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The news is not bad, and that's good





This chart shows new mortgage purchase applications, which have been very weak, but look to have bottomed in July and have increased marginally since. This is not too much to go on, of course, but at the very least it suggests that the weak home sales numbers we've seen of late are not getting worse, and that therefore the housing market is not in freefall as many have been suggesting. The recent weakness may prove to have been a temporary lull. Whatever the case, it also adds to the case that the dreaded double-dip recession is not unfolding.

In other news, today's equity rally seems to have been helped along by news that European banks are not collapsing. This action reaffirms my view that the market has been extremely worried about bad news, and therefore the absence of bad news ends up being a positive. If we end up with any positive news, there will likely be plenty of action to the upside.

Meanwhile, I note that commodity prices continue to be strong, once again confirming the absence of a double-dip, and also confirming the absence of deflation. There are of course many prices that are falling, but just as many or more that are rising. This amounts to a relative price change, not a deflation, and this is normal given the depths of the recent recession.

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