Wednesday, July 15, 2009

Stock Market vs. Housing Market 2009

Well folks, it's been a long, long time since I posted anything here on Now Buy Stocks but I am happy to return. I figured that on the heels of my last two posts (Top 10 Stocks to Buy) I would try to make some assessment of where the market is going for the rest of the year. I know, that is a tall task.

Stocks versus Westport CT Home Prices

I thought it would be interesting to compare the prices of Westport CT homes for sale and housing prices in general with my assessment of the other popular investment vehicle of our times: ye almighty stock market. Remember that a luxury community like Westport can actually reflect market volatility a lot because it is populated by many Wall Street tycoons.

So, first let's take a look at the plight of home prices. Basically, everyone knows they have gone significantly everywhere. Also, inventories are lined up and have only just (maybe) begun to move. There are way too many houses on the market so prices have to fall. That is the law of supply and demand. It works when you buy stocks and it works when you buy homes.

Now the S&P 500 has come down even more than Connecticut homes sales have. Remember that the wealthier areas hold up more in a downturn. But the market has just been crazy.

Earnings Disparity

I thought it was more or less all better when it began its March '09 upturn but it has been kind of disappointing of late. Has it moved sideways or thoroughly turned down? Either way it has not continued to rise despite firms like Goldman Sachs reporting very surprising positive earnings (Q2 2009).

Johnson & Johnson did not fair as well. Many people have jumped ship on name brands to save some money. I even heard that they are spending less money by taking less pills, stretching their contact use out, etc.

So the picture we begin to see playing out through the rest of 2009 is really nothing but the same. I expect us to basically just skid sideways. Barring any unforeseen (and unlikely) big bad surprises (and I mean really big) I don't see us dipping down too far. But neither do I see any reason to get excited about buying stocks at this point.

Now, home prices such as we see in Westport, CT, really shouldn't fare any better. Investors will in general not be able to gain any extra money in this placid economy, and so how are they going to upgrade their houses? They just won't. Connecticut and all other stable housing markets are going to just go sideways, too. They may do better than the market. If I had to pick one or the other I'd go with housing, but still it is not very appealing.

Final Prediction: Real Estate and S&P 500 in 2009:

No reason to buy the stock market right now. No sign of a positive recovery in sight. Where's it going to come from? There is nothing to get excited about in stocks (or real estate) right now. So sorry!


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