All posts in "Real Estate"

Wednesday: Job Openings, FOMC Minutes

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Wednesday: Job Openings, FOMC Minutes

Wednesday: Job Openings, FOMC Minutes

by Bill McBride on 10/11/2016 07:51:00 PM

From Matthew Graham at Mortgage News Daily: Mortgage Rate Trend is Not Your Friend

Mortgage Rates were higher again today, marking the 9th straight day without any improvement. 3.625% is quickly becoming the most prevalent conventional 30yr fixed quotes on top tier scenarios, though quite a few lenders remain at 3.5%.
emphasis added

Wednesday:
• At 7:00 AM ET, The Mortgage Bankers Association (MBA) will release the results for the mortgage purchase applications index.

• At 10:00 AM, Job Openings and Labor Turnover Survey for August from the BLS. Jobs openings increased in July to 5.871 million from 5.643 million in June.

• At 2:00 PM, The Fed will release the FOMC minutes for the Meeting of September 20-21.

Read more at http://www.calculatedriskblog.com/2016/10/wednesday-job-openings-fomc-minutes.html#rGdjoZ2whbCYldL8.99

by Bill McBride on 10/11/2016 07:51:00 PM

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Published at Tue, 11 Oct 2016 23:51:00 +0000

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Wednesday: Job Openings, FOMC Minutes

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Wednesday: Job Openings, FOMC Minutes

Wednesday: Job Openings, FOMC Minutes

by Bill McBride on 10/11/2016 07:51:00 PM

From Matthew Graham at Mortgage News Daily: Mortgage Rate Trend is Not Your Friend

Mortgage Rates were higher again today, marking the 9th straight day without any improvement. 3.625% is quickly becoming the most prevalent conventional 30yr fixed quotes on top tier scenarios, though quite a few lenders remain at 3.5%.
emphasis added

Wednesday:
• At 7:00 AM ET, The Mortgage Bankers Association (MBA) will release the results for the mortgage purchase applications index.

• At 10:00 AM, Job Openings and Labor Turnover Survey for August from the BLS. Jobs openings increased in July to 5.871 million from 5.643 million in June.

• At 2:00 PM, The Fed will release the FOMC minutes for the Meeting of September 20-21.

Read more at http://www.calculatedriskblog.com/2016/10/wednesday-job-openings-fomc-minutes.html#JqP79qYIutiHeCZL.99

by Bill McBride on 10/11/2016 07:51:00 PM

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Published at Tue, 11 Oct 2016 23:51:00 +0000

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Demographics: Renting vs. Owning

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Demographics: Renting vs. Owning

Demographics: Renting vs. Owning

by Bill McBride on 10/11/2016 02:03:00 PM

Note; This is an update to a post I wrote last year.

It was more than six years ago that we started discussing the turnaround for apartments. Then, in January 2011, I attended the NMHC Apartment Strategies Conference in Palm Springs, and the atmosphere was very positive.

The drivers in 2011 were 1) very low new supply, and 2) strong demand (favorable demographics, and people moving from owning to renting).

The move “from owning to renting” is probably over, and demographics for apartments are still somewhat positive – but less favorable than 6 years ago.  Also much more supply has come online.  Slowing demand and more supply for apartments is why I think growth in multi-family starts will slow this year (or maybe be flat compared to 2015).

On demographics, a large cohort had been moving into the 20 to 29 year old age group (a key age group for renters).  Going forward, a large cohort will be moving into the 30 to 39 age group (a key for ownership).

Note: Household formation would be a better measure than population, but reliable data for households is released with a long lag.

image: https://2.bp.blogspot.com/-J5CR6RCcLSs/V_0oyx4UpOI/AAAAAAAApC0/kLfd7TdSZZQyACKpZcIiH5wGNCuPfWUyQCLcB/s320/PopRentBuy.PNG

Population 20 to 34 years oldClick on graph for larger image.

This graph shows the longer term trend for three key age groups: 20 to 29, 25 to 34, and 30 to 39 (the groups overlap).

This graph is from 1990 to 2060 (all data from BLS: current to 2060 is projected).

