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Sunday, December 31, 2006

Truck Shipments Down -- Big

In a potentially worrisome sign for the U.S. economy, domestic trucking shipments declined by almost 9 percent in November, marking the largest year-over-year decrease in almost six years, the industry's largest trade association said.The American Trucking Associations said in a monthly report that its seasonally adjusted truck tonnage index stands at its lowest level since late 2003, following an 8.8 percent decline versus the same month a year ago. The index fell 3.6 percent from the prior month.Because more than two-thirds of all manufactured...

What Can the Treasury Market Tell Us About Housing ?

Below I wrote on the housing market because I think it is the wildest of wild cards going forward economically. Because mortgage rates are tied to the 10-year Treasury bond it's also important to take a look at the 10-year treasury market to see what direction interest rates may be headed in.First, let's get a look at the bigger picture to see what...

Saturday, December 30, 2006

Housing in 2007

I agree 110% with Calculated Risk, although I would add the following.1.) Households have a record amount of total debt right now. It stands about 94% of GDP. I have not seen any number for when household debt is too much -- and I seriously doubt an exact number exists. However, I feel confident that we are near the amount when households have to start paring back on their overall debt levels.In short -- demand will continue to drop as households move from a house acquisition stance to a "pay down all this debt stance." Declining demand = declining...

Friday, December 29, 2006

Your Weekend Weimar

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Is the "Shrinking Market" A Reason for the Recent Rally

From CBS MarketWatch For some observers, this bull market can be partly explained by the fundamentals of supply and demand: The supply, or number of shares outstanding, has declined while demand, in the form of investor optimism, has stabilized and recently begun to increase."The more you shrink it, the more it has the potential to rise, all other...

Chicago PMI "Regains Footing"

From the ReleaseThe Chicago Purchasing Managers reported the Chicago Business Barometer regained its footing to register some improvement.- Production and New Orders regained strength while the rate of decline in Order Backlogs stabilized;- Prices Paid were unchanged from November;- Employment contraction continued as reported layoffs increased while hirings decreasedLet's look a bit deeper into the survey.The index dropped from September through November, then rebounded in December. We'll have to wait until January to see if this number continues...

Thursday, December 28, 2006

Worst May Not Be Over For Housing

From Bloomberg: In a Nov. 27 comment, Rosenberg notes that in addition to the record 4.3 million residential units for sale as of October, there were 1.95 million home completions, the 12th-highest month since 1979. Units under construction were through the roof as well. Rather than seeing supply dwindle and prices start to firm up in early 2007, Rosenberg says ``it could be a year before the reduction in starts begins to put a meaningful dent into the inventory backlog.''John Mauldin, an investment adviser and frequent contributor to Investors...

Richmond Fed Index Decreases

From the Richmond FedTenth District manufacturing activity growth continued to edge down in December, while expectations for future factory activity rebounded strongly from the previous month. Most price indexes in the survey declined, with many indexes recording their lowest levels in over a year.The net percentage of firms reporting month-over-month...

Existing Home Sales Increase .6%

From the National Association of RealtorsTotal existing-home sales – including single-family, townhomes, condominiums and co-ops – rose 0.6 percent to a seasonally adjusted annual rate of 6.28 million units in November from a level of 6.24 million in October, but were 10.7 percent below the 7.03 million-unit pace in November 2005.The median price of home sales decreased $1,000 to $218,000 and is down 3.1% YOY.The average price increased to $1,000 to $265,000 and is down 1.8% YOY.Inventory dropped to a 7.3 month supply while the YOY increase in...

Weekly Unemployment +1000

From CBS MarketWatchThe number of U.S. workers filing new applications for state unemployment benefits rose slightly in the latest week while continuing jobless claims climbed to their highest level in almost a year, the Labor Department said Thursday. Initial jobless claims rose by 1,000 in the week ended Dec. 23 to 317,000, the Labor Department said in a report. But in a sign of slackening in the U.S. labor market, continuing claims, or people continuing to collect state unemployment benefits, rose by 16,000, to 2.53 million, in the week ended...

Oil -- Still Rangebound

What does this chart tell us? Simple. Supply and demand are near equal. This is a great example of what W.D. Gann would call a distribution pattern. A distribution pattern occurs when a security is at the top of its respective chart or in the middle of a decline and the price starts trading sideways in a trading range. Traders who own the security...

Wednesday, December 27, 2006

Declining Volume -- Correction or Seasonal?

The SPY's volume has been declining since December 11. We've seen lower highs and lower lows.The QQQQ's volume has declined since December 18. Also note the QQQQs are bumping into the 20-day simple moving average. The end of December is essentially a Wall Street holiday, so declining volume could simply be a sign of early vacations and nothing more....

