The market rallied nicely this past week as traders were led to believe the Fed would be "one and done".
* Is the housing speculative hot money now moving into stocks?
* Is the Fed going to do one more raise then stop?
* For those of us who've cashed in, time to put some cash to work in the market?
* Or is this a classic head-fake and stay out?
All comments welcome - bulls and bears. Specific stock, option, currency or bond recommendations welcome. Keep the commentary professional and non-personal (no matter how much you disagree with each other!)
Make your case. Give us your short term and long term plays.
As HP readers know, yours truly is 90%+ in cash (earning 4% - 4.25%). Big long COP position and minor APPL, EBAY, YHOO, EWJ longs, and holding a June put option on FNM
Shorted GM, the builders and lenders briefly in Nov and covered. Waiting for right time to possibly do those plays but shorting is a dangerous game for sure.
January 07, 2006
Question for readers - market rally, or head-fake? Give us your plays
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34 comments:
The thing that has me most worried about domestic stocks is the impact of slowing if not falling real estate and mortgage refinancing on consumer spending. There is a big question mark here. Tech looks OK due to forecast increases in business spending (but don't think those businesses won't cut back if they see a downturn in sales). Right now I really like Japan. They are done with their real estate bust which resulted in three recessions over the past 15 years. All the indicators suggest a growing economy, plus alot of money managers have been under weighted in Japan stocks, so their is also a bit of a momentum play.
What if the dollar has a sudden devaluation relative to other world currencies due to the twin deficits and the possibility that others in the oil producing countries do like Iran and base oil on Euros?
It is all so complicated. It makes my head spin...sigh.
I think GLD you'll see big swings.
Insiders run it up and sell at the peaks. Amateurs buy at the peaks. But as the world financial picture gets murkier, GLD is a long term hold I believe. But I'd wait for a dip to enter.
I too like Japan. Especially if our Fed is going to stop raising. With Japan at 0%, vs our 4.25%, the Yen wasn't doing well vs. teh dollar. That will change now - so appreciating currency and appreciating stocks. EWJ.
I think there's too much manipulation to short anything at this point.
I like Canadian dollar as safe haven against depreciating US$. Any thoughts there? I have all my assets in US$, and that makes me nervous, especially since I'm moving to the UK next week.
Head fake!
Lots of end-of-the-month money almost always makes the 1st and 2nd trading days of the month better than average.
End-of-year selling of losers and start-of-year buying of what seems to be hot is perhaps even a bigger factor this week.
And then there is the simply crazy reaction to the release of the FOMC minutes, which said absolutely nothing that absolutely everybody did not already know. Virtually everything without question was bought immediately and through the end of the Tuesday session for no reason whatsoever. (Hell, XMSR satellite radio picked up 5% -- only to give it all back Wed/Thu.)
Head fake!
Keith: I like CAD (Canadian Dollar) and CanRoys (PVX, FDG) as they have been solid for me thus far. I only care about the dividends from the CanRoys.
My favorite play right now is Euros as Iran switches to Petroeuros from Petrodollars in March. This obviously means less demand for USD and EUR rises. However, this is what Iraq did and some would believe is the main reason for the invasion. First thing we did after taking control was to switch them back to Petroeuros. Will we play the nuclear card and invade Iran? Hope not.
The safest bets are 4.25% USD savings and 6.7% I Bond treasuries. In these cases, you can "set it and forget it."
First thing we did after taking control was to switch them back to Petroeuros.
Ooops, I meant back to Petrodollars. Too much EUR on the head!
same thing happened in 2000. funds using new year cash inflows to prop stocks, especially high-fliers like goog.
i am long gold and short homebuilders.
market may sustain rally until mid-april. traders have to cash out shares to pay taxes. it happened in april 2000. check it out.
Putting most of my money i made from RE into Gold stocks. Auy, looks pretty good right now. mrchinup
Putting most of my money i made from RE into Gold stocks. Auy, looks pretty good right now. mrchinup
I keep hearing the negatives. The 4 areas i'm familiar with our still trending up. I don't need stats or realtor to tell me bubble or no bubble.
austin- up
socal-los angeles,oc,san fernando valley, ventura, santa clarita etc- all up
hawaii maui- up
salt lake city - up
All of these areas still are moving
up and plenty of buyers. no gloom and doom. alot of the socal areas have buyers with multiple families purchasing together and living together i've seen more and more of this the last 4 years.
2 or 3 years before we see any real drop in prices. The interest only holders will hold on for a while. Most of these loans we locked for 5 years starting back in 02,03,04, which means 07,08,09 due. I keep hearing rates are up, what rate, rates 30year and adjustables are real close to there lows but i keep hearing rates are up. Lastly i think the only issue is will foreigners keep buying our debt, thats the real question.
