"Lowered Expectations" - The New "Green Shoots?"

Stocks are moving sideways on lackluster action. While we are not seeing the active selling we saw yesterday, buyers are clearly hesitant to step in.

On the heels of yesterday's World Bank taking down global growth rates, several industry leaders have commented on what could now be called the "lowered expectations" game:

1) ArcelorMittal CEO Lakshmi Mittal, while acknowledging some "green shoots," emphasized that "we won't see a return to very strong levels of demand until 2011" or beyond.

2) last night the Air Transport Association of America, reported that passenger revenue was down 26 percent in Maycompared to the same period in 2008, while the number of passengers was down 9.5 percent. Part of this was due to the impact of the swine flu epidemic, but cargo traffic also declined 22 percent, the ninth consecutive month of declines.

Airline stocks are down again today.


Are home prices still too high, or are appraisers being too conservative? Buried in the National Association of Realtors' monthly report on existing home sales is this nugget: "...the increase in sales is less than expected because poor appraisals are stalling transactions. Pending home sales indicated much stronger activity, but some contracts are falling through from faulty valuations that keep buyers from getting a loan."

In plain English: we're annoyed because appraisers appear to be appraising homes at values that are slightly below the selling price, and mortgage lenders are balking. Who's wrong: the buyer/seller or the appraiser?

Probably both. Appraisers are human, and having been widely burned--and criticized--for appraising homes too high during the housing boom, they are now probably trying to be more conservative.



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