September 26, 2007
Ok so the UAW walked out and then walked in, Hillary proposed nationalized medicine and France prepares for war with Iran. Mean while the US stock market tries to recover from the triple witch, banks and brokers begin to come clean on sub prime. Critics continue to say there is plenty of blame to go around and it appears the rating agencies are the focal point of the blame game at the moment.
The dreaded “R” word continues to tossed around by the talking heads but forgive for remaining skeptical but most of the data points indicating recession come from the steamy hot days of summer and while Wall Street always forgets that people put off large expenditures during the summer months ,wise investors would be careful not to.
The Real Estate market continues to search for a bottom and given the levels of inventory the search may go on for a couple more years. The big question on everyone’s mind is will a recession in housing spill over to a recession in the economy as a whole? I for one am still not buying it and the answer is simple real-estate since 2000 because of easy money had become more of an investment than a place to live ,excessive liquidity and strong demographics propelled excessive volumes of transaction ,pushing home ownership in the USA to records .In my mind there is no better indication of the power of the middle class than home ownership and there is still no simpler way to move from lower to upper middle class than to hold a steady job ,and be home owners though three generations. Yes speculators will be hit hard and even more normal sales volumes will seem very slow, fringe transactions are no longer viable, some lenders will be punished for poor judgment but at the end of the day there doesn’t seem to be the rampant reckless lending that has been so often predicted.
The market trades on future expectations, and since the “R” word is already out of the box ,it looks like the inverse of buy on the rumor sell on the news ,with bad news its sell on the rumor buy on the news. So a real economic slow down could signal the beginning of the next major BULL market.