‘Temporary factors’ behind Australia’s recent economic growth spurt, IMF says

Annual review of the Australian economy also criticises rise in underemployment and longer-term unemployment

The Australian economy could expect a stronger performance if the recent improvement in the terms of trade boosts business confidence and unlocks investment, the International Monetary Fund said.

The IMF said Australia’s economic performance had remained remarkable compared with other countries, but warns there was a downside risk to the outlook if investment remained subdued should company profits remain under pressure for longer.

Related: Harping on about economic growth makes politicians seem out of touch | Greg Jericho

Continue reading…

“Cheapest” US Treasuries In 3 Years Spark Japanese Bond Selling, Send 10Y JGB Yields Positive At 8-Month Highs

At 225bps, the extra yield gained from buying 10Y US Treasuries over 10Y JGBs appears to have been the catalyst for tonight's sudden moves in bond markets. The widest spread since 2013 has sparked JGB selling (10Y JGB yields +2bps broke above 0.00% and back at their highest since March) and UST buying (10Y UST -6bps, 30Y<3.00%)

“Why don’t we invest in the U.S. and forget about JGBs?" said Kazuaki Oh’E, the head of fixed income at CIBC World Markets Japan Inc. in Tokyo.

And that appears to be what investors have done… (sending 10Y JGB yields above 0%)…

 

Leaving Japanese banks a little overextended as the yield curve goes nowhere…

Move to new UK inflation measure sparks controversy

Views divided over decision by Office for National Statistics to shift focus to CPIH, which includes housing costs

In the midst of all the market turmoil following Donald Trump’s US election victory last week, the UK’s Office for National Statistics announced an important change in how it publishes inflation numbers – and not everyone is happy.

From March next year, statisticians will drop their focus on the consumer prices index (CPI) in favour of CPIH, which seeks to measure the housing costs of owner-occupiers.

Statement on the future of consumer price #inflation statistics in the UK https://t.co/esKX9h9yFp

Continue reading…

Zuora latest cloud company to launch predictive data product

Zuroa Insights data Zuora, the cloud company that helps SaaS companies and others manage their subscription businesses, launched Zuora Insights today, a product designed to help customers understand the nuances of the data behind the subscriptions. Like so many SaaS companies these days, Zuora understands that there is value in the data they produce on a daily basis as a byproduct of simply doing business.… Read More

Whiff of Panic in Miami’s Condo Market

By Wolf Richter, WOLF STREET

The Miami-Dade County condo market is coming under severe stress, and turmoil is spreading. There are two aspects: supply and sales activity overall, and the more obscure but highly indicative “preconstruction market.”

Preconstruction condos are a favorite playground for condo flippers. They buy the units before construction begins. When the building is completed, some of the buyers (in recent years 30% to 40%) flip their units at a profit, benefiting from the run-up in condo prices in the interim. This activity is crucial in helping developers fund their working capital. Alas, the math has stopped working.

The overall condo and townhouse market in Miami-Dade County is already in trouble. In October, sales plunged 30% year-over-year, while inventory for sale rose to over 14,000 units as of November 1, according to StatFunding’s Preconstruction Condo Market Update.

At the current sales rate, that makes for over 13 months’ supply. The blue bars in the chart from StatFunding represent the swooning sales (in units, left scale). The green line represents the ballooning inventory (in units listed for sale, right scale):

us-miami-dade-condo-sales-inventory-2016-10

There is some seasonality. So here is another way of looking at these sales on a year-over-year basis (red line = 2016 sales):

us-miami-dade-condo-sales-2012_2016-10

Behind the scenes, it looks a lot worse: the preconstruction market is in the process of unraveling. A total of 4,525 condos were completed between 2012 and 2016 at 20 large projects (80+ units each). Of them, 878 “preconstruction” units are now listed for sale by investors who’d bought from developers before construction began – 19% of the total units in those projects! At the 234-unit Marina Palms North, completed a year ago, 93 units are for sale.

But only 47 resales have actually occurred over the last six months. This makes for a supply of 112 months, or nearly a decade, at the current sales rate. At seven of those developments, with a combined 209 units listed for sale, no sales have occurred over the past six months, and the months’ supply would be infinite.

