Archive for July, 2009

Housing Prices Going Up

We received another bit of good news for the housing market.  For the first time in 3 years, the housing prices based on 20-city index actually increased, compared to the previous month.  While they are still down compared to one year ago, this is certainly a most welcome development as far as the overall economy is concerned.

July 28, 2009 at 11:05 pm Leave a comment

Housing Market Showing Signs of Life

We are finally hearing some consistently good news in the housing market.  According to a recent report, new home sales rose by 11% in June, much more than expected.  At the same time, inventory of new homes on the market dropped to 8.8 month supply, or 281,000 units, which is below “normal” level of 300,000.  Some economists think that the housing sector will stop being a drag on the overall economy and will actually add to GDP as soon as in the end of this year.

For more information, take a look at this and this article.

July 27, 2009 at 7:25 pm Leave a comment

Green Light Ahead?

As always, the flood of earnings reports sets the tone for the market, and so far this tone has been very positive.  Overwhelmingly, companies are beating earnings estimates.  Just take a look at the weekly summary at briefing.com.  It shows all earnings reports this week.  Green color is used to show positive surprises, and red is for negative ones.  As you can see, green color dominates, and this has been the reason for the market rally over the last couple of weeks.

July 24, 2009 at 8:00 pm 1 comment

Good Start to Earnings Season

We are just a few days into the second quarter earnings reports, and so far they have been good.  We have seen better than expected announcements from bellwethers such as Alcoa and Johnson & Johnson, while Goldman Sachs and Intel reported blow-out earnings.   On top of that, the Fed raised its economic forecast for the rest of the year and for 2009, something that hasn’t happened for a while.

All these news drove the market considerably higher today.  The bulk of earnings reports is still ahead, but so far it appears that the recovery is still on track and that the probability of a market consolidation is declining.

July 15, 2009 at 7:56 pm Leave a comment

Worse than the Great Depression?

Even after the rally off the March lows, S&P 500 is still over 40% below its peak in 2007; it is now at the levels of 1997, twelve years ago!  In fact, the ten year period from 1999 through 2008 is the worst decade in market history, returning compounded annual average of negative 1.38%.  The second worst decade was 1929-1938, returning -0.89% and this period of course included the Great Depression.  Early 1930’s were a great time to get into the market for long-term investors, and I believe that is the case today as well.  History doesn’t necessarily repeat itself, but it does rhyme.

While I am optimistic long-term, short-term outlook still remains as cloudy as ever.  Relatively benign economic reports and company earnings convinced majority of the economists that the worst of the crisis has passed; recovery is expected later this year or in 2010.  These reports and expectations are most likely already reflected in stock market prices, however.  While the rate of decline has slowed, at present the economy is still contracting, and housing prices are still falling.  In order for the rally to continue, we will need to see actual evidence of positive GDP growth.  Just like last quarter, coming earning reports in July and August should provide some clarity.  In the meantime, there is a good chance that markets will be indecisive and move sideways for a few months.

July 1, 2009 at 12:10 am Leave a comment


Blog Author

Leon Shirman's long-term investment philosophy is summarized in his book, “42 Rules for Sensible Investing”, also available from Amazon.

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