Starting off this terrific article from Floyd Norris is this simply astounding statistic:

More than $1 in every $10 that American banks have outstanding in loans is lent to a troubled borrower, a ratio far higher than previously seen in the quarter-century that such numbers have been compiled.

The problems are greatest in construction loans for single-family homes, where nearly 40 percent of the loans either are delinquent or have been written off as uncollectible. But they are also high in mortgage loans for single-family homes, where $1 in every $8 of loans is troubled.

Amazing . . .

That is what happens when we elected to go Japanese rather than Swedish on the financial sector — We saved the Banks, but sacrificed the Banking System.


Time to Get Swedish (January 23rd, 2009)

The New N Word: Nationalization (February 25th, 2009)

Why Aren’t Banks Lending? They Are Being Rational (December 23rd, 2009)

Banks Out of the Woods? Maybe Not
NYT, February 26, 2010

Category: Bailouts, Credit

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

37 Responses to “Banking System Remains in Perilous Health”

  1. budhak0n says:

    We’re not really left with many choices. We can continue with the overblown anger, resulting in more abandoned properties and no municipal taxes or we can simply work a deal.

    And the thing that makes everyone sick is they know that the underlying institution has known that they have us in this corner the WHOLE Time.

    Let them keep their ill gotten gains. Keep paying the taxes you schlubs.

  2. Fredex says:

    “We” saved the bankers and sacrificed everything else and everyone else.

  3. budhak0n says:

    It’s blatantly obvious to any educated man or woman that America is in need of a new mythology.

  4. Steve Barry says:

    I am neither astounded nor amazed. Looking at total credit as a % of GDP the past century, it looks to me like anything over 180% is excessive…the word bubble does no justice to the 370% we have today…I think INSANE is the proper word…DOOMED comes to mind also.

    Anyway, follow the math – with GDP at 14.3 T, multiply by180% and the maximum amount of credit we could realistically service is about 25 T. We have 52 T, and I doubt that counts unfunded liabilities like SS and Medicare…probably missing hidden off balance sheet stuff too. So I am likely under estimating that there is approximately 25 Trillion in too much credit in the US alone over what would be healthy. The US is about 25% of global GDP, so globally, it is probably easy to assume that there is likely over 50 Trillion USD in excessive credit.

    My conclusion? Deflationary debt crash underway. The Fed could print $25 trillion over time and all it would do is prop up weak credit.

  5. Winston Munn says:

    Let me see if I get this straight. The Fed theory is that if we give banks enough cash eventually they will start to make bad loans again?

  6. Convince someone will pull that ‘Swedish’ is the way to go.
    Begin with one person.
    Surely you have enough contacts to do that.

  7. torrie-amos says:

    why is this important?

    jeeze this news is over a year old.

    it’s till the same, not enough profit too support debt, u can get that from a napkin, and why i’s always says higher oil, crushes all, i’m still on 85 is a key number, guess that is when volatility ensconces

  8. Marcus Aurelius says:

    Steve Barry Says:

    “My conclusion? Deflationary debt crash underway. The Fed could print $25 trillion over time and all it would do is prop up weak credit.”

    I’d rather see them print than deflate. Printing would equalize the misery across all classes. Allowing deflation further concentrates power in the upper 2% (or so) and pain in the lower 99%.

    We need the wealthy and powerful to understand that if we go down, we take them with us.

  9. Marcus Aurelius says:


    We’d need to print and distribute the entire $52T among the bottom 66%, or so (the most indebted) to have any meaningful chance of resolution. Anything else is begging for debt slavery (and unless you’ve got hundreds of millions in the bank, don’t flatter yourself into believing that the wealthy and powerful will take you along for the ride).

  10. Steve Barry says:


    I don’t know if I agree…letting the debt default will hurt the banksters quite a bit. Letting bondholders take haircuts is not pleasant for them either. Printing the money is handing every taxpayer the bill, whether they acted responsibly or not….you are socializing the losses.

  11. Darmah says:

    I just read Mauldin’s latest newsletter titled — The Multiplication of Money. Several scary charts (they are all scary these days) and a great quote from Samuelson:

    “By increasing the volume of their government securities and loans and by lowering Member Bank legal reserve requirements, the Reserve Banks can encourage an increase in the supply of money and bank deposits. They can encourage but, without taking drastic action, they cannot compel. For in the middle of a deep depression just when we want Reserve policy to be most effective, the Member Banks are likely to be timid about buying new investments or making loans. If the Reserve authorities buy government bonds in the open market and thereby swell bank reserves, the banks will not put these funds to work but will simply hold reserves. Result: no 5 for 1, ‘no nothing,’ simply a substitution on the bank’s balance sheet of idle cash for old government bonds.”

