12-30-2015, 12:23 AM
We're fretting a bit about our only (small) purchase for 2016, ELLI. Generally, housing related stocks do not tend to perform well in a rising interest rate environment. However, consider the following:
"If we do see some rate increases coming, because it reflects a stronger economy, nobody is going to not buy a house because the mortgage rates went up," Wells Fargo CEO John Stumpf said the Goldman Sachs Financial Services Conference earlier this month. "They can choose a different product and probably get the same rate. The same thing is true for small businesses." But Bank of America CEO Brian Moynihan doesn’t agree with Stumpf. "If you see rates rise, you'll see the mortgage market slow down," Moynihan said at same event earlier this month, before the Federal Reserve raised rates. At still the same event, Blackstone Group CEO Steve Schwarzman noted that most interest-rate hikes have typically resulted in an uptick in home prices. "Twenty-five out of 26 times when interest rates went up, home prices went up," Schwarzman said.
Housing impact of rising interest rates
Then there is the fact that ELLI has been capable of increased revenues and profits even in a declining market, and the other fact that it is already considerably off its 52 week high. I guess we know a lot more when Q4 and full year 2015 earnings and guidance come out. So far the technical support at around $60 has held.