Showing posts with label real estate. Show all posts
Showing posts with label real estate. Show all posts
Monday, August 31, 2009
URE PRICE TARGET
On July 21st, indicators had URE in a Bear Trap. The price is up significantly and currently the bullish price objective of $10.75. I have owned since May of this year.
Real Estate Market
Current economic indicators show that the real estate market is in a nice uptrend, but may be a more long term bet than a short one.
Most recent U.S. construction numbers have been nice and sales of new homes rose to the largest increase in the last eight years.
As an investor, I would say that the real estate market looks good over a five year investment strategy, but with credit tight and an overall drop of 12% in the average housing price it still may be premature and a rocky road. This drop has placed many home owners underwater with respect to their mortgage and we could see a continued "leave the keys on the kitchen table". If there was one indicator I was watching closely, it is unemployment claims. This number has improved somewhat and has maintained. If this number continues to ease, we could see a very nice V-shaped recovery, if not we could see a quick downtrend in this market.
The consumer is the indicator in this market and should be watched closely. Many of the foreclosures will come to an abrupt halt if home prices stabilize.
The URE is up 150% over this time frame and I remain heavily vested. Keep in mind this is not for those who dont like large price moves. Right now it seems this could go either way, so if you have gains take some profits, if not, wait for a large pullback to get in.
Most recent U.S. construction numbers have been nice and sales of new homes rose to the largest increase in the last eight years.
As an investor, I would say that the real estate market looks good over a five year investment strategy, but with credit tight and an overall drop of 12% in the average housing price it still may be premature and a rocky road. This drop has placed many home owners underwater with respect to their mortgage and we could see a continued "leave the keys on the kitchen table". If there was one indicator I was watching closely, it is unemployment claims. This number has improved somewhat and has maintained. If this number continues to ease, we could see a very nice V-shaped recovery, if not we could see a quick downtrend in this market.
The consumer is the indicator in this market and should be watched closely. Many of the foreclosures will come to an abrupt halt if home prices stabilize.
The URE is up 150% over this time frame and I remain heavily vested. Keep in mind this is not for those who dont like large price moves. Right now it seems this could go either way, so if you have gains take some profits, if not, wait for a large pullback to get in.
Sunday, August 30, 2009
US Debt 372% to GDP
In this mornings mail bag we have this take on the current state of the economy by Bud Conrad/David Galland, Editors, The Casey Report which we hope that you enjoy.
While we aren’t contrarian for the sake of being contrary, more often than not that is the position in which we find ourselves. Today, with the media falling all over itself to paint a rosy outlook for the economy while simultaneously voicing encouragement to the new administration in its remake of the nation in previously unimaginable ways, it’s hard not to question our conviction that the worst is yet to come.
Could the economy really recover this quickly from the traumatic trifecta of a record real estate bubble, leviathan levels of debt, and a global credit collapse? We don’t see it as remotely possible, but yet… but yet… there for everyone to see are countless happy headlines and breathless exhortations that the worst is behind us.
So, is it Green Shoots or Greater Depression?
Getting the answer right is critical, because from it flow serious consequences to each of us. And not just in our investment portfolios but in how we organize our lives.
Looking for an evidence trail leading to the correct conclusion, Casey Chief Economist Bud Conrad once again put in very long hours digging through the data. Here’s what he uncovered, about the claims of green shoots, and what may actually be in store for the economy moving forward.
David Galland
Rather than accepting the many commentaries that our economy may be improving, let’s focus for a minute on the important forces that will play out over the decade ahead, and the minor improvements – from disastrous levels – that have given commentators such hope that the worst of our problems are behind us.
What Do the “Green Shoots” Really Look Like?
While some individual measures of economic activity appear slightly less dire than previously, it’s important to understand that most improvements are largely attributable to government intervention.
For example, at the onset of this crisis, commercial paper spreads rose to the point that this important source of corporate short-term funding had virtually shut down. Today, those spreads have returned to almost normal levels. But the bulk of this improvement is not due to a return of confidence in the economic system but rather to the Federal Reserve directly intervening in the market with several hundred billions of dollars.
