As Wall Street rallies to fresh highs, investors are uneasy

Bad news is cheered. Good news makes investors nervous. Welcome to Wall Street.

The S&P 500 rose above 3,000 for the first time in its history Wednesday, with gains that continued early Thursday.

The most recent jump began after Federal Reserve chair, Jerome Powell, suggested the nation’s central bank was worried about the economy. Just days earlier, strong data on the job market had the opposite effect for stocks.

This counterintuitive reaction to the news is a phenomenon that’s explained by expectations for interest rates. The weakening outlook for the economy means, in all likelihood, borrowing costs are coming down — and in the right circumstances, this can be good for stocks.

If that all sounds familiar, there is good reason. Those same conditions were in place for much of 2012 to 2015, when the S&P 500 rose nearly 45 percent.

That climb earned itself a nickname, the TINA market. It stands for There Is No Alternative, which simply means that because central banks around the world were holding rates so low, investors had little choice but to buy American stocks.

Lower interest rates made returns on government bonds around the world less appealing and drove investors to seek returns in the stock market. At the same time, the US economy was performing better than much of the rest of the world, and US stocks were seen as less speculative bets than those in other countries. These are more or less the same circumstances investors face today.

Here’s a look at why the return of the TINA market could keep the bull market going, and what could be different in 2019.

The stock market is climbing even though there’s plenty to worry about

Any of the following could arguably derail the decade-long economic expansion and the rally: the seemingly never-ending trade war between China and the United States, a slowing global economy and simmering geopolitical tensions that could escalate into a full-blown conflict.

A recession would wreak havoc on corporate profits and would cause investors to flee riskier assets such as stocks.

But a downturn in the United States is not imminent — employment and economic data make that clear. Investors have become convinced that the Fed will act aggressively to lower rates to keep the expansion going. In the futures market that investors use to bet on the Fed’s decisions, nearly 90 percent expect at least two rate cuts by the end of 2019, and 53 percent anticipate at least three.

That signaled an abrupt U-turn for Fed policymakers, whose seeming determination to continue raising rates caused a market meltdown at the end of last year.

It’s good news that investors are not particularly optimistic

The decade-long bull market has racked up record highs and broken through one milestone after another. Each instance has been met with skepticism. And that does not seem to have changed this year.

The percentage of individual investors who say they expect American stocks to rise over the next six months has remained below its historical average for nine straight weeks, according to the American Association of Individual Investors’ weekly survey.

Bank of America Merrill Lynch called its June survey of fund managers its most bearish since the financial crisis.

The rates on long-term government bonds have declined this year, as well as the expectations of bond investors for inflation over the next five years. That indicates there is significant concern about the strength of the economy in the coming years.

“You are not seeing the party hats going on the floor of the New York Stock Exchange,” said JC O’Hara, the chief market technician at MKM Partners. “The average investor has a healthy degree of skepticism. They are very aware of the signs that an economic slowdown is taking place. But in a TINA market, where are they going to put their money?”

The lack of exuberance surrounding the rally may be a reason to think it can keep going. Investor sentiment is often viewed as a contrarian indicator: When optimism is high, it can indicate that investors are ignoring risks and plowing money into stocks on the belief they can only go up. Conversely, if investors become too pessimistic, it can indicate the market has hit a bottom.

Right now, investors are more neutral. That means a rate cut, along with better than expected corporate results and economic data, could inspire the skeptics to buy and keep the rally going.

Not everyone is convinced that there are more gains to be had

“The market continues to believe we have this ‘Goldilocks’ situation. That stocks can continue to make new highs and a lot of assets can all perform well together,” said Andrew Sheets, a strategist at Morgan Stanley. “But there are a number of reasons we believe that this is not 2013 or 2015 or even the late 1990s, another period when the Fed cut and the markets did quite well.”

For one, Wall Street’s expectations for earnings remain too high, Sheets said.

When companies reported first-quarter results, they seemed reluctant to lower the financial forecasts for the year ahead. But since then, trade talks aimed at reaching a deal between China and the United States, which many believed was imminent as recently as the end of April, have broken down, and the economic data has weakened. That means that when companies start reporting second-quarter results, they are likely to issue forecasts that reflect a more difficult 12 months ahead, Sheets said.

