From the Jersey Journal:
Jersey’s housing crisis: High costs
The rest of the state is learning what Jersey City residents have known for a long time. Housing is very expensive, and at times unaffordable.
Data released Monday by the 2005 American Community Survey, a new annual demographic study by the Census Bureau, reveals that New Jersey residents pay the highest median housing costs in the nation. It is the third year in a row that the Garden State has been tabbed the most expensive place to own a home.
The 2005 median household income in New Jersey of $66,700 is nearly a third higher than the national median, $46,200. The problem for Garden State homeowners is that they pay nearly 50 percent more than the national median to keep their homes. One in six New Jersey homeowners now pays more than $3,000 a month, compared with one in four just five years ago.
Sure, home values have doubled from a median of $170,800 in 2000 to $333,900 last year. New Jerseyans are considered rich, but they need all that money just to have a roof over their heads. Salaries and wages do not keep pace with living expenses. They have money and property, but low purchasing power.
…
Add to this bleak housing costs picture the increase in fees and other taxes in this state and it is understandable why Census figures show New Jersey’s population is decreasing. The figures also do not reflect what appears to be a bottoming out of the housing market boom. The state Legislature is trying to come up with long overdue property relief, but it may be too little and too late. New Jerseyans may have to resign themselves to the fact that if they plan to keep a home here, they will probably be working well into what they thought would be their retirement years.
For those hoping to read the Moody’s housing analysis talked about in the press yesterday, my apologies..
I don’t believe the analysis, “Housing at the tipping point,” will be released to the public. Moody’s Economy.com has the price of this research piece set at $3,995.
FYI:
If you post a comment with more than two hyperlinks, the post will be held for moderation.
jb
As always, on Wednesday, Calculated Risk is the place to be for analysis of the MBA Mortgage Data
MBA: Mortgage Applications Rise
Highest median housing costs and businees executives rank NJ close to the bottom in regard to desireable states to conduct business. In conjunction with this, our “leaders” in Trenton are spinning out of control, digging us deeper and deeper. Grim, I have to stop reading these articles, very depressing.
This title over at RealtyTimes this morning really irks me:
Influencing Paralyzed Buyers To Make Their Move
Irksome title – true. But at least you have this gem of a quote: “…homesellers should be encouraged to be the first ones to price correctly for the current market. Do you want to be the first one to reduce your price and sell your home, or the last of me-toos, when you’ll get even less.”
This notion is especially irritating to me today as a lowball offer I made was summarily rejected even though it provided all the HPI gains for the Union-Newark area through 2004. That is over 68% for the seller. Still not enough.
Also irritating when I see listing like this Cape Cod in Westfield on a not especially large lot and with especially tiny rooms built in 1941 and asking $745k. http://tinyurl.com/ofl7s None of the sellers in the area I am looking are getting the message and their listing agents don’t seem to mind sitting on unsold inventory month after month. Some of them most have banked some of their 2000-2005 riches and continue to live off the fat.
In the past month, there has been A LOT of media attention on the housing situation, which to me will plant the seed in people’s heads that we are in a bubble.
I have said before that I think things like HGTV and TLC on TV have caused the run-up in house prices. those shows made a lot of people feel like they needed to buy something to be “important” and feel a part of the bigger picture. Just like everyone was buying stock in 1999, people were buying houses in 2003.
It was a national mindset that everyone needed to buy something, which was why we had bidding wars in the middle of the desert in arizona. I think the new mindset is going to be that if you buy something you are making a bad decision, and that will deter a lot of people.
Grim, one comment on this new site.
There is no easy way to forward your postings to my wife and friends. I often send along your findings and wisdom.
Can you add a “mail to” link?
Mr Oliver, here’s a link to your post:
https://njrereport.com/index.php/2006/10/04/jerseys-bleak-housing-picture/#comment-32759
Gotta ditch that Mac. :-)
Thanks Mr. O., I’ll look into that.
jb
Danke, Grim. Just looking to share the love.
Unreal, you lost me. I understand how to copy and past the URL, I was just wondering if a “mail to” button could be added, as at the old nnjbubble blog.
I’m at work on my PC, although I do use a Macbook at home.
[geek on]
I’ve wanted to buy a Mac notebook for the longest time, one of those things that was always on my geek-wishlist.