And mortgage interest rates, which briefly dropped into the 4% range, did so not because of a surge in credit worthy borrowers or eager lenders… but rather because the Federal Reserve launched a program of buying $1.25 trillion of mortgage-backed securities. Doing its part, the Treasury has poured billions into Fannie and Freddie and provides guarantees for their mortgages.
In these and many other instances, the “green shoots” that optimists have spotted are really just the visible manifestations of the massive interventions by an increasingly bankrupt government.
Indeed, the massive fiscal stimulus provided by the federal government – and by the Fed, which has slashed interest rates to near zero, purchased mountains of toxic waste, and bought up Treasury debt with billions in freshly printed money – are unprecedented in the history of the U.S.
But even a cursory review of key metrics reveals continuing declines in housing prices, rising unemployment, and slowing consumption as measured by falling retail sales, GDP, and the collapse of world trade. Sure, housing unit sales recovered a little recently, but that’s due mostly to the distress sales of foreclosed homes and houses worth far less than the outstanding mortgage. These are not signs of a strong economy.
The only rational conclusion to be drawn is that the crisis is far from over and that we are not likely to see a strong recovery anytime soon. In fact, things are likely to get much worse before they get better.
The massive debt expansion that played a crucial role in creating the disastrously overleveraged economy is not shrinking. As you can see in the chart above, it’s growing ever bigger.
While we aren’t contrarian for the sake of being contrary, more often than not that is the position in which we find ourselves. Today, with the media falling all over itself to paint a rosy outlook for the economy while simultaneously voicing encouragement to the new administration in its remake of the nation in previously unimaginable ways, it’s hard not to question our conviction that the worst is yet to come.
Could the economy really recover this quickly from the traumatic trifecta of a record real estate bubble, leviathan levels of debt, and a global credit collapse? We don’t see it as remotely possible, but yet… but yet… there for everyone to see are countless happy headlines and breathless exhortations that the worst is behind us.
So, is it Green Shoots or Greater Depression?
Getting the answer right is critical, because from it flow serious consequences to each of us. And not just in our investment portfolios but in how we organize our lives.
Looking for an evidence trail leading to the correct conclusion, Casey Chief Economist Bud Conrad once again put in very long hours digging through the data. Here’s what he uncovered, about the claims of green shoots, and what may actually be in store for the economy moving forward.
David Galland
Rather than accepting the many commentaries that our economy may be improving, let’s focus for a minute on the important forces that will play out over the decade ahead, and the minor improvements – from disastrous levels – that have given commentators such hope that the worst of our problems are behind us.
What Do the “Green Shoots” Really Look Like?
While some individual measures of economic activity appear slightly less dire than previously, it’s important to understand that most improvements are largely attributable to government intervention.
For example, at the onset of this crisis, commercial paper spreads rose to the point that this important source of corporate short-term funding had virtually shut down. Today, those spreads have returned to almost normal levels. But the bulk of this improvement is not due to a return of confidence in the economic system but rather to the Federal Reserve directly intervening in the market with several hundred billions of dollars.
And mortgage interest rates, which briefly dropped into the 4% range, did so not because of a surge in credit worthy borrowers or eager lenders… but rather because the Federal Reserve launched a program of buying $1.25 trillion of mortgage-backed securities. Doing its part, the Treasury has poured billions into Fannie and Freddie and provides guarantees for their mortgages.
In these and many other instances, the “green shoots” that optimists have spotted are really just the visible manifestations of the massive interventions by an increasingly bankrupt government.
Indeed, the massive fiscal stimulus provided by the federal government – and by the Fed, which has slashed interest rates to near zero, purchased mountains of toxic waste, and bought up Treasury debt with billions in freshly printed money – are unprecedented in the history of the U.S.
But even a cursory review of key metrics reveals continuing declines in housing prices, rising unemployment, and slowing consumption as measured by falling retail sales, GDP, and the collapse of world trade. Sure, housing unit sales recovered a little recently, but that’s due mostly to the distress sales of foreclosed homes and houses worth far less than the outstanding mortgage. These are not signs of a strong economy.
The only rational conclusion to be drawn is that the crisis is far from over and that we are not likely to see a strong recovery anytime soon. In fact, things are likely to get much worse before they get better.
The massive debt expansion that played a crucial role in creating the disastrously overleveraged economy is not shrinking. As you can see in the chart above, it’s growing ever bigger.
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