Apr052016
Are Chinese savers coerced into supporting a real estate Ponzi scheme?
By eliminating other alternatives for investing saving and encouraging real estate speculation, the Chinese government compels its citizens to sustain a Ponzi scheme, allocating resources where they are not needed.
People fuel financial manias with greed and foolish optimism. Generally, prices go up because prices were going up, and seeing that prices were going up, excited investors buy more, so prices keep going up. Once started, financial manias are self-fueling until the pool of great fools is exhausted and the entire edifice implodes under its own weight–at least that’s how it usually works.
The Chinese real estate market is an obvious bubble. Valuations are not justifiable by any standard metric, yet through a variety of government policies, the Ponzi scheme has inflated far beyond any rational level, and it shows no signs of popping. So how does the government do it? How is an unsustainable bubble sustained?
The government doesn’t give savers any other viable alternatives for storing their wealth.
The Real Reasons The Chinese Love Throwing Money Into The Housing Market
Wade Shepard, Mar 29, 2016
China’s real estate market sometimes seems more akin to a tourist trap than a bubble. Tourist towns tend to be overpriced because vendors know they have a captive audience who can’t easily take their money elsewhere, and the same goes for how China funnels investors into its housing market.
The fact of the matter is that if you’re not living hand to mouth you need to make a decision about how to store your excess wealth.
Do you keep it in the bank? In equities? Real estate? Options, futures, FOREX, gold? In the West, we have an array of places that we can relatively securely put our money which could potentially provide satisfactory returns, but in China, where economically viable options for investment are severely stunted, this just isn’t the case.
The allocation of household wealth in China looks a little like this: 46% bank deposits, 39% housing, and just 10-15% in financial assets, including stocks. Chinese investors tend to have a strong preference for putting their money in housing, coupled by a far weaker interest in other forms of investing. According to China’s National Bureau of Statistics, 90% of families in the country own their own home, while Nomura estimates that roughly 21% of China’s urban households now own more than one house, with some cities supposedly boasting 200% home ownership rates.
This is clearly the sign of a mania, but yet the mania is based on a structurally reinforced house of cards. The Chinese government created the circumstances where money must flow into real estate, then as the Ponzi scheme enriched early investors, a cultural bias developed that further reinforced participation in the Ponzi scheme.
China’s relatively high rate of multiple home ownership and desire to invest in real estate is partially made possible because of the fact that owning property there isn’t a continuous financial drain. There are no yearly property taxes — or they’re so low as to be virtually negligible, as is the case in Shanghai. Generally speaking, you pay all the taxes upon the initial purchase of a home and then don’t have to pay anything significant again until your freehold lease runs out (which is up to 70 years away). So this has created a very friendly environment for the people of China to park their long term savings in the concrete vaults which are better known as apartments.
You can imagine Chinese apartments as the world’s largest safe deposit boxes. In the United States, we don’t waste so many resources on the construction of places to store our wealth. The average safe deposit box is perhaps 3″ x 5″ whereas the average Chinese safe deposit box is 1,000 SF. But I suppose you could theoretically live in a Chinese safe deposit box–not that any of them do.
It is well known that Chinese banks pay interest rates that are much lower than inflation, so even though nearly half of household wealth in the country is kept in bank deposits this still isn’t seen as a particularly attractive option. Keeping money in the bank there is just a way to keep it liquid and easily accessible, and cannot be thought of as a viable investment option, as everybody knows that the longer their money is kept in there the more value it will lose.
Fueling this sentiment further is the fact that China’s currency, the yuan, has recently been stricken with a sudden and atypical amount of volatility due to capital controls being loosened in August of 2015. This strategic, though often misunderstood, move at liberalizing the currency lead to a drop from 6.2 to around 6.5 to the US dollar, making bank deposits seem even less attractive of a place for long term savings. …
So wealthy Chinese investors are still left with the old default option — the domestic housing market — as China’s core fiscal quagmire continues: too much money and not enough places to put it.
