Monday, September 01, 2014

The Underbelly of Corporate America: Insider Selling, Stock Buy-Backs, Dodgy Profits

The hollowing out of corporate strengths to enable short-term profiteering by the handful at the top leads to systemic fragility.


Anonymous comments on message boards must be taken with a grain of salt, but this comment succinctly captures the underbelly of Corporate America: massive insider selling, borrowing billions to buy back their own stocks to push valuations to the moon so shares granted as compensation can be sold for a fortune, and dodgy accounting strategies that boost headline profits and hide the gutting of investments in long-term growth.

Here's the comment:

"I’m occupying a vantage point that allows me to see what is going on inside the top Fortune 50 companies. I have never seen such rot before. Of the 50, at least 30 have debt at 120% of cash. Most have cut capex, R&D and maintenance by 80%. Most have been borrowing money to do stock buy-backs, while simultaneously selling off business units and doing layoffs.

Of the 50, at least 20 have 100% insider selling. For some, you would have to go back decades to find a point where all of the acting board of directors are selling. In essence, they are paying the mortgage with their credit cards. Without bookkeeping games, there are no solid earnings. There will be no earnings growth.

“Executive compensation based on stock performance” is killing corporate America.

A black swan is not needed to make it fall, a gentle breeze will do just fine."
(source message thread)

So let's try contesting these points.

Where is the data showing insiders buying hand over fist at these valuations?

Insider selling has been raising red flags since March 2014: In-the-know insiders are dumping stocks

Where is the data proving Corporate America isn't borrowing billions of dollars and using the nearly-free money to buy back shares? Buying back shares reduces the float (stocks available for purchase by the public), reducing supply and creating demand which pushes prices higher.

Stocks’ Biggest Gains Are an Inside JobCompanies spent $598.1 billion on stock buybacks last year, according to Birinyi Associates in Westport, Conn. That was the second highest annual total in history, behind only 2007, Birinyi calculated. The pace picked up in the first quarter of 2014, when companies spent $188 billion, the highest quarterly amount since 2007.

Where is the data showing Corporate America has added jobs?

Who actually creates jobs: Start-ups, small businesses or big corporations? During the 1990s, American multinational companies added 2.7 million jobs in foreign countries and 4.4 million in the United States. But over the following decade, those firms continued adding positions overseas (another 2.4 million) while cutting 2.9 million jobs in the United States.

As for dodgy accounting: when the dodgy accounting has been institutionalized, it's no longer viewed as dodgy. Which brings us to the money shot of the comment: “Executive compensation based on stock performance” is killing corporate America.

When executives and others at the top of the corporate pyramid have such an enormous incentive (stock options worth tens of millions of dollars) if they can push the stock price higher with buy-backs paid with borrowed money and accounting gimmicks that inflate headline earnings, then why wouldn't they do precisely that?

The profits are as bogus as the stock prices: both are relentlessly gamed to make sure fortunes can be reaped in a few years by those at the top.

As the comment noted, this hollowing out of corporate strengths to enable short-term profiteering by the handful at the top leads to systemic fragility. No shock is needed to bring down these fragile corporate structures: existing debt and the slightest tremor of global recession will be enough to topple the rickety facade.



Get a Job, Build a Real Career and Defy a Bewildering Economy(Kindle, $9.95)(print, $20)
go to Kindle editionAre you like me? Ever since my first summer job decades ago, I've been chasing financial security. Not win-the-lottery, Bill Gates riches (although it would be nice!), but simply a feeling of financial control. I want my financial worries to if not disappear at least be manageable and comprehensible.


And like most of you, the way I've moved toward my goal has always hinged not just on having a job but a career.
You don't have to be a financial blogger to know that "having a job" and "having a career" do not mean the same thing today as they did when I first started swinging a hammer for a paycheck.

Even the basic concept "getting a job" has changed so radically that jobs--getting and keeping them, and the perceived lack of them--is the number one financial topic among friends, family and for that matter, complete strangers.

So I sat down and wrote this book: Get a Job, Build a Real Career and Defy a Bewildering Economy.

