Tuesday, July 19, 2011 – Markets, Housing Starts, Emerging Mkts

Markets are up today. Lest you ascribe that to the news that housing starts are up in the U.S. let me point out that it was major markets in Asia that moved higher first, then Europe, then the U.S. The world is pretty much moving together, as has been the case for the last three years.

There is not much in the way of new news, except to note that the Chinese government’s revenue was up 26%. That’s what strong economic growth and inflation will do. It is a whole lot less painful and more effective than raising taxes.

Before you rush to buy China note that the Hong Kong and Shanghai markets are still down on the year and trending lower, as is most of Europe. We are not much invested in emerging markets right now because of that downward price trend, not to mention higher inflation and interest rates in many of the major emerging markets. “We will return,” just as Gen. MacArthur famously promised the Philippines many years ago.

The U.S. housing report sounded good but a look under the hood says differently. While housing starts were reported as up 14% realize that multifamily housing is also included in that. Multifamily new starts (apartments) were up 32% and were a big part of that 14% number. Single family homes were up 9% which still sounds good until you realize that the previous two months had plenty of bad weather and pushed some starts into last month. As confirmation, new permits for housing were flat again at historically low levels.

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