Wednesday, May 30, 2007

Bravery?


More of a question than a statement: if you're bearish on the RE market (we are, surprise, surprise) are you also bearish on the equity market (I am, she is indifferent). I'm not rushing to sell anything right now, but as VG pointed out in an earlier comment, some of the insiders are.

I watch my stocks fairly closely. It's easy 'cuz I only hold a couple outside of funds. When the insiders in those stocks start selling, I get a bit antsy. But not antsy enough to sell yet.

So here's the real question for today: if you don't own a house, but could, and are exercising bravery at not getting into the market despite crazy gains, because you believe a correction is coming soon, and coming hard, are you looking at the stock market with the same glasses on? I am. I'm trying to decide which segments may be recession proof, or at least not get hammered so hard. Financials? Oil and Gas? Mining? Tech Stocks? Pharmaceuticals? I don't know if anything is really recession proof.

6 comments:

Anonymous said...

I am a bear in housing (renter here) and a bull in the stock market. I am realistic though and know that the stock market will probably take a hit too. I can wait out a correction in the stock market though. I'm not selling.

S2

Sam said...

I'm bearish on much of the stock market (emerging markets, commodities, etc - basically yesterday's news, as Buffett famously remarked), but I do think it's a good time to get in on blue-chip mega-caps. These are relatively cheap for earnings and even in a recession I don't expect megabanks and big pharma to feel too much pain (though their rank-and-file employees might).

Certainly there is value to be found in equities out there that is not mispriced with regards to earnings, as housing is. It's a big market out there, and far more liquid and efficient in many ways than housing.

olives said...

Better to sell a year to early than a day too late!

A a normal part of the bust of the business cycle, everything should come down.

Given the parabolic rise in Shanghai markets recently it would seem at some point (when?) these markets will come crashing down. There are many people who believe the U.S. today is to China, what England was to the U.S. in 1929.

VG said...

I'm a short term bull but cautious on the stock market. I am picking stocks that have good upside but will be defensive on a down turn and have to be liquid.

The China correction this past week was a classic case of some froth blown off based on the traders,not the economy.When they start saying copper imports etc are slowing big then it is time to worry. Any major blow off on their market based on too much froth will be on the stocks that are basically pink sheet equivalent,no earnings etc and borderline bankrupt.There is no direct money connection with the DOW and Canada markets.
It's definitly not the time to dive in head first to the stocks but if you pick your spots on oversold metal/oil/oilsands stocks that have resources you can trade and make some good cash.Sooner or later though they all have to correct to take a breather so cautious is the name of the game.

Anonymous said...

Just posted the below article on the bear site I'm on.

"Western Canada drives national housing market to record

Canadian Press
May 31, 2007

TORONTO (CP) - Canada's housing market has continued to escape the downturn unfolding in the U.S., with the average resale price of a home climbing above the $300,000 mark for the first time in April.

Average prices, sales values and listings all set fresh records last month, and regional disparity continued to be the story with most of the frenzy taking place in provinces west of Ontario, according to the Canadian Real Estate Association.

Of all the western provinces, nowhere is as hot as Saskatchewan.

The province experienced almost 100-per-cent growth in dollar volume since the previous year and, according to Rob Nisbett, co-broker owner of Re/Max in Regina, residents sign up to be placed on an 18-month waiting list to purchase a new home.

``It's quite incredible,'' Nisbett was quoted in a story posted on a newspaper's website. ``Business is magnificent.''

``We do not have enough product to keep up with demand. I've never seen anything like this since I've been in this business almost 25 years ago,'' Nisbett said.

Saskatchewan also saw the largest percentage increase in annual unit sales and new listings of all provinces.

``Saskatoon has been a stable market but has exploded in recent months,'' said Gregory Klump, CREA's chief economist. ``After having moved to Alberta where the cost of living is more dear, people are moving back and buying homes.''

The average price of a resale home in Canada jumped 9.3 per cent in April from a year ago to $305,542, the report said.

British Columbia remains the most expensive province in which to purchase a home, with the average resale price at $431,909, while Prince Edward Island is the cheapest at $135,019.

The Prairie provinces and B.C. were the only regions of the country that saw double-digit price growth. Year-to-date transactions also set a new record in April.

``Over all, the housing market remains remarkably healthy,'' said Douglas Porter, deputy chief economist at BMO Nesbitt Burns Inc. ``Given the dire straits of the U.S. market, it puts the Canadian numbers in particular stark relief.''

Canada's real estate market continues to boom amid low mortgage rates and a historically low unemployment rate. It's a different story south of the border, with mortgage defaults rising alongside diminishing sales, home prices and builders' profits.

Seasonally adjusted home sales in Canada's major markets rose 1.5 per cent to 43,643 units, led by rising activity in Ontario, Quebec and B.C. It was also the first time that new listings for resale homes surpassed the 70,000 mark.

``This builds on strong sales we've seen in the first part of the year and continues the momentum for resale housing that began towards the end of last year,'' Klump said.

Porter said the booming commodities market in western provinces is another factor driving residential real estate sales to record numbers.

''Particularly in oil and gas, but also Saskatchewan's uranium, potash and even grain markets, have all contributed to a strong economy out West.''

Not all provinces experienced strong sales growth. Newfoundland, New Brunswick and Manitoba all saw a decline in the dollar volume of home sales in April.

Sales are forecast to reach even higher levels by the end of the year in all provinces except B.C. Price increases are expected to finish this year strong at 9.5 per cent.

``The year-to-date activity was up 6.7 per cent, and that's a new record for this period of time. It really supports our view that we're going to reach a new annual record this year,'' Klump said"

S2

Aleks said...

I'm cautious about stocks, and weighted a little heavier than normal in bonds. However, the major differences between stocks and real estate is unit cost and volatility. A house costs more money than I have, in fact more money than I earn in several years. Whereas a single share can cost as little as $5, and I can buy partial shares. You can't do dollar cost averaging with real estate, therefor you have to time the market.

However, market timing in real estate is easier because the market is less volatile. By the time I heard about the last correction in China, it was already over. Rather than worry about what the market has done and may do in future, I just stick with my asset mix and rebalance annually. With real estate, the correction is going to take years and I'll be able to watch it the whole way.