Pentonomics – Soft Patch or Quick Sand?

May 31, 2011 at 5:14 PM

The deluge of weak data continued today with home prices and manufacturing taking a dive. The S&P/Case-Shiller 20 city index of property values fell 3.6% in March from a year ago, which the biggest year-over-year decline since November 2009. The index is now at the weakest level since March 2003. Also, The Chicago Institute for Supply Management’s PMI, said its business barometer dropped precipitously to 56.6 this month, the lowest since November 2009. The prior month’s reading was 67.6 in April.

Of course, we are still told that we are now two years into this “recovery”. Inflation and high unemployment rates are what we have—yes, the misery index stings like never before. But now we are also being led to believe that we are finally ready to embrace austerity…really!

However—in sign that old habits die very hard–the Armed Services panel voted 60 to 1 last week to authorize $690 billion in spending for the military complex in fiscal 2012. That figure is UP over $20 billion from last year. Why in God’s name are we increasing military spending when we are getting a concussion from constantly bumping our heads against the debt ceiling? There will be no cuts in defense spending from this Senate and there will be no cuts in our unfunded liabilities unless the republicans agree to a tax hike—which thankfully isn’t going to occur.

And the bond market is rallying into this ever increasing affinity with debt??? Inflation and debt will soon bring an end to this rally in stocks and bonds. I think this summer could be a very dangerous time for investors.