Gaudeamus Igitur
July 16th, 2008 by 
reality
Markets are euphoric today because the price of crude oil has fallen a few dollars. Ignored in the general rejoicing, apparently, is the record low (16) reported in the NAHB homebuilder confidence index. Basically this says that no-one is showing up to look at new houses, let alone buy them. Shouldn’t be surprising, but don’t lose sight of the fact that this is the big asset class - real estate. I looked at the CMBX indices last night, and , sure enough, spreads are rising in all the commercial mortgage indices as well. Many are at record highs, especially the low quality ones. This reflects the massive overbuilding in commercial real estate, especially retail. We haven’t heard much from this sector, but we will soon.
Wells Fargo reported a decent quarter this morning. Bulls pumped the shares 25%, claiming that WFC was home safe, while ignoring the one-time effect of changing the charge-off date for equity lines from 4 months to 6 months delinquency as of April 1st.
Posted in Real Estate, Rogues and Rascals | 
July 16th, 2008 at 3:12 pm
I expect euphoria to last not longer than a few trading days. Expiration Friday plus may be one additional trading session next week. And then - nasty surprises on dollar/interest rates, or commodities, or financials.
Todays rally is pure mass one-way technical speculative play, long awaited bounce, in terribly uncertain financial, economical and political conditions.
Read today Barry Ritholtz’s “Idiots Fiddle While Rome Burns”.
http://bigpicture.typepad.com/comments/2008/07/idiots-fiddle-w.html
“Books will be written about this period of time, and our descendants will wonder in awe as to how this was allowed to happen. Tulips got nothing on us! Its not just the total dollar value of the losses that have exceeded all other global fits of financial madness combined, but rather, how so many warning signs were so blithely ignored by so many and for so long. What was wrong with these people, the authors and historians will wonder. Did the antibiotics in the food supply drive them mad? Did the High Fructose Corn Syrup compromise their ability to think? Some form of viral plague? Roid rage? What else could have created such a mass delusion amongst not just the populace, but their leadership and institutions?”
Have nothing to add.
July 16th, 2008 at 3:17 pm
High Fructose Corn Syrup, definitely. Nasty stuff.
July 16th, 2008 at 7:49 pm
Yes, that wonderful WFC 0.53/share ‘beat’ of the consensus 0.50/share…which was 0.57/share three months ago.