Housing Looks to be Starting a Double Dip

Home prices in the U.S. nosedived in October, with the worst declines coming from areas with high numbers of foreclosures.

US House Prices Decline

The S&P/Case-Shiller 20-City Composite Index for October posted a 1.3% m/m non-seasonally adjusted drop, with home prices about 29% below the mid-2006 peak.

Hulbert's Top Advisors are Bullish for 2011

US Slowing Population Bad for the Economy

Slowing U.S. population growth doesn't help the economy. Based on the experience of Japan, slowing population growth in the U.S. is nothing to celebrate, according to The Economist. After population growth in Japan slowed and eventually turned to decline, income growth slowed with it, the government accumulated a crushing debt and deflation took hold. "Population growth isn't a cure-all, but in the present economic situation it's likely to make the resolution of a range of problems much easier," the magazine noted. The Economist/Free Exchange blog (23 Dec.) , TIME/The Curious Capitalist blog (21 Dec.)

The Economist Article Link

Time Article Link

U.S. Economy

U.S. economy is going great -- except for 9.8% unemployment. A trickle of good economic news has turned into a torrent and things are wonderful, except for the 6 million people who have been out of work for more than six months, according to The Economist. The labor market is the wild card in the recovery, and 9.8% unemployment might be the reason the Federal Reserve isn't moving to withdraw stimulus. "The Fed wants markets to bet on recovery, and since August it has done a pretty decent job convincing them they should," the magazine notes. "But whether that can continue without a substantial improvement in jobs figures in the very near future is far from clear." The Economist/Free Exchange blog (15 Dec.) , Reuters (15 Dec.)

The Econonmist Article Link

Goldman's 2011 Predictions

Nobel Winner Thinks We Are a Long Way From Normal

TARP Needed But Is Nothing To Celebrate

The Troubled Asset Relief Program was necessary and probably cheaper than letting the U.S. crash into a depression, but it is wrong to describe it as a wonderful success that should be celebrated, according to The Economist. The government has become firmly on the hook for the cost of bailing out big companies that get into trouble. "The too-big-to-fail banks are bigger than ever, and the regulatory reform law didn't come close to setting up a framework through which a large, complex, international firm could go down in a period of crisis," the magazine notes. The Economist/Free Exchange blog (01 Dec.) , Los Angeles Times (30 Nov.)

Economist Link

LA Times Link

Housing Update

U.S. Home Prices Show Broad-Based Declines in Q3 2010. U.S. home prices fell back by 2% q/q non-seasonally adjusted and 1.5% y/y in Q3 2010, according to the quarterly S&P/Case-Shiller National Home Price Index; all three home price indexes have shown monthly declines beginning in July and continuing into September.

Focus on the data not the headlines. If you use the headlines to invest you would have experience a crazy roller coast ride in the past week only. Yes we are seeing improvements, but it is going to be a slow lengthy recovery. Greater than normal volatility (swings up and down in the indexes) are expected over the next 12 to 18 months. A focus on the long-term is needed for an investor to prosper.