The World Famous "Fence Wizard": July 2008

Thursday, July 24, 2008

Challenges still ahead for the back half of 2008

Starting with the good news:

Steel, Oil, Coal and other commodities have fallen off their highs. This is the first substantial sign of price deterioration in months. Gas could return to $3.50 a gallon if trends continue and steel products may begin to cheapen in the coming weeks.

Challenges ahead:
It is unclear if commercial credit will survive the scourge of the residential mortgage market and loans have been tightened for corporate borrowers. There will be no additional interest rate cuts by the Federal Reserve as monetary policy sits squarely between the battle of raising liquidity and controlling inflation with a stronger dollar.

Listen carefully: The housing market is not about to recover just yet; trends are still getting worse and Freddie Mac's mortgage survey just revealed that bets are now being made on a Fed interest rate hike in the near future....

Mortgage rates spiked this week on inflation fears, with the benchmark 30-year, fixed-rate loan soaring more than a quarter percentage point to a national average 6.63%, its highest level in nearly a year. (Click here for more)

For each set of good news it appears we can find an equally bad set of negative news. But this seems to be better than the onslaught of all bad news that we identified months prior.

Capitalism and certainly the construction market are built upon private property and credit. Both have been badly compromised in the short term and both will return to those who can survive the current period.

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