    –(Samuelson 1948, pp. 353–354)

    The link is but it appears you have to subscribe to get the whole letter,

  12. Marcus Aurelius says:

    Steve Barry:

    When everyone else has zero, the man holding a dollar is wealthy beyond belief. We die of starvation before they miss a meal.

  13. OkieLawyer says:

    @Steve Barry:

    Normally, I agree with you. But on this point I disagree. Inflation helps debtors because it allows them to pay back their debt with cheaper dollars. Normally, this would be accomplished through higher wages, but the high unemployment is depressing wages. I actually think that we need to revive the old Civilian Conservation Corps and Works Project Administration (or similar government programs) and put people to work directly. This will create demand and will release the “animal spirits” of entrepreneurs who will want to find ways of exploiting said demand.

    There are plenty of neglected public works projects (bridges, dams, railroads, roads, pollution) that could keep us busy for ten years. The real problem is that rather than facing our problems, we have swept them under the rug. Combine that with the meme that has been spread that taxes are only supporting lazy people and should be “flattened” for the benefit of the rich (so of course they can trickle on — er, I mean “trickle down” — their wealth for everyone’s benefit.

    Inflationary policies will hurt “savers” (read: those who are hoarding money). From a public policy standpoint, I think that this is the better policy.

    The time to get religion about paying off the debt is when times are good, not bad.

  14. cognos says:

    The basic stat — “$1 in every $10 is lent to a troubled borrower”. This is neither surprising nor particularly concerning. I would not be surprised if 1-yr ago… $1 in $5 was the stat.

    1) FDIC closed the least banks in what, 9 months in Feb? Every more… the “expected costs to FDIC” were extremely low… less than 1/10 the peak month. I bet they close another low number in March. The trend has been to smaller and smaller banks and lower and lower “estimated costs”… those trends continue.

    2) Credit loss growth at banks flat-lined in Q3/Q4 last year. This was somewhat hidden by the final batch of TARP repayment costs at the big banks. Q1 bank earnings will (again) be good. And might even show a decline in credit loss write-offs. Once that starts it will accelerate fast.

    3) Declines in housing prices have slowed massively and on the best numbers (Case-Shiller seasonal adjusted) look like they are up small the last 6-7 straight months. No one is saying “back to housing boom”. Housing boom was dumb. But the bottom is IN.

    Overall… 1-yr from now the recovery will be in full-swing and the banking problems will be (properly) seen as 2006-08 issues. 2009 and 2010 will be seen as the recovery years.

    BR — you should be writing the “RECOVERY” book now!

  15. jeg3 says:

    Things will not get better over the next few years as residential loans reset, and with the main street economy in a shambles and ignored by the DC establishment the second round of “Recession” will be worse. So the next few years will determine if we go Swedish or Japanese as the government dependent part of the Finance Industry needs bailouts or go bust:

    I hear Rubin will testify to congress, maybe he will say something like this:

    “On March 14, 2008, Robert Rubin spoke at a session at the Brookings Institution in Washington, stating that “few, if any people anticipated the sort of meltdown that we are seeing in the credit markets at present”. Rubin is a former US Treasury Secretary, member of the top management team at Citigroup bank and one of the top Democratic Party policy advisers.”

    Yup, just what we need we need, more retread policy makers.

    But there are other views about bankers (amazing how several thousand years ago they used better math models to model an economy):

    I think credit deflation is inevitable, but can ameliorated by Federal spending on the main street economy where it is needed and adds value in the long term (e.g. updating/refurbishing buildings for energy efficiency & new electrical grid, but not like the japanese where you overbuild with concrete where it is not needed).

  16. OkieLawyer says:


    I guess that’s why the FDIC is hiring a massive number of people. Just look here:

  17. Marcus Aurelius says:

    The banks are broke, we’re over-leveraged publicly and privately, the trade deficit continues (and we’re still borrowing, even from ourselves), CRE defaults are just starting, and we’ve resumed the “correction” (read: downward death-spiral) in RRE prices.

    On a positive note, cognose says he’s okay.