We can see the surge in the 20 to 29 age group (red).  Once this group exceeded the peak in earlier periods, there was an increase in apartment construction.  This age group will peak in 2018 (until the 2030s), and the 25 to 34 age group (orange, dashed) will peak in 2023.  This suggests demand for apartments will soften in a few years.

For buying, the 30 to 39 age group (blue) is important (note: see Demographics and Behavior for some reasons for changing behavior).  The population in this age group is increasing, and will increase significantly over the next decade.

This demographics is positive for home buying, and this is a key reason I expect single family housing starts to continue to increase in coming years.

Read more at http://www.calculatedriskblog.com/2016/10/demographics-renting-vs-owning.html#FES8blhJ845TReZS.99

by Bill McBride on 10/11/2016 02:03:00 PM

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Published at Tue, 11 Oct 2016 18:03:00 +0000

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Q3 Review: Ten Economic Questions for 2016

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By PublicDomainPictures from PixabayQ3 Review: Ten Economic Questions for 2016

by Bill McBride on 10/10/2016 09:59:00 AM

Q3 Review: Ten Economic Questions for 2016

by Bill McBride on 10/10/2016 09:59:00 AM

At the end of last year, I posted Ten Economic Questions for 2016. I followed up with a brief post on each question. The goal was to provide an overview of what I expected in 2016 (I don’t have a crystal ball, but I think it helps to outline what I think will happen – and understand – and change my mind, when the outlook is wrong).

By request, here is a quick Q3 review. I’ve linked to my posts from the beginning of the year, with a brief excerpt and a few comments:

10) Question #10 for 2016: How much will housing inventory increase in 2016?

Right now my guess is active inventory will increase in 2016 (inventory will decline seasonally in December and January, but I expect to see inventory up again year-over-year in 2016). I don’t expect a double digit surge in inventory, but maybe a mid-single digit increase year-over-year.  If correct, this will keep house price increases down in  2015 (probably lower than the 5% or so gains in 2014 and 2015).

According to the August NAR report on existing home sales, inventory was down 10.1% year-over-year in August, and the months-of-supply was at 4.7 months.  It now appears inventory will decrease in 2016.  I changed my view on this earlier this year.

Two of the key reasons inventory is low: 1) A large number of single family home and condos were converted to rental units. Last year, housing economist Tom Lawler estimated there were 17.5 million renter occupied single family homes in the U.S., up from 10.7 million in 2000. Many of these houses were purchased by investors, and rents have increased substantially, and the investors are not selling (even though prices have increased too). Most of these rental conversions were at the lower end, and that is limiting the supply for first time buyers. 2) Baby boomers are aging in place (people tend to downsize when they are 75 or 80, in another 10 to 20 years for the boomers). Instead we are seeing a surge in home improvement spending, and this is also limiting supply.

9) Question #9 for 2016: What will happen with house prices in 2016?

Low inventories, and a decent economy suggests further price increases in 2016. However I expect we will see prices up less in 2016, than in 2015, as measured by these house price indexes – mostly because I expect more inventory.

If is early, but the recently released Case-Shiller data showed prices up 5.1% year-over-year in July. The price increase is a little lower than in 2015 (prices were up 5.25% nationally in 2015), even with less inventory.

8) Question #8 for 2016: How much will Residential Investment increase?

My guess is growth of around 4% to 8% in 2016 for new home sales, and about the same percentage growth for housing starts. Also I think the mix between multi-family and single family starts will shift a little more towards single family in 2016.

Through August, starts were up 6.1% year-over-year compared to the same period in 2015.  New home sales were up 13.3% year-over-year.  My guess is starts will increase about 4% to 8% this year (as expected), new home sales will be little higher.

7) Question #7 for 2016: What about oil prices in 2016?

It is impossible to predict an international supply disruption, however if a significant disruption happens, then prices will move higher. Continued weakness in Europe and China seems likely, however sluggish demand will be somewhat offset by less tight oil production. It seems like the key oil producers (Saudi, etc) will continue production at current levels. This suggests in the short run (2016) that prices will stay low, but probably move up a little in 2016. I’ll guess WTI will be up from the current price [WTI at $38 per barrel] by December 2016 (but still under $50 per barrel).

