Good Morning!
When in doubt, tell the truth!
--Mark Twain
|
|
There has not been much economic news lately. The stock market has been in a trading range and most folks are waiting to see if the markets will ratchet upward some or if the rally is losing steam. So we thought we would provide a few snippets of things we are seeing.
We are wondering if the swine flu will impact the holiday shopping season. A report released by the Center for Disease Control and Prevention in Atlanta yesterday says there have been 22 million cases of swine flu in the U.S. since April, and 4,000 deaths. They are predicting more since flu season has just begun. This may be a great season for the online retailers if shoppers stay away from malls.
If anyone is wondering how significant government intervention is they need look no further than the new report of mortgage applications. There was the expectation that the $8,000 first time homebuyers credit would expire at the end of this month. Consequently, mortgage applications plunged to a nine year low. Before that, the biggest drop in mortgage applications was in February just before the tax credit was signed into law. Congress just extended the credit until April so it will be interesting to see if housing can rev up without handouts.
Here are a few more housing snippets.
The median home price in the U.S. fell 11% in the third quarter, year over year, said a report from the National Association of Realtors. The median price came in at $177,900. The NAR also said that 30% of sales were distressed which means bargain hunting is in vogue.
And speaking of distressed sales, a total of 332,292 properties suffered foreclosure in October. That's a 19% annual jump and the eighth month in row in which foreclosures exceeded 300,000. According to the firm, one in every 385 U.S. households was in some form of foreclosure in October. Data is complements of RealtyTrac.
The dollar is the concern of most investors these days. The stock market, gold, oil and commodities are all being driven higher by the weakening dollar. For some reason, the U.S. is totally unconcerned but not so for other countries. Thailand, South Korea, Russia and the Philippines grabbed dollars this week to hold up the value of their currencies. The administration says they are committed to a strong dollar but have done nothing to help. Reason: we can only speculate that they are turning away from stabilizing the dollar because it helps exports and will help pull us out of the recession.
One of our favorite commentators, Marc Faber from Singapore is quite worried and had this to say:
"Central bankers and pundits seem to believe that they have averted the second Great Depression while ignoring the fact that more and more debt produces less and less GDP and fewer and fewer jobs."
One problem for the dollar for Americans is we are losing purchasing power. In the past year, the currency has lost about 12% which is sort of like inflation in reverse. This partially explains why even though home building is down, the price of building or remodeling is still quite high. Only labor has cheapened.
|
|
On a humorous note, Andy Warhol's silk screen of "200 One Dollar Bills" sold for a whopping $43 million at a Sotheby's auction this week. The 1962 work sold for four times the estimated sale price this week. Maybe dollar bills will start to get more valuable!
The Chinese have really been stimulating their economy this past year. The money supply has been growing to record levels. "China has embarked on a capital-spending bubble the likes of which the world has never seen," famed investor Jim Chanos claimed recently. "Buildings are going up with no tenants, roads are built with no traffic, shopping centers are built with no tenants or customers, yet they continue to be built and they continue to be planned." It will be interesting to see how their recovery will be implemented as the months go by. They do have cash and they are using it. So far, there is no evidence that they need to cash in our government Treasury bonds. And hopefully, they won't.
Sen. Chris Dodd unveiled a 1,136-page proposed bill for financial reform. Under the proposed bill, the Fed gets stripped of almost all its banking oversight and consumer protection powers. This is good since the Fed is just another private enterprise serving banks. If they eliminated the Fed altogether it would greatly stabilize our economy and stop the creation of so many bubbles that have resulted in recent years from poor monetary policy. So far the bill to audit the Fed is languishing in committee.
The bill would create three new government agencies:
One would be designed to regulate banks, essentially combining the current powers of the Fed, the Federal Deposit Insurance Corporation, the Comptroller and the Office of Thrift Supervision.
The second new agency -- the Agency for Financial Stability -- would be a "council of regulators" that would monitor systemic risk, enforce capital standards, limit leverage and even break up companies if Congress sees fit
The third agency would be called the Consumer Financial Protection Agency, which will save us from ourselves by regulating consumer mortgage, credit and investment products.
The SEC, for all its shameful behavior (think Bernie Madoff who "made off" with billions right under their noses), gets more power and a whole lot more money. Firms like us will be targets for much stricter oversight, regulations and huge, enormous fees! It will look good for the SEC since very few firms like us engage in fraudulent, Ponzi scheming activities. We leave that to the firms that are largely unregulated, handle their own cash and fly quietly under the radar screen. It looks like our industry will be one of the first to be hit with the "new normal" of regulations and government oversight.
By: Robert M. Vance, MS, ChFC, CLU, CFP®
© Vance Capital Management, LLC
|
|
Two shoe salespeople were dispatched to a remote African country. A few days later, their employer received telegrams from each. One read: "Get me out of here-no one wears shoes." The other read: "Send more inventory-no one here owns shoes."
Since we are on the subject of shoes...
One New York shoe store ordered a large consignment of shoes from a manufacturer in Buffalo. A week later the store manager received a letter saying, "Sorry, we cannot fill your order until full payment is made on the last one." The manager wrote back, "Please cancel the new order. I can't wait that long."
--Joey Adams
|
Thanks for reading another Vance Advance!
Working for your Wealth and Peace of Mind,
The Vance Capital Management Team |
|
