A Year-End Discussion Of The Precious Metals And Housing Markets

Eric Dubin of The News Doctors  and "Doc" of Silver Doctors invited me to chat about the precious metals and housing markets the the other day.  One of my main themes with respect to the markets since 2008 is that the Federal Reserve and U.S. Government have implemented an historically unprecedented degree of intervention and attempted control over our markets.  They are interfering in all of the markets, but especially and specifically the precious metals, housing and stock markets.

As everyone with a basic education knows, all Governmental attempts to control markets have always ended in disaster.  Currently the U.S. stock markets - the Dow, S&P 500 and Russell 2000 - are now the most overvalued they've been in history.  The housing market has been artificially pumped up with price inflation that will soon reverse - hard.  And gold and silver have been pushed down in price to a level which has created an enormous demand for physical gold from China that has to be delivered.  This has triggered a global shortage of physical bullion.  The latter point is best exemplified by the U.S. Government's de facto default on Germany's request to repatriate part of its gold held in NY by the NY Fed.

The goal of the Fed/Government with the massive market intervention program is to drive the stock market inexorably higher and the precious metals lower as mechanism to "signal" to the world that everything is getting better when, in fact, this country is systemically collapsing.  The degree of intensity behind the market interventions is directly correlated with the degree to which things are actually getting worse.

Here's my conversation with Eric and Doc in which we discuss the gold/silver markets, including China's incredible demand for physically delivered bullion, and what's next for the housing market:



In terms of what occurred this morning - with no associated news that would have triggered a deep plunge in gold and silver via the Comex paper markets -  the action today tells us how "stretched" the gold market is to the short side in paper shorts vs. physical delivery demands coming from China and soon will be coming from India again. For as stretched as the sentiment and short side is with regard to bearish positions in the metals, the sentiment and leveraged long position is stretched to the bullish side in the stock market.

When the trigger is pulled that unwinds this historically unprecedented set-up in both markets, the stock market will collapse worse than in 1929/1987 and the metals will make a move that will cause a lot people on Wall Street and, hopefully, DC to jump out the window.

The Government's New Home Sales Report Was A Total Fraud - Here's Why

Last week the Government's Census Bureau issued its monthly new home sales report for November.  Not only is the Government asking us to believe that the number of new homes sold in November - historically one of the slowest months of the year for home sales - exceeded the new homes sold in June, which is the highest month for sales, but it put in enormous upward revisions to the numbers originally reported for September and October.  Hmmm...

I wrote an article which runs through why it's not possible that the Government's numbers are even remotely close to being credible.  The two primary reasons are that mortgage applications and existing home sales tanked hard during the period in which the Government is now asking us to believe that new homes sales were at their highest of the year.  Here's the full analysis:  More Government Data-reporting Fraud

It's beginning to smell a lot like Orwell's Ministry of Truth in "Animal Farm," isn't it?

War On Terror?

As it turns out, the U.S. Government is the most deadly terrorist in the world.   Here's an example that the people who still support Obama either look the other to or don't have a problem with.

U.N. experts urge U.S., Yemen to explain erroneous drone strikes:

United Nations human rights experts told the United States and Yemen on Thursday to say whether they were complicit in drone attacks that mistakenly killed civilians in wedding processions this month.

What a nice holiday present from Barack and Michelle to the citizens of Yemen...That's from a Reuters news report, in case the Obama supporters want to blame it on the Republicans or blame it on an unreliable news source:  Drone-happy Barack.  Here's an estimate of the civilian drone deaths since Obama took office just in Pakistan:  From The Left-Leaning Huffington Post.

The U.S. military actions can not be blamed on the Republicans because Obama, as Commander-In-Chief, has the ability to stop all of it.  He promised to stop a significant amount of when he was campaigning in 2008.  As it turns out, he has done nothing but escalate it.   Anyone who still supports Obama is supporting the most dangerous terrorist country in the world.

Today's New Home Sales Report For November: Complete Fiction

I'll have a lot more in-depth detail in a couple days, but suffice it to say that today's new home sales report, prepared and released by the Government's Census Bureau, goes beyond the bounds of all credibility.

Please note:  the headline number is a seasonally adjusted annualized number.  We have no idea how they statistically engineer that final number but there's no way it's even remotely accurate.  To begin, the Government significantly revised higher the numbers originally reported for September and October.  Does it make sense that October had new home sales that were higher than for June - June being the seasonally strongest month for home sales?  It gets better.  Based on the revised numbers for Sept/Oct plus today's number for November, the 3 month average for Sept-Nov was a 447,000 seasonally adjusted annualized rate.  It exceeds the 3 month average for June- Aug by 44,000.  Is it even possible for that to happen considering the strong seasonality of housing, with June-Aug being by far the strongest seasonal months?  Sorry the numbers are not believable.

