Tuesday, October 13, 2015

"I'm so scared right now..."

Is the FED malicious or incompetent?  I've always assumed it's both.  The failure to raise rates at the September meeting and the ensuing market turmoil it unleashed seems to support that theory.  The Federal Reserve NEEDS the next recession to begin soon so the inevitable downturn can be managed.  Conversely it can't be seen as causing the recession.  Blind them with bullshit seems to be the plan.  After the "dovish-hold" that no one saw coming, the FED then walked backwards and then forwards and then backwards again the forward guidance language.  I don't think the FED has a problem with the crash happening with rates at zero, they've still got more QE and NIRP in their chamber.  They likely have a BIG problem with it happening 2 or 3 years from now with the DOW, S&P and PE ratios further into full retard territory.  Can FED obfuscation tip some domino that causes the recession without the FED seeming to have caused it?   I have no idea.

How does this relate to housing you say???
 
I would argue that ultimately the FED will be seen as irrelevant to what we unfortunately still call "markets".  When the momentum turns this time no amount of QE will move market participants back into assets at anything close to these evaluations. 2011-201X will be looked upon as one big dead cat bounce.  The FED will have gone full Japan with ZIRP 4evah.  There won't be enough money seeking the US Real Estate Laundromat to keep prices anywhere near current valuations.  The Credit Mega Bubble ends not with a bang but with a whimper.  Deflation will prove unavoidable as no combination of policy tools and political will can put enough money into working peoples pockets to maintain anything near current prices even with rock bottom mortgage rates.  And don't forget baby-boomers will be selling in droves to fund retirements...

Sit tight true believers.  If you are wise with your money and can keep liquid and employed, you might be looking at fast dropping RE prices AND rock bottom interest rates.  If so you can thank Grandma Yellin and crew for blinking.

4 comments:

  1. It can be darned hard waiting though. Especially when you've got a family, and you want some "roots" and stability. Waiting for that next recession is killer right now. My gut tells me it's going to come eventually. I thought the way the stock market was headed this summer, we were starting something...and then zoom, back up another 1000 points for the DOW.

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  2. This is my second bubble. I came into my prime earning years in 2005, right as the insanity was kicking in. Since 2004 you had a 3 year window from 2010-2012 where market forces kinda were allowed to work. 3 years of sanity out of 12. Believe me I know it's rough brother. Just remember the math is the math is the math. Keep building liquidity and make sure your employment plan is a few steps ahead of the overall economy. We will have our time :-)

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    Replies
    1. Second bubble for me too. Bought near the beginning of the last bubble, and sold after it had imploded...which is why I'm so wary of jumping in during this bubble.

      Zero debt, and employment is pretty much guaranteed. I'd have to see an AMAZING house to get me off the fence.

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