Also, a number of economic measures looked more stretched than they did five years ago when the labor market was still strengthening and consumer confidence was improving, Sheets said.

It’s true that the US economy is still adding jobs, but at a slower pace than it did last year or even earlier this year, and consumer confidence is high but not improving.

Even if this is the return of the TINA market, how long can the run continue?

Sheets is not expecting a sharp downturn. After stocks have gained 19 percent this year, he and his colleagues at Morgan Stanley, are skeptical the market can continue to march higher.

But in a market that has primarily been fueled by the prospect for interest rate cuts, there is good news for investors: When the Fed starts cutting rates, stocks typically rally for the year that follows.

“If you look at all the initial rate cuts since 1954, they have tended to push the markets higher over the next 12 months,” said Audrey Kaplan, the head of global equity strategy at the Wells Fargo Investment Institute.

According to her research, the S&P 500 gained about 14 percent on average the year after the Fed’s first cut. The gains have come in 13 out of the 16 instances.

Investors have spent much of the past decade counting on the Fed to keep the bull market going, and the central bank has delivered what investors hoped for. What investors have to grapple with now, is how long this will continue.

“This has been called the most unloved bull market in history, but it will be the most highly anticipated bear market whenever the next one comes around,” O’Hara said. “Whether that is today, tomorrow, a month from now or a year, that is the question right now.”


2019 New York Times News Service

source: news.abs-cbn.com

Investors gloomiest on world growth in decade, cut US equity holdings-BAML poll

LONDON - Global investors have the most pessimistic outlook on the world economy since the 2008 financial crisis, according to Bank of America Merrill Lynch's monthly survey, which also showed a sharp fall in US equity allocations.

The survey, released on Tuesday was conducted Oct. 5 to 11 and canvassed investors managing $646 billion. It showed investors remained overweight equities overall, though the 22 percent overweight was just marginally off the recent record low of 19 percent.

But in a sign of caution, they held cash at 5.1 percent -- a net 36 percent overweight -- and well above than the 4.5 percent 10-year average.

The poll showed that a net 38 percent of respondents expected the global economy to slow, the worst outlook on global growth since November 2008. A net 35 percent of participants identified trade war as the biggest risk.

Investors were also gloomy on corporate earnings, with a fifth of respondents expecting global profits to deteriorate in the coming year, BAML said, noting that in January a net 39 percent of investors had predicted an improvement.

Focusing investors' minds is the rise in US, Treasury yields -- 10-year yields hit seven-year highs recently -- expectations of more policy tightening and signs the US economy and company earnings could slow from the sugar-rush provided by tax cuts.

All those fears were among factors which triggered a sudden selloff on Wall Street last week, putting the S&P500 on track for its biggest monthly loss since mid-2015.

There are also concerns about the overwhelming popularity of big tech, with the BAML poll showing US and Chinese tech stocks remained the "most crowded" trade for the ninth consecutive month.

The poll showed a dramatic 17 percentage-point drop in US equity allocations to a net 4 percent overweight, with Japan ousting the United States as investors' most favoured market with an 18 percent overweight.

The decline in European equity holdings too continued, falling six percentage points in October to the lowest since December 2016.

Investors remain reluctant to give up on higher-risk assets however, holding on to an overall underweight position on bonds.

"Investors are bearish on global growth but not bearish enough to signal anything but a short-term bounce in risk assets," BAML chief investment strategist Michael Hartnett said.

The poll found also that the yield level at which investors would rotate from equities to bonds was seen at 3.7 percent on 10-year US Treasuries -- the highest since March when the question was first asked.

Yields are currently around 3.17 percent, almost 10 bps off recent highs.

In an interesting turnaround, a net 51 percent of poll participants named the dollar as overvalued, "notably against emerging market currencies which are seen as never having been more undervalued in survey history," BAML said.

(Reporting by Helen Reid and Sujata Rao Editing by Josephine Mason and Raissa Kasolowsky)

source: news.abs-cbn.com

Asia steady on firmer Wall Street, pound nurses losses

TOKYO - Asian stocks steadied early on Monday, taking cues from Wall Street shares hovering around record highs, while the pound nursed losses after a poll showed a shrinking lead for Prime Minister Theresa May's party in Britain's upcoming elections.