  18. rktbrkr says:

    Construction loans for single family homes, I’m kind of surprised there have been ANY in the past xx months

  19. rktbrkr says:

    Between incipient jingle mail and put backs the big mortgage banks are on the horns of a dilemma or two, they’re running the bulls thats for sure!

  20. kmckellop says:

    Maybe that’s it … Bernanke needs to come out of the closet and go to Sweden ….”For a change”.

  21. Winston Munn says:

    Our money multiplier is broken – all it does now is divide bonuses.

  22. hgordon says:

    +1 what OkieLawyer says …

    Trickle down does not work. Liquifying the banks does not work. Wall Street continues to function as the country’s vampire squid of historic proportions. The basic issue is that money needs to get into the hands of those who will spend it, but the money needs to be spent in a way to improves net productivity of the system.

    I am still trying to get a handle on how ELR (employer of last resort) programs might actually work in this regard – this perhaps looks good on paper, but actual implementation is non-trivial. But until money is really flowing toward productive investment, we will continue to thrash around without direction.

  23. Steve Barry says:


    The Mauldin piece is avaiable free right on this blog, under Think Tank…and there is a quote in it that says the following:

    “What this graph shows, astonishingly, is that a dollar added to the monetary base now has a NEGATIVE multiplier effect. Without showing yet another chart, bank lending has fallen percentagewise the most in 67 years. The actual amount of bank loans is falling each and every quarter, with no signs of a bottom. Consumers are reducing their debt and leverage. Bank loans are being written off at staggering rates. Over 700 banks (I think that is the figure I saw) are officially on watch by the FDIC, with more banks being closed each week.”

    So, like I said, the Fed printing money is just propping up bad debt (and not doing a good job at that) and in fact is actually contributing to DE-flation right now…we are in a deflationary debt crash.

  24. cognos says:

    Good site on FDIC bank closures and such:

    - 7 banks were closed in Feb, lowest # in 11 months. trend is solidly downward and peaked last summer
    - “est costs” to FDIC have come down even more… were ~$1B in Feb (mainly in 1 single bank).
    - this level of “costs” is roughly 1/10th the peak month and prob roughly 1/2 the average over the past year.

    There is NO way to read these stats except dramatically improving.
    There is NO reason to believe they suddenly get worse and start trending up again. Based on what data?

    As Buffett said, “barring explosions” in 1-yr the problems in housing (and thus bank debt markets) will be “behind us”.

  25. Winston Munn says:

    With regards to previous debt-deflation episodes, there is much room between “at least we’re not going down anymore” and “growth recovery has begun.”

  26. cognos says:

    Winston –

    Agree. No one is saying, “the economy/market looks like 1999″.

    At the same time… when you are losing 700k jobs per month, and then -500k, then -200k, then you are +/-50k… that tends to be the simple steady path, to +200k, +300k, etc. The economy is like a battleship. It moves slowly with alot of momentum.

    Same pattern in bank losses, credit losses, bank closures, etc.

    The momentum is pretty positive off the hard bottom 1-yr ago.

  27. budhak0n says:

    We’ve already “socialized” the losses. For god’s sake we need to get off of our high horses.

    What are your choices? Try to think about things on a much smaller level. One of the biggest problems today is the individual Investor or consumers access to industry material.

    In many examples, this would be better because the most informed person can make the best individual decision.

    However, what is occurring is that people have access to information that involves the governance of large mostly “industry” material that is intended to govern large lumbering corporations with their corporate bonds and both common and preferred shares and so on.

    All you have to think about is this. If you hold the individual household to a strict moral standard of right and wrong, who the heck is going to be left to buy the Ford Trucks? Who will buy the replacement Taurus( Already forget the new name) ? Who will make the payments that allow a compact to subcompact market to exist?

    Who will show up for work to write the deals for people who don’t know how to buy or pay for a BMW 5 series?

    Your haughty taughty explanation of everything is that people who shouldn’t have access to the finer things in life got access due to loose credit standards and easy money, but what really occurred is too many people felt insignificant and marginalized and sought to receive affirmation in their lives from physical property.

    You not only lost the working class. You lost the deals that support an actual economy.

    Now kids don’t buy used cars from auto trader because they think they should be entitled to a new jetta.

    Nobody wants to work at a minimum wage job in a resort town for the summer because they think they should be going to the Carribbean and making believe they are Paris Hilton.

    It’s not an erosion of the middle class. It’s a destruction of anyone to come inherit the roles that used to be left to those willing to work for a living.

