Thread: Market Talk / September 3rd - 9th

Saturday, September 02, 2006

Markets Look Forward to a "Soft Landing" in the Economy
Stock prices rallied sharply higher Friday after the August Employment Report showed the rate of new job creation continues to be poor. The Labor Dept reported that 128,000 new jobs were created. However, they only received data which indicated that 7,000 new jobs were created and assumed that there were 121,000 missing jobs which did not get counted -- rather a large error bar even for the government.

The real unemployment rate declined from 8.5% to 8.4% from July to August, while the headline number reported by the media declined from 4.8% to 4.7%. The former figures are comparable to historical rates of unemployment before the government decided to exclude several million unemployed for various flimsy and quite transparent reasons under the Clinton Administration. The 8.4% rate reflects the fact that the economy has been under pressure from off-shoring of jobs from the US to developing Asian countries. Those lost have left the US forever, but the government fools most of the people most of the time by simply excluding some willing workers from the reported figure -- and the lap-dog journalists are only too happy to "play along" with the bureaucrats in this little game.

The stock market is also willing to play along with the bond market in thinking that the currently weak indicators pointing toward a recession in the near future are wrong this time. There is a risk that the inverted yield curve will be just as accurate in forecasting a recession for 2007 as it has been in historical terms. Another chart which has been bandied about on the Internet shows that moves in the stock market have a 79% historical correlation to moves in housing -- and housing has been dropping off a cliff. If this indicator is correct, the stock market is about to crash. It has been reported that housing provides one-third of all jobs in the country and a severe depression in housing is certainly going to put a lot of pressure on the US economy, which is driven by the consumer.

Guess the Dow for Friday,

September 15th!

Put in your guess for the DJIA closing value:

http://www.lowrisk.com/sentiment.htm

Time for the market to PAUSE and take a breath.

(Growl)

Originally Posted by robo

Saturday, September 02, 2006

Another chart which has been bandied about on the Internet shows that moves in the stock market have a 79% historical correlation to moves in housing -- and housing has been dropping off a cliff. If this indicator is correct, the stock market is about to crash. It has been reported that housing provides one-third of all jobs in the country and a severe depression in housing is certainly going to put a lot of pressure on the US economy, which is driven by the consumer.

robo...
Last night I read a story about the housing bubble that has started to burst. I found a chart that scares the h$ll out of me. I am a pretty bullish thinking person, but when you read what several economics professors like Shiller and Roubini have to say, I have to wonder about the chances of a coming recession.

http://www.rgemonitor.com/blog/roubini/142759/

The chart that scared me...
http://photos1.blogger.com/blogger/6...00/shiller.gif

To be a bull today you have to believe that the inverted yield curve, which has yet to be wrong about a future recession, is giving us a false positive. Remember interest rates are still at very low levels and energy prices are starting to soften. Consumer spending is alive and well and incomes are rising.

I think the big money comes in Tuesday will both barrels blazing hitting all the targets. The Dow will close out the week past 11,800.00. The upshot is that the points where defensive or aggressive investment positions are most effective are also typically the points where one will, at least briefly, look like an idiot for taking them. Snort.

Originally Posted by genod

robo...
Last night I read a story about the housing bubble that has started to burst. I found a chart that scares the h$ll out of me. I am a pretty bullish thinking person, but when you read what several economics professors like Shiller and Roubini have to say, I have to wonder about the chances of a coming recession.

Genod,
You should embrace the housing bubble (if there is any) as godsend. If it does happen, this will be an opportunity for you to buy low and either sell high or it will allow you to have a better cash on cash return on your investment if you decide to rent them. Playing with real estate investment is also like playing with stocks. The idea is to be able to buy them cheap and wait for them to appreciate. There are alot of investors out there waiting for the housing bubble to take place. Unfortunately, the majority of uninformed will get hurt but those who are knowledgeable will profit big.
I really do hope that the housing bubble will take place, however, if it does, the effect on the economy will not be sudden. Unlike the stocks where fluctuation goes on a daily basis, we still have time to get ready for the bubble.
This is the time to start repairing your credit report, stockpiling cash and getting to know your real estate market within your area. If we have another big bust like in 2001, 1987 etc... I will have no qualms in pulling out all of my retirement funds from ROTH and TSP to fund my real estate investment (please don't follow me unless you know what you are doing with real estate investment).
Please be careful with your investment...
Pyriel

Originally Posted by genod

robo...
Last night I read a story about the housing bubble that has started to burst. I found a chart that scares the h$ll out of me. I am a pretty bullish thinking person, but when you read what several economics professors like Shiller and Roubini have to say, I have to wonder about the chances of a coming recession.

http://www.rgemonitor.com/blog/roubini/142759/

The chart that scared me...

