alarm-clock-public-domain-460x306By Michael Snyder

Economic activity is slowing down all over the planet, and a whole host of signs are indicating that we are essentially exactly where we were just prior to the great stock market crash of 2008.  Yesterday, I explained that the economies of Japan, Brazil, Canada and Russia are all in recession.  Today, I am mainly going to focus on the United States.  We are seeing so many things happen right now that we have not seen since 2008 and 2009.  In so many ways, it is almost as if we are watching an eerie replay of what happened the last time around, and yet most of the “experts” still appear to be oblivious to what is going on.  If you were to make up a checklist of all of the things that you would expect to see just before a major stock market crash, virtually all of them are happening right now.  The following are 11 critical indicators that are absolutely screaming that the global economic crisis is getting deeper… Continue reading “ALARM BELLS GO OFF AS 11 CRITICAL INDICATORS SCREAM THE GLOBAL ECONOMIC CRISIS IS GETTING DEEPER”


A piece from Goldman Sachs economists Zach Pandl and Jan Hatzius: – Federal Reserve looks likely to begin raising short-term interest rates in December – Based on our economic forecasts, we currently expect the FOMC to raise the funds rate by 100bp next year:

  • Federal Reserve looks likely to begin raising short-term interest rates in December
  • Based on our economic forecasts, we currently expect the FOMC to raise the funds rate by 100bp next year
  • One hike per quarter
  • We see the risks to this forecasts as skewed to the downside at the moment

For economic growth in 2016:

  • US economy likely to be driven by domestic demand … in particular consumer spending
  • Forecast GDP will increase by 2.25% Q4/Q4 next year
  • Narrow and broad measures of unemployment have fallen significantly

Source: Goldman Sachs chief economist expects 100bp of Fed rate hikes in coming year

Based on this forecast by major economists, how do you see it affecting the real estate market?  Significantly?  Slightly?  Not at all?

Felix Zulauf Gives Rare Interview

Most likely, you have not heard of Felix Zulauf.  He is one of the top money managers in the world.  He is the owner of Zulauf Asset Management in Switzerland.  Mr. Zulauf  manages money for some of the wealthiest people in the world.  He rarely gives interviews.  He did recently give an interview to King World News.

Mr. Zulauf confirms what I have believed, and often written about here, that the current debt of the US (and other countries) is not sustainable.  As a result, we are entering a deflationary period, and will likely experience a financial crisis greater than any we have experienced in the past.  He feels that our monetary system will break down and we will likely have to issue new currency.  He recommends owning gold, real estate and other hard assets rather than currency.

If you want to listen to what I consider a very enlightening and informative interview, please listen to this brief interview of Felix Zulauf.

Go here and then just click on the purple mp3 button just above his biography on the left hand side.

The Bears Come Forth – A Major Crash Coming?

Barry Ritholtz writes a blog post that predicts doom and gloom… soon.

“I am on an email list that is from a group of  smart hedgies and strategists. The discussions range far and wide, and while I sometimes disagree with the conclusions, but I always find the conversation provocative.

Lately, they’ve been emailing a collection of warnings of various fund managers and strategists:

• Long time Dow Theorist Richard Russell set out this dire warning:

“Do your friends a favor. Tell them to “batten down the hatches” because there’s a HARD RAIN coming. Tell them to get out of debt and sell anything they can sell (and don’t need) in order to get liquid. Tell them that Richard Russell says that by the end of this year they won’t recognize the country. They’ll retort, “How the dickens does Russell know — who told him?” Tell them the stock market told him.”

Reuters reported that well regarded hedge fund manager Seth Klarman “sees few bargains in the current environment and predicted on Tuesday that the stock market could suffer another lost decade without any gains.” Klarman is concerned that we could see “another 10 years of zero returns.” He has 30 percent of assets at his $22 billion Baupost Group in cash, he said. (His firm started in 1982 with $27 million and has averaged 20 percent annual gains ever since).

Raoul Pal of Global Macro Investor got even more specific warning in his newsletter: Crash Is Coming In Two Days-To-Two Weeks. He sees as an “archetypal crash pattern — a sharp decline followed by a failed rally followed by a collapse.”

• But as Art Cashin of UBS pointed out in his morning missive, stark bear warnings are not restricted to equities. He cites Nouriel Roubini warned on the U.S. Treasury Market:

“Bond market vigilantes have already woken up in Greece, in Spain, in Portugal, in Ireland, in Iceland, and soon enough they could wake up in the U.K., in Japan, in the United States, if we keep on running very large fiscal deficits,” Roubini said at an event at the London School of Economics yesterday. “The chances are, they are going to wake up in the United States in the next three years and say, ‘this is unsustainable.”

• Lastly, I was tickled by this tongue in cheek warning about Gold from Jeremy Grantham: The GMO chair guaranteed that Gold will crash. Why the gold crash? Because he just bought some . . .”

I hate to be the bearer of bad news, but when you get a preponderance of professional financial types agreeing that the market is headed in a particular direction, they are either right, and we should pay attention, or they may be wrong, and seeing the wrong signals. In my view, there are too many professionals who do this for a living who see a crash coming, for different reasons, that my bet is that it will happen. This might be a good time to do some stock liquidation and hold cash. It might also be a good time to move some of that capital out of stocks and bonds into hard assets like gold or real estate. Keep in mind that real estate generates cash flow where gold does not. Something to think about.

Is The United States Headed For A Commercial Real Estate Crash Of Unprecedented Magnitude?

