Hovnanian Posts Loss and Issues Grim Guidance

From the Street.comHovnanian (HOV - Cramer's Take - Stockpickr - Rating) reported a second-quarter loss and painted a bleak picture about the ongoing real estate slowdown, saying the housing market has gotten worse after showing signs of improvement earlier this year.The Red Bank, N.J., homebuilder withdrew its full-year guidance because of the "increased uncertainty of housing market conditions."For the quarter ended April 30, Hovnanian recorded a loss of $30.7 million, or 49 cents a share, compared with a year-earlier profit of $101 million,...

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Have We Dodged a Recession?

From MSNBC (and Bonddad's fabulous girlfriend)After a relatively good showing of 2.5 percent growth in the fourth quarter of last year, the U.S. economy slammed on the brakes in the first three months of 2007. Originally pegged at 1.6 percent growth, the government revised that estimate to just 0.6 percent — barely dodging an outright downturn.An ongoing slump in the housing market, along with layoffs in construction, real estate, mortgage banking and other related industries, has weighed heavily on the economy. Fearing a further slowdown, businesses...

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Construction Spending Increases

From CBS.Marketwatch:Spending on U.S. construction projects rose 0.1% in April as a jump in private nonresidential construction outlays offset a drop in spending on residential projects.Spending on private residential construction projects fell by 1.0% for the second consecutive month, the Commerce Department reported. Meanwhile, private nonresidential construction spending climbed by 1.5% in April, the government said.Construction spending in March was revised to rise upward, by 0.6%, from a previously estimated gain of 0.2%Here's a link (PDF)...

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Think Housing Has Bottomed?

Go read this post from the Big Picture. Do it now. There's aren't even any words; it's 4 charts that will scare the bejeebus out of y...

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On the Wachovia/AG Edwards Deal

From CBS.Marketwatch:Pending completion of the deal late this year, the combination will give rise to the No. 2 retail brokerage in the U.S., with $1.1 trillion in client assets and a network of nearly 15,000 financial advisors serving clients nationwide.The deal moves Wachovia up from the No. 3 spot and behind only Wall Street powerhouse Merrill Lynch & Co. Smith Barney had been the second largest retail brokerage.The merger would also boost Wachovia's presence in three of the nation's largest states, according to analysts at Lehman Bros.,...

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BEA Adjusts GDP Down to .6%

From BloombergThe U.S. economy grew last quarter at a 0.6 percent annual rate, the weakest in more than four years, as housing slumped, the trade deficit widened and businesses reduced inventories.The gain in gross domestic product was weaker than the median forecast by economists and compares with a 1.3 percent pace initially estimated last month, according to revised figures from the Commerce Department today in Washington.Last quarter may prove to be the low point for the economy as recent reports showed business spending improved and leaner...

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WSJ Gets The Fed Right

From the WSJ:On May 9, the Fed left its short-term interest-rate target at 5.25%, where it has stood since last June. It released a statement reiterating that inflation remained its predominant concern and that policy makers considered inflation "elevated." That surprised some observers, given prior data showing inflation had slowed a bit.The more confident outlook about economic activity would appear to diminish the odds that the Fed will cut interest rates in coming months. "Policy is on hold for as far as the eye can reasonably see," Joshua...

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Bush Learns The Art of Diplomacy

In the dying days of his presidency President Bush seems to be finally learning the subtle art of diplomacy, if his decision to appoint Robert Zoellick to head the World Bank is anything to go by.Zoellick comes as a breath of fresh air, after the lamentable failure of the Wolfowitz presidency.Many have applauded Zoellick's nomination by President Bush, hoping that it will help restore the reputation of an organisation that was tainted by the regime of his predecessor.Pending confirmation by the board, Zoellick will start on June ...

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Rental Property Slowdown

In further worrying news for those with a stake in the housing market, figures show that the demand for rented properties in the UK suffered its worst slowdown for two years in the three months to April.The lettings survey from the Royal Institute of Chartered Surveyors showed demand being hit. RICS spokesman, Jeremy Leaf, said:"Housebuyers are returning to the market to avoid rising borrowing costs, signalling a drop in demand for rental property.Rising borrowing costs and a subsequent drop in yields have also contributed to a worrying time for...

