HOLY COW: Robert Shiller Could Easily See Another 25%

Recent housing and employment data suggests the U.S. economy is at a tipping point where a double-dip recession is possible and home prices could have much further to fall, a veteran economist said on Thursday.

Robert Shiller said the recent uptick in unemployment is not yet enough of a sign as to which way the recovery is heading. But if unemployment continues to rise in the coming months, it could suggest another recession.

"Whether we call it a double-dip or not, I think there is a risk," Shiller told Reuters Insider television in an interview.

Likewise, data showing U.S. home prices fell into a double dip in March could prove to be either a seasonal effect over the winter months or part of a downward trend.

"My gut feeling is we might see a continuation of the decline" in home prices, Shiller said earlier on Thursday at a Standard & Poor's housing summit.

He added that a 10 percent to 25 percent slump in real home prices "wouldn't surprise me at all," though he cautioned that was not a forecast.

A glut of houses for sale, ongoing foreclosures, tight credit and weak demand have kept the housing market on the ropes even as other areas of the economy start to recover.

Those headwinds have led the National Association of Home Builders to say the market will see no improvement this year.

"We now think single-family housing starts will probably be no better than they were in 2009, which basically tracked as the worst year on record," Jerry Howard, chief executive at NAHB, said during the summit.

Howard said their economists expect a slight uptick next year and a more robust housing market in 2013.

BOTTOM UNCLEAR

As for when home prices might bottom, Shiller told Insider that was unclear and it was possible prices could slide for 20 years.

"We've seen five years of decline already since the peak in 2006 and I don't see evidence that we're coming out of it," he said.

Shiller, known for warning about bubbles in the stock market and housing market, is also the co-founder of the S&P/Case-Shiller home price index. Last week the index showed single-family home prices in March slumped to lows not seen since March 2003, falling below the previous crisis-era bottom set in April 2009.

That report, along with other data, including grim jobs figures and a slowdown in manufacturing, suggested that the economic soft patch seen in the first quarter of the year could be more protracted.

Home prices had been supported last spring by a tax credit, but the housing market has struggled since the credit expired.

Speaking at a separate housing conference in Cleveland, Federal Reserve Vice Chair Janet Yellen said there was no quick fix.

"Looking forward, I unfortunately can envision no quick or easy solutions for the problems still afflicting the housing market," Yellen said. Even once the housing recovery takes hold, it will be "long and drawn-out", she said.

Nonetheless, she pointed to steps being taken to heal the market, including developing uniform national servicing standards, and giving banks incentives to participate in stabilizing communities.

Catalyst Needed: Gold Stocks are Underowned and Oversold

While Gold is only 2% from all time highs, the gold stocks have struggled and underperformed badly. This is reminiscent of 2008, although we don’t think a similar result is coming. The fact is as QE 2 ends and the failed recovery peaks, money is moving out of risk assets and into Bonds. Gold is holding up very well but the gold stocks are struggling and in need of a catalyst.

Let’s take a look at GDX (large caps) and GDXJ (juniors). In the following chart we show both along with the bullish percent index for the sector, which is at 40% but often bottoms at 25%-30%. For GDX we note strong support at $48 and $50 with support at $51. Meanwhile, GDXJ remains above key support at $34. Should that falter we are looking at $31.50-$32.00 as the next support.

Whatever bullish sentiment there was at the end of 2010, has completely eroded. Assets in Rydex’ Precious Metals Fund (courtesy of sentimentrader.com) are near an 18-month low and very close to a two-year low.

We should also note that sentiment is not so bullish on Gold itself. Mark Hulbert‘s HGNSI indicator, which was 70% at the recent top, fell to 7% at the recent bottom and is now only 20%. Yes, with Gold only 3% away from a new all time high, the average market timer recommends mostly cash instead of a long Gold position. Furthermore, open interest in Gold futures is 22% off its high and the speculative long position is 21% off its high.

Technically the gold stocks are in a good low-risk position. However, there needs to be a fundamental catalyst for the sector to bottom, build a base and embark on a new sustained advance. Strengthening of the real price of Gold always helps, though its effect is not immediate and usually lags by a few months.

In the following chart we graph Gold against other markets. Similar to 2008, we see that the gold stocks are falling against gold yet Gold is quietly strengthening against Oil, Industrial Metals and the S&P 500. The real price of Gold began to strengthen across the board in September 2008 and it was only a month later that the sector bottomed.

As growth and deflation reemerge as the primary concerns, we will see Gold continue to strengthen against all markets and assets (sans Treasury Bonds). That is a positive though not immediate catalyst for the gold stocks. The worse the economic numbers and the worse conventional assets perform the more likely the Fed is to continue to provide increased artificial support. Moreover, the strong Treasury market provides the Fed political cover and the ability to monetize bad debts. They want to do this when Bonds are strong not weak.

