I told ya so. Seldom do I use such immodest words, but there comes a time when even I must acknowledge my omniscience. Like my brother Ted says, if I were a little more humble, I’d be perfect.
First, don’t bet against America. Every time I’ve made that caution over the past three years the gold nuts, Yank-bashers and doomers have jumped down my throat claiming US unemployment is 24%, half the country is on food stamps, the stock market’s a giant ponzi, and without central bank stimulus it would just be another Zimbabwe. But with iPads and iPhones. And, of course, Beyoncé.
Well, suck it up. America is back. Not only is the Dow Jones up 19.42% this year and the S&P 500 ahead 19.1%, but corporate profitability has remained robust and employment is rising month after month after month. Markets have obviously benefitted from central bank policies keeping bonds on a leash and rates in the basement, but they also reflect an economy which has crawled back from a mauling four years ago. Like there was any doubt.
Still more to come. There will be no recession in the US this year or next or likely the one after that. Consumer confidence just hit a five-year high, largely because people can see more and better jobs being created. So many new vehicles are being sold the car companies just cancelled summer break. Within months, maybe weeks, the US Fed will start easing back on the stimulus spending. Markets will correct (of course), but as billions of worried dollars find their way back into growth assets, it’s hard to see downturns as anything but a chance to go shopping.
Still hiding in the orange guy’s shorts? Only you are to blame.
Speaking of interest rates, more abject humility. I told you they have but one direction in which to move, and that it would be the bond markets – not central banks – making it happen. History will prove I’m right, and the myopic weenies who say rates will fester at historic levels forever, wrong. Hell, it’s already happening.
As stocks go up, bonds wobble. Yesterday, for example, US 10-year Treasuries (the safest thing in the world) had their worst day in almost two years, with prices falling and yields jumping to the highest levels of the year.
Why? Because things are getting less scary. And as the American economy revives (see above), it means the Fed can wind down bond purchases which have kept rates artificially depressed. So, Treasury yields have risen a dramatic 50 points since the beginning of the month, and were pushed further on news of rising confidence and a real estate renaissance.
Whazzat, you say? Didn’t Garth two years ago tell us to buy America and sell Canada?
In fact, I did. Since then housing starts have rebounded back above the million-per-year level. Resale homes are selling at the best clip since 2006. In the past year Phoenix houses have gained 22% in value and Vegas is up 20%. Even Miami properties are worth 19% more. This week the Shiller-Case S&P index recorded the largest year/year gain since silly bankers were handing out Ninja loans to Oakies buying McMansions.
Nationally, house prices gained 10.9% in the past year. Yes, prices are still down 25% from the bubbly peak, but recently values have been rising about 1% a month. Sales are up. Prices up. Construction up. Demand is steady and a huge whack of the inventory of distressed properties has been absorbed by the vulture class, people who’ve made solid capital gains which are likely to double over the next four years.
So much for the housing ‘dead cat bounce’ the America haters on this pathetic blog said explained the numbers. Because if you want to see a true fetid feline, just head north of the border.
Canada’s third-largest market is the antithesis of what’s happening in resurgent US cities. Here, thanks to blogger ‘Patiently Waiting’ are the tell-all numbers for sales of SFHs in all of Vancouver and the Lower Mainland (Van and Fraser Valley boards):
In the last 30 days there have been 969 deals. That’s a 53% drop from the same period last year (2,056), a 61% decline from 2011 (2,510), a fall of 58% from 2010 (2,300), 63% less than in troubled 2009 (2,599), and 49% fewer than in 2008 (1,918).
“Despite what the main stream media is telling people, the real estate boards’ own computer data demonstrate that sales are currently still trending significantly lower than previous years, as we move further into the 2013 year,” our correspondent reports.
By the way, sales year/year are down in Halifax, Montreal, Toronto, London, Winnipeg, Regina, Edmonton and Vancouver. Every market is unique. And all real estate is local. But this was not the spring tens of thousands of emaciated realtors were hoping for.
But it’s the spring I forecast.
Now, wanna hear about gold? Forget it. Even I have limits.