Reuters Business Channel | Reuters.com REAL ESTATE BOOM!

Reuters Business Channel | Reuters.com

The real estate boom is getting its second breath. As Reuters reports, the boom is alive and well in hurricane ravaged areas.

The talk talk talk of a real estate bubble slowed the market for a while. Right now, buyers should be aware that homes are cheap partly because mortgage rates are so low. However, mortgage rates have been creeping up. Greenspan has jawboned the banks to raise rates and to screen for better credits. The jawboning can only go so far.

Millions of Americans can afford a home, millions more Americans can afford to move up and millions more can afford a second home. The housing market has held up extremely well in the face of very negative consumer attitudes. The next leg will be shorter but prices will rise significantly.
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Myrtle Beach Real Estate

macroblog

Macroblog reports that Angela Merkel is the new conservative chancellor of Germany. The problem is that the Social Democrates retained 8 of 14 seats in the cabinet.

A Maggie Thatcher or a Ronald Reagan is what Germany needs; stay tuned. The fact that the country needs to reform or get left behind is clear to all sides. The socialist will move in the right direction even though they will kick and scream the whole way.

With something like 10 new countries added to the EU, the European community can possibly rival the economic power of the US. Several of the new entrants are experiencing fast growth. One of the reasons for the growth has been the passage of lower tax rates. Businesses are moving to these areas because labor costs and taxes are low. Go Angela Go; bring Germany out of the doldrums of socialism and into the world of capitalism!

EARNINGS UP--STOCKS DOWN!

Company earnings continue to rise. Granted, much of the gain has been in oil and oil services but the overall average is getting to be large. Forward earnings on the S&P are over $84 which means the forward PE is at 14 times! At 14 times earnings, the earnings yield exceeds 7%.

CHECK OUT:
The Market and Corporate Earnings
Investment Yield


IT IS TIME TO LOAD THE BOAT! KEEP JUST A LITTLE POWER DRY AS SENTIMENT FIGURES HAVE NOT GONE TO EXTREME LEVELS. MANY SENTIMENT INDICATORS ARE EXTREME BY ONE STANDARD DEVIATION. JUST A LITTLE MORE BAD NEWS PLAYED UP IN THE PRESS COULD SHOOT THESE "PERCEPTION VERSUS REALTY MEASURES" TOO TWO STANDARD DEVIATIONS. SUCH AN EVENT WOULD SIGNAL THE BEST BUYING OPPORTUNITY IN THREE YEARS!

SUN MICROSYSTEM

Business 2.0 sent me an email report on the SUNW--GOOGLE mashup. The indications are that GOOGLE will purchase thousands of SUNW servers. SUNW uses AMD dual core chips that are the size of pizza boxes. They are perfect for the GOOGLE racks and racks of computers because they are fast and cool. Heat is a major problem in data centers.

The SUNW servers run Linux, MSFT and SUNW software. The folks at ZD NET as recounted earlier, seem to have it right. The "FAT" MSFTsystems are not needed by the majority of users. The average person needs a simple interface and access to much information; video, audio and text.

Several months ago, it was true that GOOGLE operated 10 data centers in the US with about 10,000 off the shelf computers in each center. It has been reported that GOOGLE is in the process of expanding to 60 data centers. These centers are connected by heavy duty "fiber highways" and will offer the "jumping off" place for GoogleNet.

The ties betweenGOOGLE and SUN are tight; the cofounder of SUN was the first investor in GOOGLE and Eric Schmit was at SUN before he was hired to run GOOGLE.

Commercial real estate agents report that data centers are in short supply. Many folks are not aware of the heavy capital spending cycle that is upon us. Businesses are going to be bidding for space and resources. Unemployment is relatively low. The FOMC must continue to raise short rates to "cut future inflation off at the pass". The consumer is going to get squeezed a little in the process.

Investors should consider steady earning growth stocks in the consumer staple and heath care areas to balance more aggressive investments made in the high tech area or business service area (such as airlines). Energy stocks are in "bounce" mode. The stocks have run up, down and are headed back up. I would be cautious here.

The cobweb supply and demand curve of energy is about as unpredictable as it gets. Furthermore, the stock prices discount what will happen next year, not this years earnings. Oil company earnings will be extremely strong this year. However, billions of consumers have been hit hard by the recent spike in gasoline prices. The developing nations have been hit twice as hard as the rest of the world. The cutbacks in countries such as Indonesia and India are more severe in percentage terms than in the US.

