Reply #7: "Record stock prices" are backward looking [View All]

You really have to look at the root of what got any stock prices to a high level, and how underlying predictions are going--forward.

Enrons balance sheet looked good, for some time.

I assure you, my source says parts of the building industry are facing bankruptcy. Consider that homebuilders rely on subcontractors. When subcontractors go belly up--which is happening--builders lose out one hundred percent of their investment in said, plus they have to cover replacement costs. Subcontractors are not bonded in the residential building market. And even if they were, the price of bonding would go up, due to the current fiasco.

As for the inflation("indicators"--smirk), it isn't simply "plywood up 25 percent". Plywood has almost doubled in price, depending on the period you look at. Also copper, aluminum, steel--everything.

That's why some segments are facing bankruptcy. It is CERTAIN to affect the builders, even with strong balance sheets (in the past). At least, delays and major cost overruns, which means smaller margins.

The Federal Reserve is way, way, way off base when they cite "low inflation." So much so, I wonder if disaster is unavoidable at this point.

Now, factor in rising interest rates, and the possibility that mortgage liquidity could vanish overnight if Fannie Mae goes out, or is reduced in capacity, which is likely.

Not to mention, the Asians are cutting back on Treasury purchases, which have depressed interest rates for some time.

Finally, the whole growth model for housing was drawn up considering a pre-outsourcing immigration and white-collar salary model--which has evaporated.

I did not mean to do a stock analysis, but since you asked...