Friday Charts: Nasty Politics And The Best Inflation Hedge

Includes: DIA, ITB, SPY
by: Lou Basenese

Words mean little on Fridays in the Wall Street Daily Nation. Instead, we let pretty pictures do the talking for us. Each week, I select a handful of graphics to put important economic and investing news into perspective for you. So I’ll (mostly) shut up now …

Bad for Politics, Good for Stocks

The bickering over the objectivity of unemployment figures is about to kick into high gear. Why? Because another jobs statistic fell unexpectedly, just like the latest unemployment reading did.

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Yesterday, the Labor Department reported that weekly initial unemployment claims filings fell by 30,000 to 339,000. That’s the lowest level in more than four years.

The drop makes economists look like overeducated and overpaid weathermen – again. (Or we can go with “idiots” if you prefer being blunt.) They expected an increase of 1,000 filings to 368,000. Talk about a whiff!

Of course, any time I mention politics I get blasted for being a raging liberal and a gun-toting Tea Partier. So I’m going to avoid weighing in on the subjectivity of the statistics for fear of being accused of supporting a political party that I, in fact, do not. Instead, I’ll stick to what I know – stocks!

As I’ve noted before, when initial jobless claims drop, stocks rise. That’s something we can all celebrate, right?

You Didn’t Foreclose on That!

Every time I reiterated my stance that the real estate market was on the mend – and it is – critics blasted me. They said I was ignoring the next big shoe to drop – another flood of foreclosures.

Newsflash: I still look smart. And they still look like fear mongers.

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This week’s report from RealtyTrac reveals foreclosure filings – default notices, scheduled auctions and bank repossessions – dropped 7% in the last month and 16% in the last year. Foreclosure activity is actually at its lowest level since July 2007.

As Daren Blomquist, Vice President at RealtyTrac, says, the shoe isn’t being dropped. It’s “being carefully lowered to the floor and therefore making little noise in the housing market.”

Indeed. Long live the real estate recovery!

What’s a Better Inflation Hedge: Gold or Real Estate?

Since we’re dishing on real estate, I figured I’d bring this interesting chart to your attention.

After years and years of warning against the threat of runaway inflation, investors understandably piled into gold. So far, inflation’s been a no-show. At least the profits decided to show up, though.

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Since bottoming out on October 23, 2008, gold’s up 151.9%. But surprise, surprise. Real estate stocks are up even more.

Since hitting bottom on November 21, 2008, the iShares Dow Jones U.S. Home Construction Index Fund (BATS:ITB) is up 177.9%.

Gold might be the favorite inflation hedge. But right now, real estate’s the best bet.

In the famous words of G.I. Joe (because it never gets enough exposure in the financial press), “Now you know … and knowing is half the battle.”