Posts Tagged ‘realty’
Is the Euro Really a Burro?
Well, it appears the Eurozone is under seige again as Italy and Spain are now in the crosshairs of the debt crisis. Remember when it was all about Greece and their impending default? It now appears that the contagion is snowballing through Europe. The Troll had a beat on this story a couple of months ago (see Greek Mythology). If a stop gap isn’t instituted soon to soak up a lot of the debt exposure (a Central Bank perhaps) the Euro might become……wait for it……a “Burro”. That’s Spanish for Donkey of course and one of the few words that convey negativity while rhyming with Euro. See what the Troll did there? When you think about it the Burro is the perfect animal to symbolize the French. They smell and are quite disagreeable…….He’s here all week folks!
The Troll
Occupy Wