Friday, December 05, 2008


Ninety-three percent of Americans who want to work have steady jobs and most of the rest are drawing unemployment pay. The typical family drives two cars 1,000 miles per month each. At 20 miles per gallon, they buy 100 gallons of gasoline per month and they will soon be saving $2.60 per gallon, or $260 per month, over the peak prices of last summer. The typical family is saving at least as much in lower heating and cooling costs and double as much on the price of other goods. The average family is saving $1,040 per month, not counting any reductions in interest costs!


The home affordability index just hit an all time high! The average family has 141% of the income needed to buy the average home. The all time high was reached before the latest sharp decline in mortgage rates. Long term interest rates are very low.


A few weeks ago, treasury market interest spreads were prediction deflation for the next year or more. Those spreads have rapidly faded. Central bankers are stimulating like never seen before. Certain markets are turning, while the relief of lower fuel prices continues. Last summer, very few believed me when I said that oil would ultimately trade back down to at least $35 per barrel. My calculation was based on the cost of production from some of the most expensive oil fields. Yesterday, a major firm lowered its bottom estimate to $25. That is possible, if lower demand means that the $35 oil fields are closed.

Add up all the numbers and you will find that consumers are getting healthy very quickly. One thing that you can count on in America is that financially healthy consumers will spend their money. In the short run, a lot of people have cut back. They are paying off old debts and waiting to buy an electric car. They will soon discover that high mileage cars are available and cheap. The long term growth trend of owning a home and a second home is set to resume. The extra low price of real estate is huge. Trillions of dollars of real estate is available at the lowest prices ever. Many a family can afford five homes is they wish.

The average family will actually save more than $1,400 in lower costs in 2009. The bulk of this money will be spent on other things.

Unemployment is a lagging indicator. This morning, much was made about job losses. The fact is that in recession after recession, the highest job losses show up just when the worst of the recession is over.

My family has a 20% share of a beach condo available. We do not want to sell at current prices but, like so many people, we need to lighten our load. Let me know if you want to enjoy visiting the beach for the next fifteen years while watching the value of your investment soar!