Some indicators help us to find out what the US economy is going now.
1. The 30-year-fixed rate of housing mortgage has climbed from 3.81% to 4.57% since last September.
2. The growth of home sales stopped since this January.
3. The median existing-home price broke the highest record recently since the Recession.
Does it mean that the energy of the accumulated rent values of the US economy is being weakened? Plausible. But we still need more signals for us to complete our judgements. However, the trade conflicts can deteriorate the US economic progress, as we have talked about for the past six months. We are facing a possible stagnant.
The damages of the trade wars to the US are not only increased prices of goods and services, but also the higher transaction costs and uncertainty. These lead to twists of the resource arrangements and causing massive inefficiency. The sabotaged economic machine can be detected by the weak real estate markets, according to the theory of the wealth vault. Even worse, people may take some protective actions if the economic forecast is turning gloomy. All can diminish the returns of the tax cut and de-regulation held by the Trump government.
Because it takes much higher transaction costs and longer time of the home markets than of the stock markets, the former one is a better measure of the health of an economy. Firmly optimistic outlooks are highly required for people to decide to buy a house. If a stock market goes well, we are not that sure about the true economic progress. Nonetheless, as the real estate market performs well, we are more confident in the real economic progress. This is why the liar 蔡英文Tsai Ing-wen and the aged self-claimed expert are both wrong. The index of a stock market is NOT a sufficient indicator of the economic progress. Not even close.
As we talked about yesterday, there is a very small chance for the foreign buyers to swift orders to Taiwanese firms due to the inability to immediately mass production. If the US economy plunges, there will be no chance of the dreamed purchases. I have no idea why the aged self-claimed expert made such arguments to mislead people. But I strongly recommend my readers to be careful about any sudden reactions and changes of the physical constraints of the capital markets. “Not losing money” is always our priority of the investing principles.