Higher U.S. Gas Prices And The Illusion Of Economic Recovery

The housing recovery seems to have been a temporary affair. Preliminary data frames March as weak as last October. It looks like lower interest rates boasted sales. Those rates are up from 4.72% to 5.02%.

Worse yet, Operation Twist is over. That is where the Fed sold the short end of the bond market and bought notes and bonds of 5, 7, 10 and 30 years. Even though the BIS, The Bank for International Settlements, said the program was a resounding success, it was not. American friends knew the Fed was a buyer, so they proceeded in selling long dated paper destroying what the Fed policy was trying to accomplish. Now we expect QE 3, which we have expected for sometime. Lest we not forget the slight easing of credit and the government's FHA low down payment programs.

A large negative we did not face several months ago was higher gasoline prices, which the public believes are going to stay at current levels for the next few years.

If a new house is purchased it has to be close to work and that often is not an easy task.

Making plans more difficult is that only half of the homes being sold will be lived in by the owners - the rest are owned by speculators, who for the past 5 years have been eminently unsuccessful in picking a bottom in the housing market.

We wonder if these buyers are aware that the administration, which we reported on a few weeks ago, have proposed to have Fannie Mae and Freddie Mac dump 560,000 under water defaulted properties on the hedge funds and others in blocks of $1 billion or more to be eventually rented and put into REITS. Buyers also have to contend with builders building 513,000 new homes a year when 6.8 million homes are already on sale.

Now that banks have cleaned up most of the defaults at the low end of the market they'll now concentrate on the smaller middle sector and the top of the market. This lender policy will add many more homes to defaulted inventory and could take that number to 9.8 million defaulted homes for sale. Those looking for a let up will have to wait beyond 2014. That means you should continue to rent over that timeframe. That means depending on type and area, homes over that period should fall another 10% to 20%. What is disconcerting is the perpetual buying by lenders (banks), Wall Street, government statistics, the National Association of homebuilders and the National Association of Realtors - all produce bogus figures to trick the public into buying. There is also a shrinking number of people eligible to be buyers. These facts at our disposal tell us that there is no housing recovery in progress and that the economy needs QE 3 ASAP. The Fed is trapped and has to print more money just to keep the game going sideways. That, of course, pushes inflation higher, which pushes gold and silver higher.

The stock market may be approaching old highs due to the Fed manipulating money, but there is no recovery on Main Street, nor will there be.

We do not know if you noticed, but the Dow has just gotten back to even after its 57% plunge of March 2009. In that correction we recommended sale of 14,200 with a bottom at 6,600. The actual bottom was 6,550.

The Fed also has to continue zero interest rates. As rates rise more money is needed to fund debt and that means the Fed has to print more money to offset the cost of borrowing at higher levels.

As far as building over 600,000 new homes a year we have been asking for more than five years how can builders be building with an enormous for sale inventory hanging over the market. Construction payrolls are at a 16-year low and quite frankly we do not know why there is any construction at all?

I have to chuckle every time I hear Obama’s folks and the MSM doing their best to spin the “recovery” numbers. This article hit the nail on the head. A true recovery can’t and won’t begin until Obama is out of the White House. The people with the money are not going to risk it without believing there is some sort of positive return, which, they’ve learned in the past 3 1/2 years, is not possible under Obama and his policies. I think Newt said it best when asked when the recovery would begin (paraphrasing): “The night of November 6th, when Americans know Obama has been defeated.”

Hang tight FRiends and don’t believe the massive spin that will be coming our way.

Everything Is Going To Be Alright?

Is the U.S. economy going to be okay? Well, if the only source you listened to was the mainstream media, you would be left with the distinct impression that the U.S. economy is heading toward a full recovery and that everything is going to be alright. Unfortunately, that is not the case at all."

First, the Stock Market values reflect mostly the high end money folks getting back into it for business purposes - make money (not a bad thing but it does not reflect the economy). They are in the know and most have no idea about investing...so they simply take our money.

If you look at the actual 70%-80% of folks that actually control the economy (thanks to our non Manufacturing, spending citizens) you could see that the economy is not really getting much better. We can’t spend our way into prosperity.

I love to watch CNBC daily and watch the majority of the folks there trying to spin the economy as getting better. If you watch closely, you will find a few that continue to disagree (wonder why). Guess they are not on their payroll.

Our economy is currently made up of almost 70% spending by citizens. Companies are making money alright mostly by overseas profits not by selling in America. That means that the actual situation in America is much worse than they let on. Nothing new here - politics at it’s best.

The government is printing money hand over fist trying to get the rest of us to spend like it was yesterday. Seems that it is not working as well as they hoped hence another call for QE3 and more inflation. Of course that is good for the government also since is lowers export costs and lowers costs of those holding US bonds. In the meantime, many are finding that inflation is taking away their livelihood.

We are in big trouble and most have no idea...

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