"Million-Dollar Parking Spots" – Peak Stupidity Has Arrived In Manhattan

by Mike Krieger

Hundreds of men in starched robes descend on an opulent hotel here to vie for the most distinguished digits. Earlier this year, Abu Dhabi businessman Saeed Khouri made headlines and the Guinness Book of World Records when he paid $14 million for the tag simply sporting a “1.” His cousin, stockbroker Talal Khouri, paid $9 million for “5″ — the second-largest sum ever paid for a license plate.

- From the July 1, 2008 Wall Street Journal titled: Read My License Plate: It Cost Me a Fortune

I vividly remember reading the above article in the Wall Street Journal over six years ago and shaking my head in disbelief. Although the U.S. equity market had already peaked in October of 2007, in early July 2008 the oil market was hitting new record highs almost every single day. I remember going on an endless stream of client visits with my former employer, partly due to the novelty of me being one of the few sell-side guys out there yelling that we were in the midst of a massive commodity bubble. Within days of that WSJ Journal article, the oil bubble popped and the price crashed from a high of $147 per barrel to $32 by December, or a nearly 80% plunge in five months.

I will never forget that article because it was the perfect indicator that too much money was sloshing around that particular market. It’s one thing to pay too much for a home or even a car, but license plates? To me that was the definition of madness.

Fast forward six years, and due to Central Bank policies that provide free money to the oligarchs residing in the world’s financial capitals, places like New York City and London are awash in billions upon billions of dollars. As is always the case, these fortunate bailout recipients are more than happy to throw it around in the most absurd of manners. It appears the latest craze in my hometown of NYC revolves around parking spaces, which in one new luxury building in SoHo are selling for $1 million each.

The New York Times reports:

What will $1 million buy in New York City? A diamond-encrusted Cartier men’s watch. A small fleet of 2014 Bentley Continentals. Or maybe your very own parking spot in SoHo.

A new development, 42 Crosby Street, is pushing the limits of New York City real estate to new heights with 10 underground parking spots that will cost more per square foot than the apartments being sold upstairs.

The million-dollar parking spots will be offered on a first-come-first-served basis to buyers at the 10-unit luxury apartment building being developed by Atlas Capital Group at Broome and Crosby Streets, itself the former site of a parking lot. At $250,000 a tire, the parking spaces in the underground garage cost more than four times the national median sales price for a home, which is $217,800, according to Zillow.

“Most ultrahigh-net-worth individuals have car collections as well as service vehicles for their staff,” Mr. Hannah said. “Parking is in serious demand and has proven an excellent investment with no sign of a decline.”

Meanwhile, let’s not forget the fact that many apartment units being sold for astronomical sums in Manhattan aren’t even being occupied, something I highlighted in the piece, Introducing Ghost Skyscrapers – NYC Real Estate Goes Full Retard:

“The Census Bureau estimates that 30 percent of all apartments in the quadrant from 49th to 70th Streets between Fifth and Park are vacant at least ten months a year.”

You’ve gotta hand it to the folks at the Federal Reserve. They have succeeded in destroying the American middle class while simultaneously creating a vibrant market for oligarchs to flip million dollar parking spaces in less than six years. That is truly a historic achievement in societal destruction.

Ultimately, we’ll know it’s all over when Goldman securitizes parking spaces and successfully unloads the paper onto the New York State pension fund.

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Dollar heads for best run in 17 years

By Patrick Graham

LONDON (Reuters) - The U.S. dollar headed for its ninth straight week of gains on Friday, some measure of how the economic fortunes of the United States and its major economic peers are diverging after six years of financial turmoil.

Benchmark 10-year U.S. Treasury yields rose to their highest in over a month, while European stocks shrugged off weakness in Asia to inch higher. <.FTEU3>

A broad rise for the greenback was the main bet of most major investment houses this year but it has taken a very long run of relatively good U.S. numbers and a surge in concern over European and Japanese growth for the currency to deliver.

Investors are convinced a Federal Reserve meeting next Wednesday will rubberstamp a shift towards higher interest rates next year suggested by a study by researchers from the U.S. central bank this week.

A 2 percent rise on the week in response took the U.S. currency to a six-year high of 107.39 yen on Friday . Against the euro it gained 0.2 percent on the week at 1.2921, broadly flat on the day.

"The dollar generally remains firm but the dollar index has started to show some hesitation," Swedish bank SEB said in a note to clients on Friday.

The dollar index, a measure of the greenback's value against a basket of six major currencies, remained on course for its longest streak of weekly gains since the first quarter of 1997.

