Tuesday, May 17, 2011

Poor Data Undermines Fed Pumping Effort

Well, there's nothing the Federal Reserve can do about a collapsing economy, after all.

Data from the housing sector today suggests that despite pumping literally trillions into the US financial system, the original canary in the coal mine, residential real estate, is still lying prone on the operating table, unable to move, dead as a doornail. And yet, the Fed and the federal government still insists that spending more money (creating more debt) is the ultimate fix-all.

One has to wonder just when the American public will have had enough of this disaster in centrally-planned economics. The banks have been spared, though they remain among the worst investments listed. The government has exceeded the debt limit (yesterday), and is now raiding the retirement funds of public employees. The federal employees are the first to be robbed. Next will be state pension funds, so you teachers out there, adjust your lifestyle pans accordingly as you're about to receive a very unwanted haircut.

The numbers coming from the real estate sector can be characterized as nothing less than a national disaster. Housing starts and building permits fell to unprecedented lows at 523,000 and 521,000 (annualized), respectively. The numbers for housing starts (new homes) represents a 23% decline from a year ago, while the permit figures for new home construction fell 4% from March.

All in all, it's simply horrible environment in which to be building new homes. The level of new home construction has been at the lowest level since the government began keeping track and continued to decline. There's simply too much shadow inventory being held onto by the banks, who don't want to realize losses on the many homes that are either already REO, in the foreclosure process or where the homeowner is already more than three months behind.

The market for new homes is absolutely the thinnest it's ever been and it doesn't appear to be getting any better.

Adding to the ongoing economic catastrophe were figures on industrial production - flat for April - and capacity utilization, which may have peaked in March, at 77%. April's figure came in at 76.9%, and will likely be revised lower.

Thus, we have a stalled industrial sector, a dead residential housing market, slow to no job creation and the recession was supposed to have ended more than two years ago.

Face it, folks, your government is not in favor of prosperity for the average American. If congress and the administration were serious about jobs and growth and not preoccupied with fighting wars on drugs and terror and meddling into the affairs of other countries, none of this would be happening. We've been sold out, lied to and yet there are fewer and fewer voices of protest. One supposes that Americans have had enough, yet are so worn down by joblessness, violence, foreclosures, regulations and intrusions that they haven't got the energy to complain.

Wall Street is feeling the stress as well. The Dow Jones Industrials were down a nifty 170 points in the early going, but, as usual, when the Fed money comes into play, reversed course and finished with a smaller loss. The other indices were down as well, except the NASDAQ, which posted a fractional gain, probably from being so viciously sold off the prior two sessions.

The "go away in May" crowd seems to have it about right. During the month - today being the 12th trading day in May of 21 total, so we're past the mid-point - the NASDQ is down 90 points, the Dow is off 330 and the S&P has shed some 34 points. It's not a great amount, yet, though it is already a 2-3% decline. Slow death. The S&P has been down eight of the 12 sessions in May. The correction is underway.

Dow 12,479.42, -68.95 (0.55%)
NASDAQ 2,783.21, +0.90 (0.03%)
S&P 500 1,328.98, -0.49 (0.04%)
NYSE Compos 8,333.07, -3.52 (0.04%)

Declining issues danced past advancers, 3815-2713. NASDAQ recorded just 28 new highs and 83 new lows, the second day in succession that the lows have been on the high side. The NYSE continues to resist flipping negative, as new highs outnumbered new lows, 80-47. Volume was moderate, another ominous signal on a down day.

NASDAQ Volume 2,190,797,000
NYSE Volume 4,459,555,500

WTI crude dropped 46 cents, to $96.91, though it traded significantly lower for much of the session. High gas prices, in spite of slack demand and 15% lower crude, persists, however, with the US average at $3.94, down only a few cents from its peak. Just a few hours ago, a group of Democratic Senators called for an FTC probe of oil refiners, suggesting that price-fixing has occurred. Rest assured that it is nothing more than a dog-and-pony show as the senators are merely grandstanding, knowing full well that their campaigns are largely financed by these very companies.

The hit squad was out in full riot gear in the metals markets, sending gold down $4.80, to $1485.00 and sending silver below $33/ounce, before it rebounded to post a gain of 35 cents, currently at $33.95. It should be apparent to all that the forced de-leveraging in precious metals is not about to abate, and prices could tumble quite a bit further, especially where gold is concerned.

A discussion is underway in Washington as to whether it would be prudent to sell some of the gold held at Fort Knox to keep the government running. Presidential candidate Ron Paul feels it's a good idea, though he faces opposition, notably from President Obama. The US gold reserves are valued presently at roughly $370 billion.

All along, the government sits back and watches in a silent stupor, as the United States of America, and its constitution, is slowly ground to dust. And not a word of protest was heard.

No comments: