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  • The Economy & This Rocky Recovery

    For the most part, the economic reports over the last month or so have been positive, including last Friday's 1Q GDP increase of 3.2% (annual rate). Most economists agree that the recession hit bottom in the middle of last year, and we have now seen three consecutive quarters of positive GDP growth. Yet while it would seem safe to conclude that the Great Recession is over (for now), economic growth will be handicapped all year by the continued housing crisis. Home foreclosures continue to increase at a record pace, including an unprecedented 367,056 properties in March alone. Thus, it is quite possible that the 3.2% growth rate in the 1Q will be the best we see all year. We will take a look at most of the latest economic reports in this issue, as well as the rapidly growing problem in home foreclosures.

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  • Consumer Confidence & Bank Lending Plunge

    Two economic/financial reports last week were shockers and support my view that we may be facing a double-dip recession. First, consumer confidence unexpectedly plunged in January - no analysts that I read saw this large a drop coming. Second, the Federal Deposit Insurance Corporation (FDIC) released its quarterly report which showed that lending by US banks plunged last year in the sharpest decline since 1942. We also saw new unemployment claims spike higher for the week ending February 20.

    What does this all mean? For one, the economy is not improving and more and more Americans are coming to know this. And banks are still not lending - what else is new? Are we indeed headed for a double-dip recession? Maybe, maybe not, but the odds are increasing. This week, we go over the latest reports, and try to come to some conclusions. And we end on a personal note from me. Let's get started.

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  • The "Catch 22" Housing Slump Is Not Over

    We begin this week by looking at the latest report on the economy. GDP rose a bit more than expected in the 4Q, up 5.7% (annual rate). Despite that, many economists are downgrading their forecasts for growth in 2010. Following that, we will take a close look at the latest reports on the housing market. Despite the improvement in the economy, home prices continue to fall in most areas of the country. The housing slump is still not over, and this is a big reason why consumer spending is not likely to recover to pre-recession levels anytime soon. If you are concerned about the housing market, you will definitely want to read this week's E-Letter.

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  • Why This Recession Could Last Another Year

    While we have seen some encouraging economic data over the last month or so, the vast majority of reports remain negative. The housing slump is getting worse, not better, with home prices plunging a record 19% in the 1Q. The home foreclosure rate skyrocketed 46% over year-ago levels in March. Meanwhile, millions of adjustable rate mortgages (ARMs) are going to "reset" to higher monthly payments over the next couple of years. And finally, the default rate on commercial real estate loans and mortgages is rising rapidly. All of this reinforces my view that this recession will last all year or longer, and this is bad news for the credit markets and the stock markets. Don't be fooled by all the talk of "green shoots" in the economy. We are not out of the woods yet....