Before the Bell – Lennar (LEN) – Housing – Marc Faber – Fed

Fed Day – Either markets don’t care, the Fed will do nothing or the very modest sell-off we’ve seen this month priced in expectations for the Fed’s eventual exit.

I fall into the Don’t Care camp. Yeah, I get the fact that if the Fed moves today, we could easily get a knee jerk reaction sparking a sell off that could last a few days however, as I’ve said repeatedly there are buyers lurking below looking to get in.

Some like Marc Faber of the famed Gloom, Boom & Doom Report believe the Fed will “never end their bond buying program.” (Marc Faber on CNBC) Mr. Faber who is prone to over the top predictions has been looking under every rock for the coming end of the world but so far hasn’t found it. The world doesn’t end very often so for now I choose to believe; “the sun will come up tomorrow.”

Many have supported their theory that the Fed isn’t about to exit pointing to stock prices and the gains made this year. I think a better tool is bond prices. Take a look at a weekly chart of the iShares Barclays 20+ Year Treasury Bond Fund (TLT). We are sitting close to 1 year lows. While stocks have headed north, bonds clearly have been on I 95 South.

Bonds are pointing to an eventual exit that I believe will come before the end of the 1st quarter. I stated in yesterday’s piece that the best reason to end QE is that it is no longer working.

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Lennar’s (LEN) earnings beat this morning gives me even more confidence in the recovery ahead. Beating consensus handily they came in at $0.73 vs a street estimate of $0.62. The stock has been a laggard all year with investors avoiding the shares because of the likely continued rise in mortgage rates. I talked about the company and today’s housing numbers this morning with Street.Com host Debra Borchardt. Starts and permits both coming in above 1 million is a definite plus. Perhaps home buyers   sitting on the fence are stepping up to the plate to lock in rates before an eventual hike next year or maybe this is just another sign of the economy coming back. I suspect it is a little of both.

– David Nelson, CFA