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An Interesting Rally

I was looking at the sector breakdown of today's rally on Marketgauge. There is something interesting lurking behind the market's performance. Today's volume of all industries except utilities was below average.Yet, today's volume for the SPY's, QQQQs, IWNs and DIAs was higher than previous days.Interesti...

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FOMC Minutes

Here is a link to the Fed Minutes from May 9, 2007. Let's see how the Fed saw the economy a little under a month ago:The information reviewed at the May meeting suggested that economic activity had expanded at a below-trend pace in recent months.We pretty much already knew that.The average monthly increase in payroll employment through the first four months of this year was well below the relatively strong pace recorded in the fourth quarter of 2006. In April, the construction industry continued to shed jobs, manufacturing employment declined...

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Bonddad On the Huffington Post

The Huffington Post has started a business section and they have asked me to contribute. Here is a link to my first post.I'll be writing longer, hopefully less "eco-geeky" posts the...

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Pulte Homes Cuts 16% of Workforce

From CNBC:Facing a grim housing market, Pulte Homes said Tuesday that it is cutting about 16% of its work force, or about 1,900 jobs, as part of a restructuring.Pulte Homes Inc. one of the nation's leading homebuilders, said the restructuring will save an estimated $200 million a year before taxes."The homebuilding environment remains difficult, and our current overhead levels are structured for a business that is larger than the market presently allows," Richard J. Dugas Jr., president and chief executive, said in a news release.Notice the public...

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When Will The M&A End?

From the Financial Times:Buy-out groups in the US are having their busiest month on record after launching nearly $82bn-worth of bids since the beginning of May.The frenzy of activity defies predictions of a slowdown in the private equity-driven deal boom but could also signal a desire by buy-out funds to rush into deals before credit markets take a turn for the worse.So -- when will this end? Cramer of Mad Money Fame offers five signs the boom will end.1. Interest rates on the long end going to at least 6%-7%. At that point, I believe it will...

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10-Year Rates Increasing

The 10-year Treasury Bond has been selling off for the last few weeks, sending yields to the 4.9% level. Here's a daily chart from stockcharts.comNotice the following.1.) Prices sold-off starting in early March (remember, price and yield move inversely). They stabilized from late April to early May when they resumed their sell-off. The trading pattern...

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Inflation Expectations Increasing

From the WSJ:Higher fuel costs, however, have caused consumers to expect a pickup in inflation in the next 12 months -- to 5.5%, compared with the 4.6% they expected in February.Standard economy theory states that when people have higher inflation expectations they will spend more now while their dollars are more valuable. If this assumption is true, we could have a partial explanation for why consumer spending has been resilient for about the last year.I should add, I'm not a bit fan of the psychological side of economic theory, but that's just...

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Fighting Fund Set Up

Who would be a banker in today's Britain?Gone are the days when the bank manger was a respected gentleman, in the Captain Mainwaring mould. Now the image of banks and their staff is that of a tacky used car salesman, trying to dishonestly screw the hapless customer out of every penny they own.Another nail has been knocked into the coffin of the banks' credibility, by the launch of a £100,000 fighting fund to encourage people to launch legal challenges against what they say are illegal bank charges. The money has been pledged by MoneySavingExpert.com...

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Housing Bad News Continues

From Bloomberg:Home prices in the U.S. dropped last quarter for the first time in almost 16 years, as 13 out of 20 cities reported declines in March.The value of a house dropped 1.4 percent in the first three months of the year from the same period in 2006, according to a report today by S&P/Case-Shiller. Prices last fell during the third quarter of 1991.The retreat may deter owners from tapping into home equity for extra cash, economists said. Combined with record gasoline prices, lower home prices raise concern consumer spending, which accounts...

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Is This Really A Goldilocks Economy?

From IBD:"This points to improving prospects for the economy in the second half," said Lakshman Achuthan, ECRI's managing director. He called the possibility of a recession this year "minuscule."The index's rise stems from some healing in sickly manufacturing."Services were always holding up. But the industrial side is (improving) where it used to...

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NYSE Short Sales Nearing Record

From Bloomberg:Short sellers are betting against U.S. stocks like never before as the Standard & Poor's 500 Index approaches an all-time high. That's making some of the biggest bulls even more optimistic.``What the short seller appears to be doing is doubling down,'' said Kenneth Fisher, who oversees about $40 billion as chairman of Fisher Investments in Woodside, California. ``You love to see it, because if you believe there is a basic driver to the bull market, they're going to get run over.''The amount of shorting -- where traders sell borrowed...

