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Posts Tagged ‘real estate’

Are we heading towards a double dip recession?  Take a look at the numbers:

May new home sales plunged -32%.

Mortgage delinquencies are up 36% since last year

The Baltic Dry Index has dropped -40% since May 26, 2010.  This index is considered a leading indicator of the future growth of the economy.

Manufacturing index plunged in May
May housing starts fell -10%
May retail sales post biggest decline since September 2009
May existing home sales fell unexpectedly?

Pile on top of those statistics the fact we have a major landscape change occurring in the Gulf of Mexico that will negatively affect the economy and that region as well as continued climbing unemployment and a decline in consumer spending, I just don’t think that a double dip recession is avoidable.

John Mauldin pointed out in his excellent weekly writing Frontline Thoughts that the index of weekly leading economic numbers has turned negative.  There was a -23% decline.  Then he showed this chart of what this type of drop has signaled in the past.

   

For all of those in the financial services community wanting you to drink “the everything is OK” Kool-aid, they are going to have a tough time spinning out from underneath these deteriorating numbers.

In addition these numbers are showing a renewed decline in real estate.  As I have stated before, it will be tough to turn the Titanic around without a recovering real estate market. 

This is Evidence that Economic Numbers could be Rigged

Either these numbers are rigged or their methodology is flawed or they were able to actually hand pick and find a few thousand happy people.  Now with all of the above bad news that is coming up along with high unemployment and a stock market that has been in the tank since April…The University of Michigan Consumer Sentiment Index jumped to its highest level in 2 years.  Are you kidding me?  If you believe that you might also believe that British Petroleum has the problem in the Gulf under control.  Really, there is no way that could be accurate.   

On Friday the ever so important unemployment numbers are coming out.  That should give us an interesting piece of the puzzle.  I just wonder how many jobs the Government will create out of thin air this time?   

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It really is amazing to me as I look over the latest consumer confidence numbers.  The prior month’s reading showed a better than 50% surge in confidence. This last month reported a 34% higher than expected surge again in consumer confidence.   The reason for the optimism, reports the conference board, is the “recent jumps in the stock market, low mortgage rates and smaller job losses.” 

Following the report of the confidence numbers, we see that home values fell 18% last month as foreclosures surged.  This sure doesn’t inspire confidence.   My favorite part of that report is the optimism over “smaller job losses.”  Remember that the stock market had a very good day once the May unemployment numbers came out showing a much better than expected number.   The loss of jobs was nothing like everyone feared. Of course, the Government estimated that 226,000 jobs were created that month.  That goes a long way to make the end result “look” as if the unemployment numbers are turning around.

So, here we go once again.  Although the consumer is facing enormous debt problems, the country’s future has been a mortgage away, foreclosures are in crisis mode, real estate is nowhere near the bottom, unemployment is not getting any better, etc., the consumer is confident.  Once those numbers were released today the market took off.  Investors were simply giddy over the new found confidence.   I realize that some of you might wonder when I might get some confidence back in these numbers and the system.  It will be tough for me to get overly excited when the system is broken and the numbers are highly suspicious.  Do you really believe that there is that much confidence?  Well, the stock market is making a big bet that those numbers reflect reality. 

There is a huge confidence bubble being created.  I wouldn’t want to be heavily invested when that bubble bursts.

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