The Real Data Show The Real Economy Hit A Wall

The economy is melting down – the only support for the Propaganda Narrative of a “booming economy” is a rising stock market. Without a doubt Trump has ordered the Working Group on Financial Markets – AKA “the Plunge Protection Team” – to push stocks higher for now so insiders can unload.

The huge jump in credit card debt reported yesterday by the Fed was received as “good news” for consumer spending. However, this is typical  technical color vomit served up through the mainstream financial media by Establishment “economists” and Wall Street. The likely explanation is that the average consumer is now forced to use revolving credit in order to maintain the current lifestyle.  This assertion is reinforced by the fact that the latest data from Transunion show that personal loans hit a record high in Q1 2018.

The homebuilder sector is in trouble. A Colorado-based credit union is now offering 0-percent down payment mortgages. Credit Union of Colorado will underwrite the 3% down payment FNM/FRE mortgage product and it will cover the remaining 3% of a home’s cost by giving the “buyer” an interest-free loan that is repayable at a future date or through a refinancing. The bank is charging 0.375% more for the mortgage than the rate for a 3% down payment conforming mortgage. The bank is betting the value of these homes will rise enough to cover the 3% down payment loan through a refinancing.  This is a de facto zero-down payment mortgage sponsored by the Government. 

I am certain that this product reflects the fact that banks are getting desperate for mortgage fees because the pool of borrowers who can qualify for FNM/FRE/FHA loans has dried up. The economy hit a wall in the last month or two and it’s going to crush the housing market. By the end of the summer it will be impossible for the NAR and the media puppets to blame low sales on low inventory.

In fact, recent reports from around the country show that home listings are soaring. This includes Seattle, where King County reported a 43% jump in single-family home listings in June, and Orange County (SoCal), which saw a 218% jump in home listings YTD. A 10% drop in contracts in Orange Country was also reported (The Orange County Register). In Denver, new rate of new listings exceeds contract signings now by a considerable amount.

The June employment report continues to show a “tight labor market.” This is utter nonsense given that over 95 million working age people are no longer consider part of the “labor force” using the methodology devised to compute unemployment by the Government. Again, “however…”

…the “tight labor market” narrative is not confirmed by help-wanted advertising. Help-wanted advertising is considered an accurate indicator of broad economy. The Conference Board has been tracking help-wanted advertising going back to 1919.  Formal tracking of help-wanted advertising shifted from tracking ads in printed media to tracking help-wanted ads online in 2005.

The Conference Board’s Help-Wanted Online Advertising for June declined 3.7% from May. May was down 2.1% from April. April was down 1.4%. The May and April declines were revised lower in the latest report from the original reports. New ads were down 4.6% in June from June 2017. The total number of ads were down 5.7% year-over-year for June.

The fact that help-wanted ads as tracked by the Conference Board are declining sharply month-to-month and year-over-year reinforces my view (and I’m not alone in this view) that the real economy – as opposed to the “fake news” economy reported in the mainstream media – is contracting.

A portion of the above commentary is an excerpt from the latest Short Seller’s Journal. My subscribers and I are making easy money shorting the home construction sector as well as other select stocks. This includes specific ideas for using put options plus market timing. You can learn more about this newsletter here:   Short Seller’s Journal information

7 thoughts on “The Real Data Show The Real Economy Hit A Wall

  1. It would appear that something is going on at the high end as well. In looking through the real estate listings for Breckenridge, CO, there are 145 homes for sale priced at $1mm+. The highest was over $12mm with quite a few in the $4-6mm range. That’s a lot of vacation homes for sale. And that’s just Breck, not the rest of Summit County.

    1. “Price reduced” notices are flooding the MLS system in Denver across all price segments. 10% price drops are common in the
      over $1mm segment.

  2. No doubt the party is over and lots of bag holders are now in beginning to advanced gag mode. This time last year we were still getting continuous solicitations from the house flippers wanting to buy our house and sell it or from some commercial interests due to the suburban sprawl now reaching the property line on our 11 acre home site. Of course to continue the sprawl. Even had a message on our VM landline that we weren’t interested in selling due to the phone calls for a couple months as we screen calls. Now its silent! The hangover as you so consistently illustrate is getting nasty and not going away. I still think we have a very high percentage of head in ass, however parents with kids looking for work are more aware. The deniers they be denying until they get booted out on the street. I choose my moments to debate, comment, and challenge with many as its still a waste of time. Plus if my bride is around I am screwed as she quickly interjects he’s a doomer…. Jeeze been putting up with that for 38 years.

  3. Dave, you know it’s getting bad when the CME locks out traders
    trying to short the Spoos. It looks like it’s starting to get real, I could
    not get an order thru starting @ 10:30am. I kept getting Marv Alpert,

  4. China is imploding. Check out this recent you tube clip on
    construction quality and the empty buildings. This video was
    shot on 7-3-18. I think we have a global bubble and will experience
    a global meltdown.

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