A Must Read

This Big Picture Article. No really -- you must read...

New Home Sales Up 3.4%*

From Bloomberg:Sales of new homes in the U.S. rose more than forecast last month as lower mortgage rates and more incentives helped builders reduce inventory.The 3.4 percent increase to an annual pace of 1.047 million in November followed a 1.013 million rate the prior month that was faster than previously reported, the Commerce Department said today in Washington. The supply of unsold homes at the current sales pace fell to the lowest since May.The figures add to evidence that the slowdown in construction may take less of toll on the economy early...

UAE Selling Dollars For Euros

Take a good look at this 4-year chart for the dollar:This is what happens when you run trade and fiscal deficits. Countries start to lose confidence in your currency. Over the last few years we have seen a large number of central banks announce they will diversify away from the dollar -- usually to add the euro to their reserves. OPEC, Russia, China,...

Tuesday, December 26, 2006

Holiday Sales Increase 3%

From Bloomberg:U.S. holiday retail sales rose a disappointing 3 percent from 2005 as a slowing housing market and higher energy costs cut into spending, MasterCard Advisors said.The gain is less than the 5.2 percent increase last year and the smallest growth since the survey started in 2003, MasterCard Advisors said today in a statement. Electronics and luxury goods had the strongest sales, according to the company's SpendingPulse survey.``Retailers are going to find that this was a pretty modest Christmas season,'' Britt Beemer, chairman of Charleston,...

Richmond Fed Slows

From the Richmond Federal ReserveIn December, the seasonally adjusted manufacturing index—our broadest measure of manufacturing activity—decreased to -6 from November’s reading of 7. Among the index’s components, shipments lost ten points to -4, new orders fell fourteen points to -8 and the jobs index moved down fifteen points to -5.Other indicators also suggested weaker activity. The capacity utilization index turned negative, losing twelve points to finish at -11 and the orders backlogs indicator shed five points to -16. Vendor delivery times...

Travel Day

I'm traveling today. I'll try and post about the Richmond Fed when it comes out. Also -- keep an eye on all three exchange traded funds -- the QQQQs, the SPYs and the DIAs. All closed on Friday in weak technical positio...

Sunday, December 24, 2006

The Coming Week

This will be a light trading week. The week between Christmas and New Years is typically a long holiday where traders only come in to work to catch-up on paperwork rather than actively trade. However, the markets may be turning over right now. So a light trading week could mean technical problems for the market.We have new home sales on Wednesday and Existing home sales on Thursday. The Chicago Purchasing Manager's index comes out on Friday. This will be important especially in light of last week's weak Philadelphia numb...

Saturday, December 23, 2006

Will The Real Inflation Rate Stand Up?

OK -- so where is inflation right now? Well, it depends on who you ask.According to the BLS, it decreased last month.The Consumer Price Index for All Urban Consumers (CPI-U) decreased 0.1 percent in November, before seasonal adjustment, the Bureau of Labor Statistics of the U.S. Department of Labor reported today. The November level of 201.5 (1982-84=100) was 2.0 percent higher than in November 2005.But producer prices were much higher last month:The Producer Price Index for Finished Goods advanced 2.0 percent in November, seasonally adjusted,...

Friday, December 22, 2006

Your Weekend Weimar

Have a safe holidaySpecial congratulations out to Steve Clemmons who had puppies recent...

The Markets Aren't Looking Good

The QQQQs closed in a precarious position today. They are just above support right below $43. The sell-off was on less volume than a big sell-off would probably entail, but is was also a weak day in the markets overall. The DIA's sold-off on increasing volume. That's not good.The SPYs sold-off on increasing volume. More importantly, the SPYs have...

Have Economists Forgotten About Saving?

The following is from a speech by Fed President Jeffrey Lacker yesterday.In any event, the weakness in housing will continue to be a drag on overall economic activity into the first half of next year, with the effect gradually waning as the year progresses. But I seriously doubt it will be enough of a drag to tip the economy into recession. My doubts...

Toyota to Surpass GM As World's Biggest Carmaker?

From Bloomberg:Toyota Motor Corp. expects demand for its fuel-efficient cars in the U.S., Asia and Europe to raise vehicle sales 6 percent in 2007, likely ending General Motors Corp.'s 81-year reign as the world's largest carmaker.Toyota and its affiliates will probably sell 9.34 million vehicles next year, up from 8.8 million in 2006, the company said in a statement in Nagoya, Japan. Production next year will rise 4 percent to 9.42 million vehicles.President Katsuaki Watanabe opened a $1.28 billion pickup factory in Texas last month and will start...

