February Publication Schedule

The Lehmann Letter (SM) Most observers blamed a decline in military expenditures, inventories and exports for yesterday’s weak GDP report.  Here’s what The New York Times and Wall Street Journal said:  First the Times-  “U.S. Growth Halted as Federal Spending Fell in 4th Quarter”  http://www.nytimes.com/2013/01/31/business/economy/us-economy-unexpectedly-contracted-in-fourth-quarter.html?ref=todayspaper&_r=0  “…The economy contracted at an annual rate of 0.1 percent in the last three months of 2012, the worst quarter since the economy crawled out of the last recession, hampered by the lower military spending, fewer exports and smaller business stockpiles, preliminary government figures indicated on Wednesday. ….”  Then the Journal-  “Recovery Shows a Soft Continue reading

Consumer Confidence Stumbles Again

The Lehmann Letter (SM) This morning the Commerce Department reported a slight drop in GDP for 2012’s final quarter:  http://www.bea.gov/newsreleases/national/gdp/gdpnewsrelease.htm  Uh Ohhhhhh………  Last month this letter, under the headline “Consumer Confidence Stumbles,” reported a decline in consumer confidence. Yesterday The Conference Board announced another drop in consumer confidence:  https://www.conference-board.org/press/pressdetail.cfm?pressid=4712  Consumer confidence now stands at 58.6. It was in the 60s for most of the past year, touching 70 now and then. Households’ confidence in the economy and their economic circumstances is not building.  This is further evidence of our bifurcated economy. Profits and the stock market are doing well. Employment, Continue reading

Housing: Two Views

The Lehmann Letter (SM) Strong evidence indicates housing’s recovery: Prices and sales are up. Still a long way to go? Sure. But up is up.  That’s reflected in an article from last Saturday’s Wall Street Journal: “From Power Tools to Carpets, Housing Recovery Signs Mount” http://online.wsj.com/article/SB10001424127887323375204578268083108322300.html?KEYWORDS=kate+linebaugh  It began:  “Companies that sell power tools, air conditioners, carpet fibers, furniture and cement mixers are reporting stronger sales for the fourth quarter, providing further evidence that a turnaround in the housing market is taking hold.  “The results add to data on home construction and pricing that indicate a bottom may have been reached Continue reading

1500 on the S&P: More Good News Ahead?

The Lehmann Letter (SM) The S&P 500 is the stock market’s best measure. It cleared 1500 on Friday before falling back slightly this morning. The S&P reached 1500 in 2000 just before the dotcom bust and in 2007 prior to the bursting of the real-estate bubble.  Does this mean we are primed for another debacle? Or does it mean there are blue skies ahead and we are about to break through to ever-higher ground in 2013?  The Bulls are ascendant and point to the Federal Reserve’s determination to keep interest rates low and the fading risk of bad news from Continue reading

Will Housing Lead the Way?

The Lehmann Letter (SM) This morning’s New York Times carries an upbeat assessment of housing and the economy:  “Housing Offers Hope of Strength in the Economy”  http://www.nytimes.com/2013/01/25/business/signs-of-a-housing-recovery-point-to-a-stronger-economy.html?ref=todayspaper&_r=0  It begins with these encouraging words:  “A funny thing is happening to the United States housing market. It is getting better at an accelerating rate…….”  But it concludes cautiously:  “……None of this is meant to suggest that the housing market is in good shape. But it is improving.”  The latest data on new-home sales, released this morning by the Census Bureau, underscore the need for caution:  http://www.census.gov/construction/nrs/pdf/newressales.pdf There were 369,000 new homes sold Continue reading

Europe: Too Much Success?

The Lehmann Letter (SM) Europe needs more Europe, not less. Let’s hope everyone, including the British, stays on track.This morning’s New York Times carried the following front-page story: “Europe is Edgy as Briton Seeks to Loosen Ties” http://www.nytimes.com/2013/01/24/world/europe/cameron-britain-referendum-european-union.html?ref=todayspaper&_r=0 Prime Minister David Cameron wants to loosen Britain’s ties to the European Union and bring the matter to a vote of the British electorate. This suggestion that Britain maintain an arms-length relationship with the EU is part of a long-standing tradition. Britain is historically and ideologically separate from the Continent and Prime Minister wishes to continue that tradition.  But there are pitfalls. Continue reading

Existing-Home Sales: Trudging Upward

The Lehmann Letter (SM) Residential real estate continues to make solid if unspectacular gains. That’s good for the economy because (1) residential real estate was ground-zero for the Great Recession and (2) residential real estate has been one of the last areas of the economy to recover and expand. Yesterday’s report from the National Association of Realtors confirmed the expansion even if December’s number was down a little:  http://www.realtor.org/news-releases/2012/10/existing-home-sales-slip-in-december-prices-continue-to-rise-2012-totals-up    December came in at almost 5.0 million, while the 2012 total was 4.65 million following 2011’s 4.26 million.  Existing Home Sales (Recessions shaded) But the chart also confirms how much Continue reading

The Fed: To Err Is Human

The Lehmann Letter (SM) News reports emerged over the weekend that the Federal Reserve had misdiagnosed the economy in 2007: The Fed completely missed the looming balance-sheet crisis that would drag the economy into the Great Recession.  It is easy to be an armchair quarterback and arrive at a diagnosis after the fact. The Fed’s policymakers are human, and we all make mistakes. Explaining the weather that has occurred is far less challenging than forecasting the weather that will occur.  Suppose, however, the meteorologist works with a broken model. Then the model deserves examination in order to avoid future mishaps. Continue reading

Housing Starts Surge

The Lehmann Letter (SM) Yesterday the Commerce Department reported good news for the residential construction industry: http://www.census.gov/construction/nrc/pdf/newresconst.pdf Builders began work on 954,000 new homes in December. Housing Starts  (Recessions shaded) Place that number on the chart and you can see why it’s cause for celebration. Housing starts had languished in a trough for years following the bursting of the housing bubble. Now we are approaching the one-million-start benchmark. Let’s hope the trend continues. But we have a long way to go. Starts fell to 1 million in most earlier recessions. Now we are celebrating our rise to 1 million. That Continue reading