Beware the False Idol

‘The housing market is improving…the housing market is improving’

Sadly, this is the banshee wail of the undereducated. Sadly, we have heard this non-fact based mantra going back to early 2009. Though accurately, on a broad-based view of the housing market, it remains mostly false. (this is not to say that there are some, but few pockets and areas of localized markets that are active with legitimate owner-occupied buying)

In what appears to be signs of improvement are in reality, just propped up indexes and figures. The Fed has financed nearly 3 trillion in bad loans and they continue to absorb the cost of defaults in nearly all of the FHA approved mortgages made today. (Read: Tax Payer money) Also, residential delinquencies are on the rise again, up 10.2% in Q4.

Approximately 80% of current delinquent residential loans were originated before 2008. In fact,
pre 2008 loans account for about 53% of all mortgage loans.

Then, there is the GSE’s one of the greatest scams are federal government had enacted- (guaranteeing private loans with public money) continues to dig a deeper and massive hole of debt- read: tax payer money to the tune of 190 Billion and counting.

A bit of historical data reveals that starts of multifamily housing stands at 15% below mean trends. Construction of single family residences is approximately 45%  below the long-term trend and demand for new homes is at 46% below the norm.

Additionally, there are approximately 14 million mortgages underwater. Mortgage net-equity has decreased in 4 1/2 years by a staggering 3.7 Trillion dollars.

There is a  massive amount of non-performing inventory sitting on the balance sheets of banks (in which the government and the Fed have ‘requested’ the banks not to release…) AKA, Mortgage-Stuffing, which has been ramping up in the past two years. There may be upwards of 5 to 7 million distressed assets not being disclosed by the banks. (part of the fraud-closure debacle)

Not too mention, the one trillion dollars of student debt, 16.7 trillion in national debt, 22% total under/unemployment, while the mean duration of unemployment is at 35.3 Weeks. (down slightly from a peak of 40.2, but up from last years average of 33 weeks)

The U.S. now has 48 million households on SNAP (UP by 17 million since 2008) all while housing subsidies have increased by a whopping 48%. Then there are salary and wages- (when adjusted for Real Inflation, are actually negative compared to the core rate) PCE, is flat and personal income is down -3.4%, the most in 20 years.

BUT! The big but…somehow, the average tax paying American has suddenly come up with new found disposal income to buy houses across the nation…amazing! Sadly, it is simply untrue. While there has been some activity in buying, it is mostly in the form of the governments ‘Central-Planning’ Reo-to-Rent programs, a flood of foreign buyers and phantom new start contracts.

And those “SA” Seasonally Adjusted prices you see? Fabricated. When all is said and done and you parse out the ‘noise’ prices are not truly appreciating and in fact in many states are declining once again.

“But the nar said so” Sadly, the nar (one of the largest lobbying groups in Washington) are nothing more than enablers of burden and debt to the tax payers. The nar are simply a fraud.

Question:
What is the primary job of a real estate person? If you think, buy and sell houses, sadly, you would be mistaken. The main function of any real estate firm and agent, is to act as a buffer between a buyer/seller and factual, relevant information. The industry itself is nothing more than a marketing-ministry of propaganda.

The agent acts completely in his or her own self-interest, despite the rhetoric they continually churn out. Upton Sinclair had a great quote- which explains the conflict that a real estate person inherently creates.  “It is difficult to get a man to understand something, when his salary depends on his not understanding it.”

Consumer Inflation (Food & Fuel)

By DataAnalytics

A brief report on the latest purported inflation figures.

As if under some giant slumber, the ‘public’ was given the standard
rhetorical tripe on monthly inflation figures today from the BLS.

Amazingly, CPI-U barley rose a half a percent, in fact it ‘printed’ at
0.4%! Now considering more than half the population are most likely
‘asleep at the wheel’ this report deserves a double-take, even from the
most inept, reality-TV, stupor-induced American.

If you buy groceries and drive a vehicle, you must realize
(at least we hope so) that it is costing you much, much more to
feed you and your family and fill up the old gas tank.

