The huge increase in existing housing sales and prices proves
that the REAL ESTATE BUBBLE is still boiling in the US economy.
This is really one of those situations, like in 1999, where it's WHEN NOT WHETHER BUBBLE WILL BREAK....
CLEARLY THE G-MAN HAS HIS WORK CUT OUT FOR HIM.... Greedspan has created a monster that he can no longer control...and as with most economic monsters it's going to take a lot of "over-shooting" to kill it...
Just as the stock bubble needed constant tranquilizing to kill it...so too, the Real Estate Bubble, NOW DANGEROUSLY LARGE, will need a massive withdrawal of stimulus to stop it.
SO THE FED WAS RIGHT TO INCREASE RATES LAST MONTH...AND WITH THE CURRENT NEWS ON HOUSE PRICES WE MAY EXPECT A CONTINUATION OF RATE HIKES WELL INTO NEXT YEAR...
MY HUNCH IS THAT IT WILL TAKE A 7% FED FUNDS RATE TO STOP THE HOUSE BUBBLE...
And of course "The Conundrum" will likely have to resolve itself along the way in 2006.
This news on housing prices has got to be bad for bonds...no matter what the Kindergarden at the NYSE thinks...
THE MASSIVE INFLATION IN HOUSING PRICES WILL STOP...THOSE "$80,000 HOUSES THAT ARE SELLING FOR $350,000 AFTER FIVE YEARS WILL COME BACK DOWN...
PITY THE POOR SOULS WHO BUY AT TODAY'S INFLATED HOUSE PRICE LEVELS...! OF THIS WE CAN BE ABSOLUTELY CERTAIN....
ALAS, THEY ARE BUYING CISCO AT $80!
