So the DOW hit 14,000 and then pulled back… today we’re seeing profit taking as well. And just when perception had it that inflation was pretty tame, Mr. Bernanke reiterates the Fed’s view that inflation is still the biggest concern. Today Harold Mass on Yahoo cites the collapse of two Bear Sterns Hedge funds, where they “informed investors in two battered hedge funds that their investments have become practically worthless.” Their Enhanced Leverage Fund (can you say subprime?) is done, and their High-Grade fund is down 91%.  Can you imagine? I can’t help but wonder where the fallout will end up. I know there’s a lot more to the story, and it’s not just subprime. Like pebbles tossed in a pond… the ripples will take a while to subside. Right now it looks like there’s more than a few pebbles going in.
The National Association of Home Builders reported their sentiment index was at a 16 year low, not seen since 1991.Â
“A surplus of unsold homes on the market, combined with ongoing concerns in the subprime mortgage arena and affordability issues associated with tightened lending standards and higher interest rates, continues to take a significant toll on builder confidence…”
But the NAHB still expects “home sales to get back on an upward path late this year…”  I don’t buy it, and think their forecast is early by a year or two.  But now the Fed is going to work harder with states to ensure regulation and enforcement of subprime lending and mortgage origination… better late than never I guess. Now we have a tough real estate market and a tough lending market. Many potential buyers are going to find it much more difficult to get loans completed.Â
Pretty interesting to watch a market reaching new highs in light of other economic challenges. I also wonder if consumer spending will be one of the last pebbes in the pond, and that it’ll be a choppy ride over the next year or two?
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