Of those 47 sales, 43% produced net losses after commissions. Now even more flippers are willing to take a loss: 70 units have been listed with underwater asking prices, up from 44 on August 1 and from 14 on May 1. But losses will be higher: 30% of the units that were sold at a loss had asking prices above break-even.

And it will spread from there: These losses are establishing a down-trend in the “comparable sales” data – the Holy Grail by which the industry values properties – which will depress future asking and sales prices further.

Just then, new supply will flood the market. Over the next 24 months, another 10,328 units at large developments are scheduled to be completed.

If the recent average of 30% to 40% of these new units is listed for resale, it would add another 3,614 units to the list, on top of the 878 units of 2012-2016 vintage listed today. This would increase the supply to 468 months at the current sales rate. That would be 39 years’ supply!!

No one will wait 39 years to sell a condo. Something is going to give. Prices may drop until demand materializes. Sellers may flood the already flooded rental market with these units. Or as Andrew Stearns, Founder and CEO of StatFunding put it, “something unexpected may occur due to imbalances in the market.”

At the five large developments completed between August 2015 and June 2016 with a total of 912 units, 156 units are for sale. Developers still own 123 units. Only 25 of them are listed for sale and are included in the 156. The remaining 98 developer-owned units are not listed for sale. Developers are just sitting on them. It’s the shadow inventory. The units listed for sale and the shadow inventory combined amount to 254 units, or 28% of all units in the developments.

After the prior condo crash during the Financial Crisis, and through to 2015, all developers sold all units. In the past, the moment developers got stuck with unsold condos marked “the inflection point in a condo cycle.” In the Press Release, Stearns said, “It looks like we may be experiencing the same thing all over again.”

But unsold units can be costly for developers. StatFunding:

Some developers have not repaid their construction loans, others have taken out bridge loans. Developers are also responsible for taxes, maintenance fees, and insurance of unsold units. What will developers do to liquidate unsold units?

Market gurus are eagerly proclaiming that this time, the condo cycle is different because preconstruction condos are sold with a “50% deposit.” But this isn’t a 50% deposit. It’s a series of five 10% progress payments due at at the time of reservation, at contract, at groundbreaking, at concrete-pour at the 15th floor, and at Top Off. They typically spread over 24 months.

When a buyer defaults on a progress payment in this market, with little possibility of selling the unit, everyone from the lenders to the developers is bending over backwards to accommodate the nonpayment. Also, alternative lenders have sprung up with loans for the defaulted progress payments. The actual number of defaults is a secret closely guarded by developers (though their lenders know).

But when the project is completed and the buyer with defaulted progress payments attempts to get a mortgage to finalize the purchase, which is what the developer wants to happen, the bank sees the defaulted progress payments along with the stress in the condo market and might not offer a mortgage. This is when the whole deal falls apart, even as the buyer is in arrears with the progress payments. Hence, the value of that “50%  deposit” to bail out the developer can be minimal.

Progress payment defaults “are on the rise,” according to Stearns, “and everyone in the preconstruction condo ecosystem is trying to cope with the issue.” These defaults are “a new risk to the market.”

And now the ultimate nightmare has happened for preconstruction condo flippers: The first big condo project in the area has stalled in this condo cycle, “which could be a sign of things to come,” Stearns says.

In September, the developer of the 247-unit H3 Hollywood ran out of funds and halted construction halfway into it. This is in Fort Lauderdale, Broward County, which is adjacent and to the north of Miami-Dade County. While they’re different markets, this incident is a harbinger of what may occur in Miami.

If the developer fails to get funding to finish the project, buyers of preconstruction units are at risk of losing all or almost all of their deposits. Stearns:

“Most preconstruction buyers do not understand that most of their deposit is used as working capital to build the condo project, and that if the project fails, they might lose their deposit.”

Foreclosures suddenly spike most since the last Housing Bust. Read…  What the Heck’s going on with Foreclosures? Why this Spike?

Stay Alert, America: The Worst Is Yet To Come

Submitted by John Whitehead via The Rutherford Institute,

“Those who do not remember the past are condemned to repeat it.”—Philosopher George Santayana

Stay alert, America.

This is not the time to drop our guards, even for a moment.

Nothing has changed since the election to alter the immediate and very real dangers of roadside strip searches, government surveillance, biometric databases, citizens being treated like terrorists, imprisonments for criticizing the government, national ID cards, SWAT team raids, censorship, forcible blood draws and DNA extractions, private prisons, weaponized drones, red light cameras, tasers, active shooter drills, police misconduct and government corruption.

