Thursday, September 26, 2013

"Lights Out" On The Housing "Recovery"

I'm not a Rand Paul fan, but he made a comment yesterday that makes complete sense:  (to paraphrase) If Obama likes Obamacare so much, why doesn't he voluntarily enroll in it?  To that I'll add:  Everyone in Congress is exempt from Obamacare as well.  Any Congressman who voted for it should have to enroll in it.  I'll also propose this:  how about everyone in Congress doesn't get paid until the Government ratifies an official budget - something that hasn't been done for several years now - and come to an agreement on the debt ceiling.
 Yesterday's new home sales report for August and today's pending home sales report for August further confirms that the "housing recovery,"  which I prefer to call a "dead cat bounce," has run its course.  While new home sales for August were reported as a healthy "gain" over July in the headlines, when you analyze the details the data shows otherwise.  In fact, July's plunge in new home sales was revised even lower.

I review the August data - along with a quick overview of KB Homes quarterly earnings report - which further confirms my thesis in this article published by Seeking Alpha:  Lights Out For The Housing Recovery.

In addition, the National Association of Realtors released its Pending Homes Sales Index for August.  This index supposedly tracks future home sales based on contract signings.  It was reported to be down 1.6% for August.  This is not a good sign because typically August is the second or third biggest month seasonally for home sales.  The fact that contract signings dropped like this in August is a very bad sign.

Speaking of "signs," I'd love to know how the NAR calculates its inventory of homes report.  I say this because I've noticed over the past 6-8 weeks that there has been a literal avalanche of "for sale" and "coming soon" signs posted all around the metro Denver area.  The NAR must "seasonally adjust" the listings that get reported to it.

I travel pretty much along the same routes from central Denver to south Jefferson County every week and every few days I notice more and more "for sale" signs posted.  To me it's a sign of desperation when a homeowner or a home-flipper puts a home on the market right on the cusp of the slowest seasonal selling period of the year.  My observations lead me to believe that the NAR reported inventory numbers are substantially off the mark.  Perhaps intentionally to create the illusion of low inventory.  Whatever the case may be, there's a lot of homes in Denver that are on the market that were not on the market in June and my observation stretches across all neighborhoods in terms of demographics.

I'm sure the Fed knows everything I've just stated and I'm sure that the probable re-collapse in the housing market played a tertiary consideration in their decision to not taper.  Of course, big bank solvency and Federal Government solvency are the primary and secondary considerations, with most of the emphasis place on the "primary" factor.


  1. The NAR new marketing stratagy. Buy a home for Xmas. Hurry while supply lasts. Threre has never been a better time to buy a home. Yes you can, have the American dream, your own home. The lies from these people never stop. The only good thing is that a larger proportion of the public is waking up.
    If Walmart is cutting purchasing orders in the 3rd and 4th quarters, just how healthy can the economy really be ?

  2. Not looking in right neighborhoods?

    Louis Vuitton Adjusts Business Model to Focus on the Oligarch Market

    At least in Medieval times the knights and noblemen would ride into battle, and as Nassim Taleb likes to say, had “skin in the game.” The rulers in modern feudalism merely print electronic money and hand it to themselves to purchase fetal lamb wool.

  3. Wal-Mart Stores Inc. (WMT) is cutting orders it places with suppliers this quarter and next to address rising inventory the company flagged in last month’s earnings report.

    Last week, an ordering manager at the company’s Bentonville, Arkansas, headquarters described the pullback in an e-mail to a supplier, who said others got similar messages. “We are looking at reducing inventory for Q3 and Q4,” said the Sept. 17 e-mail, which was reviewed by Bloomberg News.

    U.S. inventory growth at Wal-Mart outstripped sales gains in the second quarter at a faster rate than at the retailer’s biggest rivals. Merchandise has been piling up because consumers have been spending less freely than Wal-Mart projected, and the company has forfeited some sales because it doesn’t have enough workers in stores to keep shelves adequately stocked.

