joi, 4 decembrie 2014

Mish's Global Economic Trend Analysis

Mish's Global Economic Trend Analysis

Roubini Sees "Mother of All Asset Bubbles", But Claims Bubble Will Not Burst Until 2016

Posted: 04 Dec 2014 01:51 PM PST

How big can the current asset bubble get? Stocks, bonds (especially junk bonds), and equities are all in huge bubbles.

I know full well that calling the end is problematic. Economist Nouriel Roubini thinks he knows.

Roubini says we are in the "mother of all asset bubbles" but it's going to get even bigger, not popping until 2016.



Link if above video does not play: Roubini: We're in an asset bubble and it won't pop until 2016

We're currently in the mid-late stretch of this boom, "so next year we'll see economic growth and easy money. This frothiness that we've seen in financial markets is likely to continue from equities to credit to housing," says Roubini. He predicts an eventual crash, but not for at least a few years.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.

Putin Threatens Currency Speculators; Six Ways to Know a Currency is in Deep Trouble

Posted: 04 Dec 2014 10:51 AM PST

Here's a lesson about various ways to spot a currency that is in deep-deep trouble.

  1. Crackdown on "currency speculators"
  2. Accusations of foreign interference
  3. Measures to stop capital flight
  4. Repatriation amnesty in hopes money will return home
  5. Currency action itself
  6. Currency controls

Ruble Analysis

Let's check those six measures starting with today's report Putin Threatens Crackdown on Currency Speculators.

1. Putin Blames Currency Speculators

Vladimir Putin threatened to crack down on speculators against the rouble as he called on Russia to put its economic house in order to fight what he called an attempt by outside enemies to bring the country to its knees. "We have asked the central bank to take measures to make sure that speculators can no longer take advantage," Russia's president said in a speech on Thursday. "We know who those people are, and we have the means to rein them in. It's time to use these instruments."

2. Putin Blames Foreigners and Plays Hitler Card

"Hitler with his misanthropic ideas tried to destroy Russia and throw us back behind the Urals. Just remember how that ended," Mr Putin said. "If [Russia's annexation of Crimea] had not happened, they would have found another excuse for holding Russia back and Russia down. This has been happening for centuries — every time the west thinks Russia is getting too strong, they use these policies."

3. Measures to Stop Capital Flight

"We need to reverse the history of capital flight from our country, we need to end this era," Mr Putin said.

4. Amnesty for All

Putin promised an amnesty for offshore capital returning home, saying Russians bringing back money from abroad would not have to prove where they got it from.

5. Currency Action



Since July 2008 the Ruble had gone from 24Rub-per-US$ to 54Rub-per-US$. That is a decline of 55.55%. In the last six months alone, the Ruble has gone from 34Rub-per-US$ to 54Rub-per-US$. That is a 6-month decline of 37%.

6. Currency controls

Anton Siluanov, finance minister, reiterated the government's commitment to abstain from currency controls after Mr Putin's speech, but said that the government and the central bank would "co-ordinate" the actions of exporters on the foreign exchange market to reduce their collective influence on the rouble exchange rate.

Does that sound like the start of currency controls to you? It does to me.

If the US and Iran come to agreement ending sanctions on Iran, more Iranian oil will flow on the markets, likely pressuring prices further (assuming all other factors remain the same). A slowing global economy also pressures oil prices.

In turn, falling oil prices pressures the Ruble.

As bad as things look for Russia on the Ruble front, there is potential for things to get much worse.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com 
Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.

4 Million Homeowners Still Underwater, Total Negative Equity $157 Billion

Posted: 03 Dec 2014 11:41 PM PST

In spite of a sustained rally in home prices, the October Black Knight Financial Services Mortgage Monitor shows Four million borrowers currently underwater.

Highlights

  • Black Knight found that even though underwater mortgages are now less than 8% of all mortgages, there are still roughly 4 million borrowers in negative equity positions, who are, on average, $39,000 underwater.
  • Underwater borrowers, representing nearly $800 billion in unpaid balances and $157 billion in negative equity, are 10X more likely to be delinquent than those with positive equity.
  • Underwater borrowers exhibit a 40% delinquency rate, as compared to just 4% for borrowers with equity
  • For those with combined LTVs of 150% or greater, more than 3 out of every four (77%) are delinquent
  • There are approximately 1.3 million underwater GSE-backed mortgages representing an aggregate $39 billion in negative equity; of these, 365K are delinquent
  • Much-discussed principal reductions on delinquent underwater borrowers would require up to $89 billion in write-downs; the GSE share alone would require up to $18 billion
  • Black Knight found some relaxation in credit requirements for refinance originations (though these are still high by historical standards)
  • Weighted average credit scores for GSE refinances have come down to 742 from a high of 766 in late 2011, while credit requirements on GSE purchase mortgages have remained tight since 2009
  • GNMA backed originations have also seen some relaxation in refi credit requirements, with weighted average credit scores down from 727 at the end of 2012 to 701 (which is still significantly higher than 2005's average of 628)
  • Looking at the refi market as a whole, Black Knight found that borrowers with 740+ credit scores make up 55% of 2014 refi market, as compared to just 29% in 2005

Sustained Improvement in Negative Equity




Over the past two and a half years, there has been a sustained and continual improvement in negative equity, from 33.5 percent of borrowers being underwater in January 2012 to less than eight percent today

Only 1.2 percent of active mortgages have current CLTVs of 150 percent or higher, down from 9.5 percent in January of 2012 (the bottom of the market in terms of national home prices).

Delinquencies by Bucket



While the overall share of underwater mortgages continues to decline, delinquency rates are increasing among the remaining negative equity mortgages.

For the severely underwater – 150 percent or higher current CLTVs – over three out of every four borrowers (77 percent) are delinquent.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.
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