But I couldn’t ever justify the outrageous price, so I just run Ubuntu on my Insprion now. Satisfies all my geek desires.
[geek off]
jb
All of the articles I see stating that NYC is different put a ton of faith in the Wall Street Bonuses.
What I don’t understand is if all of the Wall Street financiers are buying new homes, don’t they still have to sell their old one?
Or are they so well-off that they can accumulate a portfolio of homes?
It would seem that for the most part, when they buy a new home with the bonus money, they would be getting rid of their own residence. The net impact on the market is still the same number of homes being sold.
Grim, I’ve had the Macbook just over a week now. I work all day on my Windows machine here at work, spreadsheets and such. My home PC became an extension of my work PC as it looks and operates the same way.
For the first time in years, having the Macbook, having to learn a new OS makes me feel like my home computer time is a hobby.
The prices have come down enough that it is on a par with a similarly equipped Windows machine. And it works, no drivers to install, no conflicts. It just works.
That being said, if you want a $599 laptop there is nothing from Apple.
From Bloomberg:
U.S. ISM Services Index Drops to 52.9 in September From 57
Service industries in the U.S. expanded at a slower pace in September as the effects of the housing slump rippled through the rest of the economy.
The Institute for Supply Management’s index of non- manufacturing businesses fell to 52.9 from 57 in August. Readings above 50 indicate expansion in industries including banking, retailing and construction that account for almost 90 percent of gross domestic product.
The report suggests the economy is losing momentum as the fourth quarter begins. A weakening housing market that has left Americans feeling less wealthy is limiting consumer spending at retailers such as Wal-Mart Stores Inc. and dragging on growth, making it likely the Federal Reserve will keep interest rates unchanged.
“The economy is slowing, but not at a great pace,” Joel Naroff, president of Naroff Economic Advisors in Holland, Pennsylvania, said before the report. “The slowdown in housing has implications not just for construction, but also for finance, real estate — lots of ancillary places.”
hey seneca,
wow, that’s a doozy. it is on the northside, so
add a couple hundred thousand, right? at least
it’s not an eyesore, and seems in decent shape.
just as good, there’s two 2/1 Capes on Edgar
Rd. next to each other with a house in between. identical
structures, one built 1946, the other ’50 or so.
The first came on the market at $530 and seems
to have been lowered to $515, although the original
listing is still posted on Realtor.com. The other
is listed at $450.
just another example of greed run rampant. sorry
but I’m too lazy to provide the MLS #s.
ts
Is there a way to edit posts for things like poor grammars and splelling errors?
Seneca Says:
October 4th, 2006 at 10:14 am
Is there a way to edit posts for things like poor grammars and splelling errors?
LOL, I was thinking the same thing.. Did you mean to mis-spell spelling? LOL!
-Sapiens
Article from the NY Post discussing falling prices in Manhattan. While it’s not NJ, Manhattan is often deified by RE bulls, who point to the strength of Manhattan as the reason why NJ RE won’t drop in NJ. Well, it looks like out “bubble wrap” may be popping.
http://tinyurl.com/jnl3t
“One in six New Jersey homeowners now pays more than $3,000 a month, compared with one in four just five years ago.”
If I read this right, we have less people (going from “one in four” to “one in six”) paying more.
Or it just tried to mean another way.
007
How did my post get imbedded? Did I do something wrong???
Grim, what is “Ubuntu?”
Ubuntu: Linux for human beings ;)
Your only a real geek if you on-line game and people actully e-mail you in character.
“njresident286 Says:
October 4th, 2006 at 9:42 am
I have said before that I think things like HGTV and TLC on TV have caused the run-up in house prices. those shows made a lot of people feel like they needed to buy something to be “important” and feel a part of the bigger picture. Just like everyone was buying stock in 1999, people were buying houses in 2003.”
Just as television ratings for CNBC fell off the cliff after 2000, it will be interesting to monitor some of the press releases coming out of HGTV……..grim – do you have a way to pull stuff consistently without creating extra work?
searches under “televison, programs, viwership, advertising sales etc.” just a thought
ack! I’ve been nested!
