Housing Starts

Case Shiller Reports "Broad-Based Slowdown For Home Prices", First Monthly Decrease Since November 2013

While the just revised Q3 GDP surprised everyone to the upside, the Case Shiller index for September which was also reported moments ago, showed yet another month of what it called a "Broad-based Slowdown for Home Prices." The bad news: the 20-City Composite gained 4.9% year-over-year, compared to 5.6% in August. However, this was modestly above the 4.6% expected. However, what was more troubling is that on a sequential basis, the Top 20 Composite MSA posted a modest -0.03% decline, the first sequential drop since February. And from the report itself: "The National Index reported a month-over-month decrease for the first time since November 2013. The Northeast region reported its first negative monthly returns since December 2013 and its worst annual returns since December 2012 due to weaknesses in Washington D.C. and Boston."

American CEOs Sum Up The Economic Outlook: "Softness, Stagnant, Cautious, Challenging"

Since May, CEO confidence among America's largest companies had stagnated - even as stocks did what they do and rise, rise, rise. That changed when Bullard (now explained as "misunderstood" by the market) set fire to stocks with his QE4 hints and Plunge Protection Team rescue. However, the last 2 weeks have seen a noticable collapse once again in CEO confidence, according to Bloomberg's Orange Book index, even as stocks reach new higher all-time-er highs. As Bloomberg's Rich Yamarone notes, recent earnings calls highlight the headwinds companies face: Executives cite “softness in consumer spending,” a “challenging” climate, “fairly stagnant economy,” and “cautious” optimism. Currency valuations are front and center.

You Asked For It, And Here It Is: The First GDP Downgrade Due To The Polar Vortex 2.0

BMO Capital Markets economist Sal Guatieri notes that the BMO Economics team has lowered its U.S. fourth quarter gross domestic product (GDP) growth estimate to 2.5% from 2.8% due to weaker housing starts and a view that November’s activity could get chilled by polar vortex 2. While October was relatively warm, November has been anything but. However, he does not expect the sort of massive hit that GDP suffered in the first quarter of 2014 due to cold weather.

Homebuilder Hope Hammered As Housing Starts Tumble

With surging homebuilder sentiment, we suspect the disappointing plunge in Housing Starts (-2.8% vs +0.8% exp) will surprise a few but there is hope... as Building Permits rose 4.8% (vs 0.9% expectations) on the back of an 8% surge in multi-family / rental units. This is the highest level fo Permits since June 2008 (but still over 50% below peak permits levels in 2005). The only region with any increase in starts was the South.

Frontrunning: November 19

  • Yellen Inherits Greenspan’s Conundrum as Long Rates Sink (BBG)
  • West African Mining Projects Take Hit From Ebola Crisis (WSJ)
  • Saudi oil policy uncertainty unleashes the conspiracy theorists (Reuters)
  • Senate Rejection of Keystone XL Measure Sets Up 2015 Showdown (BBG)
  • Ferguson, Missouri, remains on edge ahead of grand jury report (Reuters)
  • Putin Said to Stun Advisers by Backing Corruption Crackdown (BBG)
  • Italian ‘Invasion’ Has Swiss Fuming as Immigration Vote Looms (BBG)
  • Apple and Others Encrypt Phones, Fueling Government Standoff (WSJ)

All Eyes On The Freefalling Yen Which Just Plunged To Fresh 7 Year Lows

Once again all eyes are on the carry-trade driving Yen, whose avalance into oblivion is picking up speed, and where the formerly unimaginable USDJPY level of 120 as presented here in September, is now looking like this week's business, with the only question how long until Albert Edwards' next target of 145 is hit leading to nuclear currency warfare between Japan, Korea, China and ultimately, the US and Europe. Unfortunately, for Japan, at this point the terminal currency collapse will do nothing to incrementally boost exports or its economy, and the former Japan finmin was on the tape warning again that the Japanese recession will persist as USDJPY over 115 is now hurting Japan, something which should by now have been clear to most.

