It is very difficult to live in a world where many major players bend and twist the truth in order to gain benefits and divert blame.

I for one am glad that I can come somewhere as simple as a blog to try and unravel the truth with a few like-minded people.

Thanks for the insight.

All this news on housing and retailer expectations has to make one bullish on bonds... right?

In fact COT data shows 10 Year Treasury: Commercials 4 year low exposure, Specs 4 year high. On the long end we are not extreme yet but here we also see Commercials reducing exposure (selling strength) while Specs are increasing (buying strength).

TBond Survey consensus bulls have been this bullish only a few times since 2000... both times better buy points were seen near term...

Rydex Bond Bull:Bear ratio > 3 year highs...

Crowded trade? What could the crowd be missing?

This report is complete hogwash. When the future history books talk about the collapse of housing prices and the subsequent carnage, the blame will be put on the Fed interest rate policy from 2001 to 2005.

In the late 1980's and early 1990's, loose lending practices by the banks caused the $500 billion S & L bailout. This time, GSE's are going to take the hit and unfortunately for the little people, the mortgage-backed securities will suffer. But no way will this exonerate the Fed.

stockman

Thanks for the info. FWIW, heard a Don Coxe broadcast last week where he mentioned the attractiveness of long bonds, especially some Canadian long bonds.

Education System and the consumer are to blame as well...

I hate to be doom and gloom but as someone who is living in a HYPER housing bubble zone, NYC area, and own several rental properties in other cities, I can confirm from the battle field that it is BAD!

Many of my new neighbors who moved in at the peak are concerned about refinancing asap, since their creative mortgages are about to be called from their 5 yr no principal periods. They are all honest and decent families who work hard, but over extended themselves on the type of home they can afford. Many of them have traded in their expensive cars for cheaper variety brands already. I notice the parking lot is a lot less full on my weekend Costco visits.

Home owners are trying to rent out a rooms to make up for the pop in their mortgage payment going up 50-70%.

Many have started to think about relocating to areas like Raliegh NC or areas where housing is affordable and there are comparable salaries, but they too see homes for sales without any buyers in sight.

The average american household has negative savings when you factor in their debt. I guess The Fed isnt the only factor to blame. When a family decides to take a home equity loan to fund a family vacation and buy that luxury sedan at irrestible rates, they too should take some responsibility.

The real blame goes to the U.S education system which lacks any teaching of business cycles or money management. Thats my story and I am sticking to it.

NYUgrad states, "The real blame goes to the U.S education system which lacks any teaching of business cycles or money management. Thats my story and I am sticking to it."

DITTO that

BTW, I'm in the Boston area and seeing and/or hearing about the same type of things related to housing. It truly is going to be UGLY.

ECRI WLI growth rate just in at -1.6, down from -1.4% last week.

Re: "the Fed needs to pre-empt"

Re: "I for one am glad that I can come somewhere as simple as a blog to try and unravel the truth with a few like-minded people."

While I agree in principle with the two quotes (full context above) we may want to remember:
that the typical "Fed" (the persons transcribing and publishing the reports from the minutes of meetings by some presidential appointee) are 9-5 employees who probably own one of those risky mortgages (ARMS) and is just as concerned as we are with current monatary policies.

I live in the Washington DC area and is personally acquainted with many of these "Feds". They are very concerned with the current fiscal policies of this administration, but are sworn to serve it to the best of their abilities. They receive compensation by serving, protecting and promoting what the current administration perceive to be is in the best interest of the republic - at the moment.

Any low level "Fed" (95% of all goverment employees BTW) foolish (or brave) enough to question the competance of her/his superior(the President leads the Executive Branch of the US Government)would not only commit career suicide but certainly be ostracize by their peers (this being the most painful - peer ostracization)

I commend this blog for keeping the focus on where it belongs - those irresponsible political mercenaries who appear on the talk shows, news shows, financial networks acting as mouthpieces for the current administration, its political appointees (personally, I don't consider these types "Feds"... opportunists, maybe), and their minions.

BTW...thirty eight(38)% of the U.S. electorate still think the current administration is doing a great job (fiscal policies and all). Policies will have change when that changes because zealots tend to vote.

I am going to sound a hopeful note and speculate that with all the media attention now being focused on the collapse of the housing bubble, we may already be over the worst of it.

I see no reason to disbelieve the Chicago Fed report's suggestion that we are seeing a transition to an era of higher homeownership rates. Right now supply has outstripped demand, and homebuilders are adjusting, but the cycle will correct itself fairly quickly, I believe.

I live in an area that enjoyed significant home price appreciation over the last 10 years (California). My town has grown, although existing home sales have slowed and prices have stopped rising as rapidly.

What IS happening is that local businesses are expanding and our infrastructure is being improved to accommodate the increased population: road-widening projects and new water treatment facilities, a new mini-storage facility, a new car dealership, a potential re-opening of a gold mine (the Idaho-Maryland Mine, owned by Emgold Mining Corp.) that was active in during the early part of this century, etc.

