Stock Market and Home Builders Stock

R

rickhunter_IHB

New member
<p>Can you guys and gals share your thoughts on why the DOW is so happy right now?</p>

<p>It's kinda like...I'm a homebuilder, I lost $500mil and my stock goes up???</p>

<p>Just an example of the crazy world we live in. My Bond Trading friends are saying the worst is over???</p>

<p>I guess what I'm trying to ask is...Can home prices still go down 40% when the stock market goes up and the homebuilder stocks do stabilize???</p>
 
<p><em>"My Bond Trading friends are saying the worst is over"</em></p>

<p>Seriously? Can you say where they work? Please don't say PIMCO?</p>
 
It's easy....bad news equals good news and worse news equals even better.





I actually heard a CNBC analyst say last night that alot of the traders are hoping that the housing stocks have already hit their lows. I am hoping to hit the lottery this weekend too so who knows.
 
state street? pac life?





i like to look at the VIX as a rough gauge of fwd-looking risk.





http://finance.yahoo.com/charts#chart3:symbol=^vix





it implies that while expectations of risk have come down in the past few wks, esp after the rate cut, it's still nowhere near the levels earlier this year. your buddies must be very optimistic if they think the worst is over because that's certainly not overall mkt sentiment.





IR -- what were some of the other indices you said you tracked for the same purpose?
 
<p>I use the VIX too but I like to look at the volume of the options. Lots of $20 and $22.50 October strike prices of the calls were traded today. Not so much on the puts. So people are betting for some fear in the next 14 days. </p>

<p>The builders should have some more bottoms before it is all over. The guys on Fast Money had on I can't remember her name but she has won the technical trader of the year for four years and she charted CTX. She said it was due for a bull run maybe even up to $40. Once it got that high it would provide a good selling opportunity. She said it could go down to $10. Go check out the charts on the builders in the last bust and see the false bottoms.</p>

<p>Doug Kass said on Kudlow yesterday that for every recession for the month after it started the market went on a bull run. I need to double check but he is one bear who isn't too nutty.</p>
 
<em>"IR -- what were some of the other indices you said you tracked for the same purpose?"</em>





I watch the $TICK, $TRIN, and the put/call ratio for an intraday read on the market. I really try not to have a bias on overall direction as it influences my judgment when day trading. That being said, I could see the market moving higher for a while.





I think the market is moving higher on the basis of the rate cut. Capital is flowing into equities because there are few other places for it to go. Personally, I think this trend will continue for a while until we get some unexpected bad news. The expected bad news does not phase the market. I think the continuing slowdown in the economy will start to show as the third quarter earnings reports start to come in. Historically, November and December are good months for the market, so the third quarter numbers are not too bad, the rally may continue into next year.
 
The housing stock indexes are off 50% from their highs, that's pretty much a bear market and closer to the end of the decline than the beginning. Also fewer people are investing in real estate so more money is going to equities. The stock market decline is likely to be over since we now have a name to the decline. Like the 1997 Asian crisis, the 1998 LTCM crisis, now we have the 2007 subprime crisis.
 
<p>IR and fumbling - so i understand why money is flowing into equities....but the question is, will the home prices really go down 40% from their highs? given what's happening?</p>

<p>I want to buy a nice decent home in late 2009 and would hope that all this waiting will give me one for 450K?</p>

<p>ACPME - very very close..... .....but no more guessing</p>

<p> </p>
 
<em>"but the question is, will the home prices really go down 40% from their highs? given what's happening?"</em>





The flow of capital will not be into real estate. Capital chases growth and appreciation. That does not describe real estate.





If wage inflation gets out of control, prices may not drop 40%. That doesn't seem likely to me, but then again, I didn't think the FED would lower rates either.
 
<p>Interesting read from California Housing Forecast....</p>

<a href="http://www.californiahousingforecast.com/in-the-news/roubini-stock-market-a-suckers-rally.html">Roubini: Stock market a "sucker's rally"</a>

Posted on Wednesday, October 3, 2007 at 07:53AM by <a title="Registered Commenter" href="http://www.californiahousingforecast.com/display/ShowAuthorProfile?registeredAuthorId=115168&rootReturnUrl=http%3A%2F%2Fwww.californiahousingforecast.com%2Fin-the-news%2Froubini-stock-market-a-suckers-rally.html"><img class="inline-icon" title="Registered Commenter" alt="Registered Commenter" src="http://www.californiahousingforecast.com/layout/iconSets/dark/user-registered.png" />Schahrzad Berkland </a>| <a href="http://www.californiahousingforecast.com/in-the-news/roubini-stock-market-a-suckers-rally.html#comments"><img class="inline-icon" title="Comments" alt="Comments" src="http://www.californiahousingforecast.com/layout/iconSets/dark/comment.png" />Post a Comment </a>



