The National Assoc. of Home Builders Housing Market Index (HMI) was reported this morning at 46. The trend in the chart shows a soaring HMI with Single-Family Starts beginning to follow. Even though the HMI is a “soft data” sentiment index, because it has home builders as its sole focus it shows a very strong correlation of 85.7%. If one looks at the history of previous up-cycles it should be fairly easy to see that the current rate of change is the strongest observed since 1985-the inception of this particular index. The previous strongest recovery in housing occurred in this series in the early 1990s at an annual rate of change of ~35% compared to the current recovery at ~82%.
The indication continues for a robust period of housing activity and housing related employment.
The economic data continues roll-in as supportive of the stance that investors should remain optimistic for higher equity prices. It is best to remember that stock prices represent investor psychology vs. investor perceptions of business activity. That many yet remain pessimistic in the face of the strong activity we see today has been historically a good forecast of higher equity (SPY) prices as the pace of the economy becomes more obvious.
Charlie Munger: Invert And Use “Disconfirming Evidence”
Charlie Munger is considered to be one of the best investors and thinkers alive today. His thoughts and statements on investment research, investment psychology, and general rational behavior are often incredibly insightful. Anyone can learn something from this billionaire investor and philosopher. Q2 2020 hedge fund letters, conferences and more If you’re looking for value Read More