Record Dow! Whee!

[Gumby]

The trend in residential investment will probably turn around in the next year.

 

[BUM]

What gumby said.

 

[twaddle]

The trend in residential investment will probably turn around in the next year.

On what are you basing your projection?

The inventory of homes is still climbing. The sales of homes is still declining. Even if no new inventory came on the market and sales stayed at current levels, it would take almost a year to burn off the current inventory.

I think an RI turnaround in one year is optimistic. But even so, RI is a leading indicator. We still haven't seen the effects on consumption or commercial investment. If those get hit, it'll be safe to say economic growth is dead, earnings will be hit, and the stock market will be hating it.

 

[megacorp-firee]

Is it over yet?
Still it could be worse. As of Friday, for the year, I am down 2.5% from my portfolio high and up 5.6% from the beginning of the year.
Am I glad I got my AA and 5 year 'money buckets' in place.
... sleeping like a babe.

 

[Razor]

On what are you basing your projection?

The inventory of homes is still climbing. The sales of homes is still declining. Even if no new inventory came on the market and sales stayed at current levels, it would take almost a year to burn off the current inventory.

I think an RI turnaround in one year is optimistic. But even so, RI is a leading indicator. We still haven't seen the effects on consumption or commercial investment. If those get hit, it'll be safe to say economic growth is dead, earnings will be hit, and the stock market will be hating it.

I work for a multi billion dollar company in the housing industry. Last year our analysts predicted the recovery would begin in 2008. They have revised there predictions and and now expect housing to begin turning around late '09 into 2010. My company is taking appropriate actions to weather the storm which might last longer than expected.

 

[unclemick]

Is it over yet?

Yes The Saint's managed to avoid snatching defeat from the jaws of victory against a weak Dirty Bird's Team (Atlanta) in the Superdome - which everybody knows means great things for the Market. Not that good an indicator for Saint's football.

So I'll give the market a week for the initial blush to cool and make my picks from the other thread(Forever Stocks) the last three trading days.

If I DCA for ten years - hopefully I won't overpay at the outset.

So which three stocks are going to outperform the next ten years.

heh heh heh - I figure one of two things in the next ten years - Saint's make at least one Superbowl appearance or one of my forever stocks gets me to Margaritaville before I'm too old to still bogey. Carry on - no guts, no glory. Very carefully of course.

 

[brewer12345]

I don't know, as nobody really can until after the fact. But the entire economy does not hinge on residential investment.

 

[twaddle]

But the entire economy does not hinge on residential investment.

RI is about 6% of GDP. For comparison, that's a bigger part of the economy than defense spending. And it tends to have a bigger impact on consumer spending, which is 70% of GDP. Probably why it's worked so well as a leading indicator, eh?

 

[Razor]

I don't know, as nobody really can until after the fact. But the entire economy does not hinge on residential investment.

The housing industry is a major factor in the economy. Not only for high paying construction and related jobs, but products for the home account for much of consumer spending and also the money made by lenders on mortgages. Housing has a direct and indirect effect on the economy.
The housing boom and refinancing created by extremly low interest rates are the only reason a recession was avoided the first half of this decade. The same low interest rates have created the major problems that we are facing now.

washingtonpost.com

 

[brewer12345]

The housing industry is a major factor in the economy. Not only for high paying construction and related jobs, but products for the home account for much of consumer spending and also the money made by lenders on mortgages. Housing has a direct and indirect effect on the economy.
The housing boom and refinancing created by extremly low interest rates are the only reason a recession was avoided the first half of this decade. The same low interest rates have created the major problems that we are facing now.

washingtonpost.com - nation, world, technology and Washington area news and headlines

So where did you do your PhD Econ.?

 

[Gumby]

On what are you basing your projection?

You asked what your chart shows. It shows that the dips in residential investment typically last no longer than two years and that this one started in late 2005/early 2006. If past is prologue, the current downturn also should not last longer than two years.

 

[twaddle]

You asked what your chart shows.

OK, I was being a bit disingenuous.

The chart shows once of the best leading economic indicators we have. If you believe the dip in RI is a good predictor, we're headed for a recession.

Even if we don't enter a recession, we should still see a significant hit on earnings. This market has been driven by record earnings growth.