    And thus “Paper” was used to try and substitute for knowledge.

  28. b_thunder says:

    “More than $1 in every $10 that American banks have outstanding in loans is lent to a troubled borrower” – it only going to get worse, unless Fed buy EVERY EXISTING loan at par. But then either people will burn down the Fed (and all the Wall St banks) or will start burning US Reserve Notes (a.k.a. paper money) ’cause it will be cheaper to burn the paper that use it to buy food or fuel.

    Yes, Japan has been doing this bailout game for 20 years. But they started with a lot less debt, much higher savings rate, and during the 1993-1998, 1999-2000, and 2002-2008 unprecedented worldwide economic expansion. The US of A does not have these luxuries. The endgame is upon us.

  29. queball says:

    @ Steve Barry

    I agree with you that deflation is the #1 nemesis of the rich. Deflation to average joe middle class just means increased purchasing power (dollar strength). The ones that are asset heavy (rich) will take it on the chin. Bring on the big “D”, so I can asset strip for a change.

  30. vachon says:

    I’m surprised there are any new home loans going on, too.

    The desire for home ownership hasn’t gone away. I don’t mean as a way of making money, I mean ownership of a primary, long term place to live. Facilitating such ownership is still a good idea.

  31. torrie-amos says:

    bank closures, roflmao, they physically do not have enough folks to shut them down, period, they would if they coulld, they can’t, the difference between the s and l crisis and now, is that CRE and real estate started to fail in 86-87, yet, it was well known in some parts back in 83, they actually hired up in 88-89 to close em down, they closed em down, and put the assets in a pool, now, they have to find someone to take them on right now, plus, they don’t have the money to take the losses

  32. alfred e says:

    @budhakon: +++++

    @cueball: Correct ++++ All the deflation resistance does is keep the little guys out of the play. The housing market and CRE could clear in a flash if they would invite all in on fair terms. Ain’t gonna happen.

    @torrie: Interesting notion given a recent post of FDIC job openings. Considering applying just to get a peek in the box. And a view of the truth.

    As Reagan once said, the truth is hard to come by. And in most of today’s situations it’s irrelevant.

    Follow the fed, follow the fat cats as best you can, follow the gov.

    Never assume they are being open and honest.

    Transparency???? My ass. Change you can believe in.

    Well you know what BSO? You have enlightened all that voted for you. Lots of luck dude.

  33. rootless_cosmopolitan says:


    @11:44 AM, you wrote:
    “1) FDIC closed the least banks in what, 9 months in Feb?…The trend has been to smaller and smaller banks and lower and lower “estimated costs”… those trends continue.”

    And in the other comment, @1:33 PM:
    “There is NO reason to believe they suddenly get worse and start trending up again. Based on what data?”

    Based on following data:
    Number of banks in the FDIC’s “problem list” at the end of 2009 amounted to 702 with total assets of $402.8 billion, compared to 552 at the end of the third quarter 2009 with total assets of $345.9 billion and 252 at the end of 2008 with total assets of $159.0 billion.
    (, page 3)

    I conclude from these data a high probability that the number of failing banks will go up significantly in coming months (years?). It will be trending up again, instead of further trending down.

    And we still don’t know what losses the banks have been hiding on their off-balance sheets.

    @11:44 AM, you wrote:
    “2.) Credit loss growth at banks flat-lined in Q3/Q4 last year…”

    On what data is your assertion founded?

    I quote from the FDIC Quarterly Banking Profile for 4Q 2009:

    “Loan Losses Rise for Twelfth Consecutive Quarter
    Asset quality indicators worsened in the fourth quarter. Net charge-offs (NCOs) totaled $53.0 billion, an increase of $14.4 billion (37.2 percent) over the same period in 2008. The annualized net charge-off rate rose to 2.89 percent, up from 1.95 percent a year earlier and 2.72 percent in the third quarter of 2009. This is the highest quarterly NCO rate reported by the industry in the 26 years for which quarterly NCO data are available. NCOs in all major loan categories increased from a year ago…”
    (, page 2)

    @11:44 AM, you wrote:
    “3) Declines in housing prices have slowed massively and on the best numbers (Case-Shiller seasonal adjusted) look like they are up small the last 6-7 straight months. No one is saying “back to housing boom”. Housing boom was dumb. But the bottom is IN.”

