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Falling prices push existing-home sales up 6.5%
WASHINGTON (MarketWatch) -- Bargain hunters snapped up more foreclosed homes in December, lured by the biggest price decline seen in more than 70 years, the National Association of Realtors reported Monday.
Oops. I had the stock market in my head when I wrote the headline. I momentarily forgot that the housing market and the stock market are not the same thing.
Speculators borrow money to buy housing. Housing may generate rental income. Speculators pay capital gains tax if the price of housing goes up.
Speculators borrow money to buy stocks. Stocks may generate dividend income. Speculators pay capital gains tax if the price of stocks goes up.
The distinction is subtle. I'll grant you that.
As a side note, I was probably just reminded of the Great Depression. Falling stock prices pushed sales volume up as investors began to panic. This we know with certainty. We also know with certainty that the bargain hunters were lured in.
How can we know for sure?
1. There must be a buyer for every seller.
2. There was a plethora of sellers.
3. Therefore, there must have been a plethora of buyers.
Thursday: Q1 GDP, Unemployment Claims, Pending Home Sales
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[image: Mortgage Rates] Note: Mortgage rates are from MortgageNewsDaily.com
and are for top tier scenarios.
Thursday:
• At 8:30 AM ET, *Gross Domestic Prod...
4 hours ago
7 comments:
Stag,
I hate to say it, but this time it really is different.
3. Therefore, there must have been a plethora of buyers.
Yep. Lots of bottom callers got wiped out during the GD.
Today however, I don't think we have a plethora of buyers for many assets, rather we have the fed. That's bad news for main street - banks get bailed out but debtors are left with un-payable debts. I imagine rich people will be able to get loans soon. I doubt the rich want loans though.
No way can all this debt in our financial system ever be repaid (gov't, consumer or corp). Something drastic needs to happen - inflation, deflation/defaults, devaluation, etc.
All the evidence I see indicates that our economic system is worsening. And the rate of deterioration is accelerating. It's so bad, you can't even safely sit on the sidelines.
Buffett says it economic "Pearl Harbor." Maybe it's "Hiroshima."
mab,
All the evidence I see indicates that our economic system is worsening. And the rate of deterioration is accelerating. It's so bad, you can't even safely sit on the sidelines.
Haven't you heard? There's no sitting on the sidelines any longer. The government just installed a Victorian Treadmill.
http://www.learningcurve.gov.uk/victorianbritain/lawless/source7.htm
http://www.associatedcontent.com/article/119224/the_victorian_treadmill_a_torture_device.html?cat=37
There WILL be a bull market and you WILL climb the wall of worry. No more slipping down that slope of hope.
There WILL be a bull market and you WILL climb the wall of worry. No more slipping down that slope of hope.
Climb? Slip? The economy has fallen and can't get up. We've seen a serious pile of fictitious capital get vaporized. Absent the fed, we would have had a world wide debt implosion.
We've earned the worst possible outcome so the reflation (if there is one) will probably be in commodities. Of course we could also see a simultaneous reflation in the unemployment rate.
Get this:
I heard an "expert" on Bloomberg Radio claim that we were nearing the bottom of the cycle. His reasoning was that unemployment is a lagging indicator and we are seeing a lot of lay offs. As I heard this, my forehead immediately started bouncing off the steering wheel (thud, thud, thud).
I don't know how anyone can view this mess as a normal part of a business cycle.
We do have a bull market though. But you need access to the TARP in order to participate. Just ask John Thain.
mab,
I heard an "expert" on Bloomberg Radio claim that we were nearing the bottom of the cycle. His reasoning was that unemployment is a lagging indicator and we are seeing a lot of lay offs. As I heard this, my forehead immediately started bouncing off the steering wheel (thud, thud, thud).
Michigan must be kickin' butt and takin' names then. Just look at their lagging unemployment indicator.
http://research.stlouisfed.org/fred2/series/MIUR
You can clearly see that Michigan's unemployment has been lagging higher since 2000.
Using the "expert" advice, the year 2000 must have been a great time to invest in the automobile industry. It's probably too late to make serious money investing now though. The lowest fruit on the tree has no doubt already rotted, fallen off, and was then trampled to a pulp by unemployed work boots.
I wish I had been aware of the rising unemployment theory of investing when Katrina hit. I probably would have opened a new restaurant during the storm!
Finding havens for the homeless
http://www.neworleanscitybusiness.com/viewStory.cfm?recID=32496
Perhaps the most lasting scar from the storm is the number of buildings that remain unoccupied more than three years later. The U.S. Department of Housing and Urban Development pegs the figure at more than 34 percent of all homes in New Orleans. Detroit, which long held the No. 1 spot for abandoned homes, is a distant second at 18 percent.
mab,
I don't know how anyone can view this mess as a normal part of a business cycle.
It's totally normal. You can count on a second half of year recovery. We'll be getting two years ago, last year, this year, and for who knows how many years into the future.
One reason we can count on it two years ago is because we're not going to use hindsight. In its place we are going to use encouraging employment figures.
June 5, 2007
GAM: US economy set for recovery later in year
http://www.citywire.co.uk/adviser/-/news/collective-investments/content.aspx?ID=283719
Encouraging employment figures signal that the US economy is set for recovery in the second half of the year, according to GAM.
Of course, what we have now is discouraging employment numbers, so that makes it even better!
We can also count on a 2nd half of year recovery last year too. Once again we are going to ignore hindsight and stick with the experts. If you can't trust the Fed, who can you trust?
May 20, 2008
Fed's Kohn says economy to start slow recovery in second half UPDATE
http://www.forbes.com/feeds/afx/2008/05/20/afx5029104.html
It was therefore unsurprising that Kohn should conclude his discussion of the economy with the cautionary note that 'we can have even less confidence than usual in our economic forecasts'.
We can also count on a 2nd half of year recovery last year too.
I hate to be a downer cow, but I think a 3rd half recovery is more likely than a 2nd half recovery at this point.
Nothing is certain, but I thoroughly expect improvement in the 5th quarter (1st half of the 3rd half for those keeping score with the metric system).
Of course if we were to properly re-value everything in the future and then optimistically discount the future to the present, prosperity could realistically arrive in 2008. You know what that means - Cramer is right, we're going to have a housing shortage! Dow 20,000 here we come! Woohoo!
Forget the power of compounding. I'm talkin re-discounted net present gross(ly) exaggerated future values. Now that is prosperity.
mab,
It dawns on me that my 2nd half recovery theory was completely bogus. That's exactly what THEY would want me to believe.
I'm also having a hard time embracing your 5th quarter recovery theory. That would seemingly imply overtime. Based on the unemployment rate, undertime seems much more likely.
On the other hand, I cannot completely discount your theory. Part of me suspects that a tie breaker is certainly possible. Everything else is breaking.
I've been watching the game for four years so far and I'm starting to think the scoreboard is broken. Come to think of it, why is there no ball? Why are both sides playing defense? Why did I pay good money for prime sideline seats? Just what kind of game is this?!
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