Consumer Confidence Dropping
Stocks fell on the poor consumer confidence news. Bond interest rates fell on the news.
The Dollar continued its strengthening, and gold/oil/gasoline all fell in concert.
In the news today….
Consumer Confidence – hit a new recent low going back to 1983. What this means is that people are less confident in their future, and their financial future, and will be spending less. As the total expenditure by individuals is about 70% of the US economy – it doesn’t bode well for our future GDP. The confidence index number can in at 46, where 90 means the economy is okay, and 100 means the economy is growing.
Oil price is up by speculation – why do I say that? In the past few months, there was aa great correlation between a weak Dollar and strong oil. But, today, we see high oil prices with high Dollar prices. What’s happening? Oil refiners are closing down refineries – temporarily and permanently. This decrease in supply of gasoline will result in higher gasoline prices. Higher oil prices is being pushed by speculators, but oil companies will have trouble making money in gasoline as the input oil price is now higher.
Housing Prices are UP – for the 7th straight month. This is significant. However, it is my own personal opinion that the big bubble states (CA, NV, AZ, FL) are still going down as the number of foreclosures in those states are more significant. So, we must always remember that real estate markets are always local.
Here are the last numbers for today:
Dow Jones 30 Industrial – 10,282 (down 101)
10 Year Treasury Bond – 3.69% (down 0.09%)
Euro – $1.3508
Gold – $1102 (down $16)
Oil – $78.84 (down $1.47)
Gasoline – $2.07 (down $0.05)
I don’t know any confident consumers at any level. During a phone call today, a friend mentioned that he knows a developer worth $20 million (peak wealth) that will probably have to file personal bankruptcy soon.
Of course if you are levered 10 to 1 or even 5 to 1 but your real estate holdings fall by 40% to 90% (land), then you aren’t worth anything are you?
Who could have known leverage works both ways…
I’m perplexed by RE prices being up, but it is probably a result of government stimulus, mix changes, and seasonal factors. Imagine the real estate market if the USG and Fed weren’t essentially buying 90%+ of all mortgages.