Housing Starts

East Ukraine may be independent in a result which the Kremlin said it "respects" and hopes for a "civilized implementation" of the referendum results, and which assures further military escalation in the proxy war of east versus west, but stocks are happy to ignore it all again.  The reason: a positive close over in Asia (ex-Japan) after China’s State Council pledged to reform markets buoyed demand for risk, although it really is just a follow through to the furious VIX slam in the last hour of US Friday trading, which said otherwise, means buying of US equities was the reason to buy US equities. More importantly and adding to the early spoo euphoria were comments by ECB's Nowotny who said that interest rate cut alone would likely be too little to combat low inflation - suggesting a European QE is coming - also acted as a catalyst for the latest uptick in stocks: when trapped like the ECB and when "guiding" to future activity, if unable to actually execute it, may as well go all the way. End result, Spoos up nearly 0.5% because, well, others are buying spoos.

Dispassionate discussion of the near-term forces at work in the foreign exchange market.  

Goldman, it would appear, are desperate to not be forced to admit they are wrong once again. On the heels of their dramatic and humiliating swing from expectations of a +3.0% Q1 GDP growth rate at the start of the year to a current -0.6% expectation, the hockey-stick-believers are out with their latest piece of guesswork explaining how growth will explode to 3.9% in Q2 (a full percentage point higher than their previous estimate).The platform for this v-shaped recovery - "consumer spending will probably grow strongly, while the housing market should gradually improve." So 'probably' and 'should' it is then.

From 110 slides of Ackman-inspired Fannie Mae bullishness to Tudor-Jones "Central Bank Viagra", and from Jim Grant's "Buy Gazprom because it's the worst-managed company in the world" to Jeff Gundlach's housing recovery bearishness and "never seeing 1.5 million home starts ever again"... there was a little here for every bull, dick, and harry at the Ira Sohn conference. Perhaps noted behavioral psychologist said its best though: "be careful about the quality of advice you get."

This week, markets are likely to focus on US ISM Nonmanufacturing, services and composite PMIs in the Euro area (expect increases), ECB’s Monetary Policy Decision (expect no change in policy until further ahead), and Congressional testimony by Fed’s Yellen.

Even Case Shiller itself appears to have given up on housing as the driver of the wealth effect: "Five years into the recovery from the recession, the economy will need to look to gains in consumer  spending and business investment more than housing. Long overdue activity in residential  construction would be welcome, but is certainly not assured." And looking at actual city level data, we find that just 5 cities saw price increases in February; 13 of 20 cities saw their home prices decline.

The coming week will be busy in terms of data releases in the US; highlights include an improvement in consumer confidence, anemic 1Q GDP growth, and solid non-farm payrolls (consensus expects 215K). Wednesday brings advanced 1Q GDP - consensus expected a pathetic 1.1% qoq, on the back of what Goldman scapegoats as "weather distortions and an inventory investment drag", personal consumption (consensus 1.9%), and FOMC (the meeting is not associated with economic projections or a press conference). Thursday brings PCE Core (consensus 0.20%). Friday brings non-farm payrolls (consensus of 215K) and unemployment (6.6%). Other indicators for the week include pending home sales, S&P/Case Shiller home price index, Chicago PMI, ADP employment, personal income/spending, and hourly earnings.

A ‘Perfect Storm’ of demography and debt will economically and financially doom almost every country on earth. It will be TEOTWAWKI – ‘The End Of The World As We Know It’. No, it’s not the end of life or even the end of civilization. However, when it’s all over, nothing will ever be the same and that includes the disappearance of much of the middle class.  The good news - The storm won’t last forever. The bad news is there will be much more pain before it ends unless you make an effort to understand what’s happening and why.