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The Dangers of Mobile Phones

I am always amazed as to how foolish some people are when it comes to their personal security, wrt pass codes and credit card details.However, I was quite gobsmacked to overhear (as did the rest of the carriage) a conversation that someone was having on their mobile phone when travelling to London the other evening.The lady was buying some tickets for something and happily gave out her credit card details, over the phone, so that the whole carriage could hear them.It is hardly surprising that there is an epidemic of identity theft and fraud, if...

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Housing: Oversupply Isn't the Word

This is from the blog Interest Rate Roundup.* Census data on new home inventory goes back to 1963. Prior to the latest down cycle, the highest inventory level recorded was 432,000 units in August 1973. Throughout the 1980s and 1990s, it was customary to have about 300,000 to 320,000 homes for sale, with peaks (in 1989 and 1995) of around 370,000.This time around, supply has come down somewhat from the July 2006 peak of 573,000 units. But it's clear that we still have a major inventory glut -- something on the order of 150,000-200,000 units.* So...

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Corporate Balance Sheets, Merger Mania and the Current Rally

Although the US economy is operating at less than peak performance, the stock market is rallying. M&A is a primary reason for this rally. It seems that every Monday new deals are announced. How long will the pace of these deals continue?Our U.S. Investment Strategy service noted last week in a Special Report that corporate bond spreads have...

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Notes of the SPY

I keep a notebook of trading ideas and economic/market observations. Here is what I wrote about the SPYs a few days ago. There is no order of importance to any of the ideas. It's simply a running list/stream-of-consciousness group of observations.- broke through a month and a half trend line. However, it is still above the 20-day SMA. It is possible the trend line shifted down, but the previous trend line had more support from various price points. OBV has been in a range for all of May at around (roughly) 4.5 billion. CMF (Chaiken Money...

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April Same Store Sales Final Tally: 79% Miss Expectations

From seeking Alpha:Most retailers announced April same-store sales Thursday. According to Thomson Financial, 79% of them missed expectations. We'll start with the winners:The article provides a list of the major retailers. It's not pretty.We have to watch retail sales very closely over the next few months to see about the consumer's overall heal...

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Money Supply and the Recent Rally

I've been thinking about the market rally, GDP growth and money supply all morning. Here's my line of thought.1.) Here's a P&F chart of the SPY rally. Notice it started on 7/31.2.) The second quarter ended on 6/31. The BEA releases the GDP information on three dates: the last day of each subsequent month. So, we would have the 2nd quarter releases...

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The Rise of Government Wealth Funds and Money Supply

From Barron's (subscription required)Countries like China and Russia think they have sufficient reserves to meet potential runs on their currencies, and have created sovereign wealth funds in a bid to earn higher returns. Increasingly, these and other nations, including the oil-rich United Arab Emirates and Norway, are expected to funnel new money...

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Weekend Humor

I've been laughing about this all da...

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Existing Home Sales Drop

From Bloomberg:- Sales of previously owned homes in the U.S. unexpectedly fell in April to the lowest level in almost four years, dimming prospects for a quick recovery in the housing industry.Purchases fell 2.6 percent to an annual rate of 5.99 million last month from 6.15 million in March, the National Association of Realtors said today in Washington. A measure of the supply of homes for sale rose to the highest since August 1992.The decline comes a day after a government report showed sales of new homes surged as buyers took advantage of a slide...

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A Map of Gas Prices

Here is a map from the WSJ that shows gas prices around the country. I resized the image to fit on the page. I'm still learning about the whole image thing on he web so the image may be small for some people. So -- 1.) Only New Jersey has prices below $3.00/gallon.2.) The darkest color on the map means prices are over $3.40/gall...

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OPEC Won't Increase Production

From the WSJ:Two years ago when gasoline prices in the U.S. surged to the then-lofty level of $2 a gallon, the Organization of Petroleum Exporting Countries sprang into action, seeking to provide relief by pledging to boost oil production.Now, with gasoline topping an average of $3.20 a gallon nationwide, OPEC officials say they see no reason to open...

