Back in August 2005, economists everywhere were confidently predicting a "soft landing" for the US housing market. I wonder if they're so confident now?
Back in August 2005, I was a bit of a lone voice, identifying the early signs of the bursting of the housing bubble. I wrote about it in my article: "The Silence Of A Bursting Bubble ". Here's a quote from that article:
"But with the housing sector stock prices (not house prices) being the first domino to fall a different scenario could play out: the housing sector stocks are down 30-40% in two months time (like techs in 2000), Fannie May and Freddie Mac plunge, and the whole banking sector looks decidedly weak. Banking executives become worried and glum, lay off staff and tighten credit. Less credit means less buyers. Less buyers means house prices begin to decline."
Apart from a dumb assumption I made regarding timing, we have now seen all this unfold.
Fast-forward to November 2006. I posted a quiz titled "What follows the housing market down?" and had three main options: retail sales, gold price, or the banking sector - as well as "all the above" and "none of the above" options.
It seems our small group of responders thought things were about to get bad fast as they chose "all the above" as their favored response. WRONG! Retail sales and gold have continued to trend upwards. In the first paragraph on the quiz page I wrote that my next article would be titled "Is Banking Tanking?" (published December 2006, almost 3 months before banking's decline began). This was a BIG CLUE about what answer I favored. I was right again.
Crush The Guru!
OK, so now I have a swollen ego and need to be brought down a peg or two. Here's your chance. I've made this really hard on myself: todays quiz has 12 possible answers and I'm going to clearly state my favored one. I'm almost bound to be wrong, so here's your chance to crush the guru and show that others know what's about to unfold better than I do.
Win Free Trading Signals For 6 Months
Complete the quiz before the end of September and you can choose to go in the draw for six months of free trading signals for spot forex and market indexes from around the globe. To read more about the trading signals, go here:
www.TrendSensor.com/#Trial
- then click on the "Learn more" links to view trading history and backtesting results.
So Here's Today's Quiz:
What Follows The Banking Sector Down?
1. Retail Sales
2. Spot Gold
3. Employment
4. Inflation
5. The whole economy
6. The stock market
7. The US Dollar
8. Hedge Funds
9. All the above will occur simultaneously.
10. None of the above
11. Options 6 and 8 together
12. Options 1, 3, 6 and 8 together
Place your vote and read more about the options, get useful clues and my favored response at:
www.TrendSensor.com/MarketBrief/current-quiz/
Good Luck!
PS: You have until Sunday September 30th, 2007 to vote and enter the draw for six months of free trading signals.
If I was sitting at my desk and was asked which bank in the world would I buy into, with any spare $5bn I happened to have lying around, I think that would be, pretty much, my first pick. The company has virtually no toxic / bad debt and has only been suffering due to its peers disappearing in a puff of smoke and the fact that even Goldman cannot conjure up money market funds in the current environment.
Perhaps the difference is that Buffet had the $5bn and I do not. Whether I would have invested as much as he did in Coca Cola is another matter.
Notwithstanding the intervention of Warren Buffet, the markets continue to look grim as more and more creepy crawlies are revealed as each stone is turned over. The speed of market reaction is getting increasingly extreme (especially now shorting in some very heavily weighted stock is restricted). The index is regularly trading in 100 to 200 point ranges in just a few minutes on no news whatsoever. The toss of a coin is not a good way to be trading the markets but you probably have as much chance of winning as following even the best strategies.
We still await Congress's approval of Hank Poulson's Bad Bank strategy but law-makers are understandably a bit cautious of being seen to agree to such a huge increase in US government debt and its subsequent possible effect on the taxpayer.
It is possible that some form of equity stake will be demanded from banks wishing to utilise the Sink Hole and this is likely to keep bank stocks weak until the small print has been checked out.
That means the banks will have two stark choices, either struggle on over an indeterminate period slowly rebuilding your balance sheet (and still vulnerable to further downturns in the economy) but remain undiluted, or place a whole load of toxic debt over to the Fed but give up a big slice of equity to the state.
Neither of these is exactly a good scenario for shareholders of all those Banks which, unlike Warren Buffet's first choice, do have toxic debt.
Spread betting carries a high level of risk to your funds. You can lose more than you initially invest. It may not suit all investors. Only speculate with funds that you can afford to lose. Ensure you understand the risks and seek independent financial advice if and when necessary.
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Murray Nickel has sinced written about articles on various topics from Investing and Trading, Home Improvement and How to Sell on Ebay. Murray Nickel is a mathematician, statistician, and professional trader. He offers a for market indices and index ETFs, spot Forex, a. Murray Nickel's top article generates over 1600 views. to your Favourites.
Daniel Jones has sinced written about articles on various topics from Investments, Day Trading and Investments. Daniel Jones is a seasoned professional and commentator on some of the leading financial website.. Daniel Jones's top article generates over 8100 views. to your Favourites.