5.25% on the 10-year
If rates stay at this level it seems unlikely that sales won't be dropping hard within the next 6 weeks.
Rates up 65 basis points in a little over a month. On a median priced home that is about $250/month in interest.
Rates up 65 basis points in a little over a month. On a median priced home that is about $250/month in interest.
Comments
Question: How does the "wealth effect" work when you are losing $40K/mo?
A 65 BP increase on a 6.5% mortgage = 10% reduction on what a zero-down, IO debt-slave can afford to buy
Whats with the gaps on the ^TNX 5 day chart (Yahoo)? Are they significant and why would the yeilds change in the gaps?
I see you (DJO, Eleua) visit Market Ticker on occasion. Do you understand all that he is saying? I have a really tough time following him most times.
I guess you could say so. There are gaps because it is opening higher every day than it closed the previous day.
Did you happen to mouse over the bottom of the chart to see this?
I try to keep up with him. The bulk of what he discusses is technical analysis (TA), and I was never a believer in TA. To me, it is just squiggles on a chart and people assigning meaning to arbitrary values. I viewed it with the same credence as I would astrology. IOW, I believed it was the "dark art" of finance.
KD is making me more of a believer in TA. His rising bear wedge was pretty convincing. Either way, if you listen to a TA guy, there are always two possibilities at any given juncture: up or down. No shit.
They always need confirmation of something, which is almost always a retrospective. Think about that for a minute.
I have always used fundamentals, as I believe that is what ultimately moves stock prices. Notice that I said "ultimately." Back in Feb, the wheels came off the bus of mortgage finance. Fundamentals mattered. Starting in March, fundamentals not only didn't matter, the stocks moved opposite of fundamentals. The faster fundamentals deteriorated, the more stocks zoomed.
I do agree with KD that builders and CFC are complete toast. His fundamental analysis is far more compelling than his TA. Example: remember when he was talking about CFC taking out $4B in debt to goose some stock and get some liquidity when they reported they have $55B in assets? I agree that is a major red flag on their liquidity. Any disruption in liquidity could put CFC in the gutter. I doubt it would matter what pattern their stock sales history is making on some arbitrary chart.
Bottom line. In the past 4 months, I have made and lost a fortune following fundamentals. All things considered, I'm pretty happy to be solvent after going "all in" right before a once-per-century buying orgy. I seriously doubt the bulls have anything left after the run they have been on.
Watching the TNX has been very encouraging. If Uncle Ben can't find a buyer for US debt, or if he hikes rates (I am dreaming, I know...), somewhere someone is going to have something blowup in their face, and it will be 1998 currency crisis all over again.
KD's site is a wonderful education. I get about 2/3 of what he is saying, and I try to look up the other 1/3.
He sounds like a professional trader. I'm a professional pilot. I would imagine that if I had a blog that talked pilot stuff to x-Navy types, KD might be scrambling just to hang on as well.
I look forward to his stuff every day. I think he is dead-on about a major inflection being in our near future. I do find it interesting that he is practically saying that Shanghai is going to do a headder in the near term.
Hope that helps. Let's all get rich by watching an entirely predictable housing bubble collapse.
E
The trouble with fundamentals is that it doesn't matter if you can see everyone walking off a financial cliff -- if you are the only one sees it then they'll all still walk that way, and that makes the market move more than your fundamentals being right can. It would be nice if there was a better counterbalance than TA, but I don't know what that is.