Yesterday I showed you 3 simple charts, and today I figured I’d show you 3 more. But first, a summary of today’s market action as told by Zerohedge, “Anyone who followed today’s trading action with a very distinct sense of summer of 2008 deja vu dread, where soaring crude led to just one thing, soaring stocks, they are forgiven, because this is precisely how one can summarize today’s action. In a day devoid of any news (except for the JOLTS survey of course, which confirmed the gaming of NFP payroll numbers), in which bonds did absolutely nothing, with the 10 Year trading in a very tight range just shy of 2.65%, it was all about low-volume levitating equities and the energy complex.
Equities, in a New Normal world in which neither fundamentals, nor corporate results, nor newsflow matter, and just central banks are relevant, did their usual thing, rising for the fourth straight day on the now traditional low volume, also pushing the NASDAQ to fresh 2013 highs.”
Rising oil prices? Red flag.
A large part of the reason that oil prices are rising is due to the debasement of the dollar.
Rising interest rates? Another red flag.
The FED hasn’t tapered, they’ve only talked about it. You could argue that the mere talk of tapering is the only reason interest rates are rising. If you chose to make that argument, I’d point to Japan, where they’ve greatly increased their money-creation-to-buy-government-debt. Instead of interest rates falling, more money creation has resulted in rising interest rates. It’s only a matter of time before the FED’s money creation results in rising interest rates rather than falling. That time seems to have already arrived in Japan, and it may not be too far off in the U.S.
Only a fool would argue that rising interest rates are going to help the real estate market improve. And rising gasoline prices are going to have a dampening effect on the economy as well.
Which leads to the 3 charts I’d like to share today, courtesy of the Federal Reserve of St. Louis. The first is the velocity of money, which measures how fast money changes hands. In good economic times, when the economy is robust, the velocity of money is higher. In times of recession, people become less “free-spending” and tighten their belts, so to speak. This results in holding money longer and the velocity of money falls. Of course, during the boom years of 2004 to 2007, the velocity of money was high, as shown in the chart below. and of course, when the financial crisis and “Great Recession” hit in 2008, the velocity of money fell off a cliff. And if you believe all the mainstream propaganda, you would assume that since 2009 and “Green Shoots,” that the velocity of money has rebounded nicely in the “recovery.”
Yet, take a look at the chart:
Maybe you see a recovery in that chart, but I sure as heck don’t.
The next chart is also courtesy of the Federal Reserve of St. Louis. This chart shows the employment-population ratio. Basically, in times of a robust economy, more companies are growing and they have a need to hire more workers. In strong economic times more jobs are available and a greater portion of the adult population is able to find decent paying jobs, thus the percentage of people working is higher (this is the employment-population ratio). In times of recession, companies stop hiring, and even are forced to layoff workers. Good jobs disappear. People can’t find work, and the result is that the percentage of adults who are working declines.
Of course, during the boom years of 2004 to 2007, the percentage of the population working was high, as shown in the chart below. And of course, when the financial crisis and “Great Recession” hit in 2008, the percentage of the population working fell off a cliff. And if you believe all the mainstream propaganda, you would assume that since 2009 and “Green Shoots,” that percentage of the population working has rebounded nicely in the “recovery.”
Yet, take a look at the chart:
Maybe you see a recovery in this second chart, but I sure as heck don’t.
The third chart is also courtesy of the Federal Reserve of St. Louis. This chart shows the raw number of new one family homes sold in the U.S. If you guessed that in times of a robust economy, more people have jobs, and are able to find good paying jobs, and thus would like to spend some of their income on buying a new home, give yourself a gold star. And if you also guessed that in times of recession, when fewer people are working to earn and income, and people aren’t as free-spending due to economic uncertainty, that fewer new homes are sold, you’re about as good (or maybe even better) than most traditionally-trained economists. (Of course you’re using common sense, which isn’t common, nor is it allowed in any of the formally accredited, ivory tower institutions of economic education)
So anyway, the point is that lots of new home sales happen during a strong economy, and much fewer new home sales occur during a weak economy. So it follows that during the boom years of 2004 to 2007, the number of new home sales went through the roof, as shown in the chart below. And of course, when the financial crisis and “Great Recession” hit in 2008, the number of new home sales fell off a cliff. And if you believe all the mainstream propaganda, you would assume that since 2009 and “Green Shoots,” that number of new home sales has rebounded nicely in the “housing recovery.”
Yet, take a look at the chart:
Maybe you see a recovery in this third chart, but I sure as heck don’t.
Need I remind you that these are “raw” numbers. They have NOT been adjusted for a rising population. The chart shows that the current level of new home sales is at about the same level as the lows of 1966, 1970, 1974, 1980, 1982, and 1991 – all of which were periods of recession.
Just for comparison, back in 1966, the population of the U.S. was a mere 196 million, compare to today’s number of 315 million. So 400,000 new homes sold back then to a population base of 196 million was much better than 400,000 new homes sold today to a population base of 315 million.
What housing recovery?
Take these 3 charts, and add in rising interest rates and rising oil prices.
Do you really think things are improving???