Good News!!

The recession is over and a new (the 47th I believe) housing bottom is predicted. This time by the usually realistic editors of National Review. Looks like the kool-aid that Larry Kudlow has been drinking made its way over to the editorial board's water cooler.

Based on the government’s first estimate, the economy grew at a 1.9 percent annualized rate in the second quarter of the year. While weak, that’s not a number that signals recession. Even better, growth is picking up. The economy appears to have shrunk by 0.2 percent in the last quarter of 2007 and grown by 0.9 percent in the first quarter of 2008.

Unemployment is a lagging indicator, so the economy, especially the private sector, is continuing to shed jobs. But job losses, too, have been well below recession levels, and it is reasonable to expect job gains in the months to come. The housing market seems likely to find its bottom soon, too, notwithstanding Washington’s best efforts to interfere.

1.9% GDP growth in a quarter where the government sends out $150B worth of "rebate" checks. WOW! Hey NR, you're right this economy is on fire. Give me a break. This past quarter was an outlier. Unless you expect $150B of money to be printed and sent out every quarter, you should know better than to cheer this meaningless number.

And that 1.9% number will be revised downwards as the number always is. Remember, the negative 0.2% in Q4 2007 was initially a positive number that was - very quietly - revised down. This is the game the government plays. Headline number that says good news, then bury the revision a few weeks later on p.89 of a revision report. And given that we have a clueless MSM that doesn't even understand what GDP is, it's no surprise the MSM ignores the revision.

How is the housing market likely to find a bottom? The number of homes for sale as a % of all housing units is at an all time high. Almost 5% of all houses in the country are for sale. And the wave of ARM resets is not even 1/2 done. There is no way in hell the housing market finds a bottom for at least another year and more likely 2 or more years. And since the government has now decided to "fix" the housing market, another 5 years of price falls is not that far fetched. Given the rule of two, ie whatever problem the government tries to fix becomes twice as much of a problem. Don't believe me? See public education and social security as examples one and two. Just wait until the government fixes health care. God help us all.

I thought NR got it. They used to get it. But now that election season is near, they have to be good Republican soldiers. And instead of telling it like it is, they have to start doing the talk radio host thing and say all is well. It's pathetic.