In the latest retail sales report for December, auto sales were nailed - down 1.8%. The only reason overall retail sales from November to December showed a slight "gain" that November's number was revised lower. Electronics fell off of a cliff. The housing market is about to get crushed. Feedback I'm getting from my Seeking Alpha articles and blog posts on housing from housing market professionals all around the country tells me that the housing market hit a wall at the end of 2013, as I have been forecasting.
The consumer is dead on arrival. I love the way last week's retail sales were blamed on the cold weather that hit the country the previous week. I guess consumers were still thawing out and decided to not restock on everything last week even though it warmed up in most of the country. The only thing "frozen" is the real wages and disposable income of the majority of Americans. And what's left over after the monthly of cost of Obamacare is spent won't be enough to buy a new car or a new home.
The proliferation of sub-prime quality, Government-subsidized auto loans made it a no-brainer for Americans to go out and buy a new car last year - just like no-document ARM mortgages coerced the peak of the housing bubble. But all that did was "pull" sales forward into 2013 and set up another debt-default crisis. The delinquency rate on sub-prime auto loans - now 28% of all auto loans - started to move a lot higher toward the end of 2013.
Even worse, the Dodd-Frank legislation that is supposed to protect America from Wall Street's monsters - which it won't as the beasts have already had their battalions of lawyers figure out ways around it - has imposed new mortgage rules which will make if more difficult for the average guy with no growth in real income to get a mortgage. In additions, the FHA implemented a reduction in the size of the standard mortgage it will guarantee in most markets - significant reductions in some markets. Wave good-bye to the fabled housing "recovery."
Despite the rhetoric coming from the Obama team and the endless stream of Fed officials who loudly broadcast that the economy is recovering, the truth is that the system has been set up for an epic collapse. I have suggested that there has not been real, inflation-adjusted growth since 2006. If you strip away the accounting fraud and non-GAAP nonsense that the Government lets the big corporations get away with now, real cash earnings from most companies has been flat to negative since 2006. This is especially true for the big banks. Witness today's earnings report from JP Morgan in which JPM's net income was largely comprised of non-cash add-backs and absurd accounting gimmicks. If we did a true, independently-assessed audit of JPM's books, I can guarantee you that the bank is insolvent.
The stock market appears to be unraveling. When the downside momentum really grips the market it will be an incredible sight to behold. The flip-side is that gold and the mining stocks have quietly, in the background, established a bottom and a new uptrend. What's happened over the last 2 1/2 years to the precious metals market will be reversed in equally as stunning of a move to the upside as we will see with the stock market to the downside.
Tuesday, January 14, 2014
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late 2008 all over again.
ReplyDeleteOn the weather related cause of slowdown-in Chicago, the day before the cold settled in you could hardly get into a grocery store. Parking spots taken, long lines, shortage of carts.
In addition to the PM sector seemingly turning up, so is the BS index.
Great stuff as usual Dave. The rhetoric is finally crapping out. I really underestimated the power of propaganda and denial.
ReplyDeletedave,
ReplyDeletegiven your opinion of American spending...as in not much ...Who and How will buy into the underwater mining stocks..
thanks
dan
Anyone who is really smart and wants to make a lot of money
DeleteThe problem for me - and maybe I'm alone in this, but I doubt it - isn't seeing the opportunities, and it's not even a case of doing the research and finding the undervalued companies, it's knowing that no matter how much info one has, and how correct one might be about the investment premise, the game seems entirely rigged. Your fund is your business, Dave, so no matter what you think of the market ethically you're going to stay active and invested in some capacity and manner. But me, after 20+ years of active investing, including a stint as a broker for Merrill, and an MBA, the only thing I'm sure of is that if the wrong people don't want the sector I'm invested in to go up, it's not going up. Maybe that's way too jaded and pessimistic, but that's how it feels. So I invest in my own small but successful business - it seems to be the one thing I can control. Maybe I"m missing the boat - maybe the fact that the paper gold market is manipulated has no bearing on the market for gold mining equities, and maybe the market for gold mining equities is a more fair and level playing field.
DeleteSo, how are the rich going to protect themselves? Calvo, who does business with millionaires and billion dollar hedge funds, says, “A year ago, a third of the room would say buying gold and silver was just kind of crazy. Today, you have half of the room investing much more than 10 or 15% of their portfolio into physical gold and silver. To me, that is a big signal.”
