Daily Commentary by Larry Baer: Europe and many of the other economically developed countries in the world are in the middle of unwinding a 20-year debt bubble. The process is almost certainly going to be financially painful and unpleasant for governments, businesses and private individuals. Politicians will makes promises and try all manner of things to smooth the transition - but ultimately spending constraints will either be voluntarily or mandatorily imposed across the board. The process will unfortunately take multiple years rather than multiple months to complete. The good news is that once the massive debt bubble has been sufficiently deflated -- the probabilities are exceptionally high the world will enter into a period of expanding prosperity that easily lasts for a decade or more.
The almost certain recession that will engulf Europe and other parts of the globe over the coming three or four years will probably continue to fuel the bright prospects for steady to fractionally lower mortgage interest rates here in the states -- but at the expense of a noticeable slowing of domestic economic growth. Mortgage interest rates and home affordability are highly likely to remain near their most attractive historical levels over the coming year - but demand will be curtailed by a wobbly job market.
Speaking of jobs - the Labor Department reported earlier this morning that the number of American's standing in line to file for jobless benefits rose by an unexpected 6,000 last week, popping over the 400,0000 mark for the first time in over a month. Most experienced mortgage investors were quick to shrug off this morning's surprising jobless claims increase. The usefulness of this data in gauging labor market conditions tends to be greatly diminished through the second week of January because of holiday volatility.
In a separate report the private Institute of Supply Management said its manufacturing sector index picked up in November to its strongest level since June. This measure of factory activity rose to 52.7% from October's 50.8% mark. The improvement exceeded most economists' expectations and put the index above its third quarter average of 51.0%. Against a backdrop of growing recession clouds covering many of our global trading partners -- most mortgage investors discounted the nice November gain as unlikely to be sustained in coming months.
THE MARKET IS ALWAYS RIGHT! . YOU AND I ARE SOME OF THE TIME