After a solid day for risk yesterday, surging higher on a continuation of the rumor that Japan's economy will deteriorate so much the BOJ will have to print more money (even though overnight ex BOJ governor Sekido said Kuroda won't print more) we have a more cautious tone this morning heading into the Easter long weekend. A double earnings miss from Google and IBM following the US market close, comments from the Chinese Premier suggesting that the government will keep its policy settings unchanged, and a press conference from Russia’s President Putin in which the Russian president as expected, has refused to back down, has put a small dampener on sentiment today. Add the fact that due to Good Friday April equities Op-Ex will take place today and trading in the next 9 hours promises to be more unrigged than ever, especially if the NY Fed trading desk manages to slam the VIX into single-digit territory

While both the Housing Starts and Permits data reported moments ago disappointed - and sorry, you can't blame it on weather this time - with both sets of data missing expectations (Starts 946K, Exp. 970K up from a revised 920K; Permits 990K, Exp. 1010K down from a revised 1014K), the real story was in the composition of single family vs multi-family, or rental units, which showed that the previously reported rental euphoria has well and truly fizzled after a dead cat bounce in last 2013 could not be sustained. And perhaps more importantly, the complete lack of any real bounce in single-family housing, which remains at levels seen in late 2012 for starts, and is now rolling over for permits, confirms that the so-called hosing recovery not only slipped right through the vast majority of normal people, but even Wall Street is finally pulling out as builders themselves realize.

• Ukraine Says Russia Exporting ‘Terror’ Amid Eastern Push (BBG)
• Civil War Threat in Ukraine (Reuters)
• China Shoe Plant Strike Disrupts Output at Nike, Adidas Supplier (BBG)
• Mt Gox to liquidate (WSJ)
• Ex-Co-Op Bank Chairman Charged With Cocaine Possession (BBG)
• Goldman Sachs plans to jump-start stock-trading business (WSJ)
• Credit Suisse first-quarter profit falls as trading tumbles (Reuters)
• U.K. Unemployment Rate Falls to Five-Year Low (BBG)
• Lawmakers Back High-Frequency Trade Curbs in EU Markets Law (BBG)
• Yahoo's growth anemic as turnaround chugs along (Reuters)
• Spain ETF Grows as Rajoy Attracts Record U.S. Investments (BBG)

We summarized yesterday's both better and worse than expected Chinese GDP data as follows: "a substantial deterioration of the economy, one which was to be expected yet one which can be spun as either bullish thanks to the GDP "beat", and negatively if the purpose is to make a case for more PBOC stimulus." Sure enough here are the headlines that "explain" the latest overnight futures surge which has once again brought the S&P into the green on the year - a 40 point Spoo move in hours since yesterday's bottom when the Nikkei "leaked" Japan's economy is on the ropes :

• Stocks Rise on China Stimulus Speculation

Here one should of course add the comment that launched yesterday's rebound, namely the Japanese warning that its economy is about to contract, adding to calls for more BOJ stimulus, and finally this other Bloomberg headline:

• The Strengthening Case for ECB Easing

And there you have it - goodbye "fundamental" case; welcome back "central banks will once again bail everyone out" case. Hopefully today's news are absolutely abysmal to add "US economic contraction fear renew calls for untapering" to the list of headlines that should send the S&P to all time highs by the end of today.

Earlier today, the NAHB released its latest builder confidence report. Something stood out to us, namely the following data, which shows that while confidence picked up modestly in the Northeast in April, it tumbled in the West and Midwest. What's the explanation for this ongoing deterioration in housing market sentiment in states that had, not only were not impact by the "vortex" but if anything, were "crushed" by the balmy March atmospheric conditions? Why, "it's the weather, duh."

Futures are treading water once more now that Ukraine has stormed to center stage from the backburner after everyone was convinced Putin would let the situation cool off after annexing Crimea. Guess not. Adding the renewed geopolitical jitters to what has already been a beta stock bloodbath into a holiday shortened week assures some high volatility fireworks. Cautious sentiment was observed over in Asia (Nikkei 225 -0.36%) amid renewed fears that geopolitical tensions in Ukraine will flare up again following reports of exchange gunfire with pro-Russian militants. This sentiment carried over into the European session with stocks lower across the board (Eurostoxx50 -0.71%). EUR is lower after ECB’s Draghi said any further strengthening of the EUR would warrant further action by the ECB, including non-standard measures such as quantitative easing - it is amazing how frequently and often the Virtu algos still fall for Draghi's jawboning trick which has now become all too clear will never be implemented and certainly not if he keeps talking about it daily, as he does.

Dispassionate discussion of the macro-political economic climate.