Prepared by Kessler Investment Advisors, Inc. and Kessler & Company Investments, Inc. | 5/30/2013Page 3 of 6
4. Commodities are not confirming the risk-onsentiment, and for one important case, issuggesting the opposite (fig.5).5. Positive sentiment exploded with the housingnews released in May, but it is important tolook at these charts nominally. Because theyhave fallen so much, high growth ratesrepresent small nominal gains (fig.6).6. Europe is in recession. So far, the U.S. hasbeen able to ignore it because it hasn’t shownup in a measurable way. But, it would be astretch to expect that this won't have somedrag on U.S. growth when Europe representsnearly a quarter of global GDP (23%). Thenew Treasury Secretary, Jacob Lew, has beenharping on this and just yesterday, the OECDcut their 2013 global growth forecast (fig.7).
fig.6 Large percentages in housingnumbers are misleading
Data Source: U.S. Census Bureau
0k400k800k1,200k1,600k1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015
U.S. New Home Sales
(annual rate, thousands)
01/1960 — 04/2013
New Home Sales aretoiling at levels from the1960’sThis indicator has improved by 68.2%!from the trough, but the percentage isnearly meaningless when the valuehas fallen so much.
fig.5 Commodities have been decreasingwhich is not consistent with a ‘risk-on’bull market
1502002503003504004505002005 2006 2007 2008 2009 2010 2011 2012 2013 201
CRB commodity index
01/2005 — 05/29/2013
...and a main ingredient for homes has beenfalling dramatically
Lumber Futures Contract (
price per 1k board feet)6/1/2012 — 05/29/2013
Data Sources: Thompson/Reuters, JefferiesData Source: Chicago Mercantile Exchange
Note: Lumber futures are not a heavily traded contract and thereasons for this price drop may eventually relate to reasonsendemic to the industry in addition to macroeconomic reasoning.