Best of the Week
Most Popular
1.The Trump Reset, US Empire's Coming Economic, Cyber and Military War With China (2/2) - Nadeem_Walayat
2.Now Is the Time to Buy Gold - 5th Jan 17 - John Grandits
3.CIA Planning Rogue President Donald Trump Assassination? Elites "Manchurian Candidate" Plan B - Nadeem_Walayat
4.The Trump Reset - Regime Change, Russia the Over Hyped Fake News SuperPower (Part1) - Nadeem_Walayat
5.Most Popular Financial Markets Analysis of 2016 - Stock Market Crash Postponed Again - Nadeem_Walayat
6.No UK House Prices Brexit Crash 2016 Despite London Weakness, Forecast 2017 - Nadeem_Walayat
7.President Trump Understands the NSA, CIA... LIE, America's Intelligence Agencies Crime Syndicate! -Nadeem_Walayat
8.President Donald Trump's 2017 New Year Message, BBC Fake News, Was 2016 a Dream? - Nadeem_Walayat
9.Major Stocks Bear Market Still Looms - Zeal_LLC
10.Biased 2017 Forecasts - Debt, Housing and Stock Market (1/2) - James_Quinn
Last 7 days
United States Common Sense - 2017 - 23rd Jan 17
Is Dow 20,000 a Bridge Too Far? - 23rd Jan 17
The New Gold Rush Of 2017! - 23rd Jan 17
HBO HOMELAND Bet on HIllary Clinton Winning US Election and LOST - 23rd Jan 17
Stock Market New Highs For 2017? Yes, But When Do I Enter? - 22nd Jan 17
Active vs Passive Investing: And the Winner Is ... - 22nd Jan 17
The Epidemic of Bad Ideas - 22nd Jan 17
Gold Futures Prices Looking Bullish - 22nd Jan 17
Time for Crude Oil Price Drop below $50? - 21st Jan 17
AI and Robotics - We Are All Low-Skilled Workers Now - 21st Jan 17
The Trump RESET Starts on US Presidential Inauguration Day 2017 - What to Expect - 20th Jan 17
Will the CIA Assassinate Rogue President Donald Trump Like JFK? - 19th Jan 17
Bonds, Dollar, Stocks, Gold, Silver Major Markets at Turning Points - 19th Jan 17
Populism; the Danger? What About Debt? - 19th Jan 17
Gold Price 50-DMA Breakout - 19th Jan 17
Turkey, 'Axis of Gold' and End of US Dollar Hegemony - 19th Jan 17
The Most Important Market Chart on the Planet - 19th Jan 17
Trump Deficits Will Be Huge - 19th Jan 17
Stock Market Trading Patience Pays Off with CHK Using Momentum Reversals - 19th Jan 17
Gold - How to "Buy Low and Sell High" Like a Pro - 19th Jan 17
State of the Global Stock, Financial and Commodity Markets Report 2017 - 19th Jan 17
The Hunt for Russia's Next Enemy - 18th Jan 17
Returning Gold Bulls - 18th Jan 17
Biotech Breakthrough Could Create A $11.4 Trillion Opportunity - 18th Jan 17
Bitcoin and Gold - Outlook, Volatility and Safe Haven Diversification - 17th Jan 17
Stock Market Uptrend on Borrowed Time - 17th Jan 17
The One Stock to Retire On - 17th Jan 17
Trump anti-Communist Counter Revolution - 17th Jan 17
US Stock Market Update as the Trump Inauguration Approaches - 17th Jan 17
The American Crisis - Common Sense 2017 - 17th Jan 17
Obama Leaves, Hope Arrives, Will Stupid Stay? - 17th Jan 17
Damage Inflicted by Precious Metals Manipulation Is in the “Multi Billions” - Keith Neumeyer - 17th Jan 17
Gold Price Forecast 2017 Update - Video - 17th Jan 17
The Story of the U.S. Regime Change Plan in the Philippines - 16th Jan 17
Gold Price 2017 Trending Towards $1375 as Forecast - 16th Jan 17
'Deep State' CIA Director States We are Not NAZI's, Warns Trump Does Not Understand Russian Threat - 15th Jan 17
UK House Prices Forecast 2017 - Crash or Bull Market? - Video - 15th Jan 17

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

State of Global Markets 2017 - Report

US Money Supply Plunges At 1930's Pace And Housing Index Dives

Economics / Deflation Jun 26, 2010 - 09:23 AM GMT

By: Sol_Palha

Economics

Best Financial Markets Analysis Article"Advice is what we ask for when we already know the answer but wish we didn't." ~ Erica Jong

The M3 money supply in the United States is contracting at an accelerating rate that now matches the average decline seen from 1929 to 1933, despite near zero interest rates and the biggest fiscal blitz in history. The M3 figures - which include broad range of bank accounts and are tracked by British and European monetarists for warning signals about the direction of the US economy a year or so in advance - began shrinking last summer. The pace has since quickened.


The stock of money fell from $14.2 trillion to $13.9 trillion in the three months to April, amounting to an annual rate of contraction of 9.6pc. The assets of institutional money market funds fell at a 37pc rate, the sharpest drop ever. "It's frightening," said Professor Tim Congdon from International Monetary Research. "The plunge in M3 has no precedent since the Great Depression. The dominant reason for this is that regulators across the world are pressing banks to raise capital asset ratios and to shrink their risk assets. This is why the US is not recovering properly," he said.

