Here’s the audio of my appearance earlier today on David’s Knight’s show. We talked about the motives of the people bent on our enserfment and various topics related to that theme.
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I’m listening to the show, around 6 min in you are talking about the unaffordability of EVs, and at the same time I am reading Zero Hedge article about Tesla extending loans out to 84 months:
https://www.zerohedge.com/markets/tesla-attempts-stoke-demand-84-month-loans-amid-affordability-crisis
And this chart in the article is of particular interest:
https://cms.zerohedge.com/s3/files/inline-images/Snag_1b3a7725.png?itok=Qk_Vbp8D
Which is similar to the fixed 30 year mortgage rate chart:
https://fred.stlouisfed.org/series/MORTGAGE30US
What no one is expecting (except the Elliott Wave technicians) is that interest rates could continue up – which of course – makes the electric cars even more unaffordable, and homes, which means both items must be discounted to be affordable.
Everyone assumes interest rates will “pivot” then crash in the next recession – but that is nonsense – because inflationary federal spending has gone hyperbolic, as has the money supply:
https://fred.stlouisfed.org/series/FYGFD
https://fred.stlouisfed.org/series/FYFSD
https://fred.stlouisfed.org/series/M1SL
It should be noted that interest rates bottomed out and now are in an upward trend – perhaps for decades – as USSA becomes a basket case banana republic.
This structural change to permanet high rates has been expected for many years, here is a chart I made back in 2018
https://i.ibb.co/jZr7pJp/10-YEAR-TREASURY-MEGAPHONE2.png
The Fed has NOT stabilized the finance market, the Fed has monetized federal debt and has caused wild swings in rates, which now are going up like a bat out of hell.
https://www.megabolsa.com/wordpress/wp-content/uploads/2019/08/argentina-interest-rate.png
David Knights comments about our politicians are like Ted Bundy, being malevolently evil, is spot on. This wild spending on the Ukraine war is utter lunacy, we do not have any money to throw around, we are 32 trillion in debt – with the interest on the debt spiking:
https://fred.stlouisfed.org/series/A091RC1Q027SBEA
Note: from 1980 to 2020 interest rates were in a downtrend.
Needless to say, as anyone can deduce, if rates go back up to 1980 levels (or even higher – think Argentina) the USA will be in a greater depression, much worse than the 1930’s, and much longer.
Outstanding show BTW, both of you are brilliant and enjoyable to listen to, music to my ears.
Another unstated and undiscussed dimension to the EV craze is that it was driven partially by exponential home appreciation caused by interest rates dropping to the lowest level in human history.
If your million dollar home appreciates by another million, the EV buyer feels rich and secure running out and buying a 80K vehicle, plus they get tax breaks – as the wealthy are in high tax brackets – so EV kickbacks are a big deal to them.
If low rates reverse, interest rates keep going up, home prices will go down, and the psychology will also reverse, the free spending will halt, and people will all of a sudden be concerned about pennies. There is a country boy saying, no one counts their change until they are down to their last 20 bucks. That era may be coming, because high interest rates will kill the debtors.
What I am saying and putting out there, for you all to consider, is there is good technical chart evidence, and good fundamental macro evidence, that the era of low rates has ended and now we are going into a many decade era of high rates – which is going to kill luxury spending for sure, except of course, for the ultra wealthy.
As far as I know, I am one of the very few banging the drum with this warning, high interest rates are coming and they will stay high for a long time. Amerika is now in the banana republic phase – and a long greater depression.
Good/insightful batch of comments there, Yukon Jack.
‘I’d Like The Value Of My Home To Start Rising Again, I Wonder If The Good Days Are Over’
http://housingbubble.blog/?p=7701
So very few listened the last go-around, I expect about the same, this time around.
“Amerika is now in the Banana Republic phase,” Yukon Jack. To be fair I think we’ve only reached the green Banana Republic phase. The idea that the good times may be over for good Still hasn’t even started gaining traction in Normal minds. When blood flows in the street and everyone loathes and detests housing, then I’m maybe a buyer. Until then, Housing prices are cratering. I love that blog BTW helot.
Cool.
Been reading it since about its inception in 2004 or so.
That Ben Jones, he’s somethin’ else now. And, a Libertarian!
‘THE CARS ― GOOD TIMES ROLL (1978)’
https://www.youtube.com/watch?v=7BDBzgHXf64
Funny, that. Imho, the housing bubble took off just a few years before that, ~ 1974.
A mighty long stretch. No wonder people think it’ll never end.
Ben Jones is da man. I’ve seen lots of boom/busts here in Az. I remember my parents house in Tempe, they bought in 1970 for about 20K, sold it in 79 for almost a hundred. Buying low, selling high was one of the best things my dad ever taught me, other than a strong work ethic.
Az has been through more of these boom/busts than most places. The savings and loan, McCain five, The first gulf war. lots of boom/busts out here. A few years later the encroachment of the desert picks right back up where it left off.
I cant believe the number of people still buying here, paying top $$$. Although time on market is getting longer, Asks are coming down, people still act like the punch bowl will remain in place forever. Never mind the stupidest person in the world (J Yellin) has already pulled the plug on the easy money.
Hi Norman,
Government money seems to be propping up real estate prices – in my area, at least. As you know,. I’m in SW Virginia, but Northern Virginia (DC suburbs; home to lots of government employees) is only 230 miles away. They keep coming here. It makes my stomach churn because I love this quiet, formerly isolated and largely unknown area of the state. It feels like you can’t get away from them – unless maybe you move to extremely remote Montana or Wyoming – which may be the last resort. Still, I hope it does not become necessary as I’ve poured so much work and emotional investment into our redoubt here in The Woods. I guess we’ll see…
Meanwhile, mail coming!