The SUNW computers are energy efficient. I have not looked at the GOOGLE financial statement to see their electricity expense but it has to be a significant number. SUN has fought the good fight to survive up against the likes of IBM and Dell. The company made it through the "wars". With GOOGLE as a major customer, other companies will think twice before buying IBM servers. IBM has mounted a major advertising campaign. IBM is a late cycle stock. I expect IBM to do well in the progressing business expansion. However, I expect SUNW to gain share. The share gain at SUNW should have a powerful impact on the price of SUNW shares. BUY THE BULL!

IT IS TIME TO BE AGRESSIVE. THE PUBLIC IS AFRAID OF EVERYTHING FROM BIRD FLU TO HURRICANES. THE BOTTOM IS NEAR. BUY NOW TO AVOID MISSING A GREAT OPPORTUNITY.

THIS WEEKS VOTE IN IRAQ COULD BE THE SPARK NEEDED. IRONICALLY, I BELIEVE IT MAY TURN OUT BEST IF THE CONSTITUTION IS DEFEATED. IF IT IS, THE MARKET MAY TEMPORARILY DROP. IN THE LONG RUN, IT MAY MEAN A TRUE DEMOCRACY TAKES HOLD!

BLOGWORLD

JUST WANTED TO SHARE SOME GREAT READING:

Hollywood Movies Misfire with Core Male Teens"Barry Reinholtz address the decline in movie attendance and revenues. He cities that an overpriced, mediocre experience at the theatre is taking a backseat to an alternate home entertainment medium

Bill Cara comments on the rising Japanese Market

Yahoo is introducing Flicker, which is journalism from all around the globe, displayed into News Search results. Consumers can now enjoy opinions, analysis and commentary, via blogs.

James Hamilton a professor of economics at the University of California, San Diego, examines the The Macroeffects of Oil. Hamilton includes a great chart on how historical disruptions in oil production have affected the GDP.

Nuriel Roubini, a Professor of Economics, the Stern School of Business at New York University and chairman of RGE Monitor, also gives a great overview to Oil Prices and the Global Economy . Unlike previous spikes in the price of oil (1973, 1979, 1990, 2000, the this year's rise is a demand shock, rather than a supply problem.

According to the NPD Group, a group helping retailers understand consumers, Holiday Spending is expected to rise in spite of gas prices.

Internet Outsider: Microsoft to Kill Google? No.

Internet Outsider: Microsoft to Kill Google? No.

The internet outsider has put together a detailed report explaining that Microsoft has already lost the web war to Google and Yahoo. AOL and Microsoft can fight it out to see who survives as number 3 or they could join forces.

Google has started advertising its tool bar on countless sites. Battelle says this is the key to the Sun-Google deal. To get the tool bar on as many machines as is possible.

I believe Google will be hard to catch in search but to do what Google really wants to do, it must be the giant killer. Netscape died trying. Bloggett, for Googlesake, hopes that it does not "go after Microsoft ". I think the deal with Sun announced exactly that Google is out to replace Microsoft high priced products with web based free services.

Old timers still can not believe that IBM lost the hill to Microsoft . Google is going to make a good run to be king of hill. Long live the king!

ON THE EDGE OF BUY BUY BUY SIGNALS.

On Friday, I headed out to Blowing Rock North Carolina for a long weekend with family. I leave after viewing a number of indicators that suggest the market is on the edge of a major best-buy trough. Ironically, it is technical sell signals that are setting up even more powerful technical buy signals.

For example, many technicians are seeing a break below support on their systems. One simple and widely followed system of this sort is the 200 day moving average support of the S&P 500. This indicator is leading to the sell of stocks.

At the same time, valuations stongly suggest stocks as the asset class of choice. Even the move of the ten year bond to a rate of over 4.4% does not bring it close to the stock level. 4.4% is certainly much better than the recent rate of 4.1. It does not look like much but one must remember that the value of bonds flutuates inversly to the yield. The earnings yield on stocks is approaching 7%!

My family is fully invested but we will become even more aggressive if the market psychology continues to push prices below all reason. We are even willing to buy call options if certain indicators go 2 or more standard deviations from the norm. There are a number of buy signals that are now positive by more than one standard deviation. Harry Dent for one has issued a buy recommendation. He does not want to try to hit the exact bottom; no one should expect to catch the exact bottom. Again, my family is fully invested because stocks are attractively priced. This does not prevent us from raising our beta, buying calls or using leverage if the probablility of a high return grows to unusually high levels.

Hold onto your hat, this Bronco is bucking for all its worth. Ken Fisher and many other very smart, experienced investors would tell you to hang on for the wild and crazy ride!