The US authorities have an entirely different explanation for the failure of stimulus measures to gain full traction. They are opting instead for yet further doses of Keynesian spending, despite warnings from the IMF that the gross public debt of the US will reach 97pc of GDP next year and 110pc by 2015. Full story

Well, we can't say we did not warn everyone; for a long time now we have been stating that this recovery is all smoke and mirrors. Worse yet we proved that the Dow has not put in one single new high in the past 52 weeks in our article titled Dow's new highs, all lies. When priced in other commodities such as Gold, the Dow is in a clear down trend.

We also stated that the housing recovery was all humbug and unemployment levels would remain at lofty levels for years to come. High unemployment coupled with a terrible housing market is cause for concern. The housing market index dived 17 points indicating that the small uptick was mainly due to the $8000 tax credit which has now expired.

The housing market index dived to 17 in June from 22 in May, the NAHB reported.

All three components of the index fell in June, and home builders were more discouraged in all four regions of the country. "The recovery in home building will be slow due to the elevated level of unemployment, tight credit conditions, high rates of homeowner and rental vacancy rates and the high level of homes available for sale," wrote Gary Bigg, an economist for Bank of America Merrill Lynch. The index was lower than the 21 that was expected by economists surveyed by MarketWatch, and was the lowest since it hit 15 in March. The five-point drop was the most since November 2008. Full Story

Then on Wednesday it was announced that new home sales fell twice as much as was expected.

The plunge by nearly a third in new home sales to an all-time low annual rate of 300,000 reported by the Commerce Department was a "shocker" even though a decline had been expected after the expiration of the first-time home-buyer's tax credit on April 30, said Harm Bandholz, chief U.S. economist at Unicredit Markets.

"Sales fell almost twice as much as expected;" he said, and what makes it "even more concerning is by far the biggest public support for the housing market is still in place." The government continues to insure or guarantee nearly every mortgage in the U.S. through the Federal Housing Administration, Fannie Mae and Freddie Mac.

"Housing could be in for a double-dip downturn," said Sung Won Sohn, economics professor at California State University Channel Islands. The abysmal performance of home sales since the tax credit expired shows "how dependent the fledging housing recovery is on government help" and is forcing the Fed to be more cautious about withdrawing support, he said. Full Story

If one combines the above factors with a rapidly contracting M3 money supply, we have the perfect recipe for a disaster. Double dip recession is not what these chaps should be worrying about; the term they should possibly be thinking of is depression.

Conclusion

We are going to repeat what we have been saying for the past few years; avoid the housing. A better option would be to use pull backs to open up positions in Gold and or Silver; if you already position then use strong pull backs to add to them. Investing in precious metals and various other commodities makes more sense than throwing money into real estate; the only exception being good farmland.

Where do we people go if not towards the perfection of our own illusion? ~ Sorin Cerin, philosopher Random Musings

Wall Street the New Robber Barons

"If the wind will not serve, take to the oars." ~ Latin proverb

The story below provides yet another strong indication of why the markets are behaving strangely. Perhaps this partially accounts for the fact that the Dow has put in 37 new highs on what if one is polite one will call terrible volume. The SEC is allowing all the big guys to legally rob the small player. One wonders what purpose the SEC serves other than helping crooks perform even better. We are sure that many big banks are using this loophole to rob the average Joe. So banks are allowed to borrow money for almost nothing, then they use this to trade instead of lending it out, and now they can use super fast computers to gain an even bigger advantage over the smaller player. No wonder banks account for roughly 75% of the daily trading volume.

We wonder when the average Joe will stand up and demand real change from the crooks in Washington, the banker's concubines. The SEC is a Joke, they only attempt to do something when it's too late and even then they drag their feet.

On a separate note, our adult index clearly indicated the decline of morality as we know it and the "I will do anything for the money syndrome gaining traction" years in advance. The adult index has been in a steep uptrend for several years now. Expect this situation to worsen with the progress of time, until a point is reached where the masses finally take a stand and demand change instead of just asking for it.

Some fast-moving computer-driven investment firms are getting an edge by trading on market data before it gets to other investors, according to market players and researchers who have studied the trading.

The firms gain that advantage by buying data from stock exchanges and feeding it into supercomputers that calculate stock prices a fraction of a second before most other investors see the numbers. That lets these traders shave pennies per share from trades, which when multiplied by thousands of trades can earn the firms big profits. Critics call the practice the modern day equivalent of looking at share prices listed in tomorrow's newspaper stock tables today.

"It is a rigged game," Sal Arnuk, co-founder of brokerage firm Themis Trading, said Wednesday at a Securities and Exchange Commission roundtable discussion in Washington, D.C., referring to the trading activity, which some call "latency arbitrage."

While legal, the practice pushes the envelope of what is fair, critics say, and raises questions about the advantages some fast-moving traders are gaining in the market. The SEC roundtable convened executives from trading centers and firms across Wall Street as the agency continues to probe high-frequency trading and the growth of dark pools, trading venues where trades take place away from the main exchanges. Full story

"We do not quit playing because we grow old, we grow old because we quit playing." ~ Oliver Wendell Holme

by Sol Palha

www.tacticalinvestor.com

Sol Palha is a market analyst and educator who uses Mass Psychology, Technical Analysis and Esoteric Cycles to keep you on the right side of the market. He and his partners are on the web at www.tacticalinvestor.com.

© 2010 Copyright Sol Palha- All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2016 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

Catching a Falling Financial Knife