Bubble‘ of this century in the USA.
New Home Sales, after having never fully recovered from the GFC, are
again collapsing at a frenetic pace.
No one wants to talk about it on Wall Street? Similarly in the broader
economic community. Yet, it is very clear in the data, and has been for some
time.
We are all aware of sky-rocketing home prices and the joy that brings in
wealth creation for families.
Though, just the family home, is merely a peg in a moving wall. In other
words, simply maintaining the ability to move sideways at the same relative
value.
It is investors who have clearly benefited. In particular, the property
fanatics of the various industry motivation groups. However rising mortgage
rates are a real problem for this often severely over-stretched group.
Highly leveraged investing in any asset group, stocks or property,
inevitably leads to exactly the same outcome. Higher volatility and significant
correction. Corrections are OK, but wash-out the extreme speculators
corrections can be particularly savage.
The collapse in New Home Sales from a point of extreme upward price
extension, artificially created by a behind the curve Fed that fed the speculation,
can to be honest only end one way. That is a property price collapse.
This is likely to be underway within a few months, if not weeks.
The US property market is in an extreme bubble state and it is already
beginning to burst.
Add a property price correction to extreme food and energy inflation and
rising interest rates, and the answer to this riddle is without equivocation, a
fully-fledged Recession.
The USA experience is exactly identical to the current formation of
forces in the Australian economy.
Like the USA, Australian policy makers appear completely unprepared for
what is coming.
This article was written by Clifford
Bennett, ACY Securities Chief Economist. The view expressed within this document
are solely that of Clifford Bennett’s and do not represent the views of ACY
Securities.
All commentary is on the record and may be quoted without further
permission required from ACY Securities or Clifford Bennett.
This content may have been written by a third party. ACY makes no
representation or warranty and assumes no liability as to the accuracy or
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