Stock Market Correction

[Cybear]

My wallet's lighter than it was a day or so ago. I suspect yours is too, if you've been keeping close track of your IRA or 401 (k). All of which makes me wonder if Uptown's developers will push ahead or rethink their plans and projects. Your thoughts?

[uptownJim]

My wallet's lighter than it was a day or so ago. I suspect yours is too, if you've been keeping close track of your IRA or 401 (k). All of which makes me wonder if Uptown's developers will push ahead or rethink their plans and projects. Your thoughts?

[MZT]

I think North Carolina tradionally is at the tail end of national economic trends. For example when there are mergers galore on Wall Street, a year or two later you read about local company buyouts.

The stock jitters are not yet too significant. I have been reading posts on other forums bemoaning the complacancy on Wall Street the past few months and the lack of volatility. When you see those, it usually isn't too long before a reversal, and we got one. It will play out over the next week or two, and then we'll find out if there's room for the bull to get back up. There is probably some money out there waiting for a "correction" which will move back in.

But I'm in A2's camp that we have long herm uncorrected maladjustments in the economy, that were disguised by low interest rates since 2002. The implosion of the subprime lending market will have contagion effects elsewhere. Japan is grudgingly moving interest rates up, and that will also remove a lot of cheap money that was borrowed to scour the world for returns.

Change happens. I've been about 85% cash in my 401k for the last year, because I think the risk of a secular bear market beginning at any time is too great.

[swh1972]

Will be interesting to watch, but I'm not ready to say the sky is falling...

[moving uptown]

Let's see how things go over the next few days/weeks.

I, for one, have seriously questioned whether or not Novare will move forward with their three "condo towers" on S Church St., as a number of realtors I know, as well as a few folks in the development business have said -- repeatedly in the weeks before the implosion of the old power bldg -- that these might just become gravel surface lots for a while until Novare makes a decision as what to do. Of course, some of this is certainly attributable to the fact that they may be waiting to see if/when (because it seems more of a "when" right now) that the Knights get their Uptown Stadium. Nevertheless, that might more or less influence how their final project looks -- perhaps ONE condo, plus a hotel, or a hyrbid of the two ... instead of three towers.

Does anyone really think we can sustain another 2,000 units on the market when right now, we are looking at potentially 2-3,000 coming online very soon just with current developments underway? Not when 1/3 of the units in recently completed projects immediately went for resale and are still on the market! Personally, I know a handful of realtors who, in the case of 210 Trade, were there at 6AM each, and bought 2, 3 or 4 units that day -- and bragged to me how they were going to flip these ($400k units) as soon as they closed on them in a few years! Sound familiar?? What's worse is the infectious -- nay, nefarious -- work of some realtors who haev convinced people (like a smarmy salesman in Glen Garry, Glen Ross) to buy units there too! A neighbor of mine nearby in 4th Ward, she and her boyfriend bought a unit at 210 ... it will be close to $500,000 once they close. Their goal is of course to sell it in a month for $600,000. What happens to this couple (who make a combined 65,000 a year) when they have to make a second mortgage payment for five months because it takes a long time to sell that place? Do you think they will have an easy time finding someone to pay them $3,000 a month in rent if they cant sell it?

It's our own mini, hypermarket crash here in Uptown that worries me more than the stock marketing tanking (or correcting?) over the next few weeks . . .

[A2]

Change happens. I've been about 85% cash in my 401k for the last year, because I think the risk of a secular bear market beginning at any time is too great.

[swh1972]

For long-term investors, a 5-10% correction is not a huge concern, especially given the fact that the markets have enjoyed a few years of solid growth up to this point. I'm not sure I agree that we are headed for a recession, which it sounds like (A2) you are predicting from your comments, but I will admit I probably don't know any more than the average person in the street. What I do know is that over time, you are better off in the market than out of it.

[MZT]

Next week will be interesting. New Century and Fremont, the #3 and #5 largest subprime mortgage lenders, are effectively being shut down. The warehouse lenders (their creditors) on Wall Street have them on the ropes, and it's up to the Street whether these firms can even remain functioning. Lots of federal acronyms are starting to show up in the news now regarding the subprime biz - like the OCC, FBI, SEC, and FDIC.

It's starting to look like the majority of subprime lenders that were in business in 2006, won't be ... by the middle of 2007. This will remove a great number of home buyers form the market, that could only qualify under the loosest of subprime guidelines.

Makes me wonder how many skeletons have been silently dug up by Wachovia, after that Golden West acquisition last year?

[A2]

Makes me wonder how many skeletons have been silently dug up by Wachovia, after that Golden West acquisition last year?

[A2]

Be VERY prepared for another wave of intense selling in the markets tomorrow. Asian markets are getting their head handed to them right now. This is just the second shot accross the bow (the first was last week). The Nikkei is litterally in melt down mode and the Hang Seng is also taking a severe beating. This could prove to be VERY ominous to anyone (developer) seeking to come to the table with new projects in Charlotte. My hopes are that we can get ALL of the projects off the ground that have already been annouced as to satisfy the Skraper junky in me. Otherwise, it is going to be a no go for most who are planning projects. As resilient as Charlotte's market is, it will NOT be able to weather what is coming, and will see a SIGNIFICANT cool down. Sub-primes are just beginning to unravel (which is consequently just hitting the mainstream media, as they are always a year+ late to the party)and now Alt-A loans are showing major starins. I would consider what is coming MUCH worse than 91'. As a boyscout would say, BE PREPARED!