From the Asbury Park Press:
Housing lesson for legislators
If the state legislators doing a lot of studying and talking but little else about reducing New Jersey’s high property taxes needed further justification to act, they should check out fresh data from the Census Bureau about housing costs last year. The state is No. 1 in the nation, with a median monthly home ownership cost of $1,938.
That includes mortgage payments, insurance, utilities and, yes, the property taxes that support government functions. So if the legislators want to make living in New Jersey more affordable, spending has to be reduced to bring down those taxes.
…
With mortgage and rental figures like those, it’s little wonder that New Jersey residents have to work two and three jobs, take out second mortgages and make hard spending choices to stay in their homes. And it’s no surprise so many New Jerseyans are giving up and moving south or west.
Our legislators have to face those realities and make the same type of hard decisions their constituents make to bring down the cost of government and the property taxes that pay for it. They have to stop talking and start acting soon before more residents uproot for greener — and less expensive — pastures.
aol has an article, today “Housing forecast gloomiest yet for homeowners” here is the link
http://articles.news.aol.com/business/_a/housing-forecast-gloomiest-yet-for/20061003143809990021?cid=2194
There was Real estate topic discussion on CNBC sometime ago today. They talked about the Moody’s research. According to Moody’s 100 market will have downturn this year, out of which 21 may crash. The top 5 list were all from CA, FL & Reno, NV. Their reason, large supply, less affordability.
Well and ofcourse, they had NAR economist, who predicted we will still see modest growth as Job market is improving and Interest rates are historically low.
Compared to NAR, I would pick Moody’s report anyday.
What happened to the comments? Why are they nesting?
test.
Oops, my fault… Sorry guys!
According to Moody’s, Edison, NJ metro area will decrease only 5.2% from the peak in 1Q 2006? OK, no wonder no one is lowering their prices. They figure they can ask for the same outrageous price their neighbor got and they will negotiate a meager 5% off that price. And none of the NNJ areas are even on this list! Only Atlantic City, Ocean City and Edison, NJ will suffer price declines. I guess we all might as well bite the bullet and pay those asking prices.
If you ask me, this Moody’s report just adds more fuel to the sellers fire. What gives?
http://tinyurl.com/jdl28
I don’t see any nesting. But then again, I didn’t have any problems when people mentioned that fonts were small.
jb
Should be fixed now, there was an issue with an open html tag.
jb
Seneca – Thanks for posting the link.
Surprising, Allentown, PA is predicted to drop 8.2%. I am not sure now that the logic used is accurate. I am already seeing 15+% drop from last summer prices in Bridgewater. There is a townhouse that was sold last year at 375, and similar one this year is listed at 319.
This information is still preliminary as it’s still possible it could change as agents enter sales into the system. But I doubt it would by much.
For Bergen County ONLY, here is the average & median price along with the number of homes sold and number under contract in September for the past 11 years. This is for residential SFH listings; this does NOT include Condos/Co-ops & Twnhs.
Year Avg$ Med$ Sold UnderContract
1995 $265,464 $215,000 579 569*
1996 $252,048 $205,000 578 529
1997 $265,964 $218,000 656 611
1998 $297,774 $230,000 684 591
1999 $340,098 $259,000 608 439
2000 $392,537 $295,000 571 551
2001 $418,217 $325,000 545 423
2002 $494,848 $375,000 583 543
2003 $514,952 $407,000 762 645
2004 $544,765 $460,000 655 621
2005 $663,049 $520,000 684 590
2006 $647,978 $494,000 458 488 as of 10/4/06 11:15 AM EST
And here is the same data including Condos/Co-ops, Townhouses as well as SFH.
Year Avg$ Med$ Sold UnderContract
1995 $241,345 $200,000 721 689*
1996 $235,855 $190,000 705 690
1997 $250,638 $210,000 841 770
1998 $272,553 $218,000 886 755
1999 $299,183 $237,000 842 598
2000 $339,488 $260,000 803 770
2001 $368,705 $297,500 732 587
2002 $428,868 $342,000 828 774
2003 $458,021 $372,000 1039 908
2004 $478,034 $410,000 952 885
2005 $604,673 $490,000 946 832
2006 $581,529 $452,500 667 689 as of 10/4/06 11:15 AM EST
*1995 data may be incomplete as I believe this is the first year this data becomes available.