Layer onto that the Government shut-down, which seems to have affected every business statistic out there negatively except a few that are being reported by the Government.  In addition, mortgage purchase applications have plunged over the last three months.  Purchase applications have declined in 9 of the last 13 weeks.  How can new home sales possibly be higher when 90% of all new homes are purchased using mortgages?  If you take just the estimated actual number for November of 33k homes sold and simply annualize it, you get a 396,000 annualized rate.  This would overstate the actual rate because November is typically a slow seasonal month.  I have no idea where the Government's 464,000 estimate came from and I doubt anyone else does either.

Getting back to mortgage applications, here's a chart for purchase applications (source:  Calculated Risk blog):

The Government wants us to believe that new homes sales increased despite that sharp fall off in applications for mortgages used to purchase new homes, which finance 90% of all new home sales.  Finally, interest rates have been climbing steadily higher since early October.  In fact, 30-yr fixed rates have spiked up from 4.10% at the end of October to their current 4.47%.  And that rate is for a 20% down mortgage and perfect credit. 

So I'll leave it up to you to decide if you think the Government new housing report is even remotely believable.

Fact vs. Fiction - Truth vs. Lies

We can ignore reality, but we cannot ignore the consequences of ignoring reality
                                             - Ayn Rand

I was confronted at my tennis club last night by a guy who associates anyone who invests in gold with an obsession with doom and gloom. I guess he thinks that people who move their phony fiat U.S. dollars into gold are trying to get rich at the expense of general despair.  Nothing could be further from the truth in terms of what I would like to be doing vs. what I am doing.  Hell, during the 1990's I was a junk bond trader on Wall Street.  Alan Greenspan's magic money printing press was my best friend.  This particular guy is a real estate broker and his income is a "third" derivative benefit of money printing.  Anyone who works on Wall Street in the type of job I had is not only a direct beneficiary of a promiscuous Federal Reserve printing press, but also skims 90% of that benefit - i.e. a first derivative beneficiary.

The funny thing is, anyone who is receiving any benefit from the hyperbolic money printing going on right now is doing so at the expense of others.   So the real estate broker who has seen a "pop" in commissions because the half trillion dollars the Fed has tossed at the real estate market over the last year is benefiting from a temporary and very artificial "pop" in home prices and the related temporary increase in sales volume.  But what about the people who, looking back, will have significantly overpaid for their dream home when this mini-housing bubble collapses?  It's starting to drop pretty quickly already.  Prices from June to now in both new and existing homes have dropped every month since June (See My Article For The Data).  This means that everyone who bought a home in June with a 3.5% FHA down payment mortgage is now underwater on that mortgage.  I have been receiving emails from all over the country from readers describing the same kind of mess that I see all around Denver:  high end homes sitting for months on the market, "for sale" and "coming soon" signs popping up like zits on a teenager and reports from real estate agents that activity has dropped off a cliff in their city.

And guess what?  Interest rates are moving higher and the FHA, in a move that was not widely broadcast, is lowering the size of mortgage it will guarantee in 650 counties across the country.  In some cases this reduced mortgage size will be significant, especially in the mini-bubble areas.  As an example, in Clark County Nevada (Las Vegas) the limit is being reduced from $400k to $287,500.  The FHA finances over 20% of the real estate market, up from about 2% in 2008, and it has filled the void created when the big junk mortgage lenders like Countrywide and Wash Mutual went bust in the big housing bubble.  The FHA move will significantly curtail housing market activity.  FNM/FRE are also getting ready to put the squeeze on loose lending standards, but the changes have been temporarily deferred.  FNM/FRE have their own hidden landmines accumulating.

I'm not a prophet of doom and gloom, I'm trying to pull back the curtain of lies and deceit that has become endemic to our system at all levels, especially as it emanates from Wall Street, the Fed and the Government.