    “We are managing our inventory appropriately,” David Tovar, a Wal-Mart spokesman, said today in a telephone interview. “We feel good about our inventory position.”

    The order pullback isn’t “across the board” and is happening “category by category,” he said in a previous interview.

    “In some cases, we’re going to be taking less, in some we’re going to be taking more,” Tovar said.

    Wal-Mart fell 1.5 percent to $74.65 at the close in New York for the biggest decline since Aug. 15. The Dow Jones Industrial Average (INDU) slid 0.4 percent.

    [Merry Christmas, the crash is coming! Without consumer buying, you have no economy. In the Great Depression of the 30's, it dried up and companies were stuck with large inventories. But don't worry: we're in a reeeecoveeeeery.]

  4. Japan PM reassures Americans that economy is on track

    a lot of hot-air to keep Japan's people feeling "happy".

  5. Wall St. and the 'Triple-Fucking' of US Workers, Taxpayers
    'All across America,' reports Rolling Stone's Matt Taibbi, 'Wall Street is grabbing money meant for public workers

    In his latest feature-length piece for Rolling Stone magazine, the eloquently foul-mouthed financial reporter Matt Taibbi takes a close look at what he terms the "improbable triple-fucking of ordinary people" by exploring how Wall Street financiers and hedge fund barons have managed to convince those who control state workers' pensions to hand over hundreds of millions of dollars in public funds to hedge fund billionaires while simultaneously demanding huge cuts to the earned benefits of current and retired public employees.

  6. I don't have cable TV so I am not exposed to much of the mind numbing programming that passes for entertainment, but while at my local bank branch they had on the program "fleamarket flip".
    OK.....We now know just how bad things are getting when we have gone from flipping houses to flipping flea market junk, I suppose "dumpster discovery" or "gutter gold" or "trash picker treasures" are in the offing as things go from bad to worse.
    Sometimes you have to taake a step back and look at the little details, the nuances of what is going on to realize how things really are, and how really awful they are getting.

  7. Use Your Own Common Sense

    You may have noticed yesterday that Walmart announced that they will be cutting orders because inventories are piling up. Only the most minimal thought is needed to understand what this means, Americans are shopped out. If Walmart’s sales have slowed it can only mean that the sales nationwide have slowed. This is not Saks 5th Avenue or Brooks Brothers announcing slow sales, this is Walmart where the average person goes to get anything and everything they need (or want).

    It is also interesting how CNBC handled this news yesterday. They spun it and twisted the news the best that they could, they even backtracked to say that the news was misunderstood. Look, slower sales should not be a shock to anyone. What should be a shock is that when you add up the sales of various stores or the actual sales by state of real estate or private polls of employment…they rarely if ever add up to and equal the “official” numbers released. They should but they rarely do.

    Back in the late 1800′s or early 1900′s, Vanderbilt, Carnegie and JP Morgan (as well as anyone else) could just look out their window at the smokestacks to see how business was doing. Then from the 1920′s until maybe 1990 or so you could track General Motors sales to gauge national business activity. Now all you need to do is look at Walmart…and they have spoken for anyone willing to listen. So why do I bring this up? Because there is supposedly a debate going on as to whether or not the Fed needs to taper, not taper or even monetize more. Looking at Walmart (the condition of Main St.) things are not going so well. Looking at the façade of Wall St., the markets are up. One is not confirming the other.

    1. Walmart and GM cater to the middle and lower classes. Take a walk on the weekends to the higher end retail areas. Beverly Hills, Michigan Ave in Chicago etc. Plenty of money being spent by those who have been riding the market up the last five years. Yes this is called income disparity. Those who cater to the wealthy with high end goods are doing well. It is the middle and lower that is and will continue to suffer.

    2. Show the 99% some economic gains: Column

      The value judgment that is being made here is that it simply does not matter who benefits from economic growth. Instead, growth is good no matter who benefits, or who loses. The goal is, as former President George W. Bush once said, to "make the pie higher."

      But this is absurd. Would we prefer a set of policies which led to 1% of the country earning more income, and 99% of the country earning less to a set of policies which led to the reverse simply because the former had a higher growth rate? I suppose a few people might.