As you can see, average and median sales price have declined comparatively to September 2005 prices. Sales are at their lowest in the eleven year period and you have to go back to 2002 to find a comparative number of homes under contract.
Rich
Interesting speech by Bernanke this afternoon:
The Coming Demographic Transition: Will We Treat Future Generations Fairly?
jb
Some more information from the Moody’s piece:
Moody’s Economy.com Study: Housing Market Downturn in Full Swing
(the following is cut from the above link)
Metropolitan Areas That Will Suffer House Price Declines
Atlantic City, NJ
Decline -12.2
Peak 2005 Q4
Trough 2008 Q2
Allentown, PA
Decline -8.2
Peak 2005 Q4
Trough 2008 Q2
Nassau, NY
Decline -8.1
Peak 2006 Q1
Trough 2008 Q2
Ocean City, NJ
Decline -7.6
Peak 2007 Q1
Trough 2010 Q2
Edison, NJ
Decline -5.2
Peak 2006 Q1
Trough 2008 Q2
New York, NY
Decline -3.5
Peak 2006 Q2
Trough 2008 Q4
From Marketwatch:
BERNANKE: HOME BUILD DROP TO CUT H2 GDP BY 1 PERCENTAGE PT
BERNANKE: FED REMAINS CONCERNED ABOUT INFLATION
BERNANKE: KEY QUESTION IS IMPACT OF HOUSING ON CONSUMERS
BERNANKE: HOUSING MARKET SUPPORTED BY GOOD FUNDAMENTALS
BERNANKE:’SUBSTANTIAL CORRECTION’ UNDERWAY IN HOUSING SECTOR
Interesting speech by Bernanke this afternoon:
The Coming Demographic Transition: Will We Treat Future Generations Fairly?
jb
JB – do you know if anybody has this in a mp3 format?
MSD
BERNANKE: HOUSING MARKET SUPPORTED BY GOOD FUNDAMENTALS
“It was “difficult to tell” how long the slump in construction would last, he said, because both buyers and sellers have moved to the sidelines. There are “some strong fundamental underpinnings” for the housing market including continued low mortgage rates.”
I realize they are just sound bites but is Bernanke saying that builders are just waiting on the sidelines? Maybe they’re not building as much but they still have inventory to move and they sure as heck aren’t going to pull it to see if prices go back up.
I’m sure he’s referring to jobs (no losses) and the decent economy when talking about fundamentals. But it looks as if people can’t hang their hat on those two any longer when talking about maintaining the housing market prices. If we see a slip in either it’ll just exacerbate the drop in housing sales and prices.
In my dumb-ass opinion, Rich
From DJ:
Goldman Sued Over Fannie Mae Accounting
Goldman, Sachs & Co. said Wednesday that it has been added as a defendant in lawsuits regarding mortgage financier Fannie Mae’s accounting practices.
In its quarterly report with the Securities and Exchange Commission, the Wall Street powerhouse said the complaints allege that it violated laws, including U.S. securities laws, in arranging some Fannie Mae-sponsored bond deals.
The deals involved real-estate mortgage investment conduits, which are bonds collateralized with mortgage-backed securities.
The other defendants include Fannie Mae and some of its past and present executives, accountants, and other financial-services firms.
Bernanke: Housing slump may be limited
… “At the same time, I think there are some strong fundamental underpinnings that should help the housing market over the medium term, he said. These include: a good job market, strong income growth, demographics and continued low mortgage rates, he said.
“Ultimately, the housing market is going to be supported by those factors,” he said.
Bernanke said there was limited evidence that weakness in the housing market was hurting other sectors.
“To this point, other parts of the economy are remaining relatively strong,” with some exceptions in sectors related to home construction, he said. Strength in commercial construction has offset the decline in the residential sector, he said.
Bernanke was relatively brief in his comment about inflation.
I’m obviously no economist, but I think Bernanke is really out of touch when it comes to housing. Not once does he mention affordability.
I think maybe he should JUST comment on inflation as that is supposed to be his main focus.
Rich
Perhaps more of an issue of perspective, since Bernanke is talking about housing on a national level.
There are plenty of markets nationwide that have not seen anywhere near the level of appreciation (or speculation) that was seen in the “bubble areas”.
jb
Using the term “strong fundamental underpinnings” with regard to the housing market shows that the Fed is really out of touch with what is going on in many areas of the country.
