Archive - Jul 24, 2013 - Story

That's ok though: soaring mortgage rates are having "zero impact" on prices, give or take, according to the TeeVee. And really, all that's needed is just a little more record-er Option ARMs.

First the bad news (which for the market is good news): the revised May New Home Sales number was 459, down from 476K, which means last month's beat of expectations of 462K was actually a miss which would have sent the S&P soaring. Now the good news (which for the market is bad): the June New Home Sales seasonally-adjusted annualized number was 497K: the highest since May 2008 (even if far below the prior housing bubble peak) represented by an unadjusted June number of 48K actual houses sold, with more than half of it coming from the 26K new homes sold in the south. So good right right? Not really: the reason why there was a pick up in volume was not because there was far greater demand, but for the usual Economics for Dummies reason why there is demand: prices plunged.

Kate and William had a boy. Our bet on a name is George, but only because that appears to be the odds-on favorite among the London bookies.  Still, all that money flowing around must at least be a little “Smart”, right?  But as ConvergEx's Nick Colas notes, the same dynamic applies, albeit on a larger and hopefully more informed scale, when it comes to how capital markets price securities.  We have our baselines – the price-earnings ratio of the market, the interest rate on Treasuries, the average price per square foot for real estate, and so forth – and then we tweak everything else up or down from there.  That method has the benefit of simplicity, but comes with problems as well.  More than anything, Colas warns, it pushes investors to “Anchor” their notions of valuation to benchmarks which may move when the wind shifts.

"In the last week of June, the dollar value represented by ARM applications accounted for 16 percent of mortgage requests, the highest share since July 2008, two months before Lehman Brothers Holdings Inc. collapsed, according to Mortgage Bankers Association in Washington." Oops.

While Edward Snowden can perhaps breathe a sigh of relief at being abale to avoid the humdrum beat of airport food for a while, he will be stepping out into the 2nd most expensive city in the world. Based on a survey of over 200 items, Moscow ranks 2nd in the world (with $8 cups of coffee and $4,600 average apartment rental costs), and Tokyo 3rd (with $5 newspapers and $7 coffees). But the most expensive city in the world will come as a surprise to most and likely create the need for a Google Maps search. With 40.5% of the population of this nation living in property and the average monthly rent a sky-high $6,500, this southern African country's capital is the most expensive city in the world (it would seem the Chinese arrival in resource-rich African nations - N'Djamena, Chad is 4th - has had its hot-money inflationary effects).

Much has been made of the inflows into US equity markets in the last few weeks with the heralding of The Great Rotation that will lift us to Dow 36,000 and beyond. The only problem with this rather wonderful meme-du-jour (being the only thing left in the asset-gatherer's armor since bottom-up and top-down fundamentals are nothing but collapsing near-term, hockey-stick mid-term flights of fantasy) is that, as BofAML notes, institutional investors have never (that's a long time) sold as much stock as they have in the last 4 weeks - as retail has been piling in. So it would appear the 'real' great rotation is passing the hot-potato of liquidity-driven stocks from the 'smart' money to the 'dumb' money once again.

According to Interfax, Russia have authorized Snowden to leave the airport where he has been stuck for nearly a month, and grant him temporary asylum in exchange for his cooperative silence. RT adds that "Russia’s Immigration Service has reportedly granted entry permission to NSA whistleblower Edward Snowden, who has been stranded at a Moscow airport since last month. “The American is currently getting ready to leave. He will be given new clothes. Lawyer Anatoly Kucherena will bring the papers he needs to leave the transit zone of the airport,” says Interfax citing an airport source familiar with the situation. The migration service would not immediately confirm the information.

"Overall end-user demand is similar to our previous outlook, but we now expect a more significant reduction in dealer machine inventory.  That's the main reason for the reduction in the sales and revenues outlook.  During the second quarter, dealers increased their utilization of inventory from our product distribution centers, which allows them to meet customer demand with less inventory.  With the sharp reduction in dealer inventory and the decline in mining, 2013 is turning out to be a tough year and we've already taken action to reduce costs.  During the first half of the year, we've had temporary factory shutdowns, rolling layoffs throughout much of the company, reductions in our flexible workforce, and we've reduced discretionary and program costs.  While we've taken significant action already, we will be taking additional cost reduction measures in the second half of 2013,"

• Humans Beating Robots Most Since ’08 as Trends Shift (BBG)
• Easing of Mortgage Curb Weighed (WSJ)
• European Banks Face Capital Gap With Focus on Leverage (BBG)
• Signs Suggest China Warming to Idea of Stimulus (WSJ)
• China Coal-Fired Economy Dying of Thirst as Mines Lack Water (BBG)
• Jeans and shoes show criminal underbelly of China-EU trade (Reuters)
• How U.S. drug sting targeted West African military chiefs (Reuters)
• Japan scrambles jets after China plane flies by southern islands (Reuters)
• Apple Plots Return to Growth After Coping With Aging Lineup (BBG)
• AT&T Falls Shy of Analyst Estimates as Discounts Hurt Margins (BBG)
• SAC insider trading case takes twist (FT)

Plunging Chinese manufacturing and an 11 month low PMI got you down? Don't worry: there's a Europe for that, which overnight reported that manufacturing and service PMI in Germany and, don't laugh, France soared far above expectations (German Mfg and Services PMIs of 50.3 and 52.5, up from 48.6 and 50.4, and above expectations of 49.2 and 50.8; French Mfg and Services PMIs of 48.3 and 49.8, up from 47.2 and 48.4 and an 11 and 17 month high, respectively, blowing away expectations of 47.6 and 48.8). The result was a composite Eurozone Manufacturing PMI of 50.1, above 50 for the first time since February of 2012, up from 48.8 and at a 24 month high - reporting the largest monthly increase in output sunce June 2011, as well as a composite Services PMI of 49.6, up from 48.3, and an 18 month high. In other words, European Composite PMI is expanding (above 50) for the first time since January 2012.