Home sales down.
http://news.yahoo.com/s/ap/20061026/ap_on_bi_go_ec_fi/economy
My thoughts:
1. This increases the likelihood Fed will pause longer/possibly even drop rates slightly. Remember that average 6 months after fed stops increasing rates that it pulls a decrease - we are on track. Ignore what the Fed tells us, pay attention to what they do.
2. The impact of the fed rates will drop the dollar. This helps the I-fund.
3. The article tells us that average home sale price has dropped significantly. Then goes on to tell us durable goods are up. Housing impacts durable goods, but there is a lag. I expect that durable good will slow as well. Just there will be a lag.
4. The impact here will be to slow the economy and thus impact C&S funds negatively. This effect will be lagged. I expect this drop will occur but may not occur till January. January is a long ways off and a lot of things can happen. Right now this means I probably will lean toward being out of the market on Jan. 2.
5. I think we are seeing the effect of the internet on the stock market. More investors are now thinking about the Santa Rally and thus it comes about as a result. The hedge fund guys are not going to buck the trend but rather profit while the getting is good and will wait to pull the rug out. The closer we get to November the less likely I think a big pull back will be. It also lessen the likelyhood that it would be sharp since dip buyers would step in initially. This means I'll be staying on the train till I see real red.
6. The I-fund may be the place to be for awhile. Dropping dollar and an OSM that is following a climbing US market. It may not be a bad idea to diversify into the S-fund as well.
7. North Korea or Iran can always mess up a party, so I'm still watching for signs of smoke (OK we got smoke -- how about fire).