As of this morning, WTI futures are at $51 per barrel.

6) Question #6 for 2016: Will real wages increase in 2016?

For this post the key point is that nominal wages have been only increasing about 2% per year with some pickup in 2015. As the labor market continues to tighten, we should start see more wage pressure as companies have to compete more for employees. I expect to see some further increase in nominal wage increases in 2016 (perhaps over 3% later in the year). The year-over-year change in real wages will depend on inflation, and I expect headline CPI to pickup some this year as the impact on headline inflation of declining oil prices fades.

Through September, nominal hourly wages were up 2.6% year-over-year. This is a pickup from last year – and wage growth appears to be trending up. It looks like Wages will increase at a faster rate in 2016.

5) Question #5 for 2016: Will the Fed raise rates in 2016, and if so, by how much?

I’ve seen several people arguing the Fed will be cutting rates by the end of 2016 – I think that is unlikely. Instead I think the Fed will be cautious – and they will not want to reverse course. Right now I think something around three rate hikes in 2016 is likely.

Events have pushed the Fed to delay rate increases, and it now looks like zero or one are the most likely number of rate hikes in 2016.  My guess right now is the Fed will hike rates in December.

4) Question #4 for 2016: Will the core inflation rate rise in 2016? Will too much inflation be a concern in 2016?

Due to some remaining slack in the labor market (example: elevated level of part time workers for economic reasons), I expect these measures of inflation will be close to the Fed’s target in 2016.

So currently I think core inflation (year-over-year) will increase further in 2016, but too much inflation will not be a serious concern in 2016.

It is early, but inflation has moved up close to the Fed target through August.

3) Question #3 for 2016: What will the unemployment rate be in December 2016?

Depending on the estimate for the participation rate and job growth (next question), it appears the unemployment rate will decline to around 4.5% by December 2016. My guess is based on the participation rate declining slightly in 2016 and for decent job growth in 2016 (however less in 2016 than in 2015).

The unemployment rate was 5.0% in September, unchanged from 5.0% in December.  I still expect the unemployment rate to decline later this year.

2) Question #2 for 2016: How many payroll jobs will be added in 2016?

Energy related construction hiring will decline in 2016, but I expect other areas of construction to be solid. For manufacturing, growth in the auto sector will probably slow this year, but the drag on manufacturing employment from the strong dollar should be less in 2016.

As I mentioned above, in addition to layoffs in the energy sector, exporters will have a difficult year – but probably not the severe contraction as in 2015, and more companies will have difficulty finding qualified candidates. Even with some boost from lower oil prices – and some additional public hiring, I expect total jobs added to be lower in 2016 than in 2015.

So my forecast is for gains of around 200,000 payroll jobs per month in 2015. Lower than in 2015, but another solid year for employment gains given current demographics.

Through September 2016, the economy has added 1.6 million jobs; or 178,000 per month.  It now appears employment gains will be lower than in 2015 (as expected), and somewhat below 200,000 per month in 2016.

1) Question #1 for 2016: How much will the economy grow in 2016?

In addition, the sharp decline in oil prices should be a net positive for the US economy in 2016. And, hopefully, the negative impact from the strong dollar will fade in 2016. The most likely growth rate is in the mid-2% range again …

GDP growth was sluggish again in the first half (just up 1.1% annualized), and GDP is now tracking 2.1% in Q3.

Currently it looks like 2016 is unfolding mostly as expected with some key exceptions (one of the reasons I write down what I think will happen).  I changed my view on Fed rate hikes earlier this year, and now I expect only 1 hike in 2016.  I’ve also revised down my outlook for GDP and existing home inventory is declining again this year.

Residential investment, house prices, oil prices, inflation, wage growth and employment are unfolding about as I expected.

Read more at http://www.calculatedriskblog.com/2016/10/q3-review-ten-economic-questions-for.html#wJhtHIuzl8jPRA9A.99

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Published at Mon, 10 Oct 2016 13:59:00 +0000

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Leading Index for Commercial Real Estate “stumbles” in September

Leading Index for Commercial Real Estate “stumbles” in September

Leading Index for Commercial Real Estate “stumbles” in September

by Bill McBride on 10/07/2016 05:55:00 PM

Note: This index is a leading indicator for new non-residential Commercial Real Estate (CRE) investment, except manufacturing.

