Despite what others might say, 2011 was a volatile year on par with 2009, not 2010. In fact, the similarities have been eerie. In 2011 we saw, among other statistics, three days (just like 2009) when the Dow swung more than 5% from high to low — something that happened 28 times in 2008 but hadn’t happened in the five years prior. We’ve seen 193 days when the Dow moved 100 or more points from high to low, just like the 196 days in 2009.
But at least there has been some good news as of late. Last Friday’s report on new home sales confirmed that the housing industry is beginning to get some traction off of the bottom. Supply continues to fall and, while prices remain soft, sales volume is picking up.
Incomes and spending continue to increase, but at a very, very low rate. At least it appears that the declining savings rate has found a resting place and hasn’t continued to fall. It’s now at about the average rate for the past decade, at 3.5% of incomes.
Orders for durable goods were led in November by the volatile aircraft segment on big orders for Boeing (NYSE:BA). So, while these numbers are good, they have to be taken with that grain of salt that reminds us, month to month, things can look quite different — but the trend remains a good one.
Italy is grabbing the debt bull by the horns, passing legislation raising the retirement age to 66 for men and 62 for women, reinstating a property tax on first homes — how quaint — and coming up with more initiatives to reduce tax evasion. They’ve had a couple of decent bond sales last week, but anxiety remains at a high level in the euro zone. Stay tuned, as this will be the defining issue of the new year unless a war breaks out or some other unknowable event grabs center stage.
With that said, I still expect more volatility in the coming months, so please be cautious. I wish you a safe, sound and prosperous investment future and a warm, safe and happy new year.