The Economy Guy

New House Sales were down 0.6% in June compared to the previous month.  The Stock market was ecstatic over this news because this was not as bad as expected.  More importantly, the inventory of new houses shrank 5.3% (and this doesn’t seem like such a big reduction, but the trend is good) to 10 months worth of new houses.  Remember, that you shouldn’t get excited about inventory until it gets down to 3 months, and don’t forget about existing homes whose inventory is 11.1 months right now.

Durable Goods Orders were up due to defense spending.  Again, this caused euphoria in the stock market.  I don’t get it.  Why don’t people see that if we’re spending a bundle on defense products, we’re getting ready for something.  That something should be very sobering.

Home Foreclosurers came in at 220,000 foreclosure in the 2nd Quarter of 2008.  This is TRIPLE the number of foreclosures a year earlier.  There were 739,714 foreclosure filings made in the same quarter.  What’s the story here???  Foreclosures are INCREASING, and they’re increasing in 95% of the USA – not just pockets of misery.  This is the worst thing that could happen to the housing sector, so it means that house prices will continue to fall.  The highest rate of foreclosures were in Stockton, Riverside, Las Vegas, Bakersfield, and Sacramento – in that order.  Honolulu had, by far, the lowests level of foreclosures in the USA.

Okay, let’s use our logic on this situation.  First of all, the banning of naked shorts caused a massive 20% increase in those financial institutions within the past two weeks – nice if you hold those shares.  Second, what happens at the end of one month?  If nothing, you can count on those shares tumbling.  Third, what happens to the twentieth and above financial institutions?  No much, it’s perfectly legal to do naked shorts on them.  They aren’t protected by big brother – SEC.

My personal thought is that the SEC has been caught with its pants down with respect to the meltdown and massive debt write downs coming from those 19 financial institutions.  So, in order to be seen to be doing something, they made the “No Naked Shorts” edict.  By the way, those 19 financial institutions are the “friends” of the SEC, even though the SEC is supposed to regulate those financial institutions.  

So, in reality, the SEC has protected the backside of those people within those 19 financial institutions – as they own a lot of their own shares.  And, they are giving them one month to get their investments in order.