Tuesday, April 28, 2009

If You Believe The Housing Data, I have a Bridge...

The housing data came in today and it was GREAT!!! Well, if you consider an 18.6% decrease in homes sales as a positive from last March and a 35% price decrease in homes in Phoenix, a 32% decrease in home prices in Las Vegas, and a 31% decrease in San Fran.

But it was spun as positive news, avoiding what should be a larger collapse in the real estate, credit and financial markets. But it is just delaying the inevitable.

I am not hoping for a financial collapse and a housing collapse. It is just going to happen and who am I to stand in the way. All I can do is get my hedge positions in place to offset my home property losses, and my potential job loss by playing the market short. If I keep my job and my home property stays the same, I can live with that. But I would be living in unrealistic hope.

show me when unemployment stops climbing. Not that we only lose 500K jobs a month. Tell me when the losses stop. Until then, home prices will continue to go down, home sales will continue to go down and the economy will continue to enter a depression.

The market is incredibly overpriced right now. The average stock price is 22x forward earnings. Typically the average stock price is 6-10x forward earnings. That is right. we are about 3x over valued on what typical forward earnings are. That means the S&P at 300 would be fair value compared to historical numbers.

As unemployment rises, more companies will go out of business, causing more layoffs, causing more foreclosures, causing lower housing prices and the cycle continues until things get so bad that they truly do hit rock bottom and naturally reverse. The gov't continues to try to intervene in this natural process which is only causing it to last longer and will cause tax and deficit nightmares for the next 20 years.

Hotel properties are about to hit the fan. Over the last 10 years, the U.S. has totally overbuilt in the hotel arena. These properties are heavily leveraged and heavily debted. The collapse will hit hard and there will be no bailout.

OK, enough gloom and doom, but y'all need a reality check. How many of you know people that have been laid off in the last 6 months? OK, everyone. Now, how many of these people do you know that have landed a job in the last 6 months. A job that was close to what they previously had. I am sure there are a few that would say yes. But 90% of you would say no.

Don't let the Pisani's and Cramer's and Kudlow's fool you. The economy is not getting better. It is getting worse.


  1. The financial sector and the CRE sector has over 30% run this month while SRS & FAZ are getting killed through the process. What does it take for the bull to let go is the question. The strength and action today indicate that the bull intends to hold on tight and bluff some more. The news and the numbers I get from the market do not justified this run to sustain at this level without a pull back. The Feds is more determined to kill FAZ to shake out those who are shorts in the financial. They will have to come up with more lies in order to do that. It is very tough to make money at this time when you have so much uncertainty out there can swing you either way. I got in SRS today, but caught by a surprise for more downwards. You would think that CRE isn't doing that great really based on all the corporate cost cutting and spending less, not to mention about the swine flu that is not under control just yet. Any feedback and opinion are greatly appreciated. Thanks.

  2. The market appears to be doing exactly what it should not do. So the unexpected should be expected. It is part of the weeding out process by the gov't and MM's to manipulate it such that banks have a better chance of raising capital via the secondary markets instead of injecting more gov't money. not a bad idea but a bit unethical. Again the gov't and wall street steal from main street in order to get their riches. Main steet pays by being sucked into the market thinking all is good and after the new capital is injected, the market heads down as the hot air is let out crushing those who thought trouble was gone.

  3. My thoughts exactly as well. I guess patience is the virtue now.

  4. Beamer Dog, MA misses earning today. I hope that you still have AXP short. Hang on, we shall be able to make money on this short.