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Bank Fee Complaints Rocket

The Financial Ombudsman Service (FOS) has reported that there is something of a consumer rebellion, over current account fees, going on.Last year banking complaints to the FOS rocketed by 47% to over 20,000. The FOS is now dealing with 1,000 complaints a week, from members of the public who are fed up with extra bank charges. The FOS also receives around 3,000 enquiries a day about banking charges. Walter Merricks, the chief ombudsman, said: "A year ago we were receiving just 10 cases a week about banking charges.By the end of March 2007, this...

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Was Today's Market Action A Reversal Day?

A reversal day occurs when, well, the trend reverses. Key signs are a break of a trend line and high volume. We have both today. The SPYs and the QQQQs broke through their upward trend line on high volume.The common theme to the market analysis was today's housing and durable goods news implies the Fed may hike rates. I think the markets were simply...

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New Home Sales Increase 16%

From Bloomberg:Purchases of new homes in the U.S. unexpectedly jumped in April by the most in 14 years, a sign low lending rates and incentives may be reviving demand.Purchases rose 16 percent to an annual pace of 981,000 last month from an 844,000 rate the prior month that was lower than previously reported, the Commerce Department said in Washington. The supply of unsold homes at the current sales pace dropped.Lower prices and incentives offered by builders such as Centex Corp. are stirring demand for new homes after two years of falling sales....

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Durable Goods Orders Surprise On the Upside

From CBS Marketwatch:New orders for U.S.-made durable goods increased 0.6% in April, boosted by strong demand for metals, the Commerce Department reported Thursday.Orders in March rose a revised 5%, a six-month high, compared with a 4.3% estimate previously.Demand in April was held back by a 10.7% drop in orders for civilian airplanes, where new orders had doubled in the previous two months. Excluding the extremely volatile transportation category, orders were up 1.5% in April, identical to the increase in March.Orders for core capital equipment...

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Problems With the Employment Numbers?

From the WSJ:• The News: Recent signs indicate the job market may be weaker than monthly data show, particularly in construction. • The Background: The economy has slowed, but job growth has remained robust. • The Upshot: The cause of the statistical disparity remains something of a puzzle.Let me caution here: the primary reason for the disparity is based on statistical sampling which is not my strong suit. I'm good at explaining final numbers, not generating the numbers used in analysis. Now that we have that caveat out of the way:Those signs...

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Toll Brother's Net Drops

From the WSJ:The luxury-home builder's earnings fell to $36.7 million, or 22 cents a share, from $174.9 million, or $1.06 a share, a year earlier. Analysts polled by Thomson Financial expected, on average, earnings of 25 cents a share.The company said earlier this month it expected a second-quarter profit, but said it wouldn't meet its prior outlook of 43 cents to 57 cents a share. Write-downs lowered earnings by 44 cents a share, compared with just four cents a share a year earlier.Revenue for the quarter ended April 30 fell 23% to $1.17 billion...

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HIP Replacement Therapy

The nervous property market was given a much needed boost of confidence by the government's announcement that it is in effect abandoning its unloved, and ill thought out, Home Information Pack (HIP) scheme.HIP's were meant to have come into force this July. However, the costs involved and the fact that neither the market nor the home sellers were ready for the bureaucratic nightmare that this ill thought out idea would cause meant that most were hoping for them to be killed at birth.Ruth Kelly's announcement has all but killed them. HIPs will,...

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Gas Prices Up Nearly 50% Since January

From CBS Marketwatch:Average retail gas prices jumped by 12 cents to a record $3.26 a gallon last week, the Energy Department reported Monday. Gas prices are up nearly 50% since late January, one of the largest sustained increases ever recorded by the government.Here is a chart from the same article. Notice that prices usually spike mid-year. However,...

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More Retail News

From Yesterday's retail sector market brief at CBS Marketwatch: Elsewhere, shares of American Eagle Outfitters (fell 4.3% to $28.06. American Eagle offered a second-quarter forecast that fell short of Wall Street's expectations, sending the shares lower. The teen-wear retailer is looking at second-quarter per-share profit of 34 cents to 36 cents,...

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Would a Yuan Devaluation Really Help the Trade Deficit?

From IBD:But most economists say a big yuan revaluation wouldn't have a major impact on trade.As long as Americans spend more than they save and the Chinese continue to save at high rates, the trade deficit will endure."To achieve any meaningful change in trade flows, you need a reduction in (spending) by countries that spend more than their income and expenditure increases in countries that spend less than their income," said Nouriel Roubini of Roubini Global Economics. "Changes in relative prices are not by themselves sufficient."America's trade...