How much more? Well for gasoline, the national average per gallon
is now at $3.83, up from $3.54 a year ago. That’s an 8.1% Rise.
How about from last month? Prices from February are up a hefty 12%.
But yet, the BLS proclaims that the ‘official’ measure of inflation has
only risen 0.4%. How can that be? Simple, one word. Deception.

gas price chart

How about food prices? Well let’s take a closer look at the cost of food
commodities from January 2012 back to January 2011. Meat, Poultry,
Fish and eggs are up on a weighted basis of 7.21% from a year ago.
Dairy and related dairy (cheeses, yogurts, etc) have increased 9% since
last year, while Cereal and Bakery products are up 5.25% from January ’11.

cereal meat eggs

Can’t live without that morning cup of home brewed Coffee? (me neither)
Well, roasted coffee prices have soared a whopping 16.85% from January 2011.
The only ‘good’ news, is that Fruits and Vegetables have actually
dropped about a half a percent, 06% to be exact.

coffee & veg

So while the government and B-B-B- Benny and Fed tout virtually no
to little inflation, there are some of us, who understand that this simply
is NOT true. The government is playing a game, a dangerous game at that.
Manipulating, doctoring and fabricating numbers and figures in order to
‘show’ that Central Bank intervention is working. (which we know is a failure)

The BLS has truly become a Ministry of Propaganda for the government.
No longer an agency of credibility and non-partisan reporting. Engaged
in a campaign of utter and sheer deceit on jobs data and inflation.
Making a mockery of the Statistical arm of academics and public trust.

Ron Paul Grills Bernanke at the Financial Services Hearing

Financial Services Hearing Highlights February 29, 2012

Congressman Ron Paul ‘asks’ Fed Reserve Chairman Ben Bernanke a series
of rapid questions about Fiat Currency, Silver and Inflation.

Quote of the highlight is;
…”that’s why they (the American people) Lose trust in government.”
Referring to the BS Inflation rate of 2%-3%. This portion of the clip is priceless.

 

Gasoline Prices

By DataAnalytics

UPDATED Post:
February 14, 2012

The mean price per gallon for regular gasoline in the U.S. is now $3.51.
Up 12.5% from one year ago, when prices averaged $3.12 per gallon.
Just a month ago, regular was averaging $3.44 p/gal.
This continual rapid rise is cause for alarm and concern as unemployment
is increasing and the economy is falling deeper towards a double-dip recession.

Feb. 2, 2012
Here’s a quick update on U.S. Fuel Commodity Inflation, part of the
necessary and reoccurring household consuming expenditures.

Unless you have been inducted into the witness protection program or
hiding out in a remote secluded cabin…you know that gas prices at the
pump have been (recently) steadily rising since late November.

 

U.S. Gasoline Chart

 

In the week ending January 31st, the national average for regular
gasoline was $3.439 per gallon. Up from $3.101 p/g one year ago.
That’s a 10.89% increase and a 4.5% rise just in the month of January.

Gas Prices

 

The immediate question is; why? Well of course the most simplistic
and obvious answer would be supply and demand, right? Absolutely,
that would be the correct answer- except that demand for pump gasoline
has been dropping for about the past 3 months.

Demand for pump gasoline during most of 2011 had been approximately
370-million gallons per day, but over the last few months that rate has
fallen to about an average of 340-million gallons per day.

Meanwhile on the supply side, gasoline inventory has increased for the
third straight week, attaining the highest level since March of 2011.
And, with the stockpile of fuel, refinery utilization rate is down by 1.9%.

Typically, U.S. gasoline consumption has historically trended in-step with
employment and with Unemployment at unprecedented highs, the drop-off
in aggregate demand is really no surprise at all.

So the evidence reveals that demand has and continues to decrease, yet
prices at the pump keep rising. Given these two facts, we can surmise that
it is not the result of a Cost-Push trigger whatsoever.

There are many reasons for the jump in crude (both Brent and WTI)
which directly affect retail pump gasoline. DataAnalytics is working
on a story explaining those reasons, which we will publish in the coming months.

The bottom line here is, that the average driving/commuting consumer
is paying approximately 12% more for gasoline than this time last year.
Couple that sizable 15%-20% increase with inflated cost of staple foods
and the grim pressures of affordability to the average American household continue to mount.


The Iron Pump


Household Inflation & Commodity Prices

By DataAnalytics

So, how far is your dollar stretching these days? We know, not very far.
It seems that almost everything costs more today than it did last year at
this time. Well, in fact almost everything does cost more. But wait, the
BLS states that consumer inflation has increased only 3.4%. Really?

