Tuesday, March 22, 2011

Data Confirms My Outlook For The Housing Market

Nice to see Obama sipping champagne and enjoying himself in South America while he unConstitutionally puts American lives at risk in Libya and further imperils our future financially, eh?

But back to the mundane matter of the housing market.  As per the National Association of Realtors' report yesterday, existing home sales plunged 9.6% (annualized) in February and the number was substantially below the Wall Street-Einstein consensus estimate.  Prices declined 5.2% to their lowest level in nearly nine years.  That's a big price drop and, contrary to the views of the rather pedestrian mainstream analysts, lower prices are not stimulating sales.  Here is yesterday's report from Bloomberg news:  LINK

Today the Federal Housing Finance Authority reported a .3% price decline for January, BUT revised December's previously reported .3% to a 1% decline.  Here is that report:  LINK  Don't forget that is Government reported data, so the pig has probably been dressed up manipulatively with rose-colored lipstick.

Although real estate professionals and Wall Street will figure out a way to spin this data in a positive manner, the housing market still has a long to way to fall in order to correct from the massive bubble inflated by Greenspan and the related lending fraud enabled by the system.  While Govt/industry inventory shows relatively flat growth projections, the shadow inventory of foreclosures, impending foreclosures, unreported bank REO and potential existing homeowners who would like to sell but want to "wait for the market to come back a bit" has created a massive glut of inventory (and potential inventory) that it is going take substantially lower prices and a much stronger economy in order to restore supply/demand stability.  Of course, the Government and Wall Street would like you to believe that the shadow inventory is not really there, just like the Constitution...

I have been saying for quite some time that I expect to see prices decline to at least the average price levels from the early 1990's, before Greenspan's money printing mechanisms spawned successive asset bubbles and subsequent busts.

Here's two interesting graphs which show why I believe our economy is doomed - and therefore housing prices will continue to collapse - and why people are crazy to not move as much of their wealth as possible into gold and silver and out of dollar-based "assets," especially housing.  The first graph shows the Fed policy being implemented to try and prop up the economy/housing (you can enlarge the charts by clicking on them):

This graph reflects the liquidity being pumped into the system that supposedly is not leading to price inflation.  The next graph shows the ONLY result of this policy that the Government can't hide using manipulated data - the price level of the U.S. dollar index:

AND #1 and #2 causes #3 - the price of gold:

If the Fed does not continue #1, the economy collapses.  If #1 continues, #2 goes into cliff-dive.  If #1 and #2 continue to happen, gold and silver will move up to price levels that will shock and awe even well-seasoned gold-bugs.

People ask me all the time how high I think gold can go.  I refuse to put a price on it because most would think I'm nuts.  But let's just say that my price target is higher than that of  Jim Rickards or John Embry.  But if #1 and #2 continue the way I expect, I believe that my price views will prove correct....Gold, got any?


  1. Dave,

    What do you think of this method of gold valuation?


    Basically he's using probabilities of inflationary scenarios that may develop, as a result undermining the value of dollar and positively pushing the gold price.

  2. I have my own views on how to value gold and what the "true" value is. But the only two data points that matter are where gold is now, because that's what the market says it's worth at each trade, and where I think gold is going when the game clock expires. Let's just say that my view on the end game price is many multiples of Signore Tustain's "fair value" calculation.

  3. I'm going with the inflation adjusted values from John Williams over at ShadowStats. He has $7000 Gold and at 16:1 GSR that gives us $437 Silver.

    Joe M.

  4. just playing devil's advocate here...

    it seems like the offset to that monetary base graph would be the excess bank reserves...which pre-08 were next to nothing and are now 1.2 trillion.

    it would seem the Fed's grand scheme hinges on increasing the interest rate paid on excess reserves if lending starts picking up too quickly. Pre-08 excess reserves didn't earn interest.

    If all the money printing is going into excess bank reserves is there really inflation? or do people just not trust other assets (sovereign debt, asset backed, etc) and are cycling into commodities?

    am I way off-base? maybe.

  5. Dave,
    Check out this article. Provocative to say the least. I forwarded it to Gensler and Chilton -- the CFTC may not even be aware its happening. Would like to get your comments on this latest JPM/NYMEX/COMEX fraud of a scam.


    Will JP Morgan Now Make and Take 'Delivery' of Its Own Silver Shorts?

    by: Avery Goodman March 22, 2011


  6. If your view is correct gold will either be confiscated outright or, more likely, will be slapped with a 90% capital gains tax coupled with severe criminal penalties for selling on a black market.

  7. ...and continuing to beat a dead horse...

    Horrible February new homes sales. Annualized home sales were just 250K, vs, expectations of over 280K. The decline was 16.9%.

    This is a level not seen since the Kennedy administration.

    It also jibes with the bad existing home sales number form earlier this week.

  8. Dave, care to comment on BAC? i know you bought some OTM puts late last year> Believe we are starting to see the beggining of the end for this "too big to fail" bank.

  9. I cut my losses on my BAC puts after Geithner gave them that deal that let them off the hook on taking back mortgages they underwrote that ended up in FNM/FRE. That was like in December I think. Too big too fail as far as the Govt is concerned...