House Price Boom Continues

Just out:

NEW YORK, APRIL 25, 2017 – S&P Dow Jones Indices today released the latest results for the S&P CoreLogic Case-Shiller Indices, the leading measure of U.S. home prices. Data released today for February 2017 shows that home prices continued their rise across the country over the last 12 months. More than 27 years of history for these data series is available, and can be accessed in full by going to www.homeprice.spdji.com. Additional content on the housing market can also be found on S&P Dow Jones Indices’ housing blog: www.housingviews.com.

YEAR-OVER-YEAR 
The S&P CoreLogic Case-Shiller U.S. National Home Price NSA Index, covering all nine U.S. census divisions, reported a 5.8% annual gain in February, up from 5.6% last month and setting a 32-month high. The 10-City Composite posted a 5.2% annual increase, up from 5.0% the previous month. The 20-City Composite reported a year-over-year gain of 5.9%, up from 5.7% in January.
Seattle, Portland, and Dallas reported the highest year-over-year gains among the 20 cities. In February, Seattle led the way with a 12.2% year-over-year price increase, followed by Portland with 9.7%. Dallas replaced Denver in the top three with an 8.8% increase. Fifteen cities reported greater price increases in the year ending February 2017 versus the year ending January 2017…

(more after this)

Continuing…

The following chart shows the index levels for the U.S. National, 10-City and 20-City Composite Indices. As of February 2017, average home prices for the MSAs within the 10-City and 20-City Composites are back to their winter 2007 levels.

Spendy, huh?  But prices are not yet back to their 2007-2008 highs in some markets…

Let the Blow-Off Begin!!! (?)

We had a pretty good day in the market yesterday, what with net asset value up over 3%, I’m no fool and I sensed it was time to leave the party.  Market futures have continued up this morning, so we will see.  Cowardice sometimes pays better than bravery while actively trading.

In terms of where we are (very short term), I think it is possible that we are starting a wave V up, we had a little 1 up (we made some dough there), then a 2 down (where we re-entered), then we sold near yesterday’s high, and if we get a pullback later this week, we may re-enter long again.

Our usual way to play such events is a longer-term buy and hold approach, but I’ve been brushing up on my poker skills (*on the Kindle – where there are lots and lots of gambling apps) so it’s as much learning about money management as chance.  But wait until you see how closely we are replaying the early blow-off part of the 1929 period…

(after the ad, of course)

An explanatory note before I put this chart up:  I evolved (over the years) a unique way of looking at the markets as two large, loosely-linked financial “bubble-spheres.”

There is a Global Aggregate we track along with a U.S. Aggregate because the breadth of economic activity in America is hugely different today than it was in the 1920s (Roaring Twenties).

Back then, it was still a world of singular dominant industrialists like Rockefeller, the Steel Barons, the Rail Tycoons, and such.  30 Stocks mattered greatly.  Today?  Not so much.

The data (which we track on a daily basis) still useful from an analytical perspective, but the “slope of the curve” of this blow-off is evolving differently.

I won’t to into too much detail (we save that for the paying customers on the www.Peoplenomics.com side of the house), but this should give you an idea of how things are trending upward:

Where a large portion of judgment needs to be applied is intuiting the reason for the differences here recently in slope of the curve.  If you are into being a quant, you can see the divergences when you do slope-fitting.  If not (like you’re a normal person, right?) you can visually note that the read line (present day) is going up less steeply than it did in 1928-1929.

I have half a dozen leading contenders for this recent variance, although we are still going up and if yesterday is any indication, mania is lurking just behind the eyeballs of “investors” as they come out and reveal themselves as money-grubbing greedsters, which we make no apologies for.

  1. It is possible that the lack of a tax break has kept the blow-off from gathering steam.  Recall the Revenue Act of 1929 included a tax break and that may have contributed to the previous blow-off. Not that the Developer-in-Chief wasn’t pushing for it.  It’s that Congress has become (even more) adept at stewing, not doing.
  2. Second factor is real disposable Income.  As The Tax Foundation noted on Tax Freedom Day (April 23) the American public will pay $5.1- billion in federal, state, and local taxes this year.  In 1929 the bottom rate was 0.38% while the top rate was 24%.   This compares with 2016 bottom rates of 10% and top rates of 39.6% per The Tax Foundation. Notice how corporates can pay at a lower rate than humans and they can write-off the cost of (effectively) buying Congress?
  3. While I have to call to find out, despite Chief Justice Roberts hinting that Obamacare is a tax, whether it was included.  I doubt it, but it ain’t optional and penalties applied.  So seems like a tax to me.
  4. Another massive change that would reduce the slope of the curve is speed of communications.  When I am actively trading (guilty!) I am looking at a trading platform where the data comes in faster than I can cogently think it through.  My Monday sell order placed: 04/24/17 10:46:49 AM EDT was executed 04/24/17 10:46:50 AM EDT.  Compare this with trading in the Roaring Twenties when out in the American hinterlands, there was one quote per day and you had to wait for the evening or next morning paper to get the quote.  Then the quote went through a local broker and were consolidated and sent to the floor traders.  The speed of information is an interesting study:  Slower speeds can result in higher levels of information asymmetry and this causes extensions and exaggerations of (choir, please!) Bubbles!!!
  5. Because of growing volume, the exchange (NYSE) began opening Saturdays (I THINK it was 1928, but I’m too lazy to check the data files).  So this, too, would artificially increase the slope of the curve because there was 20% more trading time per week…so the modern analog would be (pencil?) 16.6% less steep on that (semi-irregular) calendar adjustment alone.