Notwithstanding the considerable media attention being paid to the potential reassurance of a housing bubble, China’s faith in real estate remains remarkably strong. But this is less because of a lack of awareness that the bottom could fall out the market than because there simply are no better options available. …
“As long as you have the money for the real estate, that is THE option,” Cody Chao, a medical student from Suzhou, asserted his country’s dominant financial sentiment with finality.Even if the entire Chinese economy was to collapse overnight, in a country of 1.3 billion people housing will always hold some kind of value. If you own your properties outright — as 80% of home owners in China do — then at the end of the day you are going to be left something that can at least be lived in.
Well, China has plenty of unused houses people can live in. In fact, they have 450,000,000 square meters of unsold housing. There is so much unused housing in China that some developers are tearing down houses that haven’t been used in the 10 years they existed. While building houses and then tearing them down 10 years later may boost the economy, it isn’t a very efficient use of scarce resources.
But like other totalitarian regimes, China isn’t particularly worried about efficiency. A lack of economic efficiency is often credited with the downfall of the Soviet Union. Chinese officials are more concerned with self-preservation, and even an inefficient economy is better than a contracting economy for keeping the elites in power.
[listing mls=”OC16061934″]
I remember a time on this website where it was vehemently denied that overseas asian buyers had any impact on Irvine Real Estate….
boy the way Glenn Miller played…..
….. those were the days…
Foreign investment has historically been a small number. In recent years this number has gotten larger, and much of it has been concentrated on new home purchases in Irvine. So while this didn’t have a large impact before, it does now.
Chinese buyers, for whom English is a second language, appear to represent nearly half of homeowners in many of the new Irvine communities.
Does the concept of a HELOC exist in China?
In other words, can partial withdrawals be made from the 1000 ft/sq safe deposit box?
It probably does, but it isn’t offered like here in the US. There aren’t as many people running personal Ponzi schemes based on appreciation like we have here.
China’s Gold Intent – ICBC Bank Reclassified as an LBMA Market Maker
ICBC Standard Bank, China and the world’s largest bank, has been reclassified as a spot Market Making Member of the London Bullion Market Association (LBMA) with effect from today according to a note posted on the LBMA website last night at 2100 GMT.
According to the post:
“In order to qualify as a LBMA Market Maker, a company must offer two-way quotations in both gold and silver to the other Market Makers throughout the London business day. Reclassification is the responsibility of the LBMA Management Committee. In deciding on the issue of reclassification, the Committee takes account of the views of the other Market Makers on the performance of the candidate company during an approximately three month probationary period.
Total LBMA membership stands at 146, consisting of 13 Market Making Members, 67 Ordinary Members and 66 Associates Members. The membership list can be found on the LBMA’s website.”
ICBC becoming a new LBMA market maker in the gold market, while expected, is an important development and again shows China’s intent with regard to becoming a key player in the global gold market. We are surprised by the lack of coverage of this important event but this could be due to the fact that the note was published at 9pm London time.
Still waiting for the Zero Hedge prediction of $2,000 gold to occur.
DOW:GOLD 1:1
Indicates when malinvestment has been purged. Recession has a long way to go.
Remember when people thought $5,000 gold was “in the bag”? Those days seem so quaint now.
Peter Schiff never lost hope.
Another China Bubble—-Subprime Housing Loans
NANJING, China—Government efforts to tackle a glut of vacant housing in China by spurring home lending have triggered a bigger problem: a surge in risky subprime-style loans that is generating alarm.
Home buyers in China normally put down a third of the cost of a new property upfront. But a rapid rise in buyers borrowing for their down payments—an echo of the easy credit that cratered the U.S. housing market and sparked the financial crisis—has led authorities to clamp down.
Peer-to-peer lenders, who raise money from investors and then lend it out at higher interest rates, made 924 million yuan ($143 million) in down-payment loans in January, more than three times the amount made in July, according to Shanghai-based consultancy Yingcan.
A senior banking executive at one of China’s top four state-owned banks said down-payment loans directly contributed to a recent run-up in housing prices in big cities. “It’s a risky practice that should be contained,” he said.
