Where’s the Economic Recovery?


The much-hyped economic recovery has suddenly disappeared into thin air as economists and mainstream analysts are left scratching their heads in bewilderment. But since the herd couldn’t see the biggest collapse in 75 years coming, what makes you think they can recognize a double dip before it develops?

2nd quarter revenue misses from stalwarts like JP Morgan, Goldman, and IBM are confirming the across-the-board weakness in economic data. Let’s not forget that JP Morgan’s net earnings increased largely because of a $1.5 billion dollar decrease in loan loss reserves- which, in my opinion, is a rather questionable move given the still uncertain economic environment.

Of course things could have been a lot worse according to President Obama, who saved or created 3 million jobs according to….himself. The farce that is our government will continue until November, when I expect the collapse in public confidence to be expressed at the polls.

Leading Indicator Index

Investors are paying close attention to the leading indicator index, which currently stands at -9.8%. A drop below -10% would virtually guarantee we are heading back into recession, since every drop below -10% in the past 42 years has resulted in a recession. We may get a -10% reading as early as this week.

Retail Sales

The consumer is starting to retrench as the economic outlook continues to be uncertain. The back-to-back declines in retail sales is a huge anomaly in an economic recovery. A sensible person would therefore just believe the obvious: we are not in an economic recovery.

The weakness in retail sales is corroborated by a rapidly falling consumer confidence index.

Real Estate

It appears there will be no snapback recovery in real estate, which anyone with some common sense could foresee. New mortgage applications just came in at a 14-year low– and this is with record low mortgage rates. New homes sales also plummeted to a record low in May. Can anyone actually spin this as a real estate recovery?

The weakness in housing demand is due to a combination of weak consumer demand and the extreme caution of banks. Real estate loans have continued to collapse throughout this ostensible economic recovery. What happened to the real estate recovery that tax-credits and trillions of dollars in stimulus were supposed to create? Was it really a figment of people’s imagination?

Conclusion

In only a couple of months, the economic recovery thesis has been turned on its head. It’s funny what hard data can do to a thesis built on sand. So what are people who’ve been consistently wrong for years telling you now? They are telling you the U.S. is not Greece; they are telling you gold is a bubble; they are telling you that the dollar is king; and they are telling you to fear deflation and run to bonds. In short, they are delusional.

Stay focused on the end game. The economy is deteriorating along with public confidence. These are trends that very few saw coming- but they are developing before your eyes. The rocket launch in gold is next. Stay tuned.