(By Mike) Well that didn't take long! Shortly after I warned that the momentum darlings of this market — Apple (AAPL), Priceline.com (PCLN) and the like — looked ridiculously overvalued and increasingly vulnerable, they tanked.
Apple lost more than $65 per share, while Priceline lost almost $80. In fact, Apple lost more value in two days than at any point in the last 23 months! We'll have to see if this is only a correction, or the end of the out-of-control, easy money-fueled run. I'm leaning toward the latter though, and I hope you've followed my advice on how to protect yourself!
[Related -Record Sales For Wal-Mart Stores, Inc. (NYSE:WMT) And Three Stocks That Could Benefit]
Now, I want to shift the focus to another sector that I believe is at risk of a serious stumble … housing. Get a load of this comment I read earlier this week …
"Interest expressed by buyers in the past few months has yet to translate into expected sales activity."
Then there's the follow-up warning about …
"Ongoing challenges that are slowing the housing recovery — particularly tight credit conditions for builders and buyers, competition from foreclosures and problems with obtaining accurate appraisals."
[Related -Apple Inc. (NASDAQ:AAPL): Q1 Estimates May Prove Conservative Given Strong Holiday Sales]
Who's saying these things? Some noted housing bear? A guy like me — who accurately called the housing crash ahead of time, and who has repeatedly warned about the lack of vigor in the recent uptick in the housing numbers?
Nope. It's from the Chief Economist of the National Association of Home Builders David Crowe! In other words, even the economist of the largest new housing industry trade group says the market remains relatively weak.
|In recent statements, the Chief Economist and Senior VP for the NAHB did not have encouraging news.|
Numbers Don't Lie —
the "Great Housing Recovery"
Is Anything But!
Why the change in tone? Simple. Numbers don't lie, and the latest figures suggest the "great housing recovery" is anything but great! The NAHB's builder confidence index just dropped three points to 25 in April from 28 in March. That missed economist forecasts for an unchanged reading by a mile.
The subindex that measures current sales fell three points to 29. Worse, the subindex that measures buyer traffic slumped four points to 18 — the lowest since December!
As if that weren't enough, housing starts plunged 5.8 percent in March to a seasonally adjusted annual rate of 654,000. That followed a 2.8 percent decline a month earlier, and it left starts at the lowest level since October!
Building permits did climb. But the improvement was in large multifamily projects — likely apartment complexes, if my read of the data is correct. Single-family permitting slipped 3.5 percent, the first decline since September.
And to make bad things even worse, the National Association of Realtors said yesterday that existing home sales slipped 2.6 percent to an annual rate of 4.48 million units last month. Economists polled by Reuters had expected sales of 4.63 million units.
I've said it before, and I'll say it again: Conditions have improved marginally in recent months, driven mostly by some of the warmest weather on record. But because we had a very early START to the spring selling season, we're going to have an early END to it. Heck, the latest figures suggest it may already be petering out.
The Investing Implications
for You …
One of the strongest sectors of the stock market, besides the momentum darlings, has been housing — or anything related to it. Paint companies have been trading like dot-coms, while home improvement retailers have been acting like it's the middle of the housing bubble again!
But I'd bet dollars to donuts that all the Johnny-come-lately mutual fund managers who have dogpiled into these stocks are going to suffer a nasty fate. I wouldn't be surprised to see names like Home Depot (HD), Lowe's (LOW), Lennar (LEN), and D.R. Horton (DHI) suffer the same kind of spills that we're already seeing in stocks like Apple and Priceline.com.
So please, if you own these names, do me a favor and get out of ‘em before it's too late! I would also be on the lookout for a worsening in the economic data as the spring progresses, and a potential slump in the broader market as a result!
Until next time,
P.S. Stay clear of housing-related stocks is exactly the advice I've given my Safe Money members. Plus I've recommended an investment that is meant to rise as real estate prices fall. Click here to learn how to join for just 12 cents a day.
This investment news is brought to you by Money and Markets. Money and Markets is a free daily investment newsletter from Martin D. Weiss and Weiss Research analysts offering the latest investing news and financial insights for the stock market, including tips and advice on investing in gold, energy and oil. Dr. Weiss is a leader in the fields of investing, interest rates, financial safety and economic forecasting. To view archives or subscribe, visit http://www.moneyandmarkets.com.