Saturday, May 25, 2013

Scandals and the Market

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Holy mother of pearl just got done writing about being honest and the flood gates open!  I'm going to take this out of context a little and say we have an advantage here like rumor has it when the games are playing we don't have our eye on Washington or your government for that matter.  Well now both aisles are so busy blowing whistles on scandals in the government like the AP recorders confiscated, IRS targeting certain political groups and the Benghazi failure. Who's minding the store?  The people that's who, more ammunition for a gun that does not need to be fired.  I mean their tearing each other up and we're taking notes the pressure is really on all over the globe, this is a good thing aside from Syria which is just a bloodshed.   Now that political governments are beating a drum to a tune that is damaging to their own ears and from the Central Banks choking on the printed money, going after gold, pipeline schemes of rescuing 401k, IRA and savings even (what the hell) to invest in your country through bonds, well not really invest they will trade you, for no one wants the damn things because their worthless.

The lessons learned here how can you trust the grading of any paper?  We were just dragged through that in 08 the Sub Prime. (life is short memories are long we're writing history)   So here ya go some more news, the housing sector is supposed to be moving up right? If you believe the media headlines, then all is good with the housing sector. Well not according to the price of lumber with a future price CME Lumber today @ 297.40 per 1000 board feet,  now that's off it's high in March 2013 of almost 410,  WHAT!  Lumber has had an extremely strong correlation with housing stocks as the chart below shows. With a correlation of .90, lumber prices and homebuilder stocks rise and fall similarly day in and day out.
This extremely correlated relationship likely makes it the better leading indicator for the homebuilders and equities markets.


The last time these two highly correlated markets became this disconnected preceded the 2011 market top that sent stocks down over 20%.  So just like when Cyprus had to sell its gold it made it a time to buy the metals but watching lumber fall it might be a time to pull out of  homebuilder stocks.

So while the government boys are not getting along with the second term of the Obama administration which many presidents go through the market indicators are your only friend.  Luck is not a factor and the commodities are the real deal of what is going on outside the BOX!  Play me my song, here it comes again!

 Nursery Crimes

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