I read a lot of analyses. I read a lot of financial news. Unfortunately, I have to say that most of it is a waste of time. Most people don’t learn from financial history.
If you have a financial bubble, the industry or sector which drove the bubble almost never leads the recovery and will lag the rest of the economy and stock market for years. The most recent financial bubble was driven by a bubble in the housing market.
What I find ironic now is that it seems that many analysts think that housing is again going to lead the market. Many of those who have been wrongly negative on the stock market in recent months have pointed to a slowdown in housing and continued weakness in housing prices.
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To be blunt, these analysts don’t get it. Housing isn’t going to lead the recovery. Housing is going to lag for years. And just because housing lags, it doesn’t mean that the economy has to collapse. New sectors will emerge and lead the economy. We are already seeing strength in commodities and basic materials. Exports in the United States will increase as the dollar continues its long-term trend lower and emerging economies expand.
Those who think that a continued housing slowdown is going to lead to a double-dip recession are sadly mistaken. The old bubble is just that old.
Using what worked in the last cycle almost never works in the next cycle.
About the Author: David Skarica
David Skarica is a member of the Moneynews Financial Brain Trust.
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