March 28, 2012
Watching the financial channels yesterday, I could not tell you how many times the word “recovery” was used. Sure, the stock market is up, but that is compliments of the Federal Reserve. Since the 2008 financial meltdown, we’ve had a money printing extravaganza. There was QE1, QE2, Operation Twist, dollar swaps with Europe and 0% interest rates (on a key rate) through 2014. Of course the stock market is up, it loves free money. Wall Street may have recovered, but Main Street is still in the dumper. (Actually, Wall Street has just broken even since the 57% plunge it took up to March of 2009.) Professional commodities trader Dan Norcini said, this week, on his blog, “. . . the FED IS TERRIFIED OF RISING INTEREST RATES.” Norcini explains, “. . . the US federal debt is at banana republic levels and any, I repeat, any rise in interest rates, will suck more of the incoming federal revenue into servicing the cost of this debt (paying the interest on it), leaving less for the spendthrift class to buy votes with. Bernanke and company cannot afford to have a stock market that stops moving higher because if and when it did, the entire facade of an economy on the mend would come crashing down with it.” (Click here to read the complete Trader Dan post.)
The Fed may have juiced the stock market with cheap money and ultra-low interest rates, but the housing market is dead. According to the latest Case-Shiller Home Index, prices are down—again. The latest data, released yesterday, reveals prices in 17 of 20 cities surveyed were down. Atlanta home prices plunged by a whopping 14.8% year-over-year. The best year-over-year increase was turned in by Detroit, with a paltry 1.7% increase. According to the Case-Shiller report, “As of January 2012, average home prices across the United States are back to the levels where they were nearly a decade ago – in early 2003. Measured from their June/July 2006 peaks through January 2012, the peak-to-current decline for both the 10-City Composite and 20-City Composite is 34.4%. January’s levels are new lows for both Composites in the current housing cycle.” (Click here for the complete Case-Shiller press release.)
I see no recovery for people on Main Street as far as housing is concerned, and neither does economist John Williams of Shadowstats.com. His latest report, last week, focused solely on housing and construction. The first line in his report says it all, “The construction industry remains distressed in the extreme, clobbered by collapsing broad economic activity from 2006 into 2009 and by three subsequent years (and counting) of no recovery—just economic stagnation.” (Click here to go to the shadowstats.com home page.) You want to see what construction spending on payrolls looks like on a chart? Here’s the ugly picture, compliments of Shadowstats.com.
This article was posted: Wednesday, March 28, 2012 at 2:31 am