Wednesday, July 25, 2012

On The Economy

The 8,753,935 workers who took federal disability insurance payments in July exceeded the population of 39 of the 50 states. Only 11 states—California, Texas, New York, Florida, Illinois, Pennsylvania, Ohio, Michigan, Georgia, North Carolina and New Jersey—had more people in them than the number of workers on the federal disability insurance rolls in July.
Here's the report where I took that quote:   LINK  Since Obama took office,  Social Security Disability benefit payments have accelerated.  In fact, year-to-date, more people have gone on SS Disability than have taken jobs.  And that's if you believe the Government job calculations.  Here's a statistic that should have everyone grabbing their pitchforks and heading out to behead the Government:
The Social Security System’s Disability Insurance Trust Fund has run deficits in each of the last three fiscal years, meaning the government has needed to borrow money to pay disability benefits to the workers claiming them. In fiscal 2009, the Disability Insurance Trust Fund ran a deficit of $8.5 billion. In fiscal 2010, it ran a deficit of $20.8 billion. And in fiscal 2011, it ran a deficit of $25.3 billion.
Like every other debt-financed "Ponzi" mechanism in our Government, this is clearly unsustainable.  The working taxpayer is getting eaten alive by the people in this country handing out Government benefits like pot at a Grateful Dead concert and by the benefit-addicted people who are consuming them.  This will be a large part of the demise of our system - and Atlas shrugs.

Can we please put any notion of the housing market stabilizing into it's proper grave site?  Sometimes I think I'm the only person in the country paying attention to the mortgage purchase application statistic released by the Mortgage Bankers Association weekly.  I'm for sure the ONLY commenter out there who has been consistently pointing out the fact the purchase applications index has been in a steady decline since February.   And it has been declining nearly every week during the May-now peak home buying season.

So today the MBAA index showed a steep 3% decline in purchase applications:  LINK  How can this possibly be happening if the housing market is stabilizing or trending higher, as the bubblehead financial media would have you believe?  It can't.  What makes the statistic even more shocking is the fact the less people are applying for a mortgage to purchase a home despite record low financing rates.  Refinancing activity is booming, led by Government-subsidized refi programs.  In other words, the mortgage data does not fit the home sale data being released by the National Association of Realtors or the National Association of Homebuilders.

Well today the data released by the industry-biased NAHB finally started to make sense.  New home sales were reported to be 350,000 for June (annualized).  But the Einsteins on Wall Street were looking for the number to be 370,000.  They clearly do not look at data from the Mortgage Bankers Association.

So despite record low mortgage rates, Government/taxpayer subsidy programs and the strongest seasonal time of the year for home sales, the housing market continues to flounder.  There will be a huge cliff-dive in housing market activity this fall and into next year, as the market for still-optimistic home buyers - and those falling prey to the "this is great value and the market has bottomed" sales pitch - has been saturated.  Here's a great analysis of the situation from a different angle:  LINK

Not only that, but I can guarantee that the expanding number of people leaving the workforce and going on SS Disablity or other Government welfare programs will absolutely not qualify for a mortgage to purchase a home (contrary to what would have occurred during the bubble years).  The housing market is dying and it will continue to die until we have a complete systemic cleansing and rebuild.  That won't happen in my lifetime.


  1. Sorry haven't read your offering yet. Watching Gensler hearing - my reaction...(Forgive me for the words) but

    Christ Almighty - what a fuck up to clean everything up. Enough is enough these guys are not going to get it right. We always say that Brussels is just a bunch of blah blah blah. They at least have an "excuse" and that is many more people involved from different cultures. You know when well run company tries to fix a problem and this kind of fuck around takes place then its finished. Can't we see that it's not only the CFTC but also this idiotic committee who haven't a clue.

    There isn't one LEADER to bang his fist on the table and says - FUCK ALL THIS SHIT. And simplify.

    Anyway wondering when people will realize this isn't going to happen. The only way this problem will be fixed is by accelerating the collapse by supporting one thing and that is keep on printing. After the collapse we start new. Just like after the wars.

    4 yrs to prepare something for a successful legal case. That says to me - take some dynamite to the legal system as well as the financial system.

    Man oh Man - we watching a fucken Kindergarden, except the real Kindergarden has positive energy

    FUCK IT! - (Read the book)

  2. key words Dave (and ez to follow) "Despite record low interest rates"

    whats next-giving tax credits (more than just tax deductibility) to offset interest costs and real estate tax costs for those earning under 100k a year?

  3. Second wave of foreclosures starts to rise in New Jersey, region

    The long-expected second wave of foreclosures in states where courts delayed their processing appears to have begun in New Jersey and area counties, with filings jumping in the second quarter from a year ago.

    Foreclosure filings in Atlantic County were up 80 percent from the second quarter last year. Increases were seen of 33 percent in Cape May County, 53 percent in Ocean County and 66 percent in the state overall, according to RealtyTrac.

