Financialization And New York City Rents (Rent Bubble????)

Financialization refers to the increase in size and importance of a country’s financial sector relative to its overall economy.  And the center of US financialization is … New York City with its investment banks like Goldman Sachs.

While west coast housing prices are cooling (but still uber-expensive on the coast). NYC rents are still hot.

Rents climbed to a first-quarter record in Manhattan, and to all-time highs in Brooklyn and Queens, data from StreetEasy show. At the same time, purchases declined and almost a fifth of home-sellers in the three boroughs were forced to cut their prices.

Many New Yorkers, weary of bargaining with owners whose list prices are still out of touch with a slowing market, are choosing to remain renters until they find the perfect deal. That’s given landlords power to raise rates and offer fewer lease sweeteners, said Grant Long, senior economist at StreetEasy.

Central Park South was Manhattan’s costliest neighborhood in the first quarter, with a median asking rent of $7,200. Landlords sought $3,785 in Greenwich Village, $3,995 in Chelsea and $2,900 on the Upper East Side. Borough-wide, rents rose 2.6 percent from a year earlier, the biggest annual increase since 2016, according to a StreetEasy index.

Owners listed apartments for a median of $3,035 in the Long Island City neighborhood of Queens, and $2,995 in Brooklyn’s Williamsburg.

The Flatiron district is no slouch at $4,615 median rent. This trendy area has numerous millionaires and billionaires (as Bernie Sanders loves to say).

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But since the advent of financialization in the 1980s, the wealth distribution in the US has become the most skewed since the 1930s.

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And much of the skew is about the consolidation of financial power in New York City (and regulation of the 0.1% resides in Washington DC.

Yes, The Federal Reserve, the hell hound for Wall Street, has helped inflate asset bubbles and keep them frothy, benefitting the 0.1%.

At the national level, home price growth YoY, while slowing, still exceeds average hourly earnings for the majority of US workers as well as core inflation.

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So, are we in a housing bubble? Previously, “economists” have said that a housing bubble is when home price growth exceeds wage growth. But when I speak to the Five Star Government forum on housing on Tuesday, I will be the only one that says the word “bubble.”

Mentioning a bubble in the 5 Star gathering is like including Carolina Reaper 2,200,000 SHU peppers in the spice mix.

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Speculators Increase Short Treasury Futures Position (But Gold LONG Positions Increase)

Speculators are increasinng Treasury short positions while speculators are favoring long positions in gold futures.
Speculators increased net short positioning throughout the Treasury futures curve in the week ended April 9. The bulk of the moves came from adding short positions in 10-year (TY) Treasury futures contracts. They increased their short position in TY contracts by $56,982. And they added some short risk to their two-year (TU) futures positions, after nearly cutting that position in half the previous week.

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Speculators also increased their short positions in five-year (FV), ultralong (WN) and classic 30-year (US). Speculators still remain short every Treasury futures contract.

How about gold? The net futures have actually increased since December.

 

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Trouble In Turkey! Lending And Swap Rates Soar As Turkey Continues Monetary Repression

This week, Turkey further roiled markets by preventing foreign banks from accessing the liras they need to close out their swap positions. That’s made it almost impossible for bankers to short the lira or exit carry trades, and forced the overnight lira rate up to about 1,000 percent from 23 percent.

And the USDTRY overnight forward implied yield has risen to 861.

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The volatility surface for the USDTRY is showing an unusual shape.

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Turkey’s USD Sr Credit Default has blown out to 473 at 10 years while their 2-year Lira swap rate is 29.

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From Zero Hedge: Just days after Turkish president Erdogan vowed to crackdown on currency speculators and launched a probe against JPMorgan for its Friday reco to short the country’s currency to 5.90 vs the dollar, on Tuesday Turkish authorities took their vendetta against short sellers to never before seen levels, when taking a page of the Chinese currency manipulation playbook, they made it virtually impossible for foreign investors to short the lira.

Turkey will not be mating with US banks like JP Morgan Chase in the near future.

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MOVE 3-month Option Volatility Index Hits All-time Low (Bond Market Bernanke’d!)

The  Merrill Lynch Option Volatility Estimate 3-Month has just hit an all-time low.

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The MOVE index is a yield curve weighted index of the normalized implied  volatility on 3-month Treasury options. It is the weighted average of volatilities on the CT2, CT5,  CT10, and CT30.

Even since Fed Chair Ben Bernanke started ZIRP and QE in 2008, continued by Janet Yellen, interest rate volatility has subsided to an all-time low under current Chairman Powell.

Not a great time for volatility traders!

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Fed Vice Chair Clarida Notes That Yield Curve Is Getting Flatter (But Inverted From 1 Year To 5 Years)

Former Columbia University economic professor and curret Fed Vice President Richard Clarida made one obvious point at a Dallas Fed meeting, and one half-truth.

(Bloomberg) — Federal Reserve Vice Chairman Richard Clarida said that when rates on shorter-dated bonds move above rates on longer-dated bonds, it can be a signal that an economic slowdown is coming.

“Historically in the U.S., inverted yield curves are actually pretty rare — they aren’t black swans, but they don’t happen a lot, and when they do happen that is typically a signal that the economy is either slowing sharply or could even go into a recession,” Clarida said Monday at an event at the Dallas Fed.

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Clarida drew a distinction between flat and actually inverted curves.

“Right now the yield curve in the U.S. is not inverted” but “it is getting flatter,” Clarida said. He noted that the Fed pays a lot of attention to whether the curve is flattening because of a fall in inflation expectations. And he said that monitoring the curve is complicated by the fact that U.S. markets are impacted by global demand for safe assets. “What happens in Europe and Asia can have an impact on our Treasury market, too.”

Well Professor Clarida, your statement is only partially correct. The US Treasury yield curve (green) is actually inverted from 1 year – 5 years. THEN upward sloping after 5 years. The US Dollar Swaps curve is inverted from 3 months to 4 years then upward sloping.

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Now, if you want to talk about a downward sloping yield curve, take Venezuela. Please!

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Another curve that is shaped like a rollercoast at King’s Dominion is the US Dollar Overnight Indexed Swaps curve.

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So Professor Clarida is only semi-correct about curve shapes. There is inversion from 1 year to 5 years, possibly signalling a slowdown (or recession) in the 1-5 year period.