Zeb's Vue To Investment

Good Morning Everyone... and here is to a very happy and prosperous day to you...

After several days in the gardens in the far north, I finished pruning an tying up the raspberries. We seem to have caught a virus in the raspberries, and if so there is no cure. It will require we move the patch and start again. The patch has been with us for 12 years, and it was there long before we bought the property. Well, until I get the energy to build a new place, I will do the best I can to bring a small crop through. My daughter is working on the onions. We need to get the peas in soon.

Opening VUE

After the move higher on Tuesday, the stockmarket on Wednesday continued to move lower. The German DAX hit a four month low yesterday, and the weakness hit the US markets as well.
Gold yesterday was still going down, but this morning is moving higher.
We can expect a continue rise in volatility as measured by the VIX and by the range (high to low) of the day on the indexes. There have been some large swings with the 2.3% decline on Monday as the point of performance (as Wednesday wiped out the Tuesday's gain).
S&P will likely to continue to test the 1550 level. Because of the popularity of the 50 day moving average of all indexes, the "crowd" will be watching that level. It is about 1542 on the S&P at this point,. (There is nothing magical about MVA or any other number. Behavior of people around those averages is what counts.)
This morning, the S&P is trading positively as price is .2% above fair value.
The European market has rebounded over night, with rumors - love those rumors - the ECB will cut rates. Also, the investors in Germany specifically seem to be in the mode of buying the dips.
Base metals (as reported a few days ago) has hurt the global economy outlook. They are the building blocks for industrial growth, and large investment firms are concerned about what is taking place.
While earnings continue (on the whole) to be excellent, revenue growth is weak across all companies except Goldman Sachs. It all provides an indication that growth has stalled (possibly going down). So, again a warning. The market prices in the future expectations not what happens today. (There is an exception to that observations. Surprises in the news will affect the prices.)
The initial claims report for April 13 showed a slight jump from 348,000 to 352,000. At this point, the analysts are not expecting a large change in hiring (not more but not less), or in other words basically hiring is not picking up.
Gold - up slightly today. If you have read this blog over time, you will know I've been reluctant to call Gold's direction. I've heard the inflationary crowd call for $2,000 dollar gold this year, but that seemed unlikely to me as long as the sovereign debt crises in Europe and elsewhere continues. The money supply world wide is also contracting even though the central banks are printing money way beyond historical levels. (That is a subject for my newsletter coming up.) The pressures that are observable is still a world with huge debts. Paying off or defaulting on debt is deflationary, and the central banks are trying to create inflation. It is a war that one would think was being won by the central banks, but it appears they are just barely able to keep their noses above water.
At 7:00 AM PDT, the Leading Indicators from Conference Board will be released. There is not expected to be any surprise. If there is a surprise this is a report that will move the market. However, what the report is most likely to show is small growth in the USA economy, and it will be spun by the pro-Obama-nation as positive, and by the doomsayers as proof the USA is ending.

Market is Tanking --

The leading indicators were down from a gain of .5% to -.1%. The expectation was for a gain, and so this was not a good report.

Be sure to stay tuned, however, as the lip flappers in the Federal Reserve and later today from the G-20 will probably cause a reaction to the upside. I would not be surprised if the market comes off the lows at the 50 MVA and/or yesterday's close and move to close higher than yesterday. Wll it? I don't know, but if I was a day-trader, I would be sceptical of this move down for today anyway.

G-20 Meetings start today...

Yawn...

Japan continues to stimulate their economy at a rate that puts the Bernanke team looking like runners-up.

Japanese Yen:

It will be interesting to listen to the G-20's reaction to Japan's announcements since last meeting. Since the BOJ is printing $76Trillion dollars per month, it will double the monetary base of Japan within two years. Wouldn't you stomp your feet and pound on the table with your shoe if you were China and the Asian tigers? What we have to do is look at what Japan is doing against what the US is doing. The Japanese economy is about 1/3 the size of the US, and is printing almost as much money per month ($76 B vs $84B) as the US. Japan is "shocking" as they try the "shock" treatment to a dead economy.

