More Bits and Pieces

I call this "more" B&Ps because it is in effect, a continuation of Odds and Ends. Also, Bits and Pieces is a song title by the DC5. They sang of a broken heart and I sing of our poor, convoluted brain that is constantly bombarded with data. Sadly, I am adding to it.
Stock Market
Cracks are showing in this bull rally. In the past two weeks the market stopped its uptrend, and had triple digit down days with volume. This is reflected in small cap, S&Ps and the Dow Index. The Russell 2000 and Dow Transports both fell below key levels and also on volume. When there are fewer people in the store, you sell less. That is the way this market hit its record highs. I have warned you that with less companies to choose from, money gets concentrated. When everyone exits for the door at the same time, you have a stampede. The Trump election win gave this market a 4,000 point boost. I see the expectations faltering. This will cause the market to retrace back to the point where it began its climb. The one positive that I see has been energy. We have been using more oil and gasoline this summer. Although this aspect took to our economy after the Independence Day time period, this usage is following the old cycle of summer driving. This means that the oil market will hold up the stock market until Labor Day. At that point if the oil glut returns, the market will tank. One fundamental reason for this is the internals of our economy. We are a credit economy. This means everything is in debt: our homes are mortgaged, our cars are mortgaged and most of our gadgets are mortgaged. If the paycheck gets cut due to less hours, delinquencies will rise. This causes a chain reaction in a negative spiral. Not good.
Housing
The need for shelter is eternal. No wonder the Fed does not include it in its inflation formula. In our consumer economy it is our biggest purchase for an individual. The only positive at the moment is the Fed has kept the interest rates low. In fact, mortgage rates are at its lowest point in 2017. Nevertheless, housing starts and permits continue to decline with a tight inventory of existing properties and at very high prices. A central problem for buyers has been the down payment. With the medium price for an existing home at $267,000, a buyer needs at least $30 grand for 10% down and other closing costs. This stumbling block has caused purchasers to seek the lower 3% FHA loans. I have nothing against these mortgages except life happens. See above or below. In addition, buyers are returning to ARMS(adjustable rate mortgages). The housing industry has utilized these two loopholes for years, but the threat of liar loans or ninja loans could resurface with the high demand. The real risk to housing will be in the future. Any downturn or spike in ARMS could severely damage the housing market recovery. According to Susan Wachter with the University of Pennsylvania's Wharton School, the key will be multifamily construction. Rents are too high, but more available and affordable rentals will allow people to save for the down payment. This point like all intellectual concepts does not jive with reality. Rents are too high, but the people building new units know this and they are seeking to keep it that way. In a related aspect the Trump administration is looking into all tax loopholes including the home deduction on interest payments. The present talk centers on a cap. Consider Beyoncé and Jay Z just signed a contract for an $88 million dollar home in L.A. The monthly payment comes to $250,000. Now, I say this these crazy homes prices have a deep root in the tax deduction. I say it should be eliminated after $5 million and dramatically reduced after the average home price for that tax year. You want to close the wealth gap? This is a good starting point.      
Three Mile Island
is scheduled to close. Not what you think. No environmental disaster is looming. It is basic economics. Costs are too high. The cost to maintain a nuclear plant is very high. These guys never suggest this when seeking to get a license to build one or the design flaws. Don't fret these points because they won't be building more in the near future. The reason is natural gas prices. As long as gas prices remain under $3, nuclear facilities lose money. Three Mile Island is set to close in the near-term. In fact, five nuclear plants have closed in the US since 2013. I, personally rejoice about this. I am against nuclear energy, however there is another option to explore for nuclear fission and it is very safe. I would like to see more research into this option. Trump is working with the Department of Energy to study flaws in nuclear design with the hope to resurrect the industry. It never hurts to have choices. Out.