Disclaimer

Disclaimer. After nearly 40 years managing money for some of the largest life offices and investment managers in the world, I think I have something to offer. These days I'm retired, and I can't by law give you advice. I do make mistakes, but I try hard to do my analysis thoroughly, and to make sure my data are correct. Remember: the unexpected sometimes happens. The expected does too, but all too often it takes longer than you thought it would.

The Goddess of Markets punishes (eventually) greed, folly, laziness and arrogance. No matter how many years you've served Her. Take care. Be humble. And don't blame me.

BTW, clicking on most charts will produce the original-sized, i.e., bigger version.

Wednesday, October 27, 2010

Debt and the Recovery

click to enlarge

Historically, US recoveries have always been fuelled by debt. Savings rates declined, car loans soared, and housing starts rebounded. In fact we have never had a US recovery without a previous recovery in housing starts.This time round, because there is already too much debt, savings rates have risen instead of fallen, car sales are OK at best, and housing is in the doldrums.

Starts are off their lows, but the contrast with previous cycles is abundantly clear. Vigorous it ain't -- and that's despite the steepest decline since data were first collected back in the 50s. Yet what did you expect? House prices are barely rising, credit remains tight, and consumers aren't exactly optimistic.

Still, with QE2, housing should at least hold steady. But don't hold your breath for a runaway boom.

(BTW, if you click on the image you'll be able to see it in its original size.)

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