Why We Can’t Have a Sustained Economic Recovery

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Why We Cant Have a SustainedEconomic Recovery
By- Michael Lombardi
http//www.profitconfidential.com
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• Things are looking up for the economy again.
  Unfortunately, things are not always as they
  seem.
• The U.S. Commerce Department said that the U.S.
  economy grew at 2.5 in the third quarterthe
  fastest pace in a year. Moodys Investor Services
  last week raised the corporate ratings of both
  Ford Motor Company (NYSE/F) and General Motors
  Company (NYSE/GM), an indication that the car
  companies are doing better as well. All of a
  sudden, people are feeling good about the U.S.
  economy again.
• But it was only this summer that analysts were
  calling for a second U.S. recession. Some
  economists said we were already in a recession.
  The numbers being released on the economy beg to
  differ. Or do they?
• Ficklethats the word I use to describe todays
  modern economists. The stock market starts
  heading down (as it did this past August) and all
  of a sudden we are headed for a recession. The
  stock market gets close to new high (as we are
  now), and the economists say weve turned the
  corner and are out of the recession.
• Whats the truth? How do we make sense of all
  these numbers to make the right decision for our
  investment portfolios and for our businesses.
• 
  

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• Ill get right to the point, my dear reader. We
  cannot have a sustained economic recovery without
  a recovery in the real estate market (see Without
  This Fixed, the Economy Cannot Recover). Job
  growth in the U.S. will not happen unless the
  construction industry, housing industry and real
  estate market in general come back. And, from all
  sides, we can see that the housing market is far
  from a recovery.
• Consider these facts about the real estate
  market
• The median price of a new U.S. home fell 10 in
  September 2011 from September 2010, the biggest
  drop in two years.
• The median price of a resale home, which makes up
  94 of the real estate market, fell 3.5 in
  September 2011 from September 2010.
• Cash deals account for 30 of all home resale
  transactions in the U.S.
• The Dow Jones U.S. Home Construction Index, an
  index comprised of the largest U.S. homebuilder
  stocks and a great leading indicator of the real
  estate market, is still down 80 from its 2007
  highthe worst performance of all Dow Jones
  sub-indices

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• Where the Market Stands Where its Headed
• Last trading day of the month and it looks like
  October is going to go out with a bang! What a
  difference a month makes. We started out October
  close to 10,400 on the Dow Jones Industrial
  Average. We are closing the month around the
  12,000 level. But, despite the markets recent
  run-up, pessimism still reigns with stock
  advisors, investors, and consumers.
• We are in Phase II of a secular bear market. This
  phase of the bear market will move stock prices
  higher, as the bear convinces investors that
  stocks are a safe investment again. Phase II of
  bear market rallies can last three to four years.
  This bear market rally has lasted 32 months thus
  far and shows no signs of abating.
• What He Said
• A Stock Markets Obituary It is with great
  sadness that we announce the passing of the Dow
  Jones Industrial Average. After a strong and
  courageous battle, the Dow Jones fell victim to a
  credit crisis and finally succumbed on Friday,
  October 3, 2008, when it fell decisively below
  the mid-point between its 2002 low and its 2007
  high.

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