Archive | July 2015


Dry Hole


Southern California just had the wettest July on record, the Angels were rained out of a home game for the first time in 20 years, and we’re all getting excited that a strong El Niño is developing for the winter. But let’s all take a deep breath. The record July rain at LAX was about one-third of an inch. That’s about a 15-minute downpour in the rest of the country. It was a little better in San Diego, just over an inch-and-a-half. So, while welcomed, it wasn’t much, especially when we consider the (dry) hole we’re in. The first chart Read More


Hot Bidding


The housing recovery, from its worst downturn since at least the 1930s, has been steady, but much less robust than most had expected. There are many explanations offered, from mean banks who have tightened lending standards, to over-indebted households who have no capacity to borrow, to a societal shift away from ownership to renting. There’s probably some truth in all of these. But housing is picking up steam, and one of the phenomenon of previous bubbles, bidding wars, may be coming back. This first graph (courtesy Redfin) shows the percentage of homes nationally selling above their asking prices: 23% last Read More




Commodity prices are in free fall. The Bloomberg Commodity Price Index (5-year chart below) is off about 30% in the last year. Gold is dropping toward $1,000/oz., and oil (WTI) is back below $50/barrel. A hundred years, Nikolai Kondratiev proposed his wave theory of capital markets, and 50 years ago Benoit Mandelbrot observed the fractal nature of these waves, their similarity over multiple time frames. When two waves of different frequencies but similar magnitudes collide, the result is a much-amplified force. That, I think, is what we are seeing in commodity prices. Commodity prices have historically moved in long waves, Read More


Wild, Wild East


The central planners in Beijing have gotten so much right for the past three decades, that they might be forgiven for believing in their own infallibility. But it’s one thing to shuffle resources around an economy—a road here, an airport there—and quite another thing to dictate supply and demand in a large market. John Major learned the folly of fighting markets in 1992, and there have countless similar experiences both before and since. Apparently confusing a healthy stock market with a healthy economy, the political powers in China decreed that stock prices should rise, directing banks and other lenders to Read More



I’m not sure why the pundits were predicting the Greeks would volunteer to walk meekly to their certain ruin, but the vote yesterday apparently surprised these experts. European equities are down 1 ½%, bonds of Italy, Spain, Portugal are selling off, the euro is a little weaker. Risk off, but the markets are not pricing in any calamity this morning. Of course, just because the Greeks voted against certain repression, does not mean they will avoid it. More like choosing the devil they don’t know for the devil they do. Unlike the dramas of their ancestors, there are no gods Read More