Posted by: jhamon | July 7, 2009

Dude, I Think I Mowed Your Green Shoots

Dr. Housing Bubble has written a tremendous post entitled The Financial and Economic Argument for No Green Shoots in which he presents 10 charts to explain why there will be no second half recovery this year.  It really is a must read for Those Who Want To Know Things, so go there, but for the ADD crowd (or as my wife would say, “the Lite version please, John”) here’s the synopsis:

  1. Auto sales have collapsed.  Maybe We the People didn’t get a good deal in GM after all.
  2. Housing starts haven’t. Started.  At all.
  3. Single family home sales are in the bunker.
  4. Personal savings rate spiking upward as people hang on to cash.  So they’re not spending.
  5. Hours worked heading south.  You don’t earn, you don’t spend.
  6. Unemployment chart in an F-22 style vertical climb.  You don’t earn, you don’t spend.
  7. Renting makes sense; therefore no quick rebound in the real estate game.  Why buy now?
  8. S&P 500 price/earnings and dividend/price ratios historically high.  Mean reversion, anyone?
  9. Deflation, not inflation, is the continuing threat (with apologies to Marc Faber).  So why buy today what will be cheaper tomorrow?
  10. Personal consumption expenditures streaking downward.  You don’t earn, you don’t spend.

Do you see a theme here? 

No more housing piggybank

+ High unemployment/underemployment

= Low consumption

Since 70% of GDP is consumer spending, can you say “Houston, we have a problem?”  See the charts for yourself, but don’t be surprised that Mr. Market is starting to sort this out.

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  1. […] Original post by jhamon […]

  2. Great post John!

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