Time alone will tell whether those who put their hopes in a political savior will find that trust rewarded or betrayed.

Personally, I’m not holding my breath.

I’ve been down this road before.

I’ve studied history.

I know what comes next.

It’s early days yet, but President-elect Trump—like his predecessors—has already begun to dial back many of the campaign promises that pledged to reform a broken system of government.

The candidate who railed against big government and vowed to “drain the swamp” of lobbyists and special interest donors has already given lobbyists, corporate donors and members of the governmental elite starring roles in his new administration.

America, you’ve been played.

This is what happens when you play politics with matters of life, death and liberty.

You lose every time.

Unfortunately, in this instance, we all lose because of the deluded hypocrisy of the Left and the Right, both of which sanctioned the expansion of the police state as long as it was their party at the helm.

For the past eight years, the Left—stridently outspoken and adversarial while George W. Bush was president—has been unusually quiet about things like torture, endless wars, drone strikes, executive orders, government overreach and fascism.

As Glenn Greenwald points out for The Washington Post:

Beginning in his first month in office and continuing through today, Obama not only continued many of the most extreme executive-power policies he once condemned, but in many cases strengthened and extended them. His administration detained terrorism suspects without due process, proposed new frameworks to keep them locked up without trial, targeted thousands of individuals (including a U.S. citizen) for execution by drone, invoked secrecy doctrines to shield torture and eavesdropping programs from judicial review, and covertly expanded the nation’s mass electronic surveillance…

 

Liberals vehemently denounced these abuses during the Bush presidency… But after Obama took office, many liberals often tolerated — and even praised — his aggressive assertions of executive authority. It is hard to overstate how complete the Democrats’ about-face on these questions was once their own leader controlled the levers of power… After just three years of the Obama presidency, liberals sanctioned a system that allowed the president to imprison people without any trial or an ounce of due process.

Suddenly, with Trump in the White House for the next four years, it’s all fair game again.

As The Federalist declares with a tongue-in-cheek approach, “Dissent, executive restraint, gridlock, you name it. Now that Donald Trump will be president, stuff that used to be treason is suddenly cool again.”

Yet as Greenwald makes clear, if Trump is about to inherit vast presidential powers, he has the Democrats to thank for them.

A military empire that polices the globe. Secret courts, secret wars and secret budgets. Unconstitutional mass surveillance. Unchecked presidential power. Indefinite detention. Executive signing statements.

These are just a small sampling of the abusive powers that have been used liberally by Obama and will be used again and again by future presidents.

After all, presidents are just puppets on a string, made to dance to the tune of the powers-that-be. And the powers-that-be want war. They want totalitarianism. They want a monied oligarchy to run the show. They want bureaucracy and sprawl and government leaders that march in lockstep with their dictates. Most of all, they want a gullible, distracted, easily led populace that can be manipulated, maneuvered and made to fear whatever phantom menace the government chooses to make the bogeyman of the month.

Unless Trump does another about-face, rest assured that the policies of a Trump Administration will be no different from an Obama Administration or a Bush Administration, at least not where it really counts.

For that matter, a Clinton Administration would have been no different.

In other words, Democrats by any other name would be Republicans, and vice versa.

This is the terrible power of the shadow government: to maintain the status quo, no matter which candidate gets elected.

War will continue. Surveillance will continue. Drone killings will continue. Police shootings will continue. Highway robbery meted out by government officials will continue. Corrupt government will continue. Profit-driven prisons will continue. Censorship and persecution of anyone who criticizes the government will continue. The militarization of the police will continue. The government’s efforts to label dissidents as extremists and terrorists will continue.

In such a climate, the police state will thrive.

The more things change, the more they will stay the same.

We’ve been stuck in this political Groundhog’s Day for so long that minor deviations appear to be major developments while obscuring the fact that we’re stuck on repeat, unable to see the forest for the trees.

This is what is referred to as creeping normality, or a death by a thousand cuts.

It’s a concept invoked by Pulitzer Prize-winning scientist Jared Diamond to describe how major changes, if implemented slowly in small stages over time, can be accepted as normal without the shock and resistance that might greet a sudden upheaval.

