PrudentBear.com - The One-Stop Shop for the Bear Case: "Excerpted from September 2005 Elliott Wave Financial Forecast
THE ECONOMY & DEFLATION
Back in March 2000, EWFF noted that the “fate of the world” hinged on the manic rise in 50 U.S. stocks, many of which were unprofitable. Five years and one recession later, the global economy is hanging by a similarly thin thread. The difference now is that the weight of the world is being held up by the public’s affection for real estate and the debt needed to acquire it. According to Irwin Stelzer of The Weekly Standard, data compiled by the Bureau of Labor Statistics “shows that housing and related industries now account for 4.8 million jobs, some 60% more than the once-mighty auto industry.” While the U.S. auto industry lost 60,000 jobs in the past 4 years, the housing industry created almost 600,000 jobs in construction and financial services. Newspapers are a good example of how whole industries are clinging to real estate’s coat tails. As anticipated in past issues, the newspaper industry is slowly falling prey to the Internet and gathering deflationary forces, but its saving grace is a flood of real estate ads that have poured in over the last year. The Wall Street Journal reports that real estate ad revenue increases of 16% to 45% are “masking what has been a years-long decline in classified-ad revenue at newspapers.”
But the home-buying binge comes at a steep cost to U.S. households. The household surplus/deficit chart from Paul Kasriel of Northern Trust Co. shows the financial impact to homeowners. From the 1950s to 1999, one year before the start of the bear market, households maintained a surplus, whereby disposable personal income exceeded total expenditures on consumer goods an"
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