Nigel Swaby, the Axe-Man, takes a break from cutting deals with Casey Serin, building new businesses (on free blog sites), partying with bobsled teams. The blogcation has really paid off and Nigel is ready to dive into some deep economic commentary... uh, bolsterd by a syndicated horoscope column.
Master of the obvious, who brought us such great insight as "My point is this is mostly algae caused by the sun," is at it again this time trying to tackle Haterz, housing bears and people with some actual insight on economics.
I believe Wall Street is beginning to wise up to the screamingly negative headlines too. Yesterday was a great example. Early in the morning, March GDP numbers were released. While there was growth, the numbers didn't hit estimates. After reaching a new record Thursday, the stock market had barely budged.
Dow 13k certainly is a pretty number, but while it's a nice psychological barrier you need to keep in mind that increasingly what is good on Wall Street isn't good for Main Street. The weak dollar affects both worlds very differently. A weaker dollar helps companies be more competitive in the global marketplace, I read somewhere that most companies that have reported earnings recently (something like 70-80%) said that the current currency situation has been beneficial to the bottom line. Good for them. But in other deeper analysis we also learn that there is some serious inflation going on in parts of our economy. Gas, milk isn't getting cheaper. What someone could buy for $1500 in 2000 is costs over $1700 now.
Finally, as the Dow continues to grow, keep in mind the percentage growth to cross these psychological growth gets to be less as it grows.
Full disclosure, unlike Nigel, I know i'm an idiot. So if any of this is off, post it in a comment, maybe i'm totally off mark here as well. I am not a doom and gloomer, I don't have a closet full of gold anywhere, I have a nice 401k and hope it doesn't disappear. I don't want another Great Depression. I am indeed a (temporary?) housing bear, I wanted to buy a house this year but when I started researching on what that really involves (yeah I know, it's silly to educate yourself before diving headfirst into something, right Casey?). I was a bit stunned how "values" in an already expensive area had grown almost 100% in about 5 years. I make a nice living and should be able to buy something decent, but what is now in my range historically are what I consider dumps. Thankfully my rental house costs me about 1/2 to almost a 1/3 of what houses in my neighborhood would cost via mortgages. So I will continue to wait.
What I know is the past few years of "wealth growth" in this country was nothing more than what is a part of Casey's story, borrowing in order to get what you want today. Through sketchy mortgages and HELOCS, I think the consumer has shot it's credit wad for the foreseeable future.
From a BusinessWeek article, via MSNBC:
What worries you the most?
I think the consumer will get stung by the real estate market as it continues to devolve. I think that the consumer is already getting stung by higher energy prices. The U.S. savings rate is negative.
With $1 trillion in ARMs [adjustable-rate mortgages] adjusting this year, and people spending more to heat and cool their homes and to drive and on groceries, these people are going to get pinched. The consumer is two-thirds of the economy, and it's tough to see the economy going ahead with two-thirds of it stalled. I think that the housing correction will extend and move lower than people think. This kind of trend always goes longer and deeper than anyone expects.
