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November 14, 2009 |
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This is a link to an interesting article by Bill Hester of Hussman Funds. The article analyzes this economic recovery to the recoveries of the past.
The particularly insightful section is on the latest readings of the Leading Economic Indicators Index (LEI) and how this index's recent spike may not be indicating as V-shaped of a recovery as many investors currently think.
His analysis highlights how much more the financial markets-related components of this index have been affecting the readings compared to their impact during the '74 and '82 recoveries.
The path of the real economy - as opposed to simply the financial markets - is the key to how robust 2010's earnings will look. Only time is going to tell this story. Regardless of the V-shaped recovery in certain indicators, the evidence is not uniformly obvious.
To read Hester's analysis, click here.
To send comments, click here.
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November 13, 2009 |
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Saw this recent video of Dan Alpert of Westwood Capital, LLC. His views on this market rally lines up with our general thoughts. His reference to stock prices (in aggregate) being high in relation to most earnings measures harks back to our recent commentary. We are obviously not alone in our concern about the sustainability of the upward move. Any investor should be wary of a being too much in the consensus. Nonetheless, Alpert's thoughtful articulation of the current environment strikes us as quite logical.
To send comments, click here.
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November 11, 2009 |
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We recently reviewed the latest report on mortgage delinquencies and foreclosures from Lender Processing Services (LPS). CNBC’s Diana Olick referred to it in the video below. In the report, slide 13 was of interest and shows the continued deterioration of the mortgage situation. Three times as many troubled mortgage loans are deteriorating versus improving. Interestingly, this report also shows that the problem has moved away from and beyond the subprime mortgage segment and into the next phase of prime loans such as Alt-A and Option ARM mortgages.
These are not small problems and it will likely mean another leg down for home prices. If unemployment continues to worsen (and we believe it will hit at least 11% in 2010), then the housing problem will continue to weaken our economy.
Why do home prices matter? It means banks will be reluctant to lend – as they have been lately – until they recoup the losses and it means that consumer wealth is likely going to be under pressure – which means they will be reluctant to borrow and spend.
Posted below is the video segment from CNBC and a picture of the looming Option ARM and Alt-A mortgage issue.
To send comments, click here