    New Jersey is among 22 states that make foreclosure a judicial process, and from 2010 to fall 2011, foreclosures were largely halted by the courts in response to reports of processing irregularities in this and other states.

    Rick Cammarano, 55, a broker-associate with Century 21 Alliance in Wildwood Crest who handles a lot of foreclosures and other distressed properties, said the push to a new peak in foreclosures is just starting.

    "I'm doing a lot of bank inspections for preforeclosures and short sales, 25 to 35 a week. That's probably double last year at this time," Cammarano said.

  4. Excellent post Dave.

    I have thought we are far from a bottom for a while now. Accordingly, I have felt the house a family member needs to sell should be sold NOW, yet the father in law says in his practiced way "but you know, the longer you hold a house, the more it goes up so if we don't get 160 for it this year, we'll do better next year."
    Ahhh...I'm just the son in law so I keep my mouth shut.

    IMHO, he's dead wrong and they should take most anything reasonable right now!.
    But, i felt this way in 08 when I was in the same boat personaly with an inherited house. Turns out, if I hadn't pushed my family to sell it in 11/9, we actually would have been able to sell it a bit higher if we had waited till about late 2010 when everyone saw green shoots and rainbows. (I still would do the same again though)

    So, be that as it may, I do expect a bounce again (in RE) once qe3 or it's equivalent gets here later this year into the next year but I think it will be a smaller, quicker bounce before the grand finale.

    I guess what I'm asking is, can prices fall much more before money printing brings them all back up again?
    My FIL could be right, they might get 200 for it 2 years from now, but will bread be $10 a loaf then?

  5. " will continue to die until we have a complete systemic cleansing and rebuild. That won't happen in my lifetime..."

    Dave, call me a nut, but there are strange and good things happening in the background -- e.g., details from Drake, Ben Fulford, Dave Wilcock -- that point to a reset being initiated this year.

    For the first time since I opened my eyes in 2004, I have become full of hope, and am actually enjoying the summer here in SoCal.

  6. It is both a fascinating and horrifying spectacle to watch what is becoming of a once great nation called the United States from where I reside in Canada (I am a Canadian, but no, I'm under no illusion that as the the big ship goes down, the smaller one will not be sucked down in it's wake, and so I prepare accordingly). I don't have anywhere near the knowledge that you do, Dave, in matters financial or economic, but I do follow you as best I can and I enjoy your blog site very much, cuss words and all. Between you, Jim Sinclair and Zero Hedge, I know enough to know that something stinks mighty bad in Denmark (some Shakespeare quote, I believe), and I just wanted to say thank you for the keen insights you provide. As I said, I'm not the most astute guy, but I am trying hard to learn with your help.

    Mike (Northern Libertarian)

  7. When will real estate start to recover? A wise observer on a real estate bubble blog posted the answer- when investors say "Real estate? Yuck!"

    When buying real estate is seen as the contrarian thing to do, when the financial so-called experts stop singing the praises of owning a home, when the NAR is as vilified as Wall Street fat cats or J P Morgon, when a house is looked upon as a place to live and Not an ATM, not an asset but a liability, not the path to riches but as a place to hang your hat after a long day at work, then, and only then, will we see real estate stabilize and begin to grow-and grow slowly at that.
    That is just my take and my viewpoint. Give the RE market a decade and a half to stabilize.

  8. Sandy Weill: Too Little, Too Late

    It's a shame it took mountains of sleaze, tremendous shareholder losses, a financial crisis and taxpayer bailouts for Weill to see the light because there are many valid reasons to break up the banks. We had a financial crisis (and subsequent taxpayer bailouts) largely because of enormous risk taking at the mega-banks like Citigroup, which led others to blindly copy the firm's risk taking model until the entire system blew up in the fall of 2008.

    Even so, it's hard to take Weill seriously. First this is a man with an ego the size of the bank he created. People who know him say he needs media attention like an alcoholic needs a stiff drink, and he's gotten precious little of it since retiring from the banking business six years ago. Yesterday made him feel like the same old Sandy again.

    Then there's his record as a banker, which should banish him from ever dispensing advice on the business he helped destroy. Follow this timeline: In 1998, Citigroup was created by merging the investment banking business of a company Weill ran, known as Travelers Group, with the large commercial bank known as Citicorp. The merger was technically illegal because still in existence was a Depression-era law known as Glass-Steagall, which prevented such combinations.

    Glass-Steagall was based a simple premise: Commercial banking deposits are federally insured. So why should the taxpayer be on the hook if some mindless trader bet the ranch and lost?

  9. How old are you Dave? I'm 23 here. Asking due to your last line.

    1. 49. Jared, sorry but this country is going to have to collapse, go through a revolution of some sort and then rebuild. I doubt that process happens in my lifetime or your's.

      My biggest concern is that the entire world ends up like the scenario in "The Road." Unfortunately I think there's a 50/50 chance that happens.