One part of the U.S. economy is in obvious big trouble: The housing market and all industries related to it. New home builders, contractors, home improvement stores, mortgage brokers and lenders — they are all feeling the pinch.
All we read about in the newspapers today is negativity on housing. Home foreclosure rates are jumping at triple-digit percentage rates, the mortgage lenders have tightened their lending criteria and, for the first time since the Great Depression, the median price of a house in the U.S. will decline this year.
Yesterday, as the Dow Jones Industrial Average put in a good performance, gaining 109 points for the session, the Dow Jones U.S. Home Construction Index got quietly pummeled again — 2.75% in one day! I wrote an article only a couple of weeks ago entitled “Housing Prices Headed to 2003 Level.” I may need to update that in the weeks to come again to “Housing Prices Headed to 2002 Level.”
Three years ago, I became bearish on the U.S. housing stocks. I’d still avoid them like the plague today. By the time the housing bust is over in the U.S., we will see some major American homebuilders declare bankruptcy.
So what’s the shining light in the U.S. economy?
It’s the manufacturing sector. Yes, after decades of seeing manufacturing plants close in the U.S. as American companies shifted production to lower wage countries like China, India, Mexico (and Canada to a degree), the jobs are coming back home.
Big American manufacturers are reassessing their foreign operations in light of a drastically falling U.S. dollar. And that’s where I see the bright light in the economy — companies with foreign operations that can get their American manufacturing plants running again, thus reducing their cost base.
As an economy, we all gain when manufacturing opens up again as jobs are created. As an investor, the silver lining is in finding those companies that suffered when the American dollar was highly valued and the fortunes of which return as the greenback continues to fall against other world currencies, making American manufacturing costs cheap again.
The New Shining Light in the U.S. Economy was last modified: February 1st, 2012 by Michael Lombardi, MBA
Michael Lombardi founded investor research firm Lombardi Publishing Corporation in 1986. Michael is also the founder of the popular daily e-letter, Profit Confidential, where readers get the benefit of Michael’s years of experience with the stock market, real estate, economic forecasting, precious metals, and various businesses. Michael believes in successful stock picking as an important wealth accumulation tool. Michael has authored more than thousands of articles on investment and money management and is the author of several successful investing publications,... Read Full Bio »
Forecasts Aug. 29, 2015
Immediate term outlook:
The bear market rally in stocks that started in March 2009, extended because of unprecedented central bank money printing, is coming to an end. Gold bullion is up $1,000 an ounce since we first recommended it in 2002 and we are still bullish on the physical metal.
Short-to-medium term outlook:
World economies are entering their slowest growth period since 2009. The Chinese economy grew last year at its slowest pace in 24 years. Japan is in recession. The eurozone is in depression. With almost half the S&P 500 companies deriving revenue outside the U.S., slower world economic growth will negatively impact revenue and earnings growth of American companies. Domestically, America’s gross domestic product grew by only a meager 2.3% in the second quarter, which will negatively impact an already overpriced equity market.
Estimates Aug. 29, 2015
Trailing 12-month EPS for Dow Jones companies (Most Recent Quarter)