A2

[sfmartin]

As a boyscout would say, BE PREPARED!

A2

[stadtguy]

I'm not a financial analyst, but I don't expect the sky to fall. I have another 25 years to retirement so I'm not overly concerned with the cyclical ups and downs of the market. Like most things, the policies that will be enacted post-subprime crash will likely hurt those lowest on the economic totem pole--the very same ones who are facing foreclosure. In the meantime, I would welcome a cool down in the price of real estate. It *might* enable me to get into one of the so-called hip inner-ring suburbs. Then again, I doubt it. As previously mentioned, those most affected will be the marginal, lower-income mortgage candidates. Perhaps a better question to ask is "where will these folks move to when foreclosed upon?" University City residents, be wary!

[swh1972]

Not trying to give any commentary on this, but the Dow has pretty much erased its losses from late February - and is back up to around the 12800 level.

[MZT]

And the dollar is setting new lows against European currencies. Investors think an interest rate cut may be coming which would help the domestic indexes... and it hurts the exchange rate.

[A2]

You hit the nail on the head MZT. The dollar is down YTD, while the markets are marginally up. So actually if you have dollar denominated securities in the indexes you are actually down. Nominal highs don't mean anything. Compare the DOW in terms of Gold, Euros, or Oil and you will see a shocking picture.

As for the General Equity markets as a whole, be prepared for another "leg down". Overseas markets are correcting harshly and the market is making a nice "double top" on the daily and weekly charts.

Remember:

If the DOW goes to 20,000, but the dollar is cut in half through the FED pumping out more worthless paper, your investment is down in real terms. It is slight of hand by the Gov't and the FED to make people feel wealthy when actually they are drowning in inflation. Just check things that the Gov't DOES NOT USE in its CPI reports. Gas, Food, Tuition, Medical Expenses. These items/services are items we ALL use, yet the gov't decides that the CPI figures should not include those trivial things. LOL What a crock. The Gov't is desperatley trying to pay back debt with cheap paper, the only problem is that inflation is the byproduct (more money chasing the same number of goods drives up prices) In the end it is the consumer and eventually the markets that end up being the real loser.

A2

[monsoon]

Indeed. Is it legal to open a bank account in Europe and deposit money there so that your stash is in Euros? It would seem to be a much safer currency now than the dollar.

[A2]

Indeed. Is it legal to open a bank account in Europe and deposit money there so that your stash is in Euros? It would seem to be a much safer currency now than the dollar.

[swh1972]

As the Dow topped 13,000 for the first time today, one would have to think that part of the attraction to the U.S. Markets recently is that they are relatively "cheap" compared to other countries' markets due to the weak dollar. Although M&A activity and decent earnings have played a part as well.

A2, I think you were saying this same thing if I read your post correctly about the Dow going to 20,000 but the dollar only being worth half as much. The flip side of that comment is what happens to your portfolio value in the same situation if you have your money in a bank account or money fund? Ugh!!

[A2]

A2, I think you were saying this same thing if I read your post correctly about the Dow going to 20,000 but the dollar only being worth half as much. The flip side of that comment is what happens to your portfolio value in the same situation if you have your money in a bank account or money fund? Ugh!!

[RiverwoodCLT]

Look out for the fourth quarter this year.

Things may look rosier now, but I do not think the Dow really reflect the total market. The S&P does a better job. The housing market has been driving the market, but as it slows down I think you are going to see the market down in the fourth quarter.

Silver and copper would be a better investment now.

[MZT]

Housing is still a good investment in the right locations, and financed with payments that renters can afford. Get a fixed rate, and they pay it off for you with devalued dollars in the future. The underlying asset maintains it's intrinsic value, regardless of the currency involved.

It's the same principle as with gold and silver, except that a small investor can't really earn any income holding those assets himself. They are simply inflation hedges or speculative plays.

[A2]

Never say that I did not warn ya'.

A brilliant piece from Bernard Ber with CIBC in Toronto. It is a relatively short read, but lays the groundwork for what many people in the financial media will avoid stating to the public at all costs. It will be harder for those to understand who are not familiar with some background in economics and finance, but I think most wll get the jargon and the point.

Party like its 1929...

http://www.financialsense.com/fsu/editorials/2007/0427b.html

And yet another from my favorite Econmist Peter Schiff with Euro Pac Capital...

http://www.financialsense.com/fsu/editoria.../2007/0427.html

A2

[swh1972]

The Dow hit record territory this morning and has crossed the 14,000 point mark (at least briefly). I believe that the S&P 500 is also near record highs as earnings are beating expectations. Subprime loans are still a major concern. The ratings agencies cut hundreds of asset backed bonds last week, and forclosures may have not yet reached their highs.

[swh1972]

Have to give A2 credit for being right on the money on his predictions of the Subprime and Alt-A effect on the markets. The last two months have been a roller coaster ride for the asset-backed sector. The Stock Market is relatively easy to follow, but there has been so much going on with liquidity and credit concerns on the debt side that many in the industry agree that this is an unprecidented event.