Whats the real culprit behind stockmarket blues?

Discussion in 'Trading' started by HedgefundTrader2, Dec 18, 2007.

  1. Real estate.
    Mortgage Mess.

    Right? Its been repeated constantly. Stock market took it on the chin.

    Now the Feds have cut rates 3 times still the market is not satisfied. They have brought in lots of liquidity but still the market is not happy. Now they are laying down rules for lenders to loan money, making it harder for borrowers to borrow. Bernanke is a stupid out of touch ivory tower intellectual clown in the ringling and barnum baily circus.

    IF you and me started buying real estate there won't be any blame. People in this country have frozen up postponing real estate buying and that is the real problem and answer to all the woes including mortgage mess and stock market. As long as the consumer freezes up and isn't encouraged to buy real estate, the woes will not go away. Real estate valuations will keep going down cause there are no new sales, inventories will keep piling up, lenders will keep tightening credit, CDOs can't be sold , and rest of the world won't buy US paper. Loans made 2 years ago were not bad, its the lack of valuations that made them look bad, lack of valuation due to lack of purchases! Lack of purchases due to lack of confidence and " wait-and-see" attitudes bringing down the temple!

    IF the Feds can do anything along with lenders, they should stimulate real estate buying. Encourage people to buy instead of renting which they are doing. The public can hold back one or two years longer, but at some point this need for housing will unwind and burst open and the market will come back on its own like it has done in the last 60 years. At some point this frozen up, lonely, unsure, scared US consumer will get over his fears and that will be the day.

    With new purchases everything in the machinery will go back to working order. The market will be stimulated , sales activity will pick up and builders will start new constructions.

    Talking about stock market, they will find another scarecrow to frighten the small investor into submissions on the days they like to trade short.
  2. Cramer: "options pinning". :D

  3. The problem here is that real estate markets have not adjusted enough to bring things to attractive, affordable levels. After the biggest housing bubble in history with 100-300% appreciation from 1999-2005, a little 10-20% correction is not going to do the job. Things would need to drop by 40-60% to get to a point where there would be any kind of "bargain" for U.S. residents - foreigners get some help from the dollar so it doesn't take as much for them.

    Right now you have a bunch of sellers stubbornly waiting for overvalued bubble-era sales prices, a lot of other potential sellers who got no takers so withdrew their listing waiting for better days to relist for sale, and many builders with oversupply. On the buy side, you have some foreigners buying in the best markets because the dollar is dropping, and a few vultures looking for foreclosures.

    Anybody who wasn't already an owner of some real estate has been effectively shut out of the markets without at least 10-20% down. Plus, what's the incentive for a new buyer to put all this money down when the market could drop further and their equity would basically disappear? And why should a buyer waste money buying an overpriced existing home when there are new homes with discounted prices from builders? And why buy now when you can see pain in the housing market for 12 months into the future at least? And why buy now when the market is in a decline, and the demographics start to turn negative around 2010-2012 creating a whole new source of supply as baby boomers sell out to downsize and retire? Without some kind of decent appreciation potential, there is no real compelling reason to buy now - current prices have eliminated any chance for appreciation for at least 3-5 years.

    Then you have government attempting to do all kinds of shenanigans to lengthen out the unwinding process. All of this makes it much worse for the psychology, and creates incentives for waiting rather than buying.

    There is also a question about possible recession within the next 12-18 months and a presidential election which could easily result in a Democrat President + Democrat Congress which is a recipe for major tax hikes.
  4. The sellers can do the same. They are taking a " wait-and -see" attitude so its a stalemate. Nothing is happening till someone cries Uncle. The sellers are always more resilient ones, they can hold on to properties longer that is why the national prices have come down only 4.5% in this 2.5 year stalemate since August 2005. Sooner or later, the buyers won't be able to hold off any longer, and a deluge and a invasion will begin, and at least thats what I saw in 1997-1998 comeback.

    Remember who started these problems? People stopped buying real estate and all kinds of strange things started happening in this country, the whole mortgage industry collapsed and now the tail is wagging the dog and the stockmarket is at risk.

    Stimulate real estate buying and it will solve the problem. Prices are not going down since people have jobs and they can pay and stay in the houses. At least that was the faulty logic American buyers used to undermine the market and themselves and now they are stuck on the highway to nowhere.