The predictability of the Asia rise/European/NY selloff pattern has become almost comic…Gold surged $4 in the last couple of hours of Shanghai trading peaking at $1,163.30 in April about 2-30 AM. Since about 1AM a sliding $US should have been helping but as MKS Sydney reports
“The $1160 level throughout the morning seemed well capped however with what seemed to be some decent iceberg orders lingering on the offer… There was decent selling from retail, macro and even physical names above $1160 so it does still seem pretty heavy going towards the top end of the range and will likely continue this way into the FOMC.”
There are plenty of well-trained (and well-fed) Bears around.
The quote above is from John Brimelow’s “Gold Jottings” daily gold market update (subscription-based). Almost every night gold rallies during Asian trading hours, only to be pushed back down once the fraudulent paper gold markets in London (LBMA) and NY (Comex) open. India and China continue to aggressively accumulate physical gold.
Meanwhile, today’s economic reports continue to confirm the fact that the U.S. economy is beginning to contract. The Empire State Manufacturing index dropped to 6.9 from last month’s 7.8 reading, missing the consensus estimate of 8. The new orders component plunged to negative 2.4.
Industrial production came in at .1%, well below the consensus estimate of .3%. The January report was revised to negative .3 from the original report of +.2%. Had the prior report not been revised lower, the report for today would have been significantly negative – as in, reflecting a large monthly contraction in manufacturing output during February.
Finally, the Homebuilder Sentiment index – which I consider to be one of the more absurdly Orwellian metrics – dropped again to 53 from February’s 55. It missed the Wall Street brain trust estimate of 56. Here’s Bloomberg’s mascara-covered take, which is in and of itself uncharacteristically and tersely blunt:
The lack of first-time buyers is an increasing negative for the new home market, evident in the housing market index for March where growth slowed 2 points to an 8-month low of 53. The traffic component of the index again shows particular weakness, down 2 points to 37 which is a 9-month low and directly reflects the lack of first-time buyers.
Notwithstanding Bloomberg’s uncharacteristic candor in its interpretation of the falling builder sentiment index, it’s not just the first-time buyer traffic that is falling off. The median real household income continues to decline, as new jobs are primarily are of the part-time variety and more people leave the workforce than are finding jobs. This dynamic does not generate the level of income that can support home ownership. This is why the rate of homeownership continues drop every month.
Let’s not forget that mortgage rates are near all-time lows and the Obama Government has significantly reduced the credit requirements to qualify for the taxpayer-subsidized mortgage programs (FHA, Fannie Mae, Freddie Mac, VHA, USDA). Even Government intervention is not stimulating housing sales.
If you want to exploit the fact that the homebuilders are now more overvalued than they were at the peak of the housing bubble in 2005/2006, my Homebuilder Research Reports will show you why and how.
When I say “overvalued,” that means relative to the companies’ underlying financials. The stock prices are lower now that at the peak, but the various financial metrics like debt, inventory and p/e ratios are higher now that at the peak. Meanwhile, we found out last week that foreclosures, especially repeat foreclosures, are at a 12-month high – LINK