It all looks pretty healthy and positive to me, despite the hand-wringing and hyperbole in the media. They focus on what sells, which is usually the bad news.

Hi Bill,

I have no idea what the housing market looks like out East, but having very recently moved back to Vancouver, I have to say I'm surprised. Here are a few charts from the following blog:

http://van-housing.blogspot.com/

Vancouver's median income: http://tinyurl.com/nbfn3

Greater Vancouver median prices: http://tinyurl.com/nzpds

Greater Vancouver house/condo price index (2000-20006):
http://tinyurl.com/mq7tn

P/E ratio (price/rent ratio):
http://tinyurl.com/mblf6

Last, but not least, our saving rate:
http://tinyurl.com/qk2ah

I'll let the figures speak for themselves. We might not be Florida or San Diego, but we're doing our best to keep up (or down, as it may soon be). ;-)

Cheers

"Life is a comedy for those who think, and a tragedy for those who feel."

"I am going to sound a hopeful note and speculate that with all the media attention now being focused on the collapse of the housing bubble, we may already be over the worst of it."

I hope you're correct babycondor...but my study of real estate markets suggests we've got a long way to go...as in measured in years.

Well since today is another dull trading day...let me throw this out here...

What IF the Fed does a 180 degree turn here
on interest rates? Ala 1994...

Anyone have any informed opinions on where this would take the current market? (several months out - not the immediate reaction)

Also one has to admit - from a chart perspective the parallels between 2006 and 1994 and very very similar.

tradesman

Trademan,

I am not a technition but I do read another blog written by Nouriel Roubini, an economist who teaches at nyu and he thinks the damage has already been done. He has 100% conviction the next move will be a rate cut by the fed and The U.S is already in a recession with everyone in denial.

He also believes that the following recession in U.S will impact the global economy over time.
http://www.rgemonitor.com/blog/roubini

My gut tells me there will be a rate cut sooner than later. several more cuts next yr. false optimism by consumers. 18 months we see falling equity markets via weak earnings in 2007, even more blood in real estate, falling dollar.

Democrats will sweep but inherit a war in the middle east, housing chaos, & bearish equity market.

I should pack up and move to toronto :)

Re:"The U.S is already in a recession with everyone in denial."

Anyone reading "Rising Tide, The Great Missippi Flood of 1927 and How It Changed America" by John M. Barry? Lots of parallels between the negative economic impact of the flooded Mississippi River then,and the Louisiana, Mississippi, Alabama devastation by Hurricane Katrina last year. Many historians believe the flood contributed significantly to the ensuing Great Depression beginning in 1929. And everyone is in denial about the final costs in dollars and displaced lives the rebuilding of the louisiana/Mississippi area will exact. A lot of Americans aren't aware just how important Louisiana and those offshore oil wells are to the the Federal Budget. Doonsayers are predicting another depression based strictly on the Government's loss of revenue from that area!

NYUGrad

Thanks for the link... that's an interesting point... I agree sometimes the market gets it wrong and goes into a denial mode...

Move to Toronto?
Nothing happening here... its dead.

Pretty soon they will have sold off most of Corporate Canada to whoever ponies up the most cash.

Every other corporation has already been looted and converted into a dead investment scheme known as an "income trust".

Soon there will be nothing left to do in this country but pack up and move out to Alberta and drill for oil.

tradesman

Retailers?

One of my daily routines involves creating graphs of industry groups which have moved to extremes in price relative to the market... creating ratios, then using a moving average and plotting an oscillator.

In the past few months I have mentioned food wholesaler group (SYY) and buggy whips (newspapers- GCI, BOW)... I remain long but have scaled back into strength.

Now I am looking at discount retailers. In addition to price vs market, a long chart of TGT going back to 1982... suggest that opportunities at this monthly RSI level have been a good entry for those with a longer horizon. I use TGT as a benchmark because of it's long trading history, good long term trend and besides I like there stores! But my purchases will be in the group, more of a basket approach.

Knife catchers only! A break of O/R with daily RSI <30 my preferred entry point.

JMHO

I don't think the fed report is entirely wrong. The housing bubble is the result of a number of factors combining to produce an out sized result. The fed is not innocent but at the same time the major provider of excess liquidity for the last decade is Japan. That liquidity rippled out through the use of the new world of financial derivatives like swaps and looking for leveraged returns found its way to the mortgage lending market. soon we had competing lenders lowering lending standards then packaging the loans and selling them in to the securities markets. Mercantilist policies by china and others kept the dollar from weakening while this happened. a positive feedback loop the fed had few tools, other than recession, to fight. The fed lacked the political will to cause a recession. Particularly in an environment that was seeing little or no price inflation in traded goods.
i agree we should look for the simple explanation but, not too simple.

>

The homes in the Raleigh area are very affordable. The salaries are generally not comparable. The National CPA organization (by definition tightwads) moved to the area to avoid high white collar sallaries.

Russell