By: Steve Smith
The housing market had already been hurting because of a lack of supply, especially at the lower to middle market. This made it difficult for first time buyers. With 30 year mortgages now moving above 5% affordability, it is even harder.
Housing has an outsized impact on the economy, some say as “it punches above it’s weight,” because of the number and variety of other industries it touches — from a broad range of jobs (plumbers, electricians, brokers, architects, lawyers) to all the material and equipment purchased, rent and what was consumed (lumber, pick-up trucks, tile, etc.
Any further slowdown in housing will ripple through the broader economy, possibly leading to a recession.
Lastly, low rates have spurred a record number of stock buybacks over the past few years. companies were able to borrow money. This was essentially done for free to use for stock repurchase plans. This shrank share count, which boosted earnings per share and helped put a floor under prices.
Without the free money, buybacks are likely to dwindle. This will leave the market vulnerable air pockets, and free falls.
Steve Smith have been involved in all facets of the investment industry in a variety of roles ranging from speculator, educator, manager and advisor. This has taken him from the trading floors of Chicago to hedge funds on Wall Street to the world online. From 1987 to 1996, he served as a market maker at the Chicago Board of Options Exchange (CBOE) and Chicago Board of Trade (CBOT). From 1997 to 2007, he was a Senior Columnist and Managing Editor for TheStreet.com, handling their Option Alert and Short Report newsletters. The Option Alert was awarded the MIN “best business newsletter” in 2006. From 2009 to 2013, Smith was a Senior Columnist and Managing Editor for Minyanville’s OptionSmith newsletter, as well as a Risk Manager Consultant for New Vernon Capital LLC. Smith acted as an advisor to build models and option strategies to reduce portfolio exposure and enhance returns for the four main funds. Since 2015, he has worked for Adam Mesh Trading Group. There, he has managed Options360 and Earning 360, been co-leader of Option Academy, and contributed to The Option Specialist website.
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