He's Baaaack

Awhile back I posted about Mikkel Thorup and his "advice".  Shortly after that, his incessant emails dried up.  No loss.  Then a couple of months ago I got a promo email.  Shortly after that, I received another "newsletter" type thing.  And it looks like he and his tools have only gotten worse.

First, he's completely come out as a COVID denier who believes "woke" is destroying civilization.  Second, he's using that fear-mongering to sell his latest grift, Veritas Villages scattered throughout developing nations, where you can live independent of "government" grids because you have your own water and power and apparently (though Thorup doesn't mention this point of course) your own staff of locals to maintain all this because you sure as Hells aren't going to.  In other words, rank neocolonialism.  Not that the types who buy into this rubbish see anything wrong with that.

The other big drum he's beating is for Pavel Durov, the Russian tech bro who was arrested in France in August.  According to Thorup, Durov was arrested because he protected free speech.  According to France and its case filings, it was because Durov refused to cooperate with investigations into criminal activities on his Telegram platform.  I would note that crime is not free speech, at least not when it's fraud, drug dealing, trafficking, and political hits, so it doesn't really look like Durov was protecting free speech.  But the truth wouldn't help Thorup's sales pitch.

Speaking of Shills

I just have to shake my head at this flack piece by Dana Peterson, EVP and Chief Economist for The Conference Board.  First a bit about Ms. Peterson.  She was appointed to her position a year ago after doing undergrad and grad in economics (*SNORT*), a stint at the DC Fed, and several years as an economist at Citi.  In other words she has no real-world knowledge of real estate of business and only a selective and pigeon-holed knowledge of finance.  And she's wholly owned by The Powers That Be (TPTB).  As for The Conference Board, it was founded over a century ago by leading industrialists and financiers as the National Industrial Conference Board, and its job was to block labor organization and promote open-shop laws.  In spite of the name change, nothing has really changed there.  It has been declared "a trusted source" by the usual suspects (*COUGH*Chicago Tribune*COUGH*Wall Street Journal*COUGH*) but really just cranks out "research" designed to show that everything is proceeding smoothly and to keep regulators and media from looking into what TPTB are doing at the expense of the rest of us.  Which brings us to this article.

Ms. Peterson's thesis is we're not in a real estate bubble.  First off, she gets the dates of the prior bubble wrong.  In 2005 the bubble was already late-stage, and as I noted in my prior post, it lasted until 2008 due to the machinations of the perpetrators.  Second, she says fraud isn't driving the market increases this time, basic supply and demand are.  This is true in a narrow and frankly sick sort of way.  As she states, there is a percentage of Millennials who are moving into the housing market.  She doesn't state this is a decided minority of Millennials who overwhelmingly into two groups: those who've hit the jackpot and landed stable, well-paying jobs, and those whose parents can boost them (There is of course significant overlap.).  The bulk of Millennials are either scraping by in rentals they can barely afford or are still in the folks' basements (And by the way, there are plenty of folks older than Millennials scraping by with barely affordable rentals, right up to those of us on the cusp of retirement.  But TPTB like to flog us for not having $1,000,000 saved away.  We really do live in a bottomless crock.).

So I don't agree with Ms. Peterson that there is some youth parade driving the market.  The reason is the same as it has been to some extent all the way back to the 70s: There aren't enough stable, living wage jobs to support a healthy single-family residence market.  Since so much of our economy is dependent on that market, we've invented unhealthy ways of keeping it going, such as all the mortgage fraud 15 years ago.  These methods invariably produce bubbles, and the bubbles invariably pop.

I would also note Ms. Peterson is wrong about there being a big change in the mortgage market from fifteen years ago (There is one exception I'll look at below.).  The same banks (or their successors) are at play, the same secondary market, and the same securitization model funneling into REITs.  And if you think Dodd-Frank really makes a difference, I have some oceanfront property in Yuma, Arizona to sell you.

