The Real Data Show The Real Economy Hit A Wall

The economy is melting down – the only support for the Propaganda Narrative of a “booming economy” is a rising stock market. Without a doubt Trump has ordered the Working Group on Financial Markets – AKA “the Plunge Protection Team” – to push stocks higher for now so insiders can unload.

The huge jump in credit card debt reported yesterday by the Fed was received as “good news” for consumer spending. However, this is typical technical color vomit served up through the mainstream financial media by Establishment “economists” and Wall Street. The likely explanation is that the average consumer is now forced to use revolving credit in order to maintain the current lifestyle.  This assertion is reinforced by the fact that the latest data from Transunion show that personal loans hit a record high in Q1 2018.

The homebuilder sector is in trouble. A Colorado-based credit union is now offering 0-percent down payment mortgages. Credit Union of Colorado will underwrite the 3% down payment FNM/FRE mortgage product and it will cover the remaining 3% of a home’s cost by giving the “buyer” an interest-free loan that is repayable at a future date or through a refinancing. The bank is charging 0.375% more for the mortgage than the rate for a 3% down payment conforming mortgage. The bank is betting the value of these homes will rise enough to cover the 3% down payment loan through a refinancing.  This is a de facto zero-down payment mortgage sponsored by the Government. 

I am certain that this product reflects the fact that banks are getting desperate for mortgage fees because the pool of borrowers who can qualify for FNM/FRE/FHA loans has dried up. The economy hit a wall in the last month or two and it’s going to crush the housing market. By the end of the summer it will be impossible for the NAR and the media puppets to blame low sales on low inventory.

In fact, recent reports from around the country show that home listings are soaring. This includes Seattle, where King County reported a 43% jump in single-family home listings in June, and Orange County (SoCal), which saw a 218% jump in home listings YTD. A 10% drop in contracts in Orange Country was also reported (The Orange County Register). In Denver, new rate of new listings exceeds contract signings now by a considerable amount.

The June employment report continues to show a “tight labor market.” This is utter nonsense given that over 95 million working age people are no longer consider part of the “labor force” using the methodology devised to compute unemployment by the Government. Again, “however…”

…the “tight labor market” narrative is not confirmed by help-wanted advertising. Help-wanted advertising is considered an accurate indicator of broad economy. The Conference Board has been tracking help-wanted advertising going back to 1919.  Formal tracking of help-wanted advertising shifted from tracking ads in printed media to tracking help-wanted ads online in 2005.

The Conference Board’s Help-Wanted Online Advertising for June declined 3.7% from May. May was down 2.1% from April. April was down 1.4%. The May and April declines were revised lower in the latest report from the original reports. New ads were down 4.6% in June from June 2017. The total number of ads were down 5.7% year-over-year for June.

The fact that help-wanted ads as tracked by the Conference Board are declining sharply month-to-month and year-over-year reinforces my view (and I’m not alone in this view) that the real economy – as opposed to the “fake news” economy reported in the mainstream media – is contracting.

A portion of the above commentary is an excerpt from the latest Short Seller’s Journal. My subscribers and I are making easy money shorting the home construction sector as well as other select stocks. This includes specific ideas for using put options plus market timing. You can learn more about this newsletter here:   Short Seller’s Journal information

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