How about the stock market?  This gentleman mocked me by asserting that the stock market was hitting all-time highs while gold was going lower.  Notwithstanding all of the provable facts about the degree the Fed now intervenes in the all of the markets, let's take a look at some surface facts.  1)  Every time the stock market hits an all-time high, it ultimately suffers a massive drop;  2) margin debt recently hit a new all-time high - let's see how that worked out the previous two times in the new millennium:

(click on graph to enlarge - source: greedometer.com)

That doesn't look so promising, does it?  Let's layer on top of that the fact that p/e ratios are currently at all-time highs.  If you strip out the phony mark to market accounting games being played by the financial sector - which represent 25% of the S&P 500 - the p/e ratios are on Pluto;  3) How about that economy?  4.1% GDP growth in Q3, eh?  Well, those who bothered to look beyond the headline nonsense saw that 40% of the headline number is attributable to the massive inventory build that is going on.  This inventory build up is historically unprecedented:

(click on graph to enlarge)

Not only is this inventory build-up 200% greater than at any time in the last 70 years, but it's nearly 400% greater than the average change in inventory.  Even worse, every time the inventory build has spiked up like this, it's been followed by a cliff-drop decline.  There are several other problematic aspects with that latest GDP report which I plan on writing about soon.

My point here is that the stock market is not only at an all-time high and at an all-time level of overvaluation, but it also reflects the extreme fraud and manipulation going on behind the headlines and rhetoric.  Just a few more points of fact:   The U.S. Government debt hits a new all-time everyday;  the number of people receiving welfare hits a new all-time high every day;  the percentage of people who are actually employed on a full-time basis as a percentage of the total population declines every day.

One last point about the economy.  I had forecast back in November that we would have very disappointing retail sales this holiday season:  Holiday Sales Will Disappoint.  I didn't put that out there because I thrive on doom and gloom, contrary to my acquaintance's assertion.  I put that out there because based on the facts that I was looking at, our economy is dropping off a cliff.  Well guess what?  We already know that retail sales were a bust over the Black Friday weekend.   It turns out that last week through Sunday retail sales dropped 3.1% - that's before stripping out inflation - and shopper traffic dropped 21%:  Retail Sales Tank Before Christmas.   Just one note of observation:  to the extent that online sales might be "cannibalizing" mall traffic, it's a fact that online e-commerce is only 6% of total retail sales.  So don't expect a big contribution from online sales reports even though the year over year percentage headline gains will be big.  As I've discussed ad nauseum, the year over year comparisons right now are exceedingly deceptive.

The point of all of this is that I don't feed and thrive on doom and gloom.  What I do thrive on is trying to expose as many people as possible to the truth as supported by the facts about what is really going on in this country.  What is really going on is that our system is collapsing in every aspect:  economically, politically, ethically, spiritually.  And I don't advocate gold because it's a way to make money off of this collapse.  I advocate gold because it's the only I can see that people have a chance of surviving the economic meteor coming at our system.   Anyone who superficially reads the headline business reports or looks at the stock market and thinks things are getting better is not looking at the facts as they exist and the truth as it is.  My only goal is to help people see those facts and then they can draw their own conclusions about the truth.

One last point of fact:  the U.S. dollar is slowly and subtly being vacated by the global monetary system while gold is slowly being re-introduced.  The Chinese are leading this effort but they have a wide array of economic allies supporting the changes being implemented.  Anyone who moves dollars into gold is going to be better off when the transition to the new global monetary system accelerates.  The U.S. dollar, like all paper fiat currencies before it throughout all of history, will be nothing but a museum relic.

Merry Christmas to all who celebrate the holiday - to everyone else who will be going out for Chinese food tonight (a big Xmas Eve tradition in NYC) have a great day off tomorrow.

Federal Reserve Market Invtervention In Extremis

For all of you who are still trying to figure out why the stock market has shot up like a bat out of hell despite the fact that the Fed has reduced (at least temporarily) the amount of monthly money printing, please take the time to read this article written by former Assistant Treasury Secretary and highly respected academic Paul Craig Roberts:  Manipulations Rule The Markets

It's no secret that the economy in the U.S. is starting to fall apart again, along with that of the rest of the world.  In order for the Fed and the Obama Government to keep feeding us the lies about the economy, it is important that the Fed - in conjunction with the U.S. Treasuries Exchange Stabilization Fund - keep the stock market moving higher and the price of gold capped at an extraordinarily low manipulated level (I'm currently working on an article that will demonstrate how the Fed manipulates the gold market using Comex paper gold futures).

Meanwhile,China keeps hoovering up all of the physical gold that is being stored in NYC and London vaults:  What's Happening To All The Gold?  That's a video interview on Bloomberg News with an analyst based in London who recently toured the primary gold vaults in London.   Guess what?  They are becoming quite empty...

Finally, I just published two separate articles which explain why the housing market - based on both new and existing home sales - is getting ready to plunge back into a nasty bear again.  You can read those here:  The Housing Market Bear Is Growling  and here:  November Existing Home Sales - Look Out Below.