Diamond’s concerns are environmental in nature, but they are no less relevant to our understanding of how a once-free nation could willingly bind itself with the chains of dictatorship.

Writing about Easter Island’s now-vanished civilization and the societal decline and environmental degradation that contributed to it, Diamond explains, “In just a few centuries, the people of Easter Island wiped out their forest, drove their plants and animals to extinction, and saw their complex society spiral into chaos and cannibalism… Why didn’t they look around, realize what they were doing, and stop before it was too late? What were they thinking when they cut down the last palm tree?”

His answer: “I suspect that the disaster happened not with a bang but with a whimper.”

Much like America’s own colonists, Easter Island’s early colonists discovered a new world—“a pristine paradise”—teeming with life. Almost 2000 years after its first settlers arrived, Easter Island was reduced to a barren graveyard by a populace so focused on their immediate needs that they failed to preserve paradise for future generations.

To quote Joni Mitchell, they paved over paradise to put up a parking lot.

In Easter Island’s case, as Diamond speculates:

The forest…vanished slowly, over decades. Perhaps war interrupted the moving teams; perhaps by the time the carvers had finished their work, the last rope snapped. In the meantime, any islander who tried to warn about the dangers of progressive deforestation would have been overridden by vested interests of carvers, bureaucrats, and chiefs, whose jobs depended on continued deforestation… The changes in forest cover from year to year would have been hard to detect… Only older people, recollecting their childhoods decades earlier, could have recognized a difference.

Sound painfully familiar yet?

Substitute Easter Island’s trees for America’s republic and the trees being decimated for our freedoms, and the arrow hits the mark.

Diamond observes, “Gradually trees became fewer, smaller, and less important. By the time the last fruit-bearing adult palm tree was cut, palms had long since ceased to be of economic significance. That left only smaller and smaller palm saplings to clear each year, along with other bushes and treelets. No one would have noticed the felling of the last small palm.

We’ve already torn down the rich forest of liberties established by our founders. They don’t teach freedom in the schools. Few Americans know their history. And even fewer seem to care that their fellow Americans are being jailed, muzzled, shot, tasered, and treated as if they have no rights at all. They don’t care, that is, until it happens to them—at which point it’s almost too late.

This is how the police state wins. This is how tyranny rises. This is how freedom falls.

A thousand cuts, each one justified or ignored or shrugged over as inconsequential enough by itself to bother. But they add up.

As I make clear in my book Battlefield America: The War on the American People, each cut, each attempt to undermine our freedoms, each loss of some critical right—to think freely, to assemble, to speak without fear of being shamed or censored, to raise our children as we see fit, to worship or not worship as our conscience dictates, to eat what we want and love who we want, to live as we want—they add up to an immeasurable failure on the part of each and every one of us to stop the descent down that slippery slope.

It’s taken us 200 short years to destroy the freedoms our founders worked so hard to secure, and it’s happened with barely a whimper of protest from “we the people.”

So when I read about demonstrations breaking out in cities across the country and thousands taking to the streets to protest the threat of fascism from a Trump presidency, I have to wonder where were the concerns when access to Obama came easily to any special interest groups and donors willing and able to pay the admissions price?

 

When I see celebrities threatening to leave the country in droves, I have to ask myself, where was the outcry when the government’s efforts to transform local police into extensions of the military went into overdrive under the Obama administration?

 

When my newsfeed is overflowing with people wishing they could keep the Obamas in office because they are so cool, I shake my head in disgust over this “cool” president’s use of targeted drone strikes to assassinate American citizens without any due process.

 

When legal think tanks are threatening lawsuits over the possibility of Trump muzzling free expression, I can’t help but wonder where the outrage was over the Obama administration’s demonizing and criminalization of those who criticized the government.

 

And when commentators who previously dismissed as fear-mongering and hateful any comparison of the government’s tactics to Nazi Germany are suddenly comparing Trump to Hitler, I have to wonder if perhaps we’ve been living in different countries all along, because none of this is new.

Indeed, if we’re repeating history, the worst is yet to come.

A Record 25% Of Used Car Trade-Ins Are Underwater

We have frequently written about the unsustainable trends in new car sales in the United States created by the combination of lower rates, loosening underwriting standards and voracious demand for new securitizations by wall street and pension funds that will do just about anything for an extra 20bps of yield. 

