UPDATE released 06 jul 19

this is the first update in 2006, kind of late, hey.

real estate

the greenspan era of continuous low interest rates created a pool of hot money stirring up

• real estate;
• stocks;
• commodities.

interest rate hikes will soon or may already have slowed down the real estate market in us real estate. then why is the market not dropping further? when prices tank, speculators got hurt first. us exch rates are now 40% lower than a few years ago, export led growth created strong demand for labor, with employment still growing, mortgage and consumer debt can still be served, thus no widespread foreclosures on residences, it might have happened to properties for speculation only.

however consumer demand is hurt by high gasoline prices and utility bills, the strong growth in us gdp is not translating into consumer demand since national and consumer debt have grown to unseen levels, personal earnings have to plough back into serving mortgage and consumer debt which undoubtedly will affect the export led asian economies.

1-2 years from now, the us economy maybe in a much worse shape since many financial instituions are financing real estate at no down payment [100%], no interest payments [piling interest onto principal not that the FIs absorbed the interest] for the first two years. they will be in for a surprise that the collateral is not worth the P+I two years from now. when they start dumping the properties, widespread decline will occur [usually with unemployment creeping up first and then mortgage payments missed].

oil prices

crude oil hit new highs recently, but not the oil stocks. one of the them is not right:

1. either crude oil has to retreat soon; or
2. price of oil stock will climb higher.

given the current market sentiment and rsi of the oil stocks, option 1 is more likely.

look at bp, 65 is a strong support, if it falls thru this support, oil prices have a lot to fall. the same for exxon at 58.

us exch rate

many economists or forecasters, even warren buffet, argue that us exch rates have to decline. given the already 40% delcine in the past few years against the euro, i doubted that it will go further south and by much. this decline in exch rate increased us competitiveness by a lot and is creating huge demand for labor of export led industries and services, thus the strong employment statistics coming off govt data releases.

it might still go south if the us keep on waging war and building weapons [creating enormous deficits] which is hard to tell given bush policy of favoring oil barrons and the defense industries.