Based on everything I observe and research, I have two holiday recommendations:  1)  if you no longer trust the Government and understand just what a Ponzi scheme our system is, start taking as much phony paper money as you can afford and quickly accumulate physical gold and silver that you keep outside of the banking and financial system - that last point is of critical importance;  2)  if you think you are going to list your home for sale in mid-January and get the same price your friendly local real estate broker quoted you back in July, forget about it - get your home listed and price it to sell if you really want to move or recapture any equity value it has right now. By this time next year I believe people will be shocked at how much the housing market has fallen apart.

One more point on housing.  While the FHA did not make a big public announcement about this, starting Jan 1 it has lowered the size of mortgage it is willing to guarantee in 650 counties.  In some cases the reduced mortgage size is substantial.  The FHA now funds over 20% of all new mortgages, including a wide swathe of subprime-quality borrowers.  Essentially you can kiss that part of market demand good-bye unless prices fall by a significant amount.

At any rate, have a great weekend and if you are taking most of next week off, Buon Natale.  If you are traveling,  auguri e buon viaggio!

Whatever

"The last duty of a central banker is to tell the public the truth" - Alan Blinder, 1994 on the PBS Nightly Business Report

An old colleague and I agreed back in 2002 - back when we were one of the few who were openly discussing how corrupted and bankrupt the U.S. was - that we would eventually see things happen in this country that would blow our minds.  As if to perceive just how rotten to the core the U.S. political and economic system was back then wasn't enough in and of itself to be considered mind-blowing, we knew worse was in store. 2008 and the unbelievable use of billions in taxpayer money to bail out the banks from their bad bets was bad enough.  But to then watch the upper management of the banks take that bailout money and distribute a lot of it as bonus money to employees was horrifying.  But I guess what's really mind-blowing is that the America public just sits there and takes it.  It's the equivalent of being raped by an HIV-infected criminal and then say, "whatever."

Yesterday was close to be mind-blowing.  The Fed somewhat unexpectedly announced that it would partially reduce its monthly money printing program starting in January.   The truth there is that the Fed has been printing more than $85 billion per month when you factor in the fact that it takes interest earned on the bonds it has bought and turns around and buys more bonds from the banks.  So the actual "taper" event is somewhat of a deception.  But then Bernanke gets in front of the media and states that the economy is improving.  Let's see, Caterpiller announced today that it's global sales plunged 12% in November;  Boeing announced that it lost a $4.5 billion jet order from Brazil because of NSA spying;  existing home sales for November were released and if you look beyond the headline nonsense, you'll find sales in November vs. November last year dropped 4% and from October to November this year sales plunged nearly 13% - I'll have more on this later but please note that mortgage rates have been dropping, so the NAR cover story of higher rates is total b.s.  There were some other negative surprises released today as well.  How's that look for Bernanke's dishonest report on the condition of the U.S. economy?

But don't take it from me, if you think Bernanke means well - he doesn't - here's an excerpt from the widely read King Report:

In his press conference Bernanke reiterated the FOMC Communique’s false narrative that persistently low inflation could harm the economy. We cannot believe that Fed academics still believe in the economic alchemy that holds that economic growth is related to inflation. Fed academics, like Soviet apparatchiks, have purged the economic history of the Seventies, Eighties and late Nineties in order to maintain the promiscuous credit policies that keep big banks and big government functioning.

The market action after the FOMC statement was equally as absurd.  Here's another comment from The King Report:

 Please note that the initial response to Fed tapering drove the S&P 500 below and important technical level (or two) and someone immediately appeared to rescue stocks by driving SPHs higher. We have warned incessantly that this scheme has occurred repeatedly since the financial crisis of 2008.

The Fed and the Government have unleashed an unprecedented amount of manipulative control over the markets - all of them, not just the precious metals market.

Perhaps Bernanke's greatest lie was when he stated under oath in front of Congress that he didn't understand gold and that Central Banks hold it merely out of tradition.  If that's the case, Benjamin Shalom Bernanke, how come the Fed spends hundreds of thousands of dollars in legal fees fighting every Freedom of Information Act inquiry seeking to see the Fed's files with regard to its gold activities?

The truth is the Fed is absolutely terrified by gold.  When the price starts to move up like it did from 2008 to 2011, it signals to the world that something is wrong.  The Fed has spent considerable time and resources since September 2011 working to keep the price of gold as low as possible.  More on this soon, as I'm working on an article about this.  But the fact stands that what is occurring right now and has been occurring in varying degrees for decades is the extreme manipulation of gold for the purpose of defending the U.S. dollar's reserve currency status.

And if Benjamin Shalom Bernanke and Janet Louis Yellen - both Old Testament adherents - can stand in front of the public and lie about that, then they must answer to a different higher authority than most Americans...yep, whatever.