Officials are now stepping on the brakes. The central bank and the housing ministry last month started to crack down on loans that can be used by home-buyers to finance their down payments.
http://davidstockmanscontracorner.com/wp-content/uploads/2016/04/OJ-AH876_CHOUSI_9U_20160330121207.jpg
To scrape together the 30% down payment for a 1.5 million yuan apartment in Nanjing, Yang Jun, a 31-year-old office worker, borrowed from friends and family but still came up 100,000 yuan, or about $15,300, short.
The property developer offered him a loan for the rest.
“It helped me realize my Chinese dream,” Mr. Yang said. “A lot of young people like me would be priced out of the market without such financing help.”
Beijing began easing credit in late 2014 to help cities fill empty apartments—a legacy of a housing-construction boom fueled by a decade of urban population growth and cheap credit.
But despite a rise in down-payment loans and lower mortgage barriers for groups such as rural migrant workers, it has proven hard to unleash buying in the right places. Instead, the easing and incentives fed a property frenzy in China’s megacities.
Shenzhen, where housing prices have soared 57% since last year, according to official data, has tightened down-payment requirements. So has Shanghai, where housing loans more than tripled in January from a year earlier.
Data on loans used to finance down payments is sketchy, as such financing is a relatively new business. In addition, developers sometimes offer such loans, and banks offer mortgage applicants loans for renovations, taxes or travel that can be channeled toward the down payment, according to property agents. Agents say these loans can attract annual interest rates of up to 24%.
This whole shadow banking system in China is fascinating.
And perhaps a little frightening. Their real estate market was a Ponzi scheme before toxic lending took hold. They will inflate a Ponzi scheme on steriods once they allow lenders to “innovate”.
I think horrifying is a better word than fascinating.
You can tell when Redfin publishes an insightful post by the fact that Nela Richardson didn’t write it.
More Jobs And More Workers. What Does It Mean For Mortgage Rates?
There was good news on the jobs front today. Employers added 215,000 people to their payrolls in March and more people started looking for work, a sign of growing confidence in the labor market. Wages ticked up and unemployment held steady, according to the Labor Department.
Homebuilders were on a roll, too, adding lots of skilled workers, including 12,000 specialty contractors. In all, there were nearly 31,000 more residential construction jobs in March than there were a year earlier, a 4.5 percent increase. That’s good news for housing and the economy.
“These jobs not only helped feed strong employment growth but also provided a lift to the housing market, where the dearth of homes for sale has stymied homebuyers,” Redfin chief economist Nela Richardson said. “Much of the decline in new housing starts is attributable the lack of skilled construction workers, so the 12,000-worker increase in residential specialty trade contractors is welcome news.”
Wait, there’s more
All that hiring is getting more people off the couch. The share of working-age adults employed or looking for work rose to 63 percent, the highest level in two years. And the past two years of job growth is the best run we’ve had since the late 1990s, said Nariman Behravesh, chief economist at IHS Global Insight.
“This is no mean feat,” Behravesh said. “This is a vote of confidence on the part of workers regarding the health of the U.S. economy.”
https://www.redfin.com/blog/wp-content/uploads/sites/5/2016/04/Capture-1.png
So what?
The monthly jobs report is a critical measure of the U.S. economy and has the power to influence mortgage rates. In theory, good news generally boosts the odds that interest rates will go up.
That’s not likely this time. At the moment, Fed Chair Janet Yellen and her team at the central bank are more worried about the anemic outlook overseas. Most people are betting Fed policymakers won’t raise rates when they meet later this month.
“This is another solid jobs report that is likely to have little impact on the Fed decision later this month,” said Curt Long, chief economist of the National Association of Federal Credit Unions. For Yellen & Co., “concerns lie elsewhere, and the odds of an April rate hike are extremely remote.”
