Dow continues to climb; housing recovery is real

Housing recovery is coming along as well as can be expected but there are still a huge chunk of people that cannot sell their homes due to being under water because of the high loans they took out before 2008.

We're still at 22% of all mortgages. But it was over 28% before.

Ironically, that is part of the reason that housing is doing so well.

These people aren't even bothering to list their houses.

Plus there is still a big backlog of homes in the foreclosure process and homes that will at some point go into foreclosure.

This causes a low inventory of houses for sale.

Low inventory plus low rates equals high sales prices.

This also means higher home values which help some come out from under water and others to get closer.

But really it's just going to take more years of paying down high rate mortgages for many to get out.

But there is progress and a light at the end of the tunnel.

Get the underwater rate bellow 5% and we will have a roaring economy.

Higher median incomes would be really helpful.

Time to start shorting the market yet, or does this bull market still have some run?

Bob Binker states this weekend....."only 1.7% food inflation the last 12 months"! IS HE CRAZY...FLagpole?

Flagpole wrote:

Dow today as of NOW is up 86 to 15,422.23.

Housing recovery is real -

http://buzz.money.cnn.com/2013/05/21/housing-recovery/?iid=HP_LN

Here's hoping you have money in the market.

Cheers!

Here's an article that suggests that housing may be in for some trouble down the road.

You mean housing inflation is real. I agree with that.

RuKiddingMe!! wrote:

Bob Binker states this weekend....."only 1.7% food inflation the last 12 months"! IS HE CRAZY...FLagpole?

Bob Brinker isn't one I usually agree with...man he has two HOT twin daughters though, one of whom I used to work with.

flagpolerules wrote:

Time to start shorting the market yet, or does this bull market still have some run?

I'm never a fan of shorting the market...good way to lose your shirt.

Does this market still have some room to run? I think so. Shouldn't matter to you too much though unless you're within 5 years of retirement or in retirement.

Best to just keep putting money in the market like clockwork (if you aren't yet retired), stay out of debt, add some bonds in there when close to retirement and in retirement, and plan to live off SS and just being frugal when the market goes south.

Okay, but what if I think the market is in a bubble? Hard for me to buy what I see as overpriced assets. Sit on the sidelines accumulating cash and wait for the inevitable correction? I'll make my 401K and IRA contributions regardless, so I'm only talking about "discretionary" investing.

Flagpole wrote:

Does this market still have some room to run? I think so. Shouldn't matter to you too much though unless you're within 5 years of retirement or in retirement.

Some of us are still waiting for the "BIG" drop Flagpole predicted about a year ago... when he said the market was overvalued or something to that effect.

My investment strategy over the past 15 years or so has been pretty similar to what Flagpole recommends. For the most part, I\'ve been happy with that approach, and plan to continue.

But then I see an article like this one from Sunday\'s WSJ:

http://online.wsj.com/article/SB10001424127887324767004578484913679967772.html

Final two paragraphs:

\"Here is the risk today. If the economy booms, quantitative easing will end. Stocks and, especially, bonds will suffer. But if the economy doesn\'t boom, stocks will suffer because profits will run out of steam. Then the Fed will have to resort to ever more wild measures to stimulate economic growth and inflation. Sooner or later, bonds will suffer, too.

These are more dangerous times than many investors realize. Far from holding a portfolio which is protected in all environments, they are basically betting on a steady boom with rising prosperity and no inflation—a best-case, and rare, scenario.\"

Flagpole or other buy-and-hold guys - does this argument give you pause, or do you still see enough upside in the economy to offset the risk that the latest market recovery is built on an extremely shaky foundation?

Flagpole wrote:

[quote]flagpolerules wrote:

Best to just keep putting money in the market like clockwork (if you aren't yet retired), stay out of debt, add some bonds in there when close to retirement and in retirement, and plan to live off SS and just being frugal when the market goes south.

Flagpole, this is what worries me about this current market. That people should be frugal when it goes south. Because you are right, people should be frugal. But conversely that means people are spending more because the stock market is doing better. Why is the stock market doing better? Because people are starting to spend more. And of course Fed policies

The economy is way, way too dependent on the stock market. In the long run I don't think that is healthy for the stock market. It exposes the stock market to a risk of a vicious downward cycle whenever the stock market stagnates. People spend less causing revenue to go down, causing stock prices to go down making people less wealthy and spending less. A normal Bear market could turn into a rout to the downside.

I would feel a lot more comfortable if we had policies that put money directly into the pockets of people. That is cut payroll taxes, raise the standard deduction, Do NOT cut Social Security as it looks like will happen. Let that stimulus drive the economy and the stock market up instead of artificially stimulating the stock market through Fed policies just for the sake of stimulating the stock market and making people feel more wealthy.

Maybe the market recovery is built on the foundation that it took over 5 years just to get back to where it was and would need to grow more to get where it should be if it were not for the big set back.

