Homebuilders Still Offering Opportunities

The other week, I did an interesting segment with the good folks at Yahoo Finance regarding real estate, housing and the home building sector. You can view it HERE. In my 2015 Fearless Forecast, the home builders were one of my top sector plays for 2015 and they have not disappointed so far, although others certainly have!

Sue Lee, the interviewer, asked me for a few companies which look particularly good. I answered by saying that I would much rather buy the whole sector through an exchange traded fund like XHB or ITB instead of cherry picking. There are a few reasons for this. First, I think the sector is ripe for consolidation, but choosing who are the acquirers and acquirees is above my pay grade. Second, the purest plays in the sector like Lennar, Toll, Beazer, Ryland, Pulte, Hovnanian, Kaufman Broad, etc. actually trade weaker than the secondary plays that support the industry like Mohawk, Aaron’s, Tempur Sealy and Owens Corning.

As I briefly discussed with Yahoo, the tailwinds to the builders are mergers and acquisitions activity and lower input costs to build houses, like raw land, lumber and labor. Higher mortgage rates is the primary headwind. This is absolutely not the same as the housing industry as a whole, which is suffering from high rates and the lowest home ownership numbers in 30 years. Additionally, baby boomers are downsizing and selling, but too many millennials, the organic buyers, don’t value home ownership like previous generations. I don’t know is this cause or effect, but millennials prefer renting or living at home as mortgages have been tough to come by for this group.

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Blue Skies

Another day, more blue skies for the major stock market indices. The pain for the bears has to be strong and growing, but I have yet to see evidence that they are throwing in the towel en mass. And price action has done absolutely wrong to suggest anything more than a trading pullback.

As I mentioned the other day, I think it pays to be a little more vigilant here, not that I think we are going to see a full fledged correction or the need to make outright sales to raise cash. Sentiment has grown a little complacent and stocks are at all-time highs, sometimes an ingredient for a quick pullback. However, the plan remains the same. Until proven otherwise, pullbacks are buying opportunities.

The longer the market can go without giving up significant gains, the more likely the resolution will be sharply higher. As a bull, it would be great to see some sideways action for a week or so and then another blast higher to really squeeze the bears. Ultimately, I still believe that stocks will experience a major blow off to the upside before the bull market ends, however, it doesn’t look like that’s right here.

Sector leadership continues to rotate in an intermediate-term positive fashion with REITs, utilities and staples all ceding to consumer discretionary, semis, biotech.

Gearing up to visit Jeff Macke and the good folks at Yahoo Finance tomorrow and then see my old friend Melissa Francis at Fox Business on her show MONEY.

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BOOM! Now High Yield is Key

What a great day in the city on Wednesday! I knew I was okay when Metro North actually ran on time to start the day. I did two segments with the good folks at Yahoo Finance, one discussing the most overused word in investing, “bubble”, and the other on the current state of the bull market. As they are posted I will share the links.

I headed to the floor of the NYSE in the afternoon for a quick stint with Bill Griffeth on Closing Bell. Since the 1980s in the FNN days, I have always been a big fan of Bill’s and I really enjoy chatting with him. The floor was crazy busy and I could hardly move around. It wasn’t, however, from floor traders and professionals doing business. There all kinds of groups visiting and moving around.

Finally, Fox Business’ Making Money with Charles Payne was my final stop and I got to spend a full hour on the show with the other guests. That was special and I will post the various links shortly.

Stocks had a huge day on Wednesday, in both directions. After Tuesday’s drubbing, the decline continued yesterday morning before firming into lunch to get back to unchanged. Then the Fed released their minutes and the market took off like a rocket ship. Frankly, stocks were so stretched to the downside to begin with and were already firming into the news. Yellen & Co. just threw gallons of gas on a tiny little fire and the inferno ensued.

At the end of the day the major indices gained back what they lost on Tuesday plus a little bit. I would have liked the internals to be a little stronger, but you can’t have everything.

The big question now is, “Was that THE bottom or A bottom?”

The jury is out at this time, but for sure, the bulls have the ball now. Let’s see where they are at 4pm today. Let’s watch leadership emerge.

High yield bonds funds, one of my most important canaries, all closed down yesterday which is the norm on a day when stocks  take off during the afternoon from a decline. I would be shocked if funds like PHYDX, NNHIX, MWHYX and JAHYX do not show gains when their prices are posted tonight. If these funds are not up at least .20% or more, that will be very worrisome for the intermediate-term.

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Rumors of the US Dollar’s Demise Have Been Much Exaggerated

The second segment I did on Yahoo Finance last Thursday was not a new one for long time readers. As many of you know, I turned very positive on the US Dollar right about the time Bear Sterns needed a bailout in March 2008. That was long before any QE (money printing) began.

Historically, the dollar spent most of its life oscillating between 80 and 120 on the US Dollar Index, an index containing a basket of currencies with the majority of the weighting against the Euro and Yen.

When the economy is strong and interest rates are typically in an uptrend, the index rises and vice versa. Usually, the US Dollar Index in anticipation of a weaker economy and lower rates and bottoms in anticipation of higher rates and a better economy. Remember, this is all relative against the rest of the world, but primarily against Europe and Japan. Additionally, in times of international crisis, the dollar is typically viewed as a safe haven.

For the past 6 years, the greenback has and continues to be one of the most hated investments, especially by the general public. They very wrongly assume that printing $5 trillion would devastate the dollar as the doomday’ers would have you believe. I can’t tell you how many times I have heard pundits talk about the “plunging dollar” or how Ben Bernanke’s money printing continues to punish it. The truth is, the US Dollar Index has never been lower than it was in March 2008.

Anyway, I didn’t mean for this post to be this long and go on and on. The segment I did last week on Yahoo Finance is below.

Why the Dollar Bears Have Been Wrong for the Past 5 Years

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The Most Hated Bull Market Continues

Yesterday, I spent a jam packed, fun filled day in New York City with client meetings and media interviews. Although I don’t enjoy the commute in and out of the city, I do enjoy the hustle and bustle as long as the weather is good since I like to walk as much as I can. I absolutely hate taking dirty, smelly cabs that take forever to get around, but I will hop on the subway when I have to go downtown.

I began my day with the good folks at Yahoo Finance creating three controversial segments. Jeff Macke, my favorite regular host who loves to disagree, ride me and try to get me out of comfort zone was on vacation so Milanee Kapadia filled in and did a masterful job. I really enjoyed chatting with her. She has a way about her interviews that is unique in today’s fast paced environment.

The first segment is below and it’s certainly not new to my readers who know I have and continue to believe that this is the most hated and disavowed bull market of the modern investing era.

“Hated” Bull Market

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Fox Business and Yahoo Finance

I head to New York in the morning (Thursday) to spend some time with my friends at Yahoo Finance. As usual, you can expect another controversial segment or two from my interview with Jeff Mackey. Yahoo Finance was the first media outlet I began to warn about Apple’s stock price heading for a 50%+ decline and that long-term forecast remains the same. However, something may be changing over the short-term…

Besides visiting Yahoo and meeting with clients, I am also scheduled to be on set with the folks at Fox Business at 1:30pm. Usually, I do my interviews from a studio in CT, but this is the first time I will be live in studio and I am really looking forward to it!