So that’s where we are this morning.  We have gotten past the recent “congestion” of the wave IV and now into a V to finish and then we can worry.

Herbert Hoover took office March 4, 1929 and the blow-off top was 183 calendar days later.  (Crap, I have to look at the data now…) 148 trading days from the Oath to Peak.  Since Trump was sworn on January 20th, you can work it all out.  By the way, Charles Curtis, a republican from Kansas wave Hoover VP – and the first Native American Vice President.  (Cut us in for a slice of your trivia wins.

Will the FedGov Close Friday?

Not entirely moot as the “White House budget chief floats trade on ObamaCare, border wall funding.”

Meantime, look for lumber prices to move up.  This as the NY Times reports “In New Trade Front, Trump Slaps Tariff on Canadian Lumber

Like They Just Showed Up?

Who’s kidding who?  From the Washington Post today: ‘In Chicago, Obama tells young leaders that ‘special interests dominate the debates in Washington.’

Fresh from David Geffen’s super yacht….ahem….  Like the special interests haven’t always been there even during….oh don’t get me started.

The Case for Internet Use Licensing

I have been repeating over and overs that too much communications can be worse than too little.  Here’s my latest proof:

40-60 hooligans swarmed a BART train in East Oakland this week.  Help people up, robbed and beat them and we gone by the time cops arrived in 5-minutes.

Read my lips:  Social (and other internet content) will have to be subjected to licensure or any old flash mob organizer in the world can come along, radicalize and rubberize not to mention victimize the innocent peeps.

Thing about the Communications Act of 1934.  When D2 sets in (there’s still some time to go) we can rest assured the “wild west” days of social will have the clamp put on…along with “unlicensed” mob-organizing messaging s/w.

You just have to see things from the Big Picture perspective.  No, anarchists and disrupters won’t be around for too many more years.  Toss in predictive web behaviors and….

(Advances in video are the focus in Peoplenomics tomorrow, BTW – neat new tech is in view…)

Comments

House Price Boom Continues — 20 Comments

  1. Yet another Trump reversal will hit record status today. On the campaign trail, Trump said many times.
    “The country wasn’t based on executive orders,” said Trump at a town hall in South Carolina in February 2016. “Right now, Obama goes around signing executive orders. He can’t even get along with the Democrats, and he goes around signing all these executive orders. It’s a basic disaster. You can’t do it.”

    Today he will sign his 32nd executive order. The most by any President ever in the first 100 days. Folks, the man lied just to be where he is today. He hasn’t, Nor does he have any intention to fulfill any of his campaign promises. Worlds dumbest man and worlds greatest liar. Dangerous combination. Who is worse? Kim Jung Un or Trump?

  2. Isn’t this nice.. they do this all the time exempt themselves.. funny thing is the fix is simple.. no price gouging no discrimination and everyone is able to buy the same product at the same price.. if it means it goes up.. so be it.. Oh open the borders.. let companies from outside the usa have an option to compete with usa companies.. same things with pharmaceuticals..

    http://www.msn.com/en-us/news/politics/republicans-exempt-their-own-insurance-from-their-latest-health-care-proposal/ar-BBAnqI1?li=BBnb7Kz&ocid=iehp

    • http://www.cc.com/video-clips/cbbn22/the-daily-show-with-jon-stewart-third-world-health-care—knoxville–tennessee-edition

      this pretty much says it all.. having seen this stuff first hand.. what gets me is people don’t grasp it.. if a clinic refuses to see a third of the patients because they don’t have insurance forcing them to seek the care they need at the Emergency room.. and are not able to pay for the services.. those costs are passed on down to those with the funds and insurances..
      the doctors that rent office space costs have to go up accordingly etc.

      • Single payer universal coverage. Increase FICA to pay for it. Get it off of the shoulders of American businesses. Cut out the multiple layer of insurance gate keeping, denial, executive and stockholder compensation.

        It’s impossible to quantify the benefits that would come about when folks no longer have to worry about getting insurance coverage. All those people working for benefits not having to do that any longer?? Wow!