      I'm not suggesting that such tradeoff exists, that policies leading to higher growth necessarily benefit the rich more. It's just an example to highlight the fact that ignoring the distributional impacts of policies doesn't mean those impacts aren't there. Focusing on one measurement of economic growth to the exclusion of everything else does not give us a very full picture of just what good economic policies are.

      Instead of asking which policies are good for the economy, an abstraction, we should be asking who, and how many, will benefit from them. We have a tax system, trade treaties and tariffs, copyright and patent systems, a framework for bankruptcy, a tort system, various benefits and subsidies for individuals and corporations, actions by the Federal Reserve, regulatory agencies, public infrastructure, and other public and publicly provided goods.
      These are all defined by policy choices.
      The current combination of policy choices is working well for some, but hardly working for most of us. Even if the economy takes off and the pace of economic growth increases, it will be nothing to cheer about unless a greater share of the population actually experiences an increase in income. Growth is not enough.

  8. THE MATTERHORN INTERVIEW Special: Jesse of Jesse’s Café Américain – September/October 2013

    L.S.: What’s your comment on the dismissal by the U.S. Commodity Futures Trading Commission of complaints about manipulation of the silver market?

    cftc-tradingJesse.: It is the credibility trap in action. The manipulation of the silver market has the de facto sanction of the government and the regulators who have turned a blind eye to it for so many years that to admit it now would be awkward and embarrassing. The TBTF banks hold so much power because they can threaten systemic destruction, but also ‘know where the bodies are buried’ so to speak.

    It is ironic that the US system has now devolved into a serious of threats of destruction and power standoffs, in the both the political and financial systems. That is a symptom of lawlessness.

    I think that if reform does come it will come slowly, as those in political power try to operate behind the scenes to repair things without risking themselves, and upsetting their personally lucrative arrangements and careers. Transparency is not possible because too many still in power are complicit, and speed is not desirable for them because let’s face it, the system is working for them as it is.

    The problem is that short term thinking like this can allow a situation to become so bad that it reaches a tipping point. That is why there was such a concerted effort to suppress the Occupy Wall Street movement. No deviation or dissent from the status quo can be permitted at this fragile time.

    And this is why they say that every so often progressives and reformers must save capitalism from the capitalists. Their short term greed takes them to some tipping point, and they become locked down in a credibility trap that must be resolved from the outside. That is a period of great risk, because sometimes cures are as bad or worse than the disease.

  9. Dave, do you think we could lose the $1000 level? Goldman Sachs is calling for $1000 gold and the current movement is extremely disquieting, which is reminiscent of the pre-crash price movement in Mar. I know the fundamentals are bullish but in the short term, PM prices are not decided by the fundamentals.

    1. anyone who even bothers to read Goldman research is an idiot. goldman became one of the largest holders of GLD in Q2. they don't even read their own research. follow the money, not the bullshit

    2. When it comes to TV or Big Wall Street Experts (and I use the term experts very, very loosely) just do the exact opposite and you will do just fine. Experts say dot coms are all the rage? Don't buy dot coms. Experts say housing is going up? Don't buy housing. Experts say sell gold? Buy gold with both hands.
      Just look at Cramer the Clown when he said buy this or that stock and see what the result was.
      Ignore the mainstream experts, they have a vested interest in getting you out of gold and into nice safe MBS or Blackberry stock.

    3. There might be an attempt to squash PM's harder but eventually it won't budge. To me, I think we're there as the metals may go down but they then reverse back up. I think silver went under $20 not long ago but it refused to go lower. I'm no expert but I check the kitco metal quotes each day and apmex site and look at the gold and silver prices. Despite the ups-and-downs, they are maintaining a straight line overall for now. Granted, maybe they can be pushed down but, with all the bad economic reports and news, I doubt Gold will hit $1000. This type of news is being handed out so you will get discouraged and sell your Gold while someone else buys it a low price. When the stock market crashes, everyone will run to PM's but there won't be a lot to buy. The debts these investors have taken on to buy stocks is so enormous that eventually the party is over.

