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The Turn is In!

July 31, 2009 – 7:20 pm

On Wednesday I wrote about the bottom of the stock market and speculated that we hit ‘the’ bottom in stock prices last March.

Today, I am speculating about reaching ‘the’ bottom for the economy. I think we have. There is no doubt that data released by the various government bodies have shown that we are not shrinking as we were, but they also have not shown us that we are growing and there is always the possibility of an unknown event that would sink us further. However, I don’t think so. This morning’s GDP number for the second quarter was better than expected with a shrinkage of 1%. That is better than the 1.5% expected and far better than the 5 and 6% shrinkage in the previous two quarters.

Note however, that it is still a fall. Our economy is still contracting, not expanding; therefore there is not much to feel good about. Yet, I am telling you that the recession is over. The turn is in. Before an economy can return to growth it needs to stop falling. It appears we are in that phase of change. The reason I am expressing confidence is because housing is improving, and not just because the new housing report showed a 10% growth number and a reduction in inventory. I have been involved in Southern California real estate for most of my adult life and I have many contacts in that industry. Lower priced homes for sale are getting scarce. There are multiple offers for these homes and supply on the open market is tight. That seems to be at odds with the foreclosure rate. But again a turn in housing always starts in the low priced homes. That has already started. So goes housing so will go the rest of the economy.

Good Trading
Steve Peasley

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