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Minyans in Manhattan and The New Orleans Jazz


Looking forward to the Minyans in Manhattan event next Friday!


Cars remain tossed about, overturned and blocking the roads.

The 'high-water-line' is still visible in many locations.

Boarded up buildings are common, right in the heart of downtown.

Major hotel chains remain closed, as do several 'name' banks. Bank buildings are vacant, save an isolated ATM machine here and there.

On Bourbon Street, classy albeit raunchy jazz clubs have been replaced by a seemingly endless row of seedy strip clubs catering a crowd dominated by young male construction workers.

The tourists are far and few between and the locals have long abandoned Bourbon Street, for Frenchman's Street.

Most amazing was the headline story carried by every local news broadcast. Indeed, several sizable neighborhoods are still in need of 'search-and-recovery,' with local authorities estimating that over one hundred 'bodies' still need to be discovered and identified.

And, the focus of the news stories was the debate over who would pay for such a task, with the local Fire Departments claiming a lack of funds and expertise in this field, as cause for the lack of response.

At the bottom line, this is America at its worst.

Sure, there are positives, and yes, America at its best has been intertwined with this natural disaster. Still, the human disaster continues.

For all its grandeur, New Orleans will never be the same.

Nonetheless, there was grandeur to be found indoors, at the New Orleans Investment Conference, which presented a top-shelf list of speakers and participants. An A-list that could define a veritable "who's who," within the investment universe.

This was American investment thinking at its best.

We brainstormed over a three-hour lunch with Kim Evans, perhaps the single most brilliant thinker attending the event.

We drank wine with Jim Rogers, and talked about commodity research.

We lunched with Bill Bonner, one of the most successful publishers in the biz.

We pressed palms and dissected the gold market with James Turk.

We strategized with 'life-coach-to-the-investment-stars,' Eileen Cassidy,

We sipped more wine while discussing the relative merits of the US service industry and labor situation, relative to that in Asia, with Dr. Mark Faber.

We posed for dozens of pictures, with the likes of David Tice and Ed McCarthy at the reception thrown by the Prudent Bear Fund gang.

We stopped for a late night investment debate in the hotel lobby bar with Kim Evans, Dr. Mark Faber, Eileen Cassidy, and John Mauldin, who was generous enough to pick up the tab.

We met with our good buddy and mentor Dennis Gartman, who was kind enough to acknowledge me (as the "six-foot forty-five inch tall Greg Weldon") during his outstanding debate dialogue, while jousting with Frank Veneroso, on GATA, China, and the industrial metals sector.

Common was a theme of gold bullishness and industrial metal bearishness.

Common was a theme of slowing global growth rates, and intensifying disinflation.

Common was a theme of Non-US centric thinking, investment wise.

Common was a theme implying that the US Fed will turn towards easier money, despite signs of total disrespect as it relates to credit risk aversion.

Common was a theme suggesting that monetization will not work forever.

Common was a theme that Asia will continue to outperform, and that China remains a primary focus from the macro-perspective.

Common was talk of the US Housing market, and with that we return to the fray, and observe dissected details of the data offered on Tuesday by the National Association of Realtors:

  • Ohio - Median Existing Single-family Home Prices fell (-)9.2% yr-yr during the third quarter alone.
  • Michigan - Median Existing Single-family Home Prices fell (-)10.5% yr-yr during the third quarter.
  • Florida - Median Existing Single-family Home Price fell (-)9.0% yr-yr during the third quarter alone.

In total, 45 out of 148 'regions' monitored by the NAR reported a decline in the Median Existing Single-family Home Price, the most ever since the NAR began keeping these records in 1979.

And, while we can easily identify Ohio and Michigan as victims of the hollowing out of US manufacturing output, particularly as it applies to durable goods and vehicles, the fact of the matter is that the U.S. Median Single-family Home Price deflated on a nominal basis during the 3Q, declining (-)1.2% nationwide.

In the purest sense of looking at the optimistically-skewed "glass-half-full," I note the very first paragraph of the report released today by the National Association of Realtors:

"Conditions for home buyers improved during the third quarter, as existing single-family home prices in many metropolitan areas experienced corrections, and most states saw sales activity below a year ago, which helped build inventories."

Sure, falling prices are good for buyers. But, how many distressed buyers are out there?


But of course, there are plenty of distressed sellers!

Sure, rising inventory of homes for sale is good for buyers. But, for sure, this is not good for sellers. For sure, this is not good for prices.

In fact, on a nominal basis as is reflected in the long-term monthly chart below, sales have collapsed, and have experienced one of the most violent declines ever recorded, in line with that seen in the 1980-81 recession.

And while we admit that prices remain high on a relative basis, the decline in the Median Existing Single-family Home Price has been deep, and in fact, it has been the deepest ever.

Evidence the chart below, which plots the deep nominal decline from a different perspective, as defined by the actual dollar change from the previous year. This chart speaks for itself, not only to the intensified volatility of home prices (a symptom of monetary "debasement"), but also to the utter violence of the recent plunge in prices, in pure dollar terms.

Taking a more conservative approach still results in an ominous chart perspective, as provided below in the plot defining the percentage change on a year-over-year basis in the Median Existing Single-family Home Price. The current deflationary plunge is second in 'depth' to only the experience of the late sixties, during the...ahem...peak of the Vietnam War.

Additionally I note the Condo/Cooperative market as detailed by the NAR:

  • 27 of 57 metro-area regions reported a third quarter price decline in Condos and Co-ops. In other words, nearly half of all metro-regions reported deflating prices.
  • National Median Condo Sales Price declined (-)2.1% yr-yr during the 3Q.

Against a deflating home price dynamic I note the growth rate revealed by the latest UBS-ICI Chain Store Sales data for the second week of November:

  • Chain Store Sales dropped to a lowly, +2.2% year-over-year pace, down significantly from the +3.4% yr-yr growth rate posted in the second week of October, and barely half of the growth rate seen in the second week of September, pegged at +4.3% yr-yr.

With a rapidly disinflating pace of retail final demand growth in mind, observe the chart below plotting the monthly-annualized growth rate in the M-2 monetary aggregate. Indeed, M-2 exploded during the month of October, expanding by more than $60 billion, the largest nominal single-month increase in over two years.

More 'tellingly,' I re-examine the forward Eurodollar Deposit Rate strip as defined in the chart below by the Dec. '07-Mar. '07 swap, which has completely flip-flopped from a +50 spread to a minus (-)50 spread, implying that the Federal Reserve is expected to cut rates, twice, during the next year.

Amid this high-powered liquidity surge I note the new multi-month high, and upside technical breakout taking place today in the Goldman Sachs Corporate Bond Fund exhibited in the chart below. This move comes parallel to tightening in credit spreads, inversion in short-end strips, flattening yield curves, and a rally in emerging market stocks and bonds.

Oh, and Silver closed above $13 again today as evidenced in the daily chart below. A move above the 2Q '06 high of $13.31 would only serve to further solidify my firm's intensifying bullishness in silver.

My firm is long silver, long the US fixed-income market, and long the European bloc currencies led by Eastern European units such as the Czech Koruna and Polish Zloty (versus the USD).

And I look forward to discussing all of these things, from US housing to Russian reserves accumulation, to the situation in Iraq, to Chinese trade, to the commodities markets and of course the US Federal Reserve and silver one week from Friday at the Minyans in Manhattan holiday 'festivus' and charity event. Indeed, Toddo looks forward to seeing a situation where yours truly is not the tallest alpha-male in the room!

I'd say me and Oak against Toddo and Patrick two-on-two half-court for the big bucks!

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