Real Estate

     

 

 

Is Seasonality in Individual Stocks Based on Sound Evidence?

People often wonder whether it is actually possible to make profitable trades by taking advantage of seasonal trends in individual stocks. Most investors accept the idea that seasonal trends in commodities exist and are also quite open-minded with respect to recurring phenomena such as the year-end rally in stock indexes.

 

S&P 500 Index, 30-year seasonal chart – the year-end rally is highlighted. It has been observed in 24 of the past 30 years and its average gain far exceeded the average loss of the six losing years. Moreover, its average gain represents more than a quarter of the average annual return of the index. The existence of this pattern is widely acknowledged and there are reasonable explanations for it.  Source: Seasonax

 

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How to Save Money When Buying or Make More When Selling a Home

In your professional capacity and perhaps also in your private life, you may be closely involved with financial and commodity markets. Trading in stocks, bonds or futures is part of your daily routine.  Occasionally you probably have to deal with real estate as well though – if you e.g. want to purchase an apartment or a house, or if own a home you wish to sell.

 

The people who took this photograph probably want to sell… how do we know? Read on…

Photo credit: vantagedesigngroup.com

 

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Moody’s & Reserve Bank of Australia Warn of Increasing Mortgage Arrears and Looming Apartment Defaults

Last Wednesday Moody’s reported that mortgage arrears continue to rise across Australia, particularly in the mining states of WA & NT:

 

Moody’s report notes that mortgage performance deteriorated in all eight Australian states and territories over the year to 31 May 2016, reaching 1.50% from 1.34% at 31 May 2015. And, in Western Australia, Tasmania and the Northern Territory, the 30+ delinquency rate climbed to the highest levels since Moody’s records began in 2005, while in South Australia, the delinquency rate was just 0.1 percentage point below the state’s record-high reached in April 2013.
Western Australia fared the worst in terms of mortgage performance over the year to 31 May 2016, with the 30+ delinquency rate increasing by 0.69 percentage points to 2.33%. This measure has been on the rise in the state since 2014, following the end of the mining boom. Relatively poorer economic and housing market conditions in Western Australia contributed to the historically high level of mortgage delinquencies.

 

chart-1-moodys-delinqueny-rate-001In Australian regions dependent on the mining boom, delinquencies and defaults have risen sharply. It seems highly likely that the bust is eventually going to spread to the large Eastern and Southern coastal cities given the degree of overvaluation based on fundamental criteria

 

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Australian property bubble on a scale like no other

Yesterday Citi produced a new index which pinned the Australian property bubble at 16 year highs:

 

Bubble trouble. Whether we label them bubbles, the Australian economy has experienced a series of developments that potentially could have the economy lurching from boom to bust and back. In recent years these have included:

 

  •  the record run up in commodity prices and subsequent correction;
  •  the associated boom in mining investment and current reversal;
  •  record low bond yields;
  •  the boom in housing construction, specifically apartments, that was spurred by the low interest rates.

 

Housing indicators in the bubble meter are at record highs but interest rates remain at record lows. Typically monetary policy is well into tightening mode at this stage in the housing cycle. A destabilizing housing burst (both in activity and prices) is a clear risk, particularly the longer the upswing runs.

 

r3-1Click to enlarge.

 

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Unknowable Degrees of Bubble Insanity

Back in February, we brought you an update on the truly insane real estate bubble in Australia (see: “Australia’s Housing Bubble – In the Grip of Insanity” for details) in the wake of Jonathan Tepper of Variant Perception reporting on an eye-opening fact-finding tour in Sydney.

 

shackThis rotting shack in Sydney and its tiny plot of land sold for nearly $1 million in May of 2014 – more than two years ago.  Since then, house prices in Australia have increased even further. Yes, it is an insane bubble, no doubt about it.

Photo credit: Attila Szilvasi

 

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Medical vs. Financial Engineering

I broke my elbow a month ago, pretty badly as I was told.  The surgeon screwed the pieces back together, using a steel alloy bracket and six screws.  Two hours later, I left the hospital with no cast, a bandage (just to cover a very ugly scar), a prescription for painkillers and therapy started a week later.

 

 

Elbow collectionThis isn’t Ramsey’s elbow specifically, but a random post surgery elbow collection from the inter-webs, to illustrate how it’s done. The contraption in the lower right-hand corner is generally used to hold an elbow together after a complicated fracture. As you can see from the x-rays, this is then complemented with additional thingamabobs as required.

Image source: eortopedi.com

 

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Restless Peasants

First, a few quick words on Brexit.  Being the always positive and optimistic person that I am (big grin), I see one very positive outcome of Brexit – it is a revolution without bloodshed.

