Steel pennies and belief systems

Maybe it's time that the U.S. Government skipped right to the chase and banned all coinage. They are fighting what seems like a never-ending battle to produce the stuff at a cost lower than the face value, more evidence of this provided today in this AP report:

Further evidence that times are tough: It now costs more than a penny to make a penny. And the cost of a nickel is more than 7 cents.

Surging prices for copper, zinc and nickel have some in Congress trying to bring back the steel-made pennies of World War II, and maybe using steel for nickels, as well.

Copper and nickel prices have tripled since 2003 and the price of zinc has quadrupled, said Rep. Luis Gutierrez, D-Ill., whose subcommittee oversees the U.S. Mint.

Keeping the coin content means "contributing to our national debt by almost as much as the coin is worth," Gutierrez said.
...
The proposals are alternatives to what many consider a more pragmatic, but politically impossible solution to the penny problem: getting rid of the penny altogether.

"People still want pennies, which is why we're still making them," Moy said.

What is it with the penny? Why do people think that we need it?

Is it some sort of a linchpin in the American psyche where, if we get rid of the penny, all sorts of other uncomfortable questions arise?

Like, while on jury duty once, a conversation was struck with another prospective juror who was about half-way through reading the DaVinci code and he remarked, "This book shakes your entire belief system".

See Coinflation.com for more on the nation's money, no assistance can be provided for questions pertaining to religion.

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Kevin Phillips on the U.S. shark tank and other ills

Kevin Phillips, author of "Bad Money - Reckless Finance, Failed Politics, and the Global Crisis of American Capitalism" was interviewed by Amy Goodman at Democracy Now (hat tip DK). A few of the highlights appear below.
First, on the types of sharks that the United States is currently swimming with inside a "shark tank" as it heads into a recession (this would be in contrast to the much preferred "shark cage", where metal bars separate the swimmers from the sharks):

• Finance dominates the US economy
• Massive debt, both public and private
• The collapse of home prices
• Global commodity inflation
• Lousy economic statistics
• The price of oil

He also noted that every time the government says things are getting better or that the worst is behind us, then things get worse. As if on cue, Hank Paulson just happened to be in the news again today: Worst of financial crisis is past: Paulson - AFP

On the government's economic statistics:

I think the government has cooked the books, and as a result, we get this unrealistic view of where the economy is. For example, they pretend that inflation is in the two- to three-percent range. Barron’s magazine did a survey of money managers, and their average estimate of what the CPI would be later this year was 2.7, and for 2009, at the end of the year, 2.8. Now, that’s ridiculous.
...
Now, the real meaning here is that when you look at the growth statistics for the economy, the GDP figures, you have to take—to get the real figures, you have to take nominal gross domestic product growth, and then you subtract for inflation. So if you’ve got nominal growth of four percent and you subtract for inflation, you still would get a positive number if you use the number of, you know, 2.6 or three percent inflation. But if you’ve got nominal growth at four percent and inflation is really six to nine percent, then you’ve got big-time negative growth, and the economy is contracting.

The government talks, you know, like they used to say in the Western movies, with a forked tongue, but so does the financial sector. All the questions about whether the ratings were really AAA or they were really something lower than BB on the securities that were imploding, no honesty in economic data or ratings or descriptions of what really goes into a financial instrument, and this has the American people at some degree of peril, because foreigners don’t really believe what we say anymore.

By the way, the popular Mortgage Lender Implode-O-Meter is mentioned in the new book.

On speculation in commodities markets:

Well, there’s a degree of commodity speculation going on, because a lot of the hedge funds in the United States have a major allocation to commodities, and they see commodities as a particularly attractive play with some of the major currencies losing their respect. And that’s particularly true of the dollar. American hedge funds think it may make more sense to be in commodities than to be in dollars or in American stocks.

But I would not say that the principal driver of global food prices is speculation.

On Peak Oil:

The peak oil question has to do with whether or not global production isn’t either about to peak within the next five, ten, fifteen years—some people believe that it’s peaked already. And if that’s the case, you can expect that, given the demand for oil that can’t be replaced by other things too quickly, certainly not in five to ten years, you’re going to see oil prices just keep climbing. And if people can assume they keep climbing, then they become a speculative vehicle, if you want to get your money out of dollars, which then makes oil prices rising a huge negative for the dollar, which means that we have this currency which is weakening in ways that raise all kinds of other questions.

