正文
by Hoisington and Greg Weldon.
"...the bond market is worriedabout inflation, or worse - stagflation. It's that 70 show all overagain. The market should start worrying about something else. Inflationis not a problem in a recession, and certainly one caused by thebursting of the largest housing bubble in US history. Be definition,those are deflationary events.
If we have a simple slowdown Ithink rates drop to 4% or less. If we see a recession, short term rateswill drop below 3%. Van Hoisington, manager of the best performing longterm bond fund over the past five years (and frequent Outside the Boxcontributor), said today that he thinks that yields on 30 year bondswill drop below 4%, from the 4.84% they are positioned at today.
Hoisingtonthinks that GDP is "going to be very slow in the fourth or firstquarter, close to zero in one of the two." The head of Freddie Mac nowestimates that there is a 40-45% chance of a recession. And the corePCE (Personal Consumption Expenditures), the Fed's preferred measure ofinflation, dropped below 2% for the first time in a long time, down to1.8%. The Dallas Fed uses sits own version of the PCE, called thetrimmed PCE (which includes food and energy), which shows inflation isnow edging down below 2%.
That will give the Fed room to cutrates in the last two meetings of the year. And the data that came outon housing suggests they will need to.
Says Greg Weldon(www.weldononline.com): the inventory of existing homes rose yet againto 4,581,000, which is an increase of more than 1,000,000 since Marchalone. It is more than double the supply since the beginning of 2005.In January there was a 6.6 months supply of homes for sale. Now it is10 months. Over 500,000 homes are in the process of foreclosure andwill soon come onto the market. I think that means in the near futurewe will see a 12 month supply of existing homes for sale.
Remember,that is an average. In some markets, that means there may be a two yearsupply and a three month supply in areas of higher demand. It is goingto become a buyer's market in the middle of next year as sellers
Wantto buy a condo? Existing condos for sale have risen by 35% sinceJanuary to 661,000. That is almost 12 months of supply, and there are alot of new condos coming onto the market as there are a lot ofconstruction projects that are just now nearing completion.
Newhome sales in August saw the largest decline in three decades, down8.3%. Mean new home prices are down 11% in the last five months. Theinventory of new homes for sale is up to 8.2 months and rising.
Gregalso spotted something which I suspected and hinted about in previousletters. The number of homes above $750,000 which are selling is downby over 35% from last year. Sales of home from $500,000 to $749,000 isdown by 25%. Jumbo mortgages are just hard to find at rates that makesense. I think it is likely that Congress will allow Fannie and Freddieto take larger loans onto their books. I would not be shocked to seethe number at $600,000, at least temporarily. Right now they arelimited to taking $417,000 loans. With a 20% down payment that meansabout $525,000 for the sales price of the home.
All this meansthat the fall-out from the housing recession is still in our future. Iexpect to be able to take out the e-letters I wrote on the problems ofdeflation back in 2002 and update them sometime next year. Again,recessions and the bursting of bubbles are profoundly deflationary."
"...the bond market is worriedabout inflation, or worse - stagflation. It's that 70 show all overagain. The market should start worrying about something else. Inflationis not a problem in a recession, and certainly one caused by thebursting of the largest housing bubble in US history. Be definition,those are deflationary events.
If we have a simple slowdown Ithink rates drop to 4% or less. If we see a recession, short term rateswill drop below 3%. Van Hoisington, manager of the best performing longterm bond fund over the past five years (and frequent Outside the Boxcontributor), said today that he thinks that yields on 30 year bondswill drop below 4%, from the 4.84% they are positioned at today.
Hoisingtonthinks that GDP is "going to be very slow in the fourth or firstquarter, close to zero in one of the two." The head of Freddie Mac nowestimates that there is a 40-45% chance of a recession. And the corePCE (Personal Consumption Expenditures), the Fed's preferred measure ofinflation, dropped below 2% for the first time in a long time, down to1.8%. The Dallas Fed uses sits own version of the PCE, called thetrimmed PCE (which includes food and energy), which shows inflation isnow edging down below 2%.
That will give the Fed room to cutrates in the last two meetings of the year. And the data that came outon housing suggests they will need to.
Says Greg Weldon(www.weldononline.com): the inventory of existing homes rose yet againto 4,581,000, which is an increase of more than 1,000,000 since Marchalone. It is more than double the supply since the beginning of 2005.In January there was a 6.6 months supply of homes for sale. Now it is10 months. Over 500,000 homes are in the process of foreclosure andwill soon come onto the market. I think that means in the near futurewe will see a 12 month supply of existing homes for sale.
Remember,that is an average. In some markets, that means there may be a two yearsupply and a three month supply in areas of higher demand. It is goingto become a buyer's market in the middle of next year as sellers
Wantto buy a condo? Existing condos for sale have risen by 35% sinceJanuary to 661,000. That is almost 12 months of supply, and there are alot of new condos coming onto the market as there are a lot ofconstruction projects that are just now nearing completion.
Newhome sales in August saw the largest decline in three decades, down8.3%. Mean new home prices are down 11% in the last five months. Theinventory of new homes for sale is up to 8.2 months and rising.
Gregalso spotted something which I suspected and hinted about in previousletters. The number of homes above $750,000 which are selling is downby over 35% from last year. Sales of home from $500,000 to $749,000 isdown by 25%. Jumbo mortgages are just hard to find at rates that makesense. I think it is likely that Congress will allow Fannie and Freddieto take larger loans onto their books. I would not be shocked to seethe number at $600,000, at least temporarily. Right now they arelimited to taking $417,000 loans. With a 20% down payment that meansabout $525,000 for the sales price of the home.
All this meansthat the fall-out from the housing recession is still in our future. Iexpect to be able to take out the e-letters I wrote on the problems ofdeflation back in 2002 and update them sometime next year. Again,recessions and the bursting of bubbles are profoundly deflationary."
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