BTFTripleD Algos Engage: Futures Rebound Following Third Japnese Recession

Perhaps the biggest shock following last night's completely expected and very predictable (previewed here over a month ago) Japanese slide into triple- (actually make that quadruple) dip recession, is that it took the BTFTripleDip recession algos as long as they did to recover most of the overnight futures losses. Because after surging to 107 on a confused short squeeze kneejerk reaction, the USDJPY subsequently tumbled 150 pips to 105.50 as rationality briefly emerged, and the market wondered for a few brief hours if rewaring the destruction of one's economy is actually a prudent thing. Then, however, when European traders started walking into work, the now default USDJPY levitation on no volume came right back, and with that the correlation algo buying of E-mini futures, no doubt helped by the Bank of Japan itself taking advantage of the CME's ES liquidity rebate program. Because without confidence as expressed by the lowest and only common denominator left - global equities - there is nothing else.

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 17

  • Obama open to appointing Ebola 'czar', opposes travel ban (Reuters)
  • Schools Close as Nurse’s Ebola Infection Ignites Concern (BBG)
  • How the World's Top Health Body Allowed Ebola to Spiral Out of Control (BBG)
  • European Stocks Rise Amid Growing Pressure for Stimulus (BBG)
  • Putin Threatens EU Gas Squeeze Raising Stakes for Ukraine (BBG)
  • ECB to Start Asset Purchases Within Days, Says Central Banker Coeuré (WSJ)
  • Investors search for signs of end to stock market correction (Reuters)

Futures Surge After ECB Verbal Intervention Talks Up Stocks, Day After Fed

If the last three days all started with a rout in futures before the US market open only to ramp higher all day, today it may well be the opposite, when shortly after Europe opened it was the ECB's turn to talk stocks higher, when literally within minutes of the European market's open, ECB's Coeure said that:

  • COEURE SAYS ECB WILL START WITHIN DAYS TO BUY ASSETS

Which was today's code word for all is clear, and within minutes US futures, which until that moment had languished unchanged, soared by 25 points. So will today be more of the same and whatever early action was directed by the central bankers will be faded into a weekend in which only more bad news can come out of Ebola-land?

Key Events In The Coming Week

Today US activity will be very light given the Columbus Day holiday. As DB summarizes, we have a relatively quiet day for data watchers today but the calendar will pick up tomorrow and beyond with a big focus on inflation numbers amongst other things. Indeed tomorrow will see the release of Germany’s ZEW survey alongside CPI prints from the UK, France and Spain. Wednesday’s data highlights will include the US retail sales for September, the Fed’s Beige Book, CPI readings from China and Germany, US PPI, and the NY Fed Empire State survey. Draghi will speak twice on Wednesday which could also be a source for headlines. On Thursday, we will get Industrial Production stats and the Philly Fed Survey from the US on top of the usual weekly jobless claims. European CPI will also be released on Wednesday. We have the first reading of October’s UofM Consumer Sentiment on Friday along with US building permits/housing starts. Yellen’s speech at the Boston Fed Conference on Friday (entitled “Inequality of Economic Opportunity”) will also be closely followed.

Futures Storm Into The Green, 20 Points Off The Lows; NY Fed's Chicago Office Kept Busy All Night

With futures slamming the lows at their open yesterday evening, touching levels not seen since May, and with the EuroStoxx 50 officialy entering correction just hours ago, down 10% from the June highs, many were wondering if the NY Fed's Chicago Trading Desk, aka Overnight Ramp Capital LLC, would be put in damage control duty and send futures right back to unchanged (because with new Ebola patient alerts springing up everywhere from Boston to Los Angeles, the pandemic is clearly contained). The answer, with a whopping 20 point levitation on no volume, and futures which are pointing now well into the green (not to mention the Eurostoxx rebounding off the lows and now green too), is a resounding yes (thank the  AUDJPY, which is over 100 pips off the overnight lows and back over 94).

"We Call It Democracy, But It's Not"

It is amazing how the government manages to continue selling Brooklyn Bridges to a gullible public. Americans buy wars they don’t need and economic recoveries that do not exist. Government in America is focused on something different from a healthy economy and the well being of citizens. We call it democracy, but it’s not.