CNBC Sucks

[Fish2006]

If you listened to CNBC, you would think we just went through the 1987 crash all over again.

The truth of the matter is we are down.. what... 300 points on the Dow on the week? Not even 3%. And suddenly, the graphics are "prepare for the bear".

They bring on the people that have been saying each and every month for the past 3 years that the market is going to go down. And finally, for a week, they are correct.

Ill tell ya what, if you had a record like that in sports betting, Sportsman would have more respect than you. Maybe these CNBC guys should start having to post the commentators recent record before they let them talk on TV.

For the record, I am still calling for a correction. Definite downward bias this month, calling to be -6% from the peak before we stop and turn up again. Yes, its a pullback, but timing the market with investments usually doesn't work, and now is not the time to try.

[beermantm]

I think you'll see the real estate market start the down trend. The over leveraged buyers holding arms and the 10% of the nation who hold zero equity in their homes are going to start to default more and more. These people are at the breaking point and real estate prices in most areas just have no room to go higher. Not to mention the the ignorance being shown toward the infrastructure across the US is going to bear heavy burdens when they turn to construction companies to have the work done and find that they are unbelievably undermanned. The skilled labor force will make out great as far as pay goes but will still not be able to meet the demands.

My understanding is a lot of the houses on the market right now are run down dilapidated houses that no one really wants to buy and yet if you look at the prices of these places you will find that they too are priced unbelievably high. This puts the final blow into the market because these start to cause a drag. It becomes to costly to buy the places and knock them down to rebuild on the good land because the market will not bear the price of the new house built in place of the old. This could either do two things it could cause the rest of the market to start to correct or open up some very good real estate opportunities. Either way the price has to come down. There is a game going on right now where people put their house up for sale then pull it back off the market after a few months looking to buy time until the market gets a bit stronger. In the mean time they are struggling to make their bills and fighting off defaulting and foreclosure.

I don't buy for a minute that the sell off was not someone seeing an underlining problem somewhere. Did you see the volume of that dip? That is the only scary part where you just don't know why the market dropped off 500+ points in a few minutes at record volume. Maybe the buying will go on and selling will slow but the volatility of the market just got a shot in the arm that is for sure.

Bear market??? Not yet.

[Fish2006]

The 500 point drop was a glitch in the system - it was more of a gradual drop over about 40 minutes (someone did a study of actual prices of the stocks that make up the index over that time period and computed the index correctly).

Real estate - well, I agree to a point. The primary thing that will happen is that people will stop moving, and wont be able to refinance, which stops the ability of people to get equity from their houses and spend it. Prices in real estate will go down probably another 10%. Personally, for me, I am thinking it might be the ideal time to buy a vacation home - perhaps another year down the road... but it will probably affect consumer spending at the margins. If would be worse, but wages are finally starting to spike, and across the economy as a whole, that should keep us Americans consuming crap just like we have always been.

The big story in the news with regard to real estate affecting the stock market is the subprime loans, alt-A loans, and option arms coming due (i.e. deliquencies are up something like 20% in the last 2 months nationwide). Thankfully, as common as it may seem, subprime and alt-A are only 5% of the mortgage market. I don't see a problem unless you a.) work in subprime mortgage servicing or origination or b.) need to get a mortgage with marginal credit, or c.) have a stock portfolio that has a sector weighting towards subprime mortgage companies. It is big news, but it gets drawfed by what is really causing the correction... which is...

The dollar weaking against the yen and the euro, which makes dollar denominated stocks worth less than before. The credit market that is most vulnerable is not the mortgage credit market, but its all this cheap money being lent out to do LBO/Mergers/Aquisitions. Any time you see everything drop - all sectors, it is usually forex related.