It details everything I've verified about employment and the economy, and lays out an action plan to get you employed.

I am proud of this book. It is the culmination of both my practical work experiences and my financial analysis, and it is a useful, practical, and clarifying read.

Test drive the first section and see for yourself.     Kindle, $9.95     print, $20

"I want to thank you for creating your book Get a Job, Build a Real Career and Defy a Bewildering Economy. It is rare to find a person with a mind like yours, who can take a holistic systems view of things without being captured by specific perspectives or agendas. Your contribution to humanity is much appreciated."
Laura Y.

Gordon Long and I discuss The New Nature of Work: Jobs, Occupations & Careers(25 minutes, YouTube)



NOTE: Contributions/subscriptions are acknowledged in the order received. Your name and email remain confidential and will not be given to any other individual, company or agency.

Thank you, Jim G. ($100), for your outrageously generous contribution to this site -- I am greatly honored by your support and readership.Thank you, Thomas M. ($25), for your most-excellently generous contribution to this site -- I am greatly honored by your support and readership.

Read more...

Labor Day 2014: In Praise of Messiness

Let's carve out a small moment to recognize and perhaps be grateful for the opportunity we each have to make a difference.


In honor of Labor Day 2014, let's praise the result of busy productive lives: everything's messy: our desks are messy, our homes are messy, our gardens are messy and our lives are messy.

Frankly, who has time to keep anything neat when it takes 12 hours a day of productive work just to keep the rolling ball of chaos (my description of my own life) more or less together? In It Doesn't Take Much Land to Grow A Lot of Food, I noted: "our garden is as messy as the rest of my life":


This line struck a chord with chef/farmer/very productive person Nancy Falster (falsterfarm.com), whose email resonated with me: yes, this is exactly how it is for those of us with too much to do every hour, every day, every week, every month and every year:

Thank you for your refreshing honesty.

I have been beating myself up as has my husband because we can’t seem to get the messes cleaned up AND farm on our small family farm in East Texas.

My desk is messy too and there is clean laundry waiting patiently to be ironed. Karl is past his stretching point and we both feel trapped at times, trying to educate folks about eating, growing and supporting real food.

Lard is melting on my stove ready to can and store, cheese is draining in the press, a few more hours before the first turning…

I’m on my way out to feed and water for the night, pigs, cows, chickens, ducks, guineas , horses and the cats all waiting.

My husband is away for another day on a family 90th birthday surprise and I’ve got to go pick up more freshly butchered and packed Cochon de Lait Cru (pastured, milk fed pork) 78 miles away in the morning, after chores of course. AND watering my messy garden!

We have a project in hand here on the farm to help veterans that need to regain their footing and learn a skill that will bring them health, food and a lifelong trade- farming = learning to grow food, plant and animal, and how to care for the land- heal the man while farming the land: warriorsthatfarm.com.

I was thinking we may not be qualified after all if we can’t keep the weeds out and our farm kept as a show place, it is just the two of us and we pretty much work all the time. 6:30 am to 9:30 pm are regular days with 'overtime' even longer.

Your words reminded me what we are doing is important plus we eat GREAT Food. As a nutrient-dense chef, I enjoy using the wonderful food in meals I make as we “raise food fit to eat”.
Your words are a great source of encouragement.

Thank you, Nancy, for reminding me that what's important is that we each have the opportunity to make a positive difference in our own and others' lives, health, work and understanding.

I have occasionally commented on the great divide in our culture between those with far too much to do and those with very little to do. For those with too much to do, time is always scarce; for those with little to do, each day is an exercise in killing time.



Given this great gulf, it is ironic that those who are shouldering the greatest burdens are prone to feeling guilty that their material lives are messy.

Labor Day is supposed to honor work, and much of the day's commentary is related to the politicization of work and the economics of work. That's all well and good, but let's carve out a small moment to recognize and perhaps be grateful for the opportunity we each have to make a difference in our own lives and the lives of those around us by being productive, not sporadically or when ordered to do so by a boss, but in fulfillment of our our own goals and purposes.

