks have been allowed to investigate themselves,” one source familiar with the investigation told Reuters. “The investigated decide what they want to investigate, what they admit to, and how much they will pay.

Wall Street has manipulated virtually every other market as well – both in the financial sector and thereal economy – and broken virtually every law on the books.
And they will keep on doing so until the Department of Justice grows a pair.
The criminality and blatant manipulation will grow and spread and metastasize – taking over and killing off more and more of the economy – until Wall Street executives are finally thrown in jail.

It’s that simple …

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See also:  Cartels R Us: Tab for Rigging Foreign Exchange $3.3 Billion and Rising

The Housing Echo-Bubble Is Popping

Washington's Blog


There is nothing remotely “normal” about the echo-bubble’s rise, and we can anticipate that its deflation will be equally abnormal.

Conventional wisdom on the resurgence of the housing markets takes one of two paths:

1. Housing is not in a bubble, it is merely returning to “normal”
2. Housing is bubbly in some markets, but prices will continue to rise

Here’s an alternative view: housing is in an echo-bubble that’s popping.Courtesy of the excellent Market Daily Briefing, here are some charts that make the case that the housing echo-bubble was just another Federal Reserve-induced speculative asset bubble that’s popping, like every other speculative bubble in recorded history.

First up: home prices, as measured by the Case-Shiller Price Index. Note the near-perfect symmetry of the echo-bubble: it has taken roughly the same time-span to inflate and reach a top as the first housing bubble from January 2004 to its peak 2+ years later.

The echo-bubble has topped out at about 50% of the decline from the primary bubble top to the trough in 2012.

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RBS fined £14.5m over mortgage selling

The Telegraph

Royal Bank of Scotland has been fined £14.5m by the City regulator for failing to ensure that advice given to mortgage customers was suitable.

The Financial Conduct Authority (FCA) said the £14,474,600 fine for RBS and the NatWest reflected "serious failings" in their advised mortgage sales business.

The firms failed to ensure that advice given to customers was suitable, according to the FCA. Two reviews of sales from 2012 found that in over half the cases the suitability of the advice was not clear from the file or call recording.

Customers were not advised properly over the affordability for them of mortgages or the appropriate term of products being offered. Others were given poor advice when looking to consolidate their debts.

Some bank advisers even offered their personal views on the possible future movement of interest rates. "This was highly inappropriate and may have resulted in the borrower being sold the wrong type of mortgage for them", said the FCA. 

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Bank of America agrees to $17bn fine over mortgage fraud - report

RT

America’s second largest lender has reached a $17 billion settlement with US federal authorities over selling bad mortgages, according to sources close to the negotiations.

The bank will pay out $10 billion in cash and $7 billion for consumer relief – such as modified home loans and refinanced mortgages, AP reports, citing officials close to the negotiations. The final verdict is due on Thursday.

The fine will be the largest single compensation settlement, beating out JPMorgan Chase & Co’s $13 billion penalty paid in November 2013. Citigroup, another major US bank, had to pay $7 billion in July.

In March, the bank was ordered to pay $9.5 billion to the Federal Housing Finance Agency to resolve similar associations. Since the financial crisis, the bank has been ordered to pay over $60 billion in fines, claims, and buying out mortgage bonds.

The deal requires the bank to admit it misled investors about the quality of mortgage loan sale prior to the housing crash, when banks lent out too much money to homeowners who eventually could not pay off their loans.

This eventually resulted in the collapse of the housing bubble and the beginning of the recession in late 2007. The banks defrauded investors about the condition of the loans, which led to billions in losses while millions of Americans lost their homes to foreclosure.

Three quarters of the loans in question came from Countrywide Financial, which Bank of America acquired in 2009, along with Merrill Lynch. In total, between 2004 and 2008, the groups sold more than $965 billion in bad loans.

Why Housing Will Crash Again - But For Different Reasons Than Last Time

Zero Hedge 

Institutionalizing the speculative excesses that inflated the previous housing bubble has fed magical thinking and fostered illusions of phantom wealth and security.

The global housing market has been dominated by magical thinking for the past 15 years. The magical thinking can be boiled down to this:

A person who buys a house for $50,000 will be able to sell the same house for $150,000 a few years later without adding any real-world value. The buyer will be able to sell the house for $300,000 a few years later without adding any real-world value. The buyer will be able to sell the house for $600,000 a few years later without adding any real-world value.

And so on, decade after decade and generation after generation: a house should magically accumulate enormous capital (home equity) without the owner having to do anything but pay the mortgage for a few years.

