End of QE2, resumption of RE and equity Bear

QE3 will happen. It is the Fed's only weapon to support the US economy. Political opposition will turn to political support when faced with the idea of unemployed Americans walking like Egyptians.

There will be no double dip, at least not in NY. Nothing will dent the $1,000 psf in Manhattan. Dreams of 50% drop are unrealistic. Prices will rise as will rents. "What goes up, must come down" is not applicable to NYC real estate. QE3 will provide cheap money for further development and RE investments.

Or something.

> There will be no double dip, at least not in NY.

Aren't we past that? We've already had the double dip...

Nothing will dent the $1,000 psf in Manhattan.

that's the take-away...you read it here.

My prediction:

No QEIII because the bond markets would go crazy.

QEII is the worst economic policy ever followed in the history of the Fed: it has defined "stagflation" nothing grows but prices.

Current House of Reps. proposals to reduce federal spending at this point are zany. Coupled with the crash that will necessarily happen when QEII is stopped & all of the happy margin now in the system works its way out, reductions in federal spending will cause a Double Dip.

Rents are currently RISING in Manhattan because housing prices have not fallen enough. Thus, as was in yesterday's New York Times, conversions to rentals are on a quick rise to the tune of thousands of new units in a very short period of time. Neither the current uptick in rents, nor current property prices, are sustainable.

We are in a period of Monetarist fiscal and monetary policy: it will be disastrous. In fact, it is disastrous as commodity prices have increased, oil is at $110 a barrel, gold is ridiculous.

This bunch of Fed Loonies are basically implementing Bernake's PhD dissertation: flood the world with money. Unfortunately, that works only to a point. The last time they did it was after the dot.com bust, which led to the housing boom which led to the housing bust, which is now leading to stock market and commodities market price patterns that have never been seen before in the history of the modern world. It is crazy.

And the bunch of House of Reps. Loonies - led by Michelle Bachmann for President! - is even crazier.

"Rents are currently RISING in Manhattan because housing prices have not fallen enough. Thus, as was in yesterday's New York Times, conversions to rentals are on a quick rise to the tune of thousands of new units in a very short period of time."

I actually agree with this part. Seeing more and more folks going for the rental option, and the stats seem to say the same.

Because housing has another 30% to fall, that's why rents are rising. But rents are more flexible, & I don't think it will be a long-term phenom.

Especially since the rest of the economy is headed for a double-dip. Why DID I vote for Obama?

HILLARY! HILLARY!

Just because things are falling down around us, it does not mean Manhattan will follow. Historically, city-states such as ours have always survived the fall of empires around them. Look at Rome. Still kicking!

"The following are 25 reasons to be absolutely disgusted with the U.S. economy....

#1 There are now 6.4 million fewer jobs in America than there were when the recession began.

#2 In Southern California, the average price of a gallon of gasoline is $1.00 higher than it was at this time last year.

#3 The average price of gasoline in the United States has jumped about 20 cents in just the last two weeks.

#4 Over the past 12 months the average price of gasoline in the United States has gone up by about 30%.

#5 In the 8 days leading up to the "historic" $38.5 billion budget deal, the U.S. national debt increased by $54.1 billion dollars.

#6 The $38.5 billion in budget cuts that the Republicans and the Democrats have agreed to represent approximately one percent of the federal budget.

#7 During the 2010 campaign, the Republicans promised voters they would cut $100 billion from the budget for 2011. Instead, they gave in when the Democrats offered just $38.5 billion.

#8 The Obama administration had been estimating that the federal budget deficit for fiscal 2011 would be approximately 1.6 trillion dollars. Now it will likely be somewhere around 1.55 trillion dollars which will still be an all-time record.

#9 According to numbers released by Deloitte Consulting, a whopping 875,000 Americans were "medical tourists" in 2010?.

#10 The median pay for CEOs increased by 27 percent during 2010.

#11 Thanks to globalism, U.S. workers now must directly compete for jobs with workers in places such as Indonesia. In Indonesia, full-time workers make as little as two dollars a day. So how are Americans supposed to compete with that?

#12 Last week, the price of gold set a new all-time record on Tuesday, on Wednesday, on Thursday and on Friday.

#13 The price of silver rose almost 7 percent last week alone.

#14 Total home mortgage debt in the United States is now about 5 times larger than it was just 20 years ago.

#15 According to the Economic Policy Institute, almost 25 percent of U.S. households now have zero net worth or negative net worth. Back in 2007, that number was just 18.6 percent.

#16 Americans now owe more than $903 billion on student loans.

#17 According to the New York Times, as of 2009 the wealthiest 5 percent of all Americans had 63.5 percent of all the wealth in America. Meanwhile, the bottom 80 percent had just 12.8 percent of all the wealth.

#18 According to a recent report from the National Employment Law Project, higher wage industries accounted for 40 percent of the job losses over the past 12 months but only 14 percent of the job growth. Lower wage industries accounted for just 23 percent of the job losses over the past 12 months and a whopping 49 percent of the job growth.

