Well, a quick recap... If you remember my tale derived from Drobny's "Great Macro Experiment", you know how I feel about the boom-bust behavior of investors from all stripes. Well, let's take a look at what happened after the latest rate cut in the Greenwich mansion market, the impenetrable Manhattan residential real estate market (not), the home building industry (believe it or not), and practically every risky asset available to investors.
- High end mansions, see more supply than demand, prices weaker yet speculation continues...
- Manhattan real estate high end drops as much as 75% - the financial sector in NYC has cut 130,000 jobs for '07, more than '05 and '06 combined, and the largest number since the numbers have been compiled by Challenger and Gray in 1993. Bonuses and Wall Street jobs tend to drive both Greenwich and Manhattan.
- The home builders up 20%+ despite receiving the worst news in the industry's history, ever, with no relief in sight according to CEOs (and really smart people, like me:-). Even Hovnanian increased, and their CEO is worst than the average subrpime junky.
- Emerging markets are on a tear, just about all of them.
- Bubblicious China soars in the face of multiple rate hikes.
- Hard commodities flying through the roof. Look at wheat, corn, gold, oil, etc.
- Speculation is even returning to real estate, with newbie investors trying to pick up foreclosures, unable to realize that even at auction many of those properties are at negative cap rates due to the amount of debt that was on them in the first place. So,there goes the rent model. You can't flip in a depreciating market with a glut of supply.
Despite this, job losses on the street and throughout mortgage America are rampant. Forget what the government job numbers say, just look at what the companies are doing. Ever since the gov't tried to state that core inflation was under control while energy, food, education, health care and housing were skyrocketing (food, health and warmth are CORE in reality) I find it hard not only to trust gov't numbers but also to believe in the intelligence of any who fall for the gov't. numbers.
The recent home builder's run is ridiculous. If this is not the most obvious case of bubble-based speculation that makes the dot.com boom look like peanuts, I don't know what is.