Case-Shiller

This Has Never Happened Before Without A Massive Bubble Bursting

As the chart demonstrates, there has never been a time when the all important leading indicator that is the San Fran housing market (see here for the reasons why) has posted such a steep slowdown in annual price increases without a bubble of some sort, be it the dot com, the first housing or the European sovereign debt bubble, having burst. Will this time finally be different?

California Leads Housing Slowdown As Case-Shiller Home Prices Decline For 4 Months In A Row

Following misses in yesterday's Markit Service PMI, Existing Home Sales and the Dallas Fed report, and today's Durable Goods numbers, we just made it a pentafecta for misses in US econ data, when the just released August Case-Shiller data for August confirmed once again that US housing is rapidly slowing down, when the Top 20 Composite Index (Seasonally Adjusted) posted another decline in August, its fourth in a row, declining by -0.15% and missing expectations of a modest 0.2% rebound (following last month's -0.5%) decline. The best summary of the situation came from S&P's David Blitzer: "The deceleration in home prices continues... The Sun Belt region reported its worst annual returns since 2012, led by weakness in all three California cities -- Los Angeles, San Francisco and San Diego." But who cares what the birth (and death) place of every housing bubble is doing, right?

Frontrunning: October 28

  • CDC says returning Ebola medical workers should not be quarantined (Reuters)
  • Sweden’s central bank cuts rates to zero (FT)
  • Hacking Trail Leads to Russia, Experts Say (WSJ)
  • Discount-Hunting Shoppers Threaten Stores’ Holiday Cheer (BBG)
  • Apple CEO fires back as retailers block Pay (Reuters)
  • Repeat after us: all China data is fake - China Fake Invoice Evidence Mounts as HK Figures Diverge (BBG)
  • FX Traders’ Facebook Chats Said to Be Sought in EU Probe (BBG)
  • Euro Outflows at Record Pace as ECB Promotes Exodus (BBG)
  • Apple boosts R&D spending in new product hunt (FT)

Futures Levitate On Back Of Yen Carry As Fed Two-Day Meeting Begins

If yesterday's markets closed broadly unchanged following all the excitement from the latest "buy the rumor, sell the news" European stress test coupled with a quadruple whammy of macroeconomic misses across the globe, then today's overnight trading session has been far more muted with no major reports, and if the highlight was Kuroda's broken, and erroneous, record then the catalyst that pushed the Nikkei lower by 0.4% was a Bloomberg article this morning mentioning that lower oil prices could mean the BoJ is forced to "tone down or abandon its outlook for inflation." This comes before the Bank of Japan meeting on Friday where the focus will likely be on whether Kuroda says he is fully committed to keeping current monetary policy open ended and whether or not he outlines a target for the BoJ’s asset balance by the end of 2015; some such as Morgan Stanely even believe the BOJ may announce an expansion of its QE program even if most don't, considering the soaring import cost inflation that is ravaging the nation and is pushing Abe's rating dangerously low. Ironically it was the USDJPY levitation after the Japanese session, which launched just as Europe opened, moving the USDJPY from 107.80 to 108.10, that has managed to push equity futures up 0.5% on the usual: nothing.

ECB Stress Test Fails To Inspire Confidence Again As Euro Stocks Slide After Early Rally; Monte Paschi Crashes

It started off so well: the day after the ECB said that despite a gargantuan €879 billion in bad loans, of which €136 billion were previously undisclosed, only 25 European banks had failed its stress test and had to raised capital, 17 of which had already remedied their capital deficiency confirming that absolutely nothing would change, Europe started off with a bang as stocks across the Atlantic jumped, which in turn pushed US equity futures to fresh multi-week highs putting the early October market drubbing well into the rear view mirror. Then things turned sour. Whether as a result of the re-election of incumbent Brazilian president Dilma Russeff, which is expected to lead to a greater than 10% plunge in the Bovespa when it opens later, or the latest disappointment out of Germany, when the October IFO confidence declined again from 104.5 to 103.2, or because "failing" Italian bank Monte Paschi was not only repeatedly halted after crashing 20% but which saw yet another "transitory" short-selling ban by the Italian regulator, and the mood in Europe suddenly turned quite sour, which in turn dragged both the EURUSD and the USDJPY lower, and with it US equity futures which at last check were red.

Equity Futures Fail To Surge Despite Ongoing Bad News Onslaught

A quick anecdote that should quickly confirm just how broken everything is: earlier today MarkIt reported European manufacturing data that was atrocious, with both German and European PMIs tumbling to levels not seen since mid-2013, and with Europe's growth dynamo now in a contraction phase clearly signalling what has been long overdue: a European triple dip recession. So what happens? Moments later Germany sells €4.1 billion in 10 Year paper at a record low yield below 1%.... even as the Bundesbank had to retain a whopping 17.84% of the auction, the highest since June, with only €4.663 Bn in bids for the €5 Bn target, the first miss since May 21. So hurray for the central banks, boo for the economy, and as for that mythical creature, once known as bond vigilantes, our condolences: good luck figuring out what the hell just happened, and good luck recalling what a free market is.