So peak oil is one of those things you just won’t see on the front pages of the newspapers, but I wish they would deal with it, because there are lots of things going wrong with the economy that the media, as well as the politicians, really don’t want to put on page one, and page one is where they ought to be. This is serious stuff.

The new book is awaiting idle time later this week en route to the East Coast - highlights will be provided later this month. If it's anything like "American Theocracy: The Peril and Politics of Radical Religion, Oil, and Borrowed Money in the 21stCentury" (now in paperback), it should be good.

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The Money Magazine commodities indicator

When Money Magazine starts running stories like this one in today's Wall Street Journal, then you'll know we're a lot closer to the end of the commodities boom than the beginning.

Are Commodities Funds a Long-Term Bet? ($)
Global Demand Could Drive Sector; The Inflation Hedge
By DAISY MAXEY
May 6, 2008; Page C13

Commodity-focused mutual funds' incredible multiyear run is leading some investors to wonder how much upside could possibly remain, but strong demand for raw materials likely means these funds can deliver additional gains, at least longer term.

While the sector may be due for a correction in the next six months or so, global demand is expected to buoy the funds over the next several years.

"In the near term, it does look like it's run too far, too fast," said Mihir Worah, manager of the $13.9 billion Pimco CommodityRealReturn Strategy Fund. "But the longer-term picture is unchanged; commodities are going to do well over the next three, five, 10 years; in my mind, there's no doubt about it."
...
With inventories for many raw materials unusually low and strong growth in emerging countries, commodity prices should continue their upward trajectory, said Mr. Worah.

"There's too much demand from emerging economies for energy and metals, and not enough supply," he said, noting that creating new supplies involves long cycles.
...
Investors generally use these kinds of mutual funds to diversify their portfolios as the sector's performance is relatively uncorrelated with that of the broader market. But commodity funds can also offer a good hedge against inflation.

This is very matter-of-fact reporting in a manner that is very different from what you might read on the same subject in recent issues of Money Magazine.

And this is probably about as close as you'll every hear anyone in the mainstream financial media say, "Invest in commodtities - it's a good long term bet".

The question posed in the title was clearly answered in the affirmative within the story.

Recall that, like the delightfully memorable Time Magazine cover in mid-2005, Money Magazine also got on the housing boom bandwagon not long before it peaked a few years ago (see June 2, 2005- Money Magazine Does Real Estate).

Then they did a hasty dismount (see Sept 5, 2005 - Money Magazine Does a One-Eighty).

My guess is that, at some point, the nation's most popular personal finance magazine will grudgingly add "commodities" as one of their approved investment asset classes (with maybe a 15 percent weighting) and that will be the time to start thinking about selling everything you've got.

But, don't worry.

As explained in today's WSJ story, that won't happen until sometime in the next decade.

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What's up with the Baltic Dry Index?

A few months ago, wasn't nearly everyone so-o-o-o-o sure that the commodities bubble had burst (again!) when the Baltic Dry Index took a dive. Well, looky here!
This report from Bloomberg the other day notes the remarkable turnaround:

The Baltic Dry Index added 1.5 percent on May 2 to the highest since Dec. 19. The index, which tracks the price of transporting bulk commodities, has gained 7.8 percent this year.

And at Minyanville the increase was attributed to yachts (no, not really):

Interestingly, an article in today's Financial Times notes that demand for stuff may not be the sole explanation for the surge in the Baltic Dry Index.

According to the FT, slow growth in the supply of bulk carriers to the market and underinvestment in port facilities is also fueling the rise in the shipping index.

Also see:

• Investment Tools - Baltic Exchange Dry Index
• Dry Ships Inc. - Baltic Dry Index Daily Market Report
• The Big Picture - Baltic Dry Shipping Index
• Mish - Commodity Boom Over for Now

If only the housing bubble could bring itself back to life with the regularity and the ferocity of the commodities bubble, the world would surely be a better place.

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Countrywide: Not so easy anymore

After hearing the complaints coming out of Las Vegas after Countrywide shut down thousands more home equity lines of credit, you'd think that "tapping home equity" (whether the equity is there or not) was some sort of an inalienable right.Bloomberg reports on the distress that the nation's former number one mortgage lender is causing in Sin City:

Countrywide Financial Corp. has suspended the home equity credit lines of almost all its Las Vegas customers, including the $60,000 Christopher Whipple says he needed to expand his cell-phone accessories business.

