Yes, the Fed matters a lot; nobody disagrees with that.

[davelj]

The graph is mis-labeled (always read the fine print). It should read “Debt SERVICE to income” which is, in fact, near record lows. Household Debt-to-GDP is at 80%, which is below the 2008 record of 96% but well above the historical average of ~50%.

Obviously, the reason the HH debt SERVICE ratio is low is because many folks locked into low-rate fixed-rate mortgages. Inflated housing prices aside, that’s a good thing for the borrowers; obviously bad for the lenders. Rates on all of the variable rate debt, however – of which there is a fair amount – are moving up as I type.

There’s over $300 trillion of debt repricing over the next 5 years globally. Absent some miracle, most of the interest rates on that debt will be doubling. These are big numbers.

Just something to think about.

[an]

[quote=deadzone][quote=an][quote=deadzone]We’ll find out soon, as the tide goes out.
All I know is the bubble is popping, and the bubble was ginormous. When bubbles pop, it triggers margin calls, recessions and other cascading effects to the economy and personal finance. We’ve seen this before.[/quote]
How much decline in housing price are we talking about here?[/quote]

At a minimum I expect all Covid appreciation to get wiped out, that is a logical starting point. But beyond that who knows. Depends on what the Fed does. They completely control and manipulate the economy and housing market. They have not even begun to taper their MBS holdings yet and the market is already cratering.

The Fed currently owns 2.7 trillion in MBS, which is somewhere around 30% of the entire market, pretty crazy. Without Fed support there is no telling how low things could go. The entire market has been fake since 2009[/quote]
Cool, so 35-50% off from today. When do you expect the bottom to be?

Also, how long does it take for a market to move from fake to real? If a market has been fake for 13 years, would it need to be fake for another 13 years before we can call it a real market?

[Anonymous]

I don’t know, 3-5 years if the latest housing crash was any indication. This bubble is different though, because inflation is sky high and the Fed already owns 2.7 trillion in MBS. The only reason the housing market turned around in 2009 is because they Fed started QE and began purchasing MBS (with money they just created out of thin air).
Now what tricks does the Fed have up their sleeve? They can’t expand their balance sheet with inflation running over 8%.
So for now they just have to let it crash and burn.

The market will no longer be fake, if and when the Fed gets out of it and there is true price discovery (aka free markets).

[davelj]

[quote=XBoxBoy]

Yes, and while that chart is certainly concerning, I don’t share the belief that that chart proves the fed caused all the inflation we are seeing.

[/quote]

I agree that the Fed has not caused ALL of the inflation we’re seeing. I’m not sure anyone believes that. But it has surely caused a lot and almost certainly most of it. If you look at the expansion of all Central Bank balance sheets since the pandemic began, that expansion (alone!) is roughly 1/3 of global GDP. It doesn’t take an Economics PhD to see how that would cause a fvck-load of inflation. Yes, fiscal policies, Putin’s douchebaggery, etc have all contributed to the inflation we’re seeing, but the Big Source is… the Fed and the other Central Banks. It’s math. (Paul Volcker turns over in his grave.)

[an]

[quote=deadzone]The market will no longer be fake, if and when the Fed gets out of it and there is true price discovery (aka free markets).[/quote]
So, never. If the market is always fake, then wouldn’t that just be the real market?

[Anonymous]

[quote=an][quote=deadzone]The market will no longer be fake, if and when the Fed gets out of it and there is true price discovery (aka free markets).[/quote]
So, never. If the market is always fake, then wouldn’t that just be the real market?[/quote]

What’s your point? The MBS market was not “fake” prior to 2009. So we certainly could return to free market eventually. But obviously our current economy is completely reliant on this Fed money printing/monetary expansion. So if Fed pulls back too quickly, the entire financial system would implode.

