Housing is the central theme with the current market dislocation. That's because it is the only instrument where such massive amounts of leverage can be had (the entire market is worth about 20 trillion dollars of which half is still to be paid off and held as mortgage investments of various forms). Now, let me present a graph of futures contracts for housing prices. I will not try to rationalize or counter this (since it's just a current futures graph) of this but it does seem to match with my current thinking that I shall explain below.
It will get worse before it gets better. At present, the belief is that later this year the fed will start raising interest rates. I think the $ is presently responding to this, and stands at a critical juncture.
This nascent strength in the $ is what has been hemorrhaging commodities recently and most of them are currently at strong support levels. I do think though that we have one more leg down in the $, when the conviction steps in that the fed will not raise interest rates (leading to one more leg up in the commodities). See the action from late last year to earlier this year. My thinking is that we should see another break down to about the 67 level by October or so. This will mark the top for commodities and the bottom for equities, and the big one coming 6 months later, the false bottom for housing.
(to be continued....below are just notes for my reference)
The actions by the government and the fed, treasury will definitely help with the stabilization of the housing market. Why 6 months? New president, new hope. But more ARM resets leading to final bottom in early 2010. Then flat prices for a year or two. Next real estate bull will reach its peak in 2018 or so!
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2 comments:
Dude a friend suggested to send money to an India bank account and get close to 9% in interest.
I think India has opened up the repatriation process and i think you can bring back up to 50K dollars a year.
good idea or what?
Yeah, good idea. This is essentially like a carry trade. A friend of mine does it...borrows from here using 0% interest credit cards and invests it in India. You probably won't be borrowing I suppose. The risks to this are
- You will lose 1% either ways in transaction costs so make sure you lock in the rate for atleast 2 yrs or so
- Make sure you can repatriate easily. Last time I checked, they wanted me to fill some form. Not as simple as electronic txfr from India to here.
- Check tax implications. If you have to pay tax in India AND are expected to pay tax here on the repatriated interest, then do the math and see if it makes sense
- Xchg rate: This is not too big a concern but it can move dramatically sometimes like earlier this yr. If commodities go whacko, Re will keep depreciating
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