Courtesy of The Automatic Earth.
Arthur Rothstein Mooo, Ropesville Farms, Texas April 1936
We’re going into another weekend, and this one’s Memorial. It may also be memorable, since there are elections in both the EU and Ukraine. And fireworks may well be part of both, during and after. In the Netherlands, where they were early, just 35% of people voted, which makes you want to look up the word democracy in the thesaurus, while in also-early-ran Britain UKIP won big. Nobody cares about Europe, or let’s say the only ones who care do so for strictly personal reasons, not for some grand ideal. The ideal is dead, the only thing left is “the EU gives us jobs and profits”, even as both claims are entirely unprovable for lack of things to compare them to. The Ukraine elections are a whole lot more serious. Willy Wonka is set to be the next president, but only part of the population will accept him, and the rest have plenty guns to prove they don’t.
The chance that Ukraine survives as a nation is about the same as the global economy, or the US economy, being in recovery. Slim in a late phase anorexic sense. New home sales were announced up. But are they?
New Home Sales Post Tepid April Bounce As Average, Median Home Price Drops
Last month’s dramatic miss of expectations for a modest post-weather pop in new home sales (having dropped 14.5% month-over-month) so it was inevitable that there would be a bounce. Modestly beating expectations, 433k annualized new home sales in April was only a 6.4% gain MoM thanks to the upward revision of the big miss in March. This ‘recovery’ remains well below the peak see in January – right in the middle of the worst weather impacted time in US history if one is to believe what the media is spewing. Before the ‘housing recovery is back on track’ meme gets going though, there is the fact that homes sold in the Northeast fell to the lowest since June 2012 … as the average home price fell to $320,100 – the lowest since August 2013.
A scratch below the surface shows that the April jump was all region, and driven by the Mideast where New Homes sold were up a whopping 47.4% (35.5% Y/Y) in April to 84K. Contrast that with the Northeast which was down -26.7% (-31.3% Y/Y) to 22K. And perhaps the most interesting fact: both the median and average home prices were down Y/Y, by 1.3% and 5.0% respectively. Further, the average new home price of $320,100 was the lowest since August 2013.
Some of the big boys think not:
Big Investors Are Betting Against US Housing Market (MarketWatch)
• DoubleLine Capital founder Jeffrey Gundlach took to the podium at a highly watched investment conference to suggest shorting the popular SPDR S&P Homebuilders exchange traded fund . He pointed to a concern, cited by others, that would-be young buyers are shunning mortgages . BlackRock CEO Laurence Fink said Tuesday that the housing market is “ structurally more unsound ” …
• Real-estate investor Sam Zell says he expects the Homeownership rate to drop as low as 55% as more people delay marriages.
• Charles Plosser, president of the Fed Bank of Philadelphia says housing fundamentals “remain sound” on Tuesday, while New York Fed Bank President Charles Dudley said later that day he believes there’s a “deep and protracted” housing downturn.
According to Jeff Cox at CNBC, the Fed is awfully bad in its history of predictions:
Everything The Fed Thinks It Knows May Be Wrong (CNBC)
At the core of the Federal Reserve’s credibility is its insistence that it can hold interest rates low enough for long enough to ensure a complete economic recovery. The reality may prove quite a bit different, particularly if current trends hold up. Those low yields are critical for both the public and private sector – financing upwards of a trillion dollars a year in corporate borrowing as well as helping to contain financing costs for the government’s $17.5 trillion debt. …
“It’s not that I don’t have faith in the Fed or think these are not some of the smartest economists out there. This is unprecedented territory,” said Lindsey M. Piegza, chief economist at Sterne Agee. “It’s going to be very difficult to understand those unintended consequences on the back end of these policies. …That confusion of how to unwind these unprecedented policies says to me there’s going to be a lot of volatility, a lot of missteps.”
It’s the rates, guys, they’ll make you poor(er) and save the economy at the same time, so your kids may not have to be chained down for their entire lives. See, in the end it all works out.