[sdrealtor]

Wait the MBS market during the bubble with no regard to underwriting and complete mispricing of risk wasnt fake but the market with underwriting standards was? That could be the dumbest comment yet

[an]

[quote=deadzone][quote=an][quote=deadzone]The market will no longer be fake, if and when the Fed gets out of it and there is true price discovery (aka free markets).[/quote]
So, never. If the market is always fake, then wouldn’t that just be the real market?[/quote]

What’s your point? The MBS market was not “fake” prior to 2009. So we certainly could return to free market eventually. But obviously our current economy is completely reliant on this Fed money printing/monetary expansion. So if Fed pulls back too quickly, the entire financial system would implode.[/quote]
My point is, the Fed has always been in the market of controlling the market. So, by your definition, the market has always been and always will be fake.

Since it always been and always will be fake, there’s probably 0% chance that it will stop being fake.

[Rich Toscano]

[quote=sdrealtor]So says the guy who has never participated in it.

Betting window remains open[/quote]

This is a deadzone-quality reply.

(PS What is the bet exactly?)

[sdrealtor]

[quote=Rich Toscano][quote=sdrealtor]So says the guy who has never participated in it.

Betting window remains open[/quote]

This is a deadzone-quality reply.

(PS What is the bet exactly?)[/quote]

lol he speaks constantly of that which he knows nothing

The bet would require all SD real estate to return to pre pandemic pricing. That would require my house to drop 48% from its current valuation. I’ll take that bet every day

[Anonymous]

[quote=Rich Toscano][quote=sdrealtor]So says the guy who has never participated in it.

Betting window remains open[/quote]

This is a deadzone-quality reply.

(PS What is the bet exactly?)[/quote]

No actually it is an SDR quality of reply. You obviously don’t notice how common this is since he posts like a hundred times a week, you probably are used to filtering them out.

[Anonymous]

[quote=sdrealtor][quote=Rich Toscano][quote=sdrealtor]So says the guy who has never participated in it.

Betting window remains open[/quote]

This is a deadzone-quality reply.

(PS What is the bet exactly?)[/quote]

lol he speaks constantly of that which he knows nothing

The bet would require all SD real estate to return to pre pandemic pricing. That would require my house to drop 48% from its current valuation. I’ll take that bet every day[/quote]

How is your NAIL doing by the way, talk about he who knows nothing.

[Anonymous]

[quote=an]
My point is, the Fed has always been in the market of controlling the market. So, by your definition, the market has always been and always will be fake.

Since it always been and always will be fake, there’s probably 0% chance that it will stop being fake.[/quote]

Okay fair point, as long as the Fed has existed, markets haven’t been “free” and they have caused bubbles even before the advent of QE through their manipulation of fed funds rate.

But starting in 2009 the Fed started QE which is a whole nother level of market manipulation. And the direct result is the mother of all bubbles.

[an]

[quote=deadzone][quote=an]
My point is, the Fed has always been in the market of controlling the market. So, by your definition, the market has always been and always will be fake.

Since it always been and always will be fake, there’s probably 0% chance that it will stop being fake.[/quote]

Okay fair point, as long as the Fed has existed, markets haven’t been “free” and they have caused bubbles even before the advent of QE through their manipulation of fed funds rate.

But starting in 2009 the Fed started QE which is a whole nother level of market manipulation. And the direct result is the mother of all bubbles.[/quote]
So, what’s your point exactly? Will the fed disappear soon?

[sdrealtor]

[quote=deadzone][quote=sdrealtor][quote=Rich Toscano][quote=sdrealtor]So says the guy who has never participated in it.

Betting window remains open[/quote]

This is a deadzone-quality reply.

(PS What is the bet exactly?)[/quote]

lol he speaks constantly of that which he knows nothing

The bet would require all SD real estate to return to pre pandemic pricing. That would require my house to drop 48% from its current valuation. I’ll take that bet every day[/quote]

How is your NAIL doing by the way, talk about he who knows nothing.[/quote]

Sold long ago for a nice profit as i reported here a while ago. Still more stupidity. Is there no bounds?

Betting window still open

[Author]

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