We've Lost the Housing Thesis

 | Jun 21, 2013 | 4:13 PM EDT  | Comments
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whr

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shw

It was another one of those "could have been worse" sessions. But you know what? I think that this was simply a relief rally -- a relief that the interest rate on the 10-year Treasury didn't spike more than we had thought it would, and a relief that China didn't let its banks go bust.

Here's the problem with a relief rally. Now that we are relieved for Friday, we have to get all relieved again every day next week.

On Friday, underneath, we saw the continued unwind of the housing trade. All you had to do was watch Whirlpool (WHR). The shelling this one took is indicative of the pain that's ahead of us when we read that mortgage rates are about to go to 5%.

Sure, Whirlpool also has a big Brazil component, but this 7-point decline is all about the big speed bump in the road of the housing highway. When I see this, and a similar decline in Sherwin Williams (SHW), I know these stocks are truly rolling over and they aren't done.

What's going to take this theme's place? I have been championing the regional banks, the techs and the industrials, and they did well today. But the stars were the bond-equivalent stocks, and that's unnerving to me, too. I do not know how they can move still higher. They are still up huge, and they no longer have that dividend support now that the rates have moved higher.

So, to put it all together, we have lost the housing thesis, and we have some potential replacements, but they aren't yet able to take up the slack. Meanwhile, the consumer-packaged-goods stocks have given you a dead-cat bounce before what I fear will be still one more leg down.

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