by Chris
Given the massive number of zombie companies out there (defined as those unable to meet interest payments from operating earnings, and so forced to continually roll over their debts while adding to them) we know that rapidly rising rates are a big deal.
That’s also true for housing which is, or was, a huge component of the US economy. I say “was” because the current narrative being floated by the Wall Street marketing firms (a.k.a. the MSM) is that housing is not important to the US economy any more. Well, at least they are trying to claim a lot less important but they have been hinting that housing can safely be ignored now, same as farming.
To that I say “nope!” and the narrative will inevitably shift back to “housing matters” as things unravel.
Here’s our fun chart of the day, scooped fresh off my Twitter feed:
While the S&P 500 was successfully stopped right at its 200 dma, there’s nothing bullish to be found here in the homebubbler chart.
The typical pattern in housing when it goes weak is to see the homebubblers tank, then home inventories climb while sales tank, then house prices go down, and finally the various lenders and mortgage insurers get in trouble starting with the riskiest first.
Last time the “finally” included huge government and Federal Reserve bailouts of the riskiest players, along with deals with the big banks to give some of their ill-gotten loot back to homeowners, but the banks (unsurprisingly) dragged their feet and for the most part screwed over homeowners. Of course, they suffered no consequences for breaking their deals with the government on this front.
Wash, rinse, repeat.