<p>Nouriel Roubini<a target="_blank" href="http://www.rgemonitor.com/blog/roubini/218147"> reminds</a> us this stock market rise is a "sucker's rally". In the CNBC interview, he says no amount of Fed cuts can prevent a recession, due to the glut of supply in houses, cars, and consumer durables. Housing prices will fall for at least 3 years, up to 50% in some areas of the country per Dr. Shiller. He reminds us, correctly, that <strong>employment is a lagging indicator</strong>.</p>



<p>This morning <a href="http://www.cnbc.com/id/15840232?video=540554396&play=1">I was on CNBC for an interview on the stock market, jobs and the economy</a>. See my comments on the <a href="http://www.cnbc.com/id/15840232?video=540554396&play=1">stock market's "suckers rally"</a>. </p>

<p><strong>Analysts and investors ask why is the stock market is going up in spite of continued flow of lousy macro news</strong>. <a href="http://www.cnbc.com/id/15840232?video=540554396&play=1">In my view the answer is clear</a>: <strong>the market is expecting that the Fed will rescue the economy from a recession: the worse the macro news the stronger the revisions for further Fed rate cut</strong> that would - in the wishful thinking of the investors - rescue the economy from a recession. <strong>But the same pattern of delusion occurred in 2001:</strong> the economy entered in a recession in March 2001 and the S&P 500 rallied by a whopping 18% in April and May because the market and investors expected that the aggressive Fed easing would prevent a 2001 recession (the famed and deluded hope of a second half of 2001 growth rebound that never occurred). It was only in June when it was obvious that the economy was sinking in spite of the Fed attempt to bail it out that the stock market started to fall again; so it was then and it is now again a typical sucker's rally fed by expectations of a Fed bailout of the economy at a time when the credit woes and credit crunch in markets are actually as bad now than in August in spite of a marginal relief of the liquidity crunch. </p>

<p><a href="http://www.rgemonitor.com/blog/roubini/213894/">As for employment we will see the September figures on Friday</a>; i am much more pessimistic than consensus on this. It was not only the fact that <strong>August employment fell; also June and July were revised downward by 80K,</strong> the unemployment rate did not go up only because 500K discouraged workers left the labor force and did not show up as unemployed; and the household - as opposed to the establishment survey - showed a 300K job loss in August alone and much more since early 2007. </p>

<p>Also the BLS employment figure are totally distorted by a biased<strong> birth/death model</strong> for new jobs in new firms. <strong>The BLS statisticians created over 1 million jobs - that may not exist - for the last 12 months based on that flawed model.</strong> About 75% of job creation in the last 12 months is based on this statistical model rather than actual establishment survey data. So expect 400k less jobs shown in the year to March when the BLS does on Friday its annual benchmark revision. <strong>The last time the BED survey was made the original 500K jobs created by the private sector in Q3 turned out to be only 20K</strong>. So expect the annual revision to significantly reduce downwards the figures for job creation through Q1 of 2007.</p>

<p>In the meanwhile the housing recession is getting much worse, capex spending is now sinking and the corporate sector has a large financing gap (less corporate savings than investment based on the new flow of funds data), consumer confidence is down and the consumer is buffetted by falling home values, falling home equity withdrawal, a mortgage credit crunch, high oil and gasoline prices and now weaker income generation as the labor market is slackening. No wonder auto sales are faltering again after the artificially boost - via massive fire sale discounts - in August, <a href="http://www.reuters.com/article/economicNews/idUSNAT00323820071002">retail sales are sharply weakening in September</a> and falling year over year in real terms.....</p>

<p> </p>

<p><strong>Also, from Yahoo Finance this Morning...</strong></p>

<p>"Stock prices are higher in early trading today as some investors read a larger-than-expected increase in unemployment claims as support for another interest rate cut. " Cough cough....band-aid!</p>
 
It may be a suckers rally. It may be a blow off top. It may be the real thing. But, either way, I wouldn't short it. The freight train may be slowing down, but that doesn't mean it is smart to stand in front of it.
 
<p>no. I dont see wage inflation either.</p>

<p>i think the money flowing into equities is a better argument for home prices inching down. since it was investors in real estate that bid up the prices. less money in real estate means less bids and lower prices.</p>

<p>i know a lot of people talk about foreclosures and subprime forcing prices down, but those are in special cases. for the general public that can hold on to the home, a better argument for them to bring down prices would be the less bids, less money argument. and they will only see this for themselves when they put the forsale sign up.</p>
 
<p>awgee- haha! Just had a feeling I guess...it has had a nice run down since the middle of Sept and I was personally thinking of jumping in today as well...</p>

<p>IR, Graph- any thoughts??? </p>
 
<p>Rick- </p>

<p>It is an ETF (exchange traded fund). The investment seeks to track the price and yield performance, before fees and expenses, which correspond to the twice the inverse of the daily performance of the Dow Jones U.S. Real Estate Index. The fund will invest at least 80% of assets in securities that, in combination, have economic characteristics twice the inverse of the daily return of the index. It will employ leveraged investment techniques to achieve the objective. </p>
 
You must log in or register to reply here.
Back
Top