Thursday, July 21, 2005

Pricking the Bubble

I think today’s move by the Chinese will be an important catalyst for moving interest rates higher and housing prices lower. Over the next few days we are likely to see tons of experts offering opinions about the future direction of the housing market.

“The most likely bubble-pricking pin is massive speculation itself, and as prospective buyers stand aside, mounting inventories will precipitate a downward price spiral.

Signs of a peak in housing are significant and growing. Just as The Economist’s Dec. 4 to 10, 2004 cover story on the dollar’s demise triggered our forecast that the buck was about to rally (see “2005 Investment Themes,” Feb. 2005 Insight), the Time magazine June 13 cover story, “Home $weet Home,” is a superb indicator that the housing play is about over. By the time the editors of Time realize that a fad or the popularity of an individual is important enough to warrant a cover story, the end is nigh.”


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