Long & Short: What if Housing Hare Becomes a Tortoise?
BULLS AND BEARS make the markets, but Barry Ritholtz witnessed something else in the past couple of weeks. "Have you ever watched a flock of birds and all of a sudden they all break left?" asks the strategist with Ritholtz Capital Partners.</br></br>Sure, the stomach-churning downturn in the last several sessions -- in U.S. stocks and then the bubblicious commodities markets -- was fast. But it wasn't surprising. The things that should have mattered didn't for the longest time, and now suddenly they do.</br></br>To figure out where the birds will come to roost, look homeward. Housing has been the key sector driving consumer spending, employment and therefore the markets. It was trending south long before last week's selloff, but investors have yet to fully appreciate its implications.</br></br>The Federal Reserve's rate-raising campaign has clearly started to have an impact, as long-term rates are moving up. And oil's relentless rise has finally started to bite. Crude's creep seemed merely worrisome when it hit $40 a barrel, troubling at $50 and ominous at $60, but by the time oil hit $70, investors seemed to forget about it. But the airlines and distributors that have been tacking fuel surcharges onto their wares didn't forget, and now inflation is on the horizon.</br></br>The rapid recent swoons are only the latest evidence of how dominated the markets are by aggressive speculators, especially the trend-following hedge funds that play the futures markets. These funds have been whipsawing the global markets, researcher Bridgewater Associates pointed out in a note this week.