Tuesday, June 27, 2006


Is that more hissing? Bloomberg (06.27.06):
"Sales of previously owned homes in the U.S. fell in May to the lowest since January as higher mortgage rates sapped demand, a private report today showed. Resales declined 1.2 percent to an annual rate of 6.67 million from 6.75 million in April, the National Association of Realtors said today in Washington. The supply of homes for sale rose to the highest since May 1997." U.S. Existing Home Sales Fall 1.2% to 6.67 Mln Rate
"Housing will pare economic growth this year as buyers are deterred by the highest mortgage rates since 2002, economists say. An unexpected increase in sales of new homes reported by the Commerce Department yesterday bears out Federal Reserve predictions that the slowdown will be gradual." Slowdown. As in a slow and gradual strangulation? This guy isn't impressed by the increase in sales, via Wolcott:
"In my view, even the May gain in housing starts was an important negative, because in the context of how housing starts have behaved over economic cycles, we've already got a breakdown. You don't get much information from housing starts just by looking at whether they're up or down. You have to do a little bit of signal processing to extract the cyclical component." Hussman Funds - Weekly Market Comment: June 26, 2006 - Recession Risks are No Longer Dormant
"From a broader economic perspective, I continue to view the enormous U.S. current account deficit as a major challenge to U.S. economic growth ahead. This deficit reflects the combination of huge U.S. fiscal deficits combined with a historically low domestic savings rate. With no net growth in U.S. gross domestic savings since 1998, the U.S. has depended on large and growing inflows of foreign savings in order to finance our domestic investment (housing, factories, capital spending, etc)." "In a reasonable world, one would look directly at the huge U.S. government deficit and paltry U.S. savings rates, combined with a housing boom that's creating a growing inventory of unsold houses, and say, 'Wow, we're not saving enough, and we're investing in the wrong stuff, and as a result, we're becoming dangerously dependent on foreign savings that will be hard to repay with future productivity.'" "Unfortunately, we're living in a world with no introspection, so we actually see analysts arguing with a straight face that our current account deficit reflects – I'm not making this up – a 'foreign savings glut.' That's like the Garth Brooks song where he looks at the beer he's holding and sings 'lo-ooong neck bottle, let go of my hand…'"


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