There are two attractive delusions that are ever-present in financial markets:One is this time it’s different, because of unique conditions that have never ever manifested before in the history of the world, and the second is there are no cycles, they are…
A funny thing often occurs after a mania-fueled asset bubble pops: an echo-bubble inflates a few years later, as monetary authorities and all the institutions that depend on rising asset valuations go all-in to reflate the crushed asset class. Take…
In my recent entry Dear Homeowner: If You’re Paying $260,000 in Property Taxes Over 20 Years, What Exactly Do You “Own”?, I questioned the consequences of high property taxes. Some readers wondered if I was saying all property taxes should…
We know two things about housing bubbles: they always pop, with devastating consequences, and apologists and pundits always deny housing is in a bubble.And so it is no surprise that here we are in Housing Bubble 2, the second housing…
The Powers That Be have gone to extraordinary lengths to prop up housing by whatever means are necessary since the collapse of the housing bubble in 2008: the Federal Reserve has pushed mortgages rates down by buying mortgage-backed securities, the…
I am often amused by the Western media’s readiness to attribute godlike powers of long-term planning and Sun-Tzu-like strategic brilliance to China’s leadership. A well-known anecdote illustrates the point. Zhou Enlai, Premier of China in the Mao era, who when…
The Federal Reserve-induced Echo Housing Bubble is finally starting to roll over, and the bubble’s pop won’t be pretty. Why is the bubble finally popping now? All the factors that inflated the Echo Housing bubble are running dry. These include:…
When China’s tinderbox economy implodes, who will be left to bid up the world’s surplus commodities and real estate? After 30 years of torrid expansion, perhaps the single most consequential factor in China’s economy is how much of it is…
Here is the conventional narrative about rents and housing valuations: 1. Rents have soared because people can’t afford to buy a house and have to rent 2. Based on soaring rents, housing is fairly valued In other words, rents and…
Speculative bubbles that burst are often followed by an echo bubble, as many participants continue to believe that the crash was only a temporary setback. The U.S. housing market is experiencing a classic echo bubble. Exhibit A is the Case-Shiller…
When a speculator bought a new particle-board-and-paint McMansion in the middle of nowhere in 2007 with nothing down and a $500,000 mortgage, the lender and the buyer both considered the house as $500,000 of collateral. The lender counted the house…
Bubbles are followed by echo-bubbles, and the bursting of the second bubble ends the speculative cycle. If we have learned anything in the past 20 years of massive asset bubbles and equally massive declines when the bubbles finally pop, it’s…
Bubbles are followed by echo-bubbles, and the bursting of the second bubble ends the speculative cycle. If we have learned anything in the past 20 years of massive asset bubbles and equally massive declines when the bubbles finally pop, it’s…