      Remember the "eye of the hurricane" is quiet and peaceful before the rest of the storm hits.

  10. Special Report: Pimco shook hands with the Fed - and made a killing


    The firm had brought in former Fed Chairman Alan Greenspan as a consultant in 2007. Gross's top lieutenant, Mohamed El-Erian, serves on an advisory committee to the central bank's most important branch, the New York Fed. Pimco's global strategic adviser, economist Richard Clarida, has known Fed Chairman Ben Bernanke for three decades and was reported to be in the running for a seat on the Fed's board of governors in 2011.

    Pimco, a unit of German financial-services firm Allianz SE, was one of four firms the central bank hired to help it buy agency MBS in 2009 under the first phase of quantitative easing, called QE1. In essence, these firms collaborated with the Fed on writing its playbook for the program. The aim was to stimulate lending and spending by driving down interest rates through mass purchases of bonds, flooding the market with cash.

    Two of the other three Fed helpers - Goldman Sachs Group Inc and BlackRock Inc - also scored big returns on bond funds during the program. However, they didn't bet on agency MBS to the degree Pimco did. Reuters was unable to determine whether the fourth contractor, advisory firm Wellington Management Co, was advising any funds trading mortgage securities at the time.


    Rosner of Graham Fisher says the Fed could have avoided any appearance of conflict of interest if it had hired its own traders. But the central bank had never bought agency MBS on such a scale, and it decided it needed help. It turned to the pros: Pimco, Goldman, BlackRock and Wellington, all of which were selected through competitive bidding. Together, they set up operations to buy agency MBS for the Fed, starting in January 2009.

    "The firms were chosen because their deep experience with agency MBS markets would enable the New York Fed to launch the program quickly while minimizing risk," a New York Fed spokesman said.

    Among other controls, the spokesman said, the New York Fed required the firms to physically separate trading staff from other employees. They also had to ensure that no information flowed between the traders making purchases at the New York Fed's direction and other traders at the firms. Each firm had to certify in writing that it was in compliance with the required controls and was subject to internal and external audits.

    Pimco assigned star trader Dan Hyman to help oversee the firm's role in the project.

    It isn't known when Hyman returned to his job on the firm's mortgage bond trading desk. Based on the contract that Pimco signed with the New York Fed, a Pimco employee would have had to adhere to a "cooling off" period of about six weeks. Those who worked for the New York Fed were forbidden by contract to use any knowledge gained from working for the Fed when trading for Pimco.

    Hyman didn't respond to requests for comment.

  11. Seymour Hersh on Obama, NSA and the 'pathetic' American media

    Pulitzer Prize winner explains how to fix journalism, saying press should 'fire 90% of editors and promote ones you can't control'

    Seymour Hersh has got some extreme ideas on how to fix journalism – close down the news bureaus of NBC and ABC, sack 90% of editors in publishing and get back to the fundamental job of journalists which, he says, is to be an outsider.

    It doesn't take much to fire up Hersh, the investigative journalist who has been the nemesis of US presidents since the 1960s and who was once described by the Republican party as "the closest thing American journalism has to a terrorist".

    He is angry about the timidity of journalists in America, their failure to challenge the White House and be an unpopular messenger of truth.

    Don't even get him started on the New York Times which, he says, spends "so much more time carrying water for Obama than I ever thought they would" – or the death of Osama bin Laden. "Nothing's been done about that story, it's one big lie, not one word of it is true," he says of the dramatic US Navy Seals raid in 2011.

    Hersh is writing a book about national security and has devoted a chapter to the bin Laden killing. He says a recent report put out by an "independent" Pakistani commission about life in the Abottabad compound in which Bin Laden was holed up would not stand up to scrutiny. "The Pakistanis put out a report, don't get me going on it. Let's put it this way, it was done with considerable American input. It's a bullshit report," he says hinting of revelations to come in his book.

