“Sell paper, buy stuff,” is probably a good strategy for this quarter, this year, and this financial lifetime. But don’t take my word for it. The founder of the top-performing U.S. real-estate fund of the last ten years-Ken Heebner of Capital Growth Management-says U.S. home prices may fall by as much as twenty percent in the coming housing fall-out.
Heebner is switching his strategy from real estate to mining, which is a good sign for Aussie investors. Heebner thinks the mortgage meltdown is a larger sign of the decline in the quality of assets on U.S. balance sheets.
He was talking specifically about nearly $US2.5 trillion in “Alt-A” mortgages that he suspects will be the next domino to fall in the slow-motion credit crash in America’s housing market. He told Bloomberg that, “It will be the biggest housing-price decline since the Great Depression,” and that prices could fall by as much as twenty percent in some U.S. cities.
We think he may be right. But we also think that Aussie assets may be de- coupling from the American market. Of course, we could be wrong. It could be that all asset classes are due for a major, post-May correction. We’ll have more to say about that tomorrow.
Markets and Money