Why Is Anyone Surprised At the New Home Number?

Seriously, is there any rational being alive that wasn’t expecting the home numbers to go down?

Sales of new homes collapsed in May, sinking 33 percent to the lowest level on record as potential buyers stopped shopping for homes once they could no longer receive government tax credits.

The bleak report from the Commerce Department is the first sign of how the end of federal tax credits could weigh on the nation’s housing market.

I guess I don’t get how any “professional” would ever think, especially after the way the car credit did the same thing, that new home sales weren’t being goosed by the tax credit.

“We all knew there would be a housing hangover from the expiration of the tax credit,” wrote Mike Larson, real estate and interest rate analyst at Weiss Research. “But this decline takes your breath away.”

It only takes your breath away if you were buying the jive the realtors are selling. How do any of these “analysts” and “economists” feel good about themselves? Look, we just saw the same thing happen with the car credit. As soon as that credit stopped, car sales plunged. Why would anyone on the planet earth think this would be different?

Paul Dales, U.S. economist with Capital Economics,” wrote in a note. “After all, unemployment remains high, job security is low and credit conditions are tight.”


Look, I’m an amateur. But even I could see that the housing numbers were being driven higher only because of the tax credit. If I can see this, why can’t the professionals? It also shows you that you shouldn’t trust the professionals either. They’re as surprised at this as they were the dot-bomb era too. Do your own research. Learn to see what is in front of your eyes and use your head.

Bernanke:Liar Or Fool?

I saw the story first from Dr Duru’s tweet earlier today about Helicopter Ben testifying before congress.

“Gold is out there doing something different from the rest of the commodity group. I don’t fully understand movements in the gold price, but I do feel that there is a lot of uncertainty and anxiety in financial markets right now; and some people believe that holding gold will be a hedge against the fact that they view many other investments as being risky and hard to predict at this point.”

I don’t know about anyone else but, I find it amazing that the guy in charge of the Federal Reserve actually testified that he’s stumped about gold. Is he serious? Or is he playing a game with congress?

I agree with DrDuru as to his thoughts on Helicopter Ben.

So, when gold is just another commodity, Bernanke is confident he understands gold. But when it diverges to the upside and makes new highs, it becomes a conundrum. Bernanke can certainly point to current inflation numbers and insist that buyers of gold are simply “uncertain and anxious.” His claim that other investments appear “risky and hard to predict” to other people is useless.

Bernanke cannot speculate much further on other fundamental reasons for gold’s rising popularity: more and more people are looking into the future and realizing that many Western governments can only afford to pay (service?) their tremendous loads of debt by printing money. Maybe not today or tomorrow, but eventually, the world will be awash in even more massive amounts of paper. This is always an available option in a world of near-zero interest rates.

So either Ben Bernanke is truly lying when he says he doesn’t understand the rise in gold and is a moron and shouldn’t be anywhere’s near the levers of power or he’s just lying through his teeth but won’t say anything as that would be a political bombshell. Neither option sounds good to me.

The Mother Of All Bailouts:European Edition

Well well well, not only did the EU get its act together, but they were able to get something out the door to help reassure people that the Euro is a good place to park your cash.

European Union finance ministers moved toward agreement on an unprecedented loan package worth at least $645 billion to prevent Greece’s fiscal woes from triggering a broader sovereign-debt crisis and shattering confidence in the euro.

Jolted into action by last week’s slide in the currency to a 14-month low and soaring bond yields in Portugal and Spain, the 16 euro governments sketched out plans to make 440 billion euros ($570 billion) available, with 60 billion euros more from the EU’s budget

Of course they still have some arm twisting to do before they’ll have used all the bullets of government manipulation.

Government officials said they won’t push the independent ECB to, for example, buy government bonds. President Jean-Claude Trichet accelerated the market selloff on May 6 by rejecting that measure.

I’m sure they’ll try their hardest to get some quantative easing going on from the ECB side.

Obama yesterday emphasized “the importance of the members of the European Union taking resolute steps to build confidence in the markets,” White House spokesman Bill Burton told reporters in Hampton, Virginia.

Of course they haven’t done anything about the underlying problems, just punted that issue down the road like the American administration. All they’ve done is put one hell of a bandaid on the patient hoping it won’t die as the head lies on the road. And it’s obvious that the public in Europe is enamored of bailouts there as they are here in the States.

Voters in Germany’s most populous state dealt Chancellor Angela Merkel a painful setback Sunday, erasing her government’s majority in the upper house of parliament and curbing its power after a stumbling start and criticism over the Greek debt crisis.
…”This is of course a warning shot for the governing parties, and the people should know that it has been heard,” said Foreign Minister Guido Westerwelle, the vice chancellor and leader of the Free Democrats, Merkel’s junior coalition partner. “We must make an effort to win back lost trust.”

Well, color me skeptical about any politician actually doing what they say. I think the thing to take away is that the pols of Europe are scared of the downside and are willing to do anything thing possible to save their asses without actually fixing the problems they have. In other words, they are acting like typical politicians and their countries will be the worse for it. But we’ll see.

