mbacapitalist

Financials and Housing: The Outlook Remains Ugly

Some interesting and useful solutions have been presented. Reducing the supply is the only sure way that the housing market will be stabilized. Changing the rules, adding incentives, etc, will not ease the amount of supply that is flooding the market. The builders are somewhat growing a brain in this area. They've sort of slowed down production of new constructs pending the approval of the financing. If the current president can get it right by commenting that if you build too much, you'll have an excess supply (obviously not in such sofisticated words), I'm sure the issuers of housing permits and builders can slow down the dumping of new supply on the market. There's just too much housing available out there.

The DC metro market is a great example. The builders continued to flood the market with excess inventory over the past several years, even post-2005 which is when the market started to dramatically cool in this area. As a result, builders have given out massive incentives, propelled the rapid cooling of housing prices, and still continue to deliver more homes. Until these units are absorbed, home prices will not even begin to stabalize. I do not see the number of people (absorbers) moving into this area exeeding the number of available housing units; its more likely the other way around. The DC market is certainly a buyers market, and if I were a buyer in this area, I would take my time.

5 Key Quotes from US Airways on the Airline Industry

I would expect more "ala carte pricing" in the future. I did notice one thing that could potentially save a substantial amount of fuel for airlines in the future. On an American Airlines flight to Dallas recently, the attendants asked that all window passengers closer their window shades before deplaning. Given that its extremelly sunny and hot at DFW, the blocking of the suns rays will prevent heat from building inside the aircraft while it is parked (greenhouse effect - pretty popular in the 80's and currently making a come back!). Since the airplane will require less fuel to run the A/C, it'll save on gas. This is especially effective at extremelly hot airports where planes have long waits in between flights (ATL, MEM, CLT).

Stop the Rate Cuts!

Can't agree anymore! The last thing we need is for more people to continue spending like there's an unlimited bank account. The lower the rates go, the more expensive commodities such as oil and gasoline will get. It is unbeleivable that the American public continues to refuse the acknowledgement that the price per barrel of oil moves in inverse to the value of the US dollar. Kind of like FXI and FXP do.

Direxion's New Leveraged India Mutual Fund to Compete with INP

floridadon: great question but its hard to say. I keep wondering why the Indian ETF's go up in trading the day following the Indian market's close when the Indian markets tanked. It looks like there isn't really a great correlation. I think INP is down b/c of market conditions mainly, in addition to a string of bad news from the financial giants in the ETN (HDFC and ICICI bank). I'm wondering if INP will tank down to 55-57, while EPI goes below 20. If so, I'll probably get some more shares b/c I think the Indian economy will grow for years to come, even though its still figuring it out. This is all based on a recent trip there so your experience may differ!

Collapse of the BRIC Trade

Paul, not a total collapse, but a major speedbump on the way to prosperity. Several of the BRIC ETF's are down for various reasons. I would agree that there is a slowdown, but a total collapse in the BRIC markets is going overboard and is unsubstantiated. Take a look at the technicals for each country:
Brazil: growth hasn't slowed nearly as much as everyone has hyped. ILF which is a high quality latin american etf has still held its ground just as other brazilian companies have. PBR for example is trading in a narrow range from its recent highs in the 120s.
Russia: This oil based economy has some more upside, though a heavily energy dependent economy. Perhaps the McDonalds in Moscow (which is the most expensive in the world) will have to raise its prices.
China: Had a recent bout with high inflation, but this is a one-time spike due to the storm. Its kind of like a company taking a major charge because their shipment was wiped out as the result of a storm. China still has a lot of upside and I think if the shares dip a little more, theres a trading range (FXI).
India: Paul, I agree with you here. After coming back from a recent trip to India, this is the one country that still hasn't decoupled from the US in a decent fashion. The city of Bangalore can pretty much state it all, massive amount of construction, US merchandise everywhere, and massive hype into exporting services, particularly IT to the US clients. Its not that many of the US firms have cut back on managed services from the clients (b/c its actually a narrowly changed figure), but the weak dollar has been massively eroding the Indian firm's currency advantage. It also seems that India's banking sector needs to have some major regulatory reforms since the major banks are carrying massive amounts of debt. Just waiting in line to withdraw money was experience enough to warrant reform!
So overall, BRIC isn't dead, but at a drop-point. I think that the Indian based ETF's will have a narrow range, even tick lower but eventually rise again. The Chinese market is in its bottom, or the beginning stages of a bottom. The olympics will not boost China completely. Remember, the last country to host the olympics spent a ton and pretty much got saddled with a ton of debt for years to come. Russia has some room to grow as they slowly modernize. MBT is a great play in this market. Brazil - has decoupled from the US, so the biggest reason why the ETF's related to Brazil or actually any of the ETF's mentioned have been performing poorly is b/c of market conditions.