Even Apples are subject to gravity, though AAPL is up over 1% today.
Thirty-year U.S. bonds are up to 3.16% today. Ten-years are threatening 2% at 1.98. Crude is up. Inflation is becoming a reality to everyone, and "core" isn't fooling those who have to go to the grocery store. People will buy food even when the price escalates, as it is right now.
I see people talking about housing making a comeback -- and it could be in some regions -- and, more to the point, in some kinds of housing. But as the working population continues to decline, there will be less demand on the upper end of housing. People stuck with all the upgraded, over-sized homes on tiny lots with homeowners association dues and restrictions will likely be stuck for a while. There are always fluctuations, seasonal and otherwise. We may see a spurt of home-building, but I am wondering if it will not be more in multi-family dwellings.
The market climb is a response to the last round of QE. With the Dow approaching 14,000, how can we be in a recession? Right? That's basically what the Fed has been counting on, and it has worked, with the cooperation of an addled and distracted media more focused on celebrity gossip and scandal than economics doldrums or corrupt politics.
Bond rates will check QE at some point. It has to. But a crash in equities would check bond rates. And there are multiple central banks playing -- with Japan now gaming in earnest. There's simply no way for anyone to know what will happen in the next six to twelve months. But I would figure on a very bumpy ride.
Maybe a year or so before the housing bubble burst I made a remark to a couple of friends about who was going to buy the McMansions once the boomers retired? I said they could be subdivided into multi-family units for new immigrants. Might not have been too far off the mark.
ReplyDelete(Yeah, I know, it dosen't take a great deal of mental horsepower to be a pessimist.)
I know I'm supposed to think positive, but pessimists are so rarely disappointed.
ReplyDeleteUp until they started running all the zero-down, very low rate mortgages, I had always been pretty optimistic about the economy. That was the point, I think around 2005, 2006, I started telling my wife it would probably be a good idea to buy some gold and silver, 'cause this sucker is going to blow.
And what did I hear on the radio the other but some mortgage broker telling people that they should call even if they are underwater on their $300,000 mortgage. They could get everything refinanced at a better rate.
I would call it the classic definition of insanity, but I don't think most of these guys are expecting a different result. It's like me getting up and going to work every morning. Nobody knows anything else to do. Yet.