We all know that the current bear market rally is built on lousy fundamentals. As the months of supply of existing homes remains glutted at 2x norms, home valuations continue to decline & are forecast to remain in valuation decline into 2010. Then there is the so-called "shadow inventory" of unoccupied homes that the bank doesn't even know that the "owner" has abandoned months ago while the grass grows knee-high. Then there are the foreclosed homes the banks are not even putting on the market for fear of diluting their returns on the homes they already have for sale, which is killing the FSBOs, BTW. So the banks are accumulating an inventory of homes they'll just hold for years until (hopefully) conditions/valuations will improve. The flood gates of consumer spending is controlled by the extension of credit by the banks depending on home valuations via HELOCs and such.
Home valuations increase = credit extension = more consumer spending = higher earnings.
Home valuations decrease = credit contraction = less consumer spending = lower earnings.
The current rise in credit is a reflection of summertime residential & commercial construction while the weather is favorable and as school seasons wind down. At the end of summer when the weather turns dis-favorable towards construction the trickle of projects will wind down, both residential & commercial... and so will credit.
... and so paychecks will stop.
... and so consumer spending will diminish.
... and so unemployment will increase.
Maybe.
Maybe not.
But it's a reasonable scenario.
So, lettuce all be real clear about this BS "green shoots" bear market rally. The largest banks have all just been baptized by the Fed/Treas. All are well-capitalized under "adverse" conditions, or have four months to become so.
Which means more $USD devaluing government debt or share dilution through secondary (& tertiary) offerings.
The only thing keeping this market going is $USD devaluation as investors move away from the safety of the $USD and into equities.
However, that is becoming increasingly difficult to maintain as the EU & UK slip into a deep recession,re-valuating the $USD as the tallest midget*.
I don't know how much more debt the US can generate to offset the economic decline in the EU & UK. God forbid some warfare should break out over oil. Again.
I think the summer will be good for real estate management companies as long as the hopium keeps flowing.
But I'll bet it'll be a cold winter.
Above are the best of Real Estate Management companies.
Non-penny stocks.
Hi four week gains.
Hi gain on FRI.
Ascending OBV.
FSRV is included to show what you DON'T want to see in an OBV even when the charted price action looks good!
I haven't done fundie analysis on 'em yet.
http://www.investopedia.com/university/indicator_oscillator/ind_osc2.asp
* The word "midget" is considered offensive to what are now PC referred to as "little people".
Since they've abandoned the word I feel at acceptable to use what has been willingly discarded.
* The word "midget" is considered offensive to what are now PC referred to as "little people".
Since they've abandoned the word I feel at acceptable to use what has been willingly discarded.
