Home prices tank and Stay away from Mexican airports...both literally and figuratively
Man the numbers keep getting uglier. The Case-Shiller index numbers for December just came out and once again the values of homes in the U.S. experienced a record drop. Home prices in the 20-city survey fell 18.5% year-over-year. This was worse than the consensus estimate and worse than the 18.2% drop that was reported in November. Month-over month, home prices slid 2.5% in December compared with a 2.3% drop month-over-month in November.
Housing is getting worse, not better and it is taking its toll on consumer confidence. Scared consumers will not spend and their lack of spending creates a downward spiral that makes the economy get even worse. On a personal level, I can confirm the consumer confidence readings. My wife and I have been getting price quotes to finish our basement from contractors. We just want a simple room for the kids to play in and for me to host an occasional poker game in. Last night we sat down and talked about it and decided to wait on pulling the trigger. The work won't be tremendously expensive, but both of the industries that we work in, autos and real estate, are on the ropes right now. We are afraid that one of us will lose our job and that we will need all the cushion that we can get. The economy is in a downward spiral right now and it won't improve until housing stabilizes.
Ahhh Spring Break. That fun time in college when everyone gets a little crazier than usual. My liver still trembles in fear when I recall the fond memories of my trips to Panama City, Florida for spring break back in the day. Traditionally, areas in Mexico such as Cancun have gotten their fair share of Spring Break traffic. That might be changing this year if it does, it could make things even worse for the operators of Mexican airports.
I sold my stakes in Mexican airports OMAB and PAC well over a year ago when I saw their reported traffic numbers start to slip. This was even before the stuff really hit the fan with the economy. The trend in their reported traffic disturbed me enough that I even shorted them both for a little while in real life, making a decent chunk of change.
I love the toll booth business model that airport operators have, but with consumer and business spending slowing things are going to be tough for them in the near term. Further compounding their problems is the negative publicity that Mexico has been getting lately. Here's a sampling:
The Perilous State of Mexico
With drug-fueled violence and corruption escalating sharply, many fear drug cartels have grown too powerful for Mexico to control. Why things are getting worse, and what it means for the United States.
Drug violence spins Mexico toward 'civil war'
Drug-related conflicts bring waves of violence, death that some liken to a civil war
U.S. helps fuel violence with market for illegal drugs, weapons supply for drug gangs
"The drug gangs are better equipped than the army," expert says
Things have gotten so bad there that major universities, including the University of Arizona and Arizona State University, are now urging their students to stay away from the country during Spring Break (see article: Universities: Spring breaks south of border to be avoided). This new found fear of Spring Break is particularly bad news for Grupo Aeroportuario Del Sureste SA de CV (ASR), operator of the airport located in Cancun. I personally believe that the stocks of Mexican Airports have even further to fall.