Corporate cash has really built up over that time and if things look promising the cash can be used to promote more growth.

If companies open their wallets, which are stacked, there is enough to keep things going.

Housing still needs time things are promising. If lenders keep holding onto their repossessed properties, that's fine and they will get a return from it.

The uncertainty of how the healthcare act will play out will keep some on the sidelines. But as that shakes out and people can see where it is going there can be good growth from there.

There may be a panic going into 2014 with the law going into effect so I can see some pullback for a bit.

It's more uncertainty than bad fundamentals that can slow things down right now.

flagpolerules wrote:

Okay, but what if I think the market is in a bubble? Hard for me to buy what I see as overpriced assets. Sit on the sidelines accumulating cash and wait for the inevitable correction? I'll make my 401K and IRA contributions regardless, so I'm only talking about "discretionary" investing.

Would you call 2007 when the Dow hit 14,100 a bubble? I would. It popped big time. So what? I lost 39% of my value on paper, but I didn't sell, so I really lost nothing. Then, with the market low for a few years, I bought at bargain prices so that today (even before today, and even before the Dow got back to 14,100 where it had been) I have more value than I did then. Even without adding in extra money, just reinvested dividends, my stuff is worth more than it was in October 2007 (but I HAVE added money like clockwork since).

The thing, is, you can NEVER know when the market will tank or when it will come back or how much either time. Good that you plan to continue with the IRA and 401k contributions. What you do with money outside that is just gravy. If you're happy with you level of retirement account giving (should be at least 15%), then bump up your emergency fund, or pay down debt if you have any, or buy something other than stocks...bonds perhaps.

This is why you become debt free (but for a house) and you continue to put money you don't need today into stocks within mutual funds.

73% of years are UP years. Stay diversified. Use Social Security money to help you through bad market times when in retirement...you need to be 100% debt free including owning your home for that to be a viable option.

When the market goes up or stays flat, take your 4% and be happy.

for me... wrote:

Flagpole wrote:

Does this market still have some room to run? I think so. Shouldn't matter to you too much though unless you're within 5 years of retirement or in retirement.

Some of us are still waiting for the "BIG" drop Flagpole predicted about a year ago... when he said the market was overvalued or something to that effect.

There WILL be a big pull back, but you should not wait for it. I never advise that you wait for a pullback. Corrections are inevitable, and there are too many reasons out there right now to cause a decent pullback within the next year or so. As I've said many times, 73% of years are UP years, so it behooves you to be in the market pretty much all the time, especially since NO ONE can accurately time it.

I don't worry about stuff like that. Pretty much, since I started investing in 1989, someone somewhere was saying that NOW is a scary time for investors. It hasn't amounted to a hill of beans. Yes 2008 was bad, but if you prepared by being debt free (but for a house) and continued to put money in the market, and didn't panic sell, you came out of it smelling like a rose. The time from March 2009 to today has been the most profitable like period of time in my investing life...and how many people out there said things were in the tank?

What if we have a 20% pullback or a 30% pullback? So what? I will continue to put money in and reap the benefits on the other side when it comes back (because it ALWAYS does).

It gets a little trickier when you're retired. This is why you need to be debt free including owning your home then...allows for very little outgo if the market tanks...that's when you rely on Social Security and cash reserves and perhaps bonds, instead of taking from your stocks.

It's definitely all related, and you can't get rid of that.

What happens with a retired person though is that if they go frugal for a couple of years, now their investment pile has to last them two fewer years, so they feel more comfortable taking from it and spending again. A downward spiral just will not ever go that way forever...there will always be something to bring it back...depleted inventories that need to be replenished, retired people who put off the things they want to do for a couple years and now feel better about spending, etc.

If someone thinks that the housing recovery is real then they either 1) didn't do their homework or 2) are stupid.

qquasi wrote:

If someone thinks that the housing recovery is real then they either 1) didn't do their homework or 2) are stupid.

We are at the start of an incredible boom comparable to 1982. Don't miss out or you will be kicking yourself for the rest of your life.

70% of the US economy is consumer spending. In 2008, people got frugal, cut spending and credit card debt. You saw what happened.

Something else not not being talked about lately is the US Dollar (full disclosure: I've been long US Dollar Index futures since Novemeber 2011). Whatever happened to that "coming" crash in the US Dollar since Obama got elected that right-wingers kept promising? The Dollar is now UP since Obama took office the first time; By comparison, the Dollar Index went from 120 to 72 while GWB and Republicans were in power.

These have not been the best of times for buy-and-hold (since 1999, not just 2009) and there has been a trading range market in place for the last 15 years. The top of this trading range on the SP500 was ~1605-1615, so we have perhaps broken out and in that case the thing to do would be buy and hold like the 1990s. There is almost certainly a test of 1600 coming, and either we will have a breakout or we will have a failure.

Personally, I have profits from gold sitting in cash that I want to put into MDY (SP Midcap), but waiting on resolution of whether buy and hold is back or not.