SoCalsurfbum

Pending Home Sales Up: Does That Mean Anything?

"Pending Home Sales Index, based on contracts signed in March, rose 3.2 percent"...

The more I see stuff like this, the more I realize the market is not paying attention and takes everything at face value.

This is a bogus number. Of course pending home sales are higher in March than in February... this has happened since housing records have been kept... it is called seasonality.

Let me make a prediction and I would love to bet anyone on this, April pendings will be higher than March. Dec.-Feb. are the slowest sales months every year, March picks up a bit... April is when the spring selling season really gets ramped up and lasts through July, then slowly falls off.

Seasonality doesn't make a housing recovery. By the way the real number is a 1.1% increase in pendings vs. 2008 and as was mentioned earlier, a pending does not mean a closing.

Back when the market was good, our close rate on pendings was about 75-85%... I can only imagine how many pendings will fall through in this market. Between difficult financing conditions, required down payments, getting short sale approvals and the inability to unload the old house at an acceptable price (which is probably the largest impediment) will make for either very long escrows or sales that just don't close.

What is happening now is not what a market bottom in housing looks like. People have a very short memory when it comes to history.

Existing Home Sales: Sign of a Thaw?

Bottoms and "Thaws" in housing don't occur like the stock market because they don't trade and react to stock market type pressures. It is a long process with signals that lag months.

Calling this a "positive sign" because you have sales data for one of the slowest sales months of the year is ridiculous. You need months in a row of actual data to make a trend before anyone has any credibility when saying things are beginning to thaw.

You point to Calculated Risk, and then don't draw the conclusion they spell out for you. February sales are down YoY from last year in every market except the West.

Overall, sales are down -10%... Northeast -20%... Midwest -18%... South -16%... West +24 (off of a really low 2007). If you combine both January and February sales, the total is -9% lower YTD than 2008. Where is the thaw?

One last thing. If you use "seasonally adjusted annual rates" (SAAR) to draw any conclusion from sales data... you are obviously a complete amateur at this real estate game. Please, do yourself a favor and learn why comparing month-to-month SAAR performance is analytically useless.

Let me give you a hint… There was a 560,000 unit variance between the High SAAR and Low SAAR announced monthly in 2008… or 11.4% of the FY actual (aka not statistically predictive of anything). If SAAR increases month-over-month (like the press release just announced) and the YoY monthly actual declines (-10% but this wasn’t in the press release)… this means that February fell “less fast” than January, but it still fell. Of course all of this is predicated on how confident you are in the “% of total year sales” value they assign to any given month as well. Useless.

As Mortgage Rates Plunge, 30 Year Fixed Rate of 3.5% Seems Likely

3.5%?

Who cares when your equity is dropping at 10% a year. Home prices are still readjusting... you are still losing money. And when interest rates go up down the road as 'yellowhoard' mentions, you will have to drop the price of your house even more to compensate.

Goldman and Morgan Stanley: Banks of Choice - Barron's

Both their Level 2 and 3 assets are huge vs Equity where small losses wipe it out... both are still highly leveraged which they need to unwind (because they are now banks) in bad markets. And are they holding anything off balance sheet? You don't know.

GS has huge exposure to AIG (AIG just released a presentatin on this)... they changed business models to get access to government support (seems more desperate than strategic)... Banking is much less profitable than their old business. Combine that with how new and immature their banking business is and I wouldn't be too confident in their stock.

But besides that Mrs. Lincoln, how was the play?

Is It a Bear Market Rally, or Something More?

"...[I]t is day 19 in the “selling stampede” and such stampedes rarely go more than 25 sessions before exhausting themselves on the downside."

One of the dumbest sentences I've ever read from an analyst, and I've seen some doozys. Statements like this remind me that if stock analysts knew even a little about what they write about... they wouldn't be an analyst. They would be printing money as a trader.

This reminds me of a guy at a roulette table looking at the screen where 8 reds hit in a row and is thinking to himself "Black is due".

My question is why did he pick 25? Why not 100 and up his chances of being right. Every day is a 50-50 chance of being right. Please be the bottom, Please be the bottom... {holding breathe}

Which Is the Best Home Price Index?

Just a quick note:

OFHEO information comes from Fannie / Freddie and because of this it only tracks homes that are within it's "conforming loan" limit... which was up until a little while ago only $400k+.

This basically eliminates a lot of California, New York and several other important markets whose median price is well above that limit. This could be part of the variance you see...

"Look at your data"... agreed. I would add to that know exactly how that data is captured and analyzed.

Four Key Points from Visa's FQ109 Conference Call

Just because every one agrees with you on how great the Visa business model is does not mean it is a good investment. Everyone gets it...

But at the current price, get real. Visa is a mature business in a well developed market, yet current pricing is assuming they will increase the size of the company by 4-5 times (which is what they will need to do to justify this price). Looks like Google at $700 to me.

Their big growth push is in $3 transactions? You need 10 of these to match one $30 purchase. How much of a boost can this possibly give to earnings? Their marketing costs vs. earnings on these low-end transactions can not be anywhere as profitable as their traditional business.

Will 2009 Be the Year of the Bull for Shippers?

Your 3 paragraph commentary tells me you don't understand the industry and are just dipping your toe in... let me give you a hint... your evidence is wrong.

Shipping is driven by only 2 factors. 1) capacity utilization and 2) freight rates. That is it.