``I hope this doesn't break me,'' the 35-year-old retailer said. His credit score was 790 out of a possible 850, putting him in the top 40 percent of borrowers. ``It's going to hurt more than I thought.''
...
Jerry Tao, a part-time lawyer and spokesman for Evofi One's parent company, lost access to his $50,000 Countrywide line despite earning more than $500,000 last year and having a credit score he says was between 750 and 770.

Though he never accessed the line, Tao, 40, said he'd hoped to redo his backyard and replace his 1995 Nissan Pathfinder.
...
``If you had anything on the ball, you could make it happen in Vegas,'' said real estate agent Donna Marie Gold, 62, who built a $4.5 million fortune buying and selling properties over six years.

After failing to complete a single sale last year, Gold said she fell $22,000 short each month on payments needed to maintain 14 properties. Now two to four months behind on some mortgage payments, she's lost access to a $250,000 Wells Fargo & Co. equity credit line.
...
John Simon, 42, borrowed $35,000 on low-interest credit cards in 2007 to pay down his $63,000 credit line and save on the 11.75 percent interest he says Countrywide charged. He expected to be able to access the credit line later. When Countrywide froze the line, he wasn't able to get money needed to pay his bills.

``They took away the last amount of cash I had to make all the payments on my father's retirement home,'' Simon said. ``From a business standpoint, this was the stupidest thing I ever did. But it was so easy.''

Geez. Does anyone feel sorry for any of these people?

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Tea and subprime sympathy with the Greenspans

Eddie Elfenbein over at Crossing Wall Street sent this link earlier today, wanting to know if I was the current high-bidder. My guess is that he wanted to make a deal if I was.

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The math behind the latest Big Oil PR campaign

After spotting this Big Oil ad for about the tenth time in recent weeks, looking at the math behind the ad copy seemed like a reasonable exercise to undertake.

[For the entire ad, see this item(.pdf) at Energy API.]

Based on a study of U.S. oil company ownership conducted last year, among other things, the ad states:

Tens of millions of Americans have a stake in the U.S. oil and natural gas industry. When the industry’s earnings are strong, the real winners are middle-class Americans, people investing in their retirement security or saving for their children’s college education.

And of course they go on to rail against the ill-effects of higher taxes on energy company profits - how higher taxes would hurt not only them, but middle-class Americans as well through their investments.

What is left unspoken here is that high energy prices aren't such a bad thing because the middle class benefits as shareholders.

But is that true at all for the "middle-class Americans" cited in the advertisement?

Let's find out...

For example, assume that the average "middle-class American" has a 401k retirement account or other investment accounts with a balance of $90,000, which seems reasonable after looking at the $40K to $80K income range across all age groups in this report.

Then figure that they hold an average of 70 percent in stocks and that all this money is in an S&P500 index fund with a weighting of about 13% for energy stocks (per the S&P500 sector weightings) resulting in a total energy stock value of $8,190

Investment in energy stocks: $90K x 0.7 x 0.13 = $8,190

Using data from the DOE, it appears that retail gasoline prices have risen from about $2.80 last summer to about $3.60 today for a hefty increase of about 28 percent. So, since a typical middle class American consumes 500 gallons of gas per year and, assuming a roughly linear increase in the gas price since that time, an additional $133 has been spent on gas over the last eight months.

Increased gas cost: 333 gallons * $0.40 = $133

That seems like a lot of money for a middle class family trying to make ends meet. Now, how much of this has been offset by rising prices for energy stocks?

Well, things were pretty volatile last summer, but it's fair to say that the giant energy ETF (AMEX:XLE) was at about $70 when gasoline prices started rising. At around $82 now, that's a hefty gain of 17 percent which, when applied to the typical middle-class American's investment portfolio,would yield a whopping gain of well over $1,000.

Increased stock value: $8,190 x 0.17 = $1392

Hey, maybe Big Oil companies aren't that bad after all!

Of course this doesn't consider those middle class individuals who have no 401k account at all or who are now too scared to death to invest in anything but FDIC insured CDs now yielding about two or three percent per year.

