-- Posted Tuesday, 14 November 2006 | Digg This Article
| Source: GoldSeek.com
Rick’s Picks
Tuesday, November 14, 2006
“Phenomenally accurate forecasts”
With the Consumer Prices Index for October due out this Thursday, every investor and economist in bozo-dom is anxiously awaiting the latest shot-to-be-heard-’round-the-world. How utterly ridiculous that we should continue to obsess each month over whether the price of a dozen eggs, or a gallon of gas, has risen by a few pennies when there is a $10 Trillion deflationary juggernaut bearing down on us in the housing sector!
Years ago, in the 1990s, when this silly obsession over an alleged “threat” of inflation reached a cyclical crescendo, then-Fed Governor Lyle Gramley asserted very publicly that the Fed was almost certain to tighten -- if not at its next meeting, then at the one to follow. I asserted otherwise in this newsletter, and I will do so again now. Let me say it loud and clear: Listen up, you simple idiots! There is about as much chance of the Fed moving back into tightening mode right now as there is of a Martian invasion.
Surely the eggheads and think-tank geniuses who are always fretting in public over the prospect of credit tightening must see what has been going on in the residential real estate market? Just last month it was reported that the average value of a home in the U.S. had declined by 9.7%. What this means – explicitly – is that every home “owner” in America with a mortgage is now shouldering an effective real-interest-rate burden of more than 15 percent. Oh, sure, the eggheads will argue, what does the average mortgage debtor know about real, as opposed to nominal, interest rates? Not much, I would admit – at least not in the academic sense. But you can be certain Joe Sixpack knows that the wealth effect he felt when home values were wafting blithely higher as recently as a year ago is not working its old magic now, and that, say, using re-fi money to buy a $5,000 TV set may no longer be such a hot idea.
We note, nonetheless, that the housing market, along with the shares of homebuilders, appears to have stabilized somewhat in recent weeks with the easing of mortgage rates. We would suggest that you view this not as a dead-cat bounce, but rather as the bounce of a dying cat from a fortieth-story ledge that lies just ten stories beneath his original perch. This is not a buying opportunity -- not in any asset class – but rather a fleeting chance for the prudent investor to batten the hatches.
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Last Call, Australia!
There are still some seats left at the Hidden Pivot in Sydney on December 2-3, so please let me know ASAP if you’re interested in attending. You can request a registration form and further details by clicking here.
Information and commentary contained herein comes from sources believed to be reliable, but this cannot be guaranteed. Past performance should not be construed as an indicator of future results, so let the buyer beware. Rick's Picks does not provide investment advice to individuals, nor act as an investment advisor, nor individually advocate the purchase or sale of any security or investment. From time to time, its editor may hold positions in issues referred to in this service, and he may alter or augment them at any time. Investments recommended herein should be made only after consulting with your investment advisor, and only after reviewing the prospectus or financial statements of the company. Rick's Picks reserves the right to use e-mail endorsements and/or profit claims from its subscribers for marketing purposes. All names will be kept anonymous and only subscribers’ initials will be used unless express written permission has been granted to the contrary. All Contents © 2006, Rick Ackerman. All Rights Reserved. www.rickackerman.com
-- Posted Tuesday, 14 November 2006 | Digg This Article | Source: GoldSeek.com
