Sentiment Extremes

We’ve saved a few sentiment extreme style articles. These were captured in real time as being likely sentiment outliers:

Sidewalk Touts Trade Tips On Shanghai’s Booming Bull Market

April 8, 2015

On weekend afternoons, large crowds descend on a pair of street corners across from People’s Square in downtown Shanghai to trade stock tips. Shen Yuxi has set up a homemade desk with two laptops, a big flat screen and offers insights like this:

“When a Communist Party chairman takes office, I buy stock in companies from his hometown,” Shen tells a crowd of about 20 people that spills out over the sidewalk.

A lot of people have been winning on Shanghai’s stock exchange in recent months. The index has nearly doubled in the past year, even as China’s once-turbo-charged growth continues to cool.

Tech stocks on China’s Shanghai and Shenzhen exchanges now have price-to-earnings ratios well beyond levels seen in the U.S. before the dot-com crash 15 years ago.

Shen, who says he’s confidant the market will continue to rise, sells a homemade DVD filled with theories he promises will allow investors to keep riding the wave. Shen says he learned how to pick stocks from studying Warren Buffett, whose face adorns Shen’s business cards.

This article was a few weeks earlier than what has endured as a high point.

The Cost of Missing the Market Boom Is Skyrocketing

October 13, 2017

Skepticism in global equity markets is getting expensive.

From Japan to Brazil and the U.S. as well as places like Greece and Ukraine, an epic year in equities is defying naysayers and rewarding anyone who staked a claim on corporate ownership. Records are falling, with about a quarter of national equity benchmarks at or within 2 percent of an all-time high.

“You’ve heard people being bearish for eight years. They were wrong,” said Jeffrey Saut, chief investment strategist at St. Petersburg, Florida-based Raymond James Financial Inc., which oversees $500 billion. “The proof is in the returns.”

And yet skeptics still abound, pointing to stretched valuations or policy uncertainty from Washington to Brussels. Those concerns are nothing new, but heeding to them is proving an especially costly mistake.

Clinging to such concerns means discounting a harmonized recovery in the global economy that’s virtually without precedent — and set to pick up steam, according to the International Monetary Fund. At the same time, inflation remains tepid, enabling major central banks to maintain accommodative stances.

Big companies are becoming huge, from Apple Inc. to Alibaba Group Holding Ltd. Technology megacaps occupy all top six spots in the ranks of the world’s largest companies by market capitalization for the first time ever.

“I’ve never been so optimistic about the global economy,” said Vincent Juvyns, global market strategist at J.P. Morgan Asset Management.

This one lacks the precision of the China sentiment extreme and is still playing out. The language is clear peak sentiment.

Media tires of berating citizens: decides to issue orders

The New York Daily News has decided that US media has been too timid in its approach to Trump so has decided to start issuing orders:

We have been wondering how media organizations plan to recover some of their credibility after the election is over. This front page suggests strongly that none of them care what anyone thinks anymore.

It has become fairly obvious in recent months that when politicians from both parties talk about “our” country they are talking about ownership in the sense of them and their well connected friends. Workers in the heartland who were making $25.00 per hour at a factory job and are now lucky to get a part time, minimum wage job are clearly not part of “our” country.

Politically we now have two parties: the left and the fake right. We are living in what appears to be a fatally corrupt country. Trump’s appeal has been reduced to racism which is utterly absurd. If you believe this go onto a building site and ask every skilled Hispanic worker who they support. The answer is Trump.

Trump is crude and rough around the edges. He is also almost certainly the only chance anyone working for a living has for the next quarter century.

Auckland’s brutal property market

Struggling first-home buyers finally find their West Auckland dream home – for $720,000

It’s taken a couple of years and an extra $120,000 on their original budget, but Gemma Mann and Mike Alsweiler have finally managed to buy their first home.

“Sometimes we’ve had to wonder if it’s worth it to be that financially stretched, just to have a house,” Mann told the Herald in April. “I mean we want it, so badly, but at what cost?”

The only catch for Mann, a 28-year-old pre-school teacher, and Alsweiler, a 29-year-old cabinet-maker, is they had to pay $720,000, well above their original price limit of $600,000.

From what we understand of the NZ loan approval process this would have needed a $144,000.00 down payment. Most people are incapable of saving that amount of money so presumably they had significant help from relatives.

He said their mortgage repayments were slightly over $600 a week, which was more than their $495 a week rental in Te Atatu, but they could afford it.

Paying the mortgage was “a bit of a gamble” if interest rates went up sharply, but they were less worried about house prices crashing, as they had no intention of selling in the near future.

Using a mortgage calculator from a major New Zealand bank their mortgage would have to be around $500,000.00 at their lowest rate (4.75%) to get a payment of just over $600.00 a week. This adds a lot of weight to the argument they were helped to buy because this puts them with $220,000.00 cash into the property without any buying costs being accounted for.

The buyer is also correct that they are gambling with their payments because mortgages are only fixed for short periods in NZ. The lowest rate advertised is for one year fixed and the longest fix is five years at an additional 55 basis points.