MSCI's broadest index of Asia-Pacific shares outside Japan stood little changed.

Japan's Nikkei edged up 0.1 percent and Australian shares were flat.

On Friday, the S&P 500 and Nasdaq scraped to record closing highs on strength in consumer shares.

The dollar index against a basket of major currencies was steady at 97.435 after rising on Friday thanks to upbeat U.S. gross domestic product data.

The greenback was little changed at 111.270 yen, with the safe-haven Japanese currency showing little reaction after North Korea fired what appeared to be a short-range ballistic missile early on Monday.

"While the North Korean situation remains tense, the market has gotten used to missile launches, with broader volatility also declining," said Shusuke Yamada, senior strategist at Bank of America Merrill Lynch in Tokyo.

"The US markets will also be shut today, and that is curbing incentive and restricting overall movements as well."

The US markets will be closed on Monday for Memorial Day.

The pound was a shade higher at $1.2811 after dropping more than 1 percent on Friday to as low as $1.2775.

Sterling suffered its steepest fall since January on Friday after an opinion poll showed the governing Conservatives' lead over the Labour opposition down to just 5 percentage points with less than two weeks before a general election.

The euro was virtually flat at $1.1176 after slipping against the broadly firmer dollar on Friday. The common currency had soared to a 5-1/2-month high of $1.1268 last week on factors including relief at the French presidential election outcome, but has failed to make further headway.

Crude oil prices were slightly higher, continuing their modest recovery after suffering a big drop last week on disappointment that an OPEC-led decision to extend production curbs did not go as far as many investors had hoped.

US crude was up 0.25 percent at $49.93 a barrel, having slumped to as low as $48.18 on Friday.

Spot gold hovered close to a near four-week high of $1,269.50 an ounce hit on Friday, led higher by investors who feared political risks.

source: news.abs-cbn.com

Euro under the gun, shares hit after Italy votes 'no' on reform

SINGAPORE/SYDNEY - The euro was under the gun on Monday, skidding to a 20-month low after Italian Prime Minister Matteo Renzi said he would resign following a stinging defeat on constitutional reform that could destabilize the country's shaky banking system.

The single currency, which slumped to as low as $1.0505 in early Asian trade after opening at around $1.0685, pulled back up to $1.0562.

The drop to its session low was the sharpest fall since June and opened the way to a retest of the March 2015 trough around $1.0457.

The single currency dropped as much as 2.1 percent to 118.71 yen, but pared some of the losses to trade down 0.9 percent at 120.06 yen.

"The 'no' vote was priced in to a certain extent in advance. So I do not expect a freefall in the euro in the near term," said Minori Uchida, chief currency analyst at the Bank of Tokyo-Mitsubishi.

"But in the long run, this will delay progress in Italy's efforts to get rid of banks' bad debt and is likely to widen the yield spread of German Bunts and the Italian bonds," he added.

The dollar was supported by expectations of a US rate increase this month and gained 0.1 percent to 113.74 yen.

The New Zealand dollar slipped 0.7 percent to $0.0782 after Prime Minister John Key unexpectedly announced his resignation on Monday, saying it was the "right time" to leave politics.

Key, a former foreign exchange dealer who worked at firms including Merrill Lynch, won office for the National Party in 2008, ending the nine-year rule of Labour's Helen Clark.

New Zealand stocks retreated 0.3 percent.

MSCI's broadest index of Asia-Pacific shares outside Japan eased 0.3 percent, while E-mini futures for the S&P 500 lost 0.4 percent.

Japan's Nikkei slid 0.6 percent.

Dealers said Italian bonds were set to come under pressure as top-rated U.S. Treasuries and German bunds gained. Futures for US 10-year Treasury notes added 10 ticks.

Investors and Europe's politicians fear victory for the opposition 'No' camp could cause political instability and renewed turmoil for Italy's banking sector, which has been hit by fears over its huge exposure to bad loans built up during years of economic downturn.

Renzi's resignation represents a fresh blow to the European Union, the euro zone's heavily indebted third-largest economy which is struggling to overcome a raft of crises.

Ultimately, the danger is that Italy holds a vote on whether to leave the euro, possibly triggering a break up of the entire bloc.

