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Economic Recovery & Shakier Foundations

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The Bullion Report will share with us some information supporting for our business. The news will be focused on economic recovery in particular and Shakier Foundations in general.

Shakier Foundations

It is starting to feel like a lifetime ago that the government and the Federal Reserve were confidently declaring that recovery was underway. They saw an increase in manufacturing activity and the potential for stimulus dollars to improve the jobs outlook. That kind of talk quickly evaporated; and even though some people still pay lip service to the idea of recovery, I believe that if there is one building it is on an incredibly shaky foundation. This instability is building a significant amount of fear in investors, and another potential level of support for gold and silver.

6-15-11%20gold.jpg

Past performance is not indicative of future results.

***chart courtesy of Gecko Software

There are a few key things to consider with regards to an economic recovery. The first, and I think the most important, is the sustainability of any positive data that the market receives. Sure, there were reports that manufacturing activity was improving, or that weekly unemployment claims were down. Immediate positivity with each new round of stimulus helped spur this kind of action on, but things always seemed to end up turned on their heads. Just when you read a headline about home sales improving another release shows them down again; at least that’s the way it looks from here.

The second thing ties into the downtrodden housing sector. Let’s not forget that is the area that caused the initial bleeding that led to the financial and credit related hemorrhage. Positive reports about housing are always a little bit like getting socks as a gift – you want to feel like it is the thought that counts, but way down on the inside you know it is a letdown. These numbers being reported are showing improvements off the worst or most dramatic drops. That means that they are improving on “really awful” which doesn’t speak to good news. Ditto on information about employment or manufacturing – these reports feel like they are worse when you start peeling off the layers of pretty paper. Yes, some jobs were added, but how many of those are at subsistence-level wages? And speaking of wage increases, are those happening for the consumer at a rate that can offset the gains seen in basic goods like coffee, wheat or gasoline?

That leads to the third poorly laid brick – consumer confidence levels. It would be difficult to find an average person who felt confident buying a house or making other big purchases in the current economic environment. The housing issue seems like an easy one for many analysts to see a silver lining in, but......

Keep going with the news at http://newsletter.berkshireassetmgt.com

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