A Dead Cat Bounce: Your Real Estate Values, Employment Stats.& The Federal Reserve,

Dead Cat Bounce

In testimony before Congress last week, Ben Bernanke lifted the Fed's skirt and gave us a glimpse of the disasters now sweeping through the U.S. economy. 
To my knowledge, he was not asked nor did he volunteer whether or not a dead cat bounced, but there were 3 other bombshells he surely did NOT talk about.

 

#1. What's CAUSING the economy to sink?

The stock market has not yet crashed.

Interest rates have not yet surged.

Gasoline prices have not skyrocketed.

There has been no recent debt collapse, market shock, or terrorist attack.

So what is the invisible force that's suddenly gutting the housing market, driving consumer confidence into a sinkhole, and killing the recovery that Washington was so avidly touting in this Summer of Recovery?

Bernanke didn’t say but the answer is clear enough: The recovery had very little substance to begin with. Rather, it was a dead cat bounce!  An illusion bought and paid for with massive bailouts, stimulus programs, borrowing and money printing.

Put another way, the recession never really ended. Yes, we saw some growth in GDP. And yes, thanks to that growth, some companies are still reporting better earnings — the news that spurred a rally in the stock market last week. But at the core of the economy, the fires that started the recession are still burning intensely.

#2.The U.S. Housing Market Is Now LOCKED Into a Chronic, Long-Term Deflation

Housing starts — traditionally the most important measure of the housing industry — is still a disaster zone, despite the latest spin. If viewed beginning in January 2006, they suffered their worst plunge in recorded history — from an annual rate of 2.3 million to a meager 477,000 in April 2009. Thus...

In just three years, 79 percent of America's largest industry, impacting more Americans net worth & American jobs than any other was wiped away.

Then, despite a series of government agency programs to shore up the industry ... plus something like $1.25 trillion poured in by the Fed to buy up mortgage-backed securities ... plus a big tax credit for new homebuyers, housing starts perked up ever so slightly: They recovered to an annual rate of 612,000 in January of this year.

It took me a day or two to look up the numbers and fiqure it out, but this recovery was so small, it retraced just 7.5 percent of the prior fall.
In other words,
Even after massive government efforts, and even at the highest point in their recovery this year, the housing industry recouped less than 1/10th of its historic three-year bust from 2006 to 2009.
Worse, existing housing value has now resumed its deflationary decline.

The most alarming factor is that widespread reports of "strategic defaults" on home mortgages have returned.

These are defaults by homeowners who can afford to meet their monthly mortgage payments, but have deliberately decided to stop paying. Their home is now worth much less than they owe and recovery of value is nowhere in sight. They know their bank won’t or can’t get around to evicting them for as long as two years, (in many states), allowing them to live in the house cost-free. They also know this tactic can give them tens of thousands of dollars in extra cash. So they're defaulting en masse and getting away with it.

To add fuel to this fire, many sellers bought in on the bounce produced by the tax credit driven sales, believed they were seeing price stabilization and placed their properties on the market this spring, only to languish as those buyers dried up.

End result:
• Market inventories are once again ballooning as far as the eye can see ...
• Bankers who would rather cut their wrists than finance new homes, and ...
• A new slump in housing that's worse than even some pessimists were expecting.

#3. Despite his now-famous quote that this is "the worst labor market since the Great Depression," Bernanke failed to reveal that...

Official Government Data Continues to GROSSLY Understate the Magnitude of Unemployment
Bernanke did not mention that the percentage of long-term unemployed in America is the worst it's been since the government began keeping records in 1948. Two facts availalable from The Heritage Foundation's website:

• Fact #1:  46.2 percent of the unemployed — have been out of work for 27 weeks or more. That's DOUBLE the worst level ever recorded and TRIPLE the peak level seen in five of the past six recessions.

• Fact #2: On average, America's unemployed have been out of work for 35.2 weeks, also the highest on record.

Bernanke did not remind Congress that based on the government's own broad measure; the true unemployment rate in the U.S. is not 9.5 percent. It's 16.5 percent — or seven full percentage points more than the figure anyone in government ever refers to.

This broader measure includes workers seeking full-time employment, but temporarily settling for lower paying part-time jobs. Plus, it's supposed to also include "discouraged workers" — those who have given up looking for work because there are no jobs to be found. During the Clinton administration, discouraged workers were "redefined" to EXCLUDE those who had been out of work for more than a year — and that definition continues to be used to this day.

That makes absolutely no sense. If they're out of work for a year, they're discouraged. But as soon as they're out of work for a year and one day, it's suddenly assumed they're happily going about their life?!

Thus, precisely when economists now recognize that one of the biggest challenges of this Great Recession is long-term unemployment ... the Obama administration, both parties in Congress, and all U.S. government agencies continue to exclude the longest term unemployed from every single one of their unemployment statistics.

This could go down in history as one of the greatest deceptions about the true state of U.S. labor markets. And according to John Williams of Shadow Government Statistics, it's big: When you add these long-term discouraged workers back into the jobless count, you find that the real unemployment rate in the U.S. is actually 21.6 percent!

But no matter how you count it, some outstanding facts are absolutely self-evident:

FACT: The enormous magnitude of the government's intervention FAR surpasses anything ever witnessed in the history of humankind.


FACT: It's not working! Housing is still collapsed. Long-term unemployment is the worst ever recorded. And the recovery, already anemic, is aborting prematurely.

Bottom line: Dead Cats Do In Fact NOT Bounce. If you were counting on the government to prevent the second major leg in this great double-dip recession, don't hold your breath.
Your Action: If you are a real estate seller, time is of the essence. Shortening your time on market is more important than ever. The need for aggressive, market capturing marketing is paramount. If you are in the position to accept current market value, the competitive bidding format and time defined nature of auction marketing may be right for you.