Do you ever become confused over daily economic data?
If not, then you probably aren’t paying close attention.
But that’s not necessarily a bad thing.
If you don’t pay real close attention and spend a good deal of time analyzing what’s really going on, you’re probably better off not paying any attention to the data at all because it is designed to confuse you; to manipulate the truth.
After all, most of these “analysts, chief economists and investment strategists” you hear about are really in the business of sales and marketing, NOT research.
And the Fed Chairman? Merely another cheerleader/politician, whose purpose is to permit extortion and fraud by the shareholders of the Federal Reserve.
In the best of scenarios, these so-called experts are late to the party, most likely only after having drawn upon the research of real experts, who made accurate forecasts long before.
The most recent example of such confusion occurred just before Christmas, on December 22, 2009, when the following headline was blasted all over the newswires...“November Home Sales Soar 7.4%.”
As you can imagine, the moronic financial reporters attributed the day’s gains in the stock market to this bit of news; as if they know what moves the market.
As I’ve discussed previously, these claims of this and that driving the market higher or lower are wrong more often than they are right.
The point is that you had to read the report to know that the data was for home resales, not new home sales.
The article also quoted numbers from the real estate shill organization, the National Association of Realtors. According to this fraudulent organization, about 2 million homebuyers took advantage of the $8000 first-time homebuyers tax credit.
Despite this (unconfirmed) data, according to the article, the inventory of unsold homes on the market fell in November by 1% to 3.5 million. This number is wrong because it does not count homes in the closing process, nor does it count homes in the foreclosure process. As you can imagine, each of these processes typically last 2-4 months.
Furthermore, this number (unsold home inventory) says nothing about the millions of homes that homeowners want to sell but have not put on the market because they are waiting for a better real estate environment.
As mentioned in the past, I have estimated the total number of single-family homes for sale and vacant apartment units to be around 12 to 13 million.
Apparently, home builders have finally figured out the reality, as shown by the most recent data on new housing starts below (although it took them a very long time to wake up).
Home sales hit a bottom in January of 2009. And it has only been through government subsidies (your tax dollars) and special programs by Fannie and Freddie (which has created more risk to tax payers) that have helped sales rebound from this low.
Despite all of these special incentives and risky maneuvers, more than one-half of the homes bought over the past two years have been foreclosures.
Adding to the confusion, the next day (December 23rd) the newswires reported that November homes sales plunged by 11%.
If you took the time to read both releases, you would have eliminated the confusion.
But very few people take the time to do that. They act impulsively.
This type of behavior can lead to a dangerous day-trading mentality. And that is precisely the media's intention. Along with creating the illusion of an improved real estate market, the media likes to generate trading activity for one of their biggest clients, Wall Street.
The point I’m trying to make is that at best, these news releases are designed to make investors behave impulsively so that they don’t take the time to sit down and examine what’s really going on.
At worst, these news releases are designed to create the illusion of a strengthening recovery.
The report was startling considering the fact that the tax credit for first-time homebuyers was extended through April 2010. And a $6000 tax credit was added for homebuyers who relocated.
At the end of November, there were 235,000 new homes for sale; the lowest inventory level in nearly 40 years (since 1971). However, based on previous home sales data, that tiny amount still represents nearly 8 months of supply.
Furthermore, the home resale data was for contracts signed over the summer, while new home sales data was for contracts signed in November.
But who would expect new home sales to rise with millions of homes in foreclosure?
Why pay a premium when you can get a better price in the foreclosure market?
When you look at the big picture, things look a bit different.
As I have discussed for nearly two years now, the big foreclosure avalanche begins in 2010 and will last through 2011, as most of the ARM and Alt-A loans reset during that period.
This serves as a fairly good indicator of where interest rates are headed. You shouldn’t expect short-term rates to move appreciably higher until at least Spring of 2010.
Short-term rates may not rise above 1% until after 2010.
Despite what most of the experts (cheerleaders) say, an improving real estate market is not the key to a recovery. That’s the type of argument used by the guys in Washington who specialize in creating a Ponzi scheme economy.
The tail can’t wag the dog.
An improving real estate market isn’t the driver of the economy.
