Economy signs: Better-than-expected means what?
Better-than-expected retail sales data eased recession fears today but not by much. The lukewarm reaction from many analysts doesn’t exactly paint a clear picture for the economy.
“I think the number is OK. Sentiment had gotten so negative that a more mediocre number like this isn’t terrible,” said James Dailey, portfolio manager for TEAM Asset Strategy Fund.
Retail sales data beat expectations but an analysis by Anooja Debnath and Emily Kaiser points out that even the expectation water-mark is not as clear as it once was. Economic forecasts are all over the map and the consensus forecast does not necessarily represent what most economists think.
Recent data has taken some pressure off the Fed but with an economy many are viewing as flat, talk of more monetary easing, and how to do it, is swirling.
Turning to the housing market, Barry Ritholtz at The Big Picture is predicting the worst in housing is likely over. Sure prices could fall another 33 percent — but it’s unlikely –because homes are now priced where they should be in today’s market, Ritholtz writes.
Barry Ritholtz at The Big Picture writes the worst is probably over for the housing market because prices have already fallen 33 percent from the peak. He said prices as of the end of the first quarter were 5-to-15 percent over fair value based on traditional metrics, so even a return to fair value would entail a smaller percentage decline. An earlier post misstated his view.
For a bolder dose of optimism, look to Warren Buffett.
Economy signs: Some good news
A look at the macroeconomic news and its impact on the mood of investors and the direction of the economy. Are we heading for a double-dip recession?
Jobless claims and trade data came in better than expected prompting some investor cheer today.
“We were expecting that things would slow down in the third quarter and start to pick up in the fourth quarter, but now it seems like the slowdown in the third quarter wasn’t as severe as we feared,” said David Sloan, an economist at 4CAST in New York.
On the housing front, homebuilders seem to be banking on a recovery and restocking land inventories. The move is partly out of shortage fears and because they see rivals doing it, said industry consultant John Burns. But note everyone is buying into the recovery scenario, including Barry Ritholtz in The Big Picture.
“I do not believe that Housing has bottomed yet, but I suspect — hope is probably more accurate — that the worst of the collapse is over. I expect no sort of bounce back anytime soon; Housing is likely to see no real gains for the next few years, and might simply drift for as much as a decade (über housing bears think much longer),” writes Ritholtz.
The Fed’s Beige Book, released on Wednesday, suggested that while the recovery has been faltering, the economy may skirt a second recession.
“The economy continues to plod forward, neither gaining momentum nor lurching back into recession,” said Sal Guatieri, an economist for BMO Capital Markets in Toronto.
Economy signs: Housing a painful recovery
A look at the macroeconomic news and its impact on the mood of investors and the direction of the economy. Are we heading for a double-dip recession?
The housing market is more closely related to the price of luxury items than staple goods such as food and clothing, reports David Leonhardt in the NYT. This being the case, don’t treat your home like an investment because the forecast is underwhelming.
But all is not doom and gloom in the housing sector. In is blog Jeff Matthews Is Not Making This Up, Mathhews espouses the “Cover Story Syndrome” method of investing. The seeds of a housing market recovery have been planted by this week’s Time magazine cover story on just how bad things are, according to Matthews.
“When investment themes get so popular they appear on the cover of a major news magazine—a dying breed, but the basic idea is still there—then that investment theme is, by definition, too popular to succeed, and maybe popular enough to start betting against,” says Matthews.
Also in the down but not out category is Mark Hulbert’s article in MarketWatch. He takes a look at how to make money amidst deflationary concerns. Look to the consumer staples and health care sectors as a way of staying in the stock market.
Investors have their head in the sand when it comes to the outlook for the economy, reports Izabella Kaminska in the FT. The blog also contains a great video of Spock’s Vulcan nerve pinch.