Analysts at RBCCM argued that, based on what happened in 2012 at the height of the Greek crisis, such a risk could see the euro trade as low as $0.8000.

"It may sound extreme, but if a second euro zone crisis were to hit, with the U.S. dollar at a much stronger starting point, EUR/USD could arguably trade lower still," they wrote.

Markets had earlier taken some encouragement when Austria's far-right presidential candidate was soundly defeated by a pro-European contender, confounding forecasts of a tight election.

The European Central Bank also meets Thursday amid much speculation it will announce a six month extension of its asset buying program and widen the type of bonds it can purchase.

"There has been some speculation that the ECB would step and front load purchases of Italian bonds if markets became unsettled by a 'No' result, so perhaps it is the thoughts of a central bank liquidity sugar pill driving things again," said ANZ economist Jo Masters.

OIL PULLS BACK

Wall Street ended last week on a cautious note, with the Dow off 0.11 percent, while the S&P 500 rose 0.04 percent and the Nasdaq gained 0.09 percent.

While Friday's U.S. payroll report was firm enough to cement expectations of a rate hike by the Federal Reserve this month, a surprise pullback in wages helped bonds pare a little of their recent losses.

In commodity markets, oil ran into profit-taking after boasting its best week in at least five years following OPEC's decision to cut crude output.

Markets are now focused on the implementation and impact of OPEC's first output cuts since 2008, to be joined by Russia and possibly other non-OPEC producers.

Brent crude was down 49 cents at $53.97 a barrel, while U.S. crude lost 37 cents to $51.31.

source: news.abs-cbn.com

Dollar on high as US yields rise, Asia shares divided

SYDNEY - The US dollar touched a nine-month peak in Asia on Monday as the risk of faster inflation at home and greater bond issuance kept Treasury yields elevated, a painful mix for assets in many emerging market countries.

The dollar neared a four-month top on the yen at 106.90 , while the euro touched its lowest since January around $1.0810. It was also at a nine-month high against a basket of currencies.

The dollar has been on a tear since the victory of Republican Donald Trump in the US presidential election on Nov. 8 triggered a massive sell off in Treasuries.

Futures for the 10-year note were at their lowest in 10 months on Monday while the cash yield was at 2.18 percent.

Just two days of selling wiped out more than $1 trillion across global bond markets, the worst rout in nearly 1-1/2 years, according to Bank of America Merrill Lynch.

The jump in yields on safe-haven US debt threatened to suck funds out of emerging markets, while the risk of a trade war between the United States and China soured the mood in Asia.

"There are signs that higher bond yields and the knock of a stronger US dollar are having a domino impact, taking down the weakest risky assets first, before moving on to the next," said Alan Ruskin, global co-head of forex at Deutsche.

"There is only so much financial conditions tightening that risky assets can take when fiscal stimulus is still 'a promise' that lies some way in the future."

MSCI's broadest index of Asia-Pacific shares outside Japan was off 0.3 percent having suffered its lowest close since mid-July on Friday.

In contrast, Japan's Nikkei firmed 0.9 percent on the weakening yen to reach its highest in nine months.

It got an added fillip from data showing Japan's economy grew at an annualized rate of 2.2 percent in the third quarter, handily beating forecasts.

E-mini futures for the S&P 500 added another 0.3 percent early on Monday.

The Dow romped up 5.4 percent last week in its best performance since 2011. The S&P 500's 3.8 percent gain for the week was its strongest in two years.

Investors have favored drug and bank stock to reflect Trump's campaign promises to simplify regulation in the health and financial sectors.

INFLATION ON HORIZON
The stampede from bonds propelled longer-dated US yields to their highest levels since January, with the 30-year yield posting its biggest weekly increase since January 2009.

With the Republicans controlling Congress, there was a real prospect Trump could enact deficit-financed tax cuts and infrastructure spending, ending years of policy deadlock.

The resulting boost to inflation would only be heightened should Trump go through with plans for slapping tariffs on imports and deporting migrants.

The result was a surge in inflation expectations.

One market rate, measuring expected inflation over the five-year period that begins five years from today, shot up 30 basis points to 2.46 percent last week, the highest since late 2014. It had been as low as 1.84 percent in June.