A healthy economy drives real estate because people have jobs; they have incomes to pay for mortgages.
Thoughts of a bottom in real estate would boost consumer confidence, which would create more buyers. This would boost housing prices, which would further boost consumer confidence. Combined, this would boost the stock market—it’s a chain reaction within an endless loop.
This explains why Washington and Wall Street are trying desperately to generate a recovery picture.
Meanwhile, they continue to contradict their upbeat message by acting in opposition.
For instance, the recent removal of the previous $400 billion funding ceiling for Fannie and Freddie should raise some major concerns. This is a huge deal because it now means that these losers get a blank check.
Furthermore, the U.S. Treasury passed this monumental funding commitment without the approval of the Senate Finance Committee and other members of Congress (not that it would have made much of a difference, other than for these guys to showboat on C-SPAN to gain political points).
Understand that when people speak of a “bottoming” in real estate, they usually don’t specify their definition.
For some, bottoming means a pick up in housing starts; for others it means increased sales.
To me, it means real estate prices.
Now why would I choose pricing as the best definition of a recovery in real estate?
Because housing pricing is one of the key determinants for homebuyers. And remember that consumers determine around 67% of the economy, so doesn't it make sense that if you want to discuss a recovery in the real estate market as it pertains to the health of the economy, you should focus on what matters to consumers?
Don't expect most economists to figure this out. Most are completely useless.
As such, I stand by my original forecast made three years ago for a median real estate price decline of 35% (upper end).
If I turn out to be correct, we probably reached the bottom in prices a few months ago. However, the bottoming process will take many months, perhaps a year. Thereafter, it will be a slow climb up.
In fact, some of the bottoming-out process will be dependent on how the Fed handles interest rates. It is possible that the bottoming out process could hover up and down in a range, taking several years before making a definitive and sustainable (although slow) move upward.
You should also be aware of the fact that with most Americans in the red for their homes, it’s not only difficult to refinance, but it’s also virtually impossible for most that might be out of work to relocate for job opportunities (the relocation tax credit is essentially useless and serves only as a tax break for well-off homeowners or those who have owned their home for many, many years).
You can’t sell your house if you owe more than its worth unless you have the cash to pay the bank the difference.
I would not expect there to be many unemployed homeowners who have the cash to pay off a mortgage deficit.
For several months, Fannie Mae has been offering refis at 125% of value as another desperate attempt to rescue the living dead who are being gouged by crooked banks that issued what I feel should be banned—ARMS and option-ARMS.
Apparently, the idiots in Washington have finally realized what’s in store for real estate in 2010 and 2011, as evidenced by the Federal Reserve’s $1.25 trillion purchase of toxic MBS, the recent removal of the $400 billion ceiling of government funds for Fannie and Freddie, the extension of the first-time homebuyer tax credit and expansion of a $6000 tax credit for homeowners who want to relocate.
In particular, the removal of the U.S. Treasury’s $400 billion loan cap to Fannie and Freddie is very odd because Fannie and Freddie have thus far used only $111 billion.
Moreover, the government has estimated that the losses from the GSEs are not expected to exceed $170 billion over the next ten years!
You might note an article I wrote last year stating that the $700 TARP would be lucky to cover the losses from AIG, Fannie and Freddie. I stand firm with that forecast.
I stand firm with my 2008 forecast that Fannie and Freddie will cost taxpayers more than $500 billion in losses before this mess has been cleaned up. In fact, this is the low end of my estimates; the absolute best-case scenario.
What is my upper-end estimate? $1.5 trillion. However, I might raise this in the future.
All of this, and Fannie and Freddie have hired new clowns offering them up to $6 million. This adds another joke to the comical nature of the United States of America; a nation with characteristics of a banana republic.
Fannie’s new CEO, Michael Williams is just as clueless as his predecessors.
The same can be said of Freddie’s new CEO, Charles Haldeman, former CEO of Putnam investments; a mutual fund company!
Median residential home prices have already declined as low as 33% from the 2006 peak. With the big loan resets approaching, it appears as if my upper limit of 35% might be exceeded.
If you live in the U.S., Canada or the UK, when the topic of real estate pops up, it’s likely that all you hear about is how bad the market is.
