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Economic Update for the Week of 5/25/12

Approximately 5 billion Euro's worth of Germany 2-Year bonds sold with a yield of 0.07%. In essence, investors are so scared of what is going on in Europe that they are willing to give Germany their money for two years with negligible earnings in order to get their money back. If inflation is considered, then they actually earn a negative real return.

Some of the cause of the recent market volatility is due to the assumption that Greece and related investment and central banks are planning for a new nationalized Greek currency.

Existing home sales were up 10% year over year. While the number of homes sold increased, the inventory of available homes for sale also increased. This is likely due to the massive overhang of shadow inventory slowing entering the markets. The increased sales activity is a good sign; however there is no reason to believe there is any significant positive trend just yet. Prices will most likely bounce around this bottoming level for quite some time and perhaps see further declines when interest rates rise. For now we can be cautiously optimistic.

US durable goods orders fell in April which is a sign of economic weakness. Durable goods are often large purchases made using credit. Most consumers are saturated with debt hence why these numbers are soft.

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