I suspect the # of new jobs created being reported (in recent years) is totally bogus; ie., today, the employment tax withholding receipts are down v 2011.
https://pbs.twimg.com/media/CeGNlB2XEAEGMPt.jpg
Oh wait, the growth rate is still positive LOL
PS: I look forward to the comic relief provided by the usual ‘shuck & jive’ brigade chiming-in 😉
Employment tax receipts, per your own chart, are not down from 2011. The % y/y increase is down. I.e., tax receipts aren’t rising as fast on a percentage basis in 2015 as they did in 2011. Personal current taxes have risen by 33.8% since 2011.
Disposable personal income has also increased by $1.6T since 2011.
Oh, and the homeownership rate is up by 0.5% YOY in the west region. What does that do to withholding?
If employment keeps rising, the homeownership rate will finally bottom out. Perhaps on the West Coast, it already has because we don’t have the foreclosure overhang of the East Coast judicial foreclosure states.
Dude, when will you learn not to use % YOY change graphs.
Zero Hedge has completely rotted your brain
CA Judge Rules In Favor Of Proposed High-Speed Rail Project
According to The Fresno Bee, a Sacramento, California, judge recently denied the efforts of Kings County Board of Supervisors to halt production of a high-speed bullet train from San Francisco to Los Angeles. This is yet another advancement for the project which has been held up in litigation and bureaucracy for the last several years.
Sacramento County Superior State Judge Michael Kenny ruled against the plaintiffs – opponents of the plan – which consist of Kings County farmer John Tos, Hanford resident Aaron Fukuda, and the Kings County Board of Supervisors. The plaintiffs argued that California High-Speed Rail Authority’s plan is not compliant with the terms of Bond Act Proposition 1-A which calls to release $9.9 billion for the high-speed rail. The act was approved by state voters in 2008.
The plaintiffs argued that California High-Speed Rail Authority’s plan violates the terms of bond act Proposition 1-A the following key areas. First, the plan is inconsistent with what voters approved on the ballot. The proposed system intends to combine high-speed rail with Caltrain commuter trains via electrified rail between San Jose and San Francisco which opponents say is not what voters agreed upon. The plan was modified from high-speed only rails when opposition in the San Francisco Bay area arose. Using a shared track system would save approximately $30 billion. Second, the plaintiffs argued that the proposed route would not traverse between San Francisco and Los Angeles in 2 hours and 40 minutes as stated in Proposition 1-A’s requirements. Lastly, it is that, in their opinion, the finances of the plan are erroneous and would be unable to operate within its budget without requiring public funds.
Despite the setback, attorney for the plaintiffs Stuart Flashman said, “Though the high-speed rail authority may have won this round, the ruling … provides ominous signs about the authority’s future use of bond funds. It notes that while the court considers it premature to find the system non-compliant, in its present stance it does not appear that use of bond funds would be permissible.”
Furthermore, Judge Kenny put a damper on what could be seen as a victory for proponents of the plan, “It appears at this time that the authority does not have sufficient evidence to prove the blended system can currently comply with all of the Bond Act requirements,” he stated, “the authority may be able to accomplish these objectives at some point in the future. This is an ongoing, dynamic, changing project.”
If the project is not high speed, then it is completely pointless. Amtrak already has a route from LA to Oakland that nobody rides because driving or flying is so much quicker.
When I went to San Francisco last November, my round trip plane ticket cost $140 on Southwest and the flight each way was only about 90 minutes. So if the train can’t meet the 2 hour and 40 minute goal mandated by the voters for a cost of $70 one way, most travelers aren’t going to bother riding the train for normal commutes once the “high speed” novelty wears off.
I am sure the State Government will begin Offering subsidized tickets or other incentives to paper over their boondoggle. Just think you can pay twice as much to get there 300% slower.
Exactly. They will build this expensive train, and other than as a novelty, nobody will ride it.
The price is alright even at the currently estimated $86 each way.
The speed though, 2:40 needs to be met.
Anything over 3 hours and nobody will ride it twice.
HUD to landlords: Rent to ex-convicts
U.S. Department of Housing and Urban Development Secretary Julián Castro revisited they are not going to tolerate landlords banning renters with criminal records from leasing their properties.