Work is not just about getting paid or securing a pension. What a diminished view of labor, to devote so much attention to compensation, when the security we pursue is far more contingent than we're told:

"There is no security on this earth; there is only opportunity." (Douglas MacArthur)

Work is what we do every day:

"We are what we repeatedly do." (Aristotle)

Work means doing the task, the thing, getting it done:

"Do the thing and you shall have the power." (Ralph Waldo Emerson)

Work requires risk:

"He who will not risk cannot win." (John Paul Jones)

Work requires variation, instability, failure and experimentation:

"Progress is not possible without deviation." (Frank Zappa, via Richard Metzger)

Work requires planning, execution and accountability:

"Victory favors those who take pains." (amat victoria curam)

A messy garden and library are worth so much more than a lifeless expanse of concrete or a neat house devoid of books, magazines and knowledge:

"The man who has a garden and a library has everything." (Cicero, via Lee Bentley)



Get a Job, Build a Real Career and Defy a Bewildering Economy(Kindle, $9.95)(print, $20)
go to Kindle edition
Are you like me? Ever since my first summer job decades ago, I've been chasing financial security. Not win-the-lottery, Bill Gates riches (although it would be nice!), but simply a feeling of financial control. I want my financial worries to if not disappear at least be manageable and comprehensible.


And like most of you, the way I've moved toward my goal has always hinged not just on having a job but a career.

You don't have to be a financial blogger to know that "having a job" and "having a career" do not mean the same thing today as they did when I first started swinging a hammer for a paycheck.

Even the basic concept "getting a job" has changed so radically that jobs--getting and keeping them, and the perceived lack of them--is the number one financial topic among friends, family and for that matter, complete strangers.

So I sat down and wrote this book: Get a Job, Build a Real Career and Defy a Bewildering Economy.

It details everything I've verified about employment and the economy, and lays out an action plan to get you employed.

I am proud of this book. It is the culmination of both my practical work experiences and my financial analysis, and it is a useful, practical, and clarifying read.

Test drive the first section and see for yourself.     Kindle, $9.95     print, $20

"I want to thank you for creating your book Get a Job, Build a Real Career and Defy a Bewildering Economy. It is rare to find a person with a mind like yours, who can take a holistic systems view of things without being captured by specific perspectives or agendas. Your contribution to humanity is much appreciated."
Laura Y.


Gordon Long and I discuss The New Nature of Work: Jobs, Occupations & Careers(25 minutes, YouTube) 



NOTE: Contributions/subscriptions are acknowledged in the order received. Your name and email remain confidential and will not be given to any other individual, company or agency.


Thank you, James K. ($50), for your awesomely generous contribution to this site -- I am greatly honored by your steadfast support and readership.Thank you, Wiktor S. ($50), for your marvelously generous contribution to this site -- I am greatly honored by your support and readership.

Read more...

Saturday, August 30, 2014

Is There Capitalism After Cronyism?

The more the Status Quo pursues the same old Keynesian Cargo Cult script of central planning and free money for financiers, the more self-liquidating the system becomes.

Judging by the mainstream media, the most pressing problems facing capitalism are:
1) income inequality, the basis of Thomas Piketty’s bestseller Capital in the Twenty-First Century

2) the failure of laissez-faire markets to regulate their excesses, a common critique encapsulated by Paul Craig Roberts’ recent book The Failure of Laissez Faire Capitalism.

These critiques (and many similar diagnoses) reach a widely shared conclusion: capitalism must be reformed to save it from itself.

The proposed reforms align with each analyst’s basic ideological bent. Piketty’s solution to rising wealth inequality is the ultimate in statist centralization: a global wealth tax.

Roberts and others recommend reforming capitalism to embody social purpose and recognize environmental limits. Exactly how this economic reformation should be implemented is a question that sparks debates across the ideological spectrum, but the idea that capitalism can be reformed is generally accepted by left, right and libertarian alike.

