View Full Version : Economic Commentary - September 26, 2006 - John Serrapere

09-26-06, 12:29 AM
Economic Commentary

by John R. Serrapere

September 26, 2006 (Update: 9/28/06)

(Past results may not be indicative of future results.)


Prior to 1999, 12-month stock returns were low after HMI peaks and high after HMI troughs (a negative correlation). Since 1999, there has been a positive correlation and RGDP has been a more dominant driver of stock returns.

Stocks Have Become More Dependent on Housing

This report was originally written to internally advise private funds for a qualified investor. The posting of this report for public viewing is intended to demonstrate applied research without an intent of business solicitation.

John Serrapere - Investment Analyst & Strategist - Foster Holdings, Inc.
Mr. Serrapere has been advising investors since 1986. He currently is the Investment Analyst & Portfolio Strategist for Foster Holdings, Inc., a large Pittsburgh, PA based family office. His firm also consults other investors seeking alternative investment options. Mr. Serrapere was formerly a principal of Rydex Leveraged Hedges, LLC in Rockville, MD where he designed registered and non-registered products.

Mr. Serrapere has published in The Journal of Indexes (http://www.journalofindexes.com/), Global Financial Data (http://www.globalfinancialdata.com/), Corporate Finance Review (Warren Gorham & Lamont, NY, NY), The Retirement Planning Journal (Commerce Clearing House, Chicago, IL) and has presented for Information Management Network (NY, NY).

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09-27-06, 11:08 AM
Yet another provocative "since 1995" transition!

09-29-06, 05:35 AM
Yet another provocative "since 1995" transition!

I wrote the exact same thing on my blog, here: http://blog.myspace.com/index.cfm?fuseaction=blog.view&friendID=51443639&blogID=171113275&MyToken=b2be26d8-c7db-42cd-ab48-3d32f2aaef9e

Is the driver of this since-1995 transition simply a change in attitude in the way we view debt? I see the caveat about future results, but should we expect the correlation to hold up at least reasonably? What would change things? What is a good argument for seeing the correlation revert to an inverted relationship?

10-01-06, 01:07 PM
Perhaps the fact that <a href="http://www.autodogmatic.com/index.php/sst/2006/10/01/housing_s_hidden_headache">so much of home builder profits are predicated upon credit creation</a> has something to do with it. As long as the system keeps inflating, financiers that abett the home builders end up with wads of cash that they have to reinvest somewhere. Join ventures in particular should show a much larger "pop" for financiers than traditional bank-loan based lending. Given that these financiers these days are often hedge/private equity funds, the money could end up anywhere--i.e. the stock market in general.