Deletehttp://usawatchdog.com/half-of-every-mortgaged-home-in-america-still-completely-underwater-fabian-calvo/
All you have to do while in any retail store is look at peoples faces and see the anguish. I was shopping at a Wal-Mart Sunday picking up travel size toiletries and it just pained me to see people having to make choices between clothing and food. I have never seen so many items just dropped by the register due to people realizing that they could either not afford the item(s) or just deciding at the last minute to put off the purchase. America I.M.H.O. has never looked worse. If people cannot afford everyday items at Wal-Mart then we as a nation are truly hitting bottom.
ReplyDeleteObama has, as planned, put the nail in the proverbial coffin. He is the best politician this country has ever seen, makes the Clintons look like amateurs. He wantsj to focus on the economy as he strangles it through more regulations and gov't control. He has mastered the Orwellian term of doublespeak and there is still 40 percent of the population that think he is a messiah. America will be in WW III OR WE WILL HAVE a currency collapse or devaluation this year. All the scenarios are not good but the absolute best we are looking at is a devaluation. Martial law is coming, get out of the cities. The time is short. This is the best we can hope for.
Deletewith managed money now on the long side in Au/Ag COT, it can scarcely be imagined that JPM et al. are going to continually undermine their own positions. in the metals we are witnessing a slow grind back up in a noticeable stair step pattern. meanwhile the criminals cover and book profit from their diminishing shorts with these increasingly weak raids. there will be no more elevator down drops. believe it or not there are certain fundamentals which the cartel itself cannot ignore any longer and the stair steps back up seems from my limited perspective the template for a methodical and fundamental revaluation and reset in the metals. meanwhile it's estimated that more than $1,000,000,000,000 was made over the past year by the bullion banks with naked shorts. where do you think all those profits are going. and why do you think the Chinese are now the proud owners of the Chase vaults at One Chase Manhattan NYC for the ludicrously low amount of $725 M. http://therealdeal.com/blog/2013/10/18/jpmorgan-sells-1-chase-manhattan-... this is just the beginning of collateral repossession by the Chicoms all across the US. probably negotiated by Hillary Clinton in her last visit. look at Detroit, upstate NY, and numerous other "Chinese enterprise zones" across the US. the good news is you will probably get true price discovery in Au/Ag. the bad news is it will take place under Chicom overlords. and, no, this isn't 1980 and Japan all over again. we're screwed.
ReplyDeleteYardfarmer - what I am about to type is pure conjecture but it startled me when I put the pieces together some two years ago. Back then while in between my real jobs I drove for a car limo. svc. . While doing so there were a number of young ambitious Chinese peeps who were actively working in the states or going to colleges and universities. All of a sudden it dawned on me could these Chinese citizens be laying the ground work for a peaceful takeover of OUR soil while most of America is sleep walking!?!!
DeleteWhat a startling fact to back up my theory when I discovered what the Chicom's (as you stated ) were up to ! http://www.rightsidenews.com/2013120633557/life-and-science/culture-wars/chinese-want-to-spend-billions-constructing-a-600-acre-china-city-in-new-york-state.html
You are so correct. The Chinese already have claims on all gov't owned lands and parks and our natural resources. This is the collateral so 48 percent of Americans can avoid working. They will call in their loans before Obama finishes his second term. I doubt if we go through another charade of an election unless the Chinese think that it will please the sheeple in America to pretend we are still free
DeleteJust curious, why aren't the banks finally solvent now, with the fed buying their toxic MBS assets from them and their $ 2 trillion plus of free money earning interest from the fed in the form of excess reserves parked there?
ReplyDeletethey are not solvent yet because there are near $1 Trillion in fines still to be imposed on the financial industry... only after these fines are unwound, likely in 2015-2016 will the QE programs begin to be realistically unwound too
Deletethats just my view
Add in the derivatives that the big banks own, with the derivatives market estimated at a value of $1.2 Quadrillion, and you finally see the stone cold truth there ain't no way in hades the banks are or ever will be solvent. maybe this is why Buffett called derivatives "financial weapons of mass destruction" if one goes the whole shebang goes, with a BANG!
DeleteHere in Maryland bars can still be packed. But cracks are becoming visible. An ice cream plant had 1,600 applicants for 37 jobs (see Michaels post at theeconomiccollpaseblog.com). My buddy says his son cannot find a part time job. What is funny is he says he can't understand why that is, when I've been telling him for a few years the big economic downturn is still coming. Normalcy bias is as powerful in these sheeple as a crack addiction. One last thing - the Money Bubble, just released by James Turk and John Rubino has recent data and is a good read for those who may be interested!
