Bring the whole family for a vacation to remember. Woo hoo - vacation time!
Usually when I take off, I am filled with regrets as I hate to miss the fun in the markets but I’ve never been happier to lighten up on positions and take a break.
I’ve been talking about fundamentals all week, possibly looking a little like Chicken Little as I’m telling people the sky is falling while the market rallies. I’m not here to win a popularity contest, however, so I’m really pushing the "better safe than sorry" school of investing this month as my best case scenario for the next couple of weeks is that we consolidate around 13,600 and my worst-case scenario is downright depressing!
Not as depressing as working for American Home Mortgage Investment Corp. (AHM) of course, that company announced they would cease "most" operations and will be letting go of 6,250 of their 7,000 employees. If you ever need to be reminded how clueless the market can be, take a look at yesterday’s chart on American Home Mortgage as it went from $1.50 to $4.50 and back to $1.50 in yesterday’s trading. This is real money people, not play money - what the hell are you thinking?!?
According to today’s WSJ, lenders are clamping down on all risky mortgages, that includes "Alt-A" mortgages like no-doc loans that speculators often use (when you have lots of money and no time). Since $1T worth of Alt-A and Sub-prime loans were written last year and the year before, we can assume at least (and boy, am I being kind) half of those deals will die this year, knocking out $500B of home transactions. At a national average of $250K per home and assuming the 1/2 of those loans are refinances (also generous), that’s 1M homes that won’t move, close to 1/4 of a year’s total transactions.