Socio-economist Immanuel Wallerstein asks a larger question: can the current iteration of global capitalism be reformed, or is it poised to be replaced by some other arrangement?


Wallerstein and four colleagues explored this question in Does Capitalism Have a Future?(Oxford University Press, 2013).

Wallerstein is known as a proponent of world systems, the notion that each dominant economic-political arrangement eventually reaches its limits and is replaced by a new globally hegemonic system.



Wallerstein draws his basic definition of the current dominant system--let’s call it Global Capitalism 1.0--from his mentor, historian Fernand Braudel, who meticulously traced modern capitalism back to its developmental roots in the 15th century in an influential three-volume history, Civilization & Capitalism, 15th to 18th Centuries:


From this perspective, there is a teleological path to global capitalism’s expansion beneath the market’s ceaseless cycle of boom-and-bust. This model of ever-larger systems of global dominance has been further developed by Braudel disciples such as Giovanni Arrighi (The Long Twentieth Century: Money, Power and the Origins of Our Times).

It is this latest and most expansive iteration of capitalism--one dominated by the mobility of global capital, state enforcement of privately owned rentier/cartel arrangements and the primacy of financial capital over industrial capital--that Wallerstein and his collaborators view as endangered.

Amidst the conventional chatter of social spending countering markets gone wild--as if the only thing restraining rampant capitalism is the state--Wallerstein clearly identifies the state's role as enforcer of private cartels.

This is not just a function of regulatory capture by monied elites: if the state fails to maintain monopolistic cartels, profit margins plummet and capital is unable to maintain its spending on investment and labor. Simply put, the economy tanks as profits, investment and growth all stagnate.

This is why Wallerstein characterizes this iteration of capitalism as “a particular historical configuration of markets and state structures where private economic gain by almost any means is the paramount goal and measure of success.”


Even those who reject this description of free markets and the self-interested pursuit of profit can agree that the prime directive of capitalism is the accumulation of capital: enterprises that fail to accumulate capital lose capital and eventually go bust.

As economist Joseph Schumpeter recognized, capitalism is not a steady-state system but one constantly reworked by “creative destruction,” the process of the less efficient being replaced by the more efficient.

In Wallerstein’s view, Global Capitalism 1.0 could end in the frustration of capitalists to continue reaping large and fairly secure profits. If capital can no longer accumulate capital, this iteration of capitalism runs out of oxygen and creative destruction will usher in a new arrangement. (Wallerstein’s chapter in the book is titled why capitalists may no longer find capitalism rewarding.)

Though the status quo believes that amending the political-financial rules is all that’s needed to maintain the current centralized arrangement, Wallerstein believes that following the old rules will actually intensify the coming structural crisis.

As the state-cartel crony-capitalism that dominates the financial and political realms unravels on multiple levels, it's difficult not to agree with Wallerstein that the more the Status Quo pursues the same old Keynesian Cargo Cult script of central planning and free money for financiers, the more self-liquidating the system becomes.

This entry is drawn from an essay published in The American Conservative Magazinea Kindle Edition is available for only $3.98/issue.




Get a Job, Build a Real Career and Defy a Bewildering Economy(Kindle, $9.95)(print, $20)
go to Kindle edition
Are you like me? Ever since my first summer job decades ago, I've been chasing financial security. Not win-the-lottery, Bill Gates riches (although it would be nice!), but simply a feeling of financial control. I want my financial worries to if not disappear at least be manageable and comprehensible.


And like most of you, the way I've moved toward my goal has always hinged not just on having a job but a career.
You don't have to be a financial blogger to know that "having a job" and "having a career" do not mean the same thing today as they did when I first started swinging a hammer for a paycheck.

Even the basic concept "getting a job" has changed so radically that jobs--getting and keeping them, and the perceived lack of them--is the number one financial topic among friends, family and for that matter, complete strangers.

So I sat down and wrote this book: Get a Job, Build a Real Career and Defy a Bewildering Economy.

It details everything I've verified about employment and the economy, and lays out an action plan to get you employed.

