Fed WILL cut rates. Inflationary worries have been conteracted by the housing downturn and the fall in commodities as well. We are looking at spiraling de-flation.
Look for a 50 basis point cut and rebounding homebuilding stock prices by Sept 18th.
well this may happen, although i doubt it as Bernanke speech implies to me that he won't cut rates by more than 25 basis point. The consequences will be devaluation of the dollar inflation and big drop in the stock market. I hope that Bernanke is more responsible than Bush and Shumer. Anyway housing is doomed, these actions just postpone the pain of the crash in house buiding stocks.
investors are playing russian roulette with the interest rates, Bush, Bernanke, sub prime mess and credit crunches. The house market is doomed, foreclosures will not stop, the banks and mortgage companies cannot lend money at low rates, buyers cannot afford new rates. The intervention by Bush was another idiotic action by a moronic president that will just prolong the crisis, whereas we would all be better off with a rapid resolution with multiple defaults. Housing stocks and mortgage companies are doomed.
Wrap your mind around this article from NAHB:
I like the part where Seiders reduced his estimate for housing starts by 10% from a month ago. I the 10% reduction that he might also make next month priced into this puppy?
"Single-family housing starts also are experiencing �an off-the-cliff decline,� he said, and will show a 43% drop from their peak when they reach a trough in the middle of next year. Single-family housing starts will slow to a seasonally adjusted annual pace of 1.02 million during the first half of next year, a 10% downgrade from his forecast of only one month ago, Seiders said."
The ARM re-set debacle is just barely underway. How will the financial world cope with the tsunami of re-sets that are due in the last 6 months of 2007 (85% more than the first 6 months) and more in the first six months of 2008 than all of 2007? How does one conclude that the damage done to date by just a pittance of re-setting is the last of the havoc and we’ve nothing but smooth sailing ahead?
How do the holders of $ billions of sour instruments whose values are plummeting wiggle off the meat hook they’re impaled on? How does the corporate debt turnover return in a market where nobody is capable of accurately fixing value? What happens the day that the drastically lowered value can no longer be hidden? What is an institution leveraged to the eyeballs supposed to sell in order to cover their margin calls?
Bets are on that Hedge Funds and banks around the world will continue to fail, along with a couple of major financial institutions. Maybe the Fed does lower rates, but other than providing the ultimate sucker signal for fools to rush back into a burning building, a lower rate will do zip in preventing more and more foreclosures triggered by the end of teaser rates, impacting prime, Alt-A and sub-prime alike. Whether the holder of a 2% mortgage gets re-set at 5.5 or at 6.0 is totally irrelevant. The evidence that this is exactly what is happening out there in debtor-land continues to pile up.
Who is going to lend money to the U.S. firms who have bamboozled their creditors with a scam that would make the mafia green with envy? (Impressed with Toll’s $500M deal with RBC? At $650K per house, it’s good for less than 1000 homes.)
And while many pundits are convinced that Benny will drop rates, none has offered an explanation of how the tanking of the USD for a country woefully dependent on foreigners buying their currency, nor why the return of hyperinflation whose bulging Boomer generation is starting to retire on fixed incomes, are such desirable outcomes.
Ah, if only life where that easy that Fed would have slashed rates to 2% 10 days ago. There are some powerful arguments that contend that not only should Benny and the Jets lower rates, they should raise them in order to put a stop the frenzied financial engineering that has built such a worthless pile of cards and such an empire of debt.
The DOW is down less than 5.75% from its historical 14,121 high, Ditto the S&P. What evidence is out there that investors need to be bailed out?
Be mindful of the Midas myth and what you wish for.
This should make the hair on the back of your neck stand up.
The only optimistic note in the report is based on a very questionable premise:
"Looking ahead, Fitch said the stronger economy will aid the housing sector in 2008, but will probably not be robust enough to counter continuing negative buyer psychology, and tight credit qualification standards."
If we go into recession in 2008, I believe that every single major public homebuilder will go under.
What a pathetic dead-cat bounce this morning.
There is plenty of pain coming. Longs and bottom fishers have been waiting for evidence of the turn in housing. It is nowhere to be found. Case-Shiller shows an acceleration of the trend for falling home prices. Remember that CS only covered through June. July and August are going to to be horrible when the data is analyzed. Ratings agencies are behind the curve, but are continually downgrading the major public homebuilders.
The public homebuilders are completely unneeded. Private homebuilders have the capacity to build all the houses that we will need for the next 5 years, which isn't that many. The private companies didn't play the Wall Street growth-at-any-cost game. They will buy up lots out of the BK of the public builders.