To conclude, there is no immediate catalyst for the gold stocks but things are starting to move in the right direction. As the economy stalls and the equity market peaks more money will move out of risk assets and eventually into Gold and then the gold shares. We are already seeing the start as Gold is firming in relative terms. Look for a bit more weakness in the gold stocks but ultimately this summer should host a major low and the gold stocks will be in a fantastic position heading into 2012.

In a bull market you always want to buy the dips. In this sector, the dips can be exaggerated. Now is the time to pay attention. In our premium service we are uncovering many great prospects in the established and speculative categories.

Danger: Further Breakdown Ahead

The S&P 500 fell again yesterday, its sixth decline in a row, and the worst losing streak in over two years. But volume on the NYSE totaled just 1 billion shares, and decliners exceeded advancers by a mere 3-to-1 — hardly selling climax extremes. Now investors are asking, “How low is low?”

With the path of least resistance down for both the near and intermediate term, we turn again to the S&P 500’s daily chart. The most significant support is still at the 1,250–1,260 double black line. Adding significance to this zone is the uptrending 200-day moving average (solid red line), which intersects at 1,252 and the low of March at 1,249. Also note that the Relative Strength Index (RSI)red line at the bottom of the chart is approaching the lower channel of a pattern that began in November, and this should provide support. But will it?

Focusing on individual sectors shows that the decline is very broad. Note that the Semiconductor HOLDRs (AMEX: SMH) chart shares many similarities with the stocks of the S&P 500. Yesterday began a test of the April low at $33.50 with the next support at the March low. Note, too, the similarity of the downward channel of its RSI with that of the S&P 500.

And even completely unrelated industries are following similar patterns. The Market Vectors Gold Miners ETF (NYSE: GDX) chart shows a major support band is currently being tested. Yesterday’s close at $53.43 fell at the lower range of that band. A close under $52.50 could put more pressure on this group and confirm the validity of a double-top and a possible sell-off to the mid-$40s.

Conclusion: Stocks are deeply oversold, and there is a strong possibility of a relief rally. However, the intermediate direction of the market has turned bearish. Moreover, the broad-based nature of the decline is reminiscent of a buildup of negative sentiment that could overwhelm buyers as margin calls force further liquidations. The stock market is in danger of breaking down. Defensive action is warranted and rallies should be used as opportunities to lighten up on equities. Traders should revert to the short-selling strategies.

There is a strong possibility of a relief rally, but stocks are likely to continue their decline

July Corn Futures Power to New All-Time Record High

July corn futures at the Chicago Board of Trade on Thursday morning hit a new all-time record high of $7.93 a bushel, surpassing the previous high of $7.88 3/4, scored on April 11. Prices did then back off the daily high and were trading near mid-range as of this writing. July futures prices have tacked on around 50 cents a bushel from this week's low of $7.29 1/4. Corn market bulls have gained fresh upside near-term technical momentum this week and are now looking for more on the upside in the near term.

The next upside price objective for the powerful corn market bulls is producing a close above major psychological resistance at $8.00 a bushel. Such would provide the bulls with additional power to suggest a fresh leg up in prices in the near term. If the Corn Belt weather patterns work in the corn bulls' favor during the critical corn pollination period that occurs in late-June/early-July, (meaning hot, dry and windy weather conditions such as those experienced in the Corn Belt earlier this week) then upside price potential in the corn futures market would be greatly enhanced.

Given the already extremely bullish and very tight supply and demand balance sheet for corn at present, any significant weather problems in the U.S. Corn Belt this summer would likely produce explosive upside price action. The corn market bulls would see their enthusiasm significantly dented if July futures prices dropped back and closed below strong chart support at this week's low of $7.29 1/4. Such would also be an early technical clue that market has put in a major price top. Near-term technical resistance for July corn futures is now located at the April high of $7.88 3/4, at Thursday's all-time high of $7.93 and then at $8.00. Support is seen at $7.70, at Thursday's low of $7.59 1/2, at $7.55 and then at $7.50. Stay tuned!

Jim Wyckoff

30% Of People With A 401(k) Have Taken Out A Loan Against It: New All Time Record

About a year ago Zero Hedge posted an article titled: "Record Number Of Americans Using Retirement Funds As Source Of Immediate Cash" after a report by Fidelity uncovered that "plan participants with loans outstanding against their 401(k) accounts had reached 22 percent versus 20 percent a year earlier." It is now time to revisit this very important topic because if recent press reports are true, last year's record number has just increased by another 50%. "On "The Early Show" Thursday, financial journalist and Newsweek columnist Joanne Lipman said, "Right now we have 30 percent of people who have 401(k)s have loans against their 401(k)s, which is a historic high. And the problem is, it's growing like crazy: By 2014, we're expecting to see 30 million people take loans against their 401(k)s." The raiding of the last ditch piggybank is on, and who can blame them? With banks setting the example of always reverting to the Discount Window (or the Excess Reserve stash as is now trendy) when in trouble, ordinary working Americans are merely following in the footsteps of their financially more "literate" betters. Unfortunately, unlike the "depositor" institutions, nobody will replenish these funds should they not be repaid and the retirement money is gone for good.

