Institutional and individual investors remain calm amid light selling to protect profit. Day traders are speculating on market makers manipulation. Short term speculative trading is very risky. Investors are not willing to buy on dip for fear of further drop. Buying and selling by day traders balances each other. Market makers have been betting on a downtrend market in the last few weeks. But they do not oversell for fear of a sudden sharp rebound.
It appears that a storm may be coming soon due to irrational flow of capital. The action of individual investors and hedge funds will have influential effect on the market when they allocate the large amount of capital on hand for investment.
Get Ready for a New Home Construction Boom! Really
Still, don't expect builders to start laying plans for new developments that will come on line in 2020, just as the housing market will be tight by historical standards. That's not how we roll in this country. I've read a lot and written some about the history of bubbles in the U.S. And whether it's a telegraph line or a railroad, a fiber-optic cable or a development in Las Vegas, we tend to jump into bubble baths when they're at their frothiest.
Foreclosures for sale: Big supply, low prices
There's a three-year inventory of homes in foreclosure for sale, and that's devastating home prices.
What's more, the homes are selling at steep discounts, especially so-called REOs, bank-owned homes that have been taken in foreclosure procedures.
Also weighing on market prices are "short sales," homes where the selling price is less than what is owed by the borrowers. These sales sold at an average 9% discount.
Pensions Leap Back to Hedge Funds
Public pension plans are lifting hedge-fund investment, seeking to boost long-term returns despite losses suffered in some funds in the financial crisis.
The bullishness comes despite a moment in the financial crisis when the fund found itself adding cash to hedge funds it was invested in that were wobbling.
"We see hedge funds as having a smaller, though still significant and important role in the asset mix," spokesman Robert Gentzel said.
Why safe corporate bonds aren't so smart anymore
Companies deemed good for the money are raising trillions selling bonds to investors who can't seem to get enough of them. It looks like a great deal for both parties -- until you consider the details.
These bonds continue to attract money partly because many mutual funds that focus on bonds feel they must invest in them no matter what the price. No one can guess when bonds could tumble but if a fund sells them and they don't drop right away, it's sure to lose investors to rival funds that didn't sell and are still collecting interest and posting higher returns -- for now.
"You have to dance until the music stops," says FPA's Atteberry, echoing a now infamous line from former Citigroup CEO Chuck Prince as to why he was making risky bets in the run-up to the financial crisis. "But if you look around the room, there's 20 people and one exit door. Not everyone is getting out."
David Wright of Sierra Core Retirement Fund is just as critical of the almost willful ignorance of risk by investors. But he's buying. He says bears are ignoring the appeal of investment grade bonds as refuges of safety in the troubled times he sees ahead. Wright says investors are courting danger in myriad other assets such as stocks, which he thinks could fall as much as 35 percent over the next nine months.
"There'll be a shift from complacency to anxiety to fear," Wright says. "And they'll gradually move into these safe haven assets."
Or so they're called.
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