The video is well worth watching. The guy talks about suffering from depression during the ordeal of trying to get a house. Based on the video he looks like this might be a current issue. Bubbles have real consequences for real people.

Also notable is that the property they bought is so far out of the main city that farmland is only minutes from their door. The house is also visibly built incredibly cheaply: it looks like a double-wide on a foundation.

We have our finger’s crossed for these two but obviously any financial knock like a job loss is likely to be catastrophic.

Australian Property Bubble

There is a rash of stories about low end workers getting rich in Australia and New Zealand. This story is popular in a New Zealand newspaper, but was written by an English newspaper and is about Australia!

Former Domino’s pizza delivery boy who earned $10 an hour owns 14 renovated properties

A man who makes A$130,000 (NZ$138,657) a year from his rental property portfolio claims you don’t need to be investing in million dollar mansions to be able to retire before the age of 30.

Tony Fleming spent a decade toiling away at Domino’s Pizzas, at times for as little as $10 an hour, but has managed to ‘semi retire’ at the age of 28 after purchasing, renovating and renting 14 homes across New South Wales, South Australia and Sydney’s west.

An example of the renovations:

We assume the one on the left is the “renovated” version but they look very similar.

The savvy investor now lives comfortably off of the rent earned from his 14 properties, while running his own buyers agency to offer expert advice for other hopeful investors looking to kickstart their own portfolio.

Once again the need to proselytize seems very strong with these people.

He said doing cheap renovations – like basic cosmetic work, new kitchen, paint and flooring – can increase the value of a rental property exponentially and are often easy to complete yourself which cuts costs again.

As with our previous story on this, behavior that only happens in bubbles is touted as universal and enduring principles. In rational markets the extra value is the actual cost and possibly a small premium for not having to do the work yourself. Slapping a coat of paint on a house has never provided exponential growth in sane markets.

After purchasing his first house in Kingswood, Fleming has since bought 12 other properties using the equity he gained from renovating those that came before and is about to finalise his 14th.

Ahh, the meat of the story! He purchased 13 properties off the strength of one purchase which rose in value.

Fleming said he realised his dream when he was studying to become a real estate agent at TAFE and noticed his lecturers all looked quite well off.

‘All the TAFE teachers were driving nice cars and had invested themselves so I learned from their stories that putting money in property can be just as financially beneficial as being an agent.’

His community college teachers were telling him not to bother with even the lazy persons job of selling real estate.

But it was not all smooth sailing from there as Fleming was burdened with a car loan debt.

He said it made him feel like a home loan was out of reach but after reassessing his budget, he was able to work out a plan to have it paid off within the year.

The investment guru – who now runs his own buyers agency called Triumphant Property Group – said he learned a lot in the ten years he spent with Domino’s, adding that the hours allowed him to pursue his real estate dream.

“Working at night time worked well because I could go and look at properties during the day and work during the evening,” Fleming said.

“I worked about 60 plus hours a week and was living at home to save money on rent.”

This is literally a guy who lived in his parents basement and delivered pizzas dispensing investment advise. He also believes he never has to work again based on the extraordinary effort of having been approved for one house. He does seem to have one genuine talent however:

LA Times VS Trump

It’s confusing keeping up with conventional wisdom. The lead front page story on LA Times:

‘Mexico is one big cemetery.’ The search for the secret graves of the disappeared.

In Veracruz, Mexico, thousands have vanished at the hands of gangs, cartels, rogue cops and extortionists. Their grieving families are digging for clues. In the last 8 weeks, searchers say they have uncovered at least 80 graves.

Donald Trump’s quote which has kept everyone outraged for months:

When Mexico sends its people, they’re not sending their best. They’re not sending you. They’re not sending you. They’re sending people that have lots of problems, and they’re bringing those problems with us. They’re bringing drugs. They’re bringing crime. They’re rapists. And some, I assume, are good people.

Is it really a stretch that some of the anti social behavior on display in Mexico is leaking across the very porous border?

 

BNZ relying on New Zealand remaining a Chinese money laundering site

BNZ chief economist Tony Alexander has revealed the bank’s plan to keep their loan book rising:

“Millions of people in China want to buy offshore assets partly to get their funds off the mainland. Currently there is a legal limit of US$50,000 per adult per annum of funds which can be taken out of China. The ability to get around this rule has been constrained for the past two years by a massive anti-corruption drive. Eventually that drive will fade. Also, eventually the rule will be relaxed.  In coming years there will continue to be strong demand for New Zealand, predominantly Auckland, property, by Chinese buyers.”

He also reveals himself to be a phenomenal asshole:

“The list in Alexander’s weekly update came in response to what he calls “whinging about how the world should be fairies and fluffy pink unicorns”.

That’s a reference to “moaning about the speed with which house prices are rising and how some groups are being negatively impacted” which he believes dominates the national housing discussion.”

“Enjoy if you have already bought. Despair if you have not,” he said.

