Commentary for August 23, 2006

| August 23, 2006

July existing home sales were reported down over 4% today, the decline being much worse than the 2% that industry “experts” had expected. Anyone who regularly follows the musings of Bill Gross over at PIMCO knows that he went out on the proverbial limb and called the top of the housing market in his monthly commentary at the beginning of August, and we agree. The boom/bust cycle in real estate follows a remarkably predictable schedule and current data argue quite convincingly that the top of this particular cyclical bull market is now in place, as shown in the following two charts from the Gross commentary:

Only time will tell, of course, but if that does turn out to be the case, what will happen to an economy that has come to rely on the housing bull market to sustain its “growth” over the past six years? The answer is, quite simply, very bad things. We will see.

Category: Commentary, Market Update

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