According to HUD, the Fair Housing Act prohibits discrimination in the sale, rental, or financing of dwellings and in other housing-related activities on the basis of race, color, religion, sex, disability, familial status or national origin.
HUD’s Office of General Counsel issues this guidance concerning how the Fair Housing Act applies to the use of criminal history by providers or operators of housing and real-estate related transactions. Specifically, this guidance addresses how the discriminatory effects and disparate treatment methods of proof apply in Fair Housing Act cases in which a housing provider justifies an adverse housing action – such as a refusal to rent or renew a lease – based on an individual’s criminal history.
According to the New York Times:
Julián Castro, the HUD secretary, is expected on Monday to announce guidance that details his agency’s interpretation of how the fair housing law applies to policies that exclude people with criminal records, a group that is not explicitly protected by the act but falls under it in certain circumstances. Federal officials said landlords must distinguish between arrests and convictions and cannot use an arrest to ban applicants. In the case of applicants with convictions, property owners must prove that the exclusion is justified and consider factors like the nature and severity of the crime in assessing prospective tenants before excluding someone.
Mr. Castro said housing bans against former offenders were common.
“Right now, many housing providers use the fact of a conviction, any conviction, regardless of what it was for or how long ago it happened, to indefinitely bar folks from housing opportunities,” Mr. Castro said in a statement. “Many people who are coming back to neighborhoods are only looking for a fair chance to be productive members, but blanket policies like this unfairly deny them that chance.”
This is probably going to be challenged in court. They are basing their authority on the fact that black and brown people are statistically more likely to have a criminal conviction, so by refusing housing to ex-cons it creates a disparate impact to minorities. I think that logic is pretty flimsy because criminal records are absolutely a factor that should be taken into consideration when deciding between two rental applications.
Unlike recovering drug addicts (who are legally considered disabled), ex-convicts are not a protected class of people.
Thus discrimination against them should be legal.
I am pretty certain most drug addicts will also have been convicted of numerous other felonies as well.
If someone has a criminal record, they probably have several other grounds for not renting to them beside the criminal past. This group probably doesn’t have sterling FICO scores, stable income, or other reasonable qualification standards a landlord can use to screen them out.
More Baby Boomers abandon the American Dream
Mortgages and homeownership may not be the American Dream as Baby Boomers begin moving into the apartments and urban areas, according to an article by Gail MarksJarvis for the Chicago Tribune.
Homeownership decreased among people ages 50 to 64 from 2005 to 2013, according to the article. In the past 10 years, Baby Boomers account for more than half of the nation’s renter growth.
From the article:
Renting is a unique twist for many boomers, who began their adult lives when the sheer size of their generation starting households drove a sharp climb in home prices in the ’70s and ’80s. For years many assumed renting was a waste of money and a home an essential investment. But after living through the recent housing crash, that assumption has been tarnished and renting now seems fine.
It is not a higher percentage of people wanting to rent than previous generation, but the large size of the Baby Boomer population caused such a shift in the market, according to Lawrence Yun, National Association of Realtors economist.
1)The populous is taxed more and more as time passes to support the continued rollover of debt.
2)RE is a fixed target
3)Recent history affirms that home equity is a temporary credit that can be deleted.
Well played Boomers.
Prop 13 results in a lower percentage of tax-to-value the longer you hold the home. So your point about taxes rising over time is true in nominal terms, but not inflation adjusted Any property tax increase is also mitigated by the MID.
http://www.realtytrac.com/news/home-prices-and-sales/2015-year-end-home-equity-and-underwater-report/
“Over the past three and a half years, the number of seriously underwater properties has been cut in half, but we continue to deal with a long tail of seriously underwater properties, and it will likely be another five years at least before most of those remaining underwater properties move into positive equity territory,” said Daren Blomquist, vice president at RealtyTrac. “At the other end of the spectrum, the growing number of equity rich properties reflects a moribund move-up market and restrained leveraging of home equity by U.S. homeowners.”