“And if you have put off buying because of one of the many incorrect forecasts that house prices were about to fall – whoops a daisy.”

In a country where it is impossible for a large portion of the working public to buy a house this is nasty.

Peak Stupidity

We have a sinking feeling things are only just getting started but it sure feels like peak stupidity. CNN published a headline we have literally been expecting and watching for:

Math is racist

The article is as stupid as the headline. It has gems of wisdom like “Or consider the fact that nearly half of U.S. employers ask potential hires for their credit report, equating a good credit score with responsibility or trustworthiness.” 

Then there is Pepe the Frog. The two kids that got a moronic “journalist” to publish that Pepe was a symbol of white supremacy have boasted to anyone that will listen about what they pulled off. What is more surreal than that an obscure cartoon character got pulled into a Presidential debate is that this story is still reverberating across what passes for news. People typically let something die when a momentous and embarrassing mistake is made but with this everyone is doubling down. The fact that it is now possible to find Pepe on the internet doing objectionable things is being touted as proof that he always was a long time white supremacist symbol.

The point has been reached where there is no rational way to fight back against the result of diseased minds. The self evident has now become a matter of opinion to vast numbers of people. Believing in objective reality has moved from simply being sane to being hateful. Western culture needs some pain to allow people to focus on things that matter.

Humans as rational economic actors

The bedrock of economics is that humans are rational economic actors. This is at best only partially true. People with money have a strong belief they are financially rational. An example of how wrong this is:

This is the auction sale result for 3454 N 79th Dr, Phoenix, AZ 85033. This is the Zillow history:

This property was publicly for sale for $59,900.00! This was almost certainly a negotiable price.

Auckland properties empty

The cry from every bubble is “no properties to be had!”. When the bubble busts it is revealed that there were vast numbers of residences held purely for appreciation. An article in the NZ Herald where a landlord asks for sympathy because getting good tenants is hard (which is true if you rent out garbage properties in bad neighborhoods) lets slip the following interesting point:

It doesn’t surprise me that so many houses in Auckland are simply kept vacant.

While his cries of anguish ring hollow to us as people that have never had issues finding decent tenants (even in poor neighborhoods) we are sure he is well aware of what other property owners are doing. Making the claim far more credible is a story that went up shortly after denying that this was true:

Auckland ghost house claims ‘bollocks’

Nothing can be determined as emphatically true until denied by an authority figure.

Getting rich in NZ: Buy Property, Wait.

Millionaire Auckland landlord reveals how he got rich

A former $17 per hour Auckland storeman who started out with only $4000 cash wants to tell others how to become multimillionaires via a new ‘how to’ property book – and any impending market downturn doesn’t worry him.

Mt Albert man Jonathan Bidmead, 53, says he went from being a storeman in a Newton computer business to being made redundant, to now owning 14 Auckland and New Plymouth properties with 20 residences worth more than $12.5 million and generating just under $400,000 annually.

By borrowing from a relative, he set himself on a path to wealth and says others can do the same.

People can repeat his ‘magic’ formula today, if they want to become wealthy and he reckons property is the way to do it, he says.

“People need to get assistance from a family member and then they can still achieve the same result as I did,” he says of those with relatively little savings.

Ahh yes of course: be born with wealthy relatives. Solid planning on his part.

“In 1991, I put $4000 of my own money into my first place in Springfield Rd, Western Springs. The house cost $79,000 and I borrowed $12,000 from my father-in-law to get enough for the deposit.

“It was a three-bedroom duplex, the worst house in the street. Half the windows were broken and I didn’t know there was a clothes line until I mowed the lawn. And from then on, using just the growth in equity from that property, I borrowed against it to buy more properties,” he said.

The Western Springs house was his own home.

“I was made redundant from the computer firm and I spent a day going around the HR places looking for jobs and just decided ‘no, this is the wrong way to do things’ so for the next six months I read books on property investment and business and I realised property investment was the way to go. The bulk, of wealth for most people around the world is held in real estate,” he said.

“I bought eight houses for no money down in less than three years – 2001 and 2002 – just on the equity in my house. They were in Avondale, New Windsor, Westmere,” he said.

The other six were purchased after that, he said.

They generate a gross annual rental income of just under $400,000, he said.

He has discovered the ability to sign zero down loans. This trick has been discovered before in many parts of the world and at many different points in history.

The revenue gets mentioned repeatedly in this article/advertorial but there is never a hint of his debt service or other costs.

“The book is to encourage informed investors to buy one or two properties and if they hold on to them for about 10 years, they’ll accumulate more money than they can save in their lifetime,” he said, rejecting the concept the downturns can be dangerous for investors. 

Price appreciation during an epic bubble is apparently one of life’s absolutes. How far this bubble has run is evidence that such jaw dropping stupidity gets written about as words of wisdom.

“I love downturns. From 2007 to 2010, property prices actually dropped and I look forward to the downturns,” he said.”

His experience of “downturns” can be seen in the graph below:

His city of Auckland went sideways for a while (and yes even dipped negative for a few nano-seconds).