How much is that house? At least 10% below the asking price

When sales of existing homes fell in August–for the first time since March–home sellers jumped into action, slashing the asking price on their properties.

The average discount from asking price to sale price was 10% as of October 1, according to Trulia, a provider of real estate pricing date. The total hit? A $28.4 billion price cut in an effort to attract buyers.

So where was the worst damage? And what does this discounting mean for future home prices? Read more

Job loss is slowing but not very quickly

Initial claims for unemployment–that’s the number of people filing claims for unemployment for the first time because they’ve just lost a job–fell by 33,000 from the previous week to just 521,000, according to data released this morning by the Department of Labor.

That’s the lowest number since January and below the 540,000 initial claims that economists had expected for the week.

The four-week moving average –which washes out some of the volatility in the weekly numbers–fell to 540,000 last week from 549,000 the week before.

So job loss is slowing. But progress is painfully slow. Read more

Do you see a pattern here? Is it a good sign for the economy that consumers are eating more cereal and TV dinners?

Let them eat cereal. And TV dinners. Cake may need to wait for the recovery.

This morning General Mills (GIS) reported fiscal first quarter earnings of $1.28 a share, a huge 25 cents a share better than Wall Street was expecting. And the company raised its guidance for the full fiscal 2010 year by $4.40 to $.5 a share, up from earlier company estimate of $4.20 to $4.25.

Maybe it’s too much to put this surprise together with yesterday’s stronger than expected earnings from ConAgra Foods (CAG) and say that in these tough economic times consumers are eating what’s easy, simple, and affordable.

Cereal fits that bill—even if you calculate the cost per bowl. So too do the TV dinners that formed the backbone of ConAgra’s over-performance in the quarter. Read more

We have nothing to fear but a replay of 1937 itself

The specter of 1937 hangs over the economy and the stock market.

That’s the year that over confidence that the Roosevelt administration had whipped the Great Depression and that it was time to balance the federal budget led to another deep recession that wiped out three years of growth and sent the economy reeling back to the Depression depths of 1934.

The Dow Jones Industrial Average, which had climbed 127% from a low of 85.51 on July 26, 1934 to a high of 194 on March 10, 1937,  would fall by 49% from that peak by March 31, 1938. And since it only takes a 50% loss to wipe out a 100% gain, in March 1938 the Dow was at 98.95 just about the 85.51 that it had been in July 1934.

Thanks to another collapse in 1942 stocks wouldn’t match that 1937 peak until 1945.

A few days ago I wrote a post “Most of the time rallies like this have been followed by a gain over the next 12 months”  (http://jubakpicks.com/2009/09/14/most-of-the-time-rallies-like-this-have-been-followed-by-a-gain-over-the-next-12-months/) arguing that the odds were on an investor’s side since a year after almost all big rallies–like the one going on now—the stock market was still higher in a year.

Almost. The one big exception, the one that delivered a loss big enough to wipe out portfolios, came in 1937.

It’s that “almost” that constantly gives me pause as I look, not so much at the stock market, but at the economy and at what passes for our national discussion of economic policy these days.

The comforting thing about looking back at that economic and investment disaster in 1937 is that we did it to ourselves. Bad policy decisions, not accident or fate, led us over the cliff in that year. So all we have to do to avoid a repeat of the results is to avoid the policy mistakes right?

Disturbingly, there are plenty of signs that we might well be prepared to do it to ourselves all over again. Read more

It’s official: This is now the longest recession since the Great Depression. Here’s why that matters

With the GPD numbers for the quarter that ended on June 30 showing that the U.S. economy is still shrinking, it’s now official: the recession that began, according to the National Bureau of Economic Research, in December 2007 is now the longest at 17 months and counting since the Great Depression.

Next up in the list of dubious records we all hope that we don’t break is the 1920-21 recession (at 18 months), 1913-1914 (at 23 months), 1910-12 (at 24 months) and the grand daddy of them all, the 1929-33 recession (at 43 months).

Why does this matter? Because when it comes to the effects of recessions, it’s length that counts. Read more