As of the end of 2015 there were 12.6 million (12,621,274) U.S. properties that were equity rich (at least 50 percent equity), representing 22.5 percent of all properties with a mortgage. The number of equity rich properties at the end of 2015 was up 2.1 million (2,145,015) from the 10.5 million (10,476,259) representing 19.2 percent of all properties with a mortgage at the end of Q3 2015 and up 1.4 million (1,371,628) from the 11.2 million (11,249,646) representing 20.3 percent of all properties with a mortgage at the end of 2014.
What does your comment have to do with the Boomers who “abandoned the american dream to rent”(aka topic at hand)?
Absolutely nothing.
Way to deflect.
I gotta go with el O on this one. If anything, California seniors should remain homeowners and enjoy the low tax basis from buying a house years ago.
I would just qualify the MID. If your income is near the US median household income =/- 50%, the MID doesn’t likely benefit you much, if at all. If your household income is well above the median US household income, the AMT likely greatly affects your ability to deduct property taxes.
If your income is high, and you’re out of the AMT, the MID benefits you greatly. If your income is very high, the Pease phase-down begins to negate all of your Itemized Deductions.
“Serial Refinancers” Played Large Role in 2015 Refi Wave
Banks enable personal Ponzi Schemes again
JACKSONVILLE, Fla., April 4, 2016 /PRNewswire/ — Today, the Data & Analytics division of Black Knight Financial Services, Inc. (NYSE: BKFS) released its latest Mortgage Monitor Report, based on data as of the end of February 2016. This month, in light of its recent reports on rising equity levels nationwide, Black Knight looked at those on the other end of the spectrum and found that as of the end of 2015, there were still 3.2 million borrowers in negative equity positions, representing $126 billion in underwater first and second lien housing debt. While negative equity rates continue to improve on the national level, the recovery is decidedly imbalanced in terms of both home price levels and geography. As Black Knight Data & Analytics Senior Vice President Ben Graboske explained, borrowers whose homes are in the lowest tier of home prices continue to struggle with high negative equity rates.
“Throughout 2015, the negative equity population in the U.S. decreased by over 30 percent, bringing another 1.5 million homeowners out from underwater on their mortgages,” said Graboske. “However, even after four years of improvement, the recovery has not reached all corners. When we looked at the population by home price levels, we found that over half of the nation’s underwater properties are in the lowest 20 percent of their respective markets. That’s the highest share on record. In fact, while the national negative equity rate is now 6.5 percent, for homes in the lowest price tier, it’s over 16 percent. Furthermore, this group is seeing a slower recovery than the nation as a whole. At the current rate of improvement, it would take more than five years for the negative equity rate in this lowest price tier to reach 2005 levels – roughly two-and-a-half years longer than homes in the top 20 percent.”
Retiring Baby Boomers Are Not the Main Reason for the Drop in Labor Force Participation
The Washington Post repeated one of the major myths about the recovery in an article in the March employment report when it told readers:
“In the long shadow of the recession, the share of the population in the work force sunk to 62.4 percent in September, the lowest level in nearly 40 years. The government calculates that number by counting the people who have a job or are actively looking for one. That means students, retirees and stay-at-home parents are generally not considered part of the labor force.
“Indeed, the shrinking of America’s workforce is largely due to broader demographic shifts. The labor force peaked at 67.3 percent of the popuation in 2000 and has been drifting downward ever since. The biggest driver has been the retirement of Baby Boomers, who are turning 65 at the rate of 10,000 each day. Young people are also staying in school longer and less likely to work during their studies.”
Actually, the main reason the labor force participation rate (LFPR) has fallen has been a drop in the LFPR among prime age workers (ages 25–54). This peaked in 2000 at 82.8 percent in early 2000. In September of 2015 it bottomed out at 79.2 percent, 3.6 percentage points below its 2000 peak. The drop in LFPR in the recession and weak recovery has been primarily a story of workers in their prime working years leaving the labor force, not baby boomers retiring or young people staying in school longer.
