Wednesday, August 15, 2012

Update On Housing And Government Economic Statistics

I take great pleasure when I post a view on an economic topic and then subsequently I find even more empirical evidence that my view is correct. After I published my updated thoughts on the housing market in this country - which of course runs contrary to the noise coming from the media and the bubblevision idiots - I found an article on housing which was actually written a day before my post on Monday.

I have been following the Dr. Housing Bubble blog for several years and the author posted a blog piece detailing the incredible rise in low-down-payment FHA insured mortgages since 2007.  I have been harping on this point for quite some time now, and this piece presents the hard data.  The FHA - aka the Taxpayer - is sponsoring 3.5% down payment mortgages, which have more than doubled in terms of the number of loans outstanding from 3 million in Q2-2007 to 6.8 million in Q2-2012.

Unfortunately, the performance characteristics - i.e. rate of delinquency/defaults - of FHA mortgages is starting to make them look like nothing more than taxpayer-sponsored subprime mortgages.  How do you all like that?  Here's the blog post, which I would urge everyone to spend time reading:  LINK  What I find ironically humorous is that the housing market cheerleaders are actually cheering us into the next big housing mortgage blow-up.  It's kind of like the chickens in the barnyard cheering for the success of Colonel Sanders...

On to the Obama Government.  As everyone who watches any television knows, Obama is taking full credit for a supposed saving and turnaround of General Motors.  Given the enormous taxpayer resources that have been shifted from the taxpayers to the bank accounts of GM upper management and union workers, any claim of success from an economic standpoint is highly questionable, if not outright a lie.  In stark contrast to Obama's boastful bullshit - something which has become one of his hallmark traits - it turns out the U.S. Treasury just released a new estimate of the cost of the bailout to Taxpayers.  Originally Geithner was claiming $21 billion.  He's now upped the ante to $25 billion:  LINK.  Please note:  this is just an estimate, which has been no doubt highly polished and massaged to cover up the true cost.

HOWEVER, the Treasury estimate would not include the big loss the Government/Taxpayer has in GM's stock.  The Govt still owns about 30% of the outstanding shares, the value of which has declined $6.1 billion since the GM IPO.  Add that to the $25 billion cost estimate and we're now north of $31 billion.  This assumes GM stock does not decline anymore before the Government unloads the rest of its stock.  GM stock is down 39% since its November 2010 IPO.  The Dow is up 18% in that time frame.  Imagine what happens to GM stock if the Dow goes back into bear market mode, which it will in spades if the Fed does not print up a lot more money.  If these numbers are considered "success" by Obama, I truly fear what a failure looks like...

Last, I wanted to delve briefly into yesterday's July retail sales report released by the Obama Government.  It reported that retail sales were up .8% for July from June, which was a lot higher than the .3% Wall St. estimate.  This number is highly questionable, and most likely substantially wrong.  First, understand that this number is computed using questionable sampling methods which involve contacting selected retailers and having them "guesstimate" what their sales will be for July based on early month trends:   Advance estimates are based on early reports obtained from a small sample of firms selected from the larger Monthly Retail Trade Survey (MRTS) sample. All other estimates are from the MRTS sample.

This description of the data sampling comes from the Census Bureau's report:  LINK  If you pull up that link, you'll see that the footnotes also describe the "adjustment" process the Government applies to the data to "seasonally adjust" the numbers.  Translation:  "we take questionable advance sales estimates and put them through our turkey grinder and adjust the results to fit our political needs."  Furthermore, they "revised" lower the number from June, which mathematically makes the "calculated" increase for July look even greater.

In addition, the data released by the Government is not in any way supported by the actual sales tax receipts for July from California, the largest State in the country with 12% of the population and the 8th largest economy in the world.  As you can see from this LINK, California's sales tax receipts were down 40% from July 2011 and were 33.5% below the estimated expectation.  So you can see just how accurate "advance estimates" can turn out in reality.  Quite frankly, a data sampling representing 12% of the U.S. population is likely a lot more accurate than the Government's loose advance estimate sampling.

Finally, a report released which contains Mastercard's retail sales data for small retailers for July showed that retail sales at small retailers plunged from July last year (consistent with the California data), but also dropped off month to month from June, quite contrary to the Government's claim:  LINK.

So do you want to place faith in actual cash-register data from the State of California and from Mastercard, or place your faith in the Government?  The truth is that the Government retail sales report is outright fraudulent.


