Housing: Look Out Below

One interesting item of note in today’s employment fairy tale presented by the Government was the sequential monthly decline in average hourly earnings. Unfortunately,  less people are getting jobs than are the number people who are leaving the workforce AND the ones getting jobs are getting paid less.  This is not the formula for stimulating housing sales.

I did a short video which presents the reasons why the housing market is about to re-enter its long term secular bear market:

I posted my newest housing short-sell idea a couple days ago. Including today’s bounce, my first three ideas have already returned 12.6% (from 7/29/14) and 6.3% (from 8/20/14) and 7.7% (from 9/9/14). Those are actual returns, not seasonally adjusted annualized rates.  What makes these sector a compelling short-sell play is the fact that those returns from shorting these stocks have occurred despite the fact that the S&P 500, despite the recent sell-off, is higher now than it was at the beginning of August.

You can access the reports here:   Homebuilder Short Sell Reports.   The newest report is at the top and they are posted in order  from newest to oldest.  I discuss how to use puts and calls to replicate shorting the stock if you are not comfortable shorting stocks.

The reports show in detail how these companies are using manipulative, misleading accounting to make their income statements and balance sheets look better.  Every single one of them has bloated up their inventory and debt levels back to where they were in 2005/2006, on a unit sales base that is 1/3 – 1/4 of what the sales were in 2005/2006.  I believe that company in my very first report will go bust eventually.  Hell, I remember trading that company’s junk bonds in the 1990’s, after Drexel Burnham has levered the be-jeezus out of it and left it dying from debt in the late 1980’s/early 1990’s.

In terms of timing a new short sell entry or adding to an existing position, I would recommend waiting for the DJUSHB to bounce for a few days to a week.  It got incredibly oversold through Wednesday and will likely bounce with the S&P 500 for a bit.  Use the rsi/macd indicators and the 50 dma to start timing your entry/adds.

In terms of some affirmation from specific housing markets that my thesis is valid, see these industry reports:

Seattle Region August Home Sales:   “near average pace but fell short of July and a year ago [August 2013].

Miami Region August Home Sales:  “fell on  a year-over-year basis for the 3rd consecutive month in August…continued to run well below year-ago levels.”

Las Vegas Region Home Sales:  “logged its slowest August home sales in 16 years last month.”

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8 thoughts on “Housing: Look Out Below

  1. I work as part-time/ minimal wage in Retail. My hours just got cut from 28 hours to 18. At the other store, people have been cut down to 8 hours a week (2 4-hour shifts). One customer in the store said another company is cutting employees to one day a week. Bleak xmas ahead…..

    1. Dude, that can’t be right. The Govt and Obama and all the shit stains on tv said the jobs report shows the economy is overheating. LOL

      Sorry to hear about your situation. I think a lot of us are being affected by what they’re doing to us.

  2. unknown timeframe when/if this turns.

    The current reading is the highest in the history of this indicator, which dates back to the creation of the euro currency in 1999. That is another way of saying that the “smart money” commercial traders are making a huge bet that this uptrend in the dollar is going to reverse itself. Commercial traders are often early in adopting a lopsided position, but they are nearly always proven to be correct.

    http://www.mcoscillator.com/learning_center/weekly_chart/commercials_betting_on_big_dollar_downturn/

  3. A Convenient Smokescreen

    For years the Fed has used the jobless rate and inflation as the key metrics for guiding Fed policy. But with the unemployment rate falling faster than Fed forecasts year after year – partly due to slower-than-expected labor force growth – other criteria have entered the picture.

    Erstwhile Fed Chairman Alan Greenspan was well-known for his deliberately opaque utterances, and is reported to have once said, “I know you think you understand what you thought I said but I’m not sure you realize that what you heard is not what I meant.” His successor, Ben Bernanke, committed to transparency, appointed his eventual successor, Janet Yellen, to head up the Fed’s communications committee. The growing confusion about the Fed’s rate hike criteria under Ms. Yellen’s watch is ironic in that context.

    A year and a half ago, Ms. Yellen introduced a labor market “dashboard” incorporating four indicators in addition to the jobless rate. Three more indicators were subsequently added to the dashboard. Then, in her Jackson Hole speech in August, she mentioned a 19-component index developed by Fed economists, as well as an even broader 24-component Labor Market Conditions Index (LMCI) developed by the Kansas City Fed.

    https://www.businesscycle.com/ecri-news-events/news-details/economic-cycle-research-ecri-a-convenient-smokescreen

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