An employee of the Tokyo Stock Exchange (TSE) stretches at the bourse at the TSE in Tokyo April 11,  …

A range of political shocks to the system, from turmoil in the Middle East to fighting in Ukraine and a referendum on Scottish independence, have added to the backing for the dollar against a range of emerging and developed world currencies.

But the euro, hammered by worsening economic numbers and further easing of monetary policy by the European Central Bank in the past month, has begun to find some support in the last few days.

Sterling was also looking more robust, helped by a poll that showed supporters of preserving Scotland's 300-year old political union with England four points ahead with less than a week to go before the Sept. 18 vote.

The poll also helped Britain's top equity index rise for the first time in six sessions <.FTSE>, driven by Scottish-based shares such as Royal Bank of Scotland , soft-drink group AG Barr and utility SSE .

CARRIED BACK

The rise in volatility on currency markets - at a four-year high on sterling on Friday - more broadly has prompted some investors to pare back on carry trades, where they borrow at low rates in euros and yen to buy higher-yielding assets such as commodity-linked or emerging market currencies.

Victims included the Canadian dollar, which plumbed a five-month low of C$1.1030 , while Australia's dollar hit a six-month low of $0.9053 .

The dollar gains have also pushed oil prices to their lowest in two years , while gold sank to an eight-month trough and copper fell to a three-month low.

In contrast, the dollar's gains on the yen were considered positive for Japanese exports, corporate earnings and equities. The broad Topix index <.TOPX> added 0.2 percent and reached its highest level since July 2008.

Stocks elsewhere in Asia fared less well as investors fretted that even the hint of a shift in Fed policy might spark a withdrawal of funds from emerging markets. MSCI's broadest index of Asia-Pacific shares outside Japan <.MIAPJ0000PUS> was down 0.3 percent at one-month lows.

In Europe, Germany's DAX <.GDAXI> and France's CAC 40 <.FCHI> were down 0.2 and 0.1 percent respectively.U.S. retail sales numbers later Friday may fuel speculation over interest rates. Economists expect a solid rebound of 0.6 percent in August, up from a disappointingly flat reading in July and fueled by a boom in auto sales.

A strong result would only add to speculation the Fed might refine, or even drop, its commitment to keeping rates low for a "considerable time" after its asset purchase program ends. That has put yields on two-year Treasuries on track for their highest weekly close since April, 2011.

"The market will be on the defensive going into next Wednesday's Fed meeting due to the growing contingent who are convinced a hawkish language change is imminent," said William O'Donnell, head of Treasury strategy at RBS.

"But bearish expectations may surpass what the Fed will deliver," he added. "We think September is a bit premature for a language change and that the Fed is just looking to have the conversation."

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Illusioned by the Economic Recovery

By: GoldSilverWorlds

Europe’s economy is at a standstill. This summer was full of critical developments in the Eurozone: In June, the European Central Bank (ECB) decided to move into the territory of negative real interest rates! The deposit rate, which already was at 0%, was cut to minus 0.10%. Additionally, its refinancing rate was cut from 0.25% to 0.15%, and its marginal lending facility dropped to 0.4%. This was one of a package of measures the ECB said it was considering to combat disinflation in the Eurozone and give the economy a push. Due to the continued dim outlook of the economy, the ECB further reduced the deposit rate to minus 0.20% and the refinancing rate to 0.05% in early September.

In our first Outlook back in December 2012 we discussed measures of financial repression in our financial markets. The first one we listed was that of negative real interest rates and we expressed our concern of it continuing for some time. That the ECB resorts to this option comes as no surprise, the economy has been close to a standstill in the past two years and European debt levels remain alarmingly high. What better way to reduce the cost of debt? And as a bonus, banks are charged to pay the central banks for their deposits. Of course, these costs will shift to deposit holders who, as we stressed before, will not only lose money in real terms, but potentially in nominal terms as well.

Asset-backed securities… again?

To further encourage credit supply in the continent, the ECB also mentioned it will launch its targeted longer-term refinancing operations (TLTROs), an enhanced and improved bank lending mechanism (excluding mortgage lending). Auctions are scheduled for September and December this year. An initial USD400 billion will be up for grabs! But the biggest revelation was that the ECB would start a US-style bond-buying facility by purchasing asset-backed securities (ABS) from banks.

