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Housing Market and Stock Market following ARM Readjustments Despite Low Rates

 Well - I'm reassured that the numbers now match our predictions, albeit a month sooner than I anticipated.  Back in March, I stated that the markets would rise then crash spectacularly in July.   Looks like the high was actually April 26 or so at DOW 11,205.  The recent DOW low on June 7th, was  9,810 - a 12% drop from the high.

I called the bottom of the TED spread at 10 basis points and it has risen ever since, yet no where near the height of the crash.

Where will the market go?

I anticipate that we will continue to test the 10,000 level of the DOW over the next month until we get some (any) good news.   Retailers will see a bump in September as pent up demand for goods outweighs the cautionary consumer.

Housing, as previously stated will be flat to down for new construction (i.e. non-urban areas) as there is a refocus to live closer to work.

I'd like to share a personal experience with the mortgage market as I recently closed on a house.

Despite my massive loan to value ratio, the loan process was fastidious to the point of stupidity.   CYA was the note of the day and the mortgage officers are erring on the side of extreme caution.  Woe to anyone trying to get a mortgage in Las Vegas or Florida.

On closing, look in August for Value opportunities.  This will be a flip flopped market for the Oct-Dec 2010 timeframe, rising when it historically falls.


Disclosure: SDS hedge