Fed fund futures in turn imply a better-than-70 percent probability the Fed will hike rates in December.

Yet rising bond yields are tightening financial conditions at a pace that might appear premature to policymakers.

This was a point underlined by Fed Vice Chair Stanley Fischer on Friday, saying the central bank was monitoring long-term US government borrowing costs even as the economy appeared strong enough to proceed with gradual rate rises.

Mexico's peso did gain over 1 percent on Monday to around 20.64 pesos per dollar after Trump appeared to soften some of his more incendiary campaign pledges that were seen hurting the Mexican economy.

The New Zealand dollar initially eased after a powerful earthquake rocked the island nation early on Monday, killing at least two people and prompting a tsunami warning that sent thousands fleeing to higher ground.

Yet the currency soon steadied around $0.7115 as rebuilding work promised to support an already strong economy and lessen the need for further interest rate cuts.

In the oil market, Brent crude added 6 cents to $44.81 a barrel, while U.S. crude was flat at $43.41.

source: www.abs-cbnnews.com

Why oil-driven Asian bond rally could boomerang

SINGAPORE - Plunging oil prices have sparked a big rally in Asian government bond markets as lower fuel costs cut inflation expectations, but the rally could be built on shallow foundations as monetary policymakers remain out of step with tumbling bond yields.

The price of oil CLc1, of which Asia is a net importer, has halved in less than six months, driving bond yields down across the region, from India to South Korea, as markets anticipate looser monetary policy to accommodate the resulting disinflation.

The imminence of further monetary easing in Europe and Japan builds a strong case for bond yields to drop further.

But there is little sign yet of official rate cuts, particularly in markets such as Indonesia, Malaysia and the Philippines, where central banks were sounding hawkish or even raising rates into the final months of 2014.

"The oil price has caught central banks by surprise," said ING's chief Asian economist Tim Condon.

"The panic of 2013 is right now foremost in their minds, and they are looking at a Fed rate hike, and so I think they will remain pretty dug in," he said.

The fear of a repeat of 2013's "taper tantrum", when talk of the Federal Reserve withdrawing monetary stimulus prompted vast sums of foreign capital to bail out of the region, helps explain why Asian central banks might err on the side of tighter monetary policy.

But there are other factors that also suggest official policy will stay tighter than the bond markets imply.

For one, a rising U.S. dollar is pushing down all emerging market currencies, which already indirectly eases monetary conditions for Asian policymakers and creates pressure on them to keep interest rates up to prevent the flight of foreign cash.

The market mismatch is evident in Indonesia, where the rupiah currency has fallen 9 percent against the dollar in the past six months.

Ten-year Indonesian government bond yields, which are normally significantly higher than overnight policy rates to reflect the risk of holding bonds to term, are just 5 basis points above the 7.75 percent policy rate, having fallen 60 bps since mid-December.

One plausible scenario that could trigger a bond market tumble is if lower oil costs dramatically improve U.S. growth numbers in the next couple of months, leading to renewed optimism about global growth and a rise in Treasury yields.

Far from cutting rates, policymakers might then have to raise rates.

PARADOX

The odds of this high-growth scenario playing out are perhaps reflected in how well equity markets have held up despite worries about disinflation, patchy economic growth and the possibility that Greece could return to the emergency room.

Despite a wobbly start to 2015, Asian shares are up 6 percent in the past three months.

"We are apparently on the edge of deflation, and yet equity markets aren't collapsing," said BofA Merrill Lynch strategist Claudio Piron. "And there are certain elements to what is going on which are reminiscent of the Asian financial crisis -- oil prices falling, dollar strengthening, bonds rallying strongly -- which all seems very ominous."

With the exception of Thailand, none of Asia's central banks has explicitly spoken of the need for easier policy.

Inflation has slowed sharply, except in Indonesia and Malaysia, where fuel subsidies were cut late last year.

While consumer price inflation in the Philippines is well below the central bank's expected 3 percent average for the year, the rhetoric from policymakers suggests markets may at best hope for rates to be on hold.

On the other hand, Indonesia's inflation is running at nearly double the official forecast range for this year, thanks to a jump in domestic oil prices.

ING's Condon doesn't expect any of Asia's central banks to react in a hurry to either oil or slowing inflation, and instead says they might be prepared to tolerate disinflation just as the European Central Bank and Fed do.