ECB President Mario Draghi is daring banks to test the controversial ABS buying program. Recently, the ECB revealed that it settled for BlackRock Inc. to advise on developing this ABS program. Asset-backed securities are financial instruments, which essentially are a repackaging of loans whether mortgages, auto credit, credit card debt, receivables among others. These are then sold on to investors. Ideally, this securitization reduces credit risk because ABS are spread across several underlying loans (diversification). But lest we forget what happened in 2008! Yes, BlackRock is no stranger to this field – it was one of four hired by the Fed to manage the Federal Reserve program in the midst of the crisis back in 2008. Now, BlackRock has more than USD4 trillion assets under management and is one of the largest investors in European ABS. But the fact that it has come to this option indicates that the monetary system in Europe is in shambles! The names of this program change over time, but in essence the outcome is the same: injecting more money into the system.

No recovery in sight

Europe and the world are holding on to the small recovery indicators, such as those released by the European Commission expecting the EU’s real GDP to go up by 1.6% in 2014 and 2% in 2015. Is this what we call a recovery? With these low figures along with close to zero inflation, Europe is in a battle for growth. 2Q2014 growth numbers were most certainly not reassuring: Germany, the largest EU economy, contracted by 0.2%, France was at a standstill, with small exceptions such as Spain, the Netherlands and Portugal reporting meager growth of less than 1%. The crisis in Ukraine played a significant factor no doubt as it affected production and the real economy. Demand for German industrials, particularly to Russia, has dropped significantly – Germany is Russia’s biggest trading partner in Europe. The EU had imposed sanctions on Russia last June for supporting separatists in Ukraine. And so the impact will still reflect in next quarter’s numbers. But the crisis is escalating with fears of possible Russian military intervention and Europe meeting to discuss a new set of sanctions. These developments will not fare well for the European economy, and certainly not for Germany, making the target growth of the year rather optimistic.

Safeguarding property rights is key to protect your wealth

The news flow has only supported my opinion that I explained earlier this summer: With the West accumulating more and more debt, along with real production and the real economy going nowhere, there is no reason for optimism. We don’t know how the future will look like and when the final shutdown of the system will actually occur. But what can be said is that all the problems, which led to the crisis in 2008, are still the same and haven’t been resolved. On the contrary, more money has been printed out of thin air and trillions of dollars of new debt has been directed into asset bubbles such as stocks and real estate. At the same time, it is obvious that the paper assets system is being used to destroy civil liberties in most countries and as Prof. Dr. Stahel describes in his article, this money is also being used to finance foreign intervention and wars.

This brings me to the important topic of international diversification. One should never put all eggs in one basket. Holding part of one’s wealth outside the jurisdiction one resides in and outside the banking system is of paramount importance. In this regard, we are convinced that the jurisdiction of the “Confederation Helvetica”, or better known as Switzerland, offers the best protection in terms of safeguarding private property rights. We should never forget why Switzerland became a safe haven in the first place. We have been and still are a little country with a small domestic market and no natural resources. This was the starting point of a culture based on trading property rights and self-determination enjoying minimum government interference. Switzerland, contrary to most of the world, has the understanding that the nation states are not ultimate “gods”, which the people have to serve or even sacrifice their lives for. The basis for such a concept, or better said, tradition has been and still remains, mutual respect, deep belief in private property rights, self-responsibility, neutrality, or rather, anti-interventionist principles, hard work, and the adherence to mutually agreed upon contracts. The Swiss confederation is the last remaining direct democracy based on the principles of decentralization. These values have been instilled over Switzerland’s 700-year history and remain part of our cultural DNA today. Due to these values we are convinced that we will continue to see Switzerland as a leader in offering the best protection for private wealth.

We can see the signs … the system is shutting down

As we said, we find that there is no reason to believe that the uncertainties in our system have been resolved. Instead, it is our understanding that we have more uncertainties today than a few years ago. This is also the reason why we believe that the global economy will not see a positive development in the years ahead. Understanding the fallacies of our system is essential to finding a prudent investment strategy to protect one’s wealth. We have seen political and military events directly affect the economy and its growth path – that is why we need to hold on to physical gold outside the banking system as our “insurance policy”. What we believe and are sure of is that holding parts of one’s wealth in physical gold and silver, stored outside the banking system, never made more sense. Monetary instruments are a convenient measure not to deal with the real problem, but rather to delay it. What we hear about recovery is pure fiction, an illusion, and we can now confirm that the signs of our system’s failure are drawing close.

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Better Days Ahead For U.S. Stock And Housing Market

By: Puru_Saxena

BIG PICTURE – After bottoming out in 2012, America’s housing market has climbed to a 6-year high and it is probable that the 2006-record will be surpassed within the next 2-3 years.

