October 10, 2003

Mortgage rates rise above 6 percent

Man, blogging must be getting pedestrian. There's now a blog on...get this...mortgage rates. Useful though, for folks like me and you. You can find the blog here or by going tohttp://www.bankrate.com/brm/news/mortgages/mortgage_update.asp The fixed 30-year rate is now back above 6%, after four weeks of falling. Does this signal the end of historically low mortgage rates? I've said that before and been wrong. But it is in keeping with the idea that the big-run in financial, housing, and real estate stocks is a blow-off top--asset inflation of the first order rather than the market's prediction of future earnigns growth in those industries. Don't take my word for it though. Look at the charts. The chart above is a 3-year weekly-close chart for the streettracks Willshire REIT exchange traded fund (RWR). The fund's ten largest holdings are: 1. Equity Office Pptys Tr 7.38% 2. Simon Ppty Group Inc New 4.99% 3. Equity Residential 4.79% 4. Prologis 3.31% 5. Vornado Rlty Tr 3.30% 6. Archstone Smith Tr 2.96% 7. Public Storage Inc 2.87% 8. Boston Pptys Inc 2.86% 9. Kimco Rlty Corp 2.70% 10. General Growth Pptys Inc 2.66% The yellow line is the 20-week moving average. I wanted to extend both the chart and the MA out in time to give you an idea of how pronounced the increase has been since the March lows this year.The slope is steep. And it looks to me like the employment news last week and this--although misunderstood--is triggering a new wave of asset inflation that could send the REITs into parabolic mode. Thus the blowofff top. You see the same pattern forming in the Philly Broker/Dealer Index... And in small cap stocks as measured by the Russell 2000... And speaking of small caps, notice any resemblance between the chart above, and the same chart of the Russell 2000 between January of 1999 and May 2000--in other words the last manic phase of the tech bubble?


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