No loan for you, come back one year!

This market is something else. Range-bound or not, I fail to see what's cheap and safe here. What is expensive? Why is it all Fed and nothing else matters?
Anyway, back to what may be cheap. iShares seem to tell me that US Home Builders (gasp) and US Regional Banks (gasp-gasp) are yer losers for the "cumulative return since inception" beauty contest. MSCI's Mexico, Latin America and Emerging Markets indices are the winners. So having established the historical performance dogs, let's give them a look.

(Reuters) - The government is investigating labor practices at top U.S. home building companies, an action described by one industry trade group as "overbroad" and potentially very costly.

Oh, that may hurt, doctor. Litigation, check. Headwinds in the form of high unemployment, numerous foreclosures and the general buyer apathy, check. But there is at least one variable that looks a bit better than others. Prices are kind of low. And they have been in the negative territory on 3-mo, 6-mo, YTD, 1-yr, 5-yr and since inception. From the glorious days of 2006, iShares Dow Jones US Home Construction index lost not less than 80.72%. Even the Japanese stocks are more expensive YTD.

So here is a question based on this rather simplistic comparison. Having been down 80 percent, how much more air is left in the balloon? I mean, of course, there is a big fat zero that can be waiting for you as an investor in a company that goes bust. However, let's assume that a lot is already priced in. I mean, it's been a while. So yes, they can, and probably will dip more. Maybe we all get into this "lost decade" thing and Fed will be unable to inflate us out of it. But something tells me that the US might play out a bit differently. This here ain't Japan.

Will the American people share tiny apartments and ride Vespas around the palazzo in the city? Will public transportation become the place to be seen? Will it be cool to live with your parents forever? Will raising kids in tiny apartments become really cool?

I don't think so. Americans want a backyard, a dog, 3 bedrooms plus central air and a barbecue grill. They want the American Dream, damn it.

Let's check demographics and call it a night?


"According to an annual state of the nation's housing from Harvard University's Joint Center for Housing Studies, once the U.S. emerges from recession, strong demographic trends will restore health to the housing market. The key is echo boomers, the 75 million Americans born between 1979 and 1995.

"There will be 5 million more echo boomers than there were boomers when they first started swelling housing markets," said Eric Belsky, executive director of the Joint Center.

As a result, household growth during the next 10 years should range between 12.5 million and 14.8 million, according to the report. All those new households mean demand for many new housing units.

"This is a powerful, powerful underpinning of future demand," said Belsky."


This was said in 2009. Two years later, with the builders trading like the nuclear winter is here already, with much lower prices and cheaper mortgages, what has changed? Cash will do better in the next 20 years? Gas and food will get cheaper? Landlords will be lowering rents? Possibly yes, but probably not.


Yes, there are negatives. Prices will drop more. Harder to qualify for the loan. Unemployment is high. Sentiment is low.

But the American Dream is an awfully persisting creature. I would be pressed hard to bet against it in the long run. Not to mention that it seems to be on sale now.

Safe still?

The contrarian in me wants to stay in USD because everybody seems to hate it.
The contrarian in me wants to short a little bit of gold because everybody seems to love it.

Dollar-bashing is fashionable nowadays and articles named "Why the Dollar's Reign Is Near an End" are in vogue on WSJ. Gold, and increasingly silver are the "place to be"? This vaguely feels like real estate 3 years ago, with one major caveat: people don't borrow yet to buy precious metals. That, and the portability of the little shiny rounds, coupled with a number of other considerations (sovereign debt levels of the developed countries and etc.) that play in favor of gold/silver/platinum and the like.

I agree with the notion that it's not that gold is so great but the alternatives are kind of bleak right now. I think owning some stable global businesses that are reasonably priced, shareholder-friendly, have healthy debt levels (somebody recently said that right now a CEO who hasn't issued debt should be fired) and generate dividends may make sense to some of us?

However, my gut tells me that more or less everything looks kind of fully-priced right now. Granted, sitting on some zero-yielding scary deteriorating safe haven no more paper is a tricky proposition. But what if China slows down, Fed gets a bit more hawkish and Middle East cools down a bit? If we deem worst-case scenario as probable why not deem the opposite as possible? I might be 1000 percent wrong but I fail to see people exchanging little silver bits for coffee at their friendly local coffee shop in the next 12-24 months.

Yet, I know that gold has something that paper dollar does not. Have you held an ounce of gold lately on the palm of your hand? When you do you KNOW it's money.

"Gold still represents the ultimate form of payment in the world. Fiat money in extremis is accepted by nobody. Gold is always accepted."

Alan Greenspan

P.S. I am still waiting for a correction here. Will the end of QE2 bring us some long-awaited discounts?