The piece also cites reports by Wells Fargo and the Kansas City Federal Reserve Bank indicating that those with more education are doing much better in finding work in the recovery. This is not clear from the data. In the last year the employment rate of people with college degrees has not changed, while it fell by 0.6 percentage points for those with some college.
By contrast, the employment rate for people with just high school degrees fell by just 0.1 percentage point. It rose by 1.7 percentage points for workers without high school degrees. This gap is even more striking since the retiring baby boomers are less-educated on average than younger workers, so their retirement should be having a disproportionate effect in reducing the employment rate of less-educated workers.
This study of course adjusts for the difference in the number of baby boomers exiting the 25-54 range and the number of millenials entering it. Not to mention the fact that unemployment is higher for those entering the range vs. those exiting it, due to the fact that they have fewer skills.
The mix of the 25-54 prime age demographic is dynamic. The tail end of baby boomers are exiting while the peak of millenials is entering. Doesn’t take much thought to conclude that shifts in mix don’t mean unemployment is increasing for prime age workers.
When college degree unemployment is 2.5%, a significant reduction won’t happen. High unemployment of the poorly educated means that employment increases must come from this demographic.
According to BLS, the biggest percentage drop has been among non-Hispanic white men.
http://www.bls.gov/emp/ep_table_303.htm
2004 – 73.0%
2014 – 68.4%
This is why Trump resonates.
Yes. That is a very strong statistic that helps explain his appeal.
I know sad stories of guys in that demographic. They were working construction or some trade and their work went to zero when the big recession started. Some went through painful divorces and lost their homes. They are late 50’s early 60’s and broke. It’s a sad place to be. Before you judge them ask yourself how you would cope in that situation. Not sure what I would do.
Why Silicon Valley’s “It’s Different This Time” Is Now A Broken Record
Like a broken record whenever a profit measure was asked of “Silicon Valley” (i.e., everything social or tech) as to when something would either be profitable or, begin returning investor cash with either net profits or dividends. The response was always the same “It’s different this time.” Meaning: there aren’t any now, but just you wait! Some are still waiting, and waiting, and waiting, and….
The only reason this retort was tolerated for as long as it had been is for that other “it’s different this time” meme that took hold in unison when it came to everything one thought they understood about investing, free markets and capitalism itself: quantitative easing e.g., QE.
As long as the Fed enabled “free money” to chase momentum plays – the gravy train to cash-out-riches was running on rails. Yet, here too investors, savers, and more would ask “When does normalization type policies begin that benefit the prudent balance sheet or fiscally responsible?” And here the retort was much same, “Not now, but just you wait!” And again they too are still waiting, and waiting, and waiting, and…
Of course the answer to the question of why we’re waiting is, you guessed it – “it’s different this time.” Four words that replaced a teenager’s one word answer to everything: “Because!” But that’s what a Ph.D is for I guess – making the simple more complex. But I digress.
However, today there are visible cracks showing in the armor of that once fool-proof defense. Everywhere you look (but you have to open your eyes too see) the once celebrated IPO cash-out where dreams and fortunes are made regardless if the business model works, stable, or is even viable, has been all but erased 4 months into 2016. And how much longer it goes on is anyone’s guess.
As we stand today, as of this writing, there have been zero IPO’s of any “unicorns.” Zero, as in zip, zero, nada. Why? Is it – different this time?
As a matter of fact I’m of the opinion that today: the more words used to protect the fairy-tale meme will actually work against it. I’ll finish with the latest example for anyone who wants to truly understand just how encompassing the “it’s different this time” narrative really has become and – to what extent.
There is probably no other industry that has been disrupted, broken, changed, and far more other ways than I can type – than music. And there has been no other business model in the “eyeballs/ears for ads” internet genre than streaming music services. Billions of listeners, billions of this, billions of that. Valuation touted of $BILLIONS, and more. “It’s the way of now!” “Streaming is it!” “Invest now or miss the boat!” “This is where the money of the decade is to be made!” And on, and on, and on. However, there’s a problem.
