Home Sales Missed by their Economists. What else is new. Update August 24, 2010

Marc's Notes:

Sales of U.S. Existing Homes Fell in July to 3.83 Million Rate

Economists projected sales would fall from June’s previously reported 5.37 million pace but not to the extent it did. Estimates in the Bloomberg survey of 74 economists ranged from 3.96 million to 5.3 million which means the sales were lower then every economist in the survey. Sales fell to 3.83 Million.


Read the above news article out today. Out of 74 “economists”, all 74 got it wrong. Even the economist who estimated the lowest was still 130,000 homes off.
And we trust these guys? Whose economists are they polling? Manny, Moe and Jack?

This economist however, who actually has a degree in economics and paid attention in school so long ago, has been warning you since 2009 that July, August, September and October home sales AND beyond would be horrendous and bingo. 

The reason?

The home credit has expired and all those buyers that were supposed to buy AFTER the credit expired ALREADY bought. Like I keep saying, credits and government stimulus only brings forward future buyers: basically cannibalizing future sales to show a immediate boost, but then you get this huge “hole” from all those buyers you cannibalized earlier that aren’t there now.

These credits and programs don’t really bring forward much new business. They just entice the gullible and marginal buyers into a falling market to take inventory off the banks hands.

And so goes the housing market.

Like I keep saying: House prices want to come down.
There is little market for homes. What market exists was goaded up by those “programs” and the spin and lies told by the home builders, Washington and those in the industry to get the last suckers to believe housing was coming back.
A classic rally call in all asset bubble explosions: “Its getting better!”, is almost as bad as “they aren’t making any more beach property”, or “people will always want to live here!”. All are cat calls from economic neophytes that don’t know history nor the movement of money and asset classes.

Housing Recovery?

BS.

It ain”t getting better and its about to get a whole lot worse.

Bottom line: The home markets exploded in 2008. There are just too many homes, too many people under water, loans are harder to get, the inventory is ballooning with more waiting in the wings to be sold and even more people are defaulting then ever. Top that off with a dash of terrible unemployment and an economy that is coming off a sugar “stimulus” high and you have the makings for one lousy tasting exploded house cream pie.

Markets:
Well, I can tell you one thing. I didn’t do a show called “Beware the Ides of Fall” for nothing.
Fall is coming and the markets again looks to revert back to where it should have gone sans stimulus. In the tank. I know, I know. Doom and gloom. But look at fundamentals, not spin.

Recoveries should have rising employment, new hiring’s, increasing demand, rising interest rates, consumer optimism, business expansion, bank lending and house sales.

We are seeing NONE of those classic recovery signs. In fact all the above are getting worse by the day. I want the economy to recover too but that’s not what I see. I know why I don’t see it.
You can’t stimulate a debt ridden economy with more debt but that is what they are attempting to do, so much like the house programs, you just “juice” up the figures until the money runs out then back down you go. Debt must be PAID OFF or WRITTEN OFF. Housing must be allowed to crash to where it SHOULD BE. People should be encouraged to save, not consume, and all those billions should have been used to build factories so we could sell stuff and get a lasting recovery. Instead they shuttle trillions to the banking system where they gamble with it causing inflation and little money comes back to me and you. What DOES come back is the inflation and blowups. The money is wasted on their paper bets and all of us get stuck with the bill. To shut us all up, they dole out billions to pay people to stay home instead of work, dig holes and fill them, prop up dead car companies and insurance companies and bail out dead beat borrowers. They slap all of us with more taxes, more regulations so business is afraid to hire anyone, force health care down our throats, march all over the gosh darn planet in iron beasts that cost a fortune and kill thousands in the name of God knows what. Then they have the audacity to try and build a Mosque at ground zero and open it on the 10 year anniversary on the very same day for Gods sakes.

Are you kidding me? Where is the common sense? Where is the nation our forefathers founded?
Where are the principals?

Rolling over as we speak as my call of “it won’t be enough” rings true.

Meanwhile interest rates are PLUMMETING and the US DOLLAR is rallying like there is no tomorrow.  Read my UNION article  “Treasuries Anyone?” in last weeks UNION. You can read it online.

Your bank accounts are holding your US DOLLARS safe and sound and your purchasing power is ok for now. As explained previous shows and newsletters, since you are located IN THE US, your bank accounts in US DOLLARS won’t show an increase but your INTEREST RATE FUNDS and your FOREIGN CURRENCY FUNDS will show a decrease, which is why you are seeing those balances decrease on your statements. This is as expected. Our interest rates funds are down hard but they are insuring your US dollars so if they are going down, your US DOLLARS are gaining in purchasing value. This interest rate dive and subsequent market roll over is saying DEFLATION, or in my words, “It wont be enough”. Deflation is the debt being written off or discounted. Deflation is what nature is calling for right now and without government meddling, that is what we will get. But beware, we will also see inflation in certain areas and we are seeing that in food right now for starters. More cometh.

INFLATION! 
Coffee, wheat, sugar, soy, gold, foodstuffs.
All reaching new highs.
We are seeing “selected inflation” in certain markets, which is what I have been saying in these newsletters and shows for the past year and a half, and deflation in other areas.
This drug pumped, debt laden, mismanaged behemoth of an “economic world gone mad” is convulsing between deflation and inflation, puking up distorted hairballs of contradiction because its been so massaged, kicked, injected, stimulated and rejected so what’s coming out of the oven is one uranium juiced “what not”.

Gold and Silver holding up nicely as the exodus from paper currencies and paper debt of all types is making people trade in their paper stuff for the last real currency of kings.

Hold your gold and silver, add your interest rates funds to protect your US DOLLARS, hold most of your money in US BANKS (still yes) and add foreign currency funds.

Add some contrary funds if you have a lot of stocks. Use DOG for a simple not too leverage fund. Those owning the leveraged funds should not buy anymore of these leveraged contrary funds and sell some of them when the market drops into the 9000’s and transfer to DOG. The FEDS will start printing again when the stock market drops raising the possibility of a new market run in the spring. Bad inflation and higher interest rates wait in the wings.

Gamblers play- Nat Gas still not going anywhere but recall this is a year or 2 long project and an inflation hedge. Oil of course, sell BP covered calls. Uranium will rise and gold and silver stocks are always a good gamble. Remember however, VERY LITTLE MONEY in gambler plays, only what you can afford to lose.

Also get some money offshore using a Swiss Annuity if you prefer (order up the free booklet on my site) and hunker down for the fall.
Its sizing up to be a doozy.

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All for now,
marc