  3. George, I talked to my daughter in Spokane tonight. She’s been looking for a house for a while now. She said suddenly the market is so hot that houses are selling within 3 days for 20-30K over asking price. She’s now waiting for the crash. We were in the Seattle area in 2008, she remembers.

  4. George, not get why you are so down on Obama. Daily attacking the man (this day, where/how he vacations). Instead of addressing his ideas or accomplishments, such as tripling the stock market and bringing US tax revenues back up to pre-crash levels. Ad hominem attacks. Surprising for (generally) such a data driven person as you. Mike

    • He killed Bin Laden and took us from the great recession to stock market record levels. He started the debate on healthcare and actually got something passed. And while far, far from perfect, this current Trump administration would not be talking about any type of healthcare at all, if it wasn’t for it already being in place courtesy of Obama. That is why repeal and replace is such horse$%#. Just fix it and make it better.

      He started the conversation on Wall Street reform as well. It’s not perfect, but even the GOP is satisfied with most of Dodd-Frank. It’s time to peel back the layers now that the junk has been swept away, and again thanks to Obama, fixing Dodd-Frank will be an easy and across the aisle project.

      The $62 billion he gave to the auto industry saved Detroit and made them solvent again. Now, with the help from Silicon Valley, the auto industry is stepping up to the plate to become the future car for todays millennials.

      He established rules to limit carbon emissions. And for those who don’t think this is a huge, huge success, go to a time machine, dial it back a billion years and walk with the dinosaurs where you belong. It’s about breathing right more than it is climate change.

      Normalized relations with a gold mine of a country in Cuba. For those that don’t think this gorgeous country is not a financial gold mine for investors, find a time machine, dial it back a billion years and go walk with the dinosaurs where you belong.

      Established Net Neutrality. Even George can agree with this one.

      Kicked banks out of the student Federal loan program. Saved $36 billion and increased Pell Grant funding.

      Kickstarted Clean Energy Investment program. Huge, Huge Huge successes. The most valuable car company in America owes it’s success to this program. Tesla is one of dozens of successes from this program. And dozens more have emerged because of the success of Tesla. But Ford, GM, Archer Daniels Midland and others also benefitted. Of course the GOP only wants to talk about Solyndra. Short sighted and just plain wrong.

      He passed credit card reforms, expanded overtime pay, improved school nutrition, improved women right to fair pay, protected LBGT rights from employment discrimination, and on and on. And, he did it without any bloviation, media bashing or scandal.

      Obama was not perfect. No Presidents ever have been. But to be down on a man that in retrospect, accomplished a hell of a lot, is just plain ignorance.

    • Tripling the stock market? Do you mean inflation? Great accomplishment. US revenues are at record levels, but nothing, nothing compared to the amount of debt he allowed under his administration. Healthcare? I have friends who can’t afford to go to the doctor because their insurance is so damned expensive. His limits on carbon emissions have shut down half the electrical generating power in Michigan. We are going to become like Great Britain where the elderly die of hypothermia in their own homes because they can’t afford to turn on the heat! You should research the results of those clean energy investments. Millions of dollars of solar and wind investments paid into companies with no returns, idle factories, people paid to sit and do nothing for days on end. IMHO Obama has no good ideas or accomplishments.

      • Healthcare…did they have it before?
        Shutting down electrical generating plants? Dumbest comment of the year. They aren’t shutting down electrical generation, they are changing the source of the generation, which, by the way is awesome and a step in the right direction. That means alternative efforts are replacing them.
        You re about a million times wrong on the clean energy investments. Many states now, especially in the west have over 50% of their power generated from clean energy and the companies generating them are extremely profitable.
        I have a suggestion. Find a time machine, dial it back a billion years and go walk with the dinosaurs where you belong.

  5. When this top blows off, the markets will never return in our lifetime. JSMineset.com just posted an explanation of why the so called markets are staying up. Central banks around the world have increased their asset holdings by $1.2 trilllion so far this year, they have been buying stocks and bonds, including a lot of junk. Central bank reserves of this crap are now over $14 trillion, over $4 trillion of that is the Federal Reserve Holding USA treasuries which should be rated as junk. The problem comes when they are forced to sell these reserves. There is no entity large enough to absorb this in the entire world. Central banks are the largest entities. They have printed so much money they are running out of things to buy with it. It’s like being required to spend $100k at Walmart to keep Walmart from going out of business. You would end up with a lot of crap. And that’s exactly what these central banks have on their balance sheets. They are buying the stocks and bonds that no sane person would want to keep the markets up in am attempt to start that rush for the door.

    When the top does blow off, the big boys will already be short. For others attempting to go short, they will simply have no one to take the other side of that short.

