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Wednesday, April 23, 2014 12:59 PM


New Home Sales Plunge 14.5%; It's Not the Weather; Steen Jakobsen on Consensus vs. Reality


The Census Bureau report New Residential Sales Report shows sales of new single-family houses in March 2014 were at a seasonally adjusted annual rate of 384,000.

  • Sales are 14.5 percent below the revised February rate of 449,000
  • Sales are 13.3 percent below the March 2013 estimate of 443,000
  • Median sales price was $290,000 vs. $260,900 in February, $257,500 in March of 2013
  • Average sales price was $334,200 vs. $318,900 in February, $300,200 in March of 2013
  • Median sales price was up 11.5% from last month, 12.6% from year ago
  • Average sales price was up 4.8% from last month, 11.3% from year ago
  • New houses for sale was 193,000
  • Supply is 6.0 months at the current sales rate

Sales by Region (Month-Over-Month, Year-Over-Year)

Northeast +12.5% MOM, -22.9% YOY
Midwest    -21.5% MOM, -17.7% YOY
South        -14.4% MOM, -03.8% YOY
West         -17.7% MOM, -27.9% YOY
Total         -14.5% MOM, -13.3% YOY

It's Not the Weather

USA Today noted "Harsh winter weather helped hold down sales in February and may have in March as well."

Also note: "Economists had predicted an annual rate of 450,000 for March, according to the median forecast in Action Economics survey."

My question: If sales decline was weather related, then why were sales up in the Northeast?

I suggest the Fed managed to blow another housing bubble, especially in California and the West where sales are down the most. With rising rates, people are priced out of the market.

Steen Jakobsen on Consensus vs. Reality

Steen Jakobsen, chief economist at Saxo Bank tweeted "Housing tanks again - according to consensus housing should add 0.5%-0.8% to GDP in the US in 2014"



Steen: "Consensus is looking for 0.5% to 0.8% positive GDP from housing. Pity the opposite is happening ... and that on a day when 100% of economists in recent survey by Jim Bianco see US rates higher in six months! Yes, 100%."

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

10:20 AM


Einhorn Shorts "Cool Kid" Bubble Tech Stocks


Greenlight Capital hedge fund manager Einhorn Shorting Tech as ‘Cool Kid’ Stocks Show Bubble.

Greenlight Capital Inc., the $10.3 billion hedge-fund firm run by David Einhorn, said it was betting against a group of technology stocks as evidence grows of a bubble.

“There is a clear consensus that we are witnessing our second tech bubble in 15 years,” the New York-based firm said in a quarterly letter to clients today.

Greenlight said that companies it’s betting against may fall by at least 90 percent “if and when the market reapplies traditional valuations,” according to the letter, a copy of which was obtained by Bloomberg News.

Greenlight cited initial public offerings of technology firms that have “done little more than use the right buzzwords and attract the right venture capital” as evidence of how far along the current bubble is.

Greenlight, best known for wagering on a decline in Lehman Brothers Holdings Inc. before the bank collapsed in 2008, said it was betting against a group of stocks because it reduces the potential of a single investment becoming too costly. The firm didn’t identify the individual companies.

Greenlight questioned whether technology companies would be able to keep their highly skilled employees if they stopped giving them large amounts of equity. The firm said it was hard to ignore the future dilution of shares that result from paying employees in stock.

“Once again, certain ‘cool kid’ companies and the cheerleading analysts are pretending that compensation paid in equity isn’t an expense because it is ‘non-cash’,” Greenlight wrote.
Valuations are without a doubt back in bubble land. The only open question is whether the time is finally ripe for shorting.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

Tuesday, April 22, 2014 11:59 PM


China Manufacturing Output and New Orders Contract Once Again


Chinese manufacturing remains in contraction for 2014. Output and new orders were down for the 4th consecutive month, but at a slightly reduced pace according to the HSBC Flash China Manufacturing PMI.



Commenting on the Flash China Manufacturing PMI survey, Hongbin Qu, Chief Economist, China & Co - Head of Asian Economic Research at HSBC said:

The HSBC Flash China Manufacturing PMI stabilised at 48.3 in April, up from 48.0 in March. Domestic demand showed mild improvement and deflationary pressures eased, but downside risks to growth are still evident as both new export orders and employment contracted. The State Council released new measures to support growth and employment after the release of Q1 GDP. Whilst initial impact will likely be limited, they signalled readiness to do more if necessary. We think more measures may be unveiled in the coming months and the PBoC will keep sufficient liquidity.

There is a massive expectation that China will step on the gas at any time now to improve conditions. I rather doubt it, unless there is a far bigger, disorderly breakdown.

China needs to rebalance, and will. Slower and slower GDP growth will generally be the norm, most likely for years to come, perhaps interrupted by an occassional unsustainable spurt here or there.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com


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