Economic activity is a composite of its parts and single measures of activity cannot be used in isolation from others. Monthly Supply of New Homes looks good but is not, while Chemical Activity Barometer which is a good overall indicator reaches record highs. Economic activity is not uniform and it is important to invest selectively.

 

Monthly Supply of New Homes for Sale look very good by themselves, but the pace of the housing market remains at 1991 recession levels. Monthly Supply New Homes for Sale at 4.3mos-also seeing price decline (which I predicted couple of years ago) as smaller new homes enters the mix. Credit remains tight and the pace of sales remains well below what is needed in my opinion to get excited about bank mtg lending and homebuilders themselves.

 

Normally I would be all in a selection of housing related issues. But, govt regulation, heavy fines and threats to even tighter regulation forced me to change my positive stance in 2015. I continue avoid banks and housing till I can get a better sense that credit spreads are widening and that we are likely to see some improvement in the current very slow pace for housing.

 

The Monthly Supply looks very good, but everything else indicates the pace is likely to remain slow and earnings are likely to be below previous levels.

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The Chemical Activity Barometer(CAB) hit an all time high of 114.4. This is an overall economic indicator considering this index’s composition and that chemicals are produced for and used in every aspect of human activity. Seeing this indicator hit new highs, provides support for higher equity prices as well as higher fixed income yields.

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