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Housing at lowest level since 1945, will DOW follow?

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posted on Sep, 30 2011 @ 06:47 PM
Today I read an article about how housing starts is down to it's lowest level since 1945, and another article about DOW reaching 1,000 by 2016. Here's the housing article:

The stats in the above link come from shadowstats:

Before 2006 we all knew that real estate only goes up. Afterwards we learned real estate values can also go down, to 50%, or to 25% or less. From 2006 to 2008 the ride was a oscillation of recovery hope and panic as we watched the unstoppable slide downwards.

We also learned in 2008 that real estate is a leading indicator for the stock market, about this new entity called the 'Plunge Protection Team', and the concept of pumping liquidity into banks and therefore the stock market. The stock market often acted irrationally, we even saw money rush to safety like commodities and still stock moved strangely higher as safe investments such as commodities rose.

It seems the stock market was pumped up artificially by trillions of dollars from invisible hands. Thousands of money makers (banks) have shut down, entire countries (PIIGS) are marching to default and bankruptcy (and more countries are joining), the ratio of employed to population keeps shrinking, and consumers are consuming less. Given the environmental factors, it's hard to find the basis for high valuations in the stock market.

Today the DOW is 10,913.

Since housing is a leading indicator for stock, will the DOW drop to 1945 levels? The range in 1945 was 140-180.

Today there are articles recalling what Bob Prechter of Elliot Wave International said in 2009, based on wave theory that DOW will drop to 1,000 by 2016 (just 5 years from now).

Friday, September 30, 2011
Elliott Wave Update ~ 30 September [Update 6:40PM]
[Update 6:40PM: Followers (me) of Robert Prechter of Elliott Wave International call this "Primary wave [3] down" - or P[3] for short - but I do strongly consider another primary long-term count: that of the double three combination pattern of flat-zigzag-zigzag.

Let me make clear that in the long run it does not much matter as I agree completely with both Prechter's minimum target - Dow 1000 - and the time involved to get there (approx June 2016). Precter's cycle time work is amazing and if you cannot agree with his wave counts, its certainly hard to argue with his time counts.

Having prices fall back to the long-running DOW 1000 support that spanned from the 1960's to early 1980's certainly seems reasonable. How it gets there is up to debate and for EW technicians to argue over. But in the end I don't think even Prechter would care if its charted as a combination Supercycle wave or a simple expanded Supercycle flat (in which P[3] is a part of). They both lead to the same destination - severe contraction and deflation and collapse of the credit cycle that pumped this sucker up to begin with.

[Update 4:55PM: This is for those that insist "the Dow can never go to _____" (pick a number lower). Greece's stock market kind of reminds one that markets can get cut in half and then get cut in half yet again and again.
More at link above....

The Bob Prechter statement referred to above can be found below:

Readers sometimes ask if I am serious about the Dow eventually falling below 1000. People can understand that the Dow can fall in terms of gold, but they are so convinced about coming hyperinflation that they consider the idea of the nominal Dow in triple digits to be simply out of touch with reality.

The primary reason I believe the Dow is going to fall that far is its Elliott wave structure, which calls for it. But I can also see a monetary reason for this event. The tremendous inflation of the past 76 years has occurred primarily by way of instruments of credit, not banknotes. Credit can implode.

The only monetary outcome that will make sense of the Elliott wave structure is for the market value of dollar-denominated credit to shrink by over 90 percent. Given the eroded state of capital goods in the U.S. and the depletion of manufacturing capacity, it is not hard to see why all these IOUs have a deteriorating basis of repayment. The future has already been fully mortgaged; it's time to pay. But there is no money to pay, only more IOUs, which cannot be paid, either. So the credit supply (after a brief respite) will continue to shrink, which means that wealth, and therefore purchasing power, will disappear along with it. In the broadest sense, this change will constitute a collapse in the "money supply."

Such a monetary background would be consistent with the Dow falling below 1000 in nominal terms. ...

So, what do you think the near future holds? Well, considering you are on this forum, I'm guessing you have similar thoughts.
edit on 30-9-2011 by Dbriefed because: (no reason given)

posted on Sep, 30 2011 @ 07:20 PM
reply to post by Dbriefed

I'm thinking that if it had been the invisible hand instead of invisible hands then there would not be so much cause for concern. Besides that it's simply too complex of a problem for me to fully understand. (Then again, I'm not exactly the sharpest pencil in the box, either.)

Good thread.

posted on Sep, 30 2011 @ 08:36 PM
The big problem with real estate right now is the glut of homes on the market. Foreclosures are driving down prices and new home construction is virtually zero. Ironic that there are so many homeless and while at the same time the sheer number of available homes is is drag on the economy. Even more ironic is that the only way to fix this part of the economy is if thousands of homes get destroyed in some disaster or bulldozed.

posted on Sep, 30 2011 @ 08:41 PM
The biggest problem is our government for forcing banks to give loans to people who could not afford many of these homes. Our government deserves the blame directly on them.

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