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Sustainability

February 22, 2010 – 11:59 am

Last week’s strong market, with the Dow up four days in a row, may slow down this week as there will be many new economic reports to digest. Traders will be looking for further evidence of an economic turn around and what effect it may have on corporate earnings so their focus will be on the statistics coming out of Washington.

This week’s report on home sales, both new and existing, will draw strong interest as housing is a very pervasive underlying economic force. Mortgage rates are very low and there have been several months of improvement (though small), but will that trend continue? There is a sense that the foreclosure rate could overwhelm the beginnings of a recovery. Falling prices and over supply might be good news for new buyers but not so good for the overall economy, especially for the banks.

The evidence continues to build that the economy is at an early stage of a recovery. That recovery appears to be broadening and may well have sustainability as our government plans on spending an obscene amount of money this year. That money will further fuel the recovery.

For investors it’s all about sustainability. What happens when the spending stops? What will happen if foreclosures swamp buyers’ appetite to step in to the housing market?

There is always something to worry about. It just seems fear is heightened at this time because we have just survived the worst recession since the Great Depression and we are still not out of its grip. Still, the facts are its grip is lessening.

Good Trading
Steve Peasley

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