Search This Blog

Tuesday, May 28, 2013

What's lighter than a balloon filled with helium? A Wall St balloon filled with BS...

The market is quite happy today.. +160 pts as of this noontime posting..

Of course when the market is happy, no one with half a kernel of brainpower should be, but we'll put that truth aside for a moment...

Why is Wall St so jubilant?

"The S&P/Case-Shiller house-price index of 20 big metropolitan areas rose a seasonally adjusted 1.1% in March from February, the largest monthly gain since April 2006" (AP)
and..

"Consumer confidence strengthened in May to the highest level in more than five years, suggesting Americans' attitudes were resilient in the face of belt-tightening in Washington... its index of consumer attitudes jumped to 76.2 from an upwardly revised 69 in April" (Reuters)

To quote Shaggy, "Like Wow!"

What a recovery we're all witnessing..  How could anyone dispute that 1-2 power punch of super-duper groovy good news, ehh?

Its really not that difficult actually...
We start with housing.  Let's follow the dots..

What are the three biggest mover-shaker cities on the top-20 list?

Phoenix, San Francisco and Las Vegas with home price increases of over 20% year to year...  And what were some of the US cities that suffered the most dramatically with home prices falling the most precipitously back in the early days of this recession-depression?

Yep.. same three cities.
What three cities experienced the smallest home value increase?

New York: 2.6%,  Cleveland: 4.9% and Boston: 6.7%..  All cities that felt very minor effects from the market crash of 2008 and kept their prices relatively steady throughout the past five years.

Major cities like Philadelphia, Houston and Detroit aren't even on this list..  That means for many major cities and municipalities, home sale growth was either less than 2.6% and/or negative i.e. drop in home prices...

OK, so.. next Q-- why would certain cities like Phoenix and Las Vegas spike?
1)  Prices dropped so low and so quickly during 2007-10, there's really no where to go but upward..

2)  Fannie Mae and Freddie Mac now guarantees 100% of all mortgages meaning when banks lend money to home buyers, the government takes on a totality of the risk.

This allows banks to once again lend without any direct affect or impact of a buyer defaulting in the future.  Taxpayers now assume all risk

3) There is a shadow housing inventory..  For every home released by the banks post-foreclosure to be listed for sale, there's another 1-2 homes purposely kept off the market especially in cities hurt most by the housing drop.
This is done to control supply/demand.  Too many houses on market means buyers have all the power in price negotiations with sellers and this causes prices to fall.  When you control and decrease selection, it ultimately creates fewer homes for more buyers.

4)  Super-low interest rates based on the Federal Reserve's policy of killing savers and fiscally responsible people while encouraging Americans to acquire massive amounts of debt, which is the only 'engine' driving this global economy...

Indebtedness.

5)  That most despicable scum called speculators or house 'flippers' who buy homes they have no intention in living in, making a couple cosmetic adjustments and reselling at 5-15% profit.

In all likelihood, the jackals sell the homes to other flippers to do the same, and so on.. This was a big reason for the crash of home values in 2007, not the weak background checks or the dramatic APR rate change after 12-24 months..
Home flippers drastically inflated the value of homes giving an illusion these high percentage spikes would be normal.  Cleverly they extended a common value manipulation seen in the stock market into the real world of housing i.e. manipulative overvaluation...

And they're doing it again...

6) Foreign money buying up cheap US properties as investments and means to hide from their own nation's tax collectors...

So in summary, nothing about this housing recovery is organic or 'Real'.. Its all based on smoke and mirrors and buttressing and puppet strings and other chicanery giving life where little exists.

How will you know there's a true recovery?  When the Fed stops manipulating the interest rates so low so banks can borrow cheaply and inflate the market.    If people are buying homes when a 30 year mortgage is 4.5-7.25% instead of  at 2.25%..
Think of it like customers in a department store..  Its hustling n' bustling-- packed with people.. Long lines at the registers.. Everyone's hands and arms filled with bags...  You'd think..Hey, this joint is jumpin!

Then you notice the signs that say "Everything in store 50-70% off"

Is that a successful business operation?

If it appeases Wall Street, to some it would be...

So now let's debunk all that Consumer Confidence nonsense...
1)  The current findings are not based on realities..  Rather-- expectations.

The second week of every month the Consumer Confidence Board asks responders their opinions on their confidence as consumers presently.   Every fourth week, responders are asked how more or less confident they will feel six months into the future.

2)  As we've stated before, in a population of over 310 million people, they only phone poll 5,000 individuals which is less than one hundred-thousandths of one percent.

If the findings are ever negative, Wall Street will dismiss and shoo it away quicker than a fly from a face, rationalizing the super small sample size..  And when the findings are positive, they're taken as an accurate reflection of the public's mood.
3)  Why does Wall Street care?  Simple-- the more you shop, or More importantly, the more you believe everything is OK as your motivation to shop, the greater profit for the major corporations and the larger the dividends for shareholders..

And afterwards when you maxed out your cards and there's still no good paying job awaiting, the market will just giggle at you..

Let's try to tie this all up by using the example of a very sick patient..

He/she is lying in a coma-- motionless, eyes closed... tubes feeding it intravenously .. machines controlling the ability to breathe, etc..
What would a sane person's definition of recovery be?

If someone grabbed the comatose person's leg and lifted it,is that 'walking'?   If the big toe was held onto by another and moved back n forth, did the patient really wiggle it?  If a person can not actively feed themselves or breathe on their own, is that 'improvement'?

We guess if you can make profit off the illusion, you'd say 'Yes!'

The 'body' of course is the US economy.  (Its actually the global economy but not enough time today to delve into all that)
And this 'body' is being 100% manipulated.  Its being portrayed with the complicity of corporate owned media as a fully-functioning 'organism' that is flourishing mostly on its own but simply receiving a minimal amount of assistance or crutch to help it get along...

And that's not true..

It is all illusionary.

To buy a home, you need a good paying job... Not Mickey D.
Few good paying jobs are to be found-- most jobs are temp, part time or entry level.

Without a good paying job, there's few good options

If someone wants a home badly, right now they're putting down a mere 3-5% down.  That's a debt burden of 95% to 97% over 30 years, which is what government desperately needs... You indebted.

Remember, the system is set up to profit both from your debt-ridden spending spree and your ultimate financial downfall (debt collectors, sheriff notices, foreclosure, bankruptcy)..  Its' win-win for them..
Add home debt to student debt and car debt and you are now a worker for life.

And here's the simple truth about consumer confidence:

When you have money, you feel confidence..and when you don't have money, you don't feel confident about anything..

And if magically you took away people's ability to use credit cards with exception of bank cards directly connected to one's checking account, then polled people, you'd see a confidence survey in utter free fall.

Don't believe any of the lies the media tells you about the economy.  More importantly, don't increase your spending habits based on these untruths...

When your personal life's economic fortunes improve, then you will know what's the best spending habits for you