So where are we in the cycle? The latest hotel and airline numbers upto the end of June have reflected a fairly robust turnup from last years lows. The most recent hotel occupancy figures reinforce this view. After tumbling for eight straight quarters hotel occupancy rates finally bottomed out at the end of Q4 2009. Since then they've been rising at a fairly brisk pace and are now 6% above the lows recorded last year. However,they are still 5% below the 1997-2007 decade median for before the crisis erupted. So there you have it. After a trillion dollars of stimulus we are a little more than halfway back to where we were.
As we enter the summer season hotel rooms in the major global centers are scarce and prices are non-discountable. Much to every hoteliers relief the Americans are back en masse and spending . Chinese and Indian travel flows are also up strongly . No sign here of a double dip although we'll have to wait until after the summer tourism and leisure boost to see how corporate spending is holding up.
This probably indicates that equities, at current valuations, are discounting in a continuation and possible acceleration of the Q1 and Q2 uptrend. With government expenditures set to be cutback, in some cases sharply, the posited continuation of bullish consumer sentiment maybe overly optimistic. I'm still happy to be long quality corporate bonds until this jobless recovery morphs into something sustainable. Compeling value still doesn't seem to exist in the equity universe. At current rates of job creation it's going to take another 5 or so years for employment levels to get back to where they were. The same for the banks holdings of real estate. Let's hope a double dip doesn't come along ( or a separate downturn is say 2014) to compound matters.