    Probably mainly because of the $8000 tax credit for first time home buyers and the Fed’s MBS purchasing program. Both are going to run out within the next months.

    The Case-Shiller house price index is the only one, which has still increased. Its growth has been trending down again. The index is a three-month average. The OFHEO has been about flat in Q4 2009.[1] And the loan performance house price index has been declining again.[2]


    So, the price data are mixed, at best. New and existing home sales are sharply down again. Housing starts and builders confidence move sideways. Unemployment has been moving up again. Various consumer confidence indices are down. Consumer credit is further contracting. Mortgage rates will probably go up. Millions more foreclosures coming. All not good for house prices. On the other hand, industrial production indices are still pointing upward. So it’s mixed at best, currently. I concede this could be a temporary wobble down from the government stimulated upturn of 2009. However, you apparently see only positive news everywhere, and that the economy was on the track back to normal growth rates, despite that the government stimulus is running out and private credit is still not expanding. In contrast, it looks to me as there was a reversed picture emerging compared to the one about a year ago, when there was all the talk about the “green shoots”.

    The other day or so you accused several people here to see only what they want to see as it matches best to their preconceived (pessimistic) views. Could it be that your perception of reality suffers itself from of what you others are accusing?


  34. cognos says:

    RC –

    Strange, warped readings of the data. (But its nice to have a detail participant in the discussion):

    1) You dont dispute my data that the number of bank failures (monthly) has trended down hard (1/2 peak) and the “est costs” of those closures has trended down harder (1/10 peak) since summer. Instead you offer that the “list of troubled banks” has grown by 30% in number and by 20% in assets.

    So what? The “list of troubled banks” grew much MORE from YE 2008 to Q3 2009 (roughly 3x # of banks, 2.5x assets)… YET the failures were front loaded in 2009. At the end of the day — the “list” does not seem precede growth in failures / closures AT ALL.

    Wait for March… it will be even better than Feb. HY bonds and mortgage credit bonds are up big (50-100% over 1yr ago)… dont you see how this directly mirrors a bank balance sheet? (It also mirror the 1/10 rate of “est costs” to the defaults at the FDIC).

    2) Again here… you dont dispute my data at all. You cite YoY credit losses. We ALL KNOW early 2009 was bad, duh! My point is that Q3/Q4 QoQ credit losses and write-offs did not grow, they peaked. When something is up 20% one Q, then 50% QoQ for a few Qs… then its +/-3% QoQ… this is how losses peak.

    Then they head back down. Look at ANY bank earnings statement. Looks at why the major banks all were able to raise equity and re-pay TARP. Look at the regional banks (RF, ZION, etc), mortgage insurers (MTG) and REITS (GGP) that are up 20-60% YTD stock appreciation. AXP said credit losses peaked, etc.

    For example, from WellsFargo’s CFO on the earnings call:

    Credit losses in almost all of the consumer portfolios declined or stabilized in the fourth quarter. Losses declined from the third quarter in the liquidating home equity portfolio, credit card, personal credit management, Wells Fargo Financial auto and Wells Fargo Financial credit card portfolios.

    We believe that if these trends continue, losses in about half of our 13 consumer lending businesses would have already peaked and it is possible, emphasis on the word possible, that consumer losses in total may also have already peaked.

    3) Case-Shiller (the only guy who works hard to make a reliable index) is up 7 straight months and YoY declines have gone from 20% to 3-5%. Again, no one is saying “boom”. But your arguments as to why we “might” go down again… seem forced. You go down 40%… then you come up 5-7%. Seems like the worst is over. This stuff moves like a battleship.

    In fact, your points about “housing starts” being off… home builder confidence… these data point are SUPPORTIVE of future pricing. The key to lower prices is LESS building and supply.

  35. rootless_cosmopolitan says:


    “Strange, warped readings of the data.”

    From a warped point of view, the other side appears warped.

    “1) You dont dispute my data that the number of bank failures (monthly) has trended down hard …”

    I dispute your very selective perception of data and jumping to conclusions, which seemed to be shaped by your preconceived view that the crisis is basically over and everything is going back to normal growth rates now.

    On the increase in the number of “problem banks” in the FDIC-list, you replied:
    “So what? The “list of troubled banks” grew much MORE from YE 2008 to Q3 2009 (roughly 3x # of banks, 2.5x assets)”

    Troubled banks Assets/billion US-dollar
    Q4 2008 252 159.0
    Q3 2009 552 345.9
    Q4 2009 702 402.8

    So you compare a three quarter change with a one quarter change, and since the increase was much larger over three quarters than over the one quarter, it’s not as bad anymore? Now, that I consider a “warped” reading of data. What about multiplying the one quarter with 3 first, and compare then?

