lots of news and a little banter on this forum about HELOCs, Reits, Home values... but very little about the Fed, Interest rates, credit risk and the corresponding credit bubble.... its not all bad news, but the changes are coming faster than ever...
lets review what seems like years worth of news all packed in the past couple of weeks...
1. Housing- still in free fall. inventory levels and foreclosures continue to creep up. My opinion is that we aint seen nothin` yet.... I am in the `waiting` camp and may pursue property in the form of low ball offers of 50%+/- the asking prices..
2. Interest rate today was cut by 1/4. Many wanted 1/2, but they will live with it. The concern is not that the rate was `only cut` by 1/4, but the language used in the report... Bomber Ben all but told us flat out not to expect any more cuts and started using inflation (gasp!) as his basis... so what now, Ben? dont worry about the dollar anymore? ... unfortunately, it will take much longer for any positive effects of a lower dollar to take hold than the negative effects on the economy...
3. Looking at new cars for my wife. All German cars are holding firm in value, if not downright increasing in price... what this means? My vanishing US$ is starting to hit the consumer where it hurts...
4. Oil at $94 per barrel. You have got to be kidding me... one slip in logisitics, any more congestion at the ports and any indication of a refinery shut down will send gas prices to the moon.... mark my words. (I have bought slugs of PBT in the past week, mid 15s)
5. Merrill just had the single largest write down in history.... and THEY STILL CANNOT VALUE IT PROPERLY. (Hate to use caps, but if this doesnt freak people out, then I dont know what will...) Friends on wall street are glad they are able to kill this quarter once and for all so they can focus on profits again. But even they admit they freaked out and are not sure all of the bad news has come out because the true cost vs. current basis has a spread so out of whack they dont know which a$$ the dirt is flying out from next...
6. Did anyone see the MasterCard earnings report? This all but confirms credit has ever so quickly shifted the risk from home eq lines that were used as ATMs over to plastic credit.... the problem? for the consumer, higher interest rates/higher pymts and lower net worth. (IMHO, Mastercard will realistically be a strong short when a lot of the dust settles)
7. Default rate at Alt-A levels are increasing... see #1.
In summary- the economic reality of Americans is that they cannot afford all of the above in one full swoop... Lower $, higher oil, reduced home equity/net worth, higher payments... the economy reminds me of a table with a broken leg being held by books...
but who am I? currently investing in gold, silver and bulk shipping companies and recently have reentered the oil/gas arena. So far, so good. good luck to the rest of you.
lets review what seems like years worth of news all packed in the past couple of weeks...
1. Housing- still in free fall. inventory levels and foreclosures continue to creep up. My opinion is that we aint seen nothin` yet.... I am in the `waiting` camp and may pursue property in the form of low ball offers of 50%+/- the asking prices..
2. Interest rate today was cut by 1/4. Many wanted 1/2, but they will live with it. The concern is not that the rate was `only cut` by 1/4, but the language used in the report... Bomber Ben all but told us flat out not to expect any more cuts and started using inflation (gasp!) as his basis... so what now, Ben? dont worry about the dollar anymore? ... unfortunately, it will take much longer for any positive effects of a lower dollar to take hold than the negative effects on the economy...
3. Looking at new cars for my wife. All German cars are holding firm in value, if not downright increasing in price... what this means? My vanishing US$ is starting to hit the consumer where it hurts...
4. Oil at $94 per barrel. You have got to be kidding me... one slip in logisitics, any more congestion at the ports and any indication of a refinery shut down will send gas prices to the moon.... mark my words. (I have bought slugs of PBT in the past week, mid 15s)
5. Merrill just had the single largest write down in history.... and THEY STILL CANNOT VALUE IT PROPERLY. (Hate to use caps, but if this doesnt freak people out, then I dont know what will...) Friends on wall street are glad they are able to kill this quarter once and for all so they can focus on profits again. But even they admit they freaked out and are not sure all of the bad news has come out because the true cost vs. current basis has a spread so out of whack they dont know which a$$ the dirt is flying out from next...
6. Did anyone see the MasterCard earnings report? This all but confirms credit has ever so quickly shifted the risk from home eq lines that were used as ATMs over to plastic credit.... the problem? for the consumer, higher interest rates/higher pymts and lower net worth. (IMHO, Mastercard will realistically be a strong short when a lot of the dust settles)
7. Default rate at Alt-A levels are increasing... see #1.
In summary- the economic reality of Americans is that they cannot afford all of the above in one full swoop... Lower $, higher oil, reduced home equity/net worth, higher payments... the economy reminds me of a table with a broken leg being held by books...
but who am I? currently investing in gold, silver and bulk shipping companies and recently have reentered the oil/gas arena. So far, so good. good luck to the rest of you.
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