I wanted to call attention to this article because I thought it had some fundamental facts which I think will affect the market at some point in the future. But as Forester remarked the timing is difficult.
I think that what we have seen in foreclosures is the tip of the iceberg. Over the next couple of years we are going to see 3,000,000 houses in trouble, if not on the market and foreclosed.
“Banks are still valuing homes too highly on their balance sheets so they are vulnerable to a downturn in home prices again.”
In addition the banks are playing chicken with the market on house prices. They are holding foreclosed houses off the market rather than dumping them. They are also playing vicious games – listing houses for low prices, and when they get an offer taking the house off the market. Only to relist it for a higher price a few months later. And you wonder why people hate banks.
“I think the TARP repayments were a bad idea,” said Forester, because they could leave banks short of funds if a second housing crash does hit.” This is well said, but the banks are desperate to escape adult supervision so they can return to their bonus feeding troughs.
Banksters are gangsters.
They have fattened on a naïve public (Mafia percentages on debit card overdrafts, for example) and they are being brought to heel, as they should be. What this means for our bank positions only the chart knows (we are long BAC and C).
If you subscribe to Elliott Wave Theory then you have to think that the upturn in house prices is Wave B of the downwave, which coincides with Forester’s forecasts for prices.
I’m not going to forecast what the market is going to do, or predict the future (re, my favorite quote from Nils Bohr: “Prediction is always difficult, and especially so when it concerns the future.”). I don’t need to do that because, as I have said in one of my quotable remarks “You don’t need to predict the future, because the chart tells you what to do right now.” While Forester was making .4% in 2008 the edwards-magee.com newsletter was short from 12603.04 to 6469.95, a gross of 6133.09 Dow points.
One other point mentioned in the article caught my attention:
“And though he was right about the 2008 crash, he was also a couple of years early. His fund took a defensive stance in 2006 and as a result underperformed the market by double-digit percentage points in 2006 and 2007, with returns of 3.4% and a loss of 5.2%, respectively.”
I can’t remember a time when I tried to anticipate the market and didn’t get my nose bloodied. Best to wait until the market tells you what to do.
“Nothing matters until it matters” said Forester. I like that.