    “YET the failures were front loaded in 2009. At the end of the day — the “list” does not seem precede growth in failures / closures AT ALL.”

    Tell this to the FDIC that they don’t need to worry about the increasing numbers of banks on the “problem list”, because it doesn’t mean anything and everything will only get better, you concluded. I didn’t get such an optimistic view from the FDIC-report.

    Additionally, the number of bank failures doesn’t paint the full picture, since banks are also overtaken by others. The number of reporting institutions decreased by 87 from Q3 2009 to Q4 2009, over three quarters, this would be 261. In comparison, the number of reporting institutions decreased by 206 in the first three quarters of 2009. So, that’s an increase in Q4 2009, too, which is consistent with the increasing number of “problem banks”.

    “Wait for March… it will be even better than Feb.”

    And why is March supposed to be relevant? Whatever happens in March, up or down, the general trend in this year will be relevant.

    On credit losses:
    “2) Again here… you dont dispute my data at all. You cite YoY credit losses. …”

    Not quite true. This was only part of the data in the quote. The quote also contained data on a Q3 2009 to Q4 2009 change.

    “We ALL KNOW early 2009 was bad, duh!”

    Actually, net-charge offs of bad loans decreased from Q4 2008 to Q1 2009.
    (, page 2)

    You see, credit losses already had peaked back then. Now they are peaking again, as you conclude from what data ever.

    “My point is that Q3/Q4 QoQ credit losses and write-offs did not grow, they peaked.”

    They grew by about 6%. You interpretation is that this is the peak. Like they had peaked already in Q1 2009, when they even fell slightly compared to the previous quarter.

    On home prices:

    “3) Case-Shiller (the only guy who works hard to make a reliable index) is up 7 straight months…”

    And the rate of the increase has been decreasing again, recently. How do you explain the increase in 2009, except from first home buyers tax credit and mortgage rates kept low by the Fed’s buying program, so all based on stimulus spending by the government, which is running out?

    ““The turn-around in home prices seen in the Spring and Summer has faded with only seven of the 20 cities seeing month-to-month gains, although all 20 continue to show improvements on a year-over-year basis. All in all, this report should be described as flat.” says David M. Blitzer, Chairman of the Index Committee at Standard & Poor’s. “Coming after a series of solid gains, these data are likely to spark worries that home prices are about to take a second dip. Before jumping to conclusions, recognize that the one time that happened at the beginning of the 1980s, Fed policy saw dramatic reversals, which is very different from the stable and consistent Fed policy we have today. Further, sales of existing homes – those included in the S&P/Case-Shiller Home Price Indices – have been very strong in recent months, working off the inventories of houses for sale. At the same time, housing starts remain weak, fears that the market will be swamped by a wave of foreclosures are heard and government programs aimed at the housing market will expire in the first half of 2010.”

    The argument with “very strong” sales of existing homes in support of home prices in this quote has just been invalidated with the latest data of existing home sales.

    “But your arguments as to why we “might” go down again… seem forced.”

    Do they? Which ones exactly and why?

    “In fact, your points about “housing starts” being off… home builder confidence… these data point are SUPPORTIVE of future pricing. The key to lower prices is LESS building and supply.”

    Latter is true. However, housing starts is a leading indicator for where the economy is headed.

    The new home sales data are interesting, too. Show me when it ever has happened before, at least since data are available, that new home sales went lower not long after the end of a recession than the previous low during the recession without having a new recession:

    It hasn’t happened before. Now the question is, is this just an exception from the rule, or perhaps, the recession actually didn’t end in summer 2009, or another recession is imminent?

    At least, this supports the notion that the improvement in the housing data in 2009 was mainly due to the massive government stimulus for the economy and housing. This is an argument why I can be optimistic that house prices will go down further this year.


  36. cognos says:

    RC -

    Thats why they call it a market — P&L. I have my bets placed…

  37. cognos says:

    Generally speaking, the key to strong performance in markets and investing is to ALWAYS and ONLY — FOCUS ON THE FUTURE.

    When the present is BAD… but the future is going to be BETTER… that tends to be a very good time for buying risk assets.

    That time is NOW. (and was even more so the case 1-yr ago).