From Dodge Data & Analytics: Dodge Momentum Index Stumbles in September

The Dodge Momentum Index fell 4.3% in September to 129.0 from its revised August reading of 134.8 (2000=100). The Momentum Index is a monthly measure of the first (or initial) report for nonresidential building projects in planning, which have been shown to lead construction spending for nonresidential buildings by a full year. The decline in September was the result of a 5.3% drop in institutional planning and a 3.6% decrease in commercial planning, retreating from the strong performance in August which benefitted from an influx of large projects ($100 million +) into planning. September’s decline follows five consecutive months of gains for the Momentum Index, and resumes for now the saw-tooth pattern that’s often been present in the data since 2014. Even with the recent volatility on a month-to-month basis, the Momentum Index continues to trend higher, signaling that developers have moved plans forward despite economic and political uncertainty. With the September release the Momentum Index is 5.1% higher than one year ago. The institutional component is 5.4% above its September 2015 reading, while the commercial component is up 4.9%
emphasis added

image: https://1.bp.blogspot.com/-ZBd_eflanQg/V_gLu8nB1JI/AAAAAAAApBs/yi4U7o5sSbcgEwEZjB9j0Ec9-c0Vur5awCLcB/s320/DodgeSept2016.PNG

Dodge Momentum IndexClick on graph for larger image.

This graph shows the Dodge Momentum Index since 2002. The index was at 129.0 in September, down from 134.8 in August.

According to Dodge, this index leads “construction spending for nonresidential buildings by a full year”. In general, this suggests further increases in CRE spending over the next year.

Read more at http://www.calculatedriskblog.com/2016/10/leading-index-for-commercial-real.html#4f6Vbtho2bUAp3UG.99

by Bill McBride on 10/07/2016 05:55:00 PM

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Published at Fri, 07 Oct 2016 21:55:00 +0000

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Las Vegas Real Estate in September: Sales up 8% YoY, Inventory down 18%

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By PIX1861 from Pixabay

Las Vegas Real Estate in September: Sales up 8% YoY, Inventory down 18%

by Bill McBride on 10/07/2016 01:01:00 PM

This is a key distressed market to follow since Las Vegas has seen the largest price decline of any of the Case-Shiller composite 20 cities.

The Greater Las Vegas Association of Realtors reported Southern Nevada Housing Supply Shrinks as Sales Rise and Prices Stabilize, GLVAR Housing Statistics for September 2016

The Greater Las Vegas Association of REALTORS® (GLVAR) reported Friday that the local housing supply is shrinking as Southern Nevada home sales increase and prices stabilize.

According to GLVAR, the total number of existing local homes, condominiums and townhomes sold in September was 3,541, up from 3,285 total sales in September 2015. Compared to the same month one year ago, 7.6 percent more homes, and 8.9 percent more condos and townhomes sold in September.

The total number of single-family homes listed for sale on GLVAR’s Multiple Listing Service in September was 12,794, down 4.4 percent from one year ago. GLVAR tracked a total of 2,241 condos, high-rise condos and townhomes listed for sale on its MLS in September, down 34.8 percent from one year ago.

By the end of September, GLVAR reported 7,427 single-family homes listed without any sort of offer. That’s down 8.7 percent from one year ago. For condos and townhomes, the 1,161 properties listed without offers in September represented a 49.8 percent decrease from one year ago.

GLVAR continues to track fewer distressed sales and more traditional home sales, where lenders are not controlling the transaction. In September, 4.6 percent of all local sales were short sales – when lenders allow borrowers to sell a home for less than what they owe on the mortgage. That’s down from 6.8 percent of all sales one year ago. Another 6.0 percent of all September sales were bank-owned, down from 7.1 percent one year ago.
emphasis added

1) Overall sales were up 7.8% year-over-year.

2) Total active inventory (single-family and condos) is down 18% from a year ago (A very sharp decline in condo inventory).

