I have an old friend who is an attorney that used to say, "Money makes people funny". Well, I'd like to make one minor change to that statement. "CHEAP money makes people funny!." The era of low interest rates has allowed drastic changes to take place in Real Estate markets across the country. In this interest rate environment we have people buying homes that, under normal circumstances, would not be able to do so. That's not necessarily a bad thing in and of itself. The problem comes with the eventual downturn that will not only have these people losing their homes but ruining their credit in the process. 100% financing used to be the rare exception. Today, it is the rule. What goes around comes around and, unfortunately, I believe it's going to come around a lot sooner than people think. The reason I say that is because, in my opinion, the market is being manipulated by cheap money and, as they said in the movie, "Stupid is as Stupid does". You have people now using their homes like personal banks. They're stripping out equity at alarming rates to buy "stuff" like cars, boats, motorhomes and, yes, STOCKS!. They're margining their homes to buy STOCKS on margin. This, my friends, is a recipe for disaster! We'll continue to monitor this MARKET TREND and see if our assessment of the situation comes to fruition. But to us it feels like DEJA VU all over again!
Dale F. Doelling
Chief Market Technician
Trends In Commodities
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