Many of the negative fundamentals will not be hidden for much longer, IMHO.
By Daniel at 30 November, 2009, 10:10 pm
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I read the one retail group was projecting Black Friday sales would be as much as 16% higher than last year. Boy, was that a bad prediction! I was amazed that the tally came in at only a 0.5% decrease compared to last year. I suspect that number was a preliminary estimated and will be revised lower over time. The question is: will the MSM carry the story about the revision? I don’t see how they can afford to not do so. If they bury such news, they will risk credibility with those who still believe them when stocks turn down and the truth comes out.
I’m not sure how low we can go on this next leg. There are plenty of forecasts that project the DJIA will hit a new low. But, if you believe in reversion to the mean, there is a strong case that stocks need to get back down to the 7,500 area. That, of course, assumes that nothing else blows up and the housing market actually bottoms sometime in 2011 as I have been expecting all along. It also assume that they is no major international catastrophe, like Israel invading Iran and huge disruptions in oil flows from the Middle East. The ensuing spike in oil prices could knock the wind out of all sales coming so soon after the last one, and not being connected to demand.
The reality of the housing market is that many regional markets are still too costly for buyers relative to incomes. Bottom line: we still have another 10-15% to go on average, more in some areas, less in others. That’s not going to help the economy or the jobs market.
- Mark Bern
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