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PeakTrader said...

Regarding taxes, it seems, when someone buys a new home, the implicit tax rate is about 50%:

New-home sales plunge 33 pct with tax credits gone
June 23, 2010

Each new home built creates, on average, the equivalent of three jobs for a year and generates about $90,000 in taxes paid to local and federal authorities, according to the National Association of Home Builders. The impact is felt across multiple industries, from makers of faucets and dishwashers to lumber yards.

The median sales price in May was $200,900. That was down 9.6 percent from a year earlier and down 1 percent from April.

New-homes sales made up about 7 percent of the housing market last year. That's down from about 15 percent before the bust.

The drop in new-home sales means fewer jobs in the construction industry, which normally powers economic recoveries but has remained lackluster this time.

My comment: The $90,000 in taxes on a $200,000 new home may not include the generation of indirect taxes through the multiplier effect.

Also, with home prices and mortgage rates lower (the 10-year bond yield is down to 3.12%), purchasing a home is even more affordable.

New Home Sales chart:

http://2.bp.blogspot.com/_dZJ6SFB1ecE/TCJP3Cf1htI/AAAAAAAADi0/wsSPIfxtOuA/s1600/New+Home+Sales

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Buffett's Favourite Indicator Points Down
18 June 2010

Watching the trains go by

The indicator in question is freight car loadings, which reflect the amount of goods transported over the US railway system. According to David Rosenberg, chief economist at asset manager Gluskin Sheff, the latest data for the week of June 5 shows a rate of decline over the past 13 weeks that would work out to 25% on an annual basis.

This is particularly troubling, since, as Rosenberg notes, "This metric is closely linked to the only [two] areas of the economy that have been major contributors to the recovery: Exports and inventories."

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PeakTrader said...

Shipments of waste and scrap have a 82% correlation with GDP.

Waste grew at a fast pace last quarter, although real GDP expanded 3%.

It looks like the Total North American Carloads Waste and Scrap Material category peaked around Apr 30th, which is when the $8,000 home buying tax credit expired.

Weekly Railfax report:

http://railfax.transmatch.com/

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PeakTrader said...

The only way this recovery will gain traction is when there's a homebuilding turnaround.

The timing and the strength of the turnaround are uncertain. We already squandered trillions of dollars creating massive government debt.

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Unemployment insurance running out for millions
June 22, 2010

"At the end of this month, if Congress does not change things, 1.2 million people will see their unemployment insurance expire -- a number that will increase each subsequent month if no extension to benefits is granted.

"It's a pretty grim picture for these people," said Ross Eisenbrey of the Economic Policy Institute.

"There are no jobs for 80 percent of job seekers" (and) An estimated 200,000 to 300,000 teachers could lose their jobs next year."

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VangelV said...

I see weakness in the economy, lots of debt, huge deficits, high taxes,too many regulations, and regime uncertainty that discourages capital formation. We just saw the housing sales collapse, just as many of us predicted after the incentives ran out. We have seen Obama attack the wealthy, the health care industry, the telecoms, the energy sector, and other sectors of the productive economy even as he made clear that he will support the public sector with higher taxes and more borrowing if necessary.

From where I stand the US is looking like a failed state that is only as well off as it is because of momentum. It has not elected a competent president for more than half a century and tends to worship activist presidents who grow governments and reduce individual liberty. I do not see hope for a lasting recovery until voters sweep the progressives and meddlers aside and allow the economy to liquidate unproductive investments so that the competent can move ahead and begin to create real wealth.