Wednesday, November 27, 2013

The Housing Market Approaches A Cliff

Things always become obvious after the fact 
  - Nassim Taleb

I issued a "sell" on the new homebuilder stocks at the end of January (Dow Jones Home Construction Index basis - DJUSHB).  Since then, the DJUSHB is down 18% and has been down as much as 26%.  This is a remarkable call considering that in the same time period the S&P 500 is up 20%.  During this same period, homebuilder company executives have been dumping their shares at a stunning pace.

I have been postulating that what has been promoted as a housing market recovery by the financial media, Wall Street and the Obama Government is really nothing more than a dead-cat bounce in a long term bear market that has been fueled by a couple trillion in taxpayer-backed Federal Reserve and Government stimulus programs.

Since the beginning of the year, I have written several articles explaining how and why the housing market has appeared to be in recovery when, in fact, both price and transaction volume has been artificially manufactured through the use of direct Fed money printing, Government implemented and tax-payer financed mortgage programs and outright bank accounting and operations fraud.   As for the latter, while some of the banks have been prosecuted and/or engaged in what seems to be large settlements for business and accounting fraud, they have found other ways to exploit the numerous accounting and regulatory loopholes in order to continue their schemes.  As my English major adviser in college used to say, "same old wine, new bottle."

At any rate, I published an article yesterday on Seeking Alpha which shows why the housing market "bounce" is now transforming quickly into a rapid decline.  Keep in mind that when you read news headlines or hear reports on financial tv, they are using year over year comparisons in order to broadcast continued "gains."  As I have writing about, in order to understand what's really going now, you need to look at the month-to-month sequential comparisons.  On this basis, the  housing bounce topped out in late spring and has been declining since June. 

You can read my latest article here:  The Housing Market: A Black Swan on the Horizon

What's most interesting about the sequential decline in almost every housing market metric is that this decline has been occurring in what should be the market's strongest seasonal period.  If you are looking to sell your house and get the kind of prices that realtors are promoting, it is likely too late.  If you want to sell your house, or have to, I would suggest getting it ready to be listed by mid-January and price it to sell, not to maximize profits.

Have a happy, healthy Thanksgiving and remember:  enjoy what you can, as much as you can, while you still can.


  1. Your details analysis is always really good. Looks like several items from different points are going to gravitate to the center (housing, unemployment, weak retail sales and disposable income, China's gold buying and selling oil with their own currency instaed of US domination, etc.). The temp agencies here are hiring only up to Jan 1st then layoffs. Walmart starts its black friday on thanksgiving at 6PM. Remember when you had to be there 2-4am in the morning on friday, just hoping and waiting to get in at 5am? The media last year showed people at Best Buy camping outside the door from midnight onward with sleeping bags and portable TVs just to get in at 5am. They too are open thanksgiving at 6PM. Personally, I'm glad I stocked up on food instead of technology.

    federal unemployment is set to expire 3 days after christmas, layoffs will be coming jan 1st, and obamacare then sets in.College students now have loans that they may never be able to pay off and probably will never own a home. Their future has been mortage off. So much for filling their heads with "Our generation can changed things and changed the world". Maybe on the virtual world of facebook or twitter.

    So we are indeed reaching the cliff!

  2. Off the topic. Do you monitor the price movements on the Shanghai Futures Exchange? There is some sort of backwardation in silver on the SHFE. Just look at the settlement prices of Ag1312 and Ag 1401 since last week.

  3. The NYT Implies that Not Prosecuting JPMorgan Proves DOJ’s Vigor

    No one expects Andrew Ross Sorkin’s slavish “Deal Book” lackeys to demand that the elite Wall Street bankers whose frauds drove the financial crisis be imprisoned, but the slavishness to the banks revealed when major news stories emerge continues to irritate if not surprise. A recent embarrassment can be found here.

    The “Deal Book” Spinmeisters

    The context of the NYT article was the expected settlement between DOJ, various states, and JPMorgan. The spin comes fast and hard, which would be great in cricket (or quarks) but, sadly, exemplifies the national paper of record’s “Deal Book” devotional pages. The “Deal Book” shows that cricket masters can impart very different spins. The first substantive paragraph’s spin is to minimize JPMorgan’s fraud.

  4. The war on democracy
    How corporations and spy agencies use "security" to defend profiteering and crush activism

    A stunning new report compiles extensive evidence showing how some of the world's largest corporations have partnered with private intelligence firms and government intelligence agencies to spy on activist and nonprofit groups. Environmental activism is a prominent though not exclusive focus of these activities.

    The report by the Center for Corporate Policy (CCP) in Washington DC titled Spooky Business: Corporate Espionage against Nonprofit Organizations draws on a wide range of public record evidence, including lawsuits and journalistic investigations. It paints a disturbing picture of a global corporate espionage programme that is out of control, with possibly as much as one in four activists being private spies.
    The report argues that a key precondition for corporate espionage is that the nonprofit in question:

    "... impairs or at least threatens a company's assets or image sufficiently."

    Referring to the work of US investigative reporter Jeremy Scahill, the report points out that the notorious defence contractor Blackwater, later renamed XE Services and now Academi, had sought to become "the intel arm" of Monsanto, the agricultural and biotechnology corporation associated with genetically modified foods. Blackwater was paid to "provide operatives to infiltrate activist groups organizing against the multinational biotech firm."

    The FBI's involvement in corporate espionage has been institutionalised through 'InfraGard', "a little-known partnership between private industry, the FBI and the Department of Homeland Security." The partnership involves the participation of "more than 23,000 representatives of private industry," including 350 of the Fortune 500 companies.

    But it's not just the FBI. According to the new report, "active-duty CIA operatives are allowed to sell their expertise to the highest bidder", a policy that gives "financial firms and hedge funds access to the nation's top-level intelligence talent. Little is known about the CIA's moonlighting policy, or which corporations have hired current CIA operatives."

  5. A stunning new report compiles extensive evidence showing how some of the world's largest corporations have partnered with private intelligence firms and government investasi logam mulia
    intelligence agencies to spy on activist and nonprofit groups. Environmental activism is a prominent though not exclusive focus of these activities. still investment is something you should avoid especially when you follow the crowds :(