    The Obama administration lies systematically, he claims, yet none of the leviathans of American media, the TV networks or big print titles, challenge him.

    "It's pathetic, they are more than obsequious, they are afraid to pick on this guy [Obama]," he declares in an interview with the Guardian.

  12. Albert Edwards accuses Fed of inequality cover up

    The U.S. Federal Reserve has engineered a housing bubble to divert attention away from growing inequality in the country, according to controversial Societe General strategist Albert Edwards.

    Edwards, who is known for his bearish views, argued that the Fed's surprise decision last week to keep its stimulus program intact would continue to inflate house prices in the U.S.. The idea behind the Fed's bond-buying program is to free up more funds so that banks have more money to lend to home-buyers. With more buyers on the market, and interest rates near record lows, house prices should increase.

    Edwards referred to recent comments by Marc Faber, publisher of the Gloom, Boom & Doom Report, who said the Fed's decision to maintain its $85-billion-per-month quantitative easing program meant it was "climbing to a higher diving board."

    But Edwards added: "I go further. I see growing inequality draining the swimming pool dry. The crunch, when it comes, will be ugly."

  13. What's Wrong With This Picture?
    American Workers: Hanging on by the Skin of Their Teeth
    What Obama cares about is trimming the deficits and keeping Wall Street happy. That’s it. But the people who elected him don’t want him to cut the deficits, because cutting the deficits prolongs the slump and costs jobs. What they want is more stimulus, so people can find work, feed their families, and have some basic security. That’s what they want, but they’re not going to get it from Obama because he doesn’t work for them. He works for the stuffed shirts who flank him on the golf course at Martha’s Vineyard or the big shots who chow down with him at his $100,000-per-plate campaign jamborees. That’s his real constituency. Everyone else can take a flying fu** for all he cares.

    Then there’s the Fed. Most people don’t think the Fed’s goofy programs work at all. They think it’s all a big ruse. They think Bernanke is just printing money and giving it to his criminal friends on Wall Street (which he is, of course.) Have you seen this in the New York Times:

    “Only one in three Americans has confidence in the Federal Reserve’s ability to promote economic growth, while little more than a third think the Fed is spinning its wheels, according to a New York Times/CBS News poll….

    The Fed has been trying for five years to speed the nation’s recovery from the Great Recession by reducing borrowing costs to the lowest levels on record….

    Most Americans, it would appear, remain either unaware or unpersuaded.” (“Majority of Americans Doubt Benefits of Fed Stimulus“, New York Times)

    “Unpersuaded”? Are you kidding me? Most Americans think they’re getting fleeced; unpersuaded has nothing to do with it. They’re not taken in by the QE-mumbo jumbo. They may not grasp the finer-points, but they get the gist of it, which is that the Fed has run up a big $3 trillion bill every penny of which has gone to chiseling shysters on Wall Street. They get that! Everyone gets that! Sure, if you want to get into the weeds about POMO or the byzantine aspects of the asset-purchase program, you might detect a bit of confusion, but –I assure you–the average Joe knows what’s going on. He knows all this quantitative jabberwocky is pure bunkum and that he’s getting schtooped bigtime. You don’t need a sheepskin from Princeton to know when you’ve been had.

  14. Dave,
    In my little midwestern city suburb I am seeing lots of properties go on the market just in the last month also. And I am seeing the dreaded "new price" sign on many more properities than in the last several years. Looks like pricing power in my area is slipping away.

    On another topic did anyone see Rick Rule's comment about most bear markets lasting 4 yeras, so he thinks that this PM equity bear has 1 to yeras left. Any comments? I am interested to hear them. Thanks.

    1. Thanks for the color. I have a feeling that is going on in a lot of cities.

      I don't pay attention to Rick Rule. In fact, I try to avoid his commentary. He overhypes most of the time. I'm surprised he's hedging is views now by saying the mining share sell-off has another year left.

      I've NEVER in my life EVER seen any research that shows "bear" markets last 4 years. The pm/miners are not in a bear market. They've just finished a nasty 2 year correction.

    2. thanks Dave. Always appreciate your comments.

