Jul 312009
Eric Sprott, a veteran fund manager and researcher based in Toronto, believes the buyers are in la-la land when it comes to interpreting economic data emanating from the world’s largest economy. A few of his salient points include:
- A prolonged U.S. retail sales slump, highlighted by a same-store sales plunge of 32% last month at Abercrombie & Fitch (ANF, news, msgs), shows that consumers are in no mood to buy goods even if factories were ready to make them. A plunge of 5.1% reported by U.S. shopping malls in June was worse than the dire 4.5% forecast.
- Unemployment is not just the worst since 1983 — 29% of the unemployed have been looking for work more than six months; the number of people taking unemployment benefits has reached a record 6.88 million; and six people are looking for work for every job opening, a fourfold increase from just a year ago.
- With consumers on the sidelines, U.S. industry is on the brink. Factories used only 68.3% of available capacity in May 2009. The lowest prior level since the Depression was 70.9% in December 1982.
- Despite the recent uptick in construction, new-home sales are down 73% from their 2005 high, and the cumulative loading of rail cars is down 19.2% from 2008′s depressed levels.
- Price/earnings multiples on U.S. stocks, reflecting investor sentiment, fell only to a multidecadeaverage at 16 rather than to the single-digit lows seen in prior deep recessions.
The Economic Recovery Puzzle’s Missing Piece – Jon Markman, MSN Money