Frontrunning: September 30

  • Hong Kong protesters stockpile supplies, fear fresh police advance (Reuters)
  • Protesters stay out on Hong Kong streets, defying Beijing (Reuters)
  • Traders Turn Up Grilling Sausages at Hong Kong Protests (BBG)
  • Ukraine Army Sees Worst Day Since Truce as Battles Flare (BBG)
  • Islamic State uses grain to tighten grip in Iraq (Reuters)
  • For Putin Ally, U.S. Sanctions Only Add to Anti-Russia Conspiracy Theory (WSJ)
  • Coinbase Leads Move to Bring Bitcoin to Masses (BBG) - good luck
  • Austria Cracks Down on Spies -- and Jihadis (BBG)
  • EU Believes Apple, Fiat Tax Deals Broke Rules (WSJ); Apple’s Irish Tax Deal ‘Engineered’ to Boost Employment, EU Says (BBG)

A Day Of Global Economic Disappointments Is Just What The Stock Ramp Algo Ordered

It has been a night of relentless and pervasive disappointing economic data from just about every point on the globe: first the Chinese HSBC manufacturing data was well short of expectations (50.2 vs. Exp. 50.5), which was promptly spun as bullish and a reason for more stimulus by the PBOC even though the central bank has been constantly repeating it will not engage in western-style shotgun easing. Then Japanese wages, household spending and industrial production came in far below expectations - in fact at levels which suggest Japan is once again in a recession - which once again was spun as bullish, because the BOJ has no choice but to do more of the same failed policies that have made Abenomics the laughing stock of the world. Finally, moments ago Europe reported the lowest inflation data in 5 years, as well as core CPI sliding to just 0.7%, and which was, wait for it, immediately spun as bullish for risk as once again the local central bank would have "no choice but to ease." In other words, thank god for horrible news: because how else will the rich get even richer?

The Housing Echo-Bubble Is Popping

How do we know when an asset class is in a bubble? When everyone who stands to benefit from the continuation of the expansion declares it can't be a bubble.

More Bad News Out Of Europe Coupled With Hopes For More QE Push Stocks, Bonds Higher

If the big hope propelling both ES and S&P cash over 2,000 was the Ukraine-Russian talks, leading to some de-escalation and a thawing of Russian-German conditions, then it was clearly a dud. As the WSJ reports, "face-to-face talks between the Russian and Ukrainian presidents failed to produce a breakthrough for ending the conflict over eastern Ukraine, as Kiev released videos of captured Russian soldiers and rebels pushed toward a government-held city. The one-on-one session, which Ukraine's President Petro Poroshenko described as "tough and complex," ended early Wednesday after a day of talks on the crisis in the Belarusian capital of Minsk. Mr. Poroshenko said afterward that he would prepare a "road map" toward a possible cease-fire with the pro-Russia separatists." In other words, absolutely no progress. There was however escalation, when overnight the September Bund future rose as much as 36 ticks to 151.18, after Poland PM Tusk said “regular” Russian troops are operating in eastern Ukraine. And so we are back to square one, with concerns over Russia pushing European bonds to new record highs, in turn leading to more US Treasury buying, while a brand new rumor of more easing from the ECB, this time by Deutsche Bank, has propped up European equities, which like US futures are trading water around the critical 2000 level.

"Widespread Slowdown In Home Price Gains": Case-Shiller Misses, Rises By Slowest Since 2012

The fourth (or is it fifth?) dead cat bounce in the US housing market is rapidly fading, as we just confirmed by the latest Case-Shiller Home Price Index data for the month of June, which saw a Y/Y increase in home prices of just 8.07%, below the 8.3% expected, and the slowest increase since December 2012. As the report noted, "for the first time since February 2008, all cities showed lower annual rates than the previous month." On a monthly basis, the NSA index, Case-Shiller's preferred, rose by 1.0% for the 10 and 20-City composite, with the Seasonally Adjusted composite declining for the second consecutive month: the last time there were two consecutive monthly declines during a price declining phase was in late 2010.

Frontrunning: August 26

  • That will teach the UAE who's boss: U.S. Won’t Consult Syria on Militant Strikes: White House (BBG)
  • Putin Set to Meet Poroshenko as Ukraine Tensions Escalate (BBG)... but the de-escalation algo?
  • Tim Hortons’ Canadian Fans Squeamish of American Hookup (BBG)
  • Israeli air strikes target more Gaza high-rises (Reuters)
  • How Steve Ballmer Became a Rookie Basketball Mogul (WSJ)
  • Buffett to Help Finance Burger King Tax-Saving Deal (BBG)
  • U.S. Factories Keep Losing Ground to Global Rivals (WSJ)
  • Boehner, Camp Profit From Corporate Bid to Avoid U.S. Tax (BBG)
  • Experimental U.S. hypersonic weapon destroyed seconds after launch (Reuters)
  • The Neo-Neocons (WSJ)

Case-Shiller Home Prices Tumble Most Since Dec 2011, Miss 2nd Month In A Row

But it was supposed to be the weather? S&P/Case-Shiller home prices dropped in May and missed expectations for the 2nd month in a row. Against a forecast rise on 0.3%, prices dropped in May by 0.3% - the biggest drop since December 2011. It appears we are going to need more Chinese hot money flow buyers. Of note, while in April Case-Shiller reported only 5 cities out of the tracked 20 posting sequential price declines, in May this number has soared to 14. And so the fourth dead cat bounce in housing appears to be over.