Gold And Silver Fall On Cold Weather

JM Bullion
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Listen to the 3.28.14 Smaulgld Podcast on Soundcloud

Podcast Summary

0:00-5:30 Introduction/Review of the Week’s Economic Data

GDP Grows on Increase in HeathCare Costs and Utility Bills

5:30 7:00 the Fourth Quarter U.S. GDP grew at a decent rate as consumer spending was robust- on increased healthcare costs and higher utility bills. These expenses are included in GDP as consumer spending and growth. If we get colder and sicker the economy appears to be growing. Indeed the weather has been blamed for poor economic performance but coler weather means higher energy bill so the cold weather is actually making the economy look good.

Home Prices-Down, Existing Home Sales-Down, Mortgage Applications- Down, Pending Home Sales-Down & New Home Sales- Down. Why? The Weather!

7:00- 9:00 The weather has been blamed for all the weakness in the housing market. Home prices are down. Existing home sales are down. Mortgage applications are down 18% year over year. Pending home sales are down. New home sales are down even though there is a supposed inventory shortage holding back the housing market. If there really was a shortage such that the demand was not being met, there would be an increase in new homes being built and sold. There is not. The explanation- the weather. The real reason for lower home sales is that the job market is not robust and people are spending more money on health care and utilities (to boost the GDP!) and credit is tight even though interest rates are still low.

Fed President James Bullard predicts that the unemployment rate will go down to 6% this year. It should as more people leave the labor force! How much longer can the weather be blamed?

9:00-13:48 discussion of the real estate market in the D.C. metro area and home builders and tightness of credit. Discussion of the drop of mortgage profits to historic lows.

Gold and Silver Down on Cold Weather- Everything is Blamed on the Weather- Forecast: More Weather

13:48- 16:15 discussion of the efficacy of QE. If there is a declining real estate market even though the Federal Reserve has printed $4 trillion and is still pouring $55 billion month into the economy (or rather the banks), how will housing market improve as the Fed tapers and ends quantitative easing? Gold and silver are down because of the weather. When will the weather recover?

The forecast is for more weather.

Keynesians and Natural Disasters

16:15-18:28 Discussion of the impact of natural disasters and war on the economy. Keynesians believe really bad weather helps the economy! We had bad weather and winter in 2004-2005 and millions of homes were sold. Comparison of new home sales now vs.ten years ago.

18:28-22:05 Discussion of real estate markets doing well because of decent job markets- San Francisco, Washington D.C and New York. Discussion of what the Fed President are saying.

22:05-28:22 discussion of Fortune interview of Jeremy Grantham who called Janet Yellen ignorant. QE was not a plan to improve the economy rather a plan to bail out the banks some of which are still not able to pass the Fed’s stress test.

28:22-34:10 discussion of how the U.S. democracy has reached a state where its citizens have learned how to vote themselves a raise. Discussion how the Fed serves its shareholders- the too big too fail banks. Discussion of the relationship between the banks and the regulators. Discussion how fines help keep smaller competitors out of the market. Discussion of the amount of money the too big to fail banks make and how they make it.

34:10- Discussion of why people wish to believe the economy is getting better. Discussion of stated income loans and their guidelines. Discussion of bankruptcy guidelines. Discussion of homes being sold outside the MLS.

Gold Falls on Cold Weather

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Further Reading:

Who Will Buy the Homes to Support the Housing Recovery

The Housing Recovery and the Law of Small Numbers

Why the Housing Recovery is a Farce Illustrated by Two Charts

The False Housing Recovery of 2013 and How it Unravelled

The Recovery Has Reversed – Welcome to the Revocery

Millennials, Not Part of the Club Yet

Royal Canadian Mint

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