Tag Archives: housing market collapse

A Bear Market In Stocks Began In May 2015

Technically, the move in the stock market that began in March 2009, when the stock market bottomed after the 2008 financial market de facto collapse, should not be termed a “bull market” because it required several trillions of Central Bank and Government intervention to move the stock market.   Definitionally the stock market is no longer a “market” – rather it’s an intervention.

Having said that, with the entire financial world – especially Wall Street analysts and financial  media boobs – focused on the S&P 500 and the Dow, the NYSE Composite, which covers every stock traded on the NYSE, has begun what is likely a bear market that started from its record high of 11,254 on May 21, 2015:

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As the graph above illustrates, the NYSE Composite index – every stock that trades on NYSE – is down close to 6% since May 2015.  The NYSE Comp is more representative of the stock and more reflective of the deteriorating conditions in the economy than are the SPX and Dow, which are used as propaganda tools by the financial market and political elitists.

In fact, as has been demonstrated in several places in the alternative media, as it turns out just a handful of the largest cap stocks are keeping the SPX and Dow in what appears to be a “bull market.”    This graph below sourced from Zerohedge shows the performance of the SPX with and without the infamous “FANG” stocks (FB, AMZN, NFLX, GOOG):

As you can see if you strip out the FANG stocks from the calculation of the SPX index, the index is flat going back to the beginning of 2015. Yet, the SPX hit an all-time high in August 2015. Qu’est-ce que c’est?  As explained in the ZH article:   The FANGS “have gained $570 billion of market cap or nearly 80% during the previous 19 months” [Jan 2015 – Aug 2016]…”if you subtract the FANGs from the S&P 500 market cap total, there had been virtually no gain in value at all.”

I wrote to my Short Seller Journal subscribers this past weekend:

NYA began diverging from the SPX and the Dow back then. It points to broad overall weakness in the stock market relative to the biggest stocks by market cap. This pattern in the broader stock market is also more reflective of the economic reality of a deteriorating economy. Small and mid-sized companies are experiencing deteriorating fundamentals which is translating into deteriorating market caps.  SSJ for October 16, 2016

The point here is that economic reality is diverging from the propaganda infused message that the Fed, Wall Street and politicians want us to buy into.  The housing market illustrates this perfectly.  I have been detailing in my blog the methodology by which the Government manipulates the new home sales statistics.  This morning it was reported that housing starts for September plunged 9% from August.  Of course the media puts its propaganda spin on this. For instance, Bloomberg attributes the drop to multifamily starts. But multifamily starts is the metric that gave the housing starts report any “legs” to begin with.  Marketwatch references a “durable recovery.”  But does this look like a durable recovery?

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New single family home sales – despite the trillions of dollars infused into the housing market by the Federal Reserve and Government – never got any higher than where they were in 2008 after the housing bubble popped and sales had already dropped by 66%. Before that, the last time single family home sales were at Marketwatch’s “durable recovery” level was in 1995!

And in truth the methodology used by the Government to present new  home sales (Seasonally adjusted annualized rate based on highly questionable Census Bureau data collecting) grossly overstates the true level of new home sales at any given time.  The same can be said for the NAR’s existing home sales.  Like everything else in our system, the housing market activity is primarily a product of the propaganda and not real economic activity.

The point here is that underlying economy is far weaker than the propaganda coming from the elitists would have us believe.  They can stimulate fraud and deception all they want but ultimately they can not force a shrinking middle class with rapidly shrinking disposable income from spending money.

More important, you can make money from this insight because most stocks in the stock market have been going lower since mid-2015.  This pattern in the broader stock market is also more reflective of the economic reality of a deteriorating economy. Small and mid-sized companies are experiencing deteriorating fundamentals which is translating into deteriorating deteriorating market caps (from the latest Short Sellers Journal)

Every week I provide proprietary insight into the economy and markets in the Short Seller’s Journal.  I also highlight at least two or three short-sell ideas.   Most of these ideas have been working now since early August (late Fed to late July was rough).  As an example, in the September 18th issue I presented Credit Acceptance Corp, a subprime auto loan finance company with a balance sheet that is a ticking time bomb, with the stock at $198.60.   It’s trading today at $183 – down 7.8% in less than 4 weeks – despite a largely flat SPX in that timeframe.  CACC will eventually be cut in half from here, at least.

