Month: November 2015

U.S. Existing Home Sales Retreat; Prices Down for Fourth Straight Month

The National Association of Realtors reported that sales of existing homes declined 3.4% (+0.9% y/y) during October to 5.360 million (AR) after an unrevised 4.7% increase to 5.550 million in September. The latest figure disappointed expectations for 5.40 million sales in the Action Economics Forecast Survey. Single-family home sales were off 3.7% last month to 4.750 million (+1.5% y/y). Condo and co-op sales eased 1.6% (-3.7% y/y) and were 6.2% below their June high.

The median sales price of an existing home fell 0.9% to $219,600 (+5.8% y/y) and was down 7.1% from June’s record $236,300. The average sales price fell 0.9% to $262,800 (+3.4% y/y).

By region, sales in the Northeast remained unchanged m/m at .760 million units (5.0% y/y) but were near the eight-year high. Sales in the West retreated 8.7% to 1.160 million (0.0% y/y) following September’s 6.7% increase. In the South, sales declined 3.2% to 2.140 million (-2.7% y/y) and reversed the prior month’s gain. In the Midwest, sales eased 0.8% to 1.300 million (+6.0% y/y) after September’s 2.3% rise.

During September, the composite index of home affordability rose 3.5% to 163.5 (-2.9% y/y). Payments as a percent of income eased m/m to 15.3% but were up from the low of 11.7% in January 2013.

The inventory of unsold homes declined 4.5% y/y to 2.140 million. The 4.8 months’ supply of homes on the market remained down from the 11.9 month high in July 2010.

Domestic Demand Led German Economic Growth in Third Quarter

German domestic demand increased 0.7 percent in the three months through September, according to data released Tuesday from the Federal Statistics Office in Wiesbaden. Imports jumped 1.1 percent, while exports rose just 0.2 percent and capital investment shrank by 0.3 percent. The economy expanded 0.3 percent, matching a Nov. 13 estimate.

Government expenditure expanded 1.3 percent last quarter, the fastest rate since the start of 2009, and private spending increased 0.6 percent. The figure for exports was the weakest in almost three years.

Domestic demand added 0.7 percentage point to growth, while net trade stripped out 0.4 percentage point. Inventories added 0.2 percentage point. (…)

Japan to raise minimum wage by 3% to boost consumption

Japan will raise the minimum wage by 3 per cent each year from next fiscal year as part of a package of policies aimed at strengthening consumer spending and stoking economic growth.

The government will also strengthen policies to get more women into the work force and ease regulations to encourage corporate investment and breathe new life into an economy that has struggled with patchy domestic demand. (…)

The national average of Japan’s minimum wage was 780 yen ($6.36 U.S.) per hour last fiscal year, so a 3 per cent increase would still not buy more than a bowl of ramen noodles – an illustration of the difficulty policy makers face in boosting consumption.

Abe told cabinet ministers he eventually wants to raise the weighted national average minimum wage to 1,000 yen per hour. (…)

Energy Downturn Spreads Beyond the Oil Patch The prolonged slump in crude prices is rippling beyond the oil industry into areas of the North American economy that, until recently, had managed to avoid the worst of the downturn.

(…) Signs of that distress are spreading throughout once-booming oil-producing regions across North America. Sales of single-family homes in Houston fell 10% on the year in October, the first double-digit decline this year, according to the local association of real-estate agents. Restaurants in Texas and the Southwest have experienced a drop in revenue and customer traffic, industry tracker Black Box Intelligence said in a recent report. (…)

The gloom is deepest in and around pockets of the industry where costs are highest: shale oil, oil sands and the offshore Arctic. Tapping those fields made sense when oil was $100 a barrel, but less so below $50. From plunging car sales in Calgary, Alberta, to higher hotel-room vacancies in Williston, N.D., and weakening restaurant traffic in Texas, the ripple effects of the downturn are spreading.

North Dakota earlier this month said output from the Bakken Shale, once one of the hottest growth areas in the industry, marked the first year-over-year decline since 2004 in September. That came as some producers gave up on the Bakken, where profit margins are thin due to higher production and transportation costs than many other oil-producing areas. (…)

October home sales in Calgary, the headquarters of many Canadian oil and gas companies, fell by a third on the year, according to the Calgary Real Estate Board. September sales of new vehicles in Alberta fell 13% on the year to 23,142 units, according to Canada’s statistics agency.

Hedge funds’ oil shorts reach 2015 peak Bets on further pressure on crude build ahead of Opec meeting

SHARE BUYBACKS

Pace of Stock Buybacks Stirs a Debate

Corporate stock buybacks are climbing toward a post-financial-crisis high this year, furthering the debate about the use of hundreds of billions of dollars in company cash to enhance quarterly earnings reports.

Stock repurchases boost earnings per share, even if total earnings don’t change, by reducing the number of shares. Analysts and investors typically track per-share earnings, not overall earnings. (…)

This WSJ piece is timely as James wrote me yesterday “curious to hear how all these share buybacks have distorted the EPS growth numbers.”

This is a more significant matter at specific company levels than at the overall Index level. S&P calculates that 68% of the S&P 500 companies have lower share counts in Q3’15 than in Q3’14 and 22.5% have 4% fewer shares. On the other hand, 9% have 4% more shares YoY.

Keep in mind that many buybacks seek to offset dilution from options exercise. Also, share buybacks have the effect of increasing losses per share when companies are losing money (e.g. energy companies currently).

• S&P 500 Profits Fall $25 Billion in First Three Quarters of 2015

The facts are that, in total, there are currently 0.8% fewer shares in the S&P divisor than there were last year. This is up from –0.5% in Q2. On a trailing 12-month basis, the share count has not declined by more than 1.5% YoY during this bull market. The TTM share count peaked in September 2011 and has declined a grand total of 2.9% since then. Interestingly, the TTM share count troughed in March 2009 and is now 1.5% higher than at the start of this bull market.

In reality, share buybacks do not have a meaningful impact on aggregate EPS.

Insiders sending an ominous market signal

Corporate insiders have been dumping shares at the highest pace in 4½ years, according to market data firm TrimTabs. The selling averaged $450 million a day in November, the highest since May 2011. (…)