GDP and Income - very revealing...

Source: NY Times

GUNDLACH: This Chart Is Why Janet Yellen Doesn't Want To Raise Rates 

Federal Reserve Chair Janet Yellen has long said she remains focused on the health of the labor market, and in her most recent public comments at Jackson Hole, she said that given the current state of the labor market, there was "no simple recipe for appropriate policy in this context." 

And for Gundlach, one chart makes clear why Yellen's desire to raise interest rates is most likely far less than many assume. 

Wages as a percent of GDP remain near multi-decade lows, and until this trend shows any sign of improvement, Gundlach doesn't think that Yellen will want to do anything with interest rates. 

Gundlach also noted that real wages for the bottom seven deciles of earners had fallen between 2007 and 2014, to which Gundlach said, "It seems tough that with so many workers losing purchasing power on a year-over-year basis, you could raise short-term interest rates." 

This graph appears to provide a vivid indicator that the world's economic condition is not moving in a 'positive' direction....yields headed downward is not indicative of strong economic growth trends! 

How much 'spoken word' power from the European central banks has assisted with this downward movement with everyone speaking about potential QE?

Although it is very interesting that the 'risk premium' for Italy and Spain appears to have dissipated...in spite of their continuing economic struggles.

Chart Of The Day

The Schizophrenic US Housing Market In One Chart

by Tyler Durden on 08/21/2014 

For those who are looking for just one chart with which to summarize the US housing market, here it is courtesy of the NAR, which earlier today reported July existing home sales, which despite beating expectations, were still 4.3% below the 5.38 million annualized homes sold a year ago.

The chart shows that while the housing market for the low-end continues to collapse (the 12.9% drop was "only" -12% three months ago), and the mid-range is virtually frozen, all the upside activity, activity which pushes the median price ever higher (in July it was $222,900, 4.9% percent above July 2013 and the 29th consecutive month of year-over-year price gains), was in the ultra-luxury segment, or houses which cost over $1 million as the "1%", both foreign and domestic, continues to convert their pieces of fiat paper into hard real-estate assets

Source: NAR

household income and the velocity of money

Two interesting data sets that provide some insight into the struggles that we are facing in the real life economics of the new normal...

Real median household income has declined, meaning the purchasing power of earnings fell.
 

 

An economy in good health has a high velocity of money. 

 

Housing Permits, Starts Surge Driven By Renewed Rental Housing Scramble

Starts:

And Permits:

So is this the housing recovery everyone's been waiting for? Sadly, no, because one glance at the internals reveals that virtually all of the surge higher was on the back of multi-family housing units. Specifically, in permits, virtually all of the rise was due to multi-family, aka rental, unit construction, which soared by 73K, from 309K to 382K, a 24% increase, while single family, residential, units were up by a tiny 6K, or less than 1%.

Start was more of the same, because while single-family units here did post a modest improvement, rising to 656K, it well below the 710K highs reached in November 2013, all of the action was again in multi-family units, which exploded higher by a whopping 33% in one month, from 318K to 423K. This just happens to be the highest print since Lehman and matches the other highest mult-fam housing record in the past decade from January 2006, when the same number of multi-family housing units was started.

Finally, considering just how volatile this series has become, don't be surprised if in September the July data is revised wildly lower considering the wild margin of error, especially on the Starts side, where the "final" data point is within 11% of the presented number.

by Tyler Durden on 08/19/2014 

Fed speak

Fed speak - latest edition:

Yellen said the central bank has no “mechanical answer” for when to raise rates, and that before doing so, policy makers must be certain the economy is on a solid footing. While her overall view is positive, she said there are still “mixed signals” and “we have in the past seen sort of false dawns.” 

St. Louis Fed President James Bullard said July 17 the Fed may have to raise rates more quickly than planned and that it’s “closer to its macroeconomic targets today than it has been most of the time since 1960.” 

Ex-Fed speak - 

J. Alfred Broaddus, president of the Richmond Fed from 1993 to 2004, said while the risk of getting behind the curve on raising rates is increasing, “this is a different world” with economic data harder to interpret than ever before. “If I were there now I would be conflicted,” Broaddus said. “This is a difficult time and there’s a lot that’s unprecedented here.”