Lawrence Yun, chief economist for the National Association of Realtors, appeared on Fox Business News to talk about today’s horrific decline in existing home sales.
Favorite line: “It’s not a sky-is-falling scenario … at least not yet”.
REMINDER: All investment, economics, and finance related material now appears at the new IaconoResearch.com. For the time being at least, this has become a personal blog covering a variety of mostly unrelated topics.
On August 24, 2010,
in Housing,
by Tim
[The following commentary is from the latest issue of the Weekend Update (Volume V, Issue 34) at Iacono Research. For subscription details, click here.]
The increasing amount of commentary on the subject of whether or not the world now faces a “bond bubble” combined with a recent article detailing the poor performance of inverse bond funds in 2010 seemed like sufficient justification to revisit a topic that was discussed here three weeks ago when I took “A Quick Look at Rising Rate Funds” (see Volume V, Issue 31).
Recall that, in the referenced discussion topic, short-term and long-term charts of Treasury yields were shown, in which it is clear to see that interest rates rose for decades to a peak in the early 1980s and have retreated from there to what now appears to be the end of another secular trend. Also, 13 inverse bond funds were presented in table form with the following three being suggested as likely candidates for the model portfolio when the time is right:
- Profunds Rising Rates Opportunity 10 (RTPIX)
- Rydex Inverse Government Long Bond Strategy (RYJUX)
- ProShares Short 20+ Year Treasury (TBF)
Obviously, as should be clear when looking at the graphic below, the time has not been right over the last four months because all three of these “unleveraged” funds – a key consideration for a position that may be held in the model portfolio for a very long time – have been big losers. Funds that apply leverage of between 1.25x and 3x have done much worse than the 1x funds, in some cases the year-to-date losses exceeding 40 percent.
On August 24, 2010,
in Housing,
by Tim
The National Association of Realtors reported that existing home sales plunged 27.2 percent in July after the homebuyer tax credit ended in June, roughly double the decline that analysts were expecting. This is more confirmation that the housing market is in serious trouble, a double-dip decline in home prices now even more likely to come in the months ahead.
Home sales fell from a downwardly revised annual rate of 5.26 million units in June to just 3.83 million in July, the lowest level since 1995. Inventory rose sharply, the months of supply metric soaring from an upwardly revised 8.9 months to 12.5 months, the highest level in 11 years. All things considered, markets are taking the news fairly well, so far…
On August 24, 2010,
in Bonds, Our Culture,
by Tim
A quick check of the California budget crisis reveals that the state will not make scheduled payments to the public schools and county governments totaling a few billion dollars and that they’re getting ready to issue IOUs again. Details are in this LA Times report:
California’s top fiscal officials Monday ordered the deferral of $2.5 billion in payments to the state’s public schools next month to conserve cash and stave off the need to begin issuing IOUs.The state’s budget is 54 days late, and that delay has stretched the state’s depleted treasury to the breaking point. Issuance of scrip could come within weeks.
The deferral announced Monday “was not taken lightly,” state Controller John Chiang, Treasurer Bill Lockyer and Department of Finance Director Ana Matosantos wrote in a joint letter to the Legislature.
…
State officials acknowledged the added hardship. “The lack of a state budget is levying additional fiscal stress on schools … deferral of state payments will further exacerbate the situation,” Chiang, Lockyer and Matosantos wrote.Fiscal officials also ordered that a $400-million payment to counties be delayed; $700 million in county funds were pushed off in July.
The latest skipped payments to counties and schools must be repaid within 90 days, said H.D. Palmer, a spokesman for the Department of Finance.
Apparently these moves were expected, but they came a bit earlier than most officials were thinking. Furloughs are back, thanks to a recent court ruling that upheld Governor Arnold Schwarzenegger’s order and it’s just another typical late-summer in the Golden State.
On August 24, 2010,
in Housing,
by Tim
While waiting for the National Association of Realtors to report on July existing home sales this morning, deflationist Gary Shilling mixes it up with RE/MAX CEO Dave Liniger on the subject of whether the American dream of building wealth through home ownership is dead.
Note the wonderful black-and-white footage of a falling house when Shilling is introduced. Not surprisingly, the real estate sales guy remains optimistic.
On August 24, 2010,
in Uncategorized,
by Tim
MUST READS
State defers schools, welfare payments – SF Gate
Japan’s Nikkei index leads world markets lower – AP
Fed Split on Move to Bolster Sluggish Economy – WSJ
In Preparation for July Home Sales, aka Armageddon – CNBC
Why Tuesday’s Home Sales Report Should Be Awful – WSJ
How financial reform will really work – CNN/Money
How Hyperinflation Will Happen – Gonzalo Lira
China Will Force the World Off Oil – CFR
Housing’s Second Leg Down – Bloomberg
The Revaluation That Wasn’t – WSJ
MARKETS/INVESTING
Oil falls to near $72 in Europe on economic fears – AP
Gold slips below $1,220 as euro, equities sink – Reuters
Gold market dazed as India gives a miss to festive gusto – Commodity Online
Betting on tail risk seriously endangers your wealth – Reuters
A statistical take on the Hindenburg Omen – MarketWatch
Yes Folks, Hindenburg Omen Tripped Again – WSJ
ECONOMY/WORLD/HOUSING/BANKING
BoA sees US double-dip danger from `fiscal chicken’ – Telegraph
Latest data suggest we are already in double-dip recession – MarketWatch
US Money Supply Figures: Dude, Where’s My Deflation? – Jesse’s Cafe
Greek Banks Pressured to Merge as Economy Hurts Profits – Bloomberg
Spain uses social security fund to prop up the bond market – Telegraph
Euro Zone Austerity Takes Toll on Growth – Financial Times
The Importance of Mortgage Rates – EconomPicData
For Mortgage Mod Program, New Numbers Show Old Problems – ProPublica
Credit card interest rates are through the roof – CNN/Money
Fed Loses Bid for Review of Bailout Disclosure Ruling – Bloomberg
Monday at the Treasury: an overlong exegesis – interfluidity
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