I am proud of this book. It is the culmination of both my practical work experiences and my financial analysis, and it is a useful, practical, and clarifying read.

Test drive the first section and see for yourself.     Kindle, $9.95     print, $20

"I want to thank you for creating your book Get a Job, Build a Real Career and Defy a Bewildering Economy. It is rare to find a person with a mind like yours, who can take a holistic systems view of things without being captured by specific perspectives or agendas. Your contribution to humanity is much appreciated."
Laura Y.


Gordon Long and I discuss The New Nature of Work: Jobs, Occupations & Careers(25 minutes, YouTube) 



NOTE: Contributions/subscriptions are acknowledged in the order received. Your name and email remain confidential and will not be given to any other individual, company or agency.


Thank you, Dan A. (book/DVD), for yet another thoughtfully generous contribution to this site -- I am greatly honored by your steadfast support and readership.Thank you, Glenn H. ($50), for your marvelously generous contribution to this site -- I am greatly honored by your support and readership.

Read more...

Friday, August 29, 2014

Can a National Quasi-Religion (Pro Sports) Go Broke?

Attending costly games is on the margins of the household budget. When the credit card gets maxed out, attending is no longer an option.

Please understand I'm not suggesting professional sports isn't the greatest thing since sliced bread: I'm simply asking if attending pro sports games has become unaffordable to the average American.

Who cares as long as we can watch the games for free on television, right? That raises another issue: in the next recession, will advertisers still pay billions of dollars for broadcast TV ads on sports channels when ads on mobile devices distributed via Big Data analysis can directly target the (shrinking) populace who still has disposable income to spend?

Before we look at the money side of pro sports, let's note the glorious shared experience of "our team" winning and hated rivals losing.Sports is one of the few experiences that unites a remarkably diverse populace, and one of the few spheres of life that isn't politicized to ruination.

We all get to live vicariously through sports, and the stranger cheering beside us is suddenly a "friendly" in a largely hostile world.

With apologies to Dallas Cowboys fans: Joe Montana to Dwight Clark-- The Catchin January 1982: (Cowboys fans have many memorable moments to savor, including a number in this game)

The problem is that attending a game is prohibitively expensive. A seat in the nosebleed section might only be $15, but there's parking (or train fare), and the $10 beer and the $10 hotdog. That's $40 - $50 for one fan or $80 for two people.

Given that the average wage is $44,000, $80 for "cheap seats at the game" is not inconsequential. Given that many clubs are now pricing tickets by demand, it's easy for two people to spend $200 to attend a game.

How many people can afford to attend games on a regular basis without maxing out a credit card or drawing on a home equity line of credit (assuming there's home equity to tap)?

Cities desperate to retain pro franchises are on the hook for hundreds of millions of dollars spent building $1+ billion stadiums. Many claim that they'll recoup the money from hotels and shopping malls built adjacent to the stadium, but this gargantuan cash flow has yet to actually materialize.

The winner take all dynamic of our pop culture has driven salaries and team overhead costs into the stratosphere. This pushes costs so high that teams literally can't afford a losing season. Alas, not every team can win the conference, much less the championship.

The assumption that TV ad revenues will continue to support the enormous costs of the system is rarely questioned. The ads have to work to make sense, and in an economy in which the average wage earner is making less money every year (measured by purchasing power rather than nominal dollars), and more and more of the dwindling income is devoted to healthcare, taxes, debt service and essentials, there are two questions here:

1. What good is an ad if the viewers have no disposable money to spend?

2. Rather than pay to broadcast an ad to every viewer, few of whom are in the market for whatever item you're selling, why not target the core audience directly with mobile ads?

If an advertiser is marketing beer that (in Mike Royko's memorable phrase) tastes like it's been strained through a horse, where's the most bang for the ad buck--a broadcast ad to sports fans who have seen hundreds of beer ads and are either already fans of the swill being advertised or consumers who will never buy the product, regardless of ads, pricing, etc.?

The typical ad-industry justification is that if Swill A can capture 1% of market share from Swill B, spending tens of millions of dollars on TV network ads is a wise investment.

