Posts Tagged ‘consumer confidence’
The news headlines are saying the U.S. housing market is witnessing robust growth and flipping homes for profit is back.
While many are now saying there is growth in the U.S. housing market and that it will continue, I disagree with them, based on many different factors…all of which I want my readers to know about.
Yes, home prices have gone up, but that’s about it for positive developments. The housing market still suffers, and there are problems that need to be fixed before it sees a full-on recovery.
The delinquency rate on single-family residential mortgages in the U.S. remains staggeringly high. In the second quarter of this year, it was 9.41%. Yes, again; it has declined from its peak of 11.27% in the first quarter of 2010, but it’s still almost 140% higher than its historical average of 3.94%! (Source: Federal Reserve Bank of St. Louis web site, last accessed November 8, 2013.)
As I have been harping on about in these pages; institutional investors jumped into the U.S. housing market buying residential homes in bulk, and as a result, prices increased. But we didn’t see first-time home buyers run towards the housing market—an increase in first-time home buyers is essential for any economic recovery.
According to the National Association of Realtors, in September, first-time home buyers accounted for 28% of all existing home sales in the U.S. Meanwhile, investors were behind one-third of all existing home sales! (Source: National Association of Realtors, October 21, 2013.)
The “U.S. Economic and Housing Market Outlook” report issued in October by the Office of the Chief Economist at Freddie Mac said, “According … Read More
Consumer confidence in the U.S. economy is falling fast. This phenomenon will bring key stock indices lower. But sadly, no one is really talking about this. “Buy, buy, and buy even more” is the theme among stock advisors. Optimism is increasing, and so is stock market risk.
The Thomson Reuters/University of Michigan Consumer Sentiment Index, a measure of consumer confidence in the U.S. economy, has fallen to a level not seen since December of 2011. This gauge of consumer confidence fell to 72.0 in November from 73.2 in October. (Source: Reuters, November 8, 2013.)
With that said, please take a look at the chart below of consumer confidence as plotted with the University of Michigan Consumer Sentiment Index in red and the S&P 500 in green. Pay close attention to the circled areas.
Chart courtesy of www.StockCharts.com
Generally, the chart above shows consumer confidence and key stock indices have had a direct relationship since 2001. In fact, at times, consumer confidence acts as a leading indicator of where key stock indices will head.
But since the beginning of this year, this relationship has gone the wrong way! As consumer confidence fell, key stock indices continued to march to new record highs! Just add the divergence between consumer confidence and the key stock indices to my long list of why this stock market shouldn’t be going up.
Consumer confidence predicts where consumer spending will go. If consumers in the U.S. economy are pessimistic about their future, it is very likely they will pull back on their spending. As a result, companies sell less, produce less, and earn lower profits—which eventually results … Read More
The U.S. Department of the Treasury has reported that for the federal government’s fiscal 2013 year, which ended on September 30, 2013, the U.S. government budget deficit was $680 billion—the smallest budget deficit in five years. (Source: Bureau of the Fiscal Service, October 30, 2013.)
Should this be taken as great news? No, it’s “smoke and mirrors,” as I will explain below. But the mainstream certainly thinks this year’s budge deficit, which came in below $1.0 trillion, is good news. They forget that no matter how you look at it, any budget deficit, no matter how small or large, is adding to a bigger problem at hand—our massive national debt.
Let’s face it: a budget deficit at the end of the day means the government spent more money than it received. Where does this extra money that the government spends come from? The answer is simple: it borrows. And as a result, the national debt rises.
Our national debt has increased significantly over the past few years. At the beginning of 2008, the U.S. national debt stood at $9.2 trillion. Today, it stands above $17.0 trillion. (Source: Treasury Direct web site, last accessed October 31, 2013.) This represents an increase of almost 85% in the national debt in the matter of a few years.
I believe the national debt will double from here…from $17.0 trillion to $34.0 trillion.
Why am I so negative on the national debt? I’m skeptical because I don’t believe this year’s numbers present the real story on government spending. Let me explain…
In the fiscal 2013 year, the U.S. government paid … Read More
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