Any idea what happens to a "reasonable" P/E when the E takes a big hit? I think we're about to find out.

 

[Razor]

So where did you do your PhD Econ.?

I have a degree in Business and Quantitative Analysis from University of Wis. You don't have to have a degree to see what's going on. But you do have to have your eyes open. To ignore the obvious will get you nowhere.

 

[brewer12345]

I have a degree in Business and Quantitative Analysis from University of Wis. You don't have to have a degree to see what's going on. But you do have to have your eyes open. To ignore the obvious will get you nowhere.

Bully for you. But it is all too easy to over exaggerate what is going on in the enormous, diverse US economy.

FWIW, I thought the Fed over-tightened by pushing rates up to 5.25% and inverting the yield curve. The foolishness of excessively loose credit kept that from becoming apparent for a while, but now that that is over, it has become painfully obvious that the Fed did overdo it. But there is an obvious solution: whackety whack. At this point, I imagine we will see Fed funds down to 4% or possibly less in 2008.

 

[unclemick]

I'm keeping my football indicator - and plan to DCA thru whatever happens!

And maybe a little windex for my crystal ball.



heh heh heh - ying and yang wise.

 

[calmloki]

Bully for you. But it is all too easy to over exaggerate what is going on in the enormous, diverse US economy.

FWIW, I thought the Fed over-tightened by pushing rates up to 5.25% and inverting the yield curve. The foolishness of excessively loose credit kept that from becoming apparent for a while, but now that that is over, it has become painfully obvious that the Fed did overdo it. But there is an obvious solution: whackety whack. At this point, I imagine we will see Fed funds down to 4% or possibly less in 2008.

Yeah, well, Britney got visitation rights, which bodes ill for the market. OTOH, she ran over a flip-flop clad paperazzi's foot, which should push oil to new highs. If she would only go to a charity event and waddle her shaven torso all spraddle-legged into the waiting lenses of the photogs i could be buying heavy today!

Whoop! This should do it! "Dozens treated for TB outbreak blamed on stripper"

 

[brewer12345]

If she would only go to a charity event and waddle her shaven torso all spraddle-legged into the waiting lenses of the photogs i could be buying heavy today!

You know, you can claw your eyes out, but you can't claw out the eye in your mind.

 

[Razor]

Bully for you. But it is all too easy to over exaggerate what is going on in the enormous, diverse US economy.

FWIW, I thought the Fed over-tightened by pushing rates up to 5.25% and inverting the yield curve. The foolishness of excessively loose credit kept that from becoming apparent for a while, but now that that is over, it has become painfully obvious that the Fed did overdo it. But there is an obvious solution: whackety whack. At this point, I imagine we will see Fed funds down to 4% or possibly less in 2008.

Over- exaggerate? I think people have been misled and the true scope of the problems we are facing have been swept under the rug. This economy is based on consumerism and much of that spending is for durable goods and other home related products. Cutting interest rates to keep the market from collapsing can only be a short term fix for so long. We are in unchartered waters right now. We are at war, the internet and housing booms are over, government spending is out of control, interest rates were at an historical low and now on the rise, the value of the dollar is plummetting, oil prices are skyrocketing, the first baby boomers are starting to collect social security, high paying jobs are leaving the country, immigrants are driving down wages, we are becoming a service oriented economy, we don't make anything here anymore, the trade deficit is climbing and the national debt is rising. To predict that the stock market will continue to rise because it always has before doesn't work anymore. The NASDAQ is still half of what it was in 2000. Someday the DOW could follow suit. Cutting interest rates is not the miracle cure all for the economy.

 

[brewer12345]

Over- exaggerate? I think people have been misled and the true scope of the problems we are facing have been swept under the rug. This economy is based on consumerism and much of that spending is for durable goods and other home related products. Cutting interest rates to keep the market from collapsing can only be a short term fix for so long. We are in unchartered waters right now. We are at war, the internet and housing booms are over, government spending is out of control, interest rates were at an historical low and now on the rise, the value of the dollar is plummetting, oil prices are skyrocketing, the first baby boomers are starting to collect social security, high paying jobs are leaving the country, immigrants are driving down wages, we are becoming a service oriented economy, we don't make anything here anymore, the trade deficit is climbing and the national debt is rising. To predict that the stock market will continue to rise because it always has before doesn't work anymore. The NASDAQ is still half of what it was in 2000. Someday the DOW could follow suit. Cutting interest rates is not the miracle cure all for the economy.