But does this argument hold up when advertisers can target beer buyers with a history of buying Swill A and B directly via their mobile phones as they enter the supermarket? Which ad do you reckon has a higher probability of modifying consumer choice, another beer ad that viewers mute/ignore, or a coupon delivered to the beer buyer at the point of purchase?

In short, the mobile ad revolution has barely begun, and while broadcast ads on TV, radio and the Internet will all still attract advert money, it seems highly likely we've reached Peak Broadcast TV Advertising income.

Take a glance at this chart of household income: every sector from wealthy to low-income is bringing home less money. What does that tell you about the future of advertising?


Based on anecdotal evidence submitted by readers and correspondents, it seems that much of the discretionary spending on things like attending sports events and concerts is being funded with debt or drawdowns of savings/equity. In other words, people are charging big-bucks tickets on their credit card, not paying for them out of weekly earnings.

There may be a generational component as well. Most of the people in the top 10% of household income are Baby Boomers in their peak earning years. On the face of it, they can easily afford to pay for costly tickets, parking, beer, etc. at one of the sports industry's new secular cathedrals (i.e. stadiums).

But these same people are often also paying for kids' college and funding care for their aging parents. $200,000 a year looks great until you subtract taxes, college costs, assisted living costs for a parent, a big mortgage and rising costs for essentials.

My point is: going to games is now like going to concerts or a fancy restaurant: each consumes a major chunk of dwindling discretionary income. As credit and income tighten, it's getting easier to decide to forego the concert, game or high-end dining experience.

In other words, attending costly games is on the margins of the household budget. When the credit card gets maxed out, attending is no longer an option.

I haven't found any studies on this question, but I also wonder if Gen Y is as committed to the idea of investing so much time and money in sports as their elders. If they are indeed less invested, this adds additional weight to the idea that we've reached Peak Pro Sports.

I confess I'm jaded. I don't have the time or emotional surplus to invest in following sports, and I tend to see the sports industry as just another bloated cartel that rips off its customers because it can, enriching a handful of super-wealthy owners who bask in the reflected glory of a secular religion.

Put the trends together and it certainly looks like the sports cartel has already sucked up all the oxygen in the room. In the next recession, we may find that pro sports will no longer be able to support the sky-high costs of its overhead and secular cathedrals.



Get a Job, Build a Real Career and Defy a Bewildering Economy(Kindle, $9.95)(print, $20)
go to Kindle editionAre you like me? Ever since my first summer job decades ago, I've been chasing financial security. Not win-the-lottery, Bill Gates riches (although it would be nice!), but simply a feeling of financial control. I want my financial worries to if not disappear at least be manageable and comprehensible.


And like most of you, the way I've moved toward my goal has always hinged not just on having a job but a career.

You don't have to be a financial blogger to know that "having a job" and "having a career" do not mean the same thing today as they did when I first started swinging a hammer for a paycheck.

Even the basic concept "getting a job" has changed so radically that jobs--getting and keeping them, and the perceived lack of them--is the number one financial topic among friends, family and for that matter, complete strangers.

So I sat down and wrote this book: Get a Job, Build a Real Career and Defy a Bewildering Economy.
It details everything I've verified about employment and the economy, and lays out an action plan to get you employed.

I am proud of this book. It is the culmination of both my practical work experiences and my financial analysis, and it is a useful, practical, and clarifying read.

Test drive the first section and see for yourself.     Kindle, $9.95     print, $20

"I want to thank you for creating your book Get a Job, Build a Real Career and Defy a Bewildering Economy. It is rare to find a person with a mind like yours, who can take a holistic systems view of things without being captured by specific perspectives or agendas. Your contribution to humanity is much appreciated."
Laura Y.

Gordon Long and I discuss The New Nature of Work: Jobs, Occupations & Careers(25 minutes, YouTube) 



NOTE: Contributions/subscriptions are acknowledged in the order received. Your name and email remain confidential and will not be given to any other individual, company or agency.

