Socialistic Xmas Lust Of American Capitalists

Clowns have been hiding in the US Existing Home Sales, now they are coming to the stock market. Some media outlets even see prices brighten ... just keep in mind those socialist discounts, err, first-time home buyer tax credit. This is a classic text book recovery in everything? Yes, there is little value of existing home sales activity in terms of GDP growth, but new home sales do.

Interestingly, but the existing home sales frenzy goes on without much help of credit, so, most likely, the life time opportunity in housing leads to dis-savings ... So, we are basically moving back to old normal, which was not to sustain, but that was then ... Because the next step in bull's scenario is renewed borrowing?

As to life time opportunity in the US housing market, the chart by BNP Paribas reminds today, that we may have some time to run for the real value. Click on chart to enlarge, courtesy of BNP Paribas.

As BNP Paribas comments on shadow inventory:

In addition, headline numbers do not account for discouraged homeowners who have stopped advertising for their property as they wait for prospects to strengthen of for homes which have been put up for rent. In this respect, the vacancy rate for residential rental properties reached a new record high of 11.1% in Q3, suggesting important imbalances remain.

I am not sure for what reason, but the sense of lost life time opportunity reminds me of words by Dylan Grice, the global strategist at Societe Generale:

But a good story isn't an investment case. Anyone investing in the late 1990s into the story that the internet was going to change the world, for example, likely lost a fortune, even though the story was 100% correct. Value should always get in the way of a good story.

If there is any bear left, then Lombard Street Research was warning yesterday:

Mr Zhou Xiachuan, Governor of the People’s Bank of China, today signalled the end of the global market bounce that has been in progress since the end of last winter. The only major addition of liquidity in the world economy over the past year has been in China. That is about to be withdrawn. Risk assets look like an unwise place to be in early 2010 – especially commodity futures and the government bonds of countries with large deficits and/or debts.

Click on charts to enlarge, courtesy of Lombard Street Research.


Indeed, China's domestic markets managed to close in red yesterday, however, today there is little sign of liquidity fear left.

US personal income and spending data for November were worse than expected by consensus economist, with all consequences, but this should not be the reason for Xmas pessimism?

Merry Christmas!