SSJ is a monthly subscription that is published weekly.  I also provide some ideas for using puts if you are not comfortable shorting stocks and I also disclose when I participate in the ideas in my own account.  You can cancel at any time – there is no minimum commitment. You can access more information on the subscription here:  Short Seller’s Journal.

Here’s another example of the insight and analysis provided in the SSJ:

Another interesting report out last was China’s exports for September, which were down 10% year over year in September vs. -3.3 expected. The US and Europe are China’s largest export markets. If China’s overall exports dropped 10%, it’s mathematically probable that US and EU imports from China were down more than 10% in September. It also implies and reinforces the thesis that US consumer spending is contracting (of course, if this drop in exports from China translates into a narrowed trade deficit for the US, that will be spun as a positive by the financial media!)

Housing Market Horror: Home Equity Loans Making A Big Comeback

…Just in time for the housing market to take a big dump. I’m going to really start hammering on the truth about the housing market. The media propaganda and industry hype is flowing in epic proportions. Lately I’ve been hearing a plethora of ads on the radio for mortgage companies pushing home equity loans. “Time to take advantage of the higher housing prices and use the equity in your home to pay off credit cards or remodel your house.” Vintage 2005. The ad I heard earlier today said that you can close in 10 days and not have to make a payment for 60 days. Lead the sheep to slaughter.

This is just in time for a big price collapse to hit the market. Most of you probably missed this report, but I did not:   30% Of Homes Lost Value Over The Last YearLINK

Almost 30% of all homes lost value in August from a year earlier, according to real estate company Zillow Group Z, -0.81% down from a recent high of 65% in January 2009… real-estate website Trulia’s recent report on the fastest moving housing markets showed a slowdown in how quickly homes are being sold…

This means that in most markets, if you bought a home in the last 9 months and took advantage of the new FNM/FRE 3% down payment program, you’re already way underwater.  The article references Denver has a “hot market.”  Yes it was white-hot until about June.  I would bet, based on all the data that I observe, that the average price is down 10% since June.  My email gets peppered every day with notices of price reductions on metro area homes.   This is not the kind of sign you see in a market that’s hot:

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I recently posted an article from the Denver Post in which an actual realtor was quoted as saying that buyers were drying up and sellers were chasing the market lower with price reductions. This is how it started when the big bubble popped. Denver was one of the hottest markets during the bubble and it was one of the first to explode. Any buyer who bought a home in the last three months with the intent of fixing it up and flipping is now going to be stuck unless they’re willing to eat a big loss.

The reason home equity loan pimps are working overtime is because the banks that fund this paper take the security and throw it into a pooled asset-backed structure and they slice it up into “risk” tranches and wrap derivatives around it and toss it to the institutional pigeons who have loads of cash looking for yield.  No one factors in loss of principal in their ROR models.  All they care about is that the “juicy” 4% yield.

While the re-emergence of aggressive home equity lending is a signal the top is in and a renewed collapse is starting, this is perhaps the biggest warning flare, just like the first time around 8 years ago:    Hamptons Mansions Pile Up on Market as Luxury-Home Sales Dip

As I was discussing with a good friend of mine in NYC yesterday, it’s not the absence of foreign money that’s taken the bid away from the Hamptons, as the Bloomberg article asserts, it’s the bread and butter Wall Street jockey who is looking at a serious cut in bonus compensation and the possible loss of his job.   Just wait until the ones who leveraged up with a big fat jumbo mortgage realize that they can no longer afford to maintain their Hamptons retreat and their NYC apartment or their NY/NJ Mcmansion.   There will be a lot of homes out on the east end of Long Island from which the owner walks.

The Hamptons indicator precluded the popping of the big bubble. It will also be one of the smoking guns that precedes the re-collapse of the housing market.