What do you think. Unemployment was over 10% and a big bull rally began that ended in the dot com pop?
Short-term, who knows. You have a market that rallies when Homebuilder's Confidence is at an 18-month low and unemployment is actually 17-18% by the 1982 method of calculating it. Long-term, there's a night and day difference between now and early 80s. Back then, sky high interest rates were coming down. Stocks were truly at great valuation levels. There are more differences than similarities. Even the March 2009 bottom wasn't nearly as "cheap" as the early 80s.
The whole thing reminds me of it. The big M&A Spree, double digit unemployment. Lots of Capital being used for speculation. It was during the 80s when we began our big hollowing out of US industry which lead to the big bull run. Maybe this is the second leg. Anyhow just ride it. My short puts expire in 26 days. Anyhow the more foreclosures and lower home sales growth is good. It means less people will be house poor and not saddled with big 2-3 grand mortgage payments to banks. and will have quite a bit of cash left over for spending.
Several differences: Creditor nation in 1982. Gold had ran and was headed back down. It is still headed higher. Fed backed into a corner. Can miracles still happen?
But I think people jumping out of 2-3-4 grand monthly mortgages into 600-1000 dollar rents must be a bullish sign. I know Obama wants to prop up housing and keep people house poor servicing 80% of thier wealth in mortgage payments. But I think folks bailing out of homes is like cutting interest rates. Cause thats more money entering the economy and not into the coffers of banks. Which is a monetary black hole absorbing all useful capital.
True, and I really don't think this "suburb homes-to-apartments" is (or will be) enough to cause the positive effects he assumes. More likely, house prices will just have to keep falling until we're close to an historical norm. And that won't be pretty.
But you can rent out homes for cheap as well. If you can walk away from you 3.5K mortgage and rent your home down the street for 1.3K Thats a big chunk of money in your pocket.