Wednesday, December 06, 2006

Housing Still a Big Deal

On Wednesday, the stock market took a little breather and we expect that it will be short lived.  The market’s ability to rally one more time will come into play over the next few days of trading.  We see that the Friday jobs’ report has expectations of reporting 110K new jobs for November.  That is a safe estimate for the stock and bond market.  

Try to imagine what kind of number that really is—it’s low.  With the supposed strength the Fed sees in the economy that number should be 300K not a measly 110K.  The prospects for the biggest job growth engine in the economy are going a little soft.  You know what we are talking about, housing.  

Housing is now being touted as being in a bottoming phase.  The wheels are about to Fall off the housing train but we still hear about how that market is bottoming.  There is plenty of inventory and very few buyers.  The big home builders are running away from options to buy land but at the same time they tell us that things are starting to look up.  Why would they be dropping these land options if things were so good?  

Our point has been for a year that the housing market would eventually pull the economy down with it.  So many jobs have been created in this space—realtors, construction, mortgage bankers, appliance, carpet and furniture manufacturers, lawn and garden supplies, you name it.  All of these will suffer from the slowdown in housing.  

So far we are just starting to hear about the difficulties of people trying to sell their houses and that they’re “not going to sell their houses at such low prices”.  Well, then we say, they won’t sell their houses.  The builders are willing to cut some deals but not these home owners.  

What about the speculators who now have two or three mortgages.  They are going to wait it out and hope that a buyer comes along or that prices go up again.  We mentioned the Subprime environment this week and the problems it is having.  These delinquent Subprime homeowners don’t really have a choice in the matter.  The housing market will not bail them out.  The houses they are living in will become more excess housing inventory.  This will be a vicious cycle.  

Ok, Ok, enough ranting.  The market tried to fall in the morning but that selling gave way to buyers later in the day.  The lows of the early morning were it.  Yes, there was some timid selling in the middle of the afternoon but it didn’t really move the market down very much.  

We really do think the time is very near.  Please consider what you own and find some good exit point.  We know the end of the year is close but the tax man can not be minded right now.  You have your investments to think of.  If they are in a tax deferred plan, then the tax man doesn’t even care.

In tomorrow’s post we will try to determine the course of the market over the next week or two.  The Friday jobs’ report and next week’s Fed meeting are starting to get close.

Dow Industrials:  12,309.25  -22.35
VIX: 11.33
QQQQ:  44.26
RYVNX:   16.93
RYAIX:  21.46
RYCWX:  36.18
TLT:  90.97
BEGBX:  14.37

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