Holiday's Approaching

With the holiday's approaching, posting will drop a bit. I will be traveling Saturday afternoon to the the bond parents. I will be returning on the 26...

Thursday, December 21, 2006

Is NASDAQ Topping?

As we get closer to the year end, it's time to look at charts from a standpoint of what happened in 2006 and what may happen in 2007. Fund managers have a new year in which they have to at least beat the averages' gains and hopefully do better (although most don't). When looking at the NASDAQ chart (courtesy of Stock Charts), notice it may be forming...

Philly Fed Is Mixed

From the Philadelphia Federal Reserve:Overall economic conditions in the region’s manufacturing sector declined slightly in December, according to firms polled for this month’s Business Outlook Survey. Indicators for general activity, new orders, and unfilled orders were negative in December. Indicators for shipments and employment, however, were positive and stronger than last month. Although firms again reported higher prices for their own manufactured goods, the survey’s prices paid indicator continues to suggest diminishing cost pressures....

Final 3Q GDP Up 2%

From the BEA:Real gross domestic product -- the output of goods and services produced by labor and property located in the United States -- increased at an annual rate of 2.0 percent in the third quarter of 2006, according to final estimates released by the Bureau of Economic Analysis. In the second quarter, real GDP increased 2.6 percent.The increase in real GDP in the third quarter primarily reflected positive contributions from personal consumption expenditures (PCE), exports, equipment and software, nonresidential structures, and state and...

The Farepak Debacle III

The Farepak debacle is a story that simply won't go away, especially in the run up to Christmas.The rival Christmas savings specialist Park Group Plc, which now that Farepak has collapsed is the UK's largest Christmas savings club, is claiming that they could have saved Farepak from collapse.Managing Director, Chris Houghton, is quoted as saying:"We made four (approaches) in 18 months. All at different times with different prices. We felt we'd made full offers for the business, and for some reason they did not want to take it."Adding:"We were bending...

Wednesday, December 20, 2006

How Bullish or Bearish is Business Right Now?

I just got done reading the following post from Morgan Stanley and thought it would be a good time to see how business if feeling about the economy.Business conditions continued to deteriorate, remaining below 50% for the seventh consecutive month, but the deterioration isn’t intensifying. The Morgan Stanley Business Conditions Index (MSBCI) increased by four points in early December to 44%, retracing some of November’s decline. The less-volatile three-month moving average edged up two points to 43%, the highest level since August. At 43%, the...

Yield Curve Still Inverted

As my screen name implies, I use to be involved with the bond market. I was a bond broker with several regional firms before I went to law school. I like to joke that I have mortgaged my soul twice -- an all to common experience in the current economy.Below is a chart of today's yield curve from about 12:15 EST. The chart is from Bloomberg.That's...

Pretzel Logic, Hold the Salt

This is actually Tula Connell's post. We're experiencing some behind-the-scenes technical difficulty with passwords and such right now, so I'm posting this for Tula. -- BonddadPretzel Logic. Hold the Salt.Let’s see. U.S. Treasury Secretary Henry Paulson went to China last week to get the Chinese government to voluntarily lower the value of its currency, the yuan. He failed. But to save face for the United States, China said it will buy four Westinghouse nuclear reactors—never mind worries that this nation is selling its competitive advantage...

Thailand and Emerging Markets Rebound

From Bloomberg:Emerging-market stocks rallied from the biggest drop in three months after Thailand exempted stocks from capital controls imposed on international investors.Thailand's SET Index jumped 11 percent in Bangkok after plunging 15 percent yesterday, its biggest slide in 16 years, following the introduction of the new rules. Benchmarks in South Korea, Indonesia, Malaysia, Pakistan, Russia, Hungary and South Africa were all up more than 1 percent.The Morgan Stanley Capital International Emerging Markets Index, which tracks 25 markets, added...

The Farepak Debacle II

A very small measure of good news has been delivered to the hapless victims of the Farepak collapse. Roy Martin QC, one of Scotland's leading lawyers, is to represent Farepak victims for free in their fight to recover their money.Roy Martin QC is dean of the Faculty of Advocates, and has agreed to waive his £5K per day fee to take up the case of the Farepak victims.He will meet with campaigner Louise McDade, of the Farepak Victims Committee, to see if Farepak's victims have any grounds for legal action.Mr Martin will examine the case on behalf...

Tuesday, December 19, 2006

More on the Housing Starts 6.7%* Increase

Below are some posts from homebuilding related news stories from December. The stories are from the Yahoo homebuilding sector web page.First -- in December both Hovnanian and Toll Brothers predicted a bottoming in the housing market. It's important to remember that CEOs are media savvy. In other words, they may be saying this hoping it comes true, or with an eye to maybe influencing the market in some way.However ...Construction spending dropped 1% in October.The overall drop was driven by a 1.9 percent decline in private residential construction...