ReplyDeleteGreat point. I am in Maryland too and even wash dc is starting to feel the pain
DeleteN.S.A. Devises Radio Pathway Into Computers
ReplyDeleteThe technology, which the agency has used since at least 2008, relies on a covert channel of radio waves that can be transmitted from tiny circuit boards and USB cards inserted surreptitiously into the computers. In some cases, they are sent to a briefcase-size relay station that intelligence agencies can set up miles away from the target.
http://www.nytimes.com/2014/01/15/us/nsa-effort-pries-open-computers-not-connected-to-internet.html?
makes you want to go out and buy a computer, eh?:)
Hedge Funds Hit With Biggest Net Outflow Since '09
ReplyDeleteInvestors fled from hedge funds en masse last month, with the industry suffering its biggest net redemptions since the height of the financial crisis.
The SS&C GlobeOp Capital Movement Index, which measures net hedge fund subscriptions or redemptions, fell 3.56% in December. The reading was the index's worst since September 2009.
December's withdrawals all but wiped out last year's net inflow into hedge funds; the SS&C index rose just 0.16% last year.
December frequently sees a large outflow from hedge funds, as investors move to rebalance their portfolios. But last month's redemptions were much higher than December 2012's: A year ago, the index dropped just 2.61%.
The increased redemptions could be due to hedge funds' massive underperformance last year. The SS&C GlobeOp Hedge Fund Performance Index rose only 12.32% last year after adding 0.72% in December. The Standard & Poor's 500 Index soared 30%, and the MSCI World Index about 24%.
http://www.finalternatives.com/node/25833
Year over year comparisons of mortgage originations from Wells Fargo and JP Morgan Chase support everything you're saying. The 60% decline in mortgage funding is pretty telling, as is the composition of refi vs. purchase volume:
ReplyDeletehttp://blogs.marketwatch.com/thetell/2014/01/14/the-end-of-the-mortgage-party-home-lending-plummets-at-wells-fargo-j-p-morgan-chase/
Calling a bottom in the market? Bold. I know less than 1% of what you know, but sure seems like this can be dragged out much longer to support the dollar. Very few thought they could drag it out this long, so who knows what they have planned. That said, hope you are right.
ReplyDeleteI know two people in different metro areas with jobs that rely on home construction/remodel that were laid off last week. Last spring/summer they could barely keep up with demand. I see all these expensive new housing developments all over the west coast from my work travel driven by baby boomer 401K/real estate boom money and I can't help but think who will buy these houses 10-20 years from now, unless the prices drop drastically. There is no way my generation will have the money.
For Prime Minister Cameron Re. LBMA Gold Trading
ReplyDeleteBecause gold is an asset unto itself (it is nobody's liability) and because gold lies at the heart of the financial system, the disappearance of gold liquidity or gold flows due to continued price control will signal financial system crisis causing a subsequent rush to secure other real assets, disruption of both the global bond markets and of currency functionality.
Mr. Cameron, you must act quickly to reform the LBMA. Consequences of not acting are world financial system turmoil.
Individuals worldwide are watching and noting the activities in the UK gold markets and their consequences to the world's financial system.
Physical gold is, as we speak, being rapidly withdrawn from the financial system and, because there is limited gold available, you have only a limited time to act to disallow levered gold instruments and ensure only real trading of gold on the LBMA so that gold flows are maintained in the financial system.
In 2014, physical gold exchanges are, in addition to the already extant Shanghai Gold Exchange, scheduled to start trading in Moscow, Dubai, Singapore, Thailand and South Korea. These markets will provide a further source of demand for Western gold given continued containment of gold's price and this essential financial asset will be further stripped from the West's financial markets and disappear into the East depriving the West of this critical stabilizing asset from our financial system.
http://www.safehaven.com/article/32394/for-prime-minister-cameron-re-lbma-gold-trading
Physical gold, the safest asset in an unsafe world”
ReplyDelete15 January 2014
He presents some very interesting graphs showing why US debt can never be repaid. Egon also explains why risk is greater than ever and that the likely consequences will be QE to infinity and a depressionary hyperinflation.
http://goldswitzerland.com/gold-will-reign-as-currencies-stocks-and-bonds-collapse/
I agree with this post.
ReplyDelete