Remember how I implied “would unravel quicker than a sweater thread?” And all it would take was when the meme of “it’s different this time” began being debunked in ways so glaringly obvious without saying a word? Well, here is the latest fulfillment of that argument.
Streaming music; for all that it’s been touted to be; both the be all, and, end all of music. Along with why its business model would be the darling of investors everywhere. I ask you not only to contemplate this yourself, but also, think about how this one fact is going to play into the minds of not only current investors, but rather, those desperately needing new investors today for all that “cashing out” to take place tomorrow. Ready?
Vinyl sales, yes, as in those plastic looking arcane relics of yesteryear that adorn many a bar room wall or lie boxed is some grandparents basement hasn’t just made some resurgence that you didn’t read on you latest social media “eyeballs for ad revenue” of choice. No, this resurgence isn’t making such a comeback as to replace digital. However, what is has done is antiquated that meme of “it’s different this time” when it comes to those “eyeballs for ads” supported models. Ready? (If you’re an investor in one form or another of the “eyes for ads” model you might want to take a seat. Don’t say I didn’t warn you.)
According to the Recording Industry Association of America (RIAA) vinyl sales generated more revenue in 2015 than ALL the ads/advertising on YouTube™, Spotify™, and Soundcloud™ – Combined!
But what about all those eyeballs/and ears you ask? Sorry, but the pun just writes itself:
It’s differen..It’s differn…It’s differen…It’s differen…It’s differen…It’s differen…
Black Lives Matter Activist: “If Trump Wins We Will Incite Riots Everywhere”
The social fallout from Trump’s rising popularity continues with the most disturbing event taking place recently when prominent Black Lives Matter activist and rapper Tef Poe tweeted a message for “white people”: if Donald Trump wins the presidency, “niggas” will ‘incite riots everywhere.’
“Dear white people if Trump wins young niggas such as myself are fully hell bent on inciting riots everywhere we go. Just so you know,” Poe tweeted. A screenshot of the tweet was captured below by the Daily Media.
http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2016/03/27/160316tweet_0.jpg
He followed up with another promise: “Trump wins aint no more rules fammo. We’ve been too nice as is.”
As Daily Media adds, “Poe is by no means a nobody, he has appeared in innumerable articles charting the rise of ‘Black Lives Matter’ and was credited with coining the phrase, “This ain’t your grandparents’ civil rights movement.”
The rapper was one of the co-founders of Hands Up United, a “social justice” organization that emerged after the death of Michael Brown that was responsible for coordinating large BLM protests in the St. Louis area.
Ironically, as the website updates, Poe has since deleted his tweet and then claimed that he never made the comments, instead suggesting it was “slander.”
“He’s now whining about “slander”. Talk crap, then play the victim when you get challenged on your crap. Same process EVERY time with social justice warriors.”
This actually makes sense. It would explain all of the crazy things coming out of his mouth:
“Donald Trump Is Beginning His Exit Strategy”
http://www.huffingtonpost.com/richard-zombeck/donald-trump-is-beginning_b_9608654.html
Wait what? You’re not going to chastise ‘Despicable P’ for his threats of violence against white people?
Bit of a false equivalency there, no?
Nice deflection, but nonetheless I see a lot of parallels:
-Both leaders of energized political movements
-Both issue controversial tweets
-Both use the politics of race
-Both imply using violence
-Both whine about slander
What are the differences in your mind?
One is running for President leading the Republican party’s nomination. The other is a community activist.
+1 to MR
Obama was a community activist, thus, not a false equivalency. jussay’n 😉
Obama’s a community activist … who happens to have a JD from Harvard Law School. I’ll go out on a limb and suggest this rapper is not a college grad…
If he’s a high school dropout, he’s one of the FEW not supporting Trump! Ouch.
You have attacked Trump supporters, and even police providing security at Trump rallies, as bigoted in the past. Level of education never seemed to factor into your criticism in those instances.
https://www.youtube.com/watch?v=BvaXwBSXc0w
“chopper” = assault rifle
“hollows” = hollow point bullets
AND “religion of peace”
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