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Comfort Zone Investing: Small signs of a recovery

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No one thinks good times are here again. Unemployment is too high and will most likely get worse before everyone agrees that the recession is over. (If you're one of the many jobless who have been looking for months for a job, this is a depression, not a recession.)

No, times aren't good yet. But there are signs, both anecdotal and data driven, that show the worst is most likely over. Many of these signs aren't very visible. They don't make headlines, yet they do give credence to the idea that consumers are starting to spend, that the economy has stopped its downward spiral.

First up is RV (recreational vehicle) sales. Not given a lot of news print, this particular item is followed by many economists as a good indicator of what consumers are doing. That's because it's the largest discretionary item they can buy. According to USA Today: RV wholesale shipments jumped 16% in August from July to a seasonally adjusted annual rate of 209,800, While that's about half the industry's torrid sales pace in 2006, it's a 136% surge from January. The trade group predicts 146,200 shipments in 2009 and a 27% increase in 2010.

RVs were one of the first groups to show weakness, well before the general economy started downhill. RV sales began dipping in early 2007, many months before overall retail sales declined and the recession's beginnings in December of that year. In recoveries, camper sales often heat up early, as buyers who put off purchases grow optimistic enough to open their wallets. Industry officials attribute the rebound to improved credit for dealers and consumers, low dealer inventories and stable gas prices. The big driver is rising buyer sentiment, which could forecast more robust retail sales than predicted. Airstream has boosted production 30% the past six weeks. Keystone RV is hiring 200 workers to fill added demand.

The next indicator: home prices. For the second straight month, they've gone higher. As reported in the Wall Street Journal: home prices increased a seasonally adjusted 1.2% in July from the prior month, according to the S&P Case-Shiller home-price indexes. It was the second month of seasonally-adjusted gains. Prices are still 13.3% lower from a year earlier, but recent monthly gains show that the pace of decline has slowed. The government tax credit for first-time homebuyers helped spur demand but with its expiration date looming on the horizon, many economists are concerned about how strong the housing market's recovery will be once it's gone.

So we're not out of the woods on housing just yet. But the fact that home prices have stopped going down is the first step toward a recovery. How long the price trends will be higher is unknown. The first time buyer credit of $8,000 goes away on November 30 so any homes that qualify will need to be in escrow by now if they have a chance of closing by November 30. We'll know a lot more about housing prices at the beginning of November. One possible boost: the tax credit may be extended, even raised, if it's shown that the benefits are much greater than the tax credit. Since housing is crucial to a general economic recovery, this sector will stay in the headlines. The more housing demand, the more jobs will be filled as new homes require more carpenters, roofers, plumbers, etc.

There are two more indicators that are more anecdotal than data driven, until the data are revealed. The first one is shopping center parking lots. As I travel I always look at parking lots of large retail shopping malls. Lately they've become more crowded, finding a space is more difficult. That would re-enforce the recent survey by the trade group International Council of Shopping Centers. It reported that retailers expect sales to rise by 1.5% over the holidays and into January, the best in three years. The group expects same-store sales in November and December to be up 1%. Last year, they were down 5.8% and in January declined by 5.4%, the worst performance on record.

Part of their optimism comes from average weekly earnings going up, after a downward trend for two years. Furthermore, jobless claims are slowing after peaking in March of this year when they reached a 26-year high.The last indicator: bidding on eBay. It seems to be getting stronger. Items that used to have only one or two bids are now getting five or six, and prices are definitely improving for sellers. This is from a small sample. I'd be curious if eBay would release some data on sales, but from observation, it seems that consumers are feeling better and willing to bid a little higher for even the smallest of items. Again, this is a purely personal and observational piece of information, but like a lot of other economic indicators, this one may suggest a trend that hasn't yet been picked up in the headlines and portends better days ahead.

Ted Allrich is the founder of The Online Investor, founder of Allrich Investment Management, LLC, as well as the author of the book Comfort Zone Investing: Build Wealth and Sleep Well at Night. In this weekly column, he offers advice to investors who are just getting started.

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Last updated: November 26, 2009: 10:04 AM

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