patrick.net
An Antidote to Corporate Media
1,198,142 comments by 14,128 users - Al_Sharpton_for_President, desertguy, PeopleUnited, Reality online now
Where is the housing bubble money coming from?
invite response
2015 Nov 15, 10:12pm 1,331 views 3 comments
Comments 1 - 3 of 3 Search these comments
2
zzyzzx
2015 Nov 16, 7:14am
zzyzzx
2015 Nov 16, 7:14am
1. The "Great Blowing Sound". All of the dollars sent overseas for the last 30 years in what Ross Perot called the "Great Sucking Sound" are now coming back in the "Great Blowing Sound". Rich people in China are buying up high quality dollar denominated assets everywhere all around the world. Besides the SF Bay Area, Vancouver, Sydney, and other high quality cities are getting impacted especially hard by Chinese money flooding in and buying anything and everything.
I'm not convinced that the Chinese buying spree is nationwide.
In the last bubble I knew where the money was coming from: Subprime loans fueled by mortgage backed securities that were underwritten by designated bagholders like AIG, pension funds and naive foreigners.
Finding out when the bubble was going to end was EASY. Just watch the cost of derivatives insuring subprime BBB- paper. It all started to blow in early 2007. The bottom was another easy tell. Just look for when all the rate resets finished rolling over, which was in early 2012.
So the big question for all the REAL financial analysts out there and not all the whiners and crybabies is what are the dynamics behind this cycle? Where is the money coming from? What is holding it all up? When can we tell that it's going to end?
My working hypothesis is two fold.
1. The "Great Blowing Sound". All of the dollars sent overseas for the last 30 years in what Ross Perot called the "Great Sucking Sound" are now coming back in the "Great Blowing Sound". Rich people in China are buying up high quality dollar denominated assets everywhere all around the world. Besides the SF Bay Area, Vancouver, Sydney, and other high quality cities are getting impacted especially hard by Chinese money flooding in and buying anything and everything. This one will probably end... never. Maybe WWIII or a civil war in China? Imposition of big taxes on foreign real estate investment in the U.S? So yeah, probably not likely anytime in the near future. I think this is a secular long-term trend.
2. Quantitative easing money spreading out through the stock market and then fueling acquisitions, which fuels tech startup valuations, which fuels venture capital, which fuels San Francisco rents, which fuels house prices, ad nauseum. When will it end? They are never going to raise rates. The subprime derivates is like 1/1000 the size of interest rate derivatives. The financial carnage from a rate rise would be ridiculous if they tried that. They might slow down the money printing though if the dollar starts sliding. So I'd say watch the DX.
Anyone else have any good ideas here?