Housing bottom?

We have seen this before.  Once again, many analysts are this the bottom.  Here is an example

 

"Better affordability, driven by lower home prices and mortgage rates, will likely help to spur sales activity in coming months," wrote Banc of America analyst Daniel Oppenheim.

 

Time has proven Citi Investment Research analyst Stephen Kim wrong.  Now here is another analyst calling housing bottom.  With all the problems we have been seeing, it is going to be a while before we can even start talking about a recovery.  Mortgages are now harder to get, foreclosures are on the rise, and if the job market tanks, then all bets are off.  I found it good time to short HOV and BZH through options.  Only time will tell if Mr. Oppenheim is right.

 

Another factor people have been talking about is the fact that the housing issues have been on MSM (latest example was 60 minutes yesterday).  Yes, we have been seeing so much stuff in MSM about housing.  But this market is a long way from bottom. 

 

Let's wait and see if this is indeed the bottom of housing.

Dollar Carry Trade?

Is dollar going the way of Yen?  "Ahead of the Tape" column in WSJ looks at similarities between dollar and yen last decade. 

With the housing bubble bursting, the interest rates might be low for many years to come.  Could this make it a favored currency for carry-traders?  If it does, it may complicate fed's life as it will drive dollar down. 

US being a net importer works in dollars favor as other nations economies depend on US.  And they also have large amount of dollar reserve whose value goes down when dollar depreciates. 

It's hard to tell if there is going to be a dollar crisis as other economies are dependent on the US.  But as these economies replace use consumers with other consumers, the dollar will keep declining.

One thing is for sure.  Dollar is no longer the worlds leading currency.  It's hard to believe how hard it has come down in last 10 years. 

 

The developments have some currency traders asking the previously unthinkable: Could the U.S. dollar slowly be turning into the Western equivalent of the yen?

 

"The dollar is now generally looking like a low-yielder," says Alan Ruskin, international strategist at RBS Greenwich Capital. "If the fed-funds rate got below 3%, it would establish itself as that."

 

There are good reasons to doubt this scenario. If economic pain overseas deepens, foreign interest rates will likely come down, too, closing the gap with U.S. rates. This is one reason the dollar didn't become a carry-trade currency when the Fed cut its target rate to 1% after the 2001 recession.

 

By the time the U.S. banking crisis is resolved, the dollar might look nothing like it does today.

http://online.wsj.com/article/SB120147966674720853.html?mod=todays_us_money_and_investing

 

December New Home sales

Once again, the December home sales fell by 4.7%.  The November sales were revised to 13% from 9%.  If you add the 4% to this month, that is back-to-bak 9% drops.  It is so bad, it's hard to put a lipstick on this fugly numbers.  Home prices decreased by 10% and average price dropped 12%! 

These are the lowest numbers in 13 years!  We told you it's going to be a wild ride...hold on.

 http://www.cnbc.com/id/22879982

Duped into a rate cut?

When Helicopter Ben became the fed chairman, I had hopes he would be different from Alan Bubblespan.  But it seems as if he is worse than Greenspan.  It is not a secret anymore that the fed cut rates because they were worried about a plunge in the stock market. 

 

Now it seems the plunge was due to Societe Generale SA liquidating their positions. 

 

So the stock market plunge was aided by liquidation of these positions.  The fed was duped into a 75 basis rate cut! 

 

http://bloomberg.com/apps/news?pid=20601087&sid=agExEa2kSYxc&refer=home

 

December Home Sales

December home sales declined again. It dropped 22% (23% unadjusted) from last year and 2.2 (7.2 % unadjusted) from last month. So the slide in home sales continue. The inventory declined to 9.6 months from 10.1.

The median price plunges 6% to $208,400.

Another 3/4 point Cut?

No that's not a typo.  The market is expecting another 3/4 point rate cut.  The fed must follow masters..err markets order. 

 

http://www.cnbc.com/id/22804604

Late Tuesday, the futures were pricing in a 90% chance of a half-point cut and a 60% chance of a three-quarter point cut next week.

 

"The Fed is very, very, very worried," said John Tierney, an analyst at Deutsche Bank in New York.

Interesting Month

I just got back yesterday.  It has been an interesting month.  The fed lowered the fed rate by 75 basis points.  The fed is in panick mode. 

I sold my Countrywide options (expiring Friday) last Thursday because I thought there could have been an emregency cut on Friday (I bought more yesterday).

It looks like another interesting opening today.  S&P futures are down about 3%.  Let see if PPT can save the day today.