Housing Bulls Welcome Bad News

 | Sep 11, 2013 | 3:43 PM EDT
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Either people think that housing has troughed with this horrendous mortgage application numbers this morning or they think that Federal Reserve tapering is just off the table because of those horrific numbers.

First, before I make any judgments about housing, let me just say that the torch has been passed to the multinationals. We are getting a host of sell-side research reports that are very bullish about both Europe and China, and they are moving all of the Emerson Electric (EMR) / United Technologies (UTX) names, to focus on two that Credit Suisse put out research on today.

The housing stocks just aren't that important to the advance anymore. The accoutrement stocks, like Lowe's (LOW), are hitting a new high anyway, so it isn't as if the stocks of the homebuilders have brought down the cohort.

But you know these stocks, including Lennar (LEN), Toll Brothers (TOL), PulteGroup (PHM) and DR Horton (DHR), certainly aren't doing well because of their own orders. These rates and these application numbers assure us of that. With all of the mortgage-related layoffs at the banks, my friend and colleague Matt Horween points out, there is no sign things are getting better. Just worse.

What seems to be happening -- and I clash with my friend Doug Kass here -- is that the mortgage application numbers are so awful that they may be Exhibit A for why the Fed shouldn't taper. Think about it like this: What's the biggest fear of tapering? I think it is that mortgage rates would shoot up, and that would kill the nascent housing recovery that could provide so many more jobs if we could just gear up to make three times the number of homes we are building now, which would bring us back to where we were before the crash.

Well, guess what? The worst fears have already occurred. The drop-off is more severe than anyone would have thought had they said, "We are tapering now!"

That would mean perhaps we are witnessing a trough in sales and it is all up from here.

Either way, again I am focused on Eaton (ETN) and PPG (PPG) and Honeywell (HON), which have been kept back because of weak overseas sales. Today, though, somehow we are getting rallies in both.

Yesterday I posted a piece about the market's bullish behavior. An interpretation that has the worst possible news for housing -- a dramatic decline in mortgage applications -- is being viewed as a positive, and that may be the most positive, uncritical bit of analysis yet!

I still say stick with internationals. I can't tempt fate with housing, because the numbers are probably too high.

I guess I am too bearish!

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