You will recall that we first turned positive about America’s housing market two years ago and at that time, we forecasted a multi-year upswing. Fast forward to today and property prices have already risen over the past couple of years and we expect them to appreciate for at least another 2-3 years.

Look. America’s housing market is highly cyclical in nature and historically, upswings have lasted for several years. Accordingly, it is conceivable that the ongoing bull market will also continue for longer than most investors anticipate at this time.

If you review Figure 1, you will observe that after a lengthy consolidation phase, the S&P/Case-Schiller Home Price Indices have climbed to levels not seen since 2008.  This is in line with our expectation and we believe that the 2006-record will be taken out during this multi-year upswing.

Figure 1: US housing – bull market underway!

Source: S&P Dow Jones Indices

Although the 2006-2009 housing bust was brutal, enough time has now elapsed to sustain a multi-year bull market in real-estate.  Furthermore, household formation and inflation are two factors which will continue to support property prices over the long-term.

Since the housing industry in the US employs millions of people, the ongoing recovery in real-estate will prove extremely beneficial for the world’s largest economy. It is notable that over the past several months, construction jobs have accounted for approximately 15% of employment growth in the US and this trend will probably accelerate in the future.

As millions of Americans return to full-time employment, they will start spending on discretionary items, thereby unleashing pent-up demand.  Moreover, as home prices continue to rise, the ‘wealth effect’ will have a tremendous impact on consumer sentiment and this will bring about prosperity in the US.

Make no mistake, the ongoing bull market in housing has been engineered by the Federal Reserve and the eventual monetary tightening will bring about the next bust. At present, the Fed Funds Rate is still at a historic low and most market participants are keenly monitoring data points to see when Ms. Yellen will start raising short-term rates.

If you review Figure 2, you will note that the US CPI rose by 2% over the past 12-months (left panel) and the US unemployment rate has now declined to approximately 6% (right panel).  Given the fact that the rate of inflation is now hitting against the Federal Reserve’s target rate and the jobs market is significantly better, the first interest rate hike must not be too far away. 

Figure 2: US economic data (CPI and Unemployment rate)

Source: Bureau of Labor Statistics

Although nobody really knows when the monetary tightening cycle will commence, we suspect that the first rate hike will occur in 6-9 months. If asset markets continue to advance until spring (likely scenario), then in an attempt to thwart animal spirits, it is likely that Ms. Yellen will raise the Fed Funds Rate in the first or second quarter of next year. 

When that happens, the stock market will probably embark on a 10-15% pullback but the initial move by the Federal Reserve should not trigger the next prolonged bear market.  After all, previous bull markets in history ended after several months of monetary tightening, so the ongoing primary uptrend should also continue until late into the rate hiking cycle.

Whilst we are on the topic of interest rates, it is worth mentioning that that long dated interest rates in the US have declined dramatically since January.  In fact, the decline in the 30-Year US Treasury Yield has been relentless and we are now trading at a multi-month low.

From our perspective, this slide in long dated bond yields has been brought about by the resurgence in deflationary fears.  You will recall that when the previous rounds of quantitative easing ended, market participants prepared for a deflationary scare by buying long dated US Treasury securities. This appears to be happening again and (once again) capital is flowing towards the safety of US government bonds.

At this stage, it is difficult to know whether the end of quantitative easing will bring about an economic slowdown.  However, if the housing market holds up in the US and business activity remains resilient, bond yields may reverse course and appreciate sharply.   

Although long dated interest rates in the US have depreciated over the past year and the yield curve has flattened somewhat, it still remains pretty steep (Figure 3). Undoubtedly, this is good news for the stock market and supportive of our bullish hypothesis.

Figure 3: US yield curve remains steep

Source: Bloomberg

As stated previously, prolonged bear markets in the past have always been preceded by the inversion of the yield curve, so the steep yield curve should sustain the ongoing festivities on Wall Street.

In addition to the favourable monetary environment, the technical data also remains supportive of the stock market.  For instance, approximately 70% of the NYSE stocks are currently trading above the 200-day moving average, new 52-week highs are significantly greater than the new 52-week lows and the Volatility Index (VIX) has plunged.

More importantly, the stock market’s breadth is strong and the NYSE Advance/Decline Line has climbed to a record high (Figure 4 - lower panel, on the following page).  It is noteworthy that during the previous bull markets, the NYSE Advance/Decline Line always topped out several months before the stock market, so the current strength in this indicator suggests that this uptrend has further to run.

