The New York Times ran a story this past weekend about the death of real estate as the traditional vehicle through which American families built wealth. The National Association of Realtors today came out with figures that showed sales of real estate for the month of July were at their lowest since 1995. Our recovery is threatened and we need an evil fall guy on whom we can blame the decline of housing. Let’s gather the usual suspects and see who’s done it.Â First up is the sub-prime borrower who let go of the house next door to you. He looks normal, but without a job or unemployment benefits, no can’t be him.Â Next is your local builder but he has just filed for personal bankruptcy and is working odd repair jobs to make ends meet, it can’t be him. Last isÂ your local Realtor and she looks tired. It must be the two other jobs she’s workingÂ while helping the family stay current on their bills. Maybe this time around its the politicians. Well, no the current administration -although they actually thinks of themselves as modern day JesusÂ raising the dead they’re delusional about the powers they have, its definitely not them.
There is one andÂ only one evil suspect and that is Wall Street. Yes the Wall Street that changed Location, Location, Location to Derivative, Derivative, Derivative and forever moved the control of the housing market from its traditional market forces to the forces that are subject to daily and hourly manipulations ofÂ nerdy guys with PhD’s in Physics and Mathematics sitting behind Algorithms.Â One equation can make them Billions in a fraction of a second and destroy the lives of millions who worked all their lives to afford a roof over their heads. Yes real estate is dead, and math and science have turned into evil machines of mass destruction.Â Our government is so clueless to the nature of Wall Street’s work that if the the smartest scientist/investigator looks into any of their proprietary and highly secretive Mortgage Backed Securities models or into any of the hedge funds that made bets on the failure of the American Dream he/she can’t figure it out if their life depended on it. Yes these are the Masters of the Universe and part of their plan to dominate is to free real estate from its traditional qualities and let it bleed to death while they get rich from the fees they make in manipulating the securities they create.
So, as millions of Americans today were deciding to either let go their home because they can no longer hold on or to reduce their asking prices yet again, Wall Street was cashing in on its bets that confirmed that Housing is dead.
For a detailed Memetic analysis of how Wall Street caused the housing crisis, read my post from April 2009 at this link
While the historic shift of wealth continues at the hands of the most sophisticated Â thieves (Investment Bankers), their game is becoming more and more diabolical. All the talk in financial circles now is about how Goldman Sachs used the most sophisticated technology of the future costing millions to make split second trades and beat out the smaller firms who are using outdated 2009 technology (how un-cool). The record profits that GS reported a few weeks ago fly in the face of the most distressing economic data since the Great
Depression. Their use of continually advancing technology (a hallmark of an innovative post-industrial economy) to advance unsound trading principals is paramount to industrial terrorism.
Up until the end of the 1980’s stock prices used to be representative of productive economic output, an enterprise value systemÂ built on strong foundation of accountability which meant that Wall Street only rallied when the rest of the economy did. For most of the 90’s investment bankers were hatching diabolical systemic plans in dark rooms to make Wall Street “DE-COUPLE” from the real economy to minimize the need for accountability and in the process decouple from any relationship representing real economic output. Below
is a sample representation of the brazen, decoupled SPIN that Wall Street puts on REAL ECONOMIC DATA to insure their continued manipulation of investors large and small. This is not a joke. All you need to do is listen to CNBC for 15
minutes and see this pathology that has become a whole new language. The list is from a post on the blog Seeking Alpha. Never a dull day on Wall Street.