Hi Eric,
Sorry to hear about your sweet enclave being overrun w/rats. Pretty sure I speak for all us Arizonians here at EP autos when I say you’d always be welcomed and loved here in AZ. To be honest though, we have the same problems. Phoenix, 100 miles away is overflowing with the worst on offer from Cali. The good ones who came here from Cali seem outnumbered about 4-1.
It is heartbreaking. I’ve worked pretty hard on my little Cornville spot as well. Ten years of blood, sweat, and tears poured into it. We’re considering moving on, just leaving it as a bug out option. I know people in Montana who say the same thing. Boise and all its environs becoming California North. All the easy money has created extreme imbalances everywhere.
I’m looking at all my options. Kind of hoping for a hard RE crash so I can buy a summer home in Alaska next year on the cheap. I’m taking the family down to Panama for a couple weeks this winter to have a look see. I’m not entirely sure I want to ride out the WW Marxist wave here in the US.
Thanks for the link to the housing bubble blog, I used to read that and patrick.net back in the heyday of the 2006-9 housing crash. I checked it out again, it is now political, back then is was only housing – started by the banking wonks who saw the bubble from inside of the banks.
Here is my favorite housing youtuber:
Reventure Consulting
@ReventureConsulting
403K subscribers
https://www.youtube.com/channel/UCVTQunGrE3p7Oq8Owao5y_Q
He is one smart whippersnapper.
Hi Jack,
I’ll second what others have said – your observations re interest rates/housing value “wealth” are, I think, exactly right. I draw a parallel to the last housing bubble – back in the early 2000s – which I remember vividly as I lived in the epicenter of it in Northern Virginia, where the annual rate of increase in home prices was such that a home bought for less than $200k circa 1998 was selling for $400k by 2002. I knew a lot of people back then who felt flush with equity – and took out loans to buy luxury items or do expensive remodeling, etc. When the “music” stopped and home values took a squat, a number of these lost their homes, being no longer able to support the debt they’d bought
I agree with you that this is likely to happen again.
Thanks for the reply, and the reason I posted that info, is that you were bringing up the issue that EV’s have become unaffordable as rates rise. Everyone, and I mean everyone in the car companies and Wall Street BELIEVE as gospel that the Fed will pivot (soon) and interest rates will dive again, see chart:
https://static.seekingalpha.com/uploads/2022/8/5/saupload_Fed-Funds-Pivot-Periods-072822.png
But what if interest rates do not do what is expected, then what you said will actually be much worse! Mortgage rates could easily blast through 8% (a magical number because it is the long term 200 year average of 10 year Treasuries). When 8% is breached with no pivot, that will not only be headlines, it will be a realization point that the good times of low rates is over, and let me tell you – there are millions of real estate speculators who will then unload – just as Black Rock is doing now, and the housing funds did last year. They are getting out early because the math is no longer in their favor (which means their borrowing costs are greater than the appreciation).
If you follow Fed rate hikes, this is a good link: https://www.investing.com/central-banks/fed-rate-monitor
What I am saying is that no Fed pivot for very long because with the huge M1 increase and non-stop HUGE deficit spending, inflation is an unleashed beast that can not be tamed.
This is being discussed – the Fed must NOT pivot early or it will be a repeat the 1970’s mistake when the Fed pivoted to early – which led to inflation taking off again, and the installation of Paul Volcker.
And during all of this huge crisis – drunk insane Congress will be deficit spending to the moon for WW3. What is needed are massive spending cuts, the Pentacon 90% cut, but ZOG will not allow that.
Where I live there has been 200% appreciation in home prices. This is heavily influenced by general inflation (increase in the money supply) but also secondarily supply/demand dynamics. Buyers are still around looking to put their rapidly depreciating dollar assets into things with intrinsic value (wood, screws, beachfront views, etc.) Interest rates are now high. People who bought at low rates are staying put, not selling to buy into high rates. So there is a severe lack of supply leading to… higher prices. Now there are no less than 5 new houses being built within 2 blocks of me on formerly unimproved lots in an attempt to feed supply into demand. There hadn’t been a new house in this 2 block area in the 7 years I’ve lived here.
I’d like to see some of the charts you mention about folks draining equity to buy other items. If high rates were to affect/discourage anything, it would be equity lines of credit. Personally, I’m not seeing it like I did 20 years ago. A lot of your theory hinges on this assertion.
Your theory about rates is a bet that the Fed can control inflation and actually cause deflation with interest rate policy, namely higher rates. That this rate policy actually works and will somehow influence supply/demand dynamics to the point where our money will be “worth” more in the future. I don’t believe that for a second. I don’t believe in the Fed.
I agree, the Fed is a gigantic inflation engine, and this: ” folks draining equity to buy other items. ” is my argument what was fueling EV craze.
But what if home appreciation reverses? Then the equity spending will screech to a halt, and EV sales will plummet, as car buyers get very conservative and not tend to buy the latest fad car.
I also don’t believe in the Fed, see this:
https://www.elliottwave.com/articles/2021/06/17/14/43/why-are-we-paying-these-guys
Eric,
We weren’t just gifted with an Eric Peters audio track; there was actual video of the Man, Myth and Legend included in this installment! And I liked your shirt, by the way. I have one of those.
David Knight is well-spoken and astute, it is certain, but don’t sell yourself short Eric. You speak as your write, and are quite verbally precise and draw from a vast lexicon. Any orator would do well in conveying their thoughts as effectively.
Thanks for the kind words, BaDnOn!
And I’m glad you’re enjoying the Keeeeeeeeeeev shirt, too!
Awesome broadcast on David Knight today!
Thanks for the kind words, wfozx!
I enjoy talking with David; he’s become a friend and I respect the guy hugely. Also, he’s just a nice guy. Earthy, erudite and modest. The kind of guy I aspire to be one day!