Edge and Odds

The enemy of knowledge is not ignorance, it’s the illusion of knowledge (Stephen Hawking)

It ain’t what you don’t know that gets you into trouble. It’s what you know for sure that just ain’t so (Mark Twain)

Edge and Odds

Invest with smart knowledge and objective odds

THE DAILY EDGE (23 November 2016)

Call me Did you miss STORY TIME! ? Some readers’ comments:

  • Today’s post “Story Time” was excellent. I’m not sure how you find time to gather and process all this information, but you organize and present your thoughts in a unique and thoughtful manner. Thank you for all you do. (Robert K.)
  • Denis: I know of no source (and I’ve been reading a lot lately) that has put the Trump ‘revolution’ on top of the last twenty years of ever growing debt mismanagement and various leverages tucked away in so many places as you have done this week. (John D.)
U.S. Existing-Home Sales Highest Since February 2007 Homebuying activity rose in October for the second straight month to a new cyclical high despite rising prices and shrinking inventory, a sign housing demand remains buoyant as the year comes to a close.

October’s sales of previously owned homes rose 2.0% over the month to a seasonally adjusted annual rate of 5.60 million, the National Association of Realtors said Tuesday, the strongest pace since February 2007. Sales of previously owned homes in October were up 5.9% from a year earlier. (…)

After hitting an annual rate of 5.57 million in June, sales softened over most of the third quarter before picking up over the past two months. September’s sales pace was revised up slightly to 5.49 million. (…)

The median price of an existing home sold in October was $232,200 up 6.0% on the year. Still, people seemed eager to pony up. First-time home buyers accounted for 33% of October sales, according to NAR, down from 34% in September, a figure that matched the highest level since July 2012. (…)

The total inventory of homes on the market declined 4.3% YoY to 2.020 million.

Are we near a cyclical peak? Recall that the 2004-07 extravaganza was just that. Doug Short’s chart shows that sales of existing homes are where they were before the 2001 recession.

Existing Home Sales

On the other hand, Doug digs a bit further to provide hope of a longer lasting cycle:

The Census Bureau’s mid-month population estimates show a 16.9% increase in the US population since the turn of the century. The snapshot below is an overlay of the NAR’s annualized estimates with a population-adjusted version.

Existing Home Sales Growth

But here’s the rub from The Daily Shot:

(…) mortgage applications have been declining according to Mortgage Bankers Association (MBA). Something looks off here.

Source: @ANZ_Research

And this from CalculatedRisk, a downturn likely to be exacerbated by rising mortgage rates:

Surprised smile Dallas on Verge of Bankruptcy Due to Pensions; Just a Matter of Time (For Dallas, Houston, LA, Oakland, Chicago, etc)

Meanwhile, risk on!

here is the S&P High Beta Index vs. the S&P Low Vol Index. It’s “risk-on” time.

 

The First Thanksgiving?

Is it racist?

Trump Tempers Views but Defies Standards In an interview with The Times, President-elect Trump offered the Clintons an olive branch and disavowed the alt-right, but said he had no legal obligation to step away from his business empire.

(…) The interview demonstrated the volatility in Mr. Trump’s positions. (…)

But nothing meaningful financially.

Mug Happy Thanksgiving!

EUROZONE FLASH PMI SIGNALS STRONG, BROAD GROWTH

The pace of economic growth in the eurozone accelerated to the fastest so far this year in November. Rising order books meanwhile prompted firms to take on extra staff at the joint fastest rate since early-2008, and prices charged inched higher, indicating that inflationary pressures are at their highest for over five years.

The preliminary ‘flash’ Markit Eurozone PMI, based on approximately 85% of final survey replies, rose to 54.1, up from 53.3 in October. The latest reading signalled the strongest monthly increase in output since last December. Identical rates of expansion were seen across both the manufacturing and service sectors, with the latter seeing the best expansion for 11 months. Although manufacturing output growth eased slightly, the rise was still the second-largest in 2016 so far.

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New order inflows also showed the largest monthly improvement since last December, with the rate of growth accelerating for the third month running. The influx of new work helped cause backlogs of uncompleted orders to rise at the fastest rate since May 2011.

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With firms’ outstanding order book volumes accumulating to the greatest extent in five-and-a-half years, companies took on more staff to help raise operating capacity. Employment growth strengthened for the second month running to reach the joint-highest pace since February 2008.

Average prices charged by companies for their goods and services meanwhile rose for the first time since August of last year, led by price rises in the manufacturing sector. Furthermore, although only marginal, the price increase was all the more notable for being the largest since August 2011.

Increased prices commonly reflected the need to pass higher costs on to customers to protect margins. Average input costs showed the largest monthly rise for one-and-a-half years. In manufacturing, the rise in input costs was the sharpest for over four-and-a-half years.

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Germany saw another strong performance, with the rate of business activity growth dipping slightly but remaining well above the recent low seen in September. German service providers reported the fastest expansion since May, but growth slowed in manufacturing, albeit remaining robust thanks largely to improved export sales.

Growth meanwhile picked up in France to show the second-best expansion over the past year, with both new orders and employment showing the largest gains for almost one-and-a-half years. Services led the expansion, though manufacturing also continued to improve on the back of rising exports.

Elsewhere in the eurozone, growth of business activity accelerated markedly to a ten-month high, with new orders and employment likewise recording stronger rates of increase.

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Chris Williamson, Chief Business Economist at IHS Markit:

The PMI readings so far for the fourth quarter point to GDP expanding 0.4%, led by a rebound in German growth to 0.5%. France is also seen to be enjoying its best spell since the start of the year, with the PMIs signalling GDP growth of 0.2-0.3% in the fourth quarter. (…)