I Love The Smell Of Economic Napalm In The Morning…

It smells like…VICTORY:

First off, mortgage purchase applications tanked 7% from the previous week. Mortgage purchase applications are now down five weeks in a row. Mortgage purchase applications have been declining now for over a year. Flash headline: if people are not applying for mortgages, they are not buying homes. Kind of throws napalm on the “seasonally adjusted, annualized rate metrics vomited at us by the National Association of Realtors and the Census Bureau

Second, housing starts and permits missed the consensus estimate from Wall Street’s brain trust economic propaganda department.  Now, housing starts are kind of a b.s. number because all a homebuilder needs to do is file a permit on a piece of land and stick a shovel in the ground and it’s called a “start” by the Census Bureau.   Based on my in-depth analysis of several of the largest homebuilders – see: Housing Reports – more than 50% of all new homebuilder inventory can be considered “spec” inventory.

With new home sales volume declining (the unseasonally adjusted, unannualized, actual deliveries net of cancellations, the latter of which are running in the low-mid 20’s percent now), the housing “starts” number is largely meaningless.   This is especially true when you factor in that the big driver in the last year has been multi-family buildings.  I know that in Denver there’s a literal avalanche of large new apartment buildings that are now in various stages of completion.  I also know that all new buildings are now offering 1-month free move-in incentives, including the one I live in, which is less than an year old.  I have had several readers send me emails saying that they are seeing the same thing in their cities.   This means that as apartment rents dive, home rental rates dives and the value of homes in general dives.  This is a full repeat of the last housing bust cycle that began in 2005.

Third, industrial production, which came in at .2% for January but missed the consensus estimate from Wall St., which was looking for .4%.   Worse, the -.1% drop in December was revised lower to a -.3% drop.    The manufacturing component of this index rose .2% vs .4% expected BUT the .3% gain in December was taken away and is now being report as…no gain.

Just a quick observation on the slight gain in industrial production in January.  The biggest influence in the gain reported was output from utilities.  This makes sense because its winter and because every household in the northeast was likely running their heaters overtime with the unusually cold weather.   Also, with the wholesale inventory to sales ratio spiking higher quickly – again, another sign that consumerism is tanking hard –  a lot of the product manufactured in January will likely get tossed on the proverbial log-pile, waiting in vain to be purchased by someone with room on their credit card…

The economy is slipping into darkness quickly. It’s probably why the tension in Ukraine is being escalated, as we learned today that the U.S. is now shipping “tanker buster” jets to Europe at Germany’s apparent request.  “When all else fails, they take us to war” – Gerald Celente.


6 thoughts on “I Love The Smell Of Economic Napalm In The Morning…

  1. For cream on the top Dave, the mess on the west coast where over 40 container vessels sit at anchor outside Long Beach, waiting to unloaded/loaded while the labor dispute continues. With more off-shore traffic jams piling up outside of Seattle and other ports of call. This is causing cascading ripples in the economy, that will soon become a tsunamy of lay-offs at downstream companies, that depend on (JIT) ‘just-in-time’ deliveries for their production lines.

      1. Spoke with a supplier this afternoon who’s expecting a number of containers, that should have been delivered last week. He informed me that they were contacted this morning by the port authority, saying the company would be fined $300 per day for each container that is failed to be picked up! Meanwhile, he says the trucking outfit can’t even get close to the entry gates to the terminals! Catch 22.

  2. Dave,
    I love your chats with Rory , keep them coming. You are keeping me sane these days. It has been a tough slog the last few years with gold and miners, but it will just make our payday even bigger with the continued distortions.

  3. Dave,
    Two weeks ago I was out in Lakewood in the Bel Mar area. There are huge numbers of apartments being built. I was aghast. The first thought that came into my head was “where are all these people going to find jobs?” I have a niece that graduated from UC Boulder last May and has yet to find a job here in Denver where she now lives. I also have noticed the huge numbers of apartments built east of downtown on Park Ave. If you drive to Boulder up US 36 you also see large numbers being built out near Broomfield. Are these all being built on spec? You can add commercial RE to the future crash of homebuilders.

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