The Conditions For A “Perfect Storm” Are Rapidly Developing – Spiking Gas Prices, Food Prices, Interest Rates, Deteriorating Housing-Market, And Deutsche Bank Is On The Verge of Collapse
Spiking Gas Prices Have Joined Spiking Interest Rates As The Newest Threat To The Recovery
There was sparse monthly data reported in the last week. Consumer credit increased. Producer prices increased sharply due to the increase in oil prices in June. Consumer sentiment about the present increased. Consumer sentiment about the future, an element of the LEI, decreased even more.
The big story among the high frequency weekly indicators continued to be the spike in the price of Oil, so let’s start with that:
- Oil $105.95 up +$2.73 w/w
- Gas $3.49 down -$0.01 w/w
- Usage 4 week average YoY up +2.4%
This Market Collapse Will Shake The World Financial System
On the heels of another wild week of trading in global markets, today one of the top economists in the world sent King World News an exclusive piece warning that a key market collapse will shake the world financial system. Michael Pento, founder of Pento Portfolio Strategies, wrote this piece for KWN.
Pento: “The U.S. Ten-Year Note yield has been surging of late. Absent another recession, or renewed European debt crisis that threatens the existence of the Euro currency, or the Fed launching QEV; the yield should approach 4% by the end of this year. How much should we be concerned about yields rising to that level?….
Inflation Is Too Low? Are You Kidding Us Bernanke?
And over time, those increases really add up. An article by Benny Johnson details how the prices of many of the things that we buy on a regular basis absolutely soared between 2002 and 2012. Just check out these price increases…
Peanut Butter: 40%
A Loaf Of White Bread: 39%
Spaghetti And Macaroni: 44%
Orange Juice: 46%
Red Delicious Apples: 43%
Ground Beef: 61%
Chocolate Chip Cookies: 39%
So how in the world can Bernanke possibly come to the conclusion that inflation is too low?
Is he insane?
There are rumors that some of the biggest banks in the world are in very serious trouble. For example, Jim Willie (a financial writer who usually puts out really solid information) is insisting that Deutsche Bank is on the verge of collapse…
“The best information coming to my desk indicates that three major Western banks are under constant threat of failure overnight, every night, forcing extraordinary measures to avoid failure. They are Deutsche Bank in Germany, Barclays in London, and Citibank in New York. Judging from the ongoing defense from prosecution and cooperation (flipped) with Interpol and distraction of resources, the most likely bank to die next is Deutsche Bank. They are caught with accounting fraud and outright financial fraud over collateral shell games, pertaining to USTreasury Bonds, other sovereign bonds in Southern Europe, and OTC derivatives linked to FOREX currency contracts. D-Bank is a dead man walking.”
WE’RE ALWAYS ON THE VERGE OF ANOTHER FINANCIAL CRISIS: 3 MAJOR BANKS ARE UNDER CONSTANT THREAT OF FAILURE OVERNIGHT, EVERY NIGHT
Signs of a Housing-Market Falloff as Mortgage Rates Rise
The housing recovery is in for a major pause due to higher mortgage rates. It is not in the numbers now, and it won’t be for a few months, but it is coming, according to one noted analyst. The market has seen rising rates before, but never so far so fast; there is no precedent for a 45 percent spike in just six weeks. The spike is causing a sense of urgency now, a rush to buy before rates go higher, but that will be short term. Home sales and home prices will both come down if rates don’t return to their lows, and the expectation is that they will not.
“It has gotten a lot quieter, which is a shame because historically the rates are still very low,” said Ruth Griel with Prosperity Mortgage.
“It’s having a kind of chilling effect on the market,” said Mark Beardsley, a Realtor with Long and Foster. “What’s happening is we are pricing down. If they were qualified for 600, now we’re looking at 550 and below.”
JPMorgan Sees Further Pain in Mortgages If Rates Remain Elevated (Refinancing volume could fall as much as 40 percent)
JPMorgan Chase & Co. Chief Executive Officer Jamie Dimon warned investors that higher interest rates could lead to a “dramatic reduction” in the bank’s profits by eroding demand for mortgage refinancing.
The surge in 30-year home-loan rates to 4.46 percent at the end of June from 3.51 percent in mid-May caused second-quarter mortgage-fee revenue to decline 20 percent, the New York-based bank reported today. Refinancing volume could fall as much as 40 percent in the second half if rates remain elevated, Chief Financial Officer Marianne Lake told analysts on a call today.
Should we be concerned about these Real Estate breakdowns?
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Whether you rent or own Real Estate, the direction of Real Estate values is very important to the health of the overall economy! Unless you liver under a rock, I’m not telling you anything new when I share that the weakness in Home Construction stocks in 2005 and Real Estate back in 2006 had a big impact on the economy and stock markets in 2007/2008!
The rally over the past few years, after the huge declines in Real Estate, has been impressive to say the least. The 4-pack above reflects a variety of leading Real Estate index’s, ETF’s and one stock that is key to home improvements. What do they all have in common? After huge rallies they all formed bearish rising wedges with support lines being broke of late!
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On 5/3 the Power of the Pattern suggest “interest rates were ready to blast off and it could hurt bonds big time”! (see post here)
The Dark Side Of Soaring Rates: A Housing Market That Lost 16% Of Its Value In Under Two Months