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In This Issue:
Gary Dorsch discusses the current real estate market drop and a possible recession.
|October 1, 2007||TraderSavvy.com | Read Past Issues|
"Your vision. Our expertise."
Fed Rate Cuts Can Energize the “Commodity Super Cycle”
Historically, the US economy has gone into recession seven times since 1960, and six of the downturns were foreshadowed by an Inverted yield curve, where yields on three-month Treasury bills exceed the yield on ten-year Treasury Notes. Usually, when lenders in the bond market are willing to accept lower interest rates for longer term debt than for shorter term debt, it is a signal that the US economy is about to experience a serious slowdown or even a recession within 12-months.
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So far in this decade, the Inverted yield curve has made two appearances, in March thru Dec 2000, at the height of the frenzy for internet and high tech stocks, and as recently as July 2006 thru May 2007. Soon after the appearance of the Inverted yield curve in 2000, the Nasdaq and S&P 500 imploded in 2001, and an eight month economic recession arrived in 2002.
Meanwhile, existing US home sales fell 4.3% in August to a 5.5
million-unit annual rate, swelling the inventory of homes and condos for
sale to 4.58 million units, to a record supply of 10-months. Former Fed
chief “Easy” Al Greenspan said on Sept 16th, the he would not be surprised
if US home prices fell by double-digits into 2008.
A double-digit decline in US home prices could spark big job losses. Construction employment fell about 15% in both the 1990’s and 1980’s recessions, and it dropped 18% in the recession of the mid-1970’s. In each case, the sector’s declines were far steeper than job losses in the overall economy, and the recovery took longer. About 7.6 million Americans workers are employed by construction companies, so a 15% decline would translate into the loss of 1 million jobs.
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Disclaimer: SirChartsAlot.com’s analysis and insights are based upon data gathered by it from various sources believed to be reliable, complete and accurate. However, no guarantee is made by SirChartsAlot.com as to the reliability, completeness and accuracy of the data so analyzed. SirChartsAlot.com is in the business of gathering information, analyzing it and disseminating the analysis for informational and educational purposes only. SirChartsAlot.com attempts to analyze trends, not make recommendations. All statements and expressions are the opinion of SirChartsAlot.com and are not meant to be investment advice or solicitation or recommendation to establish market positions. Our opinions are subject to change without notice. SirChartsAlot.com strongly advises readers to conduct thorough research relevant to decisions and verify facts from various independent sources.
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About Today's Author:
Gary Dorsch worked on the trading floor of
the Chicago Mercantile Exchange for nine years as the chief Financial
futures analyst for three clearing firms, Oppenheimer Rouse Futures, GH
Miller & Co, and a commodity fund at the LNS Financial Group, members
of the CME and CBOT. He telexed analysis of foreign exchange, global
interest rates, gold and other commodities to clients in Hong Kong,
London, the Middle East, and dozens of commodity trading advisers across
the United States. After the closing bell, Mr Dorsch spoke to 40 customer
branch offices around the United States via live hook-up from the trading
pits of the Chicago Merc.
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