Short Squeeze, Fed Still Buying, Strong Home Sales

If you are like me your probably read at least 5 stories about Gamestop this week. This is a great example of a ‘short squeeze.’ There has been other speculation about ‘pump and dump’ strategies and whether it really is a David vs. Goliath story (Cleary in runs like this the ones that got in early and out early are the ones that profit). What I like about this narrative is that it is now very evident that individual investors do have some power to move the market and influence major financial institutions. This story shows one specific Wall Street’s bet’s position, what prompted him to get in (it was more than diamond and rocket emojis), and how he turned $300K into $4M pretty quick. He also admits to losing $60K in previous gambles.

Rates – moved a bit higher at the end of this week after a nice two week period of improvement. Rates remain near historic lows down approximately 7/8% year over year.

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Jobs – The number of people filing for unemployment for the first time decreased slightly last week but is still hovering at an elevated level over 4x pre-covid levels and well above the highs of the previous recession.

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Homes Sales – while the number of pending sales did not increase from the previous month, it is the highest December number ever recorded. Year over year pending sales are up 21% which is incredible in light of the record low inventory. Lawrence Yun (NAR chief Economist) predicts a 15% increase in sales during 2021 and 6.6% appreciation.

Mortgage Application volume decreased by approximately 4% last week. Purchases are still up 16% from this time last year when there was 23% more inventory. The average loan amount for homebuyers hit $395,200 – another record high. Due to lack of inventory people are buying more expensive homes.

Inflation – the Personal Consumption Expenditures (PCE) index was up 0.4% in December. Year over year the index increased 1.3% which is relatively mild, but the month over month increase is significantly higher.

Fed – the Fed announced they would continue purchasing a minimum of $120B per month of MBS and Treasuries. Fed Chair Jerome Powell said he was not at all worried about a bubble in the housing market and that high activity and lack of supply has led to significant price increases. He believes this will temper a bit.

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