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More On Housing – 2008 All Over Again
This commentary is from a subscriber to my Short Seller’s Journal:
The 3% down loans seem to have brought in a lot of first time buyers into the market. I live in the east bay area of California, which is more affordable than San Francisco, or the South Bay area but still painfully expensive nonetheless. Rents are now the same as a mortgage payment on a home in the exurbs. So a lot of people seem to be buying for this reason. They only look at the monthly payments but overlook the fact that when financial markets seize up and the music stops, you could be left holding the bag on a hugely upside down mortgage and can’t get out of a 30 year commitment by selling.
A friend of mine, who is a borderline novice in financial matters, just bought a home. He has meager savings and has jumped on the 3% down bandwagon. This is the guy who until I told him to pay off his credit card balances because of the usurious interest rate, had no clue the damage they were doing to his finances. He was making minimum payments on them because he wanted to build up his savings – I explained to him how by earning 0.01% interest and paying out 18-24%, his savings were getting depleted every month.
The Bottom line is people who are not too financially savvy are being lured into the housing market by the banks. I don’t know how long this 3% crap has been going on, but it seems that Banks are desperate and looking for newer segments of people to swindle.
Everyone has probably seen the report on NYC high end real estate posted in Zerohedge – LINK. While the suburbs in Denver are still hot because of the huge influx of people moving here from California, I’m seeing the same price cuts and inventory build-up in Denver that is described in the ZH piece. I get listings on just one central Denver zip code. Yesterday alone i received two price changes of 5% on listings over $850k.The inventory in that price segment is bulging. Over the weekend I was hit with more than 20 new listings and price cuts all across the price spectrum. I have received six more today – 1 new listing and five price reductions.
Now that the NAR is begging the Government to give debt-bloated college graduates even more debt to buy a crappy starter home, I can smell the desperation to keep the housing market’s “gerbil” running on the wheel. But the gerbil is like a meth-addict that has been overdosed for too long with near-zero interest rates and recklessly lascivious Government mortgage subsidies. Like the gerbil, the housing market is about to seize up and re-collapse. It will be an event that is much more horrific than what occurred in 2008.
The mining stocks are one economic convulsion away from from more than doubling in value. – “Hal,” long-time friend/colleague
June Existing Home Sales Report: More NAR Promtional Propaganda
The data is distorted due to the “seasonally adjusted annualized rate” calculation. In theory, existing home sales should be higher than May last year because, with lower interest rates (manipulated by the Fed) and easier access to Government subsidized mortgages (FNM, FRE, FHA, VHA, USDA), the monetary and fiscal policy implementors running the U.S. have made it as easy for someone to buy a home now as it was during the big bubble. I would argue that the “increase” in reported home sales is fully attributable to “seasonal adjustments” which become exaggerated when the number is converted into an annualized rate.
Fox News Goes Full Retard On Gold
We’re very bullish on gold, which is the anti–paper money, of course, and is underowned by investors around the world. – Paul Singer, Elliot Management Corp
I keep Fox Business channel on because it has the best tv “ticker scroll” for monitoring basic market activities. Also, some of the women on the show are easy on the eyes. Liz Claman is not one of those.
I came in from getting lunch and saw this tag-line on Claman’s afternoon show: “Gold Losing Glitter.” I turned up the volume to hear her explaining to the idiots who might actually listen to the garbage broadcast on the show that gold was getting hit today because investors no longer felt a need to use gold as a hedge against the BREXIT vote now that the polls show that BREXIT is currently out of favor with the chippies in England.
Considering that gold is up about 20% since mid-December, vs. 1.9% for the S&P 500, it’s safe to assume the reasons that gold is being accumulated stretch a lot further and deeper than Claman’s idiotic explanation.
In fact, Prime Minister Cameron announced a referendum date for a vote on the issue of whether England shall remain in the EU, or not, on February 22 this year. Only 5% of gold’s 20% price appreciation since it bottomed in December has occurred since that date.
I dare say it’s a bit pre-mature to announce that gold is losing its glitter, especially in connection with the British EU referendum. The truth is that gold is being accumulated by smart money as a hedge against the idiocy of fiat currency-based monetary systems controlled by corrupt Government’s and Central Banks. It’s as simple as this:
Paper money eventually returns to its intrinsic value: zero. – Voltaire
The Economy Is Tanking – Inflation/Obamacare Attacking The Middle Class
The economic reports continue to show an overall rate of deterioration in economic activity down to levels – in general – comparable with the 2008-2010 period. Freight transportation activity is part of the “nerve center” of the economic system. The latest data from Cass shows a rapid decline in both freight shipments and expenditures that began in mid-2014:
Although shipments ticked up from April to May 1.3% – attributable to seasonality – year over year shipments for May dropped nearly 6%:
As you can see, expenditures plunged 10.1% year over year. North American freight shipments reflect all economic activity at all levels of the economic system across a broad spectrum of industries.
Retail sales reports going back to December 2014 are signalling economic stress at the household level: “During normal economic times, annual real growth in Retail Sales at or below 2.0% signals an imminent recession. That signal basically has been in play from December 2014, based on industrial production, retail sales and other indicators), suggesting a deepening, broad economic downturn” (John Williams, Shadowstats.com)
This financial stress at the household level is beginning to show up in credit delinquencies and defaults. Last Tuesday Synchrony Financial reported an unexpected spike in its credit card charge-off rates: Rising Credit Card Defaults. As I’ve detailed in prior posts, auto loan delinquencies and defaults are beginning to accelerate. I’ve covered a couple of credit and credit-related companies in my Short Seller’s Journal , one of which is down 18% since I featured it on March 20th. This is a remarkable fact given that the S&P 500 is up 1.5% in the same time-frame. When the stock market rolls over, this stock will drop at least 50%.
Although the latest retail sales report last week showed a small gain month over month, the unexpected gain was fueled almost entirely by the rise in gasoline prices. The Government CPI report does not show much inflation, because the Government goes out of its way to not measure inflation.
The Government’s methodologies used to hide real inflation have been dissected ad nauseum by this blog and many others over the years. Instead, I wanted to share a write-up a friend and colleague of mine sent me which elegantly describes the truth about inflation and Obamacare and the affect both are having on the average American household:
There’s a huge disconnect between the Government CPI report and true inflation. May wholesale gas prices were flat while the Commerce Dept reported that May gasoline sales for retail sales purposes went up 2.1%. Implies 2% usage higher which might tie in with how, with lower gas prices earlier this year there was the shift to the lower mileage bigger vehicles, or could be more driving.
However, April gas prices according to CPI were up 8.1% but wholesale prices were up more like 14% in April. So the CPI price increase is 57% of the futures price increase. Apply the “lower inflation” to revenues driven by inflation and that’s how GDP gets overstated.
There a lot of moving pieces in the data charade. CPI is reported later this week (June 16th) and it will be interesting to see whats reported for gas. I looked at this a few years ago and found stark inconsistencies between the price level used by the Government in its CPI index vs wholesale gas prices, which are futures based.
The other issue is in food. This is where the CPI index substitution comes into play that John Williams (Shadowstats.com) talks about. My own index includes “outside skirt steak” which is approaching $20 a pound, where I used to pay $5-7 a pound a few years back. So we actually bought/substituted rib eyes at 10 bucks a pound. From an inflation perspective, if that got into the counting, I reduced my inflation by 50% (we later bought hamburger meat at Sams for 2.79 a pound so in the month we cut out our personal CPI on meat by 85%-although we moved to lower quality products). Another issue was cereal–which I used to buy regularly at Walmart early this year at $2.50 a box and it’s now $3.30 a box (32% price inflation).
So, what’s the point?
The point is that there is getting to be some serious inflation in food and somehow its not showing up in the Govt data. In addition, with all the variability with sales and type of stores and how the GDP, Jobs or CPI surveys are created–less than scientific, the government can drive whatever reporting outcome it wants and it’s virtually impossible for anybody to follow.
Regardless of how gasoline pricing is showing up for various Govt reports, between the higher cost of gas and food, and lower earnings in general, people are getting more and more stretched especially as healthcare, education and housing costs go much higher.
This latest retail sales report did confirm home improvement is now declining (big ticket items and durable goods), which had been one of the few bright spots in retail. I am also guessing that there is a shift in overall spending to necessities. The huge increases in Healthcare premiums is pretty significant for a family along with co-pays and deductibles. Practically speaking the middle class is getting attacked. There are not enough ultra-high income earners who can carry the economy.
The S&P 500 made another failed run at an all-time high earlier this month. If the Fed was not aggressively preventing any down-side momentum from gripping the stock market, there would like be a stock market crash.
The U.S. financial and economic system is inching toward an abyss that is much deeper and darker than the abyss into which it plunged in 2008.
Can Gold Hit $1500 By The End Of September?
Gold was taken down $19 from the close of Friday’s post-Comex Globex trading, when it closed at $1301, to $1281 40 minutes into Comex floor trading on Monday, June 20. The apparent catalyst was the polls which surfaced over the weekend that showed the public sentiment in England had shifted heavily in favor of remaining in the EU.
It’s all Kabuki theatre because, at the end of the day, if it looks like the elitist will not get the outcome they want in Thursday’s vote, they’ll rig the outcome to make sure they do get it. Nothing happens by accident and it’s no coincidence that the pro-euro MP was given a dirt nap last week and the polls all of sudden shifted to reflect No-BREXIT outcome.
But gold began to rise steadily during the day, which means that there plenty of other catalysts besides the BREXIT issue which drove the price of gold higher since May 22. At the same time the stock market sold off steadily from its high of the day 30 minutes into the NYSE open. This market action is bullish for gold and quite bearish for stocks.
The big question in everyone’s mind is, “where would the price of gold be without the heavy intervention exerted on the market by the Comex paper gold Ponzi scheme?
