Economic Reports & Observations 03/19/07
NAHB/WF Housing Index down to 36 vs prior 39 Full Report & Data
Inside the number: Builder confidence down to 39 from 72 in mid 05. SFR sales down to 37 vs prior 40 and 77 in mid 05.
This morning, China raised interest rates for the 3rd time in 11 months. Putting more pressure on the BOJ to keep raising.
Although no one expects the BOJ to raise at Tues meeting, every word of the statement will be scrutinized for clues re further tightening prior to June.
We expect the next BOJ 25 bps raise to come at the end of summer as the Fed cuts 25 bps. This 50 bps trimming in the carry trade equals 5% to anyone leveraged at 10X, read hedge funds.
Sometime back we mentioned using the dollar index as a barometer of market liquidity. Perhaps the $ vs Yen is an even better barometer.
The Yen, DJIA and most global market charts have moved in synch since the BOJ raised 3 weeks ago. The yen was at a multi year low recently, now the dollar is at a 2007 low vs the Yen.
Manufacturing, housing, sales and economic data over the last few months, indicate that the contraction in housing and the subprime malaise are creeping into the general economy.
Like the BOJ statement Tues, the FOMC statement Wen will be reviewed for any comments regarding subprime, housing or spillover into the general economy.
We believe that investors have mistaken global hyper liquidity for bottom line performance. Ya gotta play to win, right? Wrong...
False positive #1: After a precipitous 2 year plunge, the housing stock index HGX was in a contrarian rebound. Did the housing situation get better? The HGX is tanking again.
False positive #2: the SOXX rallied the 2nd half of last year, but has danced sideways since mid Nov. and sits on 50 DMA. Today it was the only sector down.
Unlike the lemmings, lowered forward guidance and a slowing economy with nothing to fall back on, make wary and intelligent investors sell.
The yield curve has been inverted for an extended period. Although interest rates may go lower along with the dollar, we believe that unlike previous cycles, housing and stocks could also go lower.
Near term, we suspect that the dollar will move lower vs the Yen on poor housing and economic data. Any other surprise comments or subprime woes (BK) could shove the dollar towards the 2006 low.
Stay tuned as the $ dives, the yen bounces higher on carry trade unwind and markets head lower.
Inside the number: Builder confidence down to 39 from 72 in mid 05. SFR sales down to 37 vs prior 40 and 77 in mid 05.
This morning, China raised interest rates for the 3rd time in 11 months. Putting more pressure on the BOJ to keep raising.
Although no one expects the BOJ to raise at Tues meeting, every word of the statement will be scrutinized for clues re further tightening prior to June.
We expect the next BOJ 25 bps raise to come at the end of summer as the Fed cuts 25 bps. This 50 bps trimming in the carry trade equals 5% to anyone leveraged at 10X, read hedge funds.
Sometime back we mentioned using the dollar index as a barometer of market liquidity. Perhaps the $ vs Yen is an even better barometer.
The Yen, DJIA and most global market charts have moved in synch since the BOJ raised 3 weeks ago. The yen was at a multi year low recently, now the dollar is at a 2007 low vs the Yen.
Manufacturing, housing, sales and economic data over the last few months, indicate that the contraction in housing and the subprime malaise are creeping into the general economy.
Like the BOJ statement Tues, the FOMC statement Wen will be reviewed for any comments regarding subprime, housing or spillover into the general economy.
We believe that investors have mistaken global hyper liquidity for bottom line performance. Ya gotta play to win, right? Wrong...
False positive #1: After a precipitous 2 year plunge, the housing stock index HGX was in a contrarian rebound. Did the housing situation get better? The HGX is tanking again.
False positive #2: the SOXX rallied the 2nd half of last year, but has danced sideways since mid Nov. and sits on 50 DMA. Today it was the only sector down.
Unlike the lemmings, lowered forward guidance and a slowing economy with nothing to fall back on, make wary and intelligent investors sell.
The yield curve has been inverted for an extended period. Although interest rates may go lower along with the dollar, we believe that unlike previous cycles, housing and stocks could also go lower.
Near term, we suspect that the dollar will move lower vs the Yen on poor housing and economic data. Any other surprise comments or subprime woes (BK) could shove the dollar towards the 2006 low.
Stay tuned as the $ dives, the yen bounces higher on carry trade unwind and markets head lower.
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