Today, we find that Edmunds’ “Q3 2016 Used Vehicle Market Report” reveals that many of the same problems also afflict the used auto market.  The most startling takeaway from the report is that the percentage of used cars being traded in with negative equity values continues to spike and currently stands at an all-time high 25%.  Moreover, the average balance of the negative equity also continues to rise and stood at $3,635 for Q3 2016, up from roughly $2,750 in Q3 2011.

Auto

 

Meanwhile, the average used car price also continues to rise and stood at $19,200 as of Q3 2016.  This implies that, since most people simply roll their negative equity into their new loans (because, why not?), many used car buyers are likely sitting on loans where ~15-20% of their outstanding balance simply reflects their negative equity from their previous car. 

Autos

 

But wait, there’s more (think weekend CNBC infomercial).  Despite rising average used car prices and rising negative equity, average monthly payments for used cars have managed to stay pretty much flat since Q3 2011.  Obviously, monthly payments are determined by 3 variables: beginning loan balance, interest rate and term.  While interest rates have certainly come down from Q3 2011, they haven’t declined nearly enough to offset a $3,300 increase in starting principal balance which indicates that, like new car loans, used car loan terms are getting stretched out further and further to manage monthly payments.

Autos

 

Of course, none of this is terribly surprising…just another ponzi scheme, courtesy of accommodative fed policies, which will all come crashing down at some point.  And while timing when bubbles will burst is always tricky, with terms already maxed out, treasury yields spiking and used car purchasers extremely sensitive to monthly payments we suspect the time could very well be near.

Can President Trump Really “Open Up Libel Laws”?

Submitted by Mike Krieger via Liberty Blitzkrieg blog,

Ken White over at law blog Popehat has written a very useful article on whether or not Trump is likely to be the existential threat to free speech that so many are concerned about.

Fortunately, he argues that free speech is pretty well protected at the judicial level, adding that most contemporary attempts to whittle away at First Amendment rights actually emanate from “liberal” judges targeting hate speech, as opposed to conservative ones.

Here’s the article: Lawsplainer: About Trump “Opening Up” Libel Laws.

Donald Trump famously said he’d like to “open up” libel laws. How much should that concern you?

 

From my perspective — as a First Amendment advocate and an opponent of Trump — it should concern you as an attitude about speech, but not much as a policy agenda.

 

Let’s start with what he said.

 

“One of the things I’m going to do if I win, and I hope we do and we’re certainly leading. I’m going to open up our libel laws so when they write purposely negative and horrible and false articles, we can sue them and win lots of money. We’re going to open up those libel laws. So when The New York Times writes a hit piece which is a total disgrace or when The Washington Post, which is there for other reasons, writes a hit piece, we can sue them and win money instead of having no chance of winning because they’re totally protected,” Trump said.

 

I begin with the proposition that Trump is a bullshitter. The polite way to put that is that he says things that are not intended to be taken as factual statements. Was this one? Was it merely emotive? Did he think he could do this sort of thing? It’s anybody’s guess. My guess it that it was mostly bullshit — worrying in terms of his attitude towards free expression, but not a policy agenda.

 

Let’s talk about the substance, such as it is.

 

Trump complains about the press being able to run “hit pieces” and purposely “negative and horrible and false” articles. Part of that is true and part is false. The press can absolutely run hit pieces and negative and horrible articles. We don’t have sedition laws any more, and it’s not illegal to be biased or “unfair” in a philosophical sense. Only false statements of fact can be defamatory. Arguments, characterizations, insults, and aspersions can’t be, unless they are premised on explicit or implied false statements of fact.

 

When a public figure like Trump sues for defamation, they must prove that the defendant made a false statement with actual malice — that is, they must show that the statement was false and that the defendant either knew it was false or recklessly disregarded whether or not it was false. “Reckless disregard” means something like deliberately ignoring manifest signs that the statement was false. That’s been the standard since New York Times v. Sullivan in 1964. Note that even under this standard, a media outlet that wrote a “purposely . . . false” statement of fact can be held liable. It’s a difficult standard, but it can be done, as Rolling Stone found out this month.

 

So. There are two impediments to Trump and his sympathizers being able to sue whomever they want for “hit pieces” or “negative” and “horrible” statements. First, there’s the requirement that defamation involve a statement of fact, not an opinion or insult. Second, there’s the actual malice standard that applies to defamation claims against public figures.