Right now there is a glut of capacity that cannot be fully utilized in the coming years so capacity utilization of the ships is way down. By the way they are reporting that 7% of global capacity has been anchored so far, which the companies you want to buy still have to pay for (un-utilized capacity)... and there still is too much capacity. And this over-capacity leads to severly depressed freight rates.

Good luck with your speculative play.

Peter Schiff Answers His Critics

Is Peter Schiff a religious figure now?! The way some of these comments carry on...

People that defend him so vehemently need to examine themselves. He is another self promoting talking head that spends time writing and promoting books, making appearances, and responding to bloggers. If my financial advisor did any of these, he is obviously not spending enough time paying attention to my account. And this is proven out by the negative returns even he admits to in the accounts he is responsible for.

If he had any foresight, like he claims, he would have had gains this year... since he claims he saw everything happening before volitility spiked in May. Some nice Puts on financials, bond purchases, hell even cash since he "saw the crash"... If he really saw it coming, this would have been the easiest year ever to make money and beat the indices... I know good managers that did. It is people that went along with Wall Street groupthink that got burned.

I made money this year and I am not even a professional... the difference is I don't claim I can see the future.

And on his supposed "hits"... financials, housing, gold... way to go captain obvious. Those were really bold choices. But wait, If you knew those were going to be hit... how come your clients lost money!???

Housing Crisis: 'Positive Spin' or Simply 'Misinformation?'

"The whole idea of a professional press is to provide the kind of trained, experienced, unbiased information (via reporting, research, corroboration and editing) people must have to make their own informed decisions."

This is a little naive. Media is a business... and at the time, the real estate / home loan sectors were the largest advertisers in the country. I personally saw a real estate company threaten to pull millions of dollars of advertising from the LA Times when they published an article suggesting that homes could drop in value.

It is impossible to remove this bias, which has always been in the media since the first paper came off the presses or TV broadcast went over the air. Their bias is tilted towards their advertisers.

Of course we could make it non-profit / governement funded to get the bias out of the news... oh wait, we already have NPR... no bias there, right? By the way NPR didn't report negatively on the coming market situation either.

... and is it really shocking to you that PR and industry sponsored hacks put misinformation out there? *Gasp*...

Existing Home Sales Rebound

Tim,

I just want to note that the Seasonally Adjusted Annual Rate is a distorted and misleading metric... and it is used because the NAR can issue a press release every other month calling a bottom in housing market by showing "improving" sales, even when sales go down.

The real number is in their press release... home sales went down 3.5% in December vs last year using the real accurate way to adjust for seasonality... YoY.

So the picture is actually bleaker... falling prices and unit volume is still dropping.

By the way... if they were really attempting to be consistent, they would seasonally adjust the Inventory number as well since housing inventory fluctuates seasonally just like home sales.

Scary Foreclosure Numbers, Scarier Prospects

$49 mm to help Riverside County, CA!?!?!!!

Talk about a drop in the bucket... That will allow them to buy 200 homes at $250k a piece (below the current market price)... those 200 are a fraction of what is available and many more homes for sale will be coming on the market real soon...

What a waste of money...

Reasons to Bail Out GM

Why give $25 billion to 2 companies whose combine market cap is $6 billion. Buy them both outright... then you can hand it over to people that might have a better chance of turning it around, like a PE model... and break the union albatross while you are at it.

All of the guys running the companies now were running it 8 years ago when they had a lot more money and a mandate to change and you can see what they did with it.

Buy it and clean out the C-suite. Float it for a couple years then flip it.

Digging into Shipping

Shabba,

You are missing the bigger picture. Ships are expensive capital intensive machines that require a certain utilization rate and pricing in order to cover their "mortgage" with positive cash flow. If they don't get the capacity utilization or pricing, the companies start burning equity at a very rapid rate. Having a ship sitting idle exacerbates this problem. Combine that with the massive amount of new capacity that has come online and is coming, while demand is dropping... and you have a lot of shipping companies with negative cash flow from operations.

I would wait and see who buys the ships when shipping lines go bankrupt (as they always do in these cycles) and buy their stock then. These lines have about as much transparency as Lehman Bros. but with a lot higher fixed costs.

By the way, the fact that they need the cash flow to try to cover some of their loan payments/cash flow problem is why you know that what Forbes rumor about ships being anchored intentionally is wrong. That would be very counter-productive for the companies.

Are Analysts Being Fooled By The Data?

Don't believe all of the rumors you read in blogs...

whoever wrote that line "I heard from a friend who heard from his father"... understands Letters of Credit as much as Sarah Palin understands Fannie Mae...

A Letter of Credit is, in it's most simple explanation, an escrow account for international transactions so that money isn't released until an order is fulfilled correctly. Banks would always accept them because it means money will be deposited in their accounts.

If this guy is talking about short term funding for his vessels, he is probably referring to his "Line of Credit" from the bank... which is completely different.

If the line of credit is what they are talking about then the Baltic Dry index is actually more of an indicator than you think... if he can't sail, there is less capacity and shipping costs should go up... but that isn't happening.

Yank... if you can't trust the US gov't statistics (which you shouldn't), why do you believe you can trust the Chinese gov'ts economic statistics? The very fact that China is doing a major economic stimulus proves that they are not hitting the 10% GDP number... which are you going to believe, government statistics or your eyes?