“Anyone claiming that America’s economy is in decline is peddling fiction.” Barack Obama – SOTU January 2016

2016 has seen one of the worst starts to a year ever for major U.S. stock indices ever, and that means mortgage rates have continued to fall during the first two weeks of the year. For those who were rushing to lock in a sub-4 percent mortgage, there really was no need to rush. It is now easy to get a 3.75 percent fixed rate 30-year mortgage here in the Houston area. Mortgage rates are driven by demand in the real estate space and the strength of the economy.

The truth of the matter is the economy is weak, and the Fed has lost control of the markets. Outside of more QE they have few good alternatives for managing the huge mess of malinvestment they sponsored. Now the world’s central banks are all staring at each other clamoring for the other to pull the trigger and provide more heroin (QE) so the charade won’t come unraveled. Unfortunately, the damage is already done.

This week we saw that the Empire State Manufacturing index plummeted to the worst levels seen since 2009, with the headline general business conditions index falling to a -19.37. New orders for the NY state index fell to a negative 23.54!¬†The precipitous fall in the markets and the new lows in oil prices don’t bode well for the next round of numbers for Dallas Fed manufacturing survey where new orders were already double digits in the red last month.

empirecollapse

Combined with sub-$30 oil prices, the decline in producer prices negative retail sales numbers, and some rather weak industrial production numbers, what you get is a shrinking economy. As Lance Roberts detailed this week, those who suggested America’s economy was actually in decline weren’t really “peddling fiction” after all. As I have said all along, no amount of optimistic spin can hid the real data. The real data is UGLY. The real data show that this “recovery” was just a mirage facilitated by central bank money printing. It was a massive exercise in wealth redistribution toward the top of the food chain which has decimated the middle class and strangled the U.S. economy for years to come.

The Atlanta Fed’s GDP Now numbers provide an example of what you get when the charade comes unraveled…a shrinking economy!

gdpnow116

Remember Houston, the drop in oil prices is “unambiguously good“…

The tremendous market rally front loaded by the Fed is now in jeopardy. Interesting that Mr. Fisher would admit to the scam only after he has left his position at the Dallas Fed.

For more perspective on how the Fed’s policy failures have crushed the real economy, I would recommend Hoisington Investment Management’s latest quarterly review…

Hoisington Q4