 

Trump doesn’t have a clear way to “open up” either one.

 

Defamation is a creature of state law, not federal law. When you sue someone for defamation, you do so under a statute or the common law of one of the states, not under federal law. You might sue in federal court if that court has jurisdiction (a tedious discussion I’ll spare you today), but that doesn’t make defamation law federal — you’d still be suing under state law. Federal law touches defamation law only to this extent: since 1964 both state and federal courts have applied First Amendment standards to defamation claims, and First Amendment law is often developed by federal courts. In addition, a few overarching federal laws limit state defamation law (for instance, Section 230 of the Communications Decency Act, which says that a service provider isn’t liable for defamation based on what a user posts, and the SPEECH Act, which prevents enforcement of foreign libel judgments in U.S. courts unless those judgments comply with First Amendment standards).

 

As President, Trump will appoint federal judges, from the Supreme Court to the various Courts of Appeal to the trial judges on the many District Courts. But that’s not a clear or easy path to “opening up” defamation law and changing either the actual malice standard or the requirement that defamation involve false statements of fact. The Supreme Court has supported the First Amendment very strongly in the last generation, particularly in comparison with other rights. The Court has repeatedly rejected recent attempts to create new exceptions to the First Amendment or to narrow it. Consider Snyder v. Phelps, in which the Supreme Court ruled 8-1 that Westboro Baptist Church protests at funerals were protected speech. That represented a firm refutation of the notion that speech could be limited because it is hurtful or offensive. Or consider the somewhat obscure but incredibly important United States v. Stevens, in which the Court — ruling 8-1 again — overturned a federal law against “crush videos” (don’t ask) and sternly rebuked the government’s position that courts can create new ad hoc exceptions to the First Amendment based on a weighing of the value of speech. Or consider Reed v. Town of Gilbert last year, in which the Court unanimously (though with some justices taking a different route) held the line on the idea that laws that restrict speech based on content are subject to strict scrutiny.

 

Unlike, say, Roe v. Wade, nobody’s been trying to chip away at Sullivan for 52 years. It’s not a matter of controversy or pushback or questioning in judicial decisions. Though it’s been the subject of academic debate, even judges with philosophical and structural quarrels with Sullivan apply it without suggesting it is vulnerable. Take the late Justice Scalia, for example.  Scalia thought Sullivan was wrongly decided, but routinely applied it and its progeny in cases like the ones above.1 You can go shopping for judicial candidates whose writings or decisions suggest they will overturn Roe v. Wade, but it would be extremely difficult to find ones who would reliably overturn Sullivan and its progeny. It’s an outlying view — not chemtrial-level, but several firm strides in that direction. Nor is the distinction between fact and opinion controversial — at least not from conservatives. There’s been some back and forth over whether opinion is absolutely protected (no) or whether it might be defamatory if it implies provably false facts (yes) but there’s no conservative movement to make insults and hyperbole subject to defamation analysis. The closest anyone gets to that are liberal academics who want to reinterpret the First Amendment to allow prohibitions of “hate speech” and other “hurtful” words. It seems unlikely that Trump would appoint any of these.

Indeed, fake liberals wanting to restrict free speech is a trend I’ve focused on for many years.

See:

Obama Enters the Media Wars – Why His Recent Attack on Free Speech is So Dangerous and Radical

Executive Director of the Kansas City Library System Issues Dire Free Speech Warning

Glenn Greenwald Confronts American “Liberals” Trying to Destroy Free Speech

Speechless – UCLA Engages in Absurd, Anti-Intellectual and Dangerous Attack on Campus Free Speech

Here We Go…Slate Magazine Bashes the First Amendment

In short, there’s no big eager group of “overturn Sullivan” judges waiting in the wings to be sent to the Supreme Court. The few academics who argue that way are likely more extreme on other issues than Trump would want.

 

So: whether or not Trump really wants to “open up” defamation law, it’s unlikely he can.

 

The statement remains concerning, though, because it displays a contempt towards First Amendment values and freedom of the press. It carelessly conflates false statements and negative coverage. It encourages the public to scorn First Amendment rights, and the public already does that enough already. It also likely encourages defamation litigation, which by its nature silences speech through the expense and stress of litigation even when the defendant prevails. For those, I condemn Trump.