So if the kids aren't alright and we don't have a bunch of mortgage fraud going on, what is driving the market?  The answer actually lies in Ms. Peterson's article.  Fifteen years ago there weren't enough good borrowers, so they were manufactured via fraud.  Lots of creative financing: no down payment, no documentation, high loan-to-value (even over 100%), and variable interest rates everywhere.  As Ms. Peterson notes, the mortgages this time are overwhelmingly conventional.  Now ask yourself who can get these loans?  One group is the fortunate few who have either made it or whose parents did.  The other group is the one really driving this market: corporate landlords.  And that's not good.  Corporate landlords have deep pockets for obtaining financing, and they're using it to snap up single family residences to convert to rentals and older commercial properties to tear down and redevelop into mid-rise apartments and condos.  There are entire housing subdivisions being built out there to be flipped as a package to a corporate landlord, and the entire subdivision will then be rental houses.  So the housing supply is shrinking, which in turn drives prices up, which makes TPTB and their kids the only ones who can afford to buy, causing another shift of assets from ordinary people to the top.  So everyone has to rent, and rents are sky-rocketing as a result.  Bye bye affordable housing.

So what is TPTB's game?  What happens to their investments if only the top 10% can afford to live in them?  Are they really making a sucker's bet?  I don't think so.  I think they believe we've hit End Game.  They know everyone has to live somewhere and they can always count on their pet government entities to bulldoze homeless camps as needed.  I think they believe the next crash, and it will happen, will result in neofeudalism with them as the lords and ordinary people as serfs, exchanging their freedom for some hovel to live in.

So keep putting lipstick on that pig, Ms. Peterson.  But until you have some actual evidence for what you're shoveling, I'm not buying a bit of it.

Our Current Boom

So everything is going great guns with the economy, but there aren't any jobs, and no one is making more money.  So how does this shark keep swimming?  Simple.  Debt.  Those pursestrings the lenders tightened up in 2007 got relaxed in 2011 and have just kept loosening, with inevitable results.  Just check this article citing the latest CardHub Debt Studies.  Credit card debt went down $1 billion in 2009, up a modest $2.2 billion in 2010, and then up an average of $41.2 billion each of the last three years.  In other words, the current consumer boom is being fueled by a tsunami of debt, and the average schmuck is already up to his earlobes.  So much for the bankruptcy downturn.  We're just never going to learn.

But I Want More Stuff!

It never ceases to amaze me how many of my bankruptcy clients ask, "How soon can I get a credit card/car loan/mortgage."  Geez, kids, cool your jets.  First, one of your problems coming out of bankruptcy will be that you'll start receiving credit card offers right away because they know you're stuck with the bankruptcy waiting period and can't stiff them any time soon.  Are you really so eager to feed the vultures?  Second, incurring debt you couldn't service is what brought you to my office in the first place.  You may think you're flush, but you're still just one job loss or medical emergency from being back in the tank.  Try this thing called "saving" for awhile.  Ask your grandparents; they can probably tell you all about it.


Look, we all want things.  I want a new car and house, too, but here's a news flash: Tomorrow will come, and if you spent it all today, tomorrow is going to hurt.  Badly.  So I maintain my cars (Memo to me: Get that front end looked at.), and I keep renting.  When we moved from Washington to Utah seven years ago, My Dear Wife wanted to buy another house.  I said, "No dear, this market is whack."  She was incensed that I would do something so un-American as fail to incur consumer debt.  But guess what?  I was right.  And we'll keep renting, too, much to her chagrin, because in less than 10 years, we'll have an empty nest, so why do I want to go buy extra bedrooms and baths?


It's called "thinking," people.  Do it or pay the price.

Merry Red Ink Christmas

Throughout the holidays, I saw people buying like mad.  I kept thinking, "Wait a minute.  The job picture stinks, about every asset and investment class is dropping, and everyone below the top 10% is getting absolutely rocked.  How is everyone buying?"


The old-fashioned way, apparently: debt.  The Fed's figures for November are out (December won't be out for another month, but I can't imagine it won't look worse.).  Consumer debt rose at an annual rate of 9.9%.  Revolving debt (credit cards, lines of credit, etc.) rose at an annual rate of 8.5%, and nonrevolving debt (mostly secured purchase money loans and student loans) rose at 10.7%.
This is a mess in the making.  We have learned nothing from four years ago.  People are once again buying by spending money they don't have by taking out loans they can't afford from people who don't care if they (or, more accurately, their clients/customers) get repaid or get stuck with collateral they can't unload so long as they get their origination fees.  And when this new house of cards collapses, where does the bail-out come from this time?

I see bankruptcies trending back up soon, but that isn't the real concern.  With the President, the House, and one-third of the Senate up for election this Fall, D.C. will pull any smoke-and-mirrors to kick the economic can past November.  But what kind of hangover will we get in 2013?  If what we've seen is any kind of prologue, you may want to find yourself a place to hide in the high grass.