Thank you, Kevin M. ($5/month), for your monumentally generous subscription to this site -- I am greatly honored by your support and readership.Thank you, Deward T. ($50), for your marvelously generous contribution to this site -- I am greatly honored by your steadfast support and readership.

Read more...

Wednesday, August 27, 2014

The Housing Echo-Bubble Is Popping

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.
The distorted fundamentals of the echo-bubble are revealed in this chart of mortgage debt to wages. Current levels of mortgage debt are double historic levels, and 35% above the level of 2001, when the primary housing bubble lifted off.
The third charts tells us the echo-bubble is popping. Note that housing sales lead price by about six months: sales started falling in late 2005, and prices rolled over in mid-2006.

Housing sales rolled over in December 2013, and sure enough, prices are starting to weaken in many markets.

The echo-bubble doesn't pass the sniff test as a "normal" housing recovery. Exhibit #1: who's buying and who's not buying:

1. Marginal buyers using 3% down-payment FHA/VA loans who wouldn't qualify for conventional mortgages. The risk of marginal borrowers defaulting is high, a reality reflected in FHA's default rate:

When lending sources dried up during the financial crisis, the FHA propped up the housing market by insuring the lenders it works with against losses and enticing them back into the market. But the FHA’s default rate shot up as its loan volume expanded, depleting its cash reserves to levels below what is required by law. In September 2013, the FHA tapped taxpayer money to cover its losses for the first time in the agency’s 80-year history.

2. Who's not buying: Upper-Income, Educated, Married with Children, and Still Not Buying:Declining Homeownership among "Prime" First-Time Home Buying Candidates (Fannie Mae Housing Insights, Volume 4, Issue 4)

3. The dominance of all-cash buyers--generally investors (those close to the money spigots of the Fed's free money for financiers) and foreign buyers.

Note the difference between mortgage credit expansion, which has lagged price gains. This suggests many of the sales (about 35% in many hot markets) were all-cash purchases that did not require a mortgage

Take away the Fed's zero-interest rate policy (ZIRP), its free money for financiersand foreign buyers seeking a safe haven for their hot money, and what's left of the supposedly "normal" housing recovery? Not much.
There is nothing remotely "normal" about the echo-bubble's rise, and we can anticipate that its deflation will be equally abnormal.

How do we know when an asset class is in a bubble? When everyone who stands to benefit from the continuation of the expansion declares it can't be a bubble.



Get a Job, Build a Real Career and Defy a Bewildering Economy(Kindle, $9.95)(print, $20)
go to Kindle editionAre you like me? Ever since my first summer job decades ago, I've been chasing financial security. Not win-the-lottery, Bill Gates riches (although it would be nice!), but simply a feeling of financial control. I want my financial worries to if not disappear at least be manageable and comprehensible.


And like most of you, the way I've moved toward my goal has always hinged not just on having a job but a career.


You don't have to be a financial blogger to know that "having a job" and "having a career" do not mean the same thing today as they did when I first started swinging a hammer for a paycheck.


Even the basic concept "getting a job" has changed so radically that jobs--getting and keeping them, and the perceived lack of them--is the number one financial topic among friends, family and for that matter, complete strangers.


So I sat down and wrote this book: Get a Job, Build a Real Career and Defy a Bewildering Economy.


It details everything I've verified about employment and the economy, and lays out an action plan to get you employed.


I am proud of this book. It is the culmination of both my practical work experiences and my financial analysis, and it is a useful, practical, and clarifying read.


Test drive the first section and see for yourself.     Kindle, $9.95     print, $20


"I want to thank you for creating your book Get a Job, Build a Real Career and Defy a Bewildering Economy. It is rare to find a person with a mind like yours, who can take a holistic systems view of things without being captured by specific perspectives or agendas. Your contribution to humanity is much appreciated."
Laura Y.

Gordon Long and I discuss The New Nature of Work: Jobs, Occupations & Careers (25 minutes, YouTube) 



NOTE: Contributions/subscriptions are acknowledged in the order received. Your name and email remain confidential and will not be given to any other individual, company or agency.

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