Sunday, July 27, 2008

Best of the Weekend on the Web....

I found some interesting posts around the web this weekend. Enjoy.

From a well known banker - "Don't buy a house today if you aren't going to stay there at least 7 years." It's funny that this is now seen as some kind of ancient mythology, but for many years this has been the threshold of the buy/sell decision. In fact, I'd argue that 10 years is a nice round number and a better number if you are a bit more conservative. Why 7-10yrs? Well, assuming prices fall 5%-20% further from here, after fees (agent fees, bank fees, attorney fees) you are probably looking at 7-10+ years of normal appreciation (2-3%/year) to get back to break-even. I'm more skeptical on housing than the author of this posting but I found it interesting that someone whose livelihood is tied to mortgage transactions would be honest about breaking even in real estate.

Let Look at the Durable Goods number on Friday. Yes, it was ahead of expectations, but consider 2 things.
1) The stimulus package has a depreciation tax credit that expires this year that is designed to spur spending and it may have contributed.

2) It's a month. Month-to-month data is basically meaningless. Look for long-term trends, including revisions - don't overlook the revisions - year over year changes, etc.

Soros buying the dips in India, should you?
Despite the screaming headlines about the roaring economies in India and China, India's primary stock index is off 35% this year and everyone is rightfully down on India's near-term prospects (violence in Gujarat this weekend doesn't help). Inflation is up to 12% and all measures of growth seem to be slowing. So why is the one of the smartest traders in modern times buying in India?

I suppose the theory is that India is able to operate independent of the rest of world, but I respectfully disagree with that theory.

The bigger risk to this style of investing is currency risk. Maybe the stock market in India might rebound, but you could have your gain wiped out by gains in the $/Rupee exchange rate.

Steer clear of India for now and instead invest in Randy Pausch's book.

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