Re: SC41

http://www.smirkingchimp.com/thread/7205

Post Mortem for the Stock Market

"There’s class warfare, all right, but it’s my class that’s winning." Investment tycoon, Warren Buffett

The real estate market is crashing faster than anyone had anticipated. Housing prices have fallen in 17 of 20 of the nation’s largest cities and the trend lines indicate that the worst is yet to come. March sales of new homes plummeted by a record 23.5% (year over year) removing all hope for a quick rebound. Problems in the subprime and Alt-A loans are mushrooming in previously “hot markets” resulting in an unprecedented number of foreclosures. The defaults have slowed demand for new homes and increased the glut of houses already on the market. This is putting additional downward pressure on prices and profits. More and more builders are struggling just to keep their heads above water. This isn’t your typical 1980s-type “correction”; it’s a full-blown real estate cyclone smashing everything in its path.

Tremors from the real estate earthquake won’t be limited to housing—they will rumble through all areas of the economy including the stock market, financial sector and currency trading. There is simply no way to minimize the effects of a bursting $4.5 trillion equity bubble.

The next shoe to drop will be the stock market which is still flying-high from increases in the money supply. The Federal Reserve has printed up enough fiat-cash to keep overpriced equities jumping for joy for a few months longer. But it won’t last. Wall Street’s credit bubble is even bigger than the housing bubble---a monstrous, lumbering dirigible that’s headed for a crash-landing. The Dow is like a drunk atop a 13,000 ft cliff; inebriated on the Fed’s cheap “low-interest” liquor. One wrong step and he’ll plunge headlong into the ether.

The stock market cheerleaders are ooooing and ahhing the Dow’s climb to 13,000, but it’s all a sham. Wall Street is just enjoying the last wisps of Greenspan’s low interest helium swirling into the largest credit bubble in history. But there are big changes on the way. In fact, the storm clouds have already formed over the housing market. The subprime albatross has lashed itself to everything in the economy ---dragging down consumer confidence, GDP and (eventually) the stock market, too. The real damage is just beginning to materialize...............

Much more important information in this excellent article.