Friday Ramblings

Top Line: As we expected in our last post, the stock market wanted to go up a little further. Thursday was the day for that rally. Now that it has happened, there can be some trading that tries to keep the prices at this level for at least a little while. Still, the next big move is Down.

As the market closed, DELL, in the form of Michael Dell, announced that they had a pretty good quarter especially for their overseas business. The stock itself enjoyed a good up move after that news and may actually spur the broader market in the morning. Why, as in why would the broad market go up because of DELL's announcement? Well, of course, any time a stock does a little better, it is a complete global event and this good news extends to all stocks. Yes, the opposite is a little different. For Bad news, the only stock that gets dumped on is the one that announces the news, as in, it's an isolated event and company specific. Ok, this is a little useless, let's get to some better Friday topics...

The possibility of the rally finding a top is in a short countdown. We think the date will be sometime between now and the jobs' report which comes out next week. It's a simple philosophy but we need to keep our eye on the situation just in case.

One of the items that we consider most every day as we have for a long while is the housing market or the mortgage market. You probably are getting tired of all of it both reading it here and actually living it. But, when we do hear some good thinking on the subject we like to share it with you. Yes, we have a bias on the subject but if there really is a good idea/argument on the other side we would present that here, too. Yes, we would.

Anyway, the news this year is all about distracting people from any difficulties. The problem is that the analysis is weak. We think the housing market has a long way to go before the Bottom occurs. Then, even more time will be required before the prices rise much again. Why is this?

Let's finally get to this...The environment for buying a house is complicated right now because of the way it used to be. Now we have a much different situation. The real estate market used to be dominated by speculators on the buy side. Now, those speculators are on the sell side with a few losses to deal with. These speculators may have turned over their houses to the mortgage holder. The mortgage holder does not want to be a real estate investor so they are sellers, too.

Here is the item we have been holding off until now...The buyers are having a little trouble getting a loan. Banks are trying to get a better borrower by requiring more down payments and squeaky clean credit. These are two big reasons in order to understand the weakness in the housing market. If interest rates would go up much at all, the payment to buy a similar Priced house must be higher with the higher interest rate.

FSI: 96.04 (still a little lower than May 12th but speculation is hot, vix is down)