The capital isn't created by magic, of course: it's created by a greater fool paying a fortune for the house on the speculative confidence that an even greater fool will magically appear to pay an even greater fortune for the same house a few years hence.

This is the result of housing transmogrifying from shelter purchased to slowly build equity over a lifetime of labor into a speculative bet that credit bubbles will never pop. This transmogrification is the final stage of the larger dynamic of financialization, which turns every asset into a speculative commodity that can leveraged via debt and derivatives and sold into global markets.

The magic of something for nothing is especially compelling to a populace whose earnings have stagnated for decades. The housing bubble fed the fantasy that a household could set aside next to nothing for retirement and then cash out their "winnings" in the housing casino when they reached retirement age.

What believers in the sustainability of the housing casino conveniently ignore is the enormous risk (and debt) being taken on by the last greater fool: if the buyer pays cash, they are gambling on rents continuing to skyrocket along with home valuations, though these two are not as correlated as many assume.

Younger buyers have less disposable income than their elders due to deteriorating wages, higher student loan debt and higher taxes on earned income. As a result, the risk of their defaulting or being impoverished by the collapse of housing valuations is much higher than the risks faced by the buyers who rode the first bubble up to (ephemeral/phantom) riches.

The only way a young household can buy a $150,000 house for $600,000 is if interest rates are low enough to enable a modest income to leverage a huge mortgage. This is the basis of the Federal Reserve's campaign to buy Treasury bonds and mortgages: by driving interest rates to unprecedented lows, the Fed enables marginal buyers to become the last greater fool.

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IMF sounds global housing alarm

Comment: The IMF warning who exactly? This is a heads up to the 1% and their minions seeking to make a bonanza off the populace as they did in 2008 to start getting ready...However, it might not play out quite as they expect...

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Financial Times

The entire world must act to have the risk of an additional devastating housing crash, the Worldwide Monetary Fund warned on Wednesday, as it published new information exhibiting house rates are well over their historical regular in several nations.

The warning from the IMF shows how an acceleration in world-wide property rates from presently substantial amounts has emerged as one of the key threats to economic security, with nations creating minimal development in keeping them under control.

Min Zhu, the IMF’s deputy managing director, stated the resources for containing housing booms ended up “even now currently being created” but that “this should not be an justification for inaction”.

Property rates “stay well above the historical averages for a vast majority of countries” in relation to incomes and rents, Mr Zhu explained in a speech to the Bundesbank last 7 days, which was only unveiled on Wednesday simply because it clashed with a European Central Financial institution announcement.

“This is true for occasion for Australia, Belgium, Canada, Norway and Sweden,” he mentioned.

In the wake of the global recession central bankers have cut interest rates to file lows, pushing property costs to a level that the IMF regards as a substantial risk to economies as varied as Hong Kong and Israel.

Uk faces housing and productiveness hazards: IMF

In Canada, for case in point, home rates are 33 for each cent earlier mentioned their long-operate typical in relation to incomes and 87 for every cent previously mentioned their long-run average in comparison with rents. The figures for the Uk are 27 per cent relative to incomes and 38 for every cent relative to rents.

The IMF’s new world-wide home price tag index exhibits a new acceleration, with charges up by three.1 for each cent on a year ago. Home rates are rising swiftest in rising marketplaces, with prices up more than ten for every cent on a calendar year ago in the Philippines, nine per cent in China and 7 for each cent in Brazil.

“In some circumstances home prices are recovering from a sharp correction throughout the Wonderful Economic downturn,” Mr Zhu explained. “In other cases, home charges have ongoing an upward march with only a little bit of moderation throughout the Fantastic Economic downturn.”

Go through Far moreLennar CEO: Why housing is nevertheless 30% under regular
Residence prices fell most intensely in peripheral European international locations, down by seven per cent on a yr ago in Greece, six.six for each cent in Italy and 5 for every cent in Spain.

Mr Zhu explained that even however the equipment for controlling residence charges ended up new, nations around the world need to start making use of them right away. He pointed to options such as boundaries on house loan lending relative to house values and incomes larger money demands for banks generating risky loans and stamp duties to moist international desire for investment decision properties.

“We want to go from ‘benign neglect’ to an ‘all of the above’ method when it arrives to plan choices,” said Mr Zhu, including that plan makers could combat the shortcomings of various approaches with “the interlocking use of a number of equipment”.

IMF warns UK government over housing bubble risk

Comment: A bit like the wolf warning the lambs to remember the price of tooth picks...It's going to be a long satisfying lunch all over again. Those hedge funds in place? Let the show begin...

