Archive for the ‘housing’ Category
Monday, March 1st, 2010
This morning the market is up on the news that consumer spending was higher than expected while incomes, though up, were lower than expected. The savings rate fell to 3.3%. At least we are still saving something. What was interesting about these numbers was that wages and salaries were up .5% but most of that was caused by working longer hours not with an increase in workers.
In every economic recovery jobs lag but the first sign of a jobs recovery is longer work weeks and an increase in part time workers. That seems to be holding true for this one though it seems slower.
ISM manufacturing for February and construction spending for January were also reported this morning. Construction spending was anticipated to be down .6%, an improvement from last month when it was down 1.2%. The actual number was in line with the expectations. The ISM index was targeted to be 58 but came in at 56.5. The market held up after these reports.
The numbers continue to show a slowly improving, struggling economy. Why hasn’t all that government spending translated into a stronger economy? Maybe because a lot of the spending will happen this year and next and most of the money so far has been used to save the banks. Maybe that was necessary but at some point the rest of the economy needs to recover. Healthier banks have not helped the overall economy yet.
Good Trading
Steve Peasley
Posted in Current News, Financial Outlook, Important, Industry Analysis, Uncategorized, banks, housing, jobs | No Comments »
Friday, February 26th, 2010
This morning the government reported their final revision of last year’s 4th quarter GDP number. There is always an initial report of GDP and then two revisions. This one showed an increase to 5.9% from a previous report of 5.7%. Most of the revision was for inventory adjustments. Do not expect that kind of growth this year. Most likely GDP growth for 2010 will be in the 1 to 2.5% range.
Also this morning was the Chicago PMI report which was up to 62.6 in February from 61.5 in January. Then a few minutes later February’s University of Michigan Consumer Sentiment Report was released which was down to 73.6 from 74.4 in January.
None of these numbers really affected the market when they came out.
By 7:00 this morning the existing housing sales number came out. Earlier in the week we had the new home sales report which was very weak (down 11%) and that put downward pressure on stock prices. This morning’s report when it came out pushed prices down a little but not by much and the market recovered it all. Existing home sales fell 7.2%, more than expected, and inventory increased to 7.8 months in January from 7.2 months in December.
This week was full of statistics and none of them changed the picture of our economy. It is growing but sputtering and it is not producing any jobs. This has heightened fear in the stock market and that is not a bad thing as it means stock prices are not overheating, but neither is there much reason for the market to rise. It is going to be a stock picker’s environment.
Good Trading
Steve Peasley
Posted in Current News, Financial Outlook, GDP, Important, Industry Analysis, Uncategorized, housing, stock market | No Comments »
Tuesday, May 12th, 2009
The week started on an up note. The stock market got a boost from the existing housing sales report which showed sales up 3% nationwide with a more than 8% increase in the west. Also on Monday a report on China’s economy showed its manufacturing sector growing much stronger than expected. That led the market higher and set a tone indicating our economy will eventually recover.
By mid week, after a couple good days, we had a sell off on Thursday which was broad based and painful. However, this morning with the bank stress test and an employment report for April behind us without any surprises the market decided to rally again, at least so far this morning. This is an obvious case of the market climbing a wall of worry.
The economic numbers actually were very encouraging this week. Retail sales were up for April by .3% and for last week up .7%, but what was more surprising was the first time jobless claims which fell by 34,000 this week and the four week average fell as well by 14,759. True jobless claims sit at over 600,000 which are very high but the stock market cares about the trend and is looking for the beginning of the change. That seems to be happening. Can this change turn into actual growth? At some point it will but not for a number of months, maybe by the fourth quarter this year or next. At some point the worry will turn to the strength of the recovery but so far no one is talking about that, yet!
We have had several weeks in which economic numbers, though still showing us that the U.S. economy is in a recession, seem to point to a turn from free falling to just falling or leveling off. The just ended earnings season came in better than expectations. Of course those expectations were severely downgraded at the beginning of the year therefore beating them is not all that difficult. The real test will be the sustainability of improving numbers. Can that happen?
I believe it will. The LIBOR rate is now below 1% when a few months ago it was as high at 5%. That is the rate banks lend to each other. The mortgage rates are at 5% or less and this week we saw productivity increase by .8%. Add these stats to all the others these last few weeks and we have strong evidence that things will get better. Finally, China, who embarked on their own stimulus plan, is already showing signs of strengthening growth despite the slow down in exports. The guidance, by independent firms, is calling for an increase in China’s GDP from 6% growth to 8% this year.
Does this mean the stock market is going to rally straight up from the March 9th low? Probably not. We will have corrections along the way. Any correction will be one to buy not sell. At the same time taking profits every so often is not a bad thing. Since China is already recovering and growing we have increased our exposure to the Asian market. You need to go where the growth is and since the stock markets of the Far East fell a lot harder than ours it has made all of Asia a good place to invest, despite the risks of lack of transparency and multiple books that their companies keep.
It is time to invest and has been for several weeks. No one knows when and where the bottom is but we can look back and clearly see a strong bottom of the various markets that took place on March 9th. Put fear aside and let’s make some money.
Posted in Currency, Current News, Financial Outlook, Hope, Industry Analysis, banks, housing, jobs, recession, stimulus package, stock market | No Comments »
Monday, March 23rd, 2009
On Friday I wrote about the fear of inflation but also stated that maybe a little inflation is not all bad, and indeed it is preferable to deflation.
Rising prices are always hard on us consumers as many times our incomes do not keep up. So why would inflation be preferable to the alternative which is deflation where prices fall? One very strong reason is that in a deflationary cycle, consumers stop spending. They postpone purchases in an effort to wait to buy lower priced items as they fall month after month. This happened in Japan in the lost decade from 1990 to 2000 where their entire economy shrank.
Also, and just as is important, is as the government takes on trillions of dollars in debt, and that is a lot of money that no one can really visualize, it is much easier to pay that debt off in inflated dollars down the road. With deflation it is much harder to pay off.
If dollars become less valuable, the cost of paying off debt is less. If you buy a house and make a $3,000 a month payment with a 30 year fixed mortgage, in 20 years with inflation that $3,000 dollars will feel much less burdensome. That is inflation at work. The government has the same issue except their mountain of debt is a much bigger problem.
A little inflation is a good thing. A lot of inflation destroys wealth.
Good Trading
Steve Peasley
Posted in Currency, Current News, depression, housing, inflation, recession, stock market | No Comments »
Thursday, February 19th, 2009
New home construction fell to a 50 year low as reported this morning. It could be worse than that as they only started counting 50 years ago. At the same time applications for mortgages last week spiked up by 40% or so over the week before, most of it for refinancing of course.
Today, Obama released his plan to save some people from foreclosure and the market didn’t really care much for it. So far the Obama Presidency has been a large disappointment from a stock market point of view. He does not really pay much attention to the industry, having repeatedly complained about the excesses of Wall Street. However, the stock market is a leading indicator of our economy. It is telling anyone who wants to listen that it does not see an economic turn around as yet.
It is time to be very cautious, holding significant amounts of cash on the sidelines with a few contra positions for protection. If you are going to own stocks, dividends are important as they will give you a cushion. Of course you need to be concerned that the companies you buy can maintain their dividend.
Most traders are waiting to see if the market will break the September lows. We are very close and it’s touch and go at this point.
Good Trading
Steve Peasley
Posted in Currency, Current News, Financial Outlook, Foreclosures, Industry Analysis, banks, housing, stock market | No Comments »
