Money and Investing Thoughts

U.S. housing starts hit 10-year low in July; permits also lower – MarketWatch

Outside of the actual home-builders, I consider this good news. To get housing started again, the first step will be to bring down available inventory to more closely match current demand.

I think demand will pick up quicker than most think. A figure I saw was that California alone adds 400,000 new households a year. Also, the permitting and building of new homes is not a quick process, so once demand starts to pick up, it will take a while for the home-builders to be able to ramp back up their numbers of new houses.

Right now we have a perfect storm of too much inventory and extreme tightness for mortgage lending. Once the crisis du jour crowd has let up on the good mortgage companies, they will start lending again, and people will be able to buy houses. Just as currently, selling begets selling, a buying cycle will be upon us before most recognize it.

Another opinion on the effects of the subprime mortgage problem on the overall market (via Random Roger):

Chicken Little’s Brethren, on the Trading Floor – New York Times

After yesterday’s drop and earlier today further downward moves I wanted to make a few comments.

I find it very interesting how some problems for a handful of companies can affect the share prices of so much of the market. When I review the stocks I hold, I see companies growing and profitable, with no reason for a large price pull back being dragged down by the market as a whole.

I have taken a look at purchasing some call options on stock I believe have been beaten down unnecessarily. I have not found any that I want to buy due to very high time premium, but it is something to look at if you have some stocks in the same boat.

Speaking of time premium, the call option prices on Thornburg Mortgage (previously written about here, here and here) are sky high. I saw implied volatility in the 160% range vs. in the low 20′s earlier in the year and 36% a month ago.

Bottom line, I will try to sit back and wait for the Buy High-Sell Low crowd to give up and good companies go back to reasonable valuations.

Jeff Matthews Is Not Making This Up

I love to read Jeff Matthews. He only post a couple of times a week (or less), but the posts are interesting, informative, humorous and well written.

Today’s post has two of my favorite topics at its core: Fear & Greed. In my opinion these two emotions over rule all of the technical analysis you can do.