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Five Things You Need to Know: Home Free-Hocking Testimony, Party Like June 29, We're Home Free (literally), Mr. T Gold Indicator Update, Fighting the Axis of Evil

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What you need to know (and what it means)!

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Minyanville's Five Things You Need to Know to stay ahead of the pack on Wall Street:

1. Bernanke Delivers Home Free-Hocking Testimony!

This morning we feel foolish. We spent about 66% of our time in yesterday's Five Things worrying about Federal Reserve Chairman Ben Bernanke's Humphrey-Hawkins testimony when, in fact, we should have been more focused on his Home Free-Hocking Testimony! Today, we correct our error.

  • While we expected potential fireworks stemming from the Q&A portion of the first day of Fed Chairman Bernanke's testimony yesterday, we didn't anticipate it would turn into a full-on Home Free-Hocking testimony.
  • According to the Wall Street Journal, Bernanke predicted that an "unfolding economic slowdown" will soon reverse the recent rise in inflation.
  • "Should [the Fed's predicted moderation in growth] occur as anticipated, it should help to limit inflation pressures over time," Bernanke told the Senate.
  • Well, he's right about that if, by "limit inflation," he means a full-bore credit collapse and transition to deflation (more on that in Number Two, below) due to the Fed-induced real estate and asset price "boom."
  • US Mortgage Applications fell 4.6% in the week of July 14 and are down 33% this past year.
  • Meanwhile, today's Wall Street Journal notes in its quarterly housing survey that "the general level of prices is edging down in some areas and leveling off in others, while the supply of homes for sale keeps rising."
  • As the Journal also noted in "Home Builders Turn to Discounts, Promotions," Lennar is out with a promotional ad that says "Turn the key, and the home is free!"
  • Just like Colonel Jack "Hannibal" Smith, we love it when a plan comes together. Humphrey-Hawkins testimony? What Humphrey-Hawkins? By 2007 this will be the Home Free-Hocking testimony.
  • Round two of the testimony and Q&A is in a few minutes today at 10 a.m.

2. We're Partying Like it's June 29.

June 29 holds a special place in our wallet heart.

  • On June 29 the S&P 500 (SPX) opened at 1245.94, the low of the day, and went out a penny shy of the high at 1272.87.
  • Yesterday, the SPX opened at 1236.74, the low of the day, and went out just shy of the high at 1259.81.
  • After June 29's close of 1272.87, 10 days later the SPX closed at 1236.20.
  • What happened? Geopolitics? Oil? Dollar? Inflation? Stagflation? Deflation? Pick whichever one you like.
  • The issue remains the same as it has been since late 2002: liquidity and risk appetite. Alan Greenspan ultimately was able to "successfully resolve" every economic issue he faced by injecting liquidity.
  • Asian Contagion? Liquidity Injection. Long-term Capital Management? Liquidity injection. September 11? Liquidity injection. Iraq War? Liquidity injection.
  • Of course, what gets lost in this "success," the reason he was able to "successfully" do this, was because risk appetites (time preferences) were amenable to increased liquidity and risk-seeking.
  • The battle now is between risk appetites. Central banks cannot force risk-seeking behavior, they can only feed it when it exists.
  • The reason we are dealing with stagflation now, as Bernanke admitted yesterday behind a thin veil in his Home Free-Hocking testimony, is because stagflation in this case is simply the transition from risk-seeking (inflation) behavior to risk aversion (deflation) behavior and decreased time preferences.

3. We're Home Free. Unfortunately, Literally.

As the Journal article, linked in Number One today, notes, homebuilders are running into tough ground... metaphorically AND literally. Moreover, related housing data is also pointing to more difficult, er, groundbreaking.

  • The Commerce Department said June housing starts fell 5.3% in June to a 1.85-million-unit annual pace, from a downwardly revised 1.953-million-unit pace in May.
  • Housing starts are down at a 23% annual rate over the last three months.
  • Permits are down 36% annually over the last three months.
  • In the nation as a whole, permits for future groundbreaking fell 4.3% in June to a 1.862-million-unit pace, the slowest since May 2003.
  • The NAHB index is at a 14-year low.
  • Merrill's David Rosenberg this morning reminds that general economic recessions follow housing recessions 70% of the time.

4. Important: Mr. T Gold Indicator Update

Look fool, there's only one indicator I need to follow with gold and it's hanging around the neck of Mr. T. Or at least it used to be.

  • Turns out Mr. T has dumped his bling.
  • According to Ireland's City Beat, the former A Team star famous for his gold chains, gold medallions and gold jewelry made the decision after recently viewing first hand the devastation caused by Hurricane Katrina.
  • "I won't wear it no more. It's put up," he told E Online.
  • Jiminy Jumping Jehosephat on a Jewelry Binge! What does this do to our Mr. T Gold Indicator we first wrote about back in mid-May? Let's take a look:

Below is the Minyanville Mr. T Gold Indicator from 1982-to-present with important peaks marked. Stop your jibba jabba and look at it, fool.

Gold, 1981-1989
(Chart courtesy Thomson Financial)


The A-Team ends its television run in March 1987, a final farewell for Mr. T. Or is it?

Gold 1991-1996
(Chart courtesy Thomson Financial)

So where is Mr. T today? Don't look now, fool. He's right behind you coming to Television this October with his new show ("like Dr. Phil with bling") "I Pity the Fool." Admittedly, we're concerned about the potential "lack of bling" on the new show, but if he even has so much as a gold ring on we're selling gold with both hands.

Gold 1997- Present
(Chart courtesy Thomson Financial)

5. Buzz and Banter Joins Fight Against "Axis of Evil."

According to our database we have subscribers to our premium Buzz and Banter real-time commentary in more than 31 countries.

  • According to Google stats, we are read in more than 110 countries, 111 to be exact out of a total of 500 countries that are tracked world wide.
  • Countries where we have Buzz and Banter subscribers are all over the place, from Albania to Italy, Japan to Portugal, Spain to Uruguay.
  • However, as the list below clearly shows, countries where we DO NOT have subscribers make up what President Bush calls the "Axis of Evil."
  • That is by design.
  • Absent from this list of Buzz and Banter loving countries are "Axis of Evil" countries: Iraq, Iran and N. Korea.

Buzz Subscription Countries
Albania
Australia
Austria
Belgium
Bolivia
Brazil
Canada
Costa Rica
France
Germany
Hong Kong
India
Israel
Italy
Japan
Lebanon
Malta
Mexico
Netherlands
New Zealand
Portugal
Puerto Rico
Singapore
Spain
Sweden
Switzerland
United Arab Emirates
United Kingdom
United States
Uruguay
Venezuela

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No positions in stocks mentioned.

The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

Copyright 2011 Minyanville Media, Inc. All Rights Reserved.

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