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Coordinated Intervention, Meet Sellers 9/27/22

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I can't take credit for that turn of phrase. It's from the great financial philosopher, Professor Lawrence Berra. Professor Berra taught at the University of DaBronx in the 1950s and 60s.  

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14 minutes ago, sandy beach said:

 

Is that a lot?

I've been looking at acreage properties up around Ukiah.  Hard for me to see much stuff up there transact apart from cash offers. As families that've held something for 50 years with effectively zero cost basis bring properties to market at prices that will clear, the outstanding inventory is going to take a complete hammering.  Seeing the start of markdowns, but they're piecemeal and positively do not reflect the new mortgage environment.

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24 minutes ago, Jorma said:

I'm not only because simple pattern recognition. 6 down days in a row the S&P is very rare. Americans get sick of selling stocks, no matter how justified. 

You're assuming that selling is voluntary. In markets like this most selling waves are not. It may be the reason for 2:30 turn time. Margin calls have been executed. 

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Now the real estate pundits are saying that there won't be any inventory offered because people with low rate mortgages won't sell.  Well, guess what, they missed the part that high rates will bring massive inventory out of the woodwork, when prices come down and the jingle mail starts. Likewise, retirees will sell because they can now get a return on their equity. 

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The math is so simple & devastating.  Let's say since the start of the pandemic that a 30-year mortgage for a $1m home required 20% down & you could finance the balance at 3.0%.

N = 360

FV = $0

PV = $800,000

i = 3.0/12 = 0.25

Calculate PMT = $3,372.83

Let's say that the $3,372.83 monthly mortgage payment reflects the maximum some couple can afford to buy a house.  Well then, at 7.0%, what is the maximum loan they can afford?

PMT = $3,372.83

N = 360

FV = $0

i = 7.0/12 = 0.58888

Calculate PV = $506,962.

Assume 80% LTV, maximum closing price is... ($506,962./0.8)= $633,702.

That's a 37% cut in purchasing power for our couple from 3.0% to 7.0%.  This is so gruesome.

So then, you can sorta say, "Everyone who bought after [Enter Year] is underwater, because of the financing costs."

The productive benefit of American mobility within a continental economy should not be underappreciated.

A lotta young workers are stuck for the foreseeable future in their first homes.

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I said I'd be here when the SPX crosses the swing point...

So, it turns out I just needed stronger drugs.  Smile. 

Just glad to be back home, but frankly I feel like, well...one step north of death.  I've been through the ringer and I'm going to just lay up and take it easy like I should have from the beginning.

Although....I wanted to comment on a couple of things...then I'm going to leave you boys to it.  No choice really...

If it keeps on rainin'...levee's goin' to break...

Expect shenanigans from here to 3600 and then a war to ensue, but held back by 3900.  3600 to 3900 = War Zone.

Shortly...you will enter into a period of "confusion", and I believe NO TREND CHANGES WILL OCCUR DESPITE ALL EVIDENCE TO THE CONTRARY.

To elaborate.  If/when markets look like bottoms and complete reversals...sure, they are bottoms, but the issues of interest(just as I'm showing you in UUP below) HAVE NOT PEAKED.  They're entering they're respective "rest periods"(always remember, 1x...rest period...1x) with a whole 'nother leg of the decline coming...and soon.   Understand? 

After the rest period...In most sectors(aka: ANYTHING not tech) I'm expecting a minimum of 2:1 market compression which equates to...a financial contagion/crash..that should only be halted by a...PIVOT.

Of course...if you bust through 3600 down to 3500?  Well, everything I've just said is delayed until you nestle yourself into the BTTB area(at 3250).  Then...see above.  Same story...rinse and repeat. 

Although...then no crash will be forthcoming...just business as usual.

Yes.  I'm repeating Scenario A and B because 3600 is make it...or...break it.

Do I know which one is going to happen?  I can recall the old biblical saying....a double-minded man is unstable in all his ways. 

Well...I have to agree. 

While I do favor the 3600 holds approach...I simply do not know. 

I'm watching with keen interest, but like I said in my initial post on this very topic.  It doesn't really matter at the end of the day.  The outcome is still the same and for me that is defined as:

The MAGNET at 2,24(x) to 2,25(x) on the SPX.

I'm going to leave you with this...

The chart on the left is a chart of the ^XOI index as it peaked on June 8th...the day I started screaming crash in oil/natural gas. 

In that chart, at the dead center of the pattern, you have a Window on March 11th.  Now...when viewing UUP on the right, you have another Window(on June 19th, the middle of a long weekend...June 17-21)).  I'll ask...how many days from March 11th to June 19th?  Ok...Now...how many days from June 19th to today September 27th? 

You're in the middle of a Window(that closes midnight September 30th). 

1507581876_bombdropsattheirfinest-September272022.thumb.jpg.0065ed4e18ba813124b72cb2e753ecfc.jpg

Take care everyone...

TCG

oh...and...

"The Amazing Stoolskin" 

Thanks for the chuckle Doc...I needed it.  Smile.

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39 minutes ago, DrStool said:

Now the real estate pundits are saying that there won't be any inventory offered because people with low rate mortgages won't sell.  Well, guess what, they missed the part that high rates will bring massive inventory out of the woodwork, when prices come down and the jingle mail starts. Likewise, retirees will sell because they can now get a return on their equity. 

Right. The retirees are going to set market values everywhere with their zero cost basis. They put their house up for $750K in a sea of $1.1m inventory, and that house transacts, all them hopers are phooked. My impression looking around Californicated real estate is that we at the Wiley Coyote stage… with a lot of white-knuckled hopesters thinking their house is “different & special.”
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