Nenner Update

Nenner update. 

Time To Go Into European Real Estate

Real estate in Europe hasn't been doing so well last year, with the exception of the U.K. and Germany (see chart below from The Economist). That will change in 2015.

I believe that the tide has turned when the ECB decided to do "whatever it takes" to defend the euro and proposed their expanded quantitative easing strategy in January 2015. Since 2012 and especially since that announcement in 2015, government bond yields in Europe have been declining at a supernatural rate, especially in Spain (see chart below from Yardeni). We are now at a point where some maturities have negative bond yields.

What is most interesting to note is that bond and bank deposit rates are very low at this moment, while the commercial real estate yields are very high. This translates into a huge spread compared to the historic average and that is why real estate in Europe is a very good place to invest in right now.

Read on here.

2013: The Rise of Asia

We just had news yesterday that China's PMI went positive to 50.6, even by the standards of HSBC. This means that the GDP growth per year of China is going to increase. It is estimated that China will have a GDP growth above 8% in 2013.

I think that's going to be a certainty. We can already see that base metal prices are rising as I pointed out the correlation between China PMI and base metal prices in this article.

I believe the copper price is in break out mode (Chart 1).

Chart 1: Copper Price

The iron ore price is increasing again after one year of downtrending(Chart 2).

Chart 2: Iron Ore Price

Shanghai real estate prices are soaring to new one year highs (Chart 3).

Chart 3: Shanghai Real Estate

Even the Shanghai Composite has made a big shift upwards after a multi year decline (Chart 4).

Chart 4: Shanghai Composite

And all of this is because the U.S. is in big trouble due to the unsterilized buying of bonds through plain money creation out of thin air and expansion of the federal reserve balance sheet. This unsterilized buying is the most inflationary action the federal reserve can take. It is even more inflationary than the ECB's sterilized Outright Monetary Transactions (O.M.T.) buying of European bonds. That is because the money supply doesn't increase when you perform sterilized buying, while unsterilized buying increases the money supply. Then we have the fiscal cliff which will be an enormous burden on the middle class citizens in the U.S. It is estimated that the 3% GDP growth will at least slow down to 1% due to the fiscal cliff situation. And don't forget the debt ceiling, which is already taking its toll on government workers in the Pentagon.

This is why the money is flowing to other assets in this world (Asia) and even into the euro right now.

We need to acknowledge that the U.S. doesn't have any bullets left at this moment...

Belgium: Real Estate Starts Falling

I live in Belgium and follow the real estate market closely. I said previously that Belgium's housing is in a housing bubble. Now that prediction starts to come true. We already knew that in the first quarter, real estate was dropping. Today we have new numbers and we see that Flanders is continuing with its drop in apartment prices. Also construction site costs are falling.

Goldman Sachs is saying Belgium real estate is 60% overvalued. That means prices are still to fall 40% in the future.

We already see how the sales are doing, not good (Chart 1).

Chart 1: Home Sales in Belgium

Another Correlation: Case-Shiller Index VS. Housing Market Index

Recently, we saw bullish indicators for housing demand. At the same time we saw bearish indicators for housing prices. Let's take a deeper look at the overall trend of the two indices HMI and Case-Shiller Index and see which correlation can be found.

You can read the analysis here: Case-Shiller Index VS. Housing Market Index.

Marc Faber And the Australian/Chinese Real Estate Market

In this article I want to present the status of the real estate and commodity market in Asia, with its implications on the global economy.

On "The Money and Wealth Show", Marc Faber has been talking about movements in the real estate and commodity markets. He talks about similarities between the Great Depression and the current crisis.

Marc Faber notes: "Eventually the financial system will cease to exist." Suggesting we will at some point go to a barter system. This barter system has already showed up in Greece at this moment. He also mentions that Australia's housing market is in the process of deteriorating (Chart 1).

To see the whole analysis, go to: Marc Faber on the Australian/Chinese Real Estate Market.

US Real Estate a Bargain?

On 20 January 2012, the National Association of Home Builders showed confidence in the housing market rose for a fourth month in January to the highest level since June 2007.

There are many reasons why I follow Marc Faber's market outlook and this is one of them. He is mostly right in his predictions.

A few months ago, Marc Faber told us that US real estate was a bargain. And look what happened, the housing market index improved. Housing starts also improved more than forecasted.

Housing Market Index

As a result the iShares Dow Jones US Real Estate (IYR) has been doing quite well over the last years.

iShares Dow Jones US Real Estate (IYR)

There has been evidence of houses in the US with multiple bedrooms, swimming pools, etc... that can be bought for only $US 150000. That is a real bargain if you compare that to where I live (Belgium), where you can only buy a medium sized appartment for $US 200000.

I don't recommend buying US real estate as I know interest rates in the US will go up. But compared to other countries (housing bubble in Belgium), real estate in the US is certainly not overpriced.