Well, you can forget the mostly impractical CPI-U Index published by
the government. What matters abundantly and has a significant
impact to the average consumer is Household Inflation.

Those household ‘commodities’ are the everyday items we all use and mostly
need with a few basic ‘wants’ in the mix as well. Such as; Food, Fuel, Apparel,
household Appliances and Electronics.

According to the “Basket of Goods” utilized in the governments CPI-U index,
inflation is approximately, +3.4% (NSA). The simple fact is that this ‘measure’ of
inflation is not relevant or indicative of real-world household/consumer price inflation.

The fact is that aggregate household-commodity inflation on nominal prices
from one year ago in October- (y-o-y comparative analysis ) for these items-
(Food, Fuel, Apparel, Appliances and Electronics) has risen +35.30%. (cumulative)
(For a breakdown of commodities and price-levels, see the graphs below)

What this really means is that the purchasing power of the average U.S. consumer
has greatly decreased, approximately 35% for these basic staples from 2010.

So what exactly has been the causation of the rapid acceleration in food, fuel,
clothing and electronics then? It”s certainly not Demand-Pull inflation. ‘Demand’
for most household commodities and gasoline has been less than last year and
personal consumption has dropped a whopping 24% from Q2 to Q3.

Could a portion of commodity inflation be tied to a Cost-Push? Perhaps,
but it would be a minor amount of the overall aggregate price rises.

Well on the food side, we know that the prices of cornmeal, sugar, rice and wheat
have been driven up by a variety of factors- first, is the slight drop off in crop
yields and second, is speculation as well as the effects of monetary supply
and wage stagnation.

inflation cereal rice pasta eggs

inflation cereal rice pasta meat eggs

Total Rise of Cereal, Rice, Pasta, Cornmeal, Meat, Poultry, Fish, Eggs: 20.82%

inflation milk fruits bread

Total Rise of Milk, Fruits, Vegetables, Bread: 24.39%
(Total Aggregate Rise of Staple Food Commodities: 22.60%)

Examining Apparel, Appliances and Electronics, specifically, home video
and audio, we see only a moderate increase in price levels from Oct. 2010.

tv clothes appls

Total Rise of Apparel, Appliances and Electronics: 5.54%

On the fuel side, it is down to OPEC and to some extent, futures trading. We know that
OPEC will no longer sell crude for less than $90-$95 per barrel for any length of time.
This ‘built-in’ price floor sets the stage for the loosely monitored, but undeniable
‘fixed-pricing’ basis on crude. Mix in speculative trading and the market is able to
some extent, manipulate the cost per barrel.

avg gas prices

Total Rise of Regular Gasoline Per Gallon Nationally: 7.15%

Given the fragile state of the U.S. economy and the unprecedented
unemployment/underemployment rate of 22%-23%, how much more
price inflation can the average household absorb?

An ideal economy retains price-stability, which at the moment we have
none of. So what does our inflation analysis reveal? Well, the obvious is that
most household commodities are costing over 35% more than they did in 2010.

Secondly, price-inflation seems to be somewhat fragmented and without argument,
some of these price rises are transitory, with a historic trend of being somewhat
predictable. But that has not been the case as of late.

Yes, most household food commodities have been shifting downward since
the beginning of 2011, with retail gasoline following suit, while the rise in rents are
averaging only about 5% nationally. On the other side of the coin, housing asset
prices have declined and continue to fall, with auto prices remaining fairly stable.

So as we close out 2011 the U.S. economy remains in a state of flux with most
tangible assets deflating, while commodities are still above 2010 price levels and
could easily rise again. The bigger question looming is what will this ‘push-pull’ yield
going into 2012? Much of it depends on the broader macro-picture, the all important
labor market, the presidential election and the Eurozone crisis will all play a role in the
macro economic picture.

The bottom line is that the variables involved, both domestically and abroad are
unknown in terms of predictability and performance. The U.S. as well as Europe
and parts of Asia could remain in this unstable economic environment for a couple
of more years or perhaps even longer. But here at home, the dollar can only be
stretched so far, before it eventually breaks.

 

For analysis purposes the following methods were implemented
*price averages reflect the retail mean.

*each commodity group was weighted.
*food commodities combined. (previous correction)
*apparel, appliances, electronics combined
Partial data derived from IndexMundi, IBD and consumer surveys