When all you read is gloom, turn here for a much different perspective.

Sunday, February 15, 2009

A Dozen Positive Bounces

It has been an amazing two weeks of positive bounces. Here are the top dozen:

1. First you read about the bounce in the Baltic Dry Index jumping up 210%.

2. Then January Retail Sales bounced by a surprising 1% month over month. (12% annualized) With Walmart, Walgreens and Amazon leading the way.

3. Next the Institute for Supply Management Indexes both headed north in January.

4. And the Intel's announcement to invest $7B soon followed.

5. There was even a international glimmer of hope for GM, when their January car sales in Brazil surged by 30%.

6. And when it comes to automobiles, US used car sales have just bounced up in January.

But what you may have not yet seen or read about in the main stream media are significant updrafts in real estate sales numbers. (Thanks to Mark J. Perry of Carpe Diem)

7. For instance, in Sacramento California, existing home sales doubled in 2008 over 2007.

8. In fact, for all of California since 2007, existing home sales are up 85%.

9. And in Flint, MI, one of the most depressed economies in the country, home sales have increase by 21%. Yes you read that right. With that 2008 bounce, Flint-area realtors recorded their best sales year in more than a decade.

10. Florida - not to be outdone - reported from West Palm Beach that a total of 638 homes sold in December 2008 compared to 467 homes in December 2007 - that's a 37% bounce.

11. Last week produced an interesting consumer survey. Even though consumers continue to *feel* gloomy about the future, the trending of their economic "current conditions" over the last 5 months continues to trend positive. (See chart)

12. And tomorrow the huge bounce begins. One of the biggest US government investment initiatives ever gets underway.

With all these upticks it is no wonder that 43 Fed economists now point to a return to US economic growth in Q3 2009. You may recall reading about a similar level-headed prediction way back in November.


  1. Hi Eldon,

    Two things...

    1. What does the "current conditions" measure in the consumer survey, and

    2. When I click on the "43 Fed economists" link, it went to an entirely different article. And not particularly cheery one, I might add...

  2. Anonymous,

    Thanks for reading.
    1. "Current conditions" is part of the survey that the U of Michigan measures. It seems to be more accurate as it measures what consumers actual experience are now. The main stream media reports another value as well -- one that predicts what consumer think will happen in the future. It is usually skewed by what people are reading in the main stream media... and fear of the future based on the news they read there.

    2. Sorry about that link. Sometimes those are the articles where I get my data. That article amidst its non-cheeriness is one that reports that 43 fed forecasters now point to a return to growth in the 3rd quarter...

    Thanks again for reading!

  3. The mainstream media (CNBC) finally picked up on some of these green shoots, but still manages to sprinkle it with obligatory gloom and hopelessness...

  4. Thanks for the link Joe and your positive article on keeping service orientation thriving right now. Everyone should have a look at this good read. by Joe M

    I have now updated my link to point to the raw philly fed data... thanks for pointing out the non-cheeriness of the initial link...

  5. Thanks for the link, Eldon. Keep up the good work. Gloom and doom has a real cost!

  6. Is it right time to start investing again in mutual funds and stock. I request your opinion on this.

  7. Vinay,

    I like what Warren Buffett wrote in his 1996 letter:

    "Your goal as an investor should simply be to purchase, at a rational price, a part interest in an easily-understandable business whose earnings are virtually certain to be materially higher five, ten and twenty years from now. Over time, you will find only a few companies that meet these standards - so when you see one that qualifies, you should buy a meaningful amount of stock. You must also resist the temptation to stray from your guidelines: If you aren't willing to own a stock for ten years, don't even think about owning it for ten minutes. Put together a portfolio of companies whose aggregate earnings march upward over the years, and so also will the portfolio's market value."

    This is typically what most stock fund managers strive to do. If you have the time on your own to follow your own plan, then you can build your own portfolio as Buffett suggests.


  8. I like Buffett's letter as well, but average returns are negative for the last ten years. It's hard to know what to do when you invest in conservative, value mutual funds and they are still in negative territory after 10 years of disciplined investing.

  9. Anonymous,

    I get your point, it is very difficult... here is a snapshot of TRowePrice Fund returns. Not all are negative for 10 years, but many are:

    The statement that stands out in Buffett's letter is:
    "You must also resist the temptation to stray from your guidelines."

    I know many folks who are fleeing in fear to CDs right now. IMHO - bad move.

    The other great Warren Buffett motto: "Be Fearful When Others Are Greedy and Greedy When Others Are Fearful"


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