There was a tremendous amount of volatility in the stock market this week with the NASDAQ entering correction territory and then rebounding. Is this just a blip on the radar? Or is the biggest bubble ever running out of steam? In this episode of the Friday Gold Wrap podcast, host Mike Maharrey talks about it. He also digs into what’s going on in the housing market and what it’s telling us about the broader economy.
Last month we reported that mortgage delinquencies soared at a record pace in April. Well, things have gotten even worse since.
The overall delinquency rate for mortgages on one-to-four-unit residential properties spiked by nearly 4% in Q2, reaching 8.22% by June 30, according to the Mortgage Bankers Association’s National Delinquency Survey. The jump in the delinquency rate was the biggest quarterly rise in the history of the survey.
Last week we reported on a looming wave of evictions on the horizon as the economic consequences of the coronavirus-induced government economic shutdowns begin to rear their ugly heads. Now for more gloomy news, there are also signs of trouble in the mortgage markets.
Mortgage delinquencies soared at a record pace in April. And that was toward the beginning of the pandemic’s economic impact.
Here is a summary of some of the significant economic data/news that came out last week.
Third-quarter 2019 new orders for durable goods remain on track for a second annual decline. August 2019 Real New Orders for Durable Goods showed a monthly gain of 0.2% [1.0% ex-Commercial Aircraft], but an annual decline of 4.9% [down by 2.1% (-2.1%) ex-Commercial Aircraft].
Pending home sales hit the lowest level in nearly five years in November, a sign that the US housing market will continue to get uglier in the near future.
Not too long ago, we reported that the air was starting to come out of housing bubble 2.0. As just one example, home sales in California hit the lowest level in a decade. And it’s not just California.
Now we’re seeing more signs of trouble. Pending home sales tanked in November, according to data released by the National Association of Realtors last week. The Pending Home Sales Index plunged 7.7% compared to November 2017, the biggest year-over-year percentage drop since June 2014.
Last week, we reported that it looks like the air is coming out of housing bubble 2.0. Now it appears the auto bubble may have also popped.
Yesterday, GM announced plant closures and layoffs due to sluggish sales. The big automaker said it plans to shutter five North American factories and slash around 14,000 jobs.
Peter Schiff put it pretty bluntly in a podcast last week. We don’t have a booming economy. We have bubbles. And it looks like the air is starting to come out of some of those bubbles. We see signs of trouble, particularly in interest rate-sensitive sectors such as real estate. As just one example, home sales in California have hit the lowest level in a decade. And it’s not just California. We’re seeing declines in many of the “most splendid housing bubbles” in America. Even more troubling is that we’re seeing these tremors and interest rates aren’t historically high.
But they are rising quickly. According to an article in Wolf Street, they may soon hit 6% and that could be the real tipping point.
As the stock market was tanking last month, Peter Schiff said a recession is obviously coming. Now things have calmed down a little bit and everybody seems convinced October was just a bad month — a needed correction. But as Peter has been saying, there are some fundamentals everybody is ignoring that look really bad. The housing market, in particular, is showing signs of trouble. In fact, we don’t have a booming economy; we have a bubble.
In an article published on Seeking Alpha, Mad Genious Economics provides an in-depth breakdown of an economy rolling over, focusing specifically on housing and auto markets, the trade war and banking.
Peter Schmidt recently wrote two article highlighting the fatal conceit of PhD central planners who populate the world’s central banks. You can read those articles here and here. But central banking is not the only place you find people suffering from fatal conceit and the delusional notion that they are smart enough to micromanage the economy. You find a lot of these people in government offices as well.
For instance, consider New York Gov. Andrew Cuomo. Before he moved into the governor’s mansion in Albany, Cuomo helped orchestrate the 2008 housing crash. Schmidt highlights Cuomo’s role in that horror story in the following article.
Earlier this month, Peter Schiff wondered out loud if the twin deficits of government budget and trade could spark an October surprise. The month isn’t over yet, but it certainly hasn’t been a good one for stock markets.
The Dow is down 3.8% in October. And it’s the best performing of the stock indexes. The S&P 500 is down about 4.7% on the month. The NASDAQ has dropped 7.4%. Dow Transports have plummeted 8.3%. And the Russell 2000 has suffered a 9.2% decline. Now, if you want some good news, look at gold. It’s up about 3% this month. But all in all, there is a lot of gloomy news on Wall Street.
All of this doom and gloom led Peter to ask an important question in his latest podcast. How many canaries have to die in the coal mine before the mainstream wakes up?