Anyone else have the feeling that there are at least as many Americans who don’t register as unemployed any longer as those that are? So, you know, the real number should be north of 12%? Look, if Italy can include hookers and cocaine to boost its GDP numbers, why would you think Washington would not? Cause their nice and decent folk looking out for you? Come to think of it, what part of US GDP is blow and pussy? However that may be:
Nearly Half Of US Unemployed Have Given Up Looking For A Job
Nearly half of unemployed Americans are on the verge of completely giving up on looking for a job, but they remain optimistic they will find a job they really want within the next six months, a new survey found. The poll, commissioned by staffing firm Express Employment Professionals, found that 47% of the 1,500 respondents agreed to some extent that they have completely given up on looking for a job, but only 7% said they agree completely with that statement. “
And why is this all going to get worse? Again, it’s the rates, guys:
Forget ‘Taper Tantrum’, Here Comes ‘Rate Rage’
If you thought market nervousness over central bank policy decisions was largely over, you might be in for a shock. Despite global markets seemingly taking the Federal Reserve’s “tapering” in their stride it now appears there’s a new concern on the horizon. “Rate rage”, dubbed on Friday by Dario Perkins, an economist at Lombard Street Research, is a term used to describe the future market turmoil that could arise from the raising of benchmark interest rates by the Bank of England and the Federal Reserve. … “With central banks less able to provide clear guidance about the future, we are likely to see renewed market volatility as they start to raise interest rates in 2015. Some investors will again be anxious to sell their bonds, fearing significantly higher yields.”
And those rising rates will need to lead to what Marc Faber mistakenly labels asset deflation, which exists no more than cookie inflation, consumer inflation or any of those terms. What Faber has right is that a lot of money/credit, trillions ‘worth’ of it, will go Poof and will never be seen again. And that will have a major effect on the economy and everyone who’s part of it.
Marc Faber: ‘Brace For A “General Asset Deflation’
With global debts 30% higher than they were at the 2007 crisis peaks, enabled by the money printing of central banks, Marc Faber warns that the “asset inflation” of the last years is not reflective of the broad growth seen in the 70s. “The system is still very vulnerable,” he warned as investors are exuberant over “hot new issues” just as they were in 2000 and fears “excessive speculation” means investors should brace for a “general asset deflation.”
But we can still grow our way out of all the negatives, can’t we? You know, escape velocity! Well, sorry …
a target=”new” href=”http://www.marketwatch.com/story/world-trade-flows-drop-in-first-quarter-cpb-2014-05-23?”>World Trade Flows Drop In Q1 2014
World trade flows fell in the first three months of 2014, another indication that a sustained and broad-based pickup in global economic growth remains out of reach more than five years after the start of the financial crisis. The Netherlands Bureau for Economic Policy Analysis, also known as the CPB, Friday said the volume of world exports and imports in March was 0.5% lower than in February. For the first quarter as a whole, trade flows were down 0.8% on a quarterly basis, after a rise of 1.5% in the final three months of last year.
That’s not happening. Maybe there’s a pocket somewhere, China?
PBOC’s Zhou Says China May Have Housing Bubble in ‘Some Cities’ (Bloomberg)
China may have a housing bubble only in “some cities” … While 12 of 18 economists say China has some national oversupply of housing, only seven say the market is in a bubble countrywide, according to a Bloomberg News survey [..] Half see bubbles in some cities, and a majority say they expect restrictions on home purchases and loans to be loosened at a regional level. New construction in China has fallen 22% and sales have slumped 7.8% this year,
No salvation there either. We’re going into the Memorial weekend, and the elections that may tear the EU further apart and do g-d knows what damage in Ukraine, with an economic system that keeps on exhibiting sings of starvation and exhaustion more than recovery (for good reason, when you look at debt levels).
Things are not going well. At all. Perhaps, instead of clinging on to happy happy propaganda emanating from the politicians who screwed up and the media that are umbilically linked to them, it would be better if we acknowledge the failures of our economic and political systems, in order to be able to build new ones. What we have now is only going to schlepp us down ever more. Not unlike Ukraine perhaps.
Here’s your weekend song.
