On this week's Connie Mack Show one of the guests was Robert Kessler, the guy who always says to buy long term treasuries. He is not one of my favorites but he made an interesting point about one aspect of the new normal. He said that back in the old days people stayed in houses for 15 years but that recently that number has come down to seven years. While I can't vouch for his numbers the trend makes sense. He said that the trend will now turn back around and go back toward 15 years.
In a similar context he said that people will drive cars for much longer than they have been accustomed of late. He talked about car sales dropping from about 12 million down to 9 million and while he said many people are expecting a rebound he is not.
There will be economic implications to this and so by extension there will be stock market implications as well assuming you agree with Kessler to some degree. Quantifying the future importance of these to segments the economy is probably impossible but both have been huge in terms jobs supplied and dollars spent. If these segments become a smaller source of jobs and attract less new spending there will be a meaningful long term drag on the US economy.
From a personal finance point of view being less aspirational, or more correctly spending less aspirational items, is a logical reaction to the type of economic event we are now working through. Anyone who is overleveraged or thinks they might be will be motivated to figure some place to cut back. This ties in directly with the idea of certain other countries moving up to their perception of the American lifestyle while the US tries to hang on to what it's got.
I tend to be optimistic where the future of American social fabric is concerned but do not expect any sort of persistent stock market leadership to come from the US, further I believe the realities of our debt situation and other problems (repeat theme coming here) make the case for generally higher interest rates and slower long term growth which means US based investors would need more foreign exposure for their investment portfolios.
9 comments:
More foreign investment might become all foreign investment down the road.
Americans are rather mobile and employers can not be relied upon so house sales may increase from 7 yr avg to some marginally higher number, but we will not see a return to 15 yr avg again
Cars are difficult to predict other than we will not see 16 million cars per year any time soon, but predicting the new normal seems difficult to me.
The best comment I heard about Fiat teaming up with Chrysler was like expecting two rocks to float because you tied them together. The solutions being touted to the public on many levels will not work IMO.
Anon 6:15 - two rocks with the buoyancy of two governments, plus R & D efficiency/economies of scale savings.
But yes they are both rocks.
Roger, the 200dma is coming into sight, especially with the push down in March. What thoughts do you have on India? I don't recollect you speaking about the country very much. Apologies if I've missed those posts.
I disagree with the 15 year, buy and hold, comment. With a large majority of single family home purchases being engineered by speculators in short sales and foreclosures, how can anyone predict a long holding period for housing? In addition, with mature areas raising property and other cost-of-ownership fees, my direct observation is that families are migrating to less confiscatory areas - whether it be other suburbs or to another area or state. Or, going where there is a better quality of life and job.
As one involved in real estate over several states in the midwest, mideast and south, I think the static observation is not only wrong, but plain stupid.
T
if SPX retakes its 200 DMA I will heed it slowly as I always do.
I am less interested in India than I used to be.
T, I am less interested in the specific number, that being 15, as opposed to the trend he cites.
Do you agree in terms of direction?
Thanks for clearing that up (about India), Roger.
On the subject of housing, my thoughts are that properties are being occupied more by singles, who will move more often as they don't need to worry about the kids' schooling. They will upscale sooner as their wage rises and/or move to a new location for a new job, or just to the new, cool part of town.
Or you'll have a marriage finish and both parties looking for dwellings, more often now than in the past. This was often cited as a reason for the shortages in housing a decade ago.
This could be the new normal:
China has 'canceled US credit card': lawmaker
http://tinyurl.com/cnb44y
Cool post by Hussman. Religion, behavioral science, and an interesting dissertation on autism. Other than that, he says the same things you say Roger.
Sam
Roger,
I'm curious as to why your interest in India has waned....care to share some words of enlightment?
Jan
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