  15. The JPMorgan Apologists Of CNBC

    I don't know which producer at CNBC had the genius idea of asking Alex Pareene on to discuss Jamie Dimon with Dimon's biggest cheerleaders, but the result was truly great television. What's more, as Kevin Roose says, it illustrates "the divide between the finance media bubble and the normals" in an uncommonly stark and compelling manner.

    Alex Pareene: I think that any time you're looking at the greatest fine in the history of Wall Street regulation, it's really worth asking should this guy stay in his job. In any other industry - I can't think of another industry. If you managed a restaurant, and it got the biggest health department fine in the history of restaurants, no one would say "Yeah, but the restaurant's making a lot of money. There's only a little bit of poison in the food."

    This view - that profits cleanse all sins, and that so long as you're making money, nothing else matters - is not normally expressed quite as explicitly as it was here. After all, there are licit and illicit ways of making money, and surely if your profits fall into the latter category, you should not be able to remain comfortably ensconced as a celebrated captain of industry. Besides, banks shouldn't be obscenely profitable: they're intermediaries, and in an efficient economy their profits should be quite easily competed away. When bank profits are high, that's a sign that the bank in question is extracting rents from the economy, rather than helping it to grow.

    The rest of the interview is a glorious exercise in watching CNBC anchors simply implode in disbelief when faced with the idea that JP Morgan in general, and Jamie Dimon in particular, might be anything other than a glorious icon of capitalist success. In the world of CNBC, the stock chart tells you everything you need to know, while the New York Times is a highly untrustworthy organ of dissent and disinformation.
    Eventually, Bartiromo asks Pareene, with a straight face, who would be the best CEO of JP Morgan "from a shareholder perspective". Since, clearly, the shareholder perspective is the only one that matters. Except, of course, it isn't.

  16. Congress did not exempt itself from "Obamacare."

    1. Well let's see, do you believe the Cleveland Plain Dealer or the Wall Street Journal?

      Having forced a health law on the American people, the White House and Democrats now seek to insulate themselves from the noxious portions of the law, and from the implementation struggles, indecision and uncertainty that many other Americans face today.

      In other words, Congress's health-care premiums will not rise, but yours may. Members of Congress will be able to afford to keep their health-insurance plan, but you may be kicked off yours. They will be able to afford to keep their doctors, but you may have to find a new one.

    2. You need to do better homework beyond that piece of shit The VERY first waiver for Obamacare - which was written by the Administration and the Senate staff - exempted the President, the Vice President and Congressional staff. There's actually been 1200 waivers attached to the law.

      Obamacare is the epitome of a totalitarian Government in operation.

  17. NSEL e-series investors can expect quick refund

    The small investors in e-series gold and silver units traded on National Spot Exchange (NSEL) may be able to get back their invested amount faster.

    The beleaguered commodity bourse, which is under severe pressure to redeem the e-series units, has proposed a faster exit route to its unit holders by way of financial settlement or encashment of e-series gold and silver units rather than giving physical delivery of equivalent precious metals.

    Though the exchange has the required physical inventory, the process for physical delivery is taking substantial time due to heavy redemption pressure.

  18. Is it your opinion, Dave, that gold prices are in a bottoming process since the late June lows, or do you think a retest of those lows is possible given the budget shenanigans in Washington? Watching the action since those June lows is almost like torture. Thanks.

  19. How the Washington D.C. Money Machine Stopped a Documentary on Hilary Clinton

    Wow, I thought, this guy [Bill Clinton] is a really good actor. And I also saw one reason why Hillary Clinton might not be thrilled about my movie. I discovered others. In Arkansas, she joined the boards of Walmart and Tyson Foods. One of the largest donors to the Bill, Hillary, and Chelsea Clinton Foundation is the government of Saudi Arabia. The Clintons' personal net worth now probably exceeds $200 million, and while earned legally, both the money's sources and the Clintons' public statements indicate a strong aversion to rocking boats or making powerful enemies.

    - Charles Furguson in today's Huffington Post