Did The Bubble Burst?

http://news.yahoo.com/s/nm/20070726/bs_nm/homebuilders_dc_2;_ylt=ApS1JiyL4ceNVCf3W1PTUxkE1vAI

Timing is everything in a market...whether that be stocks or real estate.

On Thursday, the U.S. Commerce Department said June single-family homes sales fell 6.6 percent from May, as the median sales price dropped 1.3 percent.

We sold our home a couple of months ago and although the housing market in that area of the country is strong due to Ft. Drum, one has to wonder if the recent downturn in the market has effected the areas of the country where housing was a sellers market.

First there was a shakeup....lenders in sub prime loans were facing more and more foreclosures. This happend because generally speaking, people were looking to buy more house than they could afford and getting into variable APR mortgages to do it. As interest rates started to climb, so did the interest rated on those mortgages.

If a home buyer took out a mortgage for the most the bank would lend with little or no downpayment then that buyer is probably looking at a crisis if he isn't in one already. Certainly the monthly payment of a 250k loan at 5 % variable rate is much less the 6.5% fixed for the same amount. So when that introductory rate of 5% climbs to 6, 6.5% the house of cards can come falling down.

This makes the overall real estate market a buyers market, for now.

That house I sold for $99,900 just a couple months ago may actually be worth less and the buyer who financed 100%, well it will be some time before he has any equity.

The Doom And Gloom Report - Stock Market Correction or Crash???

It started Tuesday early Tuesday morning with the Shanghai Index dropping a whopping 10%. If you look at the graph on the link you will see this drop was preceded by a rise of 100% since September 2006. Yes, I did say 100%....from 150 to over 300 before this drop.

Markets around the globe followed suit but not quite as severely. Here in the US the DJ Industrials fell by over 520 pts...regained some but ended well off the highs for the day.

So yesterday if you watched the reporting on tv about this analyst after analyst was pretty much unfazed saying that the markets were all up (although not enough in my opinion) so that was really nothing to worry about.

Or was it??

Finally I heard something that went along my line of thinking around 3:30 pm yesterday which was a broker with 20+ years of experience was concerned with the half hearted rally. He stated that the lack of real positive gains yesterday (DJIA ended up 50+ pts)...something like gaining back 200 so pts was a real concern.

The financial markets have a psychology to them. Terminology is used to describe markets much in the same manner as you would people. It makes sense in that markets are driven by people with hopes, fears, insecurities, etc. So when you have a drop of 4% as we did Tuesday and we only gain back less than 1/2 of 1%....let's just say that there are more people who are nervous about the future as it concerns stocks than those people who not.

Last night the Nikkei Index opened higher but not much and this morning at 6:30 am EST the European markets were up but only less than 1/2 %. The Nikkei in Japan ended down another .86% and a look at the European markets before 9am EST show them down another 1% - 2%. Meanwhile here in the US the S&P futures went from +4 around 7am to -16 with just another 38 minutes to markets open.

Look for a big drop right off the start in the DJIA of 100+ pts.

Look for a knee jerk reaction in the 5-15 min period after the opening bell in either direction. If you don't see the market rebound significantly in the next 1 hour or so it may be a bumpy ride. It will mean that people (markets) don't see the low prices as a buying opportunity and that there is more low to be reached. More sellers than buyers....not good.


Good Luck


9:34 am DJIA -200+ pts