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December 7, 2005


Housing stocks, ripe for a renewed sell-off, received their catalyst from a Wall Street Journal article that exposed the extent to which speculation is cooling. Homeys such as Beazer, Centex, Toll Brothers, and KB Home all fell between 3-4%. Another housing-related stock I have highlighted in the past, Building Materials Holding, dropped $4 to around $81.

These stocks truly look exhausted. Several, such as Centex, KB Home, and BMHC, failed to make new highs on their latest runs, while others, such as Hovnanian, Toll Brothers, and William Lyon Homes, could not gain any upside traction in the November rally, despite being severely oversold. It seems that a new down leg is beginning, and I suspect they will all set sharp, new lows.

Speaking of bubbles, another WSJ article today exposed Helicopter Ben as the obliviously tenacious deflation-fighter that he is. The preposterousness of his views were offensive enough to inspire a new article for the Macro Center entitled "Propensity to Print," and buttressed my views that precious metals will experience an extended bull market. The shinies tacked on another 1% today, and we saw Pan American Silver and Newmont Mining break the $20 and $50 levels, respectively.

The equity markets continued their last-hour slump from yesterday, falling about a half percent across the board. I believe the market has inflected, but I won't rest assured of that belief until I see a more convincing decline in the dollar.

Disclosure: Short BZH, BMHC; Long PAAS, NEM Calls


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