"There is some sort of asymmetry there. It's okay to undershoot inflation, it's prohibitive to overshoot. That, I think, will be the story in Asia as well."

Some market participants recognise that bias, which is possibly why short-end yields in Asian bond markets haven't moved much. But it is in longer-term yields that investors might read a warning that 2015 will hold more pain than gain.

source: www.abs-cbnnews.com

Why does Merrill Lynch have a wellness guru for brokers?

NEW YORK - At a retreat for Merrill Lynch financial advisers in a luxury Orlando hotel last month, a group of several dozen men and women in business attire swung their arms back and forth over their heads to Kid Rock's "All Summer Long" to get their circulation going.

The mild aerobics were part of a three-day event orchestrated by Chris Johnson, a wellness guru who has gained influence under John Thiel's leadership of Bank of America's Merrill Lynch wealth management business.

At Thiel's instruction, Johnson has for the last year been traveling the country teaching Merrill Lynch advisers how to lead healthier lives. He urges brokers - and, in some cases, their family members and clients - to include liver oil, wheatgrass, flax, chia and a type of algae called spirulina in their diets, and to take relaxing baths with Epsom salt to unwind.

"They're starting to go down the medication path. They have acid reflux. They don't sleep. They feel crummy. They're drinking too much. They gain too much weight," Johnson said of the Merrill employees who most need his advice. With that lifestyle, he said, "they're not going to be a good adviser. If I'm coming to my adviser, I want them to be healthy."

Thiel did not respond to requests for comment. David Walker, a spokesman for Bank of America's wealth management business, said that it was important for Merrill to focus on the health and wellness of its employees.

"We care that our advisers are taking care of themselves so they have the energy and capacity to best serve their clients and be present for their families," he said. "Any company that is not focused on wellness is behind. All of the most admired, most progressive companies with the most highly engaged employees are focused in this area."

He declined to comment on Johnson's description of health problems suffered by some members of Merrill's workforce.

NAP TIME

Known as the "thundering herd" because of their bull logo and their large numbers, Merrill's army of 14,000 brokers are not the only money-management employees being urged to take better care of themselves. Firms across Wall Street have been encouraging employees to eat right, sleep well and exercise. While Merrill is Johnson's biggest client, he has also done events with advisers at Morgan Stanley, Wells Fargo & Co and Raymond James Financial Inc.

Still, some Merrill employees have told Reuters in recent weeks that Thiel is so enthusiastic about healthy living that it has caused some hard-charging, long-time advisers to bristle.

These employees have been annoyed to receive advice about health and wellness from Thiel when they would prefer to discuss business concerns with him, several sources said.

One Bank of America executive said brokers have complained about tofu burgers served at a retreat for top producers. Another cited a message recently sent to some advisers encouraging them to take an afternoon nap to increase productivity.

Thiel has brought in another expert, Tony Schwartz, CEO and founder of The Energy Project, who has been advising Merrill employees to take a short afternoon nap to restore their energy.

Schwartz, who started working with Merrill after meeting Thiel at a conference 14 months ago, gives that advice as part of a broader curriculum aimed at pushing Merrill advisers to get the most out of their days. He said he has not convinced Merrill to implement a nap program, but that productivity increases dramatically for those who take his advice on resting, deep breathing and eating right, among other things.

"What makes Merrill Lynch special is that John is an unusually open and interested senior leader to champion this kind of work," said Schwartz. "When there is a leader like that, the power of the work is much higher."

BONGO DRUMS

Complaints by Merrill employees who are irritated by Thiel's wellness campaign come at a time when a number of high-profile brokers have left, causing some concern among top Bank of America Corp executives. Reuters found no evidence of a direct link between the focus on health and wellness and the departures.

The health advice has gone over well with some advisers who are happy their boss is encouraging them to take better care of themselves.

One high-producing broker who spoke on the condition of anonymity said "telling employees to stay fit mentally and physically - that's responsible leadership" and called Thiel the best manager he has ever had in over three decades with the firm.

In a testimonial on Johnson's website, Scott Schropp, a vice president in Merrill's wealth management business, wrote that his clients like being included in wellness events. "They come in with preconceived notions of what this program may be like and leave the program with excitement, determination and a fresh take on 'healthy living'," he wrote.

