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Strategies & Market Trends : The Residential Real Estate Crash Index
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To: nextrade! who wrote (26384)1/2/2005 8:53:15 AM
From: nextrade! of 306849
 
From our friends are Contrary Investor

Without sounding over the top, we believe this anecdotal evidence of change in the character of the US consumer base deserves much more than a modicum of attention moving forward. And in the meantime, we expect the Fed to continue “creating” liquidity like there’s no tomorrow. Watch their repo activity, coupon pass activity and the weekly Fed custodial holdings of US financial assets for the foreign sector for clues as to liquidity creation intensity. This is what’s influencing stock and housing values over the very short term, but finding very little traction in terms of goosing the real economy. In terms of Wal-Mart, it appears that their customers are going to need an improving labor and wage environment. Almost ironically as of late, the Fed has actually been withdrawing stimulus and liquidity from the real economy vis-à-vis the Fed Funds rate increases, but alternatively it has been pouring liquidity into the financial markets via a very heightened level of repurchase and coupon pass activity over the past few months. (Has the Fed been doing this recently to potentially blunt or divert attention from the important goings on at Fannie Mae? After all, they have somewhere between 9 and 13 billion reasons to be a little bit worried.) In our minds, the Fed is simply exacerbating the US domestic wealth dichotomy of the moment. A short term panacea, but a longer term erosion of the broad economic base.

ContraryInvestor.com

Monthly Market Observations

January 2005

contraryinvestor.com
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