Every few months, I like to pull together an assortment of unrelated items that I find interesting (See this). These items include things that are not quite fully baked in my mind, not yet a full column. While I wait for these to jell, I like to put them on paper to create a bookmark of ideas, and to see what generates feedback and debate.

The main qualification is that they are both interesting and potentially significant. Here are my 10 random items to round out our week:

1. All-time highs: Markets are within a few percent of record highs. Each and every pullback, if we believe the noise, is the end of the rally and the start of the next bear market. Unless it isn’t, in which case, never mind, we will be back with the same forecast when the market is 5 percent higher. I can’t recall so much angst amid so many all-time market highs; every pullback is the end of the world. It is both fascinating and perplexing

2. Housing: Housing has begun to sputter. New starts have been lower, permits soft, existing home sales disappointing. Yes, I know, the weather was awful in January and February — but it’s now May heading into June, and that excuse no longer carries. This is prime residential real-estate selling season, and it seems to be limp.

The entire post-crash housing recovery has felt artificial, part of an attempt to prop up the big banks that had billions of dollars in bad loans on their books. The past five years of zero-interest-rate policy was designed to buy time so banks could get out from under their sour mortgages, But inventory is low, and interest rates are falling, so I am unsure how this plays out. Regardless, there are going to be some fascinating analyses written on the real-estate boom, bust, reflation, and whatever comes next. Look for it in whatever replaces your local bookstore in 2025.

3. Secular bull market?: Jeff Saut of Raymond James believes we are in a secular bull market. He noted that in the 1980-85 period many investors continued to doubt that the earlier 16-year bear market was over. Very, very few were willing to accept that the cycle had turned. There are many parallels between this era and that, and I am slowly moving into Saut’s camp.  Continues here

Category: Current Affairs, Markets

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

11 Responses to “Here is What I Am Watching, Lately”

  1. VennData says:

    Realize that the angry Rick SanYelli types who have underperformed need the S&P to drop back below the 666 March ’09 low to justify their ideological rantings of the last six years. Therefore they feel it will.

    They talk about complancency but really? Who is complacent? All the Obama-loving long-ball thinking liberal they have soul-searching discussions with?

    These SALT guys who say Buffet is a tax dodger and cheer the political dirtbag Rove who accuses Hillary Clinto of having brain damage? These are the “smart money”?

    OK. Whatever, CNBC. This is a good thing for those long equities and short in your bond durations.

  2. 4whatitsworth says:

    Thanks, great stuff!

    I am obsessing on the correlation between US interest rates, the taper, and emerging markets. I can’t say that I understand it just yet but my hypothesis is that there is money to made there.

  3. TennesseeTrader says:

    The angst is because the market leader growth stocks have been decimated in the past couple of months. Concurrent with this the Dow and S&P make fresh highs. The divergences are causing the angst.

  4. JMelville says:

    Everything is fine….until it isn’t, right? You try to adhere to the “don’t time the market, invest for the long haul, slow and steady, but the doom and gloom is continually being reminded. Very thankful for a daily dose of sanity here.
    As an aside, here in Texas, I have taken to noting the out-of-state plates as I make my daily commute to work. The contingent states are most numerous, but everyday a Michigan or New York is often seen. Toyota relocating from CA and State Farm building the largest single office complex in the US down the road says housing is still moving ahead here. The modest house next door had 13 offers and sold for 10% over list last month.

  5. steveh18 says:

    The “names” have gotten clocked, some banks are weakening, and other individual stocks have been taken out and shot. We can’t breakout either way. After five years this wouldn’t be distribution, at least for the intermediate term, would it ?

  6. Robert M says:

    You probably sent a number of people to Church/ Synague/ Mosque when you brought up FASB 157 thinking they need to keep the devil down below. I’ve seen no literature indicating it has been part of the FED’s thinking when running stress tests. Reintroduction now is highly appropriate given the need for financial institutions to continue toraise capital.

