Thursday, January 27, 2011

Now We See Why The FOMC Policy Vote Was Unanimous...

For all of the absurd agonizing over every syllable of the FOMC policy statement after every meeting, what initially stood out for me with a quick skim of the initial press release was that the vote on the policy decision was unanimous.  That's really all you needed to know about the 2-day circus called the FOMC meeting. My comment to colleagues was "the monetary hawks are dead."  I'm sure this aspect was why gold and silver moved up sharply after the release of the policy decision. 

But today the jobless claims number released was substantially higher than consensus expectation.  The reason claimed was weather-related administrative backlog in the southern States due to bad weather.  If that is indeed the case, then how come when the claims number was released last week and was much lower than expected, it was never even hinted that there was this claims processing bottleneck?  I suppose George Orwell would be able to explain if he were still alive...

And the durables goods orders number came in, not only substantially lower than expected by economists, but quite negative.  For sure, this number can be volatile and is influenced by the "lumpiness" of big ticket orders like civilian and military aircraft.  But this week the numbers showed weak demand for airplanes, vehicles, computers and machinery.  Basically widespread weakness for most industrial production-related durables. 

My point here is that true weakness in the economy has been covered up with statistical manipulation and media spin.  We are seeing this in the housing numbers already, despite the media spin being put on the latest housing reports.  Point in case is that the weekly mortgage purchase applications has been declining for several weeks now and is quite inconsistent with view of home sales being presented by the latest headline numbers.  The fact is that new home sales in 2010 were the lowest in 47 years.  The data on mortgage purchase applications so far this year is suggesting 2011 will be worse.

It's going to get ugly in many respects this year and the economic reality being felt by the majority of Americans will become impossible to cover-up by the media, politicians and business leaders.  Rest assured QE2 will become QE3 in good time and you will want to have as much of your wealth as possible moved into gold and silver before that event becomes a fact.  This latest manipulated price correction is one of the better entry points I've seen in the last 10 years...

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