I usually don’t like to pull off topic, and I hate to jump on the “high tax state bandwagon” but did anyone else see this yesterday:
Beginning this week, New Jersey residents purchasing music and videos from services like Apple’s iTunes and rival digital downloads e-tailers encountered something they’d previously only found at bricks-and-mortar counterparts: a sales tax.
…
According to a CNET News.com special report completed in April, 15 states and the District of Columbia already included media downloads in their sales tax regimes, and a handful of others–New Jersey included–were contemplating similar moves.
Garden State officials didn’t stop at downloaded music…New Jerseyans must now pay taxes on data processing; tanning, massage and tattooing services; limousines; and flooring and carpeting installation, among other things.
The url is:
http://news.com.com/2061-10796_3-6122258.html
but that’s most of it.
Why would there be a “substantial correction” if housing values were “supported by good fundementals”?
“Why would there be a “substantial correction” if housing values were “supported by good fundementals”?”
Excellent point. Its double talk shenanigans designed to confuse because the stock market doing well is being manipulated before the elections and everything is supposed to look good while holding up the dyke unti the water caves in so that the big boys and manipulators can bail out first before things cave in.Reports on inflation and income not rising are not good fundementals.
Hot off the rumor mill from over at The Shore Bubble Blog. This is regarding homebuilder Kara Homes:
Kara has declared Chapter 11 as of Wed. October 4. I know this because until today, I worked there. The company is completely out of money. They did not even make payroll this week, no one received a paycheck this week. They have no intention of making good on the massive amount of money they owe to vendors & subs. They have no capability to finish the work they’ve started, either. Even if they did, there’s no one to physically do the work as most of the staff has been let go or quit.
Totally unsubstantiated rumor, take this, not with a grain, but with a 50lb bag of rock salt.
jb
Its double talk shenanigans designed to confuse because the stock market doing well is being manipulated before the elections and everything is supposed to look good while holding up the dyke unti the water caves in so that the big boys and manipulators can bail out first before things cave in.
That’s quite a hypothesis you have there. (And quite possibly one of the longest sentences I’ve ever read on this blog.)
So, if I’m reading this right, Bernanke is saying these “things” in order to confuse us so we don’t see the true economic picture and the stock market rally is being manipulated (let me guess, by “them”) in order to make it look as if all is well and we’ll re-elect the current party in power. (Hey! now I have the longest sentence!)
Please, enlighten me further.
For the curious in Bergen County, here is the number of active residential SFH listings; this does NOT include Condos/Co-ops & Townhouses.
Date 2006 2005 2004
01/31 3,328 2,297 2,270
02/28 3,501 2,341 2,275
03/30 3,543 2,400 2,409
04/24 3,856 2,604 2,529
05/29 4,352 2,877 2,873
06/26 4,588 3,041 3,048
07/26 4,623 3,171 3,168
08/30 4,505 3,210 3,145
09/27 4,512 3,494 3,163
10/04 4,486 3,454 3,149
Historical Actives are not available prior to 1/1/2004
Remember way back when I told you boys to familiarize yourself with the “plunge protection team” and the “monetary control act of 1980″.
Looks like JOHN CRUDELE of the NYP did. He is the only one at the NYP with a brain. I have a rapport with John and we goto Aix on w86th sometimes together for lunch. I thought it was interesting when he did this bit in the NYP and yes, I told him about this blog.
Here is his bit:
———————————–
COME CLEAN, BEN!
By JOHN CRUDELE
July 27, 2006 — FEDERAL Reserve Chairman Ben Bernanke revealed that the secretive Plunge Protection Team meets several times a year, but he dodged a congressman’s inquiries about what the group does and whether minutes are kept of those meetings.
So The Post has filed a Freedom of Information Act request for those minutes – specifically for the meetings that likely occurred immediately after the terrorist attacks in 2001.
I wrote about the Plunge Protection Team in a series of articles earlier this month. Formally called the Working Group on Financial Markets, it was formed in 1988 by President Reagan to advise Wall Street.
Headed by the Secretary of the Treasury, it also has top regulators and the chairman of the Fed as members.
