Judge Holds Catherine Herridge in Contempt, Slaps Heavy Fines Until She Reveals Her...
New Poll Shows the Left's Pro-Hamas Antics Have Backfired
Congress Extends Government Funding Another Week to Stop Partial Shutdown
American Paralysis and Decline
Trump's Fainthearted SCOTUS Picks Could Doom Him in DC Election Case
Soft-Soaping the 'Uncommitted' Voters Who Back Hamas
If This Is 'Christian Nationalism,' Sign Me Up!
Some Idiosyncratic Observations of the Elections So Far
Morning Joe: an Abysmal Waste of Airwaves
Michigan Tries Crazy
States Are Moving to Protect Kids Online. Time for D.C. to Follow Suit.
Bulk Mail Voting Is an Open Invitation to Fraud
The Palestinian Cause Has Officially Jumped the Shark
KJP Defends Biden Not Taking a Cognitive Test, Claims the Demands of His...
Kathy Hochul Has the Green Light to Give State Jobs to Illegal Migrants
OPINION

Playing Dead Cat Bounce

The opinions expressed by columnists are their own and do not necessarily represent the views of Townhall.com.
Advertisement
Advertisement
Advertisement

It’s the end of the year, and of course, the dead cat bounce (oops, I should say Santa Claus rally) needs something to pin its stocking on. 

So, why not housing? 

Advertisement

I feel very comfortable in my analysis of this sector because, since 2006, I have studied, written, commented in depth, and even predicted collapse of the housing market.  In 2006, I was vilified for my opinion from coast to coast, as everyone from Ara Hovnanian to Ben Bernanke said housing was only experiencing a brief hiccup. 

They went on to say that by spring of 2007, the bull market in housing would be back with a vengeance.  Housing icon Bob Toll even said it was like “fairies dancing on the head of a pin,” whatever that means. 

However, not only did I predict the housing sector collapse, I took action for the benefit of my clients.  Not on a scale of billions, like John Paulson, but certainly in millions, as my portfolios were short homebuilders, short mortgage companies, and short financial institutions. 

With patience, 2007 turned out to be Christmas everyday. 

Since then, each time a positive building permit report is released, or a new or used home sale statistic is published, or a blip in homebuilder confidence is reported, the media immediately announces the rebirth of housing. 

In most instances, it is met with an immediate upward surge in stock markets, both domestically and internationally.  After all, housing is one of the cornerstones for everything good and bad with the world’s economy. 

Advertisement

Unfortunately, if you examine the math, a 10% increase in sales, building permits, or even positive attitudes, is based upon a historically low level. 

In fact, it should give you paws (dead cat!) to reconsider. 

For example, if the numbers moved from 10% to 11%, it’s “Hurray, a 10% increase!  Or, from 5% to 6%, a 20% increase.  Finally, from 1% to 2%, a 100% increase.  Just keep in mind, the lower we go and the worse the housing market becomes followed by a larger percentage uptick, more and more people will develop an increased sense of hope in the housing turnaround. 

That’s very misguided, to say the least.  Understanding both the math and the actual housing sector situation itself dictates these dramatic stock market responses are, in fact, merely dead cat bounces.  These are great opportunities to move to cash if you haven’t done so already, or even get short. 

It’s all very clear to me.  It’s the dancing on the head of the pin that I’m still really confused about.  

Join the conversation as a VIP Member

Recommended

Trending on Townhall Videos