Tuesday, August 18, 2020

Morning Note: Mass Distortion in the Housing Market

Asian stocks were mostly green overnight with 10 of the 16 markets we track closing higher. Europe has pretty much surrendered its gains from the open, as I type 15 of the 19 indices we track are in the red. US equities are mixed: Dow down 87 points (-0.31%), S&P 500 flat, Nasdaq up 0.30%, Russell 2000 down 0.94%.

The VIX (SP500 volatility) is up 1.64% to 21.70, VXN (Nasdaq vol) is down 0.32% to 27.64.

Oil future's are down 1.14%, gold's up 0.56%, silver's up 0.74%, copper futures are up 1.96% and the ag complex is mixed.

The 10-yr treasury is up (yield down) and the dollar's getting whacked again, -0.50%.

Our core portfolio is essentially flat so far this morning, -0.01%. Our leaders being, yet again (save for ag), commodities; with base metals, silver and gold occupying 3 of the top 5 spots. Verizon and the yen being the other 2 leaders. On the flip side; utilities, energy, ag commodities, asia-pac and financials are the leading losers this morning. 

Housing data knocked it out of the proverbial park last month, with starts rising the most in 4 years. Amazing, startling even, under the circumstances.

Other related data, however, isn't so startling, given present circumstances.

Home mortgage delinquencies are hitting heights we haven't seen since the the bursting of the mid-2000s housing bubble:

Of course foreclosures have to be screaming higher as well. I mean the two go hand-in-hand, right?


I mean, well, yes, but no... not when government steps in. 

Not saying government shouldn't, under present circumstances, step in, just saying that it totally distorts markets. And my experience has been; the greater the distortion the greater the adjustment when real world reality ultimately hits...

Stay tuned, and stay hedged....

Have a great day!

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