Volatility? What Volatility

Nice spike in volatility.

Anything happen today that I missed?

Yahoo! says the Vix was only up 5.34 points. Oh wait, that’s a 30.57% rise today. Guess the market wasn’t liking that downgrade. But really, has the dowgrade for Greece already been baked into the market or was adding Portugal to the mix the part that really spooked the market. Guess we’ll find out…

We Don’t Have No Inflation

Seriously, all you have to do is exclude the bad numbers and voila, you’ve got the number you want.

Wholesale prices rose more than expected last month as food prices surged by the most in 26 years. But excluding food and energy, prices were nearly flat.

Again and again, this is the problem with government statistics today. They are rigged. Of course there is no inflation when you remove all the bad parts. I’d like to know from the eggheads, since I need food to eat and energy to live in my house, why we get to exclude it?

It’s nothing more than a way to rig the game.

Barry, It’s All About The Narrative

Barry Ritholz asks why doesn’t anyone know what a profit is in relation to the government bailouts.

Why doesn’t anyone understand what a profit is? It is the total revenue minus the total costs. Which is why this FT headline is our second dumb headline of the day:

US Treasury’s bail-out profits top $10bn

“The US government has made more than $10bn so far on banks’ repayments of bail-out funds, according to a new analysis that suggests taxpayers might turn a profit on the unprecedented help extended to the financial sector during the crisis . . .”

No, they have not made $10 billion dollars. As the article later states, “Treasury still expects to lose $117bn on the entire Tarp Programme, which includes investments in the car industry and AIG, the insurer.”

Barry Barry Barry. I love the rhetorical question. They call it a profit because other wise people might see the hundreds in billions of dollars that are lost forever and may decide that the current occupant of the white house hasn’t done anything other than make this recession worse by it’s profligate spending.

Excuse me. Congress’ profligate spending.

Regardless, the narrative is that the bailouts and all the spending at all level of the government is needed because they know better than you do. If you start to question the bailout, why, you might even start to question other things and we can’t have that. Just read the legacy media and do as your told and things will be fine.

How Is The Fed Going To Know A Bubble?

So the Fed has spoken. They know their low rates aren’t good but hey, don’t worry, they’ll be able to spot any bubbles and do something about it.

Thomas Hoenig, president of the Federal Reserve Bank of Kansas City, for a second straight meeting was the sole member to oppose keeping that pledge. Analysts saw Hoenig as concerned that holding rates too low for too long could feed some new speculative bubble in assets such as stocks or commodities.

Fed members noted the importance of closely monitoring financial markets and institutions to help detect risks at an early stage. They cited, in particular, the need to monitor asset prices and loan levels.

Information collected by Fed staff hasn’t revealed significant threats in the financial markets or widespread high-risk-taking, the minutes concluded. Still, Fed officials said they would be on the watch for any such threats.

Does anyone at the Fed remember Alan Greenspan and his Irrational Exuberance speech? That was in 1996. I vividly remember the Fed stepping in an stopping the Tech Market bubble from happening. Oh wait. That never happened. The head of the Fed even said it was a bubble and they did nothing.

Housing market anyone? Anyone not believe that 2005 – 2008 wasn’t a housing bubble? The Fed controls interest rates and yet they too could not see that bubble happen.

The Fed has missed two of the largest bubbles of all time, which happened right under their noses. But now, this time’s different? Sorry, homey don’t play that game. I remember the tech bubble. They all said this time was different. It wasn’t. And this won’t be either.

The Return Of The Bond Vigilantes?

There was a short story earlier in the week on Yahoo! that mentioned the bond auctions earlier in the week did not go over well with the buying professionals. It seems things did not go better on Thursdays auction.

The FT has a story and it seems, regardless of Helicopter Ben’s announcement, that higher rates may indeed be on the way.

For more than a year, analysts have been warning that record sized debt sales by the US Treasury were at odds with a 10-year yield sitting comfortably below 4 per cent. This week, the yield on 10-year notes jumped from 3.65 per cent to a peak of 3.92 per cent on Thursday. On Friday it was 3.87 per cent.

That is a huge jump in rates in one week. That sort of move makes people wonder what’s going on in the market.

“The environment for debt auctions has turned negative,” says Rick Klingman, managing director at BNP Paribas. “Long-term rates are rising and it is no coincidence that this has occurred after the passage of healthcare reform and the end of Fed buy-backs.”

It does seem fairly coincidental that the health care bill passes and then for the first time in almost a year the Treasury auctions do not do well. And if they continue to not do well, then we really will see higher rates. I see there’s some more auctions coming up this week, so we should have more of an idea of how the market is behaving.

One never knows about the market. This could have been a one week hangover due to the health care vote. But, if we see continued weakness for Treasuries and a piling into the TIPS then we can safely say that inflation is here, regardless of what the Fed says.