Have dogs and cats started living together, too?

 

[W2R]

I'm keeping my football indicator - and plan to DCA thru whatever happens!

And maybe a little windex for my crystal ball.



heh heh heh - ying and yang wise.

Yesterday I saw a very impressive and old looking crystal ball, sitting at the back of a dusty shelf at an antique store in Ponchatoula, Louisiana. It looked like it had been there for years.

If you looked into it very carefully, through the misty swirls of old crystal, you could see a scorpion that had been imbedded into the center of it when it was made.

Just thought that some here might appreciate the mental imagery. I was going to buy it until I saw what was inside! Does not bode well for the crystal ball gazers.

 

[Nords]

Over- exaggerate? I think people have been misled and the true scope of the problems we are facing have been swept under the rug. This economy is based on consumerism and much of that spending is for durable goods and other home related products. Cutting interest rates to keep the market from collapsing can only be a short term fix for so long. We are in unchartered waters right now. We are at war, the internet and housing booms are over, government spending is out of control, interest rates were at an historical low and now on the rise, the value of the dollar is plummetting, oil prices are skyrocketing, the first baby boomers are starting to collect social security, high paying jobs are leaving the country, immigrants are driving down wages, we are becoming a service oriented economy, we don't make anything here anymore, the trade deficit is climbing and the national debt is rising. To predict that the stock market will continue to rise because it always has before doesn't work anymore. The NASDAQ is still half of what it was in 2000. Someday the DOW could follow suit. Cutting interest rates is not the miracle cure all for the economy.

Geez, you're right and the sky really is falling. It's amazing how all the blissfully ignorant have survived this long.

An economy based on "consumerism". What the #$%^ else would an economy be based on? I'm not even going to touch that "unchartered waters" comment, although I suspect that the 20th century affords ample precedent for your assessment of the world's ability to survive your other dire reporting.

Luckily the Plunge Protection Team is taking care of us all today, and we can't even tell...

Keep posting those economic summaries, because without them we wouldn't have a wailing wall of worry to gather around. I'm going to keep sniffing around for 75-cent dollar bills under the flashing-blue-light-specials, the ones where the crowds are running away screaming from the "On Sale Now!" signs. Doesn't seem like much consumerism in action there.

 

[W2R]

Geez, you're right and the sky really is falling.

I knew it! I knew it!! Now that Nords has said it, I guess I had better start burying money in the back yard. (JOKE, you guys!)

 

[Razor]

Geez, you're right and the sky really is falling. It's amazing how all the blissfully ignorant have survived this long.

An economy based on "consumerism". What the #$%^ else would an economy be based on? I'm not even going to touch that "unchartered waters" comment, although I suspect that the 20th century affords ample precedent for your assessment of the world's ability to survive your other dire reporting.

Luckily the Plunge Protection Team is taking care of us all today, and we can't even tell...

Keep posting those economic summaries, because without them we wouldn't have a wailing wall of worry to gather around. I'm going to keep sniffing around for 75-cent dollar bills under the flashing-blue-light-specials, the ones where the crowds are running away screaming from the "On Sale Now!" signs. Doesn't seem like much consumerism in action there.

Do you have an opinion on the subject or not. It kind of funny how irate some people get when others point out the problems this country is facing. It's almost like they would rather be kept in the dark and let their faith carry them through. I never said we wouldn't survive, but I do expect some tough times ahead and I am ready for it.

 

[Razor]

Have dogs and cats started living together, too?

I thought you were an economist. You sure don't act like one. Or maybe you're a faith-based economist.

 

[W2R]

Do you have an opinion on the subject or not. It kind of funny how irate some people get when others point out the problems this country is facing. It's almost like they would rather be kept in the dark and let their faith carry them through. I never said we wouldn't survive, but I do expect some tough times ahead and I am ready for it.

I agree, though I'm not at all sure about the timeframe. There will always be tough times, and good times, ahead. So, I try to prepare for both as best as I can, and then I try not to do anything precipitous and try to hang on for the ride.