The big picture for gold remains solidly bullish, and home buyers respond to rate dip but…
Big Picture For Gold Bullish
February 27 (King World News) – Graddhy out of Sweden: Now it has a perfect first backtest so trend line is clearly valid.
Charts says gold will outperform general stock market with global capital flowing into precious metals. Historical, asset paradigm shift in the making.
Gold Backtesting After Major Breakout vs S&P 500
During declines & consolidations, always do remember the bigger picture:
Gold broke out vs S&P
Gold broke out vs CRB
Silver broke out vs S&P
Silver broke out vs Nasdaq
Platinum broke out vs S&P
Toronto Stock Exchange broke out vs S&P
SILJ (Silver Junior Index) broke out vs GDX
This company is about to start drilling what could be one of the largest gold discoveries in history! CLICK HERE OR ON THE IMAGE BELOW TO LEARN MORE.
Home Buyers Respond To Rate Dip But…
Peter Boockvar: Taking advantage of the dip in mortgage rates, though now having reversed, pending home sales in January jumped 8.1% m/o/m, well more than the estimate of up 1%. All regions saw increases in contract signings in the month. The NAR said simply, “Buyers responded to better affordability from falling mortgage rates in December and January.”
I’ll say again that the key question for housing this year is how much do prices fall in order to mitigate the sharp rise in mortgage rates at the same time the inventory of existing homes remains historically low. The NAR is predicting a modest 1.6% drop in price this year but I’ve seen some estimates of as much as down 20%. How this standoff in price plays out will also of course dictate the pace of transactions and all the economic activity that surrounds a purchase and sale.
Mortgage rates averaged 6.26% in January vs 6.60% in Q4 and vs 6.62% as of last week.
“Does it almost feels like you’ve been here before?”
What a moment of deja vu when I saw the headline over the weekend from Bloomberg News titled “Subprime Auto Lender American Car Center Shuts Down Business.” (h/t JB). Replace ‘auto’ and ‘car’ with ‘housing’ and ‘home’ and you know what I’m talking about remembering back to the headlines of 2007. This is a used car dealer headquartered in Memphis with 50 dealerships owned by a hedge fund. An email was sent to employees on Friday saying all stores were being shut “and that all employees would be terminated by the end of the business day” said Bloomberg according to “people familiar with the matter.” This came the day after an email went out saying “management and advisors had been working with lenders to improve liquidity and continue operations.”
With record high monthly payments, an average 60 month auto interest rate of 6.82%, the highest since 2010, and many used cars now worth less than the debt on them, subprime delinquencies are rising and some are handing back the keys. On pricing for new cars, I saw a stat from Cox Automotive that 1 in 4 new cars that were bought in December had an MSRP above $60k. That compares with 1 in 13 in 2016.
Some still making a ‘no landing’ call? I’ll repeat my belief that living with a vertical move in interest rates in one year after 15 years of about zero is a monthly death by a thousand cuts on over levered borrowers, whether households or businesses, and a high hurdle deterrent to new borrowers that will continue to play out as the coming years progress. In other words, it doesn’t matter as much how many Fed hikes are left as just keeping rates at current levels is itself a continued form of monetary tightening.
Economic confidence in the Eurozone in February was little changed from January with the index at 99.7 but that was below the estimate of 101. Manufacturing and services confidence fell after rising in January but consumer confidence rose to the highest since March 22 at -19 as energy prices have thankfully calmed this winter. For perspective though, it was at -6.2 in February 2020.
ECB president Lagarde is reminding us again today in an interview with India’s Economic Times that interest rates are going to rise by another 50 bps in March and that is leading to a euro rally and higher European interest rates, though her comment is not a surprise. The German 2 yr yield is up another 3 bps to 3.06%, last seen in October 2008. As for what the ECB will do after March, “we’re data dependent” said Lagarde, the standard punt when one doesn’t want to answer the question.
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***To listen to Michael Oliver discuss what to expect for the stock and bond markets as well as the gold, silver and mining share markets CLICK HERE OR ON THE IMAGE BELOW.
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