CBS News explains why raiding your 401(k) is so easy a caveman can do it:

Sheri Chaney Jones, of Columbus, Ohio, started a consulting business in October and borrowed from her 401(k) to help pay her bills.

"It was extremely easy,' she told CBS News, adding that her financial planner told her "she was seeing more and more people" do it, "because the banks were not giving loans out traditionally to small businesses anymore."

"It's not right for everyone," Jones noted, " but it is your money, you can borrow from it tax-free, you do pay yourself back at interest, but a very low interest, much lower than maybe a traditional bank."

Just like Wall Street sellside research, delusions are rampant:

"What I feel optimistic about," Jones says, "is that I will be able to grow this business to not only pay myself back at the current interest, but continue to contribute more toward the 401K than I would have if I would have stayed where I was."

And for those wondering why doing a 401(k) raid is the worst possible idea:

"It's a big, big problem," she remarked to co-anchor Chris Wragge, "and it's one that's really been under the radar. And the big problem is that, if you lose your job, you have to pay that loan back within 60 days. So suddenly, you have no income, you owe all this money back, and the fact is that most people are unable to pay it back.

"There was a survey recently that found that 70 percent of people who lose their jobs are unable to pay back the loan and go into default. And the number is even higher ... for young people -- it's closer to 80 percent."

It gets worse: "If you go into default," Lipman pointed out, "you've just raided as a piggybank your 401(k), you don't have retirement funds and you owe taxes and penalties."

Step aside HELOCs, here comes the pension money for iPad exchange:

Still says Lipman, "There are certain times when it makes sense. If you're secure in your job, if there is a one-time expense -- let's say you need money for a down payment on a home, that's fine. You know, that makes sense. Or for education, for medical expenses. You know, that can make a lot of sense. Because you are paying yourself back. And if you can stay on track, you're fine with that.

"But the problem is, when you use it as a piggybank. When people are using this to pay for a vacation, to pay for a home that's perhaps larger than they can afford - that's where we really get into trouble."

Luckily, Americans have demonstrated beyond a reasonable doubt that when it comes to abusing rainy day capital to satisfy trivial material needs, there is nothing to worry about. Nothing at all.

4.916665

Jim Rogers video Interview RT America

Jim Rogers says that the congress should take a chainsaw when cutting spending , America is already bankrupt they should not care much about the rating agencies triple A rating , the rating agencies have always been wrong in the last decade jim rogers says . America is the largest debtor nation in the history of the world. As the country goes deeper into the hole, how worried should we be? Congressmen shouldn't be worried about our credit rating, says Quantum Fund's Jim Rogers. America is already bankrupt, he says, and the only solution is to cut spending dramatically by "taking a chainsaw" to the budget. Unless something is done quickly, says Rogers, a disaster is imminent.

A Classic Technical Signal: China Breaks Down

Since "the China Story" is the foundation of global growth, demand for commodities and ultimately, stock market profits, when China's stock market breaks down it behooves us to pay attention. Technical analysis offers a number of tools to help us chart the past and present and calibrate probablities of what might happen in the future.

Much of the time there are no clear signals, and chartists can lose their way trying to discern patterns and trends which may or may not pan out in the future.

In other cases, the technical tools provide very clear signals which investors choose to ignore at their own risk. These include "death crosses" (a short-term moving average dropping through a longer-term moving average) and price sinking below moving averages.

One classic pattern is a flag or pennant (a.k.a. a wedge). The psychology behind the pennant is rather transparent. Lower highs reflect a decline in Bullish enthusiasm and buying pressure, as every "buy the dip" fails to match the previous dip-buying.

The Bullish "story" that powers the "buy the dip" buying has rendered Bearish sellers wary, so each decline is shallower than the last. The tug of war between Bulls (buyers) and Bears (sellers) has reached a stalemate.

Whichever way the market breaks from this price/volatility compression sets the new trend's direction.

The direction of China's market has been decisively signalled: breakdown. In technical analysis, it doesn't get any better than this:

In the typical course of things, price may well rise in another "buy the dip" phase, but it will meet strong resistance at the lower trend line. Price may well noodle around for a while beneath this new resistance before cascading to previous lows.

Since the Shanghai market tends to lead the U.S. and other global markets, a breakdown in China's market can be seen as a predictor of what lies ahead in the U.S. and other global stock markets.

The wheels are falling off the China story. A massive wave of malinvestment since 2008 is cresting, and the stupendous stimulus provided by gargantuan local government and private lending is expiring.

That's what the chart is telling us if we "read between the lines."