Will commercial real estate be the next shoe to drop in the ongoing U.S. financial crisis?  While most eyes are on the continuing residential real estate disaster, the reality is that the state of the commercial real estate market in America could soon be even worse.  Very few financial pundits are talking about this looming disaster but they should be.  The truth is that U.S. commercial property values are down approximately 40 percent since the peak in 2007 and currently approximately 18 percent of all office space in the United States is now sitting vacant.  That qualifies as a complete and total mess, but the reality is that the commercial real estate crisis is just starting.

Continue reading “Is The United States Headed For A Commercial Real Estate Crash Of Unprecedented Magnitude?”

Limited Job Losses Despite Harsh Weather Encouraging Sign; Positive Territory on Horizon

According to the Marcus & Millichap blog the limited number of jobs lost in February, despite harsh weather, could signal better times ahead:

March 5, 2010

  • With multiple employment sectors recording growth in February, despite anticipated losses due to harsh weather, the economy has begun to generate limited employment traction. Employers cut an unexpectedly low 36,000 jobs during the month, suggesting hiring may turn positive in the second quarter. The professional and business services sector reiterated employers’ need for additional staff by hiring 51,000 workers in February, but, as in previous months, caution reigned, with 47,500 of the added jobs being temporary. Steady increases in temporary employment often foreshadow the creation of full-time jobs as the economy emerges from recession. With five consecutive months of additions through February, temporary employment has signaled the economy is making continued headway in its choppy recovery.
  • Among other sectors, education and health services and leisure and hospitality added an aggregate 39,000 workers last month. Manufacturers created jobs for the second month in a row, adding 1,000 positions to payrolls and marking the first time since 2006 that manufacturing employment has expanded in successive months. These positive contributions to total employment, however, were more than offset by the losses in other sectors, including the elimination of 64,000 construction jobs and 12,000 transportation and warehousing jobs that may largely be attributable to poor weather, particularly in the Northeast.
  • The addition of 342,000 people to the work force last month helped keep the unemployment rate at 9.7 percent. Though this figure could be partially related to a re-benchmarking of data in January, it may also signal increased confidence in the employment market. The household survey indicated that the number of employed rose by 308,000 individuals in February. This information suggests small businesses, which tend not to be captured in the broader BLS nonfarm employment figures, may have resumed hiring on a limited scale.
  • Impact on Commercial Real Estate

  • The unemployment rate among 20- to 34-year-olds, or the prime apartment renter cohort, remained unchanged last month at 11.7 percent but has improved from a recent high of 12.2 percent last fall. Strengthening employment opportunities and job growth should stimulate the apartment sector going forward, especially as younger individuals who delayed forming households during the recession enter the work force. Following an increase of 130 basis points in 2009, national apartment vacancy will decline 30 basis points this year to 7.7 percent as more than 89,000 units get absorbed. Rents will continue to lose traction, however, as effective rents will slip 3 percent.
  • The modest improvement in manufacturing employment and further strengthening in the ISM Manufacturing Index bode well for warehouse and distribution properties in the months ahead. Nationwide industrial vacancy surged 200 basis points last year to 12.6 percent on negative net absorption of 139 million square feet. Space demand will recover slightly this year, although vacancy will rise 20 basis points.

Warren Buffet Says U.S. Housing Market Will Recover In 2011

Billionaire Warren Buffett said the U.S. residential real estate slump will end by about 2011, predicting that’s how long it will take demand for homes to catch up with the supply.Calif and nationwide housing prices

“Within a year or so, residential housing problems should largely be behind us,” Buffett wrote Feb. 27 in his annual letter to shareholders of his Berkshire Hathaway Inc. “Prices will remain far below ‘bubble’ levels, of course, but for every seller or lender hurt by this there will be a buyer who benefits.”

The worst housing decline since the Great Depression has left one in five U.S. mortgage holders owing more than their houses are worth. Record foreclosures last year flooded a real estate market already glutted with unsold property, causing new construction to fall to the lowest in at least 50 years. The fall in homebuilding is the only fix unless the U.S. decides to “blow up a lot of houses,” Buffett joked.

“People thought it was good news a few years back when housing starts — the supply side of the picture — were running about two million annually,” said Buffett, the chairman and chief executive officer of Omaha, Nebraska-based Berkshire. “But household formations — the demand side –only amounted to about 1.2 million.”

Berkshire, which owns a real-estate brokerage, a business that constructs pre-fabricated houses and units that make products used in homebuilding, has suffered amid the slump. Profit at Clayton Homes, the pre-fab housing business, fell about 9 percent to $187 million before taxes, while earnings at carpet manufacturer Shaw Industries fell 30 percent.

Read more.

CBRE Has Optimistic Outlook for Industrial Sector

CB Richard Ellis (CBRE) has published its Industrial Leading Indicator Report for the first quarter of 2010 which has a favorable outlook for the industrial real estate market in the US.

To summarize briefly: The sector was not hit with the problems of the office and retail markets. Demand for space has continued and they expect the vacancies to peak at 15% and then drop to around 10%. Another reason is that industrial property owners tend not to leverage as much as owners in the other sectors. They expect that the industrial market will start to recover as we come out of the recession in 2012 and that the next three years will be years of high demand for industrial space as businesses gear up again.

With increasing consumer spending, firms will begin hiring again in 2010 and continue to rebuild their inventories. The demand for industrial space will rebound, it is expected to turn slightly positive by year-end 2010 but the average quarterly pace of demand will be lower than that seen during the housing boom with quarterly net absorption averaging only 30 million square feet through the end of 2011. Over the following three years however as consumers and firms make up for consumption deferred throughout the downturn, demand for industrial space will match the pace set in the boom period from 2004 through 2007 before settling into a more stable pattern in the years beyond 2015.

The report does not appear to be online, so I can’t link to it. If you are interested in the report, send an email to gaminoff at aminoff dot com and I will forward a copy of the report to you.