Measuring future inventory without considering future demand is a fool’s game. Neither is predictable.
On the contrary. Not looking at trends and trajectories is foolish and one of severe denialism.
Trend 1: Pent up future inventory is building up. Easy to see with delinquency rates. Moving up quite fast. (Contributing factor unemployment, strategic walkers, some resets) Watch % upside down for future pent up inventory.
Trend 2: Unemployment is trending up (major contributing factor is credit contraction)
Trend 3: Credit is contracting and will do so for the foreseeable future (Major contributing factor defaults) According to Meredith Whitney only half way through.
Trend 4: Wages trending down making the mean a moving target in the future to the down side. This is quantifiable.
Trend 5: No new industry for job growth
Should we not look at these trends and extrapolate out? That is the wise thing to do?
They only thing keeping the whole shebang from not blowing up is accounting rules that allow banks to not count losses, which allows them to build up inventory.
The majority of the pain came in 2009, those losses have not be realized by the market yet. The record foreclosures just reported for Q3 are probably from late 2008. If you want to see what 2009 losses do to the market you wait until between Q4 2010 to Q2 of 2011.