  1. Information used to lead to knowledge and wisdom!! But when information is such a cesspool of shit - then what? Retail numbers, GDP, unemployment numbers etc. So when nobody believe any of the information anymore what then?? So we have to search for alternative media outlets which have "better" information, this is difficult enough. But what about the alternative media which focuses solely on the negative and fear factor. There are few which highlight the positive consequences of this rubbish out there. One of them at least is by C Austin-Fitts, perhaps because she is a woman.

    Two information tit bids from main media.

    From the Daily Express in the UK - (I know, I know what you thinking....)
    But in there is an article today about the profit that the BOE is making with its QE program - apparently on 375bil by next Feb their profit will be 30bill. How about that? I used to be excellent in maths but this baffles me. So printing money is a profitable enterprise above and beyond the actual printing?? So then the Germans are complete idiots not to allow the ECB to print because imagine what profit they could be making on a few trillion QE. And the FED could just carry on with QE because its profitable, clearly there is the demand for it!!

    Then about the recent EU GDP numbers - apparently in the Deutsche Welle TV news (DW) they were so good that the DAX could rise 1.7% and for the 2013 year the GDP will therefore rise to 1%. However in another article by thestreetthe heading is - Gold prices sag as the European GDP contracts.

    Well all I can say is that when information used to be knowledge it was curiosity which lead people to inform themselves more. Now it only leads to stress because information isn't what it was thought to be and so it has actually turned to the opposite - making people less wise!!! Very serious in deed.

    And when one distills a certain piece of information into a short slogan the other side is able to use it as a button to be used against that information. Case in point "QE to infinity"

    Anyway whatever - what I have learned so far is that the alternative media also has another motive.

  2. Here an interesting chart - Crude Oil/Gold ratio - - pity it only goes to 2005 but the point can still be made....

    ....with regards to the miners and oil. From the absolute rise of the XAU during the 2001 to 2005/6/7 period the actual Crude/Gold ratio was actually higher than it is today - meaning Gold has risen faster still to today.

    The crude/gold ratio is approx 0.069 today - which is the same it was from the start at 2001 and not very much higher than Gold's peak in 1980.

    So the fall in the XAU/Gold ratio to this level cannot have anything to do with the rise of oil price.

    At the very least the XAU/Gold ratio should have stayed constant from 2001 and thus XAU should at the very least be at 256 - a rise of 64%

    Another observation is that during the period from 2001 to 2005/6/7 in which the biggest rise occurred for miners, it happened with a worse Crude/Gold ratio. And at a ratio of XAU/Gold of approx 0.26 at beginning of 2006 the Crude/Gold ratio was approx 0.13 - (almost double from today). So at XAU/Gold of 0.26 - XAU should be about 416 - a rise of 168%. Not to mention that a reduced Oil/Gold ratio today could infact add to that rise???

    So what has changed?? 2008 happened and the fear associated with it affected the miners the absolute worst and they have never recovered from it.

  3. Come on, stop confusing people with the facts, don't you know we're in the midst of a recovery! I can't bring myself to watching the news any longer knowing virtually all of it is BS and corporate propoganda. I happened to hear that report on the radio yesterday and then of course a so called expert comes on and begins ranting how optimistic consumers are now, finally convinced we're in a slow but steady recovery.
    Try telling that to any unemployed +50 year old or any other unemployed person for that matter.

  4. Dave, this is nothing you you really haven't covered yourself but nevertheless a good read anyway from JS Kim over at Zerohedge

  5. 8/14 M Hanson…”Shadow” & “Ghost” Inventory Quantified
    Bottom Line:

    First timers and investors are volatile and thin cohorts that cannot sustain a “durable” recovery or push macro housing to “escape velocity”. In fact, “distressed resales” have only averaged 110k per month over the past two years. That is nowhere near enough demand to absorb all the likely supply detailed in the chart below.

    The investor and first timer by and large bowed out of the market in June, as the distressed supply was all but chocked off for the election cycle. Now, the Realtors are screaming for more Foreclosures…how ironic.

    This housing market will never achieve a “durable recovery” or “escape velocity” with 20 to 30 million homeowners — the prime repeat buyer cohort — trapped in their houses due to effective negative equity, poor credit, or legacy second liens. All that will continue to happen is stimulus-induced short squeezes like we saw this year and in 2010 followed by hangovers like in 2011 and will again in the back half of 2012 and 2013.