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Another Portent of Doom?

Following on from news that Foxtons is up for sale, there are further rather worrying straws in the wind for property owners in the UK.Demand for mortgages in the UK slowed down in April, as rising house prices and borrowing costs began to take their effects on the market.The British Bankers' Association said that net mortgage lending rose by an underlying £5.0BN in April, less than the previous month's £5.1BN and below the £5.4BN monthly average over the previous half year.Whilst this may not signal a crash of epic proportions, it may well signal...

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Gas Hits A New Record

From CNNGasoline prices broke a record Tuesday for the 10th day in a row as every state except for New Jersey now has an average price above the $3 a gallon mark in AAA's daily survey.The latest reading from the motorist group Tuesday showed the nationwide average for a gallon of regular unleaded hit $3.209 a gallon, up from $3.196 on Monday. The group's survey of 85,000 gas stations, by far the broadest sampling of gas prices, has been showing a series of record high prices starting May 13.Need I say anything mo...

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Fed's Lacker Is Concerned About Inflation

From CNBC:However, Lacker, one of the Fed's toughest inflation hawks, said he'd like to see the inflation rate come down a bit more. Although he is not a voting member of the Fed this year, Lacker dissented four times last year from the majority at the Fed who wanted to keep interest rates unchanged instead of raising them.“I don’t think the moderation we’ve seen is statistically significant,” he said. “The core inflation has been fluctuating between 2% and 2.5% for two years now and before that from 1996 through 2003, core inflation was between...

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Retail Snapshot

With gas prices hitting a record and the housing market still in a slump, it's important to keep an eye on some of the areas that may be negatively impacted such as retail. Wal-Mart is the largest retailer in the US by a wide margin, so keeping as eye on the daily news is very important. But there are other retailers to watch as well.Lowe's reports lower earnings.Lowe's Cos. reported a 12% fall in first-quarter profit Monday as the housing slump and tough comparisons sawed into the home-improvement retailer's bottom line.Multiple factors, including...

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Credit Is Still Cheap

From CNBC:As of mid-May, total M&A activity world-wide totaled about $2.19 trillion, compared with the record $3.87 trillion for all of 2006, according to Dealogic. In the U.S. M&A activity totaled $717.37 billion through May 16, on pace with last year’s $1.49 trillion. Both are shy of 1999 and 2000, when activity topped $1.5 trillion in each...

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Fed's Moscow Wants Lower Inflation

From Reuters: Moskow noted that core inflation is still running above the 1 percent to 2 percent range that some policy-makers, including himself, see as an informal comfort zone."I'd like to see inflation rates running lower at this point and more toward the center of that zone," he said.This was brought to you by the guy who has been saying for the last 6-9 months the Fed isn't going to lower rates anytime so...

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A Portent of Doom?

The news that Jon Hunt, the owner of estate agency Foxtons, will sell Foxtons for around £370m to BC Partners a private equity group has caused a few worries in the housing market.This signals to many that Hunt has, in effect, "called the market" and decided that now is a good time to get out of UK property.Foxtons started trading in a converted Italian restaurant in Notting Hill 26 years ago, it now has 19 branches in London. Hunt will continue to work in the US market.Last year, a BBC undercover documentary made a number of allegations about...

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Gas Hits A New Record

From the Atlanta Journal ConstitutionThe average price of self-serve regular gasoline hit a record high of $3.18, rising more than 11 cents over the past two weeks, according to a nationwide survey released Sunday.The latest figure topped the record of $3.07 set two weeks ago, which had been the highest price since the average cost of a gallon of gas hit $3.03 on Aug. 11, 2006, according to the Lundberg Survey of 7,000 gas stations across the country.How long until this starts to impact consumer spending? I don't have a clear answer, but when...

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When Will the Buy-Out Splurge End?

There was an article in the print version of Barron's this week. I can't find it online, but wanted to give credit where it is due. The author was discussing when the buy-out mania currently gripping the markets would end. He made the following points.1.) When the sheer size of the deals becomes astronomical. So far the size of the deals has been pretty contained, especially considering the strength of corporate balance sheets. There are two recent deals that do raise flags. The first was Newscorp's bid for Dow Jones. The thinking here is...

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