Genod,

Soft or hard landing? Looks like soft, but you are correct we have to keep a eye on it. The question is this; What does the big money think? Would you invest a Billion dollars in the stock market if you thought a recession was coming... Many investors think we are headed for a soft landing and we got this nice rally, the fed is done and the Bull is back... We shall see....

Some are now betting the fed will cut rates and others think the fed has gone to far. Lets watch big money the next couple of months and stay nibble... I'm keeping some powder dry for now....

I'm short-term neutral and Long-Term Bullish. Has the Fed gone to far?

I don't think so, but as I mentioned above it's not what I think, it's what big money thinks? They are the market movers... Will we test the lows again? Should we buy the next dip? Buy at 1290 and we could head to 1250. Buying the dips works great when you are trending up, but not so good when you are headed down. Are we still headed up?

I know Birchtree will be buying, and soon I will too... In my opinion we will head down one more time... The question is how low? However, NO ONE, NO ONE, NO ONE KNOWS FOR SURE!!! Up, down and sideways! I think we get all the next few months... All just noise if your a long-term investor.

I take my short-term recommendations from Sentiment-Trader. That's why I'm netural to Bearish for now.

In my opinion the Big Boys that are Bulls will want to clean out the Bears one more time before letting it fall. After they buy cheaper we should be off to the races... I think 1360 to 1375 is all we get this year... If things line up it could be sweet in 2007.... I'm staying patience and not chasing for now..

I have been Jumping in and out of the I fund using 20% for short-term plays... I was playing the F Fund, but now I'm sticking with G Fund...

Currently 20% in I Fund until Tuesday..

Good Trading/Investing

http://www.safehaven.com/article-5817.htm

http://www.safehaven.com/article-5815.htm

http://www.safehaven.com/article-5813.htm

I've watched and listened to all the talk re housing bubble and as a landlord myself, I certainly have a vested interest. However, I have a little different spin. Let me explain...

My 2 rental properties are homes that I and my family lived in prior to renting them out. We bought the houses with the intention of turning them into rentals. We bought nice homes in good neighborhoods with solid school systems. Both of my tenants are military.

I have a strong belief that if you have quality properties, you can move them or rent them. In military communities, the demand will still be there. I'm no so naive to expect the 15%/yr appreciation I've seen over the last 4 years, but I'm confident I'll still be able to find renters. Currently, my mortgages are break-even with my rents, so I'm willing to wait. However, I saw plenty of turnover this summer in our neighborhoods where there really wasn't much of a slowdown. It was there, but the demand for quality properties in quality neighborhoods with good schools will always exist. Just my 2 cents...

Originally Posted by Ghageman

I've watched and listened to all the talk re housing bubble and as a landlord myself, I certainly have a vested interest. However, I have a little different spin. Let me explain...

My 2 rental properties are homes that I and my family lived in prior to renting them out. We bought the houses with the intention of turning them into rentals. We bought nice homes in good neighborhoods with solid school systems. Both of my tenants are military.

I have a strong belief that if you have quality properties, you can move them or rent them. In military communities, the demand will still be there. I'm no so naive to expect the 15%/yr appreciation I've seen over the last 4 years, but I'm confident I'll still be able to find renters. Currently, my mortgages are break-even with my rents, so I'm willing to wait. However, I saw plenty of turnover this summer in our neighborhoods where there really wasn't much of a slowdown. It was there, but the demand for quality properties in quality neighborhoods with good schools will always exist. Just my 2 cents...

Some comments from a TA that supports your view....

" There is no generalized housing bubble to burst. Yes, there are pockets of bubble-like real estate markets around the US, but there is no all-encompassing bubble in real estate in the US. Real estate is a local market and you can have some areas which are vastly inflated in price while other areas are tremendously undervalued in comparison. You can't think of real estate as a "national" market -- it's just a condition contrary to the facts. Thus, a bust in housing, which is only being seen in very local markets cannot bring on a national recession".

I hope he is right!

Just buy a place in a growing area and you should be fine. Where I'm at, prices rose 2% in the past year instead of 10% the previous year. That's a slowdown but is far from being a deflating housing bubble. Some places will be hit very hard in the next couple years, but I think most areas should manage just fine. It's tough for housing prices to fall much in cities where people want to live.

Originally Posted by Birchtree

...I think the big money comes in Tuesday will both barrels blazing hitting all the targets. The Dow will close out the week past 11,800.00.

Do you really? I mean deep down really really?

The contrarian in me was actually considering buying of Friday, but this did not feel like December 31. On December 31, all the talking heads were talking about the new year drop the previous year. Most every trader was selling during the end of December. I bought because stocks dipped as a result. That really didn't happen last week. Beginning of January was a big up day, I'd be really surprised to see it on Tuesday.