Trend: Housing starts peaked in Q1 2006, starting the current down cycle; the end is not yet in sight.
The Big Picture reports an analysis from David Rosenberg of Merrill Lynch – the five phases to this current down-cycle.
Link: The Big Picture | Five phases to the current down-cycle.
"There have been five phases to this current down-cycle – the first four are still in full swing, but it is the fifth that will very likely emerge as the most difficult stage of this economic downturn and bear market:
• The first wave was the end of the housing cycle when starts peaked and began to roll over in the first quarter of 2006.
• The second wave was the end of the home price bubble when the Case-Shiller index began to deflate in the first quarter of 2007.
• The third wave was the end of the credit cycle when the interbank market froze in August 2007.
• The fourth wave was the employment cycle, which peaked when payrolls did in December 2007, prompting the Fed to reluctantly embark on an aggressive policy easing course.
• The fifth wave will be the end of the consumer cycle and the beginning of what may well prove to be the most significant recession since the mid-1970s, and while delayed by the tax rebates, this phase seems to have commenced in June when U of M consumer sentiment collapsed to its lowest level in 28 years."
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