QUESTION: Hello Martin, I was wondering if you could write a piece on the Norwegian real estate market? The market has gone complete mad the last couple of years with salaries declining, and housing prices booming. Over 40% of Oslo is now owned by people not leaving there. A lot of apartments are empty because people don’t care to rent them out, it is just for speculation. Will this continue or will the Sovereign debt crises drag the market down with it? Love your blog, and hope you can spare some time for little Norway!

HG

ANSWER: Actually, I will be speaking there in Norway in a few weeks. Most of this “speculation” is really parking money. They are not trying to actually make a profit, which is why they are not renting these properties out. This is about parking money outside of the Eurozone. This has been a bet against Brussels and the collapse of the Euro. When we look at the share market, we see an outside reversal to the upside in 2016 as our model warmed with a Panic Cycle. This too is money trying to get off the grid.

The is a picture of the Krone expressed in US dollars since 1927. Here also, the dollar is positioned to rally against the Krone and we should see a new high above that of 1985, but at the very least a rally to retest that level for the third time.

In the case against the Euro, the Yearly Bullish Reversal stood at 87125 and we closed 2016 at 86450 after reaching intraday for the year 89940. To have exceeded the Yearly Bullish for the Euro intraday yet failed to close above it warns that the rally in the Euro against the Krone is most likely coming to an end.

QUESTION: Martin – Given your compelling elucidation of the business cycle (which remains ineluctable even with central bank and regulatory distortion of money and markets), the avg annual return targets set by pension and retirement plans seems absurd. CalPERS had an annual bogey of 8% to meet via its active management. Even in a rapidly-growing economy whose markets were free from distortions, it seems that any fixed number could only rationally be set as a target if the investment horizon spanned several business cycles. This would allow at least some averaging over bull and bear phases to enable a fixed average return target like this to have any meaning.
This is not exotic – it seems commons sense. Do professional asset managers (or central bankers for that matter) make up nice-sounding goals that they know they cannot meet, or do they just not know what they are doing?

ANSWER: The fund managers are not really very professional. The majority of pension funds based their returns upon the standard 8% yield of long-term 30 year bonds. They have never actually adjusted their return expectations and thus the majority remain under-funded.

Do not apply this to all pension funds. We have helped many make the transition to the real world. When you have CALPERS where the decisions come often from the board, which is not professional, but political, therein lies the problem. The Social Security system is likewise a disaster. I tried to convert it into a wealth fund almost 20 years ago. The Democrats blocked it for anything to do with the free markets to them was risky. Thus, they stuff it with their own debt and then lowered interest rates. The fund is broke and you will see demands to raise taxes to cover the losses the politicians have created, yet they will of course blame someone other than themselves.

Someone who has simply managed a pension fund for the government is typically not qualified to be a private fund manager. If they were hired from the private sector to then clean up a public pension fund, then we have a different type of person. It will depend at that point on the board of directors and if they will allow the fund manager to make market decisions or will they still be overridden by politics.

Keep in mind that I often appear to be the lone analyst on many issues. This is ONLY because those with experience must sign confidentiality agreements to work for a fund or bank. They are not allowed to make comments for whatever they say would be attributed to their employer. I get tons of emails cheering often what I say because they are silenced. You really have to peek behind the curtain to comprehend what goes on because it really does defeat COMMON SENSE! It is like everything else. Nobody would have sat down and designed a financial or political system as we have today. This whole mess is just total insanity. It does not take a conspiracy, it takes stupidity. These people attribute such knowledge to people that is not justified. Some of these decisions do not make even the basic common sense tes