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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory
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To: Ice Cube who wrote (71981)10/14/2006 5:54:40 PM
From: Rarebird  Read Replies (2) of 110194
 
>>The worst of real estate is over, the doom and gloom outlook is not correct<<

The housing bust has yet to show up strongly in most economic reports. That doesn't mean it's not there. Individuals who used their homes as cash machines to borrow against probably are cutting back on purchases as the latest report on Retail Sales last week showed. Some of the decline in sales was due to lower gasoline prices, but if that were the whole story and the money saved from energy purchases were used to buy goods and services, no decline in sales would have been seen. Thus, the decline is a real decline.

Don't kid yourself here. All of the objective evidence points to a recession in the US economy occuring in the second half of 2007. The stock market has yet to reflect that possibility. That is not unusual: the stock market often rallies going into a recession because investors believe the Fed will cut interest rates to forestall the smash. Unfortunately, the Fed is often faked out by lagging indicators like inflation and almost always tightens too much. Now a few Fed governors have been talking about tightening again in recent days and that would simply speed up and lengthen the duration of the coming recession. That kind of talk cracks me up; for this time, they have already overtightened by a considerable amount, causing the yield curve (the difference between the 10-year US Treasury Note yield and the 90-day US Treasury Bill yield) to invert for a full quarter of a year. This makes it almost certain that the economy will be plunging into recession within about 9 months.
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