Wednesday, July 20, 2011

Head Spin Wednesday- Housing is a Bust, Again, as Existing Home Sales Plunge; Gang of Six Plans to Raise Your Taxes and Cost of Living; M1 Over 12%, While M2 Surges to Third Highest Ever; All-in-One News; Much More

Update 1: The final results are in. Over 58% of current Netflix customers will be heading for the exits in  September/October. We expect a full 20% of the 58% that say they will leave to actually stick around but downgrade their service. 15% are undecided. That still leaves almost 40% reduction in customers. Should be worth a P/E ratio of 200x earnings if you ask us. Just in time for insiders to dump a few million more shares on the unsuspecting retail investors.

Main Article
With all of the hoopla and boulder dash over the debt ceiling drama, few people really understand the reason we need to even discuss it in the first place. The fact that the debt ceiling has been increased time and time again, should be sounding the alarm bells that something is just not right - certainly not a sustainable economic policy. The few individuals that understand what raising the debt ceiling really means also understand that raising the debt ceiling means devaluation of our currency - and devaluation of currency means inflationary pressures and in turn, higher gold and silver prices.

Strong arguments can be made on both sides of the issue and we're not here to beat a dead horse but in summary: not raising the debt ceiling means a certain technical default will follow on our debts which in turn bring about the destruction of the economy as bond yields skyrocket and the economy implodes; on the other hand raising the debt ceiling means more fiat money, more inflation, higher gold prices, among a whole host of other unintended consequences and not of the good variety. Both outcomes at this point in time will end up in disaster. Which is why gold has been so strong lately. Everyone knew that the debt ceiling would be raised, on way or another. And it won't fix a thing - except raise your cost of living and your taxes.

Just yesterday, we almost fell out of our lounging chairs when we saw "the markets" rally and the bimbos on CNBS celebrating over "better than expected" (there's that word again) housing starts. Savvy investors aren't fooled in the least.

Today, we got the existing homes sales data and if we were to use one word to describe it, it would be ugly. Not only did June existing home sales plunge to an 8 month low of 4.77 million on expectations of 4.90 million, there was a record surge in order cancellations from 4% in May to 16% in June - that's nearly 1 in 5 homes that were cancelled in the middle of the transaction. Oops.

Needless to say, that plunge in sales bumped the inventory up 3.3% to 3.77 million units to a 9.5 month supply of homes at the current pace. If we extrapolate the numbers, not only are we looking at a shadow inventory of at least 2.2-2.5 million units that are itching to get on the market, but the long cycle on housing is looking like there won't be a bottom for another 7-10 years. We have to wonder how the factory conveyor belt home builders (read: KB Homes, Toll Brothers, et al) will be able to survive that long if they stop building yesterday tomorrow and allow inventory levels to drop to more normal ranges. Housing? Let's call that part of the American Dream dead money. Next.

We've discussed "retail sales" in detail here before and we have told our readers to pay particular attention to the M1 money supply which has increased an incredible 12% YoY. Needless to say, if retail sales don't at least come in above that, it's a wash. Today, we present to you another great article from ZeroHedge that describes how the third largest weekly M2 spike in history will predict a spike in "economic indicators." Notice how the M2 chart looks like the earthquake chart of recent? That's no coincidence. A must read for everyone of every level of financial knowledge. It should alert you to the fact that the "economy" is nothing but a hoax, in case you weren't aware.

The news wouldn't be over unless we mentioned Greece, the PIIGS, the U.S. and Fukushima all in a single sentence. Here we go. The big day for Greece is arriving as bond yields remain elevated across the board for the PIIGS, while the word insolvency is added to the ECB's vocabulary and bond vigilantes begin to move in early on the U.S. debt crisis, which is now officially emitting more radioactive material than Fukushima.

And that's all the news you need to know. We'll be back later with more updates when we return from a business meeting.


  1. boulder dash?
    Maybe balderdash, eh?

  2. Maybe he really meant Boulder Dash

    Loved that game on the C=64. ;)