Whether you are reading about the defaults, foreclosures, the collapse in house prices, or the problems faced by Fannie Mae or Freddie Mac, one would think that the global real estate market is suffering, but that would be an inaccurate assumption.
As you might imagine, with the economies in Asia and Latin America booming, these real estate markets are quite healthy.
Despite what you have heard from the real estate hacks, government officials, and their friends in the media, the real estate market is not in the process of recovering because it has not yet bottomed out. The same is generally true of the economy.
Recently, I exposed the incompetence underlying an article that tried to make you think there were signs of a recovery. As you can imagine, I set the record straight. Once you begin to see the the media operates on incompetence and/or deceit, you will be on the right track to becoming a more successful investor.
Even once housing prices bottom, you should not expect prices across the board to rise appreciably for quite some time. There are many reasons for this.
First, the current existing real estate inventory is huge and about to even bigger. After counting apartment vacancies, I have estimated the total number of single-family residences is approximately 13 million. If you look around your local community, you are likely to see numerous For Sale, For Rent, Foreclosure, and Short Sale signs.
Understand that this is the situation across the U.S.
I live in one of the so-called strongest economies right now, also with one of the so-called healthiest real estate markets in the U.S.; in the top 5. But I can tell you that I continue to see For Sale, For Rent, and Foreclosure signs everywhere. And I’m seeing more every month.
I also see Auto Title Loan shops popping up all over the place. Think about that for a minute. The business of getting a loan using your car as collateral is SO lucrative in one of the best economies in America, that these shops are growing by the day.
Second, the tidal wave of ARM and Alt-A mortgages is now in the process of coming due. Homeowners are now looking to refinance these loans.
The problem is that many homeowners have lost their jobs or have been forced to take lower-wage or part-time work.
As well, most homes in the U.S. are underwater; they have negative equity.
Washington is doing all it can to mitigate the early effects of America’s Second Great Depression, but nothing seems to be working.
In fact, the actions by Washington will only make this period of devastation more severe. The effects of these reckless actions will be delayed. But the cumulative result will lead to more dire consequences any way you slice it.
With the expiration of Washington’s first-time homebuyers tax credit, as well as the newer tax credit for homebuyers seeking to relocate, coming to end in coming weeks, this is sure to slow the small progress made in reducing housing inventory.
Furthermore, millions of homeowners have been waiting for the market to recover prior to placing their property on the market.
Once homeowners realize that housing prices do not bounce back up like the stock market, they will opt to list their homes.
Finally, based on my analysis, stemming from initial research I conducted from 2004 to 2006, leading to accurate forecasts for a collapse in housing prices by some 30 to 35% nationwide, it is very likely that once housing prices begin to advance by a historically normal magnitude, rising interest rates (which are a complete certainty) will cause housing prices to fall, erasing all recent gains and possibly causing prices to reach new lows.
In addition, over the next decade, millions of baby boomers scale down to condos and retirement communities, flooding the market with even more existing home inventory.
However these scenarios play out, it is with complete certainty that the housing market will require numerous years for a recovery.
Accordingly, the previous record-high media house prices reached in late 2006 are not likely to be seen before 2020.
For those of you who continue to think you can easily make money flipping houses or renting, you should wake up. Sure it can be done, but the odds are well stacked against you.
These forecasts are by no means news. My analysis for real estate has remained largely unchanged now since writing America’s Financial Apocalypse.
A Note About the Media and the Hacks
For those who are familiar with my track record, I am assuming that you agree no one in the world can match it since I still have not received any submissions for the $100,000 reward offered to the first person who can demonstrate that another person has matched my record of forecasts.
The point I am trying to make is that if you are going to listen to anyone, I should be the first on the list; perhaps the only person on your list. A partial list of my track record can be found here.
When I recommended investors to short Fannie Mae, Freddie Mac, Novistar, Fremont General, Accredited Lenders, GE, GM, the banks and homebuilders in my 2007 book Cashing in on the Real Estate Bubble, many people thought I was crazy.
That's usually the reaction when you are way ahead of the curve.
But for those who never read these books, I even released several articles into the public domain that told investors to short the banks, as early as my first publication into the public domain in May 2008 (although I officially made the call to clients in October 2007). The last sentence of this article reads:
"Finally, I would advise investors to consider taking some type of short position in financials pretty soon, preferably with an ETF, such as UltraShort Financials ProShares (SKF
Back in 2008, when I stated that the real estate problems would soon hit prime mortgages due to the fallout in the economy (I also made this prediction in America's Financial Apocalypse) many people criticized these forecasts.
Despite entertaining the possibility that the Dow Jones Industrial Average could collapse to ~6000 in America’s Financial Apocalypse, at a time when the Dow was around 13,000, I also released an article in March 2009, when the Dow was 6500. I stated that investors should start buying into the market. That was my first all-out market buy signal in years....
"What should you do? If you are a long-term investor, you should gradually start buying into the market in small increments. Only the best names, companies with little or no debt and market leadership; companies that pay cash dividends; dividends that are relatively safe (check free cash flows, debt levels for starters).
If I think it’s going lower, why am I telling you to start buying? If you try to pinpoint the bottom, you will miss everything.
Will we see a rally? Of course. When? I would say a rally could come soon. But once again, no one knows. Anyone who claims to know is a fool. You have to take things day by day. I’d expect such a rally to be triggered by some relatively trivial news or data set. Wall Street will make a big deal over it looking for an excuse to rally. The forces in play are setting up for a rally. Focus on market psychology and don’t waste time on this VXN and VIX rubbish…..they are coincident indicators. Technical analysis is fairly useless right now.
What happens if you start making money soon after you buy, say if a rally occurs? Sell, sit back and be patient. Let more bad news come in and see how the market reacts."
Meanwhile, the doomers, the guys with financial agendas attached to preaching America’s demise – they keep calling for more lows – all the way through the 65% rebound in the Dow through the rest of 2009.
You need to keep track of track records.
(I do NOT enjoy boasting about my track record; I actually hate doing it, and I hate to keep repeating it, but I have to assume that new readers are unaware of these things.)
Today, these same clowns (who are all over the media) insist the market will collapse. Why? because it's "too high." As I addressed in A Lesson in Market Forecasting, the stock market doesn't collapse for no reason. There has to be a huge problem or a string or many significant problems.
In fact, as I point out in that article, the market actually tends to go up for no reason. This is especially true when there is no bad news after coming out of a period of crisis.
Anyone who is unaware of this basic insight HAS NO BUSINESS writing financial articles.
You need to let these guys know that they are clowns.
Stop wasting your time and risking your investments listening to them.
They have terrible track records as well as agendas.
If you really want the best chance of knowing what is going on and what to expect, why not stick to the person with the best track record? That would be me, Mike Stathis, the man who has been black-balled by the financial media - for a damn good reason; so their financial partner (the financial industry) can take your money. The media sees me as a threat to expose their criminal activities.
Given my track record and absence of any agendas, as well as the fact that I do not sell securities or precious metals, you need to ask yourself why the financial media has continued to ban me.
I’ll tell you why.
They don’t want to hear from real experts.
They want to hear from naïve people that they position as experts because the financial media, whether it’s CNBC or the Wall Street Journal, receives the majority of its revenues from its sponsors; the financial industry.
So the media serves the best interests of the financial industry because they are their main client. And the financial industry can’t take your money if you are provided with valuable insight from real experts.
That’s the way the game is played folks, so I suggest you wake up and smell the coffee.
The best way to fight back is to never watch CNBC, never read the newspaper or the various financial magazines like Forbes, Fortune, so forth, because every time you watch; every time you read, whether or not you are paying directly to watch or read, you are sending them your money because the bigger their audience, the more they can charge for ads.
The more they charge for ads, the more powerful they become.
The more powerful they become, the more they grab hold of your mind.
Thus, if you do not ban the media as they have banned me (someone who has tried to help you avoid this disaster, while sacrificing millions of dollars I could have made for being a sell-out like others in the media) then you will only have yourself to blame the next time you get taken.
If you want access to institutional-level research, analysis and investment guidance, subscribe to the AVA Investment Analytics newsletter today. www.avaresearch.com
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Ask the media why they have black-balled the person with the best track record on the collapse, and thus the person who best knows what to expect and how to recover.
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