The cost of a Big Mac rose fairly consistently in line with the CPI from 1986 through 2002. Then what? It seems our friends at the BLS have been measuring inflation in a different way over the last ten years. Do you trust the BLS drones or your wallet?
It seems housing starts plunged by 16.5% during one of the biggest home sales months of the year. In case you hadn’t noticed mortgage rates are at all-time lows. In case you haven’t heard, home prices rose by 10% in the last year. In case you haven’t heard the MSM and NAR and Wall Street have been screaming about the tremendous housing recovery for the last year. As usual, I will provide a little perspective on this wonderful housing recovery. As you can see from this beautiful chart, the housing recovery has been driven by the construction of apartments by huge Wall Street funded corporations. Wall Street has also been buying up millions of foreclosed houses and turning them into rental units and driving prices skyward in the process. Ben Bernanke has provided the funds at 0% interest to his friends on Wall Street. With rental prices plunging due to oversupply, it should start to get interesting as the Wall Street titans exit stage left.
Take a gander at single family housing starts. These are houses that average Americans want to live in. In April 2013 there were a total of 57,000 single family homes started. There are 75 million households in the country. You will also notice from the chart that the only time in the history of housing where single family starts were lower than today was during the depths of the 1970-71 recession, the depths of the 1981 recession when mortgage rates were 16%, during the depths of the 1991 recession and during the financial collapse of 2008-09. They are 65% below the levels of 2006.
Is this REALLY a housing recovery?
In addition, unemployment claims surged and the average workweek hours plunged in April.
This tremendous economic information should be enough for another record high for the stock market. Party on Garth.
Submitted by Tyler Durden on 05/16/2013 08:45 -0400
We didn’t really need a confirmation that the economy was deteriorating and completely disconnected from the “market”, but we got it nonetheless. First, Initial Claims coming at 360K, on expectations of 330K, the worst print and worst miss in six weeks, confirming that weekly data is largely noise and that there is no sustainable downward trend. The May 11 weekly print adjusted and unadjusted were 360K and 318K respectively, virtually unchanged from a year ago at 373K and 325K, showing that in one year there has been essentially no progress, and that weekly initial claims of 350K is the new normal. Of course, the last week’s print was also revised higher from 323K to 328K, while initial claims also missed expectations of a round 3MM print, instead printing at 3009K.
The second negative economic number came from Housing Starts, which plummeted from a downward revised 1021K to just 853K, well below expectations of 970K, the biggest miss since January 2007 and validating the data we have shown previously in the collapse of lumber prices. So much for the “that” recovery too. The silver lining – the “no capital requiring” housing permits which rose from 890K to 1017K, which as all hedge funds know, is the easiest way to game interest in the system.
Finally, confirming that the Fed’s transmission channels are completely broken, and yet paradoxically giving Bernanke even more green light to continue building up future inflation and more QE, was CPI data, which declined from -0.2% to -0.4% in April, the worst MoM drop since December 2008 despite the monetary pumpathon from the Fed and BoJ. This is the second monthly miss in a row (and fifth of the last six). The YoY figures also misses +1.7% relative to a 1.8% expectation (ex Food and Energy) – also the lowest print since June 2011, although not very unexpected in light of the previously reported weak PPI data.. Much of the driver for this drop MoM and YoY are from a 4.3% drop in Energy prices MoM. That said, CPI would have been +0.1% if it was not for gasoline. Of course the bad is good mantra is in full swing as lower inflationary prints are providing ammunition for doves to push for more QE to defend their inflation goal. We wonder just how quickly oil prices will snap back once chatter of a taper is dismissed.
If crude inventories are the highest since 1989, why is the price of a barrel still $90? Demand always goes down during a recession. All of the energy independence gurus assure me that Bakkan Shale is going to make us a net exporter. The price of a barrel of oil in 1989 was $19. Today it is still over $90. According to our friends at the BLS, the CPI has risen by 88% since 1989. If everything was equal, the price should be $36 per barrel. It must be those evil speculators.
OR MAYBE, JUST MAYBE, the BLS, Federal Reserve and politicians have been lying about the true inflation rate. Do you really believe that inflation has averaged below 3% per year over the last 24 years? If inflation has really been averaging above 5% over the last 24 years, that would explain the current price. The fact that worldwide production has barely budged in the last 8 years might also explain the high price.
But don’t you worry. Energy independence is just around the corner.
Submitted by Tyler Durden on 05/01/2013 11:38 -0400
A month ago we highlighted the somewhat stunning reality of the real economy via the EIA’s detailed energy supply and demand data. The key takeaway was that we hoped this did not represent the true state of the economy since the data was so dismal. Fast forward to today and the DOE just released a much higher than expected build in crude inventories that took the stuffed-channel of oil products to all-time highs. The 395.3 million barrels is higher than the previous record in July 1990. There appears to be a number of factors at play – none of which are positive. There is a surge in supply due to the incessant harvesting of shale oil (which could have its own problems as we noted here). Second, we suspect there is a degree of ‘channel-stuffing’ occurring – if we pump it, they will buy – as producers and transporters are desperate to keep active and show incremental business (despite fading railcar loadings). But perhaps most important, as EIA data has shown, there has been a collapse in end demand for crude products not seen since the 1990s. Today’s surge in inventories appears to confirm demand remains subdued at best.
Chart: Bloomberg
Balloons and confetti falling on Wall Street today as the market hits a new all-time high. This is surely a sign the economy is fully recovered. Ignore the terrible economic data that comes out day after day. The only thing that matters is the stock market. Here are a few data points for some perspective on this glorious achievement:
S&P 500 – March 24, 2000 – 1,528
S&P 500 – October 9, 2007 – 1,565
S&P 500 – March 28, 2013 – 1,567
After 13 years, the stock market has advanced a total of 2.5%.
As a comparison:
Yippee for the new stock market record. It is surely a sign of great times ahead – just like it was on October 9, 2007.
