Sometimes it seems that the more we write about the rise of the surveillance state, the more examples of its long-armed reach pile up. Recently, a couple of new (to me, anyway) developments caught my eye Big Brother is watching youSecond, it was reported on Tuesday that new housing starts hit a 5-month high. That's great, but who are they going to sell these new homes to? On the heels of that report, the National Association of Realtors reported that existing home sales for June dropped to a seven-month low. Hmmm...June is supposed to be one of the peak selling months of the year. Not only that, but the cancellation rate for contracts booked in May spiked up to 16%. Not only that, but inventory - as measured strictly by the NAR - enlarged. Not only that, but the way the NAR reports its data has been under scrutiny for quite some time and by some accounts the NAR has overstated sales historically by as much as 20%. The NAR is reviewing its methodology but my bet would be that their numbers suck. Here's a news report: LINK The bottom line is that the housing market is not even close to a bottom..
Before you argue with my view, take a look at some hard proof that the fundamentals underlying the housing market are deteriorating. MGIC, the mortgage insurer, issued its quarterly earnings on Monday and reported a big loss due to liability payments it had to make on growing portfolio of insured mortgages going bad. The stock got hammered. Here's the LINK To add to this, Genworth, the insurance business spun-off by GE, reported last night that its earnings for the quarter would be hit by a $300 million charge it would take in order to reserve against increasing liability at its mortgage insurance unit. Here's the LINK
The dynamic here is that not only are the buyers in the housing market drying up, but on average the ability of homeowners to make their monthly mortgage nut is declining. I find it quite amusing that the TBTF fail banks have been reporting earnings this quarter which are driven by non-cash, non-economic earnings manufactured by reducing their reserves for bad mortgages and credit cards. Obviously the decision to assume lower mortgage write-offs down the road looks to be pre-mature based on the actual experiences being reported by MGIC and Genworth...Funny because the headline coming across Marketwatch as I write this says "U.S. stocks rise on optimism for financials." LOL
Finally, contrary to the happy proclamations by Bernanke and Geithner that the economy is improving, again real life experience is proving that things are getting worse, as now consumers are starting to put an increasing amount of their necessity purchases on a credit card:
Consumers, particularly in the lower-income end, are being forced to use their credit cards for everyday spending like gas and food,” said Tavares, who’s based in Atlanta. “That’s because there’s been no other positive catalyst, like an increase in wages, to offset higher prices. It’s a cash-flow problemHere's the LINK I would like to point out that food and gasoline are two major consumption components that the Government uses to calculate its widely used measure of inflation (the core CPI). It's also the same metric that Bernanke uses when he lectures to everyone that there is no inflation in the system...To that I simply say "things keep getting worse" - Orwell is smiling in his grave.