Tuesday, July 24, 2007

Tuesday News Hunt

Just doing some blog-related research today. Here's what I've come across:

Dow 14,000: I'm skipping the party

Big threats are being ignored as investors celebrate the stock market's latest milestone. We haven't seen such arrogance since the heady days of 1999 and 2000.

it was logical to conclude that many of these [subprime] mortgages would be defaulted on, creating ramifications throughout the financing and economic food chain.

Canadians go on a shopping spree in May; Dollar rises to 30 year high in July

Sales advanced in all retail sectors in May except in the furniture, home furnishings and electronics stores sector. Retailers in this sector saw sales decline 0.8 per cent, following six consecutive monthly gains.

I guess we're not buying stuff for our new homes anymore then right?

"Perhaps most notably, the gains are fanning out from Alberta, with almost all provinces posting impressive growth. This clearly puts additional Bank of Canada tightening in play, above and beyond a second quarter-point rate hike in September."

Inflation is not, I repeat, NOT, contained to the West, as many people like to argue. Nope. Loose monetary lending policies are all pervasive and even where incomes and RE prices aren't going crazy, high ratio lending is driving consumer trends skyward.

Both the TSX and the Dow took MASSIVE hits today: TSX down 400+ points

The TSX was up 13 per cent year-to-date at the start of this week.

Biggest single day drop in 3 years. Inflation concerns are the cause. Down over 500 points this two-day-old week. Is it strange that this is happening in July? Usually this kind of thing happens when people are at work trading, like in October.

"And anybody that cannot take this sort of thing should not be in the markets."

Does the same rule apply to homeowners?

Jitters over the subprime mortgage sector were compounded after Countrywide Financial Corp. — the largest U.S. mortgage lender — said its profits fell sharply as mortgage banking earnings tumbled. The company also cut its profit outlook amid rising mortgage delinquencies.

Despite the WARNING SIGNS, US bulls call for 7%+ gains in the Dow before year is out

"Anybody who argues with momentum, until the momentum becomes irrational, is going to get slaughtered," said A.G. Edwards market strategist Al Goldman on CNBC this week.

Leave it to BubbleVision to come up with Sh$t like this. Nope, no irrationality in this market, nothing to see here, keep moving. Can anyone remember a time in recent history when both the RE markets and the Stock markets have gone completely bullish and irrational together like today?

the market could be vulnerable to a "melt-up" that could shoot the indexes substantially higher in the next few weeks. And there's little to support stocks if a melt-up gives way to selling. The last big melt-ups were in 1987 and 1999, when the Dow moved from 10,000 to 11,000 in just 23 days. Early in 2000, the market tipped started [sic] a slide into the worst bear market in generations.

Bulls, of course, will argue: "this time it's different." I should disclose that two mutual funds that I own, both that regularly generate 20% plus rates of return yearly, are in the midst of equity sell-offs and are aiming for 50% cash holdings during the upcoming storm they foresee happening.

My thoughts on the dollar: sure our dollar seems strong, but it's measured against an increasingly weak US benchmark. Talk to someone buying Euros or Pounds and they'll tell you just how strong our dollar really is.

Inflation is crazy right now. I know, I know, look at the CPI you'll say, it doesn't lie. Nope. You're right. It doesn't lie. It just doesn't count a lot of the things Canadians are spending money on right now. Especially things that are subject to irrational market forces: like food; especially fresh food. My food bill this year is almost 30% higher than last year. And it isn't because I'm getting fat. It's because food is more expensive.

Our gas consumption is down. We drive less than ever. But our gas bill is roughly the same as last year because gas jumped over that psychological benchmark of $1/L and will likely not drop below it again anytime soon.

Red sky at night, sailor's delight. Red sky in the morning, sailors take warning... am I the only one seeing red at economic dawn these days?


oh please said...

The big question, I think, is if and when credit tightens this side of the border. With at least one Canadian bank significantly exposed to the subprime meltdown I assume that credit tightening will eventually become an issue. When? Doesn't seem to be happening yet. Down south, different story. Meanwhile it's party on, dude.

hhv said...

CIBC is tightening their exposure to US sub-prime mess. I've read anywhere from $50-100 Million in write downs. That could be a significant portion of their quarterly earnings.

Seems like banks increase rates, consumers get more confident. Bass Akwards if you ask me.

olives said...

...Right there on the front page of MSN.com's Money page: "a credit crunch may be emerging". It would be hard to get much more mainstream-newsy than MSN.

solipsist said...

am I the only one seeing red at economic dawn these days?

I've been seeing that red dawn for a few years now, but everyone is still "making" money, and pooh-poohs my warnings.

Prairieboy said...

It's a perfect storm in the making. I personally believe that North America, and perhaps the whole world, is due for something big. I'm not worried, but I do believe that we are living in interesting times.

vg said...

I think the markets have been writing off the notion rates would not go up anymore or maybe one more at tops,today was a clear sign to me we are in a high interest rate enviroment for a long time to come.

The DOW and the TSX should not have gone as high as they have but until the trend clearly changes you cant fight it but be prepared to change course in a hurry. We shall see if this is a one day event as in the past or the overdue correction, I am leaning to the latter.

geg said...

Nice photos hhv, very apropos to your subject.

Anonymous said...

10% interest rate please. 10% interest rate please. I would love to see a 10% interest. It would help us immensely.


Anonymous said...

By the way I was just reading on MSN.com that the Edmonton fire was arson. Shocking...not.

A condo building under construction goes up in flames and it is found to be arson.

Coming soon to a neighbourhood near you?


vg said...

US existing home sales down 3.8%,lowest in 4 years,statements that the housing market took the economy up and is taking it back down. Not in BC,we are a little slow to catch on to the meaning of "overvaluation".

Just heard of another young couple who flipped out of a townhouse to a house and they took a 10% hit on the sale of the townhouse cause they wanted the house so bad. The low ballers are slowly entering the market looking for the desperate who signed other deals with subject to's. I figure their payments went up at least $500 per month and had to take out a 40 year mortgage to do it.

Anonymous said...

VG, you forgot to mention sales are down but prices are up

vg said...

Oh right, I forgot to mention the .3 % increase, a whole $800 ! LOL If the median was that in Victoria I would be buying two today.

"But on a bright note, the median home price of $230,100 in June was up 0.3% from $229,300 in June 2006."

vg said...

Can't believe my ears, CH news actually just said the word "CRASH" twice and with some gusto,when describing the US housing market situation. I am shocked,that has to shake a few nerves up here.

Interesting part was that people with good credit are falling behind via Countrywide's statements. And if you are trying to borrow even with good credit no one wants to even talk to you,unreal. Anyone thinking it can't happen here then there's your wakeup call.

vg said...

One more:

"Lenders brace for rash of foreclosures among borrowers with good credit"