But in addition to giving Wall Street advice, I suspect – and former White House adviser George Stephanopoulos seems to have confirmed – that the Plunge Protection team has morphed into something more active.
And Wall Street firms may have been invited to join.
What’s clear from answers to questions posed by Rep. Ron Paul, (R.-Texas) is that new Fed chief Bernanke either doesn’t know much about the role of the working group or preferred not to discuss the matter.
And, I think, it’s time we found out a little more about an organization that could afford some Wall Street firms an opportunity to reap massive profits at the expense of ordinary investors.
Here’s some of the exchange that occurred between Bernanke and Rep. Paul last Thursday at the House Financial Committee hearings.
Rep. Paul: Good afternoon, Chairman Bernanke. I have a question dealing with the Working Group on Financial Markets. I want to learn more about that group and exactly what authority they have and what they do.
Could you tell me, as a member of the group, how often they meet and how often they have actions? And have they done something recently? And are there reports sent out by this particular group?
Bernanke: Yes, congressman. The president’s working group was convened by the president, I believe, after the 1987 stock market crash. It meets irregularly. I would guess about four or five times a year. But I’m not exactly sure.
And its primary function is advisory, to prepare reports. I mentioned earlier that we’ve been asked to prepare a report on the terrorism risk insurance. So that’s what we generally do.
Rep. Paul: In the media you’ll find articles that will claim, at least, that it’s a lot more than advisory.
You know, if there is a stock market crash, that you literally have a lot of authority, you know, to impose restrictions. And we’re talking about many trillions of dollars slushing around in all the financial markets. And this involves the Treasury and, of course, the Fed as well as the SEC (Securities & Exchange Commission) and the CFTC (Commodities Futures Trading Commission.)
And the reason this came to my attention was just recently there was an article that actually made a charge that out of this group came a position that interfered with the price of General Motors stock.
Have you read that? Or do you know anything about that?
Bernanke: No sir. I don’t.
Rep. Paul: But back to the issue of meeting. You tell me it meets irregularly. But are there minutes kept, or are there reports made on this group?
Bernanke: I believe there are records kept by the staff. There are staff, mostly from Treasury, but also from other agencies.
Rep. Paul: And they would be available to us in the committee?
Bernanke: I don’t know. I’m sorry. I don’t know.
Rep. Paul obviously doesn’t have a reporter’s knack for the follow-up question, so here’s what I would have asked next.
Crudele: Well, Mr. Bernanke, how about you find out! Someone in your position should know if, as former White House adviser Stephanopoulos has claimed, the Working Group on Financial Markets – the Plunge Protection Team – has the authority to interfere with the free market for stocks.
And we’d also like to know who makes decision for the group, politicians or guys on Wall Street. Don’t misunderstand, Mr. Bernanke. I’m not saying what the group is doing is wrong. But why should firms like Goldman Sachs – from which two of the last four Treasury secretaries have come – be in a better position than anyone else who gambles in the stock market?
See, that’s why I’ll never be in Congress.
john.crudele@nypost.com
SAS
u bet your ass the Dow and oil markets are getting “tweaked” from the boys in Washington.
SAS
How do they go about doing that?
SAS,
It’s commom knowledge on the street that the fed (PPT) was buying S&P’s during the bust of 2001. I’ve also read in barron’s how the US DOD have moved stockpiles of crude, now showing up in the inventory #’s. Isn’t it ironic that the energies and metals are getting bombed before the elections. Oh by the way, stocks, bonds and the dollar are rallying. The PPT at its best. Look at the big picture, our foreign partners are slowly moving away from the dollar. This will continue for a long time.
Interesting rumor about Kara. I don’t know if anybody has mentioned the article in Barron’s this past weekend, Housing’s Hidden Headache. The article described the use of land options and off balance sheets joint ventures to buy land.
The % of book value that land options(LO) and joint ventures(JV) represented;
NVR- LO-64%, JV-2%
LEN- LO-23%, JV-25%
HOV- LO-22%, JV-11%
TOA- LO-42%, JV-23%
These are a few of the 13 companies mentioned.
The botton line; some of these H-Builders land options deposits and/or joint ventures represent a large piece of their book value. Are these off balance sheets joint ventures somewhat enronic????
Sorry, I didn’t get a chance to pull inventory data for all systems today.
