Green shoots galore. (sales, real estate, 2009)

[MoorestownResident]

Lots of positive news out with the market up 200 points:

Residential home remodeling spending up much more than expected - which is coincident to Lowe's and Home Depot's better than expected earnings reports.

The PMI (purchasing managers index) up more than expected, the new orders component moved over 50 - for the first time in 17 months. Very notable. A level above 50 means expansion instead of contraction.

The DJIA is now at 8,700 with GM's Chapter 11 reorganization out of the way.

Jobless claims are falling; both new and existing homes sales posted small gains in the most recent months, albiet from very low bases.

[JG183]

that's right, let's send the bears back into hibernation

[MoorestownResident]

Yeah, the mongers have been pretty quiet of late. Nothing goes straight up, though, it appears the recession will end by year-end. In fairness to the mongers, that's what makes a market. It's healthy to have diametrically opposed viewpoints, no matter how incorrect they may be. LOL.

[Lusitan]

LOL - after the TRILLIONS of dollars Bush and Obama have flushed down the toilet in a (doomed-to-fail) attempt to prop up and manipulate the market, it's funny to hear cheerleaders talking about "what makes a market". Do you have no concept of what a disaster the housing market has been even with the unprecedented govt manipulation and nation-destroying subsidizing of the banksters and fools?

The realists have been right all along; the ponzi scheme has collapsed and our pathetic chimp-in-chief calls any weed he sees a "green shoot". Dow Jones up after the GM bankruptcy LOL they took GM out of the Dow because it's a FAILED COMPANY that went bankrupt LOL. No problems here, no sir nothing to see move along ... Dow looks much better now LOL.

The funny thing is, the collapse of the housing market bubble is in fact great news, as it means that housing will finally fall back to sane levels and perhaps this country will start saving again. Every news items you think the "bears" are posting as "bad" news is actually wonderful news.

Watch home prices in NJ crash through the floor as interest rates rise.

Here are some more green shoots for ya:

The Associated Press: Mortgage delinquencies hit record high in Q1

Late mortgage payments hit highest level since '72 - The Boston Globe

Dow Jones removes GM, Citigroup from DJIA - Jun. 1, 2009

http://www.nytimes.com/2009/06/02/bu...ef=global-home

http://www.nytimes.com/2009/06/02/bu...tml?ref=global

Sit back and enjoy!

[JG183]

Originally Posted by Lusitan

Watch home prices in NJ crash through the floor as interest rates rise.

and what's going to make them rise ?

"don't put all your eggs in the inflation basket just yet", says Jon Najarian, co-founder of OptionMonster.com

Najarian recommends no more than 10% of assets be put into inflation hedges such as gold (which he's long) and Treasury Inflation Protected Securities (TIPS).

what's pushing commodity prices, emerging markets, and Treasury yields higher lately is the "reflation" trade, he says (i.e. a re-embrace of risk by traders, after the flight to the relative safety of the dollar and Treasuries in late 2008/early 2009).

financial markets are reflecting these fund flows and renewed appetite for risk, rather than actual inflation, Najarian says.

IMO, the current scenario seems more like stagflation, similar to the 1970's in the U.S., but this should occur once the recession is over.

however, deflation typically occurs in recessions such as what we're in now, plus the savings rate climbed to its highest level in 14 years.

if nobody is spending, where is inflation (and the ensuing rise in interest rates) going to come from ?

[Lusitan]

Originally Posted by JG183

and what's going to make them rise ?

IMO, the current scenario seems more like stagflation, similar to the 1970's in the U.S., but this should occur once the recession is over.

if nobody is spending, where is inflation (and the ensuing rise in interest rates) going to come from ?

Nobody is spending ... except for Obama who is flushing trillions of dollars down the toilet bailing out fools and banksters, remember?

Inflation is going to come when the Chinese and other foreign investors who have been buying up most the debt every time the govt decides to "print another trillion" to flush down the toilet. Sooner rather than later those foreigners are going to start demanding higher returns on the money they're lending to U.S. through their purchase of U.S. govt bonds.

That's what being a debtor nation (or "consumer economy" if you so prefer) does for you -- you're at the mercy of your foreign lenders.

If you think stagflation is the most likely scenario, then I agree with you. But please understand what stagflation is: it's the combination of inflation + weak (or no) economic growth. That's precisely what we're going to see. And that inflation will drive up interest rates and further deflate the housing bubble.

[CaptainNJ]

Originally Posted by JG183

if nobody is spending, where is inflation (and the ensuing rise in interest rates) going to come from ?

the problem is that even though i may try to cut my spending, the government still steals money from my check every week and spends the living crap out of it and then some.

[elflord1973]

Originally Posted by JG183

and what's going to make them rise ?

