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The Interest Rate Boogie with the Homebuilders

We are finishing a volatile week for global markets and it most likely will stay that way until the ECB comes up with some announcement on Jan 22nd and/or the Greeks decide to elect a new government by the end of the month.  Earnings reports so far have been mediocre and without the promise of domestic QE, stocks have not been able to recover.  Short term things will stay choppy.

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Rates stay low so why are the Home builders so volatile?

The stock market got a gift from the FOMC minutes release today by leaving the status quo largely unchanged.  I guess there is enough jazz in the mix with oil prices, Russian solvency and high yield debt tfor the Fed to chew on for a while.  There has been plenty of volatility to go around with VIX trading just over 23 today on a  run down to the 19s.

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The Fed is not going to Raise Rates in 2015

I know there continues to be some speculation about whether the Fed will raise rates in the 1st half of 2015,  right now the answer is a resounding NO.  In fact I think the Fed Funds rate stays at 0 for all of 2015.  Here is why they have TONS of cover.  Lets look at why:

1.  Employment.  The unemployment rate.  While the heavily reported U-3 rate is back to normal, the more important U-6 rate is still at levels from October of 2008, no where near normal levels.  Check out the spread between U-3 and U-6.

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