smart-money-report.com Blog

Greg Weldon of Minyanville reports some dismal U.S. home sales data:

The latest macro-data offered in the US is clear on this point, as demand for homes wanes and the supply of unsold homes soars. Data scalpel in hand, we carve away at the data released by the National Association of Realtors (NAR), and the National Association of Home Builders (NAHB).

• NAR, Existing Home Sales fell (-) 1.3% in the month of June, driving the year-over-year rate further into negative territory, posted at minus (-) 8.9%, down from the (-) 6.6% y/y decline seen in May, and the (-) 5.7% pace of y/y erosion witnessed in April.
• NAR, Median Existing Home Price up +0.9% y/y, the lowest in over a decade, as home price reflation vanishes into thin air, relative to the +6.0% y/y pace of home price appreciation posted just one month ago, in May.
• NAR, Median Existing Single-family Home Price up +1.1% y/y, evaporating from +6.4% y/y price appreciation posted in May.
• NAR, Existing Condo Sales down by a sizable (-) 5.5% during the month of June, taking the y/y rate of Condo sales to a deeply negative (-) 14.6% pace of decline, more than double the (-) 6.6% y/y pace of sales deflation posted in May.
• NAR, Median Existing Condo Price deflated by (-) 1.0% during the month, taking the y/y price change from positive to negative, as defined by the (-) 2.1% y/y decline posted for June, versus the rise of +1.9% y/y seen in May.
• NAR, Supply of Existing Condos for Sale rose to a whopping 8 months worth of sales, a NEW RECORD HIGH, up from 7.7 months posted in May, and almost twice as many as seen in June of last year, when the figure was pegged at 4.2 months.
• NAR, Supply of Existing Homes for Sale rose by a huge +3.8% during the month of June alone, taking the total supply of unsold existing homes to a NEW RECORD HIGH of 3.73 million. Further, the number of homes for sale spiked to 6.8 months worth of sales, up from the 6.4 months worth of sales posted in May and sharply higher than the 4.4 months worth of sales posted in June of last year.

Indeed, the number of Existing Homes for Sale measured in months worth of sales reached its highest level since July of 1997, and, more impressively, has risen by more than one million homes over just the last twelve months, a nominal increase of nearly 40%!!!

John Hussman thinks that investors are focusing on the wrong thing:

Last week’s GDP report was clearly consistent with stagflation pressures, with GDP growth coming below expectations and inflation figures coming in above expectations. In fact, that’s been the general trend of the bulk of economic reports in recent months.

Investors are tenuously sticking to the first story line – moderating growth with no risk of recession, moderating inflation, beliefs that stocks are reasonably valued, and hopes for an end to the tightening cycle. Yet the data are actually consistent with a second story line – emerging (though not imminent) recession risks, persistent “structural” inflation, rich valuations, probable contraction of profit margins, and an incoherent Fed policy that is likely to become even more incoherent in attempting to battle weaker economic growth and persistent inflation simultaneously (not that I believe Fed actions will be effective in any event).

While it’s reasonable to expect that the Fed will indeed pause at its next meeting, the more important issue is that investors are probably adopting the wrong story line here.

If and when they shift to the second story line, it probably won’t be funny.

Want to know what Robert Kiyosaki has been up to lately? He’s buying gold, silver, and oil. I’ve always thought that Kiyosaki’s biggest strength is his way with words. Here’s an example of why he doesn’t want to own dollars:

What smart investor wouldn’t gladly spend funny money to buy real money?

Heck, when you put it that way who wouldn’t agree?

IBD identifies 10 top-rated stocks with low p/e ratios. No. 1 on the list is Frontier Oil (FTO). We own it in the SMR Portfolio.

Barclay’s launched the new I-Shares GSCI Commodity-Indexed Trust (GSG).  It features 24 individual commodities.

Barry Ritholtz on what it means to have strong opinions, weakly held.

Steve Saville has some thoughts on gold:

We’d be buyers of gold below $600; we’d be enthusiastic buyers of gold at $540-$570; and we’d be mortgaging the final 40 acres and putting the proceeds into gold at $510.

$100 oil? Jim Rogers says, yes, maybe this year. A Merrill Lynch analyst says no way. Wall Street insiders are starting to agree with Rogers.

A very experienced silver investor sees three stages of a coming silver shortage:

Let’s see the stages of a shortage. One, pre-shortage – the users will have to wait 3 to 6 weeks extra for shipments. Then the prices can rise to $20-30/oz. Two, shortage – the users will wait an extra 6 weeks to 4 months for silver. Then the prices can rise above the old all-time highs of $50/oz. Three, super shortage – the users have to wait more than 4 months for their silver shipments. The price will range from $100 to prices you won’t believe. If this last scenario occurs, and gold has plenty of supply, the price of silver, at a minimum, will equal the price of gold. And my crystal ball tells me that silver can exceed the price of gold by a great deal.

You should be asking, how did I calculate the prices for the different stages? My calculation is very conservative. I only take into consideration the future deficits between the producers and users, which is running currently at around 50 million ounces annually. I also take into consideration that private investors have 400 million ounces in bullion and coins that they will sell in some stages. In stage one, pre-shortage, I think investors will be willing to sell 50 million ounces at a price between $20 to $30. Stage two, shortage, investors will sell 200 million ounces between $30 and $100. And the remaining 150 million ounces will be sold in stage three, super shortage and the prices will be truly shocking.

These prices are very conservative, in my opinion, because they don’t take into consideration the naked shorts, new investments, or those banks worldwide that sold silver certificates without real silver backing, only derivatives backing.

Van Tharp says that if you do it right, good trading and good poker have something in common — they’re both boring:

I’ve been researching personality types and trading and there are many types of traders who cannot tolerate the boredom of good trading. They must have some excitement. And if they don’t find it in the markets, then they’ll make it for themselves. The results are usually disastrous. And if you put all of your chips at stake whenever someone raises, no matter what kind of hand you’ll have, you’ll also get a quite bit of excitement (probably extreme disappointment) but it will probably end early with you being eliminated from the tournament.

The same goes for trading – how often do you throw position sizing fundamentals out the window and risk more than you should?