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Friday, May 21, 2010
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26 comments:
Who know which way it is going to go...but, it seems like it could turn out to be a bear market rally in stocks and is now coming to an end. Just in time when stimulus is winding down.
De-leveraging resumes and smells like deflation is in the air.
Spider-
You may be correct. Personally I think the markets will not fall, below 950ish, but I have been wrong before so who knows.
I agree deleverging will continue. It has been going on for about 2 years now and will likely continue for many more. The world got way to levered and needs to pay the price for that now with deleveraging and muted growth.
I don't really see deflation, but rather a lack of inflation. The core CPI has been flat for 6 months now. I expect this to continue high unemployment, weak growth, and an excess of houses will offset inflation in medical care, education...
All-
It looks like the house in dunn loring that we discussed a couple of days ago went under contract. Seeing it went under contract in a few days my best guess is that it is pretty close to list.
spider,
yup it's been quite a correction so far, hard to say what's to come.
housebuyer,
All I have to go on is Krugman's blog:
disinflation
Those graphs still look like core inflation is trending down to me.
Of course, being far from retirement myself I'd be tickled if the stock market rumbled around the 9000 mark again for a while. I might even need to adjust my allocations and/or kick up my contributions sooner rather than later.
Looks like a long-painful weak recovery to me, but it still does look like a recovery.
Cara-
I agree for the younger you are the better/less bad stock corrections are. As for the core CPI. If you look at the BLS page it shows the MoM numbers and basically we are flat over the last 6 months and 6 months before that were up ~.15%/month. So as we roll off ~.15% per/month and replace it with 0% we should see the core continue to fall.
The headline number is still up ~3%, but that will fall down dramatically over the next month or two due to the ~20% drop in oil prices
I think "correction" is a misnomer, since apparently it is defined as any drop of 10% from some peak. That term implies that the former valuation was in error somehow. I suppose some would argue that market valuation isn't in error at any level; it simply reflects supply and demand, etc. Another argument is that it's possible that current valuations make more sense relative to P/E ratios, etc. However, it is also possible that this is an overreaction to European conditions. If so, that would be the "error." The media/stock market folks need to find a better term.
And yes, for people who have worked hard to save and invest so that they aren't reliant on others or govt. as much for their retirement, unemployment, illnesses, etc., this volatility (after a decade of poor performance) is really difficult to deal with.
Ace,
I'd call it jargon. Taking an existing English word and then applying a very specific technical meaning to it, and pretending that the English connotations don't still apply.
I think the rise since January was a little bit too smooth for comfort. The smoothness implied more confidence in the speed of the recovery than I felt was warranted and a disregard for the things stirring in Greece. Which is not to say this current drop isn't an over-reaction. The markets always seem to over-react if you ask me.
The state employment picture in Virginia is looking a tad bit brighter:
BLS
In April, nonfarm payroll employment increased in 38 states and the
District of Columbia and decreased in 12 states. The largest over-the-
month increase in employment occurred in Ohio (+37,300), followed by
Pennsylvania (+34,000), New York (+32,700), Texas (+32,500), and
Virginia (+28,100). Arizona, Indiana, Kansas, and Virginia experienced
the largest over-the-month percentage increases in employment (+0.8 per-
cent each), followed by Alabama and Ohio (+0.7 percent each).
Slow and painful, but still smells like a recovery to me. I know, that could change.
hb,
Is it just me or do they do everything as tables and nothing as graphs? Sigh.
Cara-
This is a pretty good site where you can get either YoY or MoM inflation data. inflation
.
It also lets you download the data and look back to the 50s if you want.
Ace,
Wall street likes "correction" because it implies that it is now "correct".
Putting in my C-S guess for March now.
175.5 +/- 1.0
i.e. flat or down less than 1% MoM.
In other words I'm guessing that the median gains we've been seeing in the past few months are mix, and in such a way that the CS numbers will be less corrupted by the change in mix.
Cara-
I agree you will be correct with your prediction. I will try and give a tighter range of 175.3 +/- 0.3
hb,
Oooo, daring!
I was thinking about a tighter range too and chickened out.
Housing market in this area is definitely stronger than the rest of the country.
Although yes unemployment is hitting a lot of homeowners. Many are forced to short sale and foreclose. Plus bad mortgage loans out there are adjusting. And banks are not modifying these loans.
http://www.merchantcircle.com/business/The.Bull.Investments.LLC.703-822-1299
Cara-
I am a little worried that the April tax deadline may start to have an impact on price. So if I am wrong it will likely be because housing fell less than I expected. Either way I am still pretty confident will continue our steady loses of ~1 point per month.
N Arl detached inventory in MLS:
DOM 0-6: 33
DOM 7-13: 44
DOM 14-20: 24
DOM 21-27: 22
peaked for spring?
MM,
If inventory increases in June and July, I would expect bad news for housing (or good, depending on your perspective).
Anyone: what is the methodology of CS? It's supposed to be same house sales? How does the fact that the vast majority of distress sales were/are lower end impact these numbers going forward?
For example, I looked at a Falls Church (FX cty) zip the other day for all foreclosure sales in the past two years. One low end condo development accounted for well over half (maybe 3/4's) of the distress sales. Does the relative volume of turnover skew CS?
hb, cara,
As you both said - April is hiding reality due to 8k euphoria...real indication is going to be May, June & beyond.
VA-
CS tries to adjust for the quality and locations of homes. So the fact that most of the sales came from a distressed condo would not be a problem. It would use the price changes in these condos to gauge the price change in other condos. It would also check how different sized SFH and TH did and would try and adjust for the differences in location size and condition to say what the market is doing as a whole.
Also remember that the information they give you is lagged in two ways. First we are only now going to get the March data at the end of May. In addition to this they using a rolling 3 months of data. So the upcoming numbers will be based on sales in January-March.
So to get to Spiders point we will not fully know what the market looks like post the 8k expiration until we get the July numbers, which will not happen until September. Although we should have some earlier indications based on what the trend is doing
Also, just FYI, but Case Shiller excludes condos. There appears to be a separate condo index for some, but not all cities it tracks.
eponymous, good point.
Anyone going to any good open houses this weekend?
Anon-
Good point.
Va_Investor,
Has inventory ever increased in June and July? I doubt it, not even in the bubble bursting years. So, yeah, it's *bad news* if it happens.
MM -- marginally, yes. It looks like inventory can peak as late as october.
http://www.recharts.com/nova/nova.html
Ignore the 2005 trend, which was the beginning of the real stampede (2005-2006) -- but you can see in 2007 we peaked pretty late in the year.
Also, its a bit harder to tell, but as you can see here (10th chart down), peaking in june or july isnt out of the ordinary
http://www.recharts.com/mris/mris_1.html
I do think however we have seen all or most of the "oomph" we will see out of this year, but we may not decline substantially until well into october.
MM,
Check out July 2005 forward. That is how I knew that the party was over.
Oh, I see. I was only referring to 'new' listings never (?) increased in Jul/Aug, not total inventory.
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