To learn more about investing in natural resources using commonly traded ETFs, stocks, and mutual funds, see this description at Iacono Research. Or, sign up for a free trial.

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Julie on high gasoline prices

Julie hits the streets to find out how badly the sky high oil prices are squeezing New Yorkers at the pump. Also see the recently updated California SUV Fill Up Index.

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What difference will +$1,200 make up against -$100,000

With home price in parts of the country dropping by $100,000 per year or more, is $1,200 in rebates from the government going to make any difference?

The now-quickly-vanishing home equity was nearly as easy to spend as the checks that are now hitting bank accounts and mailboxes. Remember when purveyors of home equity loans would offer credit cards that would tap your equity directly?

Do they still do that?

If government stimulus plans are to be effective, that's what the government should do - just issue credit cards that would tap the U.S. treasury directly and then everyone can worry about paying the money back later.

They ought to keep that in mind since it doesn't look like the first batch of checks is going to have the desired effect as explained in this report in the New York Times.

The Rebates Might Not Go to the Mall
By PHYLLIS KORKKI

Go ahead and spend — it’s your patriotic duty. That’s one way to look at the government rebates that are just starting to arrive in taxpayers’ bank accounts and mailboxes.
...
The rebates are meant to help revive our parched and stunted economy with millions of liquid infusions. But many consumers do not plan to rush to the store with the money.

According to a recent survey by the NPD Group, a research firm, 42 percent of taxpayers said they planned to pay bills with the check, and 21 percent said they would add it to savings. Only 12 percent said they would spend it on discretionary items.

It is still possible, though, that once the bills are paid, and the savings are padded, the urge to splurge will assert itself at last.

They really should consider the credit card idea for the next round - either that or just decree that home prices are going to be reset to their peak levels in 2005 or 2006 (whichever is higher) from which they will not be allowed to fall.

ooo

This week's cartoon from The Economist:

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The week's economic reports

Modest economic growth, a contracting labor market, and plunging home prices highlighted the week's economic reports. Stocks and bonds ended with the S&P 500 Index up 1.1 percent to 1,414, now down 3.7 percent for the year, and the yield of the 10-year U.S. Treasury note fell 6 basis points to 3.85 percent.Consumer Confidence: The Conference Board's measure of consumer confidence dropped from an upwardly revised 65.9 in March to just 62.3 in April, the worst reading since 1991. Aside from a worsening view of the job market, the most shocking part of this report was the big jump in one-year inflation expectations to 6.8 percent. This level was seen briefly during the energy price shock following Hurricane Katrina in 2005, a shock that ebbed much more quickly than the current one is likely to.

S&P Case-Shiller Home Price Index: Home prices for the 20-city index fell 2.7 percent from January to February and annual price declines reached a new all-time record, down 12.7 percent from year-ago levels. The steepest annual declines were seen in Las Vegas (-22.8 percent), Miami (-21.7 percent), and Phoenix (-20.8 percent). For more details and a colorful chart of home price indexes for all 20 cities over the last eight years, see this item from Tuesday.

Gross Domestic Product: The Commerce Department reported that inflation-adjusted economic growth in the U.S. remained in positive territory during the first quarter, but just barely. Real gross domestic product rose at a seasonally adjusted annualized rate of just 0.6 percent from January through March in the "advance" estimate of economic growth, the first of three readings for the first quarter.
The "preliminary" estimate will be released at the end of May and the "final" reading will come at the end of June.

Consumer spending posted its lowest quarterly contribution in almost seven years adding just 0.68 percentage points to the overall figure. Personal consumption expenditures have not been this low since the second quarter of 2001 and, prior to that, you have to go back to 1991 to find a worse reading (a detailed chart of contributions to GDP appears in this item from Wednesday).

Residential fixed investment continued to be a drag on the economy and it has now been joined by a decline in commercial building. Nonresidential investment contracted for the first time in over two years and posted its sharpest decline since 2002.

Net exports declined but were still positive, contributing 0.22 percentage points to growth, down from much higher levels over the last year. This is likely due to the higher cost of imported oil in recent months that has eaten away at export gains. A key factor in making the overall number positive during the first quarter was the contribution of 0.81 percentage points from rising inventories, likely an unintended buildup consistent with the consumer spending slowdown. If the inventory build is removed from the calculation, real GDP falls to -0.2 percent.

