Doug Kass
This post by Doug Kass appeared at 8:50 a.m. today on TheStreet.com's Street Insight.
The market's advance continues to surprise me because the disconnect between a worsening economic reality and generally rising investment expectations is striking -- and growing. To date, the U.S. consumer has had only a runny nose, led by the downturn in the residential real estate markets. However, there is evidence that the consumer's cold is worsening. Berkshire Hathaway (BRK.A Quote - Cramer on BRK.A - Stock Picks) Vice Chairman Charles Munger apparently agrees, saying over the weekend at the company's annual meeting that "consumer spending is posed to wilt and potentially will contribute to a slowdown in corporate profits."
-
Housing: The housing bubble is in the second year of a downturn that will likely last into 2009. Record-high inventories, an accelerating pattern of foreclosures (and delinquencies) and a slowing domestic economy (with moderating job growth but stubbornly high inflation) will prevent a recovery that many now are forecasting. Homebuilder cancellation rates remain high (in some instances over 30%), and the stretching of home affordability will not be resolved until home prices fall more dramatically.
Mortgages: Mortgage equity withdrawals (which have financed the consumer's consumption binge) are slowing to a crawl as the subprime mortgage mess takes a toll on credit availability through tightened standards.
Sponsored by:
RSS
