Don W

Housing Bottom Should Signal Financials Rally

3 words. Annual cyclic variation. Summer months are always positive for the housing industry - as well as market indicators. Look at housing sales and market indexes as they fluctuate on a month by month versus previous years, and you will see that May/June/July/August are always climbing. This supposed "slowdown" of the market fall is nothing but a part of that yearly cyclic nature of these markets. The decline this year from 2007 is as big of a gap as 2007 was from 2006. Come October, the cycle will go the other way, and everything will turn down hard - based on both the cyclic nature as well as the slide from 2007 that we are still well entrenched in following through the elections in November.

Is it the nature of analysts and economists to be the first on the bandwagon of "the market is getting better now" - ignoring major trends and data that any decently studied person would bring up to deflate their opinions? How many times are we going to hear someone predict "we are close to the bottom", only to hear the latest hard and reality-based figures that show that the slide continues until the markets have contracted to the levels of sustainability that we had been well over-reaching for 5 years (corrected for nominal growth over 5 years, of course). Look at charts and data that shows nominal averaged growth figures, and they show that we have contracted 18% or so and still have another 9% to contract before we are in the region of where we should have been without the out-of-control financial excesses. Add to those figures that we are paying slightly higher than average per disposable income (dollar adjusted, of course) for energy, and we should be below that nominal growth estimate. Now that China is now slowing down as well, and this winter should prove to be the major world market recession clincher. Once we have caught back up to the re-adjusted indexes - about a year out from here (hopefully) - then we might start saying that we are bottoming out. Until then, don't believe any 'expert' who keeps trying to blow happy smoke.