NJMLS and MLSGuide showed minor declines (0.5% and 0.9% respectively.
jb
SAS,
You may want to read this article, they are very suspicious of the PPT;
http://www.kitco.com/ind/Daughty/oct042006.html
So why are the stock and bond markets rallying? Government manipulation! “It makes me consider,” he says, “that the only thing standing between this market and a crash are the November elections.” Then he says the one thing guaranteed to send The Mogambo into a fit of panic and screaming, namely that inflation is soaring. “Under normal circumstances,” he says, “today’s inflation report – the highest inflation reading in 11 years – would have absolutely creamed the market. There is, to put it mildly, something fishy about this market.”
And when something is “fishy”, it means that it will get older, stinkier and more “fishy”, as it always does, until it rots away. And that lugubrious day may be coming sooner than any of us realizes, as Susan Albright has an article posted on IndiaDay.com titled “US Stock market showing huge divergence – a sure sign of a coming multi-year bear market.” In particular, the Russell 2000 versus the Dow is behaving strangely, although she did not mention the divergences between the Industrials and the Transports, as does Richard Russell of the Dow Theory Letters. She writes, as does Mr. Russell in the final analysis, that these huge divergences are “a sure sign of a coming multi-year bear market”, and that these kinds of anomalies are a “technical analysis tool for calling major bear markets.”
Her analysis? “The prospect of the economy going into recession is high. The growth prospects are low. The liquidity driven market may have already seen its best days.”
In a related note, the trade deficit is now greater than the current account deficit, meaning that we are importing more and more stuff from overseas, but we are not “exporting” as much services, and/or foreigners are not plowing their money into the USA, with customary reckless abandon. So where in the hell all this money is coming from to keep the stock and bond markets elevated is beyond me. But somebody is in for a shock.
“How do they go about doing that?”
Last time I spoke too much about that, I found something underneath my motel room bed in Vegas.
So, I learned my lesson and try to kep my mouth shut.
Perhaps read this for starters:
http://en.wikipedia.org/wiki/Plunge_Protection_Team
SAS
I’m sure you and Bob will chuckle at my naivety but I don’t see how the government or whatever can raise the stock market up across the board. A couple of blue chips maybe, but the entire market, nah.
But I’ll let it drop less the men in black jackets come for you.
… or the ones in lab coats.
I keed, I keeeed! ;-)
Rich – you got it right
Do you have raw land that you would like to sell?
Are you stuck in the subdivision process?
We buy land. Quick Closing. landbuyers@gmail.com
They just have to raise the market (Dow 30) enough to get attention. Once they get attention, the market psychology takes over with the help of the media to pump up more market psychology.
I think the housing bubble has proved just how easy a market can lack fundamentals, but yet still take off with market psychology and influence. Same is done with the stock market.
With the stock market, you actually see the results quicker because the velocity is faster.
If it doean’t happend, How did Enron and its traders screw California during the summer of rolling blackouts?
I know truth can be stranger than fiction.
:)
SAS
LandBuyers Says:
October 5th, 2006 at 12:23 am
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The cheerleaders are singing the praise of the Dow. Some may look at it as being at an all time high. It may/may not go higher. What is more important to me is that only 10 of the 30 stocks are higher than they were at the last Dow high, 6 years ago. There are screaming divergences all over the place, less new highs vs. new lows, more stock under their 200 day moving average, no confirmation from the Dow Transports. Don’t be sucked in by the PR, look beyond that.
J.B. – Regarding [There are plenty of markets nationwide that have not seen anywhere near the level of appreciation (or speculation) that was seen in the “bubble areas”.]
Many of these “non-bubble” markets, including vast expanses of plains, farms and deserts, should have had a negative appreciation during the last four years, IMO. Not only were real wages in decline, savings negative, and the highest labor inputs for farm production subsidized by migrants/illegals, but prices in some “non-bubble” areas were sustained by locusts.
Now, don’t those areas also look like bubble areas when we consider other factors?
I am not really market savvy .. But wouldn’t this whole thing be a conflict of interest. Similar to insider trading? Is anything sacred?
The only thing “sacred” is shrewdly failing to use any advice on investing that is sourced from an essentially anonymous and unlicensed internet blog.
CF will you be my big brother? ;}