Price inflation came in at an annualized rate of just 3.5 percent for the quarter, down slightly from the 3.9 percent reading during the previous quarter, however, for the purposes of adjusting nominal GDP for inflation to arrive at "real" GDP, the 2.6 percent GDP deflator is used instead. More than anything else, understated inflation is now responsible for keeping economic growth in positive territory.

ISM Manufacturing: The widest measure of the health of the nation's manufacturing sector, the Institute for Supply Management's manufacturing survey, was unchanged from March to April at 48.6.
This is below the level of 50 separating expansion from contraction and marks the fourth sub-50 reading in the last five months, but it is still well above the low-40s region that has normally been associated with recessions over the last few decades.

New orders continued to contract, unchanged for the month at 46.5. Export orders remain one of the few bright spots in this report (and for the economy as a whole) rising from 56.5 in March to 57.5 in April, part of an ongoing rebound in exports due, in large part, to the falling value of the U.S. dollar.

Confirming other indicators that point to a weakening job market, not the least of which was Friday's decline of 46,000 in manufacturing payrolls, the ISM's measure of employment fell almost 4 points, from 49.3 in March to 45.4 in April.

Personal Income/Spending: Personal income rose 0.3 percent in March following a gain of 0.5 percent in February and spending rose 0.4 percent after a gain of 0.1 percent the month before. In inflation-adjusted terms, consumption advanced by just 0.1 percent in March as spending on durable goods such as autos, furniture, and other long-lasting items fell.

Labor Report: Nonfarm payrolls declined by 20,000 and the unemployment rate dipped to 5.0 percent after analysts had been expecting a decline of 85,000 in payrolls and a 5.2 percent unemployment rate.
This was the fourth consecutive monthly decline in payrolls with a total job loss during that period of 260,000. Figures for February and March were revised modestly lower.

Construction and manufacturing firms continued to cut payrolls aggressively, down 61,000 and 46,000, respectively.

Job loss in construction has now spread to the commercial sector with payrolls declining 13,000 to go along with a loss of over 33,000 spots in residential building.

Retail trade employment declined by 27,000, almost half of the job losses occurring at building material and garden supply stores. This is part of the continuing fallout of the housing market bust and is consistent with news from companies like Home Depot where job layoffs and store closures were announced on Friday.

Gains of 52,000 were seen in education and health services and payrolls rose by 39,000 in professional and business services with strong gains in computer systems design and accounting. Temporary employment, considered a good leading indicator of future job growth, fell by over 9,000. While federal, state, and local governments contributed only 9,000 new jobs in April, the health care industry continued as a stalwart in job creation with a gain of 43,000.

Overall, this was a weak report but far better than the jobs data for the last three months. However, it is clearly not an indication of a rebound in the labor market given the worsening problems elsewhere in the economy and the fact that employment is a lagging indicator.

Summary: The story remains the same week after week - plunging home prices, sagging consumer confidence, a weakening labor market, and an "inflation-adjusted economy" that would appear much, much worse if a truer measure of inflation were used instead of the government's tortured consumer price index and other measures.

The home price declines in some parts of the country reported in the S&P Case-Shiller Home Price Index were stunning, as were the latest "inflation expectations" from the Consumer Confidence survey. It's hard to imagine that home prices will stop their descent anytime soon or that the price at the pump will return to lower levels - the current conditions are likely to wear on consumers for some time, putting great pressure on an economy soundly based on a public accustomed to spending freely.

A growing chorus of disbelievers in government data is now being heard as real world experience increasingly departs from that indicated in the "official" data and the amount of "spin" applied to the data grows. Here's the official take from the Treasury Department on recent economic reports:

Employment Fell in April:
Job Growth: Payroll employment fell by 20,000 in April, following a decrease of 81,000 in March. The United States has added 8.0 million jobs since August 2003. Employment increased in 39 states and the District of Columbia over the year ending in March.
Low Unemployment: The unemployment rate was 5.0 percent in April, down from 5.1 percent in March.

Signs of Economic Strength Include Exports and Low Inflation:
Exports: Strong global growth is boosting U.S. exports, which grew by 9.5 percent over the past 4 quarters.
Inflation: Core inflation remains contained. The consumer price index excluding food and energy rose 2.4 percent over the 12 months ending in March.