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BBC News

The International Monetary Fund (IMF) has warned the government that accelerating house prices and low productivity pose the greatest threat to the UK's economic recovery.

It said rising property values could leave households more vulnerable to income and interest rate shocks.

It also called on the Bank of England to enact policy measures "early and gradually" to avoid a housing bubble. 

In April, the IMF said the UK economy would grow by 2.9% in 2014. 

The Fund's annual health check of the UK economy found it has "rebounded strongly and growth is becoming more balanced" adding economic growth would "remain strong this year." 

It is a significant turnaround from last year when the IMF's chief economist Oliver Blanchard appeared to have a public falling out with the chancellor after he criticised the government's austerity policies.

This year IMF managing director Christine Lagarde admitted the Fund "got it wrong" in its assessment adding that while the UK's economic recovery began with consumer spending, it was now rebalancing towards an "investment-led recovery". 

The chancellor said the IMF was "right to warn the government that risks still remain" to the UK's economic recovery.

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The Warped, Distorted, Manipulated, Flipped, Housing Market

theburningplatform.com 
via wchildblog

The report from RealtyTrac last week proves beyond the shadow of a doubt the supposed housing market recovery is a complete and utter fraud. The corporate mainstream media did their usual spin job on the report by focusing on the fact foreclosure starts in 2013 were the lowest since 2007. Focusing on this meaningless fact (because the Too Big To Trust Wall Street Criminal Banks have delayed foreclosure starts as part of their conspiracy to keep prices rising) is supposed to convince the willfully ignorant masses the housing market is back to normal. It’s always the best time to buy!!!

The talking heads reading their teleprompter propaganda machines failed to mention that distressed sales (short sales & foreclosure sales) rose to a three year high of 16.2% of all U.S. residential sales, up from 14.5% in 2012. The economy has been supposedly advancing for over four years and sales of distressed homes are at 16.2% and rising. The bubble headed bimbos on CNBC don’t find it worthwhile to mention that prior to 2007 the normal percentage of distressed home sales was less than 3%. Yeah, we’re back to normal alright. We are five years into a supposed economic recovery and distressed home sales account for 1 out of 6 all home sales and is still 500% higher than normal.

The distressed sales aren’t even close to the biggest distortion of this housing market. The RealtyTrac report reveals that all-cash purchases accounted for 42% of all U.S. residential sales in December, up from 38% in November, and up from 18% in December 2012. Does that sound like a trend of normalization? There were five states where all-cash transactions accounted for more than 50% of sales in December – Florida (62.5%), Wisconsin (59.8%), Alabama (55.7%), South Carolina (51.3%), and Georgia (51.3%). In the pre-crisis days before 2008, all-cash sales NEVER accounted for more than 10% of all home sales. NEVER. This is all being driven by hot Wall Street money, aided and abetted by Bernanke, Yellen and the rest of the Fed fiat heroine dealers.
…
Reality will reassert itself in 2014, with lemmings, flippers, and hedgies getting slaughtered as the housing market comes back to earth with a thud. The continued tapering by the Fed will remove the marginal dollars used by Wall Street to fund this housing Ponzi. The Wall Street lemmings all follow the same MBA created financial models. They will all attempt to exit the market simultaneously when their models all say sell. If the economy improves, interest rates will rise and kill the housing market. If the economy tanks, the stock market will plunge, creating fear and killing the housing market. Once it becomes clear that prices have begun to fall, the flippers will panic and start dumping, exacerbating the price declines. This scenario never grows old.

Real household income continues to fall and nearly 25% of all households with a mortgage are still underwater. Young people are saddled with $1 trillion of government peddled student loan debt and will not be buying homes in the foreseeable future. Dodd-Frank rules will result in fewer people qualifying for mortgages. Mortgage insurance is increasing. Obamacare premium increases are sucking the life out of potential middle class home buyers. Retailers have begun firing thousands. The financial class had a good run. They were able to re-inflate the bubble for two years, but the third year won’t be a charm. In a normal housing market 85% of home sales would be between individuals using a mortgage, 10% would be all cash transactions, less than 5% of sales would be distressed, and 40% would be first time buyers. In this warped market only 40% of home sales are between individuals using a mortgage, 42% are all cash transactions, 16% are distressed sales, 5% are flipped, and only 27% are first time buyers. The return to normalcy will be painful for shysters, gamblers, believers, paid off economists, Larry Yun, and CNBC bimbos.

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