Tuesday, January 10, 2006

 

Housing Slump To Hit Economy, Rates, US Dollar

Reuters reports on the US dollar and housing. "The dollar's strength isn't wholly dependent on the state of the U.S. housing market, but investors said on Tuesday they are focusing more closely on that key segment of the world's largest economy than they have in years."

"As house prices appreciated, existing homeowners simultaneously cashed out equity to buy consumer goods, adding to the economy's advance and helping to create new jobs. The growing economy did two things: raise confidence in U.S. assets and increase investor demand for the dollars to buy them. At the same time, steady growth prompted the Federal Reserve's policy setting committee to raise benchmark interest rates which further stoked demand for dollar-denominated securities."

"But after 13 interest rate hikes with at least one more expected, analysts say slower demand for housing is reducing consumer spending and eroding demand for dollars. 'With a year and a half of hikes, there are indications now that (home) prices are starting to moderate across the country,' said Charmaine Buskas."

"'With the housing market expected to cool through 2006, the drivers of U.S. growth are expected to change, but this is unlikely to keep the Fed from tying up its tightening cycle any later than' March, she added."

" If 'the U.S. housing market simply falls under its own weight, a distinct possibility given the major overhangs in property values in many segments of the nation, the hit on wealth-dependent consumption and GDP growth could then be a major negative for the dollar,, said Stephen Roach, chief economist at Morgan Stanley."

"With U.S. homeownership running at 68.8 percent in the third quarter of 2005, according to the Census Bureau, a stall in the housing market will be felt across a wider swathe of the U.S. population than the stock market crash of 2000."

Comments:
Austin Yankee,

Several hundred visit here everyday, just not many comments. I blogged for months at HB before I got a single comment. And then it was something like, 'why a housing bubble blog?'
 
AustinYankee,
You can wear it. The ropes of silver and gold are close to bullion prices, if you find a good source. I've never done it.

Security becomes an issue and the best security is for no one to know you have it at home. Years ago, Ron Paul said to package your metals in plastic, put it inside two different sections of PVC with the ends glued on with PVC resin, and to bury this in your back yard at 3AM on a rainy night. I never did that either, but it's good to know.
 
Ben,

You're right, it's just like the early days on HB2 (where I lurked for the longest time).

AY,

Uranium definitely looks good. There's a great interview with Dines over at FSO; he talks about how demand is outstripping supply, which has driven the price from under $10 to over $36 in just five years. The fundamentals are phenomenal.

Village,

Doesn't affect everyone? What's that green stuff in your wallet???
 
I think this is the first article that I've seen that directly connects the housing bubble to foreign investors. (It's exciting since I'm betting on these market shifts which have been tied together in my mind.)

I believe this blog will become more active over time since I notice people looking for the next big thing (or at least something retaining value).
 
Ben,

Someone else on this thread already mentioned it so I figure I'll second it just to throw in another vote re: aesthetics.

Hardly a major issue, but I always find myself decreasing the font size.


: )
 
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