Sometimes you have to wonder how long the government and their economists will be able to continue to pull the wool over the eyes of the consumer regarding the job market and consumer prices. A closer look at the lower unemployment rate reveals that the "improvement" was due to a huge increase in those working part-time "due to economic reasons" and that full-time employment fell. As for consumer prices, "core inflation" means little to most Americans who are now all too aware of how much food and gasoline cost. As former Fed chief Alan Greenspan lamented on more than one occasion, the problem with gasoline prices is that they are too easy for the public to measure.

How can things be so bad with an unemployment rate of five percent and inflation at just two or three percent?

The Week Ahead: The coming week will be relatively light on data highlighted by a report on the trade deficit on Friday. Also scheduled for release are the ISM nonmanufacturing survey on Monday and three reports on Wednesday - productivity/costs, pending home sales, and consumer credit.

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Chart of the day

From a Tim Wood at Resource Investor:

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Housing data crybabies and deceivers

With a name of a publication like the one you see at the top of this blog, if there are any biases by the writer (which surely there are), you probably have a good idea what they are. Not so with outfits like MarketWatch where columnists can write whatever they want while keeping their true motives unknown to readers.

Either that, or they just don't understand the data.
Such was the case in yesterday's report by Chris Pummer about how recently reported home price declines of unprecedented magnitude should not be trusted.

Writers should be careful when prying into data reporting, especially when they side with Lawrence Yun and the National Association of Realtors.

Chris writes:

Commonly cited measures of U.S. home prices are overstating the degree to which the vast majority of Americans' home values have declined in the last year, producers of two of the most widely tracked indexes acknowledged this week.

Yes, all statistics are flawed - some more so than others. Get used to it.

More importantly, where did that "vast majority of Americans' home values" line come from? That's not what the NAR or S&P said about their home price indexes.

There are two arguments here, both of which are valid, neither of which makes the condition of the nation's housing market demonstrably better than reported in the mainstream media.

First is the "misleading median" that tends to be pulled up or down depending upon the mix of high-priced and low-priced homes being sold:

"If there are a lot more homes sold on the low end and fewer on the high end, the median price is bound to drop dramatically," NAR Chief Economist Lawrence Yun said. "In normal times, a median price would reflect typical homeowner equity changes, but these are not normal times. The jumbo (mortgage) market is frozen and the buying activity is more concentrated in lower-value homes."

Yes, that's true - the only problem is, this works both ways and unless Chris was one of the very few writers who complained last year around this time, then he should pipe down today.

Early in 2007, when the subprime problems were gathering steam and lender's were cutting back on making loans to shady borrowers, the sales mix shifted to the high end as jumbo loans were still considered to be "safe". This pushed the "median" higher than it would otherwise have been.

Once the credit crunch hit in August and jumbo lenders started to make up for lost time, realizing that they too might not get paid back after home prices started to fall, a sharp pullback in jumbo loans has skewed prices downward.

If you didn't complain about the first, you can't complain about the second.

The next arguments for home price declines being overstated involve the limited coverage of the Case-Shiller Home Price Index (yes, this is true - that's why they call it a 20-city index - it only covers 20 big cities) and one of the loopiest bits of reasoning I've read lately.

The S&P/Case-Shiller index, which Tuesday posted a 12.7% decline for February, is skewed for two reasons of its own -- it tracks just 20 major markets, many among the hardest hit, and its "repeat sales" survey by design pulls in individual homes both bought and sold in the last few years. Many of those are now being dumped by distressed homeowners and investors who bought at peak market prices and face higher mortgage-rate adjustments.

In other words, ignore how prices got to such lofty levels while the housing bubble was inflating and remember that a home hasn't declined in value until it is sold.

It's only the distressed properties that are being sold at much lower prices - forget about the impact that these prices have on determining the value of other homes. As soon as this multi-year wave of foreclosures passes, things will be back to normal.

How dumb!

But Chris' biggest mistake when complaining about other statistics being misleading (and the real motivation for going off on this rant this morning) comes when he cites NAR data to counter what is being reported in the media:

The glaring discrepancy in this case is that 17 of the 20 metro areas posted record annual declines, and yet 78% of the 330 metropolitan regions that NAR tracks reported price increases in the latest period -- and that despite the acknowledged downward bias in current price readings.