Brazil:

Brazil's central bank hiked up their rates yesterday in order to stem inflation. There is an oddity here (in my thinking) that needs more exploration. While commodities tank in price across the world, Brazil is facing inflation. March consumer inflation breached the BCB's target range. The rate now stands at 7.5%.

OK, that is it for 7:00 AM this morning. Have a great day, and remember to Love because your are Loved. Don't wait until disaster strikes. Hug your teenager (if they will let you), and always pray for them.

Let's Review Housing

10:20 AM PDT

Corelogic www.corelogic.com provides useful information on property and financial data. According to CoreLogic there were approximately 54,000 foreclosures in the US housing market in February. In addition they report there were 1.2 million + homes in foreclosure inventory. http://www.corelogic.com/research/foreclosure-report/national-foreclosure-report-february-2013.pdf

The top five sates with the highest level of foreclosure were the normal suspects: Florida, New Jersey, New York, Nevada, and Illinois.

In addition, there are a large number of USA homeowners that have negative equity - where negative means the value of their home is less than the mortgage. As discussed in this blog and said discussion correlated with student loans, the first time home buyer is missing in action.

Home builders are expressing worry again. The National Association of Home Builders / Wells Fargo Housing Market Index (HMI) fell in April for the forth consecutive month. Currently the National Association of Home Builders (April 15, 2013) says HMI stands at 42. Any number below 50 indicates that home builders view conditions as poor. The exceptions are in the south in Louisiana and Texas and in the far north in North Dakota where demand is far outstripping availability.

Gentle reader, homebuilders see conditions changing long before the Case Schiller housing index picks up the trend. Home builders pessimism should not be taken lightly, and maybe I do not need to remind everyone, but when times were good in the late 1990s, a huge percentage of US citizens were employed in home building, and employment in home building sector has not recovered.

These reports are contrary to the recovery in the housing market. Yes, housing prices have increased, but they are far away from the highs made in 2006.

The USA's Federal Reserve has pushed QEternity (IV) and mortgage rates have plummeted. The Home Affordability Index - a measure to show if a typical U.S. family can afford monthly mortgage payments on a home - is hovering near its all-time high. Still, the family buyer is not buying, and first time buyers are non-existance (as shown above). Of course, gentle reader, you will recognize that is because factors such as lack of jobs for young people, the salaries of people going down, and people who still have housing mortgaged before 2006 are under-water play into the lack of family buyers.

If we take the time to look back in the news and reporting while housing prices increased, we would observe that it was institutional investors how moved the home prices higher in the USA housing market through aggressive and massive absorption of depressed housing units. http://www.forbes.com/sites/morganbrennan/2013/03/18/wall-street-institutions-behind-home-price-surges-in-markets-like-phoenix/

If we exclude Texas, Louisiana and North Dakota, and remove institutional investors was there any housing recovery?

On the other hand, the stock market rise indicates that investors should not fight the Feds. As long as the Federal Reserve continues to pursue its bond-buying program, it will place downward pressure on financing rates. This will make housing improve - specifically, though, where employment is rising. It is all about the Fed and easy money.

As you can observe by today's Jobless Claims, March was not very good, and April is looking slightly worse than March. With hundreds of thousands of people still claiming unemployment, jobs must improve.

I wonder, however, if we do not have a chicken and egg scenario. If home building can start across the nation, there will be a big increase in the number of jobs available. But until jobs increase and pay increases, builders will be reluctant to go on a building spree, limiting employment.

Here is how this (at this point in time only) playing out. We can observe some softness in the amount of housing projects that are in the pipeline. The building permits reading fell to an annualized 902,000 in March, below the Briefing.com estimate of 955,000 and the 939,000 building permits in February. Watch this metric, as it may suggest that there is some slowing on the horizon for the housing market.

As usual, the data is confusing, as the Case-Shiller Index (which looks at the past and trends) show higher buying activity, but this apparently was mostly driven by institutions, not family buying.