Dumb Money Are Buying Stocks And Houses While Big Investors Are Doing The Opposite
The infamous “magazine cover” indicator could be flashing red again
When mainstream publications get wind of the bull market, we know for sure it’s no longer a secret.
This morning I couldn’t help myself… I had to pick up a copy of the USA Today. I mean, there’s a huge Bull slapped right on the cover with the headline, “Bull Run Gets Solid Footing.”
They follow up by proclaiming that the boost from home prices and consumer confidence proves that the rally is more than a Fed-induced “sugar high.” And they seem pretty confident about that…
Home Prices Rise, Putting Country in Buying Mood
Americans are in a buying mood, thanks largely to the housing recovery.
The latest sign emerged Tuesday as the Standard & Poor’s Case-Shiller home price index posted the biggest gains in seven years. Housing prices rose in every one of the 20 cities tracked, continuing a trend that began three months ago. Similar strength has appeared in new and existing home sales and in building permits, as rising home prices are encouraging construction firms to accelerate building and hiring.
Dow ends at record high as central banks reassure Wall Street
Tweet from Jim Rickards
Housing prices up. People rushing to buy homes. Just what #Fed wants. Then it will crash. Bankers will laugh at you, keep the money. Again.
Meanwhile, Big Investors Quietly Slip Out The Back Door On Housing As “Stupid Money” Jumps In
Today, another one of the original “big boys” has called it curtains: “We just don’t see the returns there that are adequate to incentivize us to continue to invest“, according to the CEO Bruce Rose of Carrington, one of the first investors to use deep institutional pockets (in this case a $450 million investment from OakTree) and BTFHousingD.
Rose’s assessment of the market? “There’s a lot of — bluntly — stupid money that jumped into the trade without any infrastructure, without any real capabilities and a kind of build-it-as-you-go mentality that we think is somewhat irresponsible.”
Of course, one can say exactly the same thing about virtually every other market where those gambling with “other people’s money” have no choice but to ride the tide and dance as long as the music emanating from the Fed is playing. However, it is rare to see one (technically, another) voluntarily step out even as others are still locked into a market where the returns are no longer worth the effort.
If nothing else, everyone now knows where the incremental “bubble” demand for housing has come from: not from the distressed end user of thes properties, for whom as we showed yesterday, the disconnect between real income and new home sales has never been wider: it was all large institutions who invested OPM, and chased any upward moving price with the fervor of a rabid dog.
But all things come to an end:
“All the people who made money during the gold rush in California, they were selling the buckets and shovels,” Gordon said. “I think there is gold in them there hills, but you’re going to have to dig deep. And hopefully you’re going to need more than one shovel.”
Carrington may start buying rental homes again when other large investors decide to sell after learning they can’t make returns that justify the prices they paid, Rose said.
“We’ll sit back in the weeds for a while and wait for a couple of blowups,” he said. “There’ll be a point in time when we’ll be happy to get back into the market at levels that make more sense.”
If the Chairman is serious about tapering, or even hinting of tightening at some point in the future, those blowups won’t take too long. And so will the blowup in the illusion that the housing market is “recovering” on anything more than yet another cheap-money fueled bubble afforded to a select few who now have no choice but to “hot potato” properties amongst each other first on the way up, and soon, going down.
US Housing Bubble II – Euphoria And Other Shenanigans
Flipping houses is back in vogue. People are jabbering about it on their cellphones while crossing streets without looking.
Billionaires Dumping Stocks, Economist Knows Why
George Soros recently sold nearly all of his bank stocks, including shares of JPMorgan Chase, Citigroup, and Goldman Sachs. Between the three banks, Soros sold more than a million shares.
Billionaires Continue To Dump Stocks, Traders Are Betting Against The Economy, Hedge Funds Preparing For Market Sell-Off, And Now They Start Betting Against Currencies As World Plunges Into Recession
Update: This important “leading indicator” is crashing
The Power of the Pattern reflected that a key economic asset could fall 50% in value back on 3/18, due to 20-year channel resistance and 75% bulls.
Lumber was trading at $385 at the time. Today, lumber is limit down trading at $287, losing 25% of its value in 70 days!
The chart reflects that 100% of the time lumber hit the top of its trading channel, it has fallen at least…
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