The most recent Metropolitan Median Price data from the NAR which included data through the fourth quarter of last year is available for anyone to see at the NAR website - while overall prices declined during the fourth quarter, 49 percent of the metroplitan areas showed price increases. Housing hotspots such as Yakima, Washington and Bismark, North Dakota top the list of areas with price increases.

Talk about misleading statistics!

The data cited in the MarketWatch story - 78% of metro areas showed increases - is actually from the third quarter report, data that was used liberally by the NAR to refute misleading reports of home price declines up until the fourth quarter report came out.

This most recent data is up to seven months old and the data cited in the MarketWatch report is an astounding 10 months old, going all the way back to July of 2007 before the credit crisis began.

Appropriately, the piece concludes with more wisdom from Lawrence Yun, who really does seem to be choosing his words much more carefully than his predecessor:

"The only way to tell what your own home is really worth is to look at local-market conditions, do Internet research and utilize professionals (such as licensed appraisers) to help determine the value of your home."

OK.

Nothing is selling. They're dropping the prices of bank-owned properties faster than they were a couple months ago and the banks can't seem to keep up with the mounting number of properties that they are collecting from buyers who either can't or don't want to pay their mortgage anymore.

There are a huge number of sellers out there with prices that are far removed from what they could reasonably expect to get today, no thanks to the claptrap coming from people like Chris Pummer.

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Job losses beat estimates

The Labor Department released the April employment report today. Payrolls declined by only 20,000 and the unemployment rate dipped to 5.0 percent. Analysts had been expecting a decline of 85,000 in payrolls and a 5.2 percent unemployment rate.

Get out the party hats!
This was the fourth consecutive monthly decline for nonfarm payrolls with a total job loss during that period of 260,000. Figures for February and March were revised modestly lower.

Construction and manufacturing firms continued to cut payrolls aggressively, down 61,000 and 46,000, respectively. Job loss in construction has now spread to the commercial sector with payrolls declining 13,000 to go along with a loss of over 33,000 spots in residential building.

Retail trade employment declined by 27,000, almost half of the job losses occurring at building material and garden supply stores, part of the continuing fallout of a housing boom that has gone decidedly bust.
Gains of 52,000 were seen in education and health services and payrolls rose by 39,000 in professional and business services with strong gains in computer systems design and accounting. Temporary employment, considered a good leading indicator for future job growth, fell by over 9,000.

While government contributed only 9,000 new jobs in April, the health care industry continues to be a stalwart in job creation with a gain of 43,000 last month.

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Just eleven days away ...

The New York Hard Assets Investment Conference is just eleven days away! The schedule has been pretty much finalized - the important parts are excerpted below:

Click to enlarge

The conference starts on Monday, but I won't be speaking until Tuesday. I'm on a panel at 8:30 hosted by Al Korelin - Causes and Consequences of the Credit Crisis.

I have a pretty good idea whose name will come up.

Then everyone will sit and listen to Dennis Gartman talk about oil and gold. Since the long-time newsletter writer famously announced that he'd sold all his gold a week or two ago, it should be interesting to hear what he has to say to an audience that likely hasn't sold theirs.

Attendees will hopefully be cheered back up again by Dr. Martin Murenbeeld who will offer some bullish thoughts on the metal.

At 10:30, I'll be conducting one of four "Masterclasses" that run in parallel for a half-hour. The title of my presentation is "Buy the Stocks, or Buy the Commodities?" and, this week, I feel fortunate to have been kept busy preparing it so as not to have too much idle time to think about the latter.

You can still register at no charge if you are interested in attending. Click here for info.

As reader Chet reminded me via email earlier today, on its current trajectory, gold will be about $750 by the time the conference kicks off.

Thanks Chet.

To learn more about investing in natural resources using commonly traded ETFs, stocks, and mutual funds, see this description at Iacono Research. Or, sign up for a free trial.

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Is anyone watching this?

While it is understandable that former peddlers of subprime mortgages and their ilk must do something for a living, must they do this? The idea of them moving like hungry locusts toward unwitting senior citizens who simply want to put food on the table, pay their utility bills, and pay for their meds just makes my stomach turn.

SPAM like this continues to show up in my inbox - I'm guessing that regulators have no clue how quickly septuagenarians are being fleeced every day.