Future Money Trends (LINK) invited me on their weekly show to discuss BREXIT, NIRP, negative 10-year German bunds and the precious metals market – LINK:
BREXIT Denied: Mission Accomplished
In this installment of the Shadow of Truth’s Market Update, we discuss the actions taken by the western elitists to rig the outcome of the BREXIT vote on Thursday (June 23), the response by the markets to the new expectation that BREXIT will be denied and the significance of anti-U.S. sentiment growing around the world.
Is The Financial System On The Brink Of Collapse Again?
Craig “Turd Ferguson” Hemke invited me on his podcast series for a discussion about somewhat hidden developments occurring behind the carefully crafted western propaganda facade.
For those who have at least been able to “blow the Orwellian smoke” away from the war on gold, you’ve noticed that the Fed/bullion banks are having a lot of trouble pushing gold lower. In fact, the current line of battle is at $1300 and I believe that barrier will soon be breached decisively to the upside.
We also discussed the ongoing “controlled demolition” of Deutsche Bank, which currently poses perhaps the biggest threat to the western financial system. You listen to our conversation in mp3 format with this LINK or by clicking on the graphic below:
“Thanks for the heads up on LULU and SHW. Bought the SHW July 15 270 strike puts and did well on exit this morning before market reversal” – “Sal,” Short Seller’s Journal subscriber
“The comparative pittance you charge for the MSJ has already paid off quite well for me and my younger brother.” – “Bill,” Mining Stock Journal subscriber
Guest Post: MP Jo Cox Killed By “Useful Idiot?”
The term “useful idiot” in an intelligence craft context refers to a person inspired by way of various means to perform an action, and more often than not, the person is compromised by mental illness or sub-par intelligence – hence the term. Was MP Jo Cox murdered by a “useful idiot” as part of a covert action? It’s too early to say, definitively. But the timing of this attack is very fishy.
Read the rest here: The News Doctors
SoT Market Update: The Fed Fails And Gold Glitters
In this installment of the Shadow Truth’s Market Update episode, we discuss the FOMC’s unwillingness and inability to raise interests even 25 basis points, the 2008 financial collapse redux, and that fact that gold is “sniffing out” a catastrophic market event on the horizon.
FOMC No Rate Hike: Gold, Silver, Miners Pop – Stocks Drop
We’re very bullish on gold, which is the anti–paper money, of course, and is underowned by investors around the world. – Paul Singer, Elliot Management Corp
Predictably, the Fed did not raise the Fed Funds rate by a piddly one-quarter of one percent today. It’s not because the economy is crashing – which it is – but because the foundation of the massive, money-printing inflated asset bubble in the U.S. and globally rests on the teetering foundation of zero-percent interest rates.
Negative rates rates presents another dilemma: a western financial system that is completely dysfunctional from over eight years of bombarding the western economies with ZIRP and money printing. At least most of the eastern hemisphere countries have Central Bank lending rates well above zero. China’s is 4.35%; Russia’s is 10.5%.
This blog unequivocally said three weeks ago, when the usual Fed clowns began their routinized interest-rate hike threat that the FOMC would whiff again. What the heck happened to today’s meeting be in “live,” John (SF Fed’s John Williams)? Now that the Fed balked once again at nudging rates 25 basis points closer to China’s overnight Central Bank lending rate, does that mean that today’s meeting was not “live?”
Interestingly, stocks were pushed higher overnight and gold was pushed lower. When I saw it at 5:30 a.m. EST, gold was down $7 from where it opened the overnight CME Globex electroning session (6:00 p.m . EST).
After the “not live” meeting was over and the results hit the tape, both gold and the stock market popped. But the stock market apparently saw through the transparency of Yellen’s smoke-blowing and interpreted another “dead” meeting to mean the economy is indeed dead. While gold ramped up toward $1300, the S&P 500 plunged 11 points in the last 28 minutes of trading.
I have been suggesting to my Short Seller’s Journal subscribers that the S&P 500 is starting to tip over – finally. I think there’s a better that 50/50 chance that the S&P 500 repeats the same kind of cliff dive it took in August 2015 and the beginning of 2016.
On the other hand, it seems that a lot of western money – wealthy individuals and smart hedge fund managers – are beginning to plow a lot of money into physical gold. Why? Because the price-movement of paper gold relative to the size of the Comex open interest is running in higher in defiance. This is something that has not occurred in the last 15 years and it’s caught a lot of market analysts wrong-footed.
The character of the market has changed. I don’t know how much leverage the Fed/bullion banks have to push gold a lot lower at these levels. We’ll find out as gold challenges $1300 again and we get closer to BREXIT. The Fed/ECB/BOE are making it clear that they will do their best to manage the price of gold into this potential event.
For anyone interested in opportunities to profit from getting in on the early stage of this next leg of gold’s bull market, check out my Mining Stock Journal. I present long term view ideas on high potential junior micro-cap mining stock ideas.
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