UNEMPLOYMENT @ 9% = BETTER THAN EXPECTED
UNEMPLOYMENT @ 10% = DOW SOARS
UNEMPLOYMENT @ 11% = GREEN SHOOT RALLY
UNEMPLOYMENT @ 12% = ALREADY FACTORED IN
UNEMPLOYMENT = 35% = DOW DROPS 100 POINTS
HOUSING PRICE DROP 1% = RECESSION ENDING
HOUSING COLLAPSES = GREEN SHOOT
HOUSING FALLS 20% = STABILIZATION
12% MORTGAGE DELINQUENCY = GOOD FOR STOCKS
HUNDREDS OF THOUSANDS OF MORTGAGES UNDERWATER = HOUSING BOTTOMED
GM CHAPTER 11 = PRICED IN
125K+ JOBS LOST FROM GM CHAPTER 11 = PRICED IN
AMERICAN AUTO INDUSTRY BANKRUPT = GOOD THING
GOVERNMENT SPENDS 1 TRILLION OF OUR DOLLARS = STIMULUS
NORTH KOREA FIRES NUKE = RALLY
ISRAEL BOMBS IRAN = 30 MINUTE END OF DAY RALLY
WORLD EXPLODES = ASIA RALLIES
NO JOBS ARE CREATED = RECESSION ALMOST OVER
U.S. DEBT OVERWHELMING = TOO BUSY RALLYING TO CARE
CONSUMER STOPS SPENDING = RETAIL RALLY
BANKS ARE INSOLVENT = SIGNS OF STABILIZATION
BANKS PASS SCAM STRESS TESTS = HUUUUUUUUGE RALLY
BANKS “ONLY NEED 75 BILLION” = OUT OF THE WOODS
BANKS PASS A REAL STRESS TEST = NEVER WOULD HAPPEN
BANKS PAY BACK TARP = LATE DAY SURGE
BANKS CAN’T PAY BACK TARP = EARLY MORNING SURGE
CALIFORNIA BANKRUPT = THE WORST IS OVER
DOLLAR RISES = RALLY
DOLLAR CRASHES = RALLY
INFLATION = BULL MARKET
DEFLATION = BULL MARKET CONTINUES
REFLATION = MASSIVE SHORT COVERING RALLY
GOLD RISES = STOCKS RALLY
GOLD FALLS = STOCKS RALLY BIG
BANKS’ FAKE EARNINGS = SIGNS OF STABILIZATION
COMMERCIAL REAL ESTATE STABILIZING = 1000 POINT RALLY
COMMERCIAL REAL ESTATE CRASHING = STOCKS SHAKE IT OFF TO RALLY
CONSUMER INSOLVENT = CONSUMER IS SPENDING
OIL @ 50 = BULL RALLY
OIL @ 60 = GREEN SHOOT
OIL @ 100 = IMPORTANT RECOVERY SIGN
OIL @ 20 = TAX BREAK
The newest buzz phrase on Wall Street is “Green Shoots”.Â Green shoots here and green shoots there and all one has to do is wait a day and watch them turn brown never to see the light of day again. So, why has there been so many false signs of economic recovery? The short answer is because we’ve exhausted the heck out of our business models. And what models they’ve been. It seems Â that in a systemic act of defiance the global economy looked at what a business sustainability models looked like, and went out and did exactly the opposite. This past decade will be remembered as the debt decade during which the Bigger is Better pathology combined with the lack of rules on debt repayment to cause the unprecedented collapse of capitalism in its current form. A bigger and better chrome-plated Hummer to replace your regular Hummer? No Problem. A bigger and better McMansion to replace your regular 5,000 square foot home? No Problem. A bigger credit card with a lower interest rate? No Problem. A bigger mortgage to refinance and buy the gold plated Hummer to replace the chrome one? No problem. You can’t pay for any of it now? NO PROBLEM! Honestly, how did we ever expect to sustain such vicious cycle of debt without any accountability what so ever.
In years past, such conspicuous consumption would have never been possible as the institutions that lend the money held the borrower responsible at one point. Â Â But, this time around there was a completely new lending philosophy created by Wall Street that took from grandma, China and Dubai equally, and because no one was watching, it made outrageous promises on returns and took hefty fees for itself. This new model wasn’t concerned about paying grandma back because in a style 10 times more sophisticated than that of Madoff it used money from China to pay her off and with a straight face called the whole scheme “securitization”.
This went on for years. Meanwhile both consumers and producers got used to receiving “securitized” money without ever having to prove the need for it, which made them all lazy, fat, and complacent. Yes, subservient hosts to a killer parasite that infected almost all who used it. Â Â So why are all the shoots brown? Two reasons:
1.Â Â Â Â Â Â The green seen by analysts is fuzz growing on dying hosts, and like any parasite once the host is dead, the parasite turns brown the next day.
2.Â Â Â Â Â Â The brain of this comatose patient who was created out of greed registers occasional electric activity and analysts exploit the heck out of it trying to convince us that he/she will walk again.
What Wall Street and the economists of today don’t understand is that in order forÂ “Green Shoots” to grow into sustainable plants, you have to take the time to plant and nurture the seeds first and not be the plant thief on the observation deck waiting to cut down the harvest that never came.