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Mr. Battenberg mostly paints now

It probably wasn't intentional, but the side-splitting dry humor in Sarah McBride's Wall Street Journal report about copper art thefts in the Southwest had me rolling:

Arizona sculptor John Battenberg, who has a 50-year career working with bronze, says he ditched the material after he woke up one day to find gaping holes in the walls of his house, where panels from his monumental work, "The Gates of Arcadia," had rested. Mr. Battenberg mostly paints now.

It seems that with the great big "Prosperity U-turn" now underway and with metal prices still sky-high, recently commissioned artwork is vanishing almost as fast as home equity wealth in some parts of the country.

From the Southern California town of Brea comes the details:

When a sculpture called the "The Spirit of Life" was stolen from its public perch here, city officials reported it to the Federal Bureau of Investigation as a case of stolen art. But the local police said it was likely a different kind of crime: commodity theft.

Weighing about 250 pounds, the sculpture was cast in bronze, the main ingredient of which is copper. That made it a tempting target for thieves looking to cash in on skyrocketing copper prices by selling it to a scrap yard.

Manhole covers, pipes and wiring have already been targeted for theft in many cities, thanks to copper prices that have risen to about $4 a pound from $3.50 a year ago and $1.50 three years ago. In the prosperous Orange County city of Brea, home to a thriving public art program, big bronze sculptures are now on the hit list. The city has lost three such works in the past 18 months.

Art specialist Trinitee Manuel oversees Brea's public art programs. Along with commissioning works for bus shelters and organizing events for children, she's now something of an expert in security systems, metal-cutting tools, hidden cameras, and ways to protect open-air sculptures -- including shrub barriers. She's even considered installing LoJack-style devices on the more vulnerable pieces.

There's a pretty cool interactive graphic with all the recent art heists too.

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Bernanke Fed still waiting for inflation to moderate

Below are excerpts from two years worth of FOMC policy statements from the Ben Bernanke-led Federal Reserve on the subject of the future course of inflation in the U.S.

With gasoline at $4 and food prices soaring, does anyone really believe that anything having to do with prices is going to moderate anytime in the foreseeable future?

Well, that is, aside from iPods and iPhones. It's too bad you can't run your car on Apple products or feed a family with them.

March 28, 2006
... inflation expectations remain contained.

May 10, 2006
... inflation expectations remain contained.

June 29, 2006
... inflation expectations remain contained.

August 8, 2006
... inflation pressures seem likely to moderate over time, reflecting contained inflation expectations...

Sep 20, 2006
... inflation pressures seem likely to moderate over time, reflecting reduced impetus from energy prices, contained inflation expectations...

Oct 25, 2006
... inflation pressures seem likely to moderate over time, reflecting reduced impetus from energy prices, contained inflation expectations...

Dec 12, 2006
... inflation pressures seem likely to moderate over time, reflecting reduced impetus from energy prices, contained inflation expectations...

Jan 31, 2007
... inflation pressures seem likely to moderate over time.

Mar 21, 2007
Although inflation pressures seem likely to moderate over time, the high level of resource utilization has the potential to sustain those pressures.

May 9, 2007
Although inflation pressures seem likely to moderate over time, the high level of resource utilization has the potential to sustain those pressures.

Jun 28, 2007
... a sustained moderation in inflation pressures has yet to be convincingly demonstrated.

Aug 7, 2007
... a sustained moderation in inflation pressures has yet to be convincingly demonstrated.

Sep 18, 2007
Readings on core inflation have improved modestly this year ... some inflation risks remain...

Oct 31, 2007
Readings on core inflation have improved modestly this year ... some inflation risks remain...

Dec 11, 2007
Readings on core inflation have improved modestly this year ... some inflation risks remain...

Jan 22, 2008
The Committee expects inflation to moderate in coming quarters...

Jan 30, 2008
The Committee expects inflation to moderate in coming quarters...

Mar 18, 2008
... some indicators of inflation expectations have risen. The Committee expects inflation to moderate in coming quarters...

Apr 30, 2008
... some indicators of inflation expectations have risen in recent months. The Committee expects inflation to moderate in coming quarters...

There appears to be no theoretical limit on how long you can continue to expect something to happen, however, practically speaking, at some point in time, people stop believing what you say.

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