Wednesday, June 22, 2011

Housing Gets Even Worse And Gold Looks Even Better

To begin with, I wanted quickly to recount a conversation I heard this morning on CNN with South Carolina Senator, Jim DeMint.  DeMint has some type of "pledge" in which he wants all Congressional signees (presumably only Republicans might sign) to withhold their backing of the debt limit increase unless legislation is also passed which implements programs which would presumably lead to an eventual balanced budget.

This is pure theater of the absurd.  We wouldn't even be in this mess if our system was based on a gold standard.  DeMint's pledge paper is worthless and Washington DC will ultimately spend this country into collapse.  Period.  Here's a brilliant quote for Richard Russell: 
A few things you know for certain.  Gold will not go bankrupt.  Gold will always have a market.  All fiat money becomes worthless over time.  Gold is real tangible money, and it will be around when the last issue of fiat money is struggling to survive.  Gold has a five thousand year history of representing wealth.  No fiat money has ever lasted as long as a hundred years.
Taking from the real life example going on in Greece right now, this shows why gold is not even remotely in a bubble and it demonstrates the true flight-to-safety/wealth preservation nature of this precious metal (and silver):  Greek citizens are emptying savings accounts and buying gold as they brace themselves for the possibility of a sovereign default and a run on the banks.  The entire article is worth reading, here's the LINK  (when you pull it up, if it asks you to register in order to read the article, copy the headline and type it into the google search bar and click on the article link after you search and you should be able to see the entire article).

Housing continues to crash, despite the best "spin" the media attempts to paint over the facts.  Recall that one of my premises is that the "shadow" inventory of homes is significantly larger than is widely acknowledged by anyone in the media, Wall Street and even most analyst/commentators. We know that banks are substantially slowing down foreclosures and default declarations and doing what they can to avoid taking on more REO.  It is my contention that the REO component of the shadow inventory is massively larger than is being published by the Government or private sources (the other primary "shadow inventory" component would be all those people current on their mortgage but would sell their house if they could get a price equal to their outstanding mortgage and all those who want to sell before the next leg down but are waiting for the market to "come back a little").

Well, the FT Blog published an article which attempts to quantify the growing REO (real estate owned) inventory at FNM/FRE/GNMA/FHA:
The federal share of REO property is also rising. For 1Q, RealtyTrac estimates that total REO property held by lenders totaled 872,000. Of this, we know from monthly or quarterly financial statements that Fannie Mae, Freddie Mac, and the FHA hold roughly 300,000 of these properties on their books, and that this inventory has been rising by more than total REO inventories over the last year. Over the next few quarters, the federally backed entities are likely to see their inventories of REO property become a larger share of the total
Here's the LINK  If you read the article, you'll see that it is likely that if the Government does not play "hide the salami" with its housing inventory the way banks do, the amount of homes streaming into the "for sale" inventory could increase by as much as 30%.   You still feel confident that we've reached the bottom of the housing crash?

Before you answer that question, take a look at this existing home sales data released yesterday, as existing home sales hit a six-month low:  LINK  Hmmmm, I thought we were in the peak selling season for housing...


  1. Talking about spin..look at this...all this guy and a few others(long haired guy) have done over the years is dismiss gata and murphy as lunatics...and now this...they should choke on their tongues! As if people need his blessing to make this a real concern..maybe cnbc will have Bill Murphy on to discuss his findings now that the pope of dope is long the story of...

    If your interest is really piqued, try questioning central banks yourself

    "Mr. Woods noted that the Vice Governor of the Belgian Central Bank said that 43 percent of the bank's remaining gold reserves have been lent out. Despite our antipathy to the argument that GATA has been making for years that much of the world's reservable gold has been put out on lending programs, this number caught our attention. Neither we, nor John, know of any central bank that has admitted putting this much gold out on loan. What then of the Bank of France, or the Bank of Italy, or the ECB itself? Suddenly our interest is piqued. Bill Murphy, where are you?"

  2. Bloomberg Interview with Rob McEwen

    Gold long term store of value.

    Real shortage of gold.

  3. Very credible policy goal...according to this logic if you're broke and can't purchase food(altered behavior)...your food inflation is zero....

    America's Latest Proposal To Deal With Its Insolvency And Pursue
    Stealth Dollar Devaluation: Change The CPI

    A few months ago we reported on Goldman's proposal to change the
    definition of GDP to make the US economy appear to be growing faster
    than it really is. So far, it has not caught on, as even the revised
    definition will soon confirm a contraction. But that proposal appears
    to have given Joe Biden some ideas, who now has taken the Fukushima
    approach to (sur)reality, whereby one merely changes the terms of data
    measurement when the data does not cooperate. Enter the revised CPI:
    "Lawmakers are considering changing how the Consumer Price Index is
    calculated, a move that could save perhaps $220 billion and represent
    significant progress in the ongoing federal debt ceiling and deficit
    reduction talks."

  4. I'm a lawyer who represents both banks and a variety of homeowners associations. What has become quite common is for banks to delay the commencement of and then delay the completion of foreclosures on homes or various units (condominiums, timeshares, fractional intervals, town homes) for as long as possible as the bank itself becomes responsible for assessments once it becomes the owner. Since they can not resell easily or at all once the foreclosure is complete this makes perfect sense and is resulting in indefinite delays of years before the bank takes title and must then look for a buyer. And good luck on that attempt!

  5. Embry - Western Central Banks Don’t Have 30,000 Tons of Gold

    “When you look at the financial condition of the United States at the federal level, at the state level and at the municipal level, to me I don’t see any way out of this. There’s too much debt, interest rates are far too low. If interest rates really reflected what’s going on, this risk in the debt and the risk of inflation, they would be hundreds of basis points higher and under that event the debt couldn’t be serviced. So there will be some form of default.”

    When asked if he was surprised by the admission that the Belgian central bank had leased out 41% of its gold Embry replied, “It caught me a bit by surprise because I have been one of those individuals who has been adamant that the western central banks collectively have leased out or swapped a significant portion of their gold.

    When they (western central banks) report having 30,000+ tons, that is not true. They may say they still maintain ownership, but they do not have it and they will never get it back. It’s been sold, it’s gone into the market and it’s gone. Ultimately I assume that gets settled up with cash, but for Belgium to admit it the other day, yeah I was taken a bit by surprise because it confirmed my thoughts on the subject.”,000_Tons_of_Gold.html

  6. Found Thelma....where's Louise?

    Bernanke Admits He’s Clueless On Economy’s Soft Patch

    Brutally honest, Bernanke admitted that he had no clue what was actually causing the current fragility in the U.S. economic recovery. While the FOMC statement assigned blame outside of the U.S., pointing at Japan along with rising food and oil prices, Bernanke was put on the spot by a reporter who noted the inconsistency behind that explanation and a lowering of long term forecasts. Bernanke took the hit, admitting only some of the factors were temporary and that he didn’t know exactly what was causing the slowdown, but that it would persist. “Growth,” said Bernanke, “will return into 2012.” (Read No Recovery Possible While U.S. Consumer Continues Deleveraging

    On wisdom, Confucius say...

    Man who jump off cliff, jump to conclusion!

    Man stuck in pantry have ass in jam.

  7. Oh how slick the media changes their tune, as if they always new PM were wise allocation. The fact that they have dropped their "tin foil hat" snide commentary is a sign we have turned the corner. Be long and strong!
    Boca Boy!