Ask any real estate agent, mortgage lender, or foreclosure agent how they feel about the economy. Not to mention that Dow Jones Industrial Average =! economy.
It's been been a great 4 years. From what I've been reading, the individual investors have mostly sat out the rally over the last 3 months or so. I figure when that money streams back in it'll be a good time to take some profits.
Well, Real Estate != economy either. I do, however, think that the stock market's recent run doesn't really reflect any particular strength in the economy.
wow, taking another run at 500 today. a little blip, nothing major. volatility will continue. we'll see between 13,000 and 14,000 all summer. by year end, we'll be at 14,600. OECD came out today saying credit risk in america is better situated than people think, worldwide growth is on course to top 5% this year.
Maybe, maybe not. You only have to look at bond market spreads to see that credit is increasingly becoming an issue. Plus economists have consistently underplayed the weakness in the housing market to an alarming extent. Personally, I think housing won't turn round for many years and will almost certainly have significant consequences for the economy during that period. Plus the dollar is dropping like a rock, making the Fed's room to manouver more restricted.
I think we're OK here. Economy's still strong, global growth is still strong. We'll be fine. It bounced back some this afternoon after all the margin calls cleared up. (Why anyone would be buying on margin right now is beyond me, but I'm sure it's happening.)
we are seeing just how over reactionary the street (and to some extent, the media) has become. credit is re-assessing risk right now. as has been said, no big deals have collapsed and all are continuing to pay off their debt. and the banks that have yet to be able to sell the debt are making 6% in the mean time. not a huge issue right now. the housing sector...just too much supply. a bunch of CEO's in the industry who thought the buying would go on forever threw up too much stock too quickly. the media is making a huge deal out of this, too, talking about it being the end of the world, it is so much more expensive to buy a home, yada yada. prices have stabilized overall (some markets have seen decreases, yes, but nationwide, we have stability). it is harder to get a sub-prime mortgage, yes, but lending standards have returned to normal, which is not a bad thing. rates are still well BELOW historic averages, ie it is still cheap to finance and purchase a home. sure, housing sales and starts are below the levels of a year or two ago, but they are returning to normalcy, not falling into some disastrous tailspin. global growth is moving right along, shown by the IMF upping their target for world growth this year to 5.2%. the USA just posted a 3.4% GDP gain in q2. we only had inflation tick up 1.4% year over year, much lower than expected. the weak dollar isn't a bad thing for our exporters (but if you want to complain about the trade deficit, don't buy foreign products, ie autos (yes, toyota still makes the majority of their cars sold here in Japan and the favorable exchange rate means they profit more), airplanes (fly airlines that use primarily Boeing jets), household appliances (yes, GE still makes theirs in Louisville)). the next month is going to be shaky. through year end, you'll see the dow and S&P500 pushing to new highs. through next year, growth looks promising. now we just need to address long-term competitivenss issues such as education, worker training, lowering corporate tax rate, reducing the SOX/regulatory burdens.
And since my fiance and I will probably buy a house in the next couple years, I would love for supply to increase and prices to decrease. Hedge funds are getting killed. Chrysler postponed their financing of their takeover. And two hedge fund managers in Connecticut are accused of manipulating the natural gas market.
What's the point? Nobody pays the nominal rate anyway. Corporate taxes are an area where I could be convinced of a flat tax w/ no favors. And frankly, hedge funds are getting away with murder right now when it comes to the taxes they pay.
the good hedge funds are killing this volatile market. remember, hedge funds don't make huge sums in bull markets, but are supposed to eat up the inefficiencies of a volatile or bear market.
you lower it, you simplify it. companies aren't paying $35m a year to just figure out their taxes. i'd love to see a drop to 10%, no loopholes, no exemptions, no corp welfare. just like we're seeing in ireland and the eastern european nations. i don't agree with the hedge fund/PE argument. if they don't make money for their investors, they don't get paid the 'riches' that they do. that is hardly regular, steady income. it is much more akin to a dividend and I'm ok with it being taxed at 15% (but I'm also in favor of taxing all income at that level, but that is a whole 'nother chestnut).
chrysler didn't postpone any financing. the takeover is going through. the banks who lent the $ for the takeover are just trying to reset the terms of their deal after they are having a less than easy time selling off the loans. but as I said elsewhere, those banks are still holding loans that are paying them 6% for the time being...
I agree. I love sell offs. Especially panic sell offs. What I hate is not having enough free cash to average into the market while its happening.. to get a decent buying opportunities when the volume lightens up... Again, part of that is I am 33, and looking to buy any weakness, and not have to worry about knowing it will be higher in 25 years.
Actually, this post reminds me of a question I've had about hedge funds for a while re: the 2-and-20 fees. I can see your point (though I don't agree) re: how they're taxed on money made from the 20%, but what about the 2% management fee (or whatever it's called)? Is that charged at the 39% rate or the 15% rate? On a completely different subject, I recently read that the proportion of the profits eaten by that 20% cut basically negate the advantage hedge funds have over more traditional, less risky investments. Something like only 5% of hedge funds produce an alpha.
I see few if any signs the housing market is stabilizing. Sales of both new and used houses are still falling at a pretty rapid rate year-on-year. The national median may be down only slightly but that's really hiding what actually is happening:- as the bottom end is evaporating due to the issues in the sub-prime market, sales are being skewed upwards. If you look at the Case-Shiller index (which attempts to track resales of the same houses) you'll see its diverged from the median in the majority of metropolitan areas it covers. Additionally, foreclosures are increasing rapidly (they are already at a record level in CA), at a time when the economy is still doing well and, as you point out, rates are low. To me the issue is to what extent the woes of the hosuing market affect the economy as a whole. If there is little "crossover" then I agree we will be fine; if not, then I think we're in for a bumpy ride.
1. the 2% management fee is used to cover operating costs such as office, secretaries, technology, salaries. and yes, the partners are taking salaries and are taxed according to the prevailing tax rates (i know a couple firms that only give their partners salaries in the range of $65-100k, while their non-partner analysts and traders are garnering higher salaries). 2. when the market is up, as it had been for quite some time, hedge funds don't have a distinct advantage over a mutual fund. remember, these were once vehicles to 'hedge' risk, ie to minimize potential loss. any hedge fund worth its salt is licking its chops at the volitility in the market as they should be protecting their investors much better than any mutual fund could.
I've heard it said that hedge funds do very little actual hedging. At least this was true of LTCM, who "hedged" by making similar bets in a wide variety of markets. Essentially, their hedge was a bet on red 32 on 100 different roulette wheels. Mostly, I'm talking out of my ass here, since hedge funds are generally very secretive about their holdings.
the early, true funds were indeed doing a whole lot of hedging. but now, anybody that wants to run an investment vehicle and avoid regulation calls themselves a hedge fund. and you're close on LTCM. they did have 32 on red, but they also 15 bets on random numbers. and all the bets were made with Don Corleone's $$ on margin.
Basically, these days, all a "hedge fund" is is a private investment partnership that avoids registration (by selling interests only to QPs (or is it AIs -- I work on the tax side, so I always forget the securities langauge). They also invest in some more exotic instruments and strategies. But are they really hedging anymore? Probably not.
I dont think they were ever "hedging" to be honest. A hedge fund is bascially nothing more than a nimble mutual fund that doesnt have to adhere to a specific strategy, or invest is specific types of instruments. And as you mentioned, its private so they can avoid certain regulatory obligations.