 

mo' peasantsThe peasants are getting restless…

Illustration via squadron.com

 

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Is it Time to Buy Income-Producing Real Estate? 

No, No, No. Much to the dismay of my real estate buddies, who are complaining about how high prices while watching the cash flow of their portfolios bursting at the seams from a few good years of rent increases, the answer is no.

 

1-Chart-Cap-rates2REIT cap rates (as of mid 2015, they have declined further since then)

 

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A Sudden Turn for the Worse

Freddie Mac posted a loss of $354 million this quarter, versus a $2.16 billion gain the previous quarter.  Fannie Mae did slightly better with net earnings of $1.1 billion, which were still substantially down from $2.5 billion the previous quarter though.

 

10621303-freddie-mac-hqFreddie Mac HQ – a strange time for posting losses

Photo via nytstyle.com

 

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Tide of Money

BALTIMORE – Another indecisive week in the markets. China did not blow up. Energy company debt did not melt down. And investors did not panic in the face of a slowing world economy, falling corporate earnings, and central bank absurdities.

This morning, all is well. But nothing fails like success. Throw a lot of money at any market, and you are asking for trouble. Today, readers are urged to check their real estate holdings.

 

vancouverVancouver at dusk…

Photo via fourseasons.com

 

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A Mountain of Debt – But at Least We Have an iPhone

Whenever I encounter someone from the younger generation (40 years or younger), I make it a point to apologize for leaving them a country in far worse shape than the one I enjoyed.  Surprisingly, none of them believe that apologies are necessary, as most have no clue what I am talking about.

 

good-bad-times-joker-tattoo-design

 

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Perverse Incentives

We haven’t written about Australia’s residential real estate bubble for some time (readers may want to check out last year’s post “Australia’s Bubble Trouble”, which contains numerous relevant charts and data).

 

Property Auction in Sidney-3Property auction in Sidney

 

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Most read in the last 20 days:

  • Punch-Drunk Investors & Extinct Bears, Part 1
      The Mother of All Blow-Offs We didn't really plan on writing about investor sentiment again so soon, but last week a few articles in the financial press caught our eye and after reviewing the data, we thought it would be a good idea to post a brief update. When positioning and sentiment reach levels that were never seen before after the market has gone through a blow-off move for more than a year, it may well be that it means something for once.   Sloshed as we are...   a...
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      Onward Toward Default People are hard to please these days.  Clients, customers, and cohorts – the whole lot.  They’re quick to point out your faults and flaws, even if they’re guilty of the same derelictions.   The age-old art of assigning blame – in this case complemented by firm knowledge of the proper way to prosperity (see lower right corner). Jack Lew not only sees the future with perfect clarity these days, he also seems to have spent his time as treasury...
  • Quantum Change in Gold Demand Continues - Precious Metals Supply-Demand Report
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  • As the Controlled Inflation Scheme Rolls On
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  • Punch-Drunk Investors & Extinct Bears, Part 2
      Rydex Ratios Go Bonkers, Bears Are Dying Off For many years we have heard that the poor polar bears were in danger of dying out due to global warming. A fake photograph of one of the magnificent creatures drifting aimlessly in the ocean on a break-away ice floe was reproduced thousands of times all over the internet. In the meantime it has turned out that polar bears are doing so well, they are considered a quite dangerous plague in some regions in Alaska. Alas, there is one species of...
  • 2018: The Weakest Year in the Presidential Election Cycle Has Begun
      The Vote Buying Mirror Our readers are probably aware of the influence the US election cycle has on the stock market. After Donald Trump was elected president, a particularly strong rally in stock prices ensued.  Contrary to what many market participants seem to believe, trends in the stock market depend only to a negligible extent on whether a Republican or a Democrat wins the presidency. The market was e.g. just as strong under Democratic president Bill Clinton as it was under...
  • Cryptonite
      The Wingsuit Test of 1912 Late last year press reports informed us that by October, the number of active accounts at US cryptocurrency exchange Coinbase* had exceeded the number of accounts at Charles Schwab, one of the oldest US discount brokers, by 1.1 million. The report was dated November 27, by which time the number of accounts had just soared by another 1.6 million. We felt reminded of the final few weeks of China's stock market bubble, which saw similarly stunning growth in retail...
  • Cryptonite 2
      Relative Scarcity and Bubble Dynamics There is widespread awareness about the relative scarcity of BTC compared to the ever-expanding fiat money supply, but it seems to us that the dynamics underlying their relationship are largely ignored. The scarcity argument underpins a lot of speculative activity in BTC and other cryptocurrencies – hence ignoring the related dynamics is probably not a very good idea.   One of the features of bitcoin people find enticing  - by no...

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