"socal-los angeles,oc,san fernando valley, ventura, santa clarita etc-all up"
Not here in LA
http://www.benengebreth.org/housingtracker/location/California/LosAngeles/
the reits look poised for 10-15% decline.
why would you buy them now?
they must be a hedge against making money.
I agree about salt lake and austin - very underpriced markets which have now been discovered by the flippers. I think those two will see appreciation the next 12 months
LA we know is in meltdown. I don't see any data for maui - anyone?
Here's LA:
Historical Data
Date Inventory 25th Percentile 50th Percentile
(Median) 75th Percentile
01/07/2006 11,219 $458,000 $599,900 $875,000
01/01/2006 11,329 $458,000 $599,900 $879,000
12/28/2005 11,756 $459,000 $599,900 $880,000
12/21/2005 12,297 $459,900 $599,950 $895,000
12/14/2005 12,601 $460,000 $605,000 $895,000
12/07/2005 12,744 $465,000 $615,000 $899,000
12/01/2005 12,930 $469,000 $619,000 $899,000
11/28/2005 12,908 $469,000 $620,000 $900,000
11/21/2005 12,979 $469,964 $625,000 $924,000
11/14/2005 12,811 $470,000 $629,000 $929,000
11/07/2005 12,597 $470,000 $629,000 $929,900
11/01/2005 12,448 $475,000 $629,900 $929,500
10/28/2005 12,496 $470,000 $629,900 $929,000
10/21/2005 12,224 $475,000 $630,000 $938,000
10/14/2005 11,978 $475,000 $635,000 $939,000
10/07/2005 11,707 $475,000 $635,000 $949,000
10/01/2005 11,593 $475,000 $639,000 $950,000
09/28/2005 11,569 $475,000 $639,000 $950,000
09/21/2005 11,305 $475,000 $638,000 $950,000
09/14/2005 11,008 $475,000 $639,000 $950,000
09/07/2005 10,415 $475,000 $639,000 $955,000
09/01/2005 10,205 $475,000 $649,000 $965,000
08/28/2005 10,168 $475,000 $649,000 $975,000
08/21/2005 9,930 $475,000 $649,900 $995,000
08/14/2005 9,719 $475,000 $649,999 $999,000
Hi everyone,
Great blog…I’ve been reading numerous websites regarding stocks and RE. Everything makes sense; stocks and RE are overvalued and will deflate. I sold all my mutual funds and moved into T-bills for now, back in September...unsure about buying gold.
Any way’s, I’m not so sure I did the right thing. I came across 2 articles and from my understanding of the articles; the Federal Reserve Board will not allow deflation only inflation. The game is rigged by the Federal Reserve, they can print unlimited amount of money.
(1)Price Deflation: A Great Idea With Low Probability
By Gary North
January 04, 2006 - LewRockwell.com
http://www.thelongwaveanalyst.ca/news/2006/06_01_03_price.htm
(2)Fractional Reserve Banking
by Murray N. Rothbard
http://www.lewrockwell.com/rothbard/frb.html
Anonymous again...
In case you can not see the
entire link for item # 1.
(1)Price Deflation: A Great Idea With Low Probability
By Gary North
January 04, 2006 - LewRockwell.com
http://www.thelongwaveanalyst.ca/
news/2006/06_01_03_price.htm
We'll see one more run-up in the economy (there's a lot of capital going into the market). One last sprint in the real-estate market will coincide...2008-2009. Keep in mind that real estate is localized, and don't forget to factor in quality-of-life changes for areas in the District. Also, traffic is not getting any better.
Anyway, after that...2011-2015..worse than the Great Depression. Double-digit inflation. The US Deficit uncontrollable. That's when we'll see the most tension between China and also when terrorists will strike the hardest.
Ride the crazy wave over the next few years. Invest like it's 1996 (Check out CMED). Slowly sell off your property by 2010. Hedge with Gold (10-20% of your portfolio). Then start moving to T-bills and high-yield bonds. You can only have one economic superpower for so long. Brazil is building 2 major ports. Expect rises in economy from Latin America, Spain, and Germany (not to mention the more obvious countries like China, India, and Singapore).
I mostly agree with the last anonymous, and think he's echoing Harry S. Dent, whose arguments are compelling. The current rally is real, and the market will go another 10% after the fed stops raising rates, but will start to drop toward the end of 2006 as more signs of recession loom on the horizon. The housing bubble collapse will accelerate the onset of recession, however real estate speculators are now rushing for the emergency exits and will be stowing cash in equities when they see the solid returns continue into Q2 so growth stocks should be mostly good for another 6-9 months.
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RickJ
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