  7. Robert M says:

    The reintroduction of FASB157 has sent a number of financial types into a tizzy. I’ve seen no literature indiciating that the FED considered this in the last running of stress test. I suspect the results would have been worse. W/ the need to continue to raise more capital as opposed to give it away as dividends it is a good call.

  8. MarkKlose says:

    I thought Housing looked a bit more promising in this morning’s numbers. We’re continuing to see a much higher level of multifamily in the mix than we have seen in the past and that may signal a generational shift away from the traditional single family home. Too early to know. From the release:

    Housing Starts:
    Privately-owned housing starts in April were at a seasonally adjusted annual rate of 1,072,000. This is 13.2 percent above the revised March estimate of 947,000 and is 26.4 percent above the April 2013 rate of 848,000.

    Single-family housing starts in April were at a rate of 649,000; this is 0.8 percent above the revised March figure of 644,000. The April rate for units in buildings with five units or more was 413,000.

    Building Permits:
    Privately-owned housing units authorized by building permits in April were at a seasonally adjusted annual rate of 1,080,000. This is 8.0 percent above the revised March rate of 1,000,000 and is 3.8 percent above the April 2013 estimate of 1,040,000.

    Single-family authorizations in April were at a rate of 602,000; this is 0.3 percent above the revised March figure of 600,000. Authorizations of units in buildings with five units or more were at a rate of 453,000 in April.

  9. Frilton Miedman says:

    To hell with guessing whether this is the top, I play it long/short based on sector rotation & business/inventory cycle.

    For over six months I’d been strategically building short protection in small caps while buying other lagging sectors – I don’t know, or care, if this is a top – I only keep an eye on sector spreads, some days I don’t even realize where the Dow or S&P are, it sometimes catches me by surprise when I look.

    I’ve been swing trading treasuries short over the last few years, got in heavy w/10 yr at 1.6%, out recently at 2.7%, now getting back in @ 2.5% and ready to chase it, especially as it approaches 2% (zero yield factoring inflation)

    If I were to guess where this rally is, I’d say we’re somewhere between 2006 & 2007, late stage, but again, it doesn’t matter that much to me.

  10. BennyProfane says:

    No China?

  11. DeDude says:

    1. The general tone on the right wing is that these are terrible times with a black man in the white house and socialism taking over. A lot of people with money are right wingers and their general feel about society may spill into their feeling about the future of the markets.

    2. Housing has been a little to much driven by investments. The investors are pulling back a bit and there are no new household formation to step in and keep the drive up. Unless young people are able to find jobs that allow them to pay a mortgage we will have a stalling housing market – but I doubt we will fall by more than single digits on units. But we may move towards smaller units to adjust towards a more realistic price/income ratio.

    3. In order to stay “Bull” the markets just have to avoid a huge pullback. That is possible even if they were to stay flat overall for the next decade.

    5. I think people have this tendency to think that parameters MUST revert to their mean. That may be true for some parameters but I don’t see why it should be for this one. The reason that corporate profit can misappropriate such a huge fraction of societies productivity is that the plutocrats have taken over. I am not sure that they will be dislodged and that working people will get more power to ensure a fair share for themselves. What this will do to demand and GDP in the long run is another story.

    6. If these rules are allowed to return to normal then we know that banks have recovered. If not – get your money the heck out of that sector.

    8. The interesting question is how fast and what new news media will be adopted by the 40-65 age group. Those are people who will be around in large numbers and have influence for decades. They are also folks who will be somewhat slow to jump on new stuff – but when they do they will tip the scale.

    10. I think we will soon move to an internet like system where people simply click to obtain the program they want to see. Then traditional “networks” become irrelevant. Sort of like the current primitive systems (Hulu, Netflix, etc.), but administered from your tablet rather than a remote. You create your favorite lists on the tablet with available new episodes marked (most of them already downloaded to your storage device). Then with a touch on the pad you decide what to see now.