3) Distressed sales are down from 13.9% of sales in September 2015, to 10.6% of sales in September 2016.

Read more at http://www.calculatedriskblog.com/2016/10/las-vegas-real-estate-in-september.html#vFScKeERIhyvUSLy.99

by Bill McBride on 10/07/2016 01:01:00 PM

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Published at Fri, 07 Oct 2016 17:01:00 +0000

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Phoenix Real Estate in September: Sales up 6%, Inventory up 3% YoY

Phoenix Real Estate in September: Sales up 6%, Inventory up 3% YoY

Phoenix Real Estate in September: Sales up 6%, Inventory up 3% YoY

by Bill McBride on 10/06/2016 04:22:00 PM

This is a key housing market to follow since Phoenix saw a large bubble / bust followed by strong investor buying.

Inventory was up 3.4% year-over-year in September.  This is the seventh consecutive month with a YoY increase in inventory, following fifteen consecutive months of YoY declines in Phoenix.

The Arizona Regional Multiple Listing Service (ARMLS) reports (table below):

1) Overall sales in September were up 6.3% year-over-year.

2) Cash Sales (frequently investors) were down to 20.2% of total sales.

3) Active inventory is now up 3.4% year-over-year.  

More inventory (a theme in 2014) – and less investor buying – suggested price increases would slow sharply in 2014.  And prices increases did slow in 2014, only increasing 2.4% according to Case-Shiller.

In 2015, with falling inventory, prices increased a little faster –  Prices were up 6.3% in 2015 according to Case-Shiller.

Now inventory is increasing a little again, and – if this trend continues in Phoenix – price increases will probably slow in Phoenix.    Prices in Phoenix are up 2.2% through July (about a 3.7% annual rate) – slower than in 2015.

September Residential Sales and Inventory, Greater Phoenix Area, ARMLS
Sales YoY
Change
Sales
Cash
Sales
Percent
Cash
Active
Inventory
YoY
Change
Inventory
Sept-08 6,179 1,041 16.8% 54,4271
Sept-09 7,907 28.0% 2,776 35.1% 38,340 -29.6%
Sept-10 6,762 -14.5% 2,904 42.9% 45,202 17.9%
Sept-11 7,892 16.7% 3,470 44.0% 26,950 -40.4%
Sept-12 6,478 -17.9% 2,849 44.0% 21,703 -19.5%
Sept-13 6,313 -2.5% 2,106 33.4% 23,405 7.8%
Sept-14 6,252 -1.0% 1,609 25.7% 26,492 13.2%
Sept-15 6,980 11.6% 1,573 22.5% 23,396 -11.7%
Sept-16 7,421 6.3% 1,499 20.2% 24,195 3.4%
1 September 2008 probably includes pending listings

Read more at http://www.calculatedriskblog.com/2016/10/phoenix-real-estate-in-september-sales.html#0rrlFcD89pQ35PrT.99

by Bill McBride on 10/06/2016 04:22:00 PM

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Published at Thu, 06 Oct 2016 20:22:00 +0000

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Is Real Estate Finally Rolling Over?

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By GLady from PixabayIs Real Estate Finally Rolling Over?


Amid all the epic financial bubbles that have emerged in the past few years, real estate has been a bit of an afterthought. Still, the action in hot market trophy properties has been pretty bubbly.

And now the run may be ending. London penthouses are sitting empty due to Brexit uncertainty. Vancouver condos aren’t selling because of recent taxes imposed on foreign buyers. And in the US some formerly red-hot markets are heading south. Consider:

Study Says Miami’s Condo Market Losing Money, Could Be in Bad Shape

(Miami New Times) – Real estate is the heart of Miami’s economy. In the past four years, more than 3,000 condo units have been built, and a whopping 11,000 are slated to finish construction by 2018. It might seem an insane proposition to sell 14,000 new luxury condos in six years, and it appears market experts agree. Real-estate analysts have been saying for months that Miami’s condo market is headed for a nosedive, and a study released yesterday suggests the Magic City might already be in that slide.

