Wednesday, October 17, 2012

Oasis or Mirage?

Today is October 17, 2012. The US Commerce Department said that housing starts jumped 15% in September to the highest level in 4 years! Okay, I’ll give readers a few minutes to stop laughing. The ‘Commerce Department’ is always good for a belly laugh. Seriously, quit laughing so I can make a point. Okay, so housing starts are up the most in 4 years. That should really boost the Dow Jones Industrials. Uh-oh. As we move into the afternoon, the Dow is actually down 20 points. What? Does no one trust the US Commerce Department? The DOPE (Department of Pathological Embellishment) seems to have zero credibility. Or perhaps there is another perspective.

Even if today’s housing number had a tiny speck of truth to it, instead of a it being a complete fabrication from a regime completely incapable of telling the truth about anything, we could also say that housing starts are the worst they have been in 22 years. Take a look at the chart (below) compiled by the Fed and observe that housing starts are about what they were in 1990, or 22 years ago. We could also observe that housing starts are about half of what they were in year 2000. Maybe that’s why there is no rally in stocks today. Is housing an oasis or a mirage?

US Housing Starts through 10/17/12 
Chart courtesy St. Louis Fed

Obviously, all ‘data’ these days is suspect. Clearly the regime has a story to sell and that story is one of economic recovery. Improved housing starts would be part of that ‘recovery’. So let’s apply some logic. 

I’m not an expert but most houses, if not all, have insulation and roofing. A big producer of that insulation and roofing is Owens Corning. What do they say about their business? If housing was really in a ‘recovery’, wouldn’t a maker of insulation and roofing be doing better as well?

Uh, well actually, Owens Corning just announced on October 9, 2012 that they were lowering full-year expectations for their earnings citing weakness in roofing and composites businesses. That’s right. They ‘lowered’ earnings citing ‘weakness’ in their business. How much? They lowered full-year earnings from between $360 million - $420 million (given in August) to between $280 million - $310 million. That’s quite a decrease! The company says that business has ‘weakened over the past two quarters’. Funny, the regime wants us to believe that home building has increased. Oh well, maybe builders are now building homes without insulation or roofing. 

Depending on whatever we want to believe, the economic recovery is either an oasis or mirage. Housing is either the strongest its been in 4 years or the weakest in 22 years. It’s all in perspective. Truth, however, does not entertain perspective.   

Disclaimer: The views discussed in this article are solely the opinion of the writer and have been presented for educational purposes. They are not meant to serve as individual investment advice and should not be taken as such. This is not a solicitation to buy or sell anything. Readers should consult their registered financial representative to determine the suitability of any investment strategies undertaken or implemented. BMF Investments, Inc. assumes no liability nor credit for any actions taken based on this article. Advisory services offered through BMF Investments, Inc.

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