Producer Prices +2%; Housing Starts Up 6.7%*

From the Bureau of Labor Statistics:The Producer Price Index for Finished Goods advanced 2.0 percent in November, seasonally adjusted, the Bureau of Labor Statistics of the U.S. Department of Labor reported today. This gain followed declines of 1.6 percent in October and 1.3 percent in September. The index for finished goods other than foods and energy rose 1.3 percent in November compared with a 0.9-percent decrease in the previous month. At the earlier stages of processing, prices for intermediate goods moved up 0.7 percent after falling 1.1...

The Farepak Debacle

The hapless victims of the Farepak collapse have had their hopes dashed of a pre Christmas settlement of the monies owed to them. Mr Justice Mann, a High Court judge, said yesterday that there were too many issues that were not fully resolved for him to be able to agree to a distribution of about £1M.The £1M being the figure suggested by the administrators of the collapsed saving club company.Mr Justice Mann said:"It will doubtless seem to some that the points which currently seem to stand in the way . . . are technical and unmeritorious... They...

Thailand Institutes Foreign Currency Controls; Stocks Drop 11% UPDATE: Controls Lifted

From BloombergInvestors based abroad will be able to invest just 70 percent of funds transferred to Thailand, and only recoup all of their funds if they keep the money in the country for more than a year, Central Bank Governor Tarisa Watanagase told reporters yesterday. Any withdrawals within a year will be penalized 10 percent of the original investment, according to the new rules. PTT and Bangkok Bank both tumbled 17 percent. PT Perusahaan Negara, Indonesia's largest gas distributor, lost 3.8 percent. OTP Bank, a Hungarian lender that's been...

Monday, December 18, 2006

Homebuilders Confidence May be Stabilizing

U.S. home builders were a bit more pessimistic about the housing market in December, but they're growing more hopeful that home sales could perk up in six months, the National Association of Home Builders reported Monday.The NAHB/Wells Fargo seasonally adjusted housing market index fell to 32 in December from 33 in November. About a third of builders view the market as favorable. The index has been roughly flat for the past five months, hovering in a range between 30 and 33. Read the full report.Before we throw a party, remember the index is still...

John Edwards on Unions

Bonddad is a Democrat. Considering I have written for Daily Kos for the last 2 years, that shouldn't be a surprise. Clinton balanced the budget and grew the economy at the same time. 'Nuff said.Bonddad supports unions. In a recovery where wages are stagnant after inflation, health care is rationed to those who can pay, college education is more...

Current Account Widens in Third Quarter

From the Bureau of Economic AnalysisThe U.S. current-account deficit--the combined balances on trade in goods and services, income, and net unilateral current transfers--increased to $225.6 billion (preliminary) in the third quarter of 2006 from $217.1 billion (revised) in the second quarter. The increase was more than accounted for by increases in the deficits on goods and on income. The surplus on services increased, and net unilateral current transfers to foreigners decreased.This is 6.8% of GDP. Most economists would say this level is unsustainable....

Avoidance vs Evasion

Gordon Brown and the Labour government are allowing their natural prejudice against those that earn above the norm to override one of the fundamental principles of taxation. Namely that tax evasion is illegal, but tax avoidance is perfectly acceptable.Simply put, tax evasion is where an individual or company does not declare/willfully understates income with the express intention of defrauding the tax collector. Tax avoidance is where an individual or company legitimately uses the tax rules to reduce their tax burden, eg by making the most of their...

Sunday, December 17, 2006

Transports Aren't Confirming the Rally

Standard Dow theory stares the averages must confirm each other's movements. For example, if the Dow increases, than the transports should also increase. The theory behind this idea is if business is improving, than business will have to get products to market which is also beneficial for the transportation industry. However, the Dow Transports...

Coming Up This Week

Housing Starts and Producer Prices come out on Tuesday. The housing starts number is important. Builders have been slowing their building pace in response to a large inventory build-up. We get the final 3Q GDP, Leading Economic Indicators and and the Philly Fed on Thursday. The ISM manufacturing numbers dropped below 50 last time, so the Philly Fed number will let is get some confirmation or not of that particular number. Personally, I've never been a big fan of the LEI numbers.Durable Goods, personal income and consumer sentiment come out...

Saturday, December 16, 2006

Why Are the Markets Rallying?

The latest stock market rally has started to get on my nerves. It’s not that making money in the market is a bad thing. To the contrary, I am personally all for it. However, something about it has seemed out of place. The business cycle and stock market are pretty tightly correlated. When business increases, stock prices go up and visa versa....

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