Homies & Real Estate: Does This Look Healthy?

[edit] As if on cue, out comes Anthony B. Sanders with… US Housing Starts Plunge Under Rising Interest Rates

I agree with you, this does not look healthy.

hgx

And this has been trending down on an intermediate basis.

iyr

While these continue to rise. The measured target on the 30yr yield being above 3.5%.

tyx

As the month of October moves past its half way point Q4 will answer the question about whether this breakout is real or will be Memorex. It was Memorex 4 times previously.

Among the other Fed-induced Ponzi funding mechanisms of the US economy, Housing and Real Estate in general are a big, fat piggie bank. Perma-bulls talking about how all is just fine because rising long-term interest rates mean the economy is doing well (which it is) are missing the entire point. They choose not to feed into their equations what the economy is built on.

That would be the ‘D’ word, debt. If the Ponzi underpinnings of the economy start to melt down we will find out whether another ‘D’ word would come into play. That would be the dreaded deflation of the whole mess. Or alternatively, balls out inflation policy layered on top of previous excess that has not yet been nearly reconciled.

A deflation of the everything bubble would be for the best. That way the system would probably eventually come back from it (deflation reloads the inflation gun for future monetary homicides), unlike an inflationary Crack Up Boom, which is ending stuff.

But with a deflation event the recent hit to stocks would have to be just the first shoe to drop (actually the second, because the first shoe would have been in February). We are managing bounce potential right now but the mix of market internals is not positive and interest rates and by extension the housing/real estate sectors may be reading the future.

HGX has already crashed to near a support level that…

…corresponds with major SPX support (I am still long SPY for a bounce but watching the market closely here with a ton of interest paying cash equiv. on hand) in the 2100 to 2200 range. Yes, such a correction would wipe out the entire Trump rally.

spx

Just a little journey to where the charts took us this morning.

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