Although there are no imminent red flags, there can be no denying the fact that we are indeed in the mature phase of this bull market.  After all, the primary uptrend commenced in March 2009, so this advance is already over 5 years old.  Furthermore, as is typical of a mature bull market, we are seeing a lot of divergence between the various industry groups.  Put simply, not every sector is participating in the advance and many leading momentum stocks have already broken down badly.

In terms of the favourable sectors, we are seeing strength in asset managers, airlines, auto companies, auto dealers, banks, biotechnology, energy (midstream and oil services), healthcare, insurance, railroads, real estate brokers, travel and semiconductors. Accordingly, we have allocated our equity portfolio to these areas and this strategy is now well positioned to profit over the following months.

In terms of the weak segments of the market, we are seeing ongoing weakness in the commodities counters, consumer staples, restaurant and retail stocks.  Therefore, unless the trend reverses, we do not recommend exposure to these industry groups.  
As far as geographical exposure goes, we continue to recommend over-weight positions in the developed world (Europe, Japan and the US).  Since April 2011, the developed world has outperformed the emerging nations by a wide margin and we expect this trend to continue for the foreseeable future. However, over the past few weeks, a number of emerging markets ETFs have broken out of multi-month trading ranges, so we now recommend modest exposure this area.

Figure 4: NYSE Advance/Decline Line – new high!

Source: www.stockcharts.com

In terms of specifics, we continue to see incredible momentum in India’s stock market!  You will recall that we first recommended exposure to this market several months ago and despite the recent run up, we see plenty of potential. 

Elsewhere in Asia, Hong Kong has recently broken out of a lengthy consolidation phase and even Taiwan’s stock market is gaining momentum.  So, our readers can consider looking for opportunities in these stock markets. 

Over in South America, Brazil’s stock market is showing signs of strength and the uptrend could continue for several months.

In summary, the monetary backdrop remains favourable towards stocks, America’s housing market is rebounding and a variety of technical indicators are showing strength.  Therefore, we continue to believe that the ongoing primary uptrend will continue for several months, so our readers should stay fully invested in common stocks.

Although this bull market is mature and we will get some volatility heading into spring, the path of least resistance remains up and investors should stay positioned for the northbound journey.

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Keane - My Shadow

My Shadow It's time to make a start To get to know your heart Time to show your face Time to take your place In every speck of dust In every universe When you feel most alone You will not be alone Just shine a light on me Shine a light I'll shine a light on you Shine a light And you will see my shadow On every wall And you will see my footprints On every floor It only takes a spark To tear the world apart These tiny little things That make it all begin Just shine a light on me Shine a light I'll shine a light on you Shine a light And you will see my shadow On every wall And you will see my reflection In your freefall Ooooooooh Ooh ooh Ooooooooh Ooooh ooh Just shine a light on me Shine a light I'll shine a light on you Shine a light Cuz when your back's against the wall That's when you show no fear at all And when you're running out of time That's when you hitch your star to mine We won't be leaving by the same road That we came by We won't be leaving by the same road That we came by We won't be leaving by the same road That we came by We won't be leaving by the same road That we came by

Italy's Ferrari reports record first-half revenues

 

Rome (AFP) - A day after Ferrari said its head was leaving after more than two decades, the Italian sports car brand on Thursday posted record revenues in the first half of 2014.

Net profits jumped 9.8 percent in the first six months of the year to 127.6 million euros ($165.1 million), the luxury automaker said in a statement.

And revenue surged 14.5 percent from the same time a year ago to an "absolutely unprecedented" 1.35 billion euros, helped by higher sales in the US, Japan, Australia and Britain, it added.

"It is a huge satisfaction for all of us at Ferrari to continue to achieve record economic results," outgoing president Luca di Montezemolo said in the statement.

"I'm sure that in a few months we will close an extraordinary year without precedent."

Ferrari on Wednesday announced Montezemolo would step down in October after 23 years at the helm, just weeks before the company floats in the US as part of its parent group Fiat Chrysler.

The top job at the biggest name in Formula One racing will be taken over by the head of parent group Fiat, Sergio Marchionne.

The two men had clashed over strategy, with Montezemolo reportedly hoping to keep the brand exclusive by limiting sales to some 7,000 cars a year and Marchionne pushing for higher sales.

Ferrari said Thursday it sold 3,631 cars in the first half of 2014, down 3.6 percent from a year earlier.

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