Are poor expectations killing the housing recovery?
Grant Williams over at Mauldin Economics was out with his latest 'Things That Make You Go Hmmm...' piece Monday and it had this chart:
Showing the percent of people who think the economic situation in their country is bad. Done late last year the Pew research shows that nearly 2/3s of the US thinks things are bad. Some of it for sure is recency bias but there are solid structural reasons beyond even the obvious lack of jobs and wage growth.
These are the reasons for the lack of jobs and wage growth, which the majority of those voting thumbs down on the economy probably are unaware of. What are those you ask? Well fortunately we don't have to depend on my say so because Stephanie Pomboy of MacroMavens explained it all much better than I could last month at the Wine Country Conference in Sonoma:
Click on the image to see the video. You can get her slides here:
Net net the Fed has backed themselves into a low interest rate corner that the economy can't go on without. This means throwing savers and retirees to the wolves by keeping interest rates low enough to get the housing sector growing again which will eventually (hopefully?) brings job growth and consumer spending back online.
So we are turning Japanese but the good news is that the Fed really, really wants us to be out there buying real estate, and now is not a good time to 'fight the Fed'.
Did you notice that only 10% of Chinese people think their economy is bad in the chart above? There are good reasons to think that may change soon. The Mauldin Economics team has some great data and insight on what's going on in the Middle Kingdom which is important because theirs is the second biggest economy after only the US and what happens there doesn't stay there like Las Vegas anymore. See Mauldin's two latest pieces on China here and here. You will have to register to access their site but it is free and well worth reading everything they produce.
Unlike Mauldin's material unfortunately, Stephanie and her team at MacroMavens focus exclusively on providing large institutions with their work and don't post anything to their website that can be accessed for free. Stephanie is interviewed by the financial media regularly as well as speaking at conferences like the WCC and you can find these by Googling her name.
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