Thiel, a former American football player at college, met Johnson at an event in Arizona some time ago. Soon after, he went to Johnson's home in rural Michigan for a one-on-one training session. At such events, Johnson teaches corporate executives how to sleep better, shop for "super foods" and cook things like healthy chili. (Johnson declined to comment on Thiel's culinary talent.)

People who know Thiel say he has wholeheartedly embraced the New Age lifestyle that Johnson, Schwartz and another guru called davidji advocate. Davidji (pronounced david-gee and spelled with a lowercase "d") describes himself as a former banker on his web site, and specializes in wellness of the mind. Davidji said he was not immediately available for an interview.

People familiar with his Merrill training sessions say they feature bongo drum playing and meditation. A video on his web site - http://www.davidji.com/ - shows davidji sitting on the beach with his pet dog, named peaches, whom he says he meditates with every day.

"The next time you sit down to meditate, if your pet - your cat, your dog, your lizard, your parrot - feels like meditating with you, create a space," he says. "Close your eyes. Drift into stillness and silence, and you'll notice that your pet gravitates toward you."

Johnson said Thiel's embrace of health and wellness helps balance out his more rugged work on Wall Street.

"He's got a big job and wanted to have energy and stamina," Johnson said "The corporate world beats you up."

source: www.abs-cbnnews.com

Home Prices Are Expected to Peak in 2016, Then Do Pretty Much Nothing Through 2022

Are you still looking to buy a place before time runs out? Don’t want to miss out on the next big housing boom?

Well, it might already be too late, assuming you’re looking to turn a big profit, or any profit at all.

A new report from two bond strategists at Bank of America Merrill Lynch, whose merger was a direct result of the latest financial crisis, predicts little upside from current levels.

In fact, after a couple years of modest growth, home prices are basically expected to go nowhere for the foreseeable future.

Home Prices Are Nearly 10% Overvalued Today

The pair, Chris Flanagan and Gregory Fitter, contends that U.S. home prices are now 9.7% overvalued relative to household incomes, using the S&P/Case-Shiller Home Price Index as the measuring stick.

Simply put, incomes haven’t done a whole lot lately, but home prices (as we all know) have surged since the crisis abated.

In fact, even after chalking double-digit gains from 2012 to 2013, asking prices in many hot markets are still more than 10% above year-ago levels.

According to their math, home prices were about six percent below fair value at the end of 2011. So it looks as if we overshot the mark once more.

Unfortunately, after stellar gains like that it’s pretty difficult to keep the momentum going, even with limited supply and low mortgage rates available.

After all, affordability has its limits, and it’s finally being tested after a few silly good years.


Not Much to Look Forward to Now

While they noted that their outlook is “well out of consensus,” Flanagan and Fitter only see home prices rising another three percent annually each year for the next two years.

That would push home prices to a level that is around 12% above fair value as determined by household income, compared to six percent below fair value when home prices bottomed in late 2011.

Then from 2016 to 2022, their model forecasts modest declines followed by an eventual recovery resulting in flat net annualized home price gains over that period.

In other words, after this current seller’s market spits out a few more nominal gains, home prices are going to settle into a range and stay there. Of course, that’s not necessarily a bad thing.

In fact, the pair thinks it’s a “fantastic outcome” and just what policymakers had in mind when establishing new regulatory framework and lending laws.

Their research echoes that of Trulia’s Bubble Watch, which revealed that home prices were still about three percent undervalued, but expected to be just right by the end of the year, or early next year.

The takeaway here is that no one wants another housing bubble just years after the worst financial crisis in recent history.

So yes, it’s a bummer that home prices aren’t going to continue flying higher and higher, but it should mean a more sustainable market for years to come.

Of course, these are all just assumptions and predictions. Economists are often wrong (and typically never right), so taking their word for it is a bit of a stretch as well.

Additionally, I doubt any model predicted home prices would rise as much as they did during the last boom, so assuming they won’t deviate from “normal levels” this time around is also hard to swallow.

Lastly, remember that this is the national picture, and that home prices can and will vary tremendously from metro to metro.

I’m just curious what will happen after 2022…

source: thetruthaboutmortgage.com