Posts Tagged ‘central bank’
Housing Recovery Already Comes to an End?
By Michael Lombardi, MBA for Profit Confidential
The housing market simply isn’t improving at the rate many in the mainstream media are telling us.
Home prices are still significantly lower than what they were during 2005 and 2006. On its own, there is no housing market recovery. All we are witnessing is the mere reflection of easy money provided by our central bank.
As I often write, to see a real recovery in the housing market, we need to see first-time home buyers active in the market. Unfortunately, they are not involved.
In April, first-time home buyers accounted for only 29% of all existing home purchases in the U.S. housing market. This was three percent lower than the previous month and 17% lower than April 2012, when first-time home buyers accounted for 35% of all home purchases. (Source: National Association of Realtors, May 22, 2013.)
According to a survey by Fannie Mae, last month, 40% of Americans said it’s a good time for them to sell their home. In April, the survey showed only 30% thought the same thing, and in the same period a year ago, this number stood at 16%. (Source: Realtor Magazine, June 11, 2013.) Hence, we are going to see more listings hit the housing market.
The inventory of homes for sale in the U.S. housing market increased four percent in April from the previous month nationally, but what’s troubling is that in a few areas, such as Stockton and Sacramento, California, new listings have surged 75% from a month earlier.
The basic concept of economics: when demand declines and supply increases, prices go down.
And the most common mortgage in the … Read More
A Mirage Called the Stock Market
By Michael Lombardi, MBA for Profit Confidential
While an economic slowdown is looming over the global economy, no one seems to care, as stock markets continue to reach new record-highs—giving investors false hopes of economic growth. But how long can this mirage actually last?
The economic slowdown in the global economy I’m talking about is a worldwide pullback in growth. Take India as the first example. According to India’s Central Statistics Office, the Indian economy is growing at five percent—its slowest pace in a decade! The director general of the Confederation of Indian Industry was quoted late last week as saying, “With no visible pick-up in any key levers of the economy, the situation remains grim.” (Source: Mallet, V., “India records slowest growth in a decade,” Financial Times, May 31, 2013.)
China, the second-biggest economic hub in the global economy, is facing headwinds, as its economy is growing at its slowest pace since 2009. Japan has undergone the largest per-capita quantitative easing program in history (its debt-to-gross domestic product [GDP] is running above 200%), and that country is back in a recession.
The unemployment rate in the eurozone was reported last week at 12.2% for April. It was 12.1% in March. The unemployment rate in Spain stood at 26.8 % and in Portugal, it stood at 17.8%. (Source: Eurostat web site, May 31, 2013.)
And industrial metal prices, which are supposed to be a leading indicator, are all heading downward.
Take a look at the chart below of the Dow Jones-UBS Industrial Metals Index. This index provides an overall picture of the performance of industrial metals.
Chart courtesy of www.StockCharts.com
Since the beginning of the … Read More
Two Emerging Markets Stomping U.S. Growth
By Mitchell Clark, B.Comm. for Profit Confidential
When the U.S. equities market crashes, most foreign stocks do as well. But when it comes to capital appreciation, the correlation ends. Domestic Chinese stocks experienced a small resurgence lately, but they are still well down from their peak in 2007. China is still very much an emerging market, but several other emerging markets are doing much better. These economies are experiencing growth in domestic demand and are also selling a lot of product to their neighbors, China and Japan.
Thailand (the second largest economy in Southeast Asia) is actually an emerging market that is a better play than China itself. And, of course, you have lots of options as an investor if considering having some exposure to the region.
The iShares MSCI Thailand Capped Invstbl Mkt exchange-traded fund (ETF), symbol THD, has been on a tear lately, representing the broader stock market in Thailand. This ETF has about a billion dollars in net assets and is up approximately 38% year-to-date. Way better than China.
Things are really happening in Thailand. According to Thomson Reuters, this emerging market experienced 2012 fourth-quarter GDP growth of 3.6%, with strong domestic demand and an 18.2% increase in exports. Private consumption grew 12.2% during the quarter and both the government and central bank expect a solid increase in global trade this year.
Another emerging market experiencing a big increase in both domestic demand and exports to China is the Philippines. Pull up the iShares MSCI Philippines Invstbl Mkt Idx ETF, symbol EPHE, and you’ll see a huge spike over the last year. According to Bloomberg, that country’s 2012 fourth-quarter GDP grew 6.8% on … Read More
Surprise: German Economic Growth Turns Bleak for 2013
By Michael Lombardi, MBA for Profit Confidential
Developing countries are supposed to be the fastest growing world economies. Sadly, according to a recent report by the World Bank, in 2012, developing countries put in their slowest economic growth rate in a decade. Developing countries saw their economic growth come in at only 5.1% for 2012. (Source: The World Bank, January 15, 2013.)
How about the more developed countries in the global economy?
“High income” countries in the global economy are estimated to have grown by only 1.3% in 2012. In 2013, this growth rate is expected to remain the same.
Gross domestic product (GDP) growth in Europe and Central Asia is expected to have slowed to below three percent in 2012 from 5.5% in 2011. Similarly, Latin America and the Caribbean are expected to see their GDP grow only three percent in 2012, compared to 4.3% in 2011.
Add it all up, the World Bank estimates that, in 2012, the overall global economy grew at only 2.3% and it expects the same rate for 2013.
Dear reader, I don’t want to be the bearer of bad news, but the numbers don’t lie. The risks in the global economy persist. The combination of a recession-infested eurozone, a slowing economy in China, a depressing Japanese economy, a disappointing U.S. economic performance, and the struggles of the other emerging market economies points to bleak world economic growth for 2013.
Even the world economies that were once the strongest are in trouble. The central bank of Germany slashed its GDP growth prospects. It expects Germany’s GDP to increase by only 0.4% in 2013 compared to a previously forecasted increase of … Read More
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