    Remember, this growth that we are seeing out there is merely creative bookkeeping to label inflation as growth. Raising prices or reducing package size can make profits go up with the sale of fewer units of product. And stock prices go up when companies borrow money to buy back their own stock. It’s not exceptionally difficult to have a profitable company when the cost of funds is near zero or even negative.

    There is nothing real out there in the financial world. Fundamentals mean nothing. There is no longer any sound money in the world except for metal, and you have to go a long way down the financial food chain to find a business doing honest accounting according to the FASB rules of 30 years ago. And that includes governments.

    Check the Chapwood index to verify this. Inflation for real consumer goods is 8-11% depending on location. Population grows by 3% per year. Any of you out there buying 8% more stuff than you did the year before? Looking at real wages, I would guess most of you are buying less than you did last year.

    • Great insight! “There is no longer any sound money in the world” (except for the metal in citizen’s bullets). The central banks are criminal enterprises run by??? People getting distracted by all sorts of minor issues while being deceived by statistics (even on this site ;) that have lost their meaning.

  6. I am still dumbfounded at the people who read and write this newsletter that think Trumps interview with the Associated Press had even a sliver of coherence to it. Just Wow. It really has me worried.

    Let’s break it down folks. There are about a dozen major news outlets that think Trump is possibly the dumbest person on planet Earth. Throw in every comedian on the planet, about 3 dozen countries and their media outlets and hundreds of millions of everyday people like me. We were joking that our company should add a question in our interview process that asks if they support Trump. Because if they do, they are indeed not smart enough to work for us. Of course, that was just us joking around, but in reality, we do question the real world cognitive awareness of Trump supporters.

    It is getting to the point where I feel really sorry for anyone who supports Trump in any fashion. It’s as if a virus has penetrated their brains to block out the insane things he says. Take George and Coastal Fog. They think the Drabble in the AP transcript make sense. Maybe an alternative universe is at play here. We all see the voice and speech patterns of two year old. A con man with a dearth of any sensible skills.

    Trump supporters see a sensical transcript, a viable businessman. What else could it be than a warp in the fabric of humanity? The universe has divided us and has changed words to reveal the differences in the intelligence of our species. It reminds me of the TV show Fringe. Which universe will win out?

    • I want to add a real life case study to my hiring comment. We almost lost a major account last week due to one of our salesmen saying the innocuous statement, “Let’s give Trump a chance”. That statement is not an endorsement of Trump, but rather an endorsement of our electoral system. Trump did win.

      The client did not see not see it that way. He questioned our priorities, our ability to think critically and our common sense. We had to bring in the big guns to save the day and the salesman had to be taken off the account. This is the division and hatred Trump has caused in business.

      Now, in the end, our client was off base and I am pretty sure that somewhere in this process this is lawsuit material. We compensated our the salesman who was the victim of our clients tirade with a similarly productive client to stave off any retaliatory action.

      Our company this week, sent a broadcast email to everyone urging all of us to refrain from any and all political commentary with clients, suppliers and such. A good move in any situation, but in a sense, also a violation of our free speech rights. These are crazy times, but I still can’t fathom why people can’t see the writing. Dozens of media outlets see through the ignorance of Trump. Yet, Only one Network supports him. See the pattern? Who is the real fake news?

      • I do understand why millions don’t like Trump, I also understand why millions of people didn’t like O. What puzzles me is why most of the very liberal press constantly makes direct attacks on Donald’s intelligence. He’s made billons, graduated from Wharton and is the President of the United States. I see a pattern with him but unintelligent is not the first thing that comes to mind.

      • This is great. The customer was obviously in the wrong, and the salesman didn’t do anything improper, but who can blame the customer? Trump supporters are all so dumb, the salesman obviously had it coming, right? I mean, maybe the customer should’ve roughed him up a little for not agreeing with him.
        That’s not victim shaming or anything, cause it’s a liberal doing it. Behold, the tolerant left.

    • … and the alternative would be different? How? please tell us, pleeeease!

      P.s. I think you’re smart, but you’re killing you own rant by your emphasis.

  7. Just a thought I’ve been batting around in my mind about historical comparisons.

    1920-1921 = 2000-2003
    1929-1932 = 2008-2009
    1937 = now or next year.

    Post 2009, real unemployment was 16-18% early on (per shadow stats), lots of retailers tanked and that trend continues, many small banks went away, tent cities, folks living out of vehicles, everything the great depression had. The reason we don’t see it as obviously as they did in the 1930s is entitlements and cheap basic goods from overseas. That’s kept the lid on. And electronic distractions….perhaps there’s a reason “the stars” are getting more outré in their behavior?

    But 1929 or 1937…..times about up.

    • Interesting thought ~ but I doubt we’re heading for WW-3, because the potential destructive energy is too big to make it profitable. We maybe heading into civil war (like Syria) as soon as a depression will rear its ugly head. As for now, the masses (and I mean masses) are too engrossed with their cell phone apps.