Real-estate expert Andrew Stearns released a study yesterday that suggests, yet again, that demand for luxury condos in Miami could be hitting its breaking point. Though there were more than 700 post-2012 “preconstruction” condos on the market in August, Stearns reported that only eight of them had sold. And all but one lost money on the sale.

Miami Condo Prices


Manhattan Apartment Sales Plunge 20%

(Bloomberg) – There are a lot more apartments available for purchase these days in Manhattan. And fewer people are buying.

Sales of previously owned condominiums and co-ops fell 20 percent in the third quarter from a year earlier as potential buyers grew cautious amid more choices, according to a report Tuesday from appraiser Miller Samuel Inc. and brokerage Douglas Elliman Real Estate. There were 5,290 resale apartments on the market at the end of September, 53 percent more than the number available in late 2013, the lowest point for listings.

The swelling inventory is providing an opportunity to New Yorkers shut out of a market in which construction has been dominated by ultra-luxury condos aimed at the wealthiest buyers. Resales, particularly those priced at less than $1 million, were in chronically short supply in recent years, and those that made it to the market sparked bidding wars. Now, more owners are listing apartments to profit from climbing values, and they’re finding lots of company.

“Rapidly rising prices over the years have pulled more sellers into the market hoping to cash out,” Jonathan Miller, president of Miller Samuel, said in an interview. “But buyers are more wary. There isn’t the same intensity of activity to burn through the new supply.”

Buyers agreed to pay more than the asking price in just 17 percent of all condo and co-op deals that closed in the third quarter, down from a record 31 percent a year earlier, according to Miller Samuel and Douglas Elliman. Consumers also are taking longer to make a decision. Previously owned properties that sold in the period spent an average of 72 days on the market, up from 67 days a year ago.

“We’re clearly seeing a slowdown,” Miller said. “This era of aspirational pricing is coming to an end. Buyers get the message first.”


Believe it or not, rents may be falling in San Jose and San Francisco

(Silicon Beat) – Falling rents? What a concept.

Especially in the Bay Area, ground zero for jumbo-sized rent hikes.

But the latest research from Abodo, the apartment search website, shows something new: rents actually dropping between August and September in San Jose and San Francisco. In fact, those cities were on Abodo’s Top 10 list for the “Biggest Fall” in rents for one-bedroom apartments during that period.

The website’s National Apartment Report for September shows the average monthly rent for a one-bedroom apartment in San Jose dropping from $2,790 to $2,455, a 12 percent decline — and the second-largest decrease among U.S. cities. A one-bedroom in San Francisco fell 6 percent, from $3,952 to $3,698, the seventh-largest decline. Seattle scored the largest fall in rent: 13 percent, from $2,170 to $1,890.

This isn’t 2007 and these real estate markets aren’t collapsing. But the switch from strong growth to modest contraction is a big deal in the context of an economy where manufacturing remains weak, trade growth is slowing dramatically and corporate profits continue to fall. Combine a mild real estate recession with the bursting of the auto loan bubble and it’s not clear where the expected 3% growth as far as the eye can see will come from.

Actually, that’s not true. It’s been clear for some time that the next growth engine will be old reliable deficit spending. Whoever is in charge a year from now will almost certainly be ramping up a major tax cut/infrastructure spending/debt relief program, paid for with either borrowed funds or newly-created dollars. Helicopter money, in other words. And no way will this be combined with higher interest rates (since the two effects would cancel each other out), so the talk of Fed tightening will die a quiet death very shortly.


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John Rubino

John Rubino
DollarCollapse.com

John Rubino

John Rubino edits DollarCollapse.com and has authored or co-authored five books, including The Money Bubble: What To Do Before It Pops, Clean Money: Picking Winners in the Green Tech Boom, The Collapse of the Dollar and How to Profit From It, and How to Profit from the Coming Real Estate Bust. After earning a Finance MBA from New York University, he spent the 1980s on Wall Street, as a currency trader, equity analyst and junk bond analyst. During the 1990s he was a featured columnist with TheStreet.com and a frequent contributor to Individual Investor, Online Investor, and Consumers Digest, among many other publications. He now writes for CFA Magazine.

Copyright © 2006-2016 John Rubino

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Published at Wed, 05 Oct 2016 18:34:51 +0000

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