Monday, September 24, 2007

Various Points

After the Fed euphoria of last week the market will get back to focusing on fundamentals this week. One interesting note from last week is that housing stocks for the most part are now back near their lows after a massive but short lived rally on Tuesday and into Wednesday. Some of these stocks were up 10 to 20% and have almost given it all back. The market is saying, I think correctly, that the FED can't save housing at this point. I still stubbornly remain on the sideline in investing directly into a homebuilder. I maintain that my entry point will be somewhere near the first major homebuilding bankruptcy which I still believe is inevitable. May still be early and it may be dead money for awhile but at that point with a major bankruptcy, I am sure rumors will be flying around about other homebuilders declaring bankruptcy, sufficient blood will be flowing in the streets for me to take a plunge.

Lowe's and Target both warned after the bell about earnings. Target to me is the more notable of the two cutting same store sales forecast from a 4 to 6% range to a 1.5 to 2.5% range calling September traffic "weak." Target is down 4% after the bell. Lowe's is down 6%. Lowe's could be shaken off as housing related but Target is great baramoter for measuring the appetite for spending in the middle class. In September it looks like it may be puking instead of digesting. If we get horrible housing numbers tomorrow morning like I suspect tomorrow could be a very ugly day in the markets.

I have been thinking alot about the dollar. Calculated Risks blog has taken the position that the dollar may be much closer to the bottom than the top. I am starting to think they may be right though I am nowhere going to bet on it. I think Europe may be on the tipping point for their own massive slowdown. This could cause their interest rates to fall quicker than what most expect helping making the dollar much more competitive. Where the dollar could get hurt for quite awhile is against our Asian trading partners who may exhibit surprising economic strength even in the face of an American slowdown. Just speculating. I can easily envision a scenario where the dollar index goes down quite a bit more, just not convinced it is a done deal.

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