US Cyclical Stuff - Aussie Stock Forums

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  1. #1

    Default US Cyclical Stuff

    As the general health and well being of all equity markets is closely linked to the US economy, I think its always prudent to monitor what is going on 'over there'.

    Hopefully we can use this thread to keep tabs on what significant economic news/events are coming from the land of stars and stripes, but for the moment I wanted to discuss some observations of my own that I think could turn out to be very important;

    In a word HOUSING
    or in two REAL ESTATE

    Living down under we have had the benefit of seeing a real estate mania first hand and the things that come along with it - home equity loans, people borrowing more money, poeple thinking they are suddenly rich, property gurus , people spending money... but most importantly people in general going a bit 'loopy' and a rapid increase in home improvement shows (just kiding). In general there has been a worldwide real estate boom..... that has yet to fully take off in america. However from the info I take in around the traps, there are signals that there is a recent surge in US real estate that won't slow down any time soon. Two of these indicators;

    1) Commentary in th US seems to be saying they are in a boom and prices are overpriced (a sure signal that they are many many months away from a top)

    2) Aussie RE investors have taken their money from Aus to NZ and now it seems to be heading to the states - of significance;


    Why do I think this is important?

    A sure fire way to delay any realisation of a debt boom is to inject 'equity' into every homeowner in the US. I don't think people will stop spending if their balance sheets suddenly turn for the better overnight. Essentially I reckon this could be the last credit card in the wallet.

    The US market could take this two ways - outflow of money from equities to RE, or confidence in the economy leading to continued equity investing, either way I think any dramatic surprise to the downside (as a result of the economy) will be delayed as a result.....


  2. #2
    Rotaredom wayneL's Avatar
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    Jul 2004

    Default Re: US Cyclical Stuff

    Quote Originally Posted by TjamesX
    The US market could take this two ways - outflow of money from equities to RE, or confidence in the economy leading to continued equity investing, either way I think any dramatic surprise to the downside (as a result of the economy) will be delayed as a result.....

    Agree! The US and the UK are desperately propping their respective markets and seem to be staving off the inevitable successfully.

    The house of cards will, of course, blow over in a twisted and tangled heap...but not yet....well who knows, these things tend to develop without people really noticing until its too late.

    My tip is to have a foot in both camps.


  3. #3

    Default Re: US Cyclical Stuff

    recent article.....

    Government economist cites speculation in some markets
    Updated: 4:34 p.m. ET June 1, 2005

    Average U.S. home prices in the first quarter climbed 12.5 percent from a year earlier, pushed higher by low mortgage rates, income growth and speculation in some markets, the Office of Federal Housing Enterprise Oversight said Wednesday.

    Home values appreciated 2.2 percent during the first quarter from the fourth quarter of 2004, or at an annual rate of 8.8 percent.

    “The House Price Index shows the rise in house prices continues at an extremely strong pace and raises the potential for declines in some areas later on,” said Patrick Lawler, chief economist for the federal financial regulator of mortgage finance companies Fannie Mae and Freddie Mac.

    The 12.5 percent increase in home prices over the past year marked the biggest four-quarter jump since the third quarter of 2004, when appreciation surpassed any increase recorded in more than 25 years, OFHEO said.

    Lawler cited low interest rates, income growing and “the apparent impact of speculation” in some markets for the sustained gains in home prices.

  4. #4

    Default Re: US Cyclical Stuff

    The Associated Press
    Updated: 9:18 a.m. ET June 16, 2005

    WASHINGTON - Construction of new homes rose 0.2 percent in May as the housing market continued its boom in response to low mortgage rates.

    Click Here!
    The Commerce Department reported that construction of new homes and apartments edged up to a seasonally adjusted annual of 2.009 million units, up from 2.005 million units in April, a month when construction activity had jumped by 9.4 percent.

    The increase, the fifth in the last six months, was slightly lower than the 0.6 percent gain that economists had been forecasting. But it still showed that homes and apartments are being built at a sizzling pace that has raised some concerns that a speculative bubble may be developing in housing similar to the stock market bubble of the late 1990s.

    Federal Reserve Chairman Alan Greenspan said last week that low mortgage rates were contributing to some “froth” in local markets. But he discounted the worries of some private economists that a national housing bubble could be developing similar to the boom on Wall Street that pushed stock prices to all-time highs before the bubble burst in early 2000, wiping out more than $5 trillion of wealth.

    Greenspan, however, said he was concerned about the dramatic increase in interest-only mortgages and the introduction of relatively exotic forms of adjustable-rate mortgages.

    “To the extent that some households may be employing these instruments to purchase a home that would otherwise be unaffordable, their use is beginning to add to the pressures in the marketplace,” he told the Joint Economic Committee.

    The 0.2 percent increase in construction reflected a 4.7 percent increase in construction of single-family homes, which rose to a rate of 1.704 million units last month. Construction of apartments, however, fell by 19.1 percent to an annual rate of 266,000 units.

    By region of the country, construction was up 18.7 percent in the Midwest to an annual rate of 185,000 units followed by a 12.3 percent gain in the West, where homes and apartments were started at an annual rate of 540 units. Construction activity was also up in the Northeast, which recorded a 5.1 percent increase to an annual rate of 185,000 units.

    The only region of the country which suffered a decline in activity last month was the South, where housing starts fell 12.1 percent to an annual rate of 903,000 units.
    Building boom away in the US

    This is why Rinker (RIN) shares have been upgraded - and up and away

  5. #5

    Default Re: US Cyclical Stuff

    Just like AUS, House Price up, home equity loans up, big spending up.... I'm tipping these results are from;

    In the troubled automobile sector General Motors reported its US sales of cars and trucks rose 15% in July, while Ford sales rose 29%; DaimlerChrysler sales jumped by 25%.
    equity mate!

  6. #6

    Default Re: US Cyclical Stuff

    I have friends in the US who are riding and taking advantage of the boom in realestate over there.

    Here-----commercial is currently the flavour and choice in property.
    Still some $$s to be had in splitting larger blocks and building dense housing projects.
    Retirement Villages of course continue to be in demand.

    While many look for reasons for doom and gloom the few take advantage of those opportunities that are presented.

  7. #7

    Default Re: US Cyclical Stuff

    Its Aus all over again, just delayed 18 months;

    Joel Naroff of Naroff Economic Advisers agreed, saying the market is getting “out of hand.” Cocktail-party and office chatter he hears nowadays is reminiscent of the tech-stock boom of the 1990s, except that now would-be investors are looking to make a killing by flipping unbuilt condo units.

    “When you see everyone starting to get into these deals, it’s getting beyond crazy,” he said. “People are saying, I’ve got to buy now, because if I don’t I’m never going to get into the market.”

    The big wheel turns, and there won't be any reduction in spending by the US consumer yet. My thinking is US company profit results will be strong for the next 12 months.


  8. #8

    Default Re: US Cyclical Stuff

    Apart from Rinker (RIN), what other Australian shares are worth watching if they are likely to benefit from the housing boom over there?

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