Video: Michael Burry 2012 UCLA Commencement Address

Recapping The PolyCapitalist's 2011 Predictions

For those keeping score three topics I made 2011 forecasts on were:

1. Rise of Android
2. China's bubble
3. U.S. Housing

On Android, the verdict is in:

The U.S. housing market officially double dipped in May and then continued to fall, so that call looks correct as well.

The China prediction is a bit murkier, but here are some points worth noting:

• The Hang Seng and Shanghai stock markets are in a bear market and down roughly 20% for the year, or 30% since May. From its peak in 2008 Shanghai is off 60%.
• Housing prices are softening quickly; in Beijing new home prices dropped 35% in November alone.
• Coastal cities such as Wenzhou and Ordos appear to be experiencing a credit crisis with reports of businessmen leaping off rooftops.
• Hot money appears to be flowing out of the country: China's $3.2 trillion in foreign reserves have been falling for three months despite a trade surplus.

Things aren't shaping up too well for China or trade relations with the U.S. in 2012 either. For more on this see here, here, here and here.

Overall, does 2.5 out of 3 predictions sound about right?

Two more quick ones: bullishness on gold has been a steady theme since starting this blog in May 2010. And how did gold do in 2011? Despite the autumn selloff gold priced in U.S. dollars has returned around 10%. Not too shabby given that the S&P500 is flat YTD. I also managed a correct mid-year bearish call on the euro.

Check back later for The PolyCapitalist's 2012 predictions.

My $0.02 on Krugman's and Delong's Inflationista Potshots

Here's Delong's OH BOY: NIALL FERGUSON PRACTICING ECONOMICS WITHOUT A LICENSE DEPARTMENT

And my comment (which for some reason won't load onto Brad's blog so I'm posting it here):

I'll readily admit that I'm not an expert on CPI methodologies, and I am inclined to believe that the BLS has many well intentioned and highly educated professionals using defendable methodological practices. However, I share Ezra's feeling that something doesn't smell right on inflation numbers.  

Over the past decade how can official cost of living figures have gone up so little when they supposedly take into account the following items: 

-Housing
-Medical
-Fuel
-Food
-Education 

These are some of the largest cost items for most consumers, and in the last decade up to the financial crisis many saw double digit price increases (in some cases in a single year). 

The BLS's CPI calculator says that $1 in 2001 has the same buying power as a $1.17 in 2007, so yes, the BLS is picking up at least some of the perceived inflation in these categories. However, do the BLS number capture the full picture? 

One thing is for certain: the CPI was utterly useless with respect to the housing bubble as it does not include housing prices, only rent. This despite the fact that nearly 70% of all American homes are owner occupied.

It's convenient to dismiss anyone questioning official government statistics as a conspiracy crank. However, under reporting of inflation by a government bureaucracy would be useful in terms of reducing that same government's expenses in the form of lower cost of living adjustments for government workers and TIPs expense. Under reporting inflation also provides ammunition for the Greenspan-Bernanke Fed to not have to raise interest rates and thereby dampen exuberance. 

In other words, many stand to benefit from the under reporting of inflation. It is therefore reasonable to cast a skeptical eye on these numbers, especially when they fly in the face of everyday experience.

A final point I'd add is that economics is too important to be left to economists, particularly with most of the 'license' holders (econ PhDs) having completely failed to identify in advance the biggest economic event since the Great Depression.

Video: Kyle Bass' Full BBC Hardtalk Interview

"Capitalism without bankruptcy is like Christianity without Hell" and other choice comments from the hedge fund manager profiled in Michael Lewis' most recent book, Boomerang.

h/t Zerohedge

Video: Robert Shiller on Why Housing Has Not Bottomed

Video: Profile of Michael Burry of 'The Big Short'

Video: China's Empty Cities

Pretty rosy view from Bloomberg's Adam Johnson in the below video. For an alternative view, see these videos from Hugh Hendry and Jim Chanos.

Video: Merle Hazard's Feelin' Lousy music video

The Buck Stops Here: Housing Price Trends and the Economic Outlook

Is the time finally right to get back into the residential real estate game? And what are the broader implications of trends in housing on the overall economy and financial markets? Let's take a look at the arguments and data.

The Case for Investing in Housing

Mortgage interest rates have come up some recently but are still near historic lows and appear attractive.

U.S. 30-Year Mortgage Interest Rates

Note: chart data only runs through early 2010; if updated through 2011
 the chart would show a recent increase in interest rates to around 5%.

We're also entering the comparatively slow home buying season and prices, after a post-bubble popping uptick, have been retreating recently.  There may be some sweet deals to be had over the next several months.

And perhaps most importantly are the following two considerations: a) the overall economy is showing increasing signs of life and b) the risk of deflation appears to be subsiding as commodity (e.g., oil) and food price inflation is taking off globally. Real estate has historically been considered one of the best ways to protect oneself against broad inflation.

Add it all up and it would appear that housing could in fact be a prudent investment right now. What would be reasons for holding off?

Continue reading the full article published on SeekingAlpha here.