Market Update — June 28

A few interesting stats / ideas that I came across on Wednesday.

Today’s the day!  Today, we’ll find out what the Supreme Court has to say about the Affordable Care Act.  In honor of that event, I want to share two slides with you.  These slides are nonpartisan.  The first slide shows that we spend much more on healthcare (as a percentage of GDP) than other OECD countries.  See slide below.

Slide 2 shows how much the government spends on healthcare as a percentage of GDP.  As you look at this, remember that we take in tax revenue that averages approximately 18% of GDP.  The point is that healthcare is dominating our spending.  See slide below.

Another week, another summit.  The European summit will address proposals concerning centralized bank supervision, unified deposit insurance and pooling debt.  Angela Merkel has made clear that pooling of debt can only come with pooling sovereignty and responsibility.  Merkel said, “I say quite openly: When I think of the summit on Thursday, I’m concerned that once again the discussion will be far too much about all kinds of ideas for joint liability and far too little about improved oversight and structural measures.”

Don’t these rules already exist?  There are also suggestions for limits on national debt (60% of GDP) and deficits (3% of GDP).   The EU already has some similar agreements.  Do you think this would do anything for Greece, Spain or Italy?  It’s like solving a weight problem by telling someone that I’m going to impose a limit on their weight.

But, this time, we’ll take it a step further.  There is talk that EU would have the power to re-write budgets if the country breaches deficit cutting rules.  Again, if Germany re-wrote Greece’s budget, do you think Greece would be okay?

Consumer confidence is falling.  Consumer confidence fell in June for the fourth consecutive month.  It fell from 64.4 to 62.  Back in February, it was 71.6.  A reading of 90 indicates a healthy economy.  The index hit an all-time low of 25.3 in February 2009.  People are worried about jobs, housing and Europe.

Natural unemployment rate.  The OECD estimated that the US has a natural unemployment rate of 6.1%.  This is the rate of unemployment that we could have without causing inflation.  Prior to our recession, economists thought that the US could sustain 5% unemployment without causing inflation.  Theoretically, the Fed will only try to stimulate demand in order to decrease unemployment if they believe that the high unemployment is not structural.

The disability issue.  The OECD pointed out the disability issue.  (If you didn’t read my blog about this, here’s the link – this is a big issue that you really should read about.)  They said that 6.6% of our working age population (between the ages of 20 and 64) were receiving disability payments in 2010.

Less Middle East oil imports.  Some analysts are predicting that America will halve its reliance on Middle East oil by the end of this decade.  This would be the result of declining demand and rapid growth of new petroleum sources.  Some of this is the result of fracking.

Housing Stats

Sales of new single-family houses in May rose 7.6% compared with April and 19.8% from May 2011.  The seasonally adjusted annual rate of sales was 369,000 last month, the highest level since April 2010 (during the tax credit period).

The median sales price of new houses also improved last month, up 5.6% from the same month last year, to $234,500. That median price was also substantially higher than May’s $182,900 median sales price for previously owned homes.

Inventory of new homes rose for the first time in more than a year, to 145,000. That works out to about 4.7 months of supply.

The Case-Shiller composite 20-city home price index was up 1.3% in April from the previous month and fell just 1.9% from a year earlier.  The annual rate of decrease has slowed – so we may be close to posting year-over-year gains. Ten of the 20 cities posted annual increases in April.  But, remember, there are fewer homes for sale and fewer foreclosed homes are being sold right now.

Random Stats

41 percent of children born in the United States in 1991 were first-borns.

Stockton (California) is expected to be the largest American city to ever declare bankruptcy.

According to Experian Automotive, the average age of the 245 million vehicles registered in the U.S. is 11 years (as of Q1).  More than 52 million cars and trucks in America are 16 years or older.

Hybrid and electric vehicles account for .9% of the registered vehicles.  That’s slightly more than two million alternatively powered vehicles.

Amazon Marketplace has 85 million unique monthly visitors, 45% higher than eBay.

Have a great week.

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