#19 The first week of air strikes in Libya cost the U.S. government about 600 million dollars.

#20 The price of corn has more than doubled over the past year.

#21 According to the U.S. Bureau of Labor Statistics, the average length of unemployment in the U.S. is now an all-time record 39 weeks.

#22 Back in the 1950s, corporate taxes accounted for about 30 percent of all federal revenue. Today they account for less than 7 percent of all federal revenue.

#23 If the U.S. government eliminated all discretionary spending and all defense spending it would still not balance the budget.

#24 It is being projected that U.S. government debt will rise to about 400 percent of GDP by the year 2050.

#25 Americans spend approximately 27.7 billion dollars a year preparing their tax returns.

That last statistic really gets me. During the month of April the American people are going to be spending massive amounts of time and money to prepare their taxes.

But what do Americans get in return for their taxes?

http://www.zerohedge.com/article/money-problems-never-seem-end-25-reasons-be-absolutely-disgusted-us-economy

"Look at Rome. Still kicking!"

That's really funny. Look at Carthage.

pulaski....that's depressing...we're focked....bad

i'm going out on the ledge

Don't Bottom - Just head to Carthage. Or Phoenicia. Or, heck, Machu Pichu.

Ottoman sounds much more comfortable.

i have standards. i won't go to LIC.

Could LIC be sown with salt, as well, as the elephants are crossing the Alps?

stupid me--i'm thinking furniture and alan was thinking empire

how's mesopotamia?

"Nothing will dent the $1,000 psf in Manhattan.

that's the take-away...you read it here."

Well, there could be one thing, I suppose.... shudder to think.

http://gizmodo.com/#!5791247/how-a-fukushima+level-disaster-would-affect-you-in-new-york-la-or-chicago

"Nothing will dent the $1,000 psf in Manhattan.
that's the take-away...you read it here."

Thing is, apartments have already sold for well below that in Manhattan? So is that really a barrier?

Is someone going to go "I was about to sell for $850 psf, but I realized that would bring the average down, so I won't..."?

;-)

Manhattan will retreat to about $700 psf. It will take time, but just look at all those rental conversions.

End of qe2 will additionally raise long term rates as the fed has been artificially holding down yields in hopes to jump start the economy. As rates move higher, real estate will contract as financing will tighten.

S&P downgrade of US debt outlook to "negative" this morning is not going to help one bit. The Fed is already circling the wagons and QE3 is sure to follow.

http://www.businessinsider.com/sp-revises-us-debt-outlook-to-negative-2011-4

QEIII is not happening - what is causing the slowdown is low interest rates, because it's fueling the surge in commodity prices. That's what Saudi Arabia basically said when the CUT production, despite oil's being at $110 a barrel: there's actually a glut that belies the bubble prices.

Inflation, when it happens, happens very quickly. I couldn't believe it when I hear a Fed governor say that they wouldn't raise rates till core inflation reached 1.5%, a 50% rise. That means CPI, at 7%, will have to rise to 11% before the Fed stops pumping all this money into the economy that has nowhere to go.

HWH, the yield curve is already unflattening - mortgage rates are going up. The Fed can only control short-term interest rates, and even then only the risk-free rate.

This is not going to end pretty.

The presumed death of Q.E. is premature. Fed likes to stay on the gas pedal long and hit the brakes late. I assume they'll continue to prime he pump until after the elections.

The rating agency story is dumb. As long as we can print money and pay out debt back in dollars there is no real immediate risk of defaul

Perhaps.

Keep in mind, though, that when QE1 ended March 30, 2010 30-year Treasury yields were at 4.7%. On 8/27/10, when Bernanke gave his Jackson Hole speech announcing QE2 30-year Treasury yields had dropped to 3.7%. (The economy had headed south following the end of QE1 and everyone was talking about a possible double-dip.) Could the economy soften again?

I tend to be concerned about a possible resurgence of inflation and long term interest rates. But it is not a slamdunk.

Besides the Fed buying treasuries, there's still regulatory pressure on the banks to pile into "good assets" and repair the balance sheet via any carry trade that carries no credit risk. So it's treasuries, agency mbs and cmo's. Lots of pressure to keep rates low, none of which have anything to do with inflation.

To that end Citi just announced the sale of 12.7 billion of "bad assets"
Basel III is sill coming and the "good earnings" being reported by the banks is a farce. Consider that mortgages are valued on an actuarial and not mark to market basis, so any bad loan can be modified and pretended to be current while the bank avoids taking a loss. Just because the banks stopped foreclosing doesn't mean that the pile of delinquent loans went away.

No, RS, mortgages are marked to market. MBS's can't be, though, because they are impossible to value, because no one knows the prepayment risk.

Banks didn't stop foreclosing, either. In fact, it's their new blood sport.