No Housing Boom This Decade

In the midst of all the bailouts you might have missed that last month, in perma-bubble Southern California the median price of the entire regional market fell by $17,500. This was the first regional price drop since April of 2009. Now one month doesn’t make a trend of course but if you only listen to the real estate industry and banking cabal you would think that all of a sudden we are circa 2003 real estate. There is this pervasive speculative attitude once again in the air even in the face of a 12.4 percent unemployment rate. The unemployment situation was revised last month nationwide and the BLS upped the number of jobs lost in this recession from the “low” 7 million to 8.4 million. So basically we were underestimating how “good” things were for an entire year (the BLS has suspect numbers because of their methodology). Yet this is part of the new economic psychology where real data is ignored in exchange for bread and circus statistics and political theater. The reality is we are not going to see any sort of housing boom for the next decade. In fact, housing will be weak for the next ten years (at least) regardless of what the government and Wall Street attempts to do.

Full Article here

My Comments: Good info. I personally want to see how the market fares after the first time home buyers stimulus. My guess is it will be another failed Govt. program that duped buyers into quick decisions. Those that took advantage of it might need a bailout if things get worse.

Point being...buy when the situation is right not because of a Govt. bribe.

Weekly Update From Puru

In baseball terms, we are passing through the middle innings of the ongoing correction in the financial markets.

Over the past week, sellers dominated the markets and the counter-trend moves are now well established. Yesterday, global stock markets experienced intense selling and this has prompted the perma-bears to (yet again) announce the start of a new bear-market. In our view, this weakness in the markets is a routine pullback within the ongoing cyclical bull-market and we expect most indices to bottom out around the 200-day moving average.

As we pointed out in February’s Money Matters, technical data does not suggest the commencement of a new bear-market and there is no evidence of a breakdown in the price charts. Accordingly, we suggest that you ride out the volatility and consider adding to your positions in an incremental manner. In any bull-market, the best time to buy is when an item briefly corrects to its 200-day moving average and most stocks and commodities are likely to approach that level over the following days. Therefore, we urge you to keep your nerve and advise you to take advantage of Mr. Market. Remember, pessimism is an investor’s best friend, euphoria his mortal enemy.

The ongoing weakness in the markets is largely due to sovereign default risk in the West but this has even affected the developing markets in Asia. In our opinion, nations such as China, India and Vietnam are not in the same boat as the debt-plagued developed nations and this weakness in prices is a great long-term buying opportunity. Over the following years, these fast-growing economies will benefit from capital flows and their stock markets will appreciate considerably. Accordingly, we recommend buying on additional near-term weakness.

Over in the commodities complex, ‘risk aversion’ is the story of the day and most hard assets are under pressure. Yesterday, crude oil dropped significantly and the selling may continue for a few more days. However, this manic-depressive nature of Mr. Market does not change the reality of supply and demand. We maintain our view that crude oil is in a secular bull-market and its price will appreciate significantly over the following years. Accordingly, we are keeping our positions in the oil patch.

Elsewhere, metal prices got whacked in yesterday’s panic sell-off. Silver was down by more than a dollar and gold broke through its important support at US$1,075. At the time of writing, gold is trading at US$1,064 per ounce and further weakness looks likely. The next major support for gold comes in around the US$1,000-1,030 region and it looks as though the yellow metal’s price will decline to that level. The related mining stocks have depreciated considerably in the past few days and the selling looks overdone. Yesterday’s moves in precious metals appeared climactic, therefore we are in the latter stages of this correction. During this turmoil, do not forget that most nations in the West are bankrupt and precious metals represent your insurance policy. Therefore, do not join the herd by giving away your safety net at throw away prices.

Base metals are also facing selling pressure and as per our expectation, the price of copper is declining. A couple of weeks ago, we advised liquidating copper-related plays and suggested going ‘short’. This seems to be working out as planned and we expect the price of copper to decline by another 10-15%.

Finally in the realm of monopoly money, the US Dollar is rallying and this should not come as a surprise to our readers. As you will recall, we were expecting the American currency to strengthen. In our view, this advance is likely to continue for a few more days, so keep all your cash in US Dollars. In our view, the European currencies are most vulnerable and we would not buy the Euro or the British Pound; not even with your money! Once the rally in the US Dollar has run its course, we will advise you to buy back the Australian and Canadian Dollars, but for now, hold on to your greenbacks.