Guidio Gossip - Anecdotes on Construction / Housing

Today at the soccer field, Guido talked with this engineer who worked at a large private construction supplier. When asked how business was, the engineer replied that it's picked up. Guido then inquired  by how much up from the bottom, and was told 5%. Whether or not this is due to the Obama housing stimulus, will remain to be seen in the next few months. The engineer, however, was ecstatically optimistic.

Well, as Guido has said before, in Tale of the Bull on this website, it's good to be optimistic. But like all ideas, by itself it doesn't pay for food, shelter, and those other little annoyances we all need for a living.

Speaking of housing, yesterday in a conversation with this hedge fund manager, Guido was told how Toll Brothers < the custom house builder > just had a successful bond offering 330 basis points above "Treasuries". The manager was using this as an example of just how ridiculous  and inflated the bond market has become. In other words a bubble.

Well evidently there's loads of liquidity out there to borrow. But also evidently no income to pay back the loans, as possibly indicated from all the mortgage delinquencies and foreclosures. The same goes for the US Federal government debt. If there are no taxes because there is no income to tax, what will be used just to pay the interest on all those T Bonds? More Fed government debt? As I've said before, this is only going to last, if it even lasts that much, as long the dollar holds up on the foreign exchange markets.

For now everybody seems to want bonds. Recent mutual fund flows indicate equity funds still having net outflows, while the bond mutual funds are being swamped with liquidity. Some in the biz think this is an indicator that the bond market is about to go down badly. Eventually,  yes it will. But when, depends on liquidity factors which is anyone's guess.

Meanwhile, calculatedriskblog.com had an interesting story about hotel revenue per available  room being down 25.5% for the latest week. They thought this might be due to the anomaly from the Labor Day weekend < the holiday when most of private labor was still working if they had a job >. However, Guido did a little checking in the Smith Travel Research report, from where the story came originated. Business cities like Phoenix, Dallas, Houston, Chicago, all had a decrease of over 40%. Though Oahu, Hawaii had a slight gain, the state is still depressed from normal levels.

Guido suspects there is more here than just post holiday aberrations. Like maybe the US economy is still sliding / falling?

"All I know is what people tell me." - attributed to Hedda Hopper