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Canadian Deflation Update

2/24/2013

CLICK TO ENLARGE Stats-Can Charts

Summary of Key Monetary Policy Variables (CANADA)

Let's check in with Stats Can and see how the inflation-deflation picture is shaping up (red arrows since 2008). SOURCE

Inflation: Below target heading towards the flat line.
Manufacturer's Prices: Slumping well off the highs; producers unable to raise prices.
Wages: Permanent worker wages heading towards the 2011 lows.
Housing: Following the downtrend of the other price metrics.

Rogue Wave Turns Choppy

There are lots of bullish commentaries about how U.S. housing is leading a "recovery" out of the doom and gloom, But the housing charts tell a different story.

The last 4 years on the Case Shiller Home Index PRICE chart shows a lot of chop in a narrow channel when compared to the previous 10 year "Eiffel Tower" rogue wave, set up by interest rate price fixing and abandonment of appraisal fundamentals.

The Federal Reserve (FRED) chart of New Home SALES shows the same chop in a tight range but at new 50+ year lows.

The current Dow Jones Housing Index (ITB) and national home builder D.R. Horton (DHI) are selling off today carving out new 2 week lows as cash buyers take profit. (Lookup ITB & DHI at stockcharts.com)

Forecast: Strong headwinds, limited visibility with choppy seas ahead.

U.S. Housing Bubble 2.0

2/5/2013

Yahoo! Interview of David Stockman Feb 4, 2013

David Stockman the former director of the Office of Management and Budget in the Reagan Administration on the topic of whether the current "U.S. housing recovery" is one.

According to David Stockman:

“I would say we have a housing bubble...again.”
“We don’t have a real organic sustainable recovery because in a world of medicated money by the central bank, things aren't what they appear to be”
“It’s happening in the most speculative sub-prime markets, where massive amounts of 'fast money' is rolling in to buy, to rent, on a speculative basis for a quick trade,”
“And as soon as they conclude prices have moved enough, they’ll be gone as fast as they came.”

Bloomberg reports that: Blackstone (BX) has spent more that $2.5 billion on 16,000 homes to manage as rentals. It’s now the country’s largest investor in single-family homes to manage as rentals, with properties in nine markets. And Blackstone is joined by others like Colony Capital LLC and Two Harbors Investment Corp. (SBY) in trying to turn this market into a new institutional asset class.

Stockman argues the problem in housing is the two forces needed for a recovery, first-time buyers and trade-up buyers, are missing. With the combination of 7.9% unemployment and staggering student loan debt, he doesn't see a young generation of new home buyers coming into the market. And with baby boomers heading for retirement with less than adequate savings, he thinks they’ll be trading down with their homes, not up.

As for the "American Dream" of home ownership, Stockman argues the past model where the government was trying to get to 69% home ownership was a huge policy mistake that led to no-down payment loans, liars loans, and a degradation of lending standards. He says the government should have no dog in the hunt when it comes to ownership versus renting. “Let the market decide,” Stockman says.

February 4, 2013 Lauren Lyster of Yahoo! Daily Ticker Interviews David Stockman: Full text and 4.59 minute video interview here.

Canadian Deflation Update

U.S. Housing Update

U.S. Housing Bubble 2.0

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