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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: ild who wrote (48489)	12/30/2005 3:53:11 PM
From: ild	Respond to of 110194

Date: Fri Dec 30 2005 16:12 trotsky (deacon@RE vs. stocks) ID#248269: Copyright © 2002 trotsky/Kitco Inc. All rights reserved i don't think a collapse in RE would be good for stocks ( Mr. Cramer notwithstanding ) . liquidity has plummeted globally throughout 2005, especially the declining growth rates in US money supply are worrisome. also, there are just way too many complacent bulls in the stock market. over recent weeks there have been huge inflows into Rydex bull and sector funds, while implied money market funds are scraping along close to yearly lows. meanwhile, mutual fund cash-to-asset ratios are right back at the all time lows recorded in 2000, while insiders have never before sold as much stock as they have over the past two years. sentiment polls have been stuck at unprecedented bull majorities all year long ( while the market went nowhere ) . a real estate bust would mean even more pressure on liquidity...the idea that capital will just move from A to B is imo a bit simplistic, especially as RE can become highly illiquid in a bust. it's not like you can sell houses at the click of a mouse button, unlike stocks. even if one drops one's asking price prepared to eat a loss ( something most people are psychologically loath to do in the first place ) , there's no guarantee that that will result in a sale. the entire residential real estate capital stock could get marked down with only a handful of transactions actually occurring. Date: Fri Dec 30 2005 14:36 trotsky (Apollo@a bust is a must) ID#248269: Copyright © 2002 trotsky/Kitco Inc. All rights reserved i agree, i'm definitely in the bear camp on that one as well. as i mentioned yesterday, imo the cause-effect vector w.r.t. interest rates will probably invert, in short, interest rates are likely to decline next year BECAUSE real estate goes bust ( whereas after the Nasdaq bust, falling interest rates actually facilitated the RE bubble ) . employment is an especially note-worthy subcomponent of this debate, as about 80% of employment growth over the past 5 years was tied directly or indirectly to the RE boom. let's just say we won't need a record number of real estate agents per 1000 population once prices head south.