Sunday, August 12, 2012

PREDICTION: Second Recession!...L&C

An easy interview reply on CNBC, CNN or any other financial news network is to remind the viewers that the market generally rises in an election year. This allows the "talking heads" on whatever station to bring up conflicting info like low volume, lack of interest by the retail investor(you and me)or any other chart or earnings report that would make one pause to think and doubt the present rally in the market. The host could mention Netflix or Chipotle both down hard this year as the guest would counter with Apple or GE. The station hopes that this will create among its viewers a creditability to maintain its rating power as a status quo force. This is the format. The problem is that it gives out only partial truths in these sound bytes. This is why, dear reader, I write my blog.
that you read here won't hardly ever be mentioned on the tube and if addressed, they will be glossed over as in the normal format of these shows. One of the most insightful is the container chart. You see, no matter what is moved or sold, it must be packaged and that package is usually cardboard. If the charts rises, the economy is growing. Conversely, if it declines, it is shrinking. Today, it is pointing lower.
the media is gushing that reports reflect that housing is finally at a bottom. This is very important because for a service economy. This would boost employment and the economy. These shows will flood you with facts like year-over-year for the first time, housing prices rose. They will point to a smaller inventory of homes on the market, less foreclosures and even Freddie Mac showed a profit with a positive guidance. This is what they won't tell you nor Obama in one of his reelection commercials.
Gary Shilling
of the Case-Shiller index, says we have a long way to go. He and I will remind you that the robo signing disaster has caused a slowdown in the foreclosure process. There are still 1.7 million homes waiting to come on the market. The flood will continue with the number of homes that are under water, just waiting for a price rise so the owners can get out. This could be as many as 24 million homes. There is also a little known housing price chart dating back to 1890 which began the explosion in housing prices and the recent decline is finally getting back to normal. You ask, what price is that? Another drop of 22% and that would reflect fair value in the trend line of housing prices.
Harry Dent
is famous for his correct predictions with his study of demographics. He sees another serious drop in housing which means the economy because the baby boomers are retiring and at best will seek smaller homes. There are 75 million in this age bracket.
Finally, another top analyst, David Rosenberg has presented a new twist which I find very insightful. He looks at the import/export numbers. He found a sharp decline which he says points to a recession. In April the number was 59  and every month since has declined to a recent 46 in July. He further correlates this to US exports and ISM new orders. He finds a high relation at 81%.
I hope this info can help you make smart decisions for your future.
LIARS and CROOKS:This week goes to President Obama who has repeatedly invoked executive privilege. He just changed the state welfare law to allow states to by-pass the work clause. He, along with most presidents have used this technique to circumvent Congress which according to our constitution will write the laws of the nation. The president's job is to enforce those laws not to create new laws like the above and when he changed the immigration law to allow children of illegals to become citizens. Does the constitution mean anything anymore?