"don't put all your eggs in the inflation basket just yet", says Jon Najarian, co-founder of OptionMonster.com

Najarian recommends no more than 10% of assets be put into inflation hedges such as gold (which he's long) and Treasury Inflation Protected Securities (TIPS).

what's pushing commodity prices, emerging markets, and Treasury yields higher lately is the "reflation" trade, he says (i.e. a re-embrace of risk by traders, after the flight to the relative safety of the dollar and Treasuries in late 2008/early 2009).

The flight to safety pulled money primarily into short term treasury securities, not 30 year bonds.

if nobody is spending, where is inflation (and the ensuing rise in interest rates) going to come from ?

Private citizens might be cutting back on spending, but the government aren't. The inflation comes from the fact that bondholders are nervous about runaway deficits.

[gagaliya]

Inflation will come, interest rate will go up, everyone knows that. To debate this point is rather foolish, what noone knows is how soon and how bad. Some recent signs are emerging.

It's like after lehman filed, everyone knows a shtstorm is coming to the market, but noone knew how bad and what will exactly happen. Now we know.

As for interest rate increase vs inflation debate on the real estate price, interest rate always wins, just look back at every single housing downturn when interest rate rises. Interest rate has a much more immediate and focused impact on the price: interest rate goes up, real estate affordability comes down, to maintain the same affordability so buyers can operate at the same level to pay the same monthly mortgage, prices have to come down. Simple common sense.

Inflation, over long term will causes the real estate price to increase, just like it does to a bottle of milk. keyword: long term. Expect further price drop once interest rate start to rise.

To be clear, i think if one finds a good deal, will get a nice break on the tax returns and is using it as a primary residence (home), now is an OK time to buy as we are past the peak. However the buyers need to be very conscious of the fact that the real estate prices have a very high probability to remain flat/down for the next 5-10 years - you will be stuck with the property for a while. So if one is just looking to buy to live for a few years then flip, it is not a wise decision.

I am actually looking to buy myself, however it will be in an area where i can rent it out easily in case i need to move because i dont expect to be able to sell it anytime soon without taking a loss. As such, net rental cashflow and easiness to find quality tenant is a top decision factor for me, on top of finding a nice building/area for myself to live comfortly.

[sholden]

Originally Posted by JG183

and what's going to make them rise ?

"don't put all your eggs in the inflation basket just yet", says Jon Najarian, co-founder of OptionMonster.com

Najarian recommends no more than 10% of assets be put into inflation hedges such as gold (which he's long) and Treasury Inflation Protected Securities (TIPS).

what's pushing commodity prices, emerging markets, and Treasury yields higher lately is the "reflation" trade, he says (i.e. a re-embrace of risk by traders, after the flight to the relative safety of the dollar and Treasuries in late 2008/early 2009).

financial markets are reflecting these fund flows and renewed appetite for risk, rather than actual inflation, Najarian says.

IMO, the current scenario seems more like stagflation, similar to the 1970's in the U.S., but this should occur once the recession is over.

however, deflation typically occurs in recessions such as what we're in now, plus the savings rate climbed to its highest level in 14 years.

if nobody is spending, where is inflation (and the ensuing rise in interest rates) going to come from ?

When people realize the Federal Government is insolvent and stop buying treasuries interests rates will be forced to rise, unless Bernanke buys them (printing the money) which will directly impact inflation which will in turn push up interest rates anyway.

But you've hit the nail on the head with stagflation once the recession is over.

Usually what happens, since Keynsian's took over anyway, is that the Fed increases the money supply in a recession - this counteracts the natural deflation to try and stop a deflationary spiral from occuring. The Fed does this by printing money and using it to buy things - which injects money into the system directly, and also by pushing money to the banks via low rates to get it out there indirectly.

Then when the recession is over, they reduce the money supply in order to stop inflation from running away. They do that by selling the stuff they bought back to the market, and raising interest rates.

That's simple enough.

Except this time round, they bought "toxic" securities with that printed money and overpaid for them too, when the recession is over no one is going to want to buy them back - since they will still be basically worthless. So the Fed can't take back all the money they injected - hence we are going to see inflation run away. Raising interests rates will also be hard, since the government has too much debt and won't be able to handle high rates itself, plus is will just crater the housing market and consumption and start this all over again.

But the money printing has pushed the reckinging back a few more years which seems to be what everyone wanted, so count that as a win.

We'll repeat this again, only due to delaying it will be worse still, and keep repeating until printing money doesn't work anymore. Then the whole thing implodes like no one would believe (see Argentina in the 80s, Russia in the 90s, Germany in the 20s). Note that those countries are all still around, the USA won't be destroyed or anything silly, it'll recover but it'll be an unpleasant transition - and the middle class is where the damage happens (the poor have nothing to lose, the rich can move enough wealth to places that benefit from inflation). Of course getting into massive amounts of debt is exactly what you want to do just before that happens - pity so many Americans will have trashed credit due to not paying their mortgage on time and hence won't be able to...

Yes, that's the doomsday scenario and isn't a certainty by any stretch. All the required pieces are in play though.