Five Things You Need to Know: Fear Mixed With Incredulity
These days, hammering a For Sale sign in the front yard of a home must feel a bit like driving a stake into the rotting corpse of a vampire.
Kevin Depew's Five Things You Need to Know to stay ahead of the pack on Wall Street:
1. Fear Mixed With Incredulity
These days, hammering a For Sale sign in the front yard of a home must feel a bit like driving a stake into the rotting corpse of a vampire; fear mixed with incredulity and the foggy notion that this unnatural gesture may not, in fact, work. And so we get headlines like those streaming across the wires this morning: "Existing US Home Sales Up 3.1 Percent in July." That's good, but only until nightfall. Then the bad craziness begins all over again.
Yes, sales rebounded in July from a 10-year low, but the median priced dropped 7.1% nationally and, worse, the number of homes entering the market hit a record. There were a record 4.67 million unsold houses and condos on the market in July, representing 11.2 month's supply at the current sales pace, the highest ever, according to the National Association of Realtors.
2. An Ongoing Nightmare...
"It's like an ongoing nightmare and no one is sure when we're going to wake up."
- Stuart Thomson, Resolution Investment Management Ltd., Glasgow
Indeed. Thomson's talking about money market lending in Europe, from Glasgow to be precise, but he might as well be standing on an orange crate in Hot Springs.
Over the weekend, I read where in Kentucky unemployment has crossed the 6.7% threshold on its way to 7%. Seven's the magic number for unemployment. Anything above 7 for any length of time is the kind of full-on crisis that results in wholesale regime change for anyone with the misfortune to be involved in state government at the behest of voters.
My mother lives about 60 miles south of Lexington, where the last large Kentucky city on Interstate 75 gives way to the foot of the Appalachian mountains of the east and the hill country that rolls up further south into Tennessee. Her city, London, is the last line of defense between decent law abiding citizens and the Crystal Meth crime wars, high unemployment and poverty that have been raging in the southeastern part of the state, under the radar of national news media, for the better part of the past decade.
I asked her for a report from Kentucky and the news was grim. "Churches and cash advance places are huge targets, and people are being robbed on the streets," she said. "Gas stations were considering closing at night, but they are being hit during the day as well and the biggest news story was a young man who climbed on the roof during broad daylight, disabled the cameras, filled up and drove off. It's crazy!," she added, in case I had somehow become too jaded by New York City to recognize economic desperation.
She had a point. Manhattan today, far from being at the epicenter of degenerating economics, is actually the last bastion of The Dream in America. Manhattan, with rents for a one-bedroom approaching $3,000 a month, is for all intents and purposes the largest gated community in the country... for now.
3. Department of Chilling Stats: The Lost Decade
Merrill Lynch North American Economist David Rosenberg presented a chilling stat this morning:
"[T]he return on cash over the past decade has exceeded the return on equities by nearly 1,000 basis points (and the entire total return in equities has come from reinvested
dividends, not price appreciation)."
That's what I mean by "structural bear market." Like all bear markets, this one will end when no one cares about it anymore, when "investing" seems ridiculous, a pursuit on par with phone book collecting.
4. Champagne for My Real Friends, Real Pain for My Sham Friends
Finally some good news... at least for the ultra-wealthy with pending yacht christenings. According to the Financial Times, champagne houses, including G H Mumm owned by Pernod-Ricard, are making their bottles thinner due to the economic pressures of production and transportation cost increases.
The cost of glass bottles has risen 40% this year. And, the FT says there is a shortage of bottles due to increasing bottle consumption in emerging markets.
Surely, by now everyone is familiar with the Senator John McCain uncountable house story.
From the Washington Post:
By Anne E. Kornblut
RICHMOND, Va. -- As part of an increasingly aggressive effort to redefine his opponent, Sen. Barack Obama on Thursday morning seized on a new remark by Sen. John McCain that he does not know how many houses he owns.
"Somebody asked John McCain, 'How many houses do you have?' And he said, 'I'm not sure, I'll have to check with my staff,'" Obama said with a tone of incredulousness at an outdoor event here.
Of course, there's nothing new about politicians on both sides attacking their opponents' apparent wealth as a signifier of economic detachment and exclusivity. This sometimes plays well on the streets of Smalltown, USA, fueling the fiery rhetoric of whomever at the moment is playing the role of The People's Populist.
However, as social mood continues to darken, we should expect increasing attacks against the signifiers of wealth across a wide spectrum of cultural channels. This is a far different mood than that of the early 1960s, when the JFK empire of "Camelot" was widely embraced and admired.
From large, gas-guzzling SUV's to suburban McMansions and ostentatious hyper-brand-conscious clothing lines, aspirational economics will soon recede, displaced by a mistrust of, and a resentment toward, those with wealth and means.
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