Last week I looked at housing and its importance as a major contributing factor in GDP in the current economic expansion, which has turned from a tailwind into a headwind as residential fixed investment has contracted.
Housing was the major component that helped fuel the economic expansion after the last recession. As such periodic analysis of housing's decline will shed light into whether a hard or soft landing is in store along with a look at consumer expenditures.
The infusion of ample liquidity since the start of the decade to bring us out of the 2001 recession, cushion the economy and markets after the September 11th attack, and the continuation of the Yen Carry trade have put a bid under financial markets and have reduced volatility to an extreme.
The US economy is based largely on the consumer. Consumer confidence is strongly tied to asset valuations, so today’s news releases for the Mortgage Bankers’ Association’s purchase applications index and New Home Sales were fairly important to gauging the possible strength of the US economy.
have been writing fairly consistently on the housing situation and how it relates to the economy. It is my belief that the determination of a soft versus hard landing, or even a 'goldilocks economy' for that matter, will be largely determined by the extent of the housing deceleration.
After Nixon abandoned the Bretton Woods gold-exchange standard on August 15th, 1971, an era of liquidity and rampant money creation began. With the rampant money creation by the Federal Reserve consumers sopped up the newly created money in the form of taking on debt.
It seems that whenever gasoline hits $3 a gallon or Exxon-Mobil is releasing its earnings, politicians show how little they understand about global economics and simple supply and demand fundamentals and begin pointing fingers.
As most know markets are forward looking, anticipating changes in the economy, government, and the Federal Reserve. As such, looking at how markets have reacted in the past to previous interest rate cycles and business cycles is warranted.
There are many things in life that we take for granted. We expect to turn on a switch and the lights to go on. When we turn on the faucet, we expect water to flow. Whenever we are hungry, we expect the grocery shelves...