Radio Rallies & Reversals

Today I thought I'd feature two stories: The first is the Case/Shiller Home Price Index in the US which fell in the month of August. The index has risen just under 7% since the April 2009 bottom, but it's still 28% below its July 2006 peak. Expired tax credits, record foreclosures, weak job growth and demand are pushing prices lower again; and problems with foreclosures are keeping prospective buyers away for fear that their purchase will be canceled as previous owners claim in court that their foreclosure was invalid. In Canada, Bank of Canada Governor, Mark Carney, is more optimistic, but there is a chance of a more severe housing correction given the sharp rise in prices and equally sharp rise in consumer debt. Debt levels in Canada are equal to, if not greater, than debt levels in the US back in 2006.

The other story is PIMCO's El-Erian commenting at a conference in New York, that Greece will likely default on its debt within 3 years. According to El-Erian, it's in Greece's interest to default as austerity measure are too tough. The 10 year Greek bond pays 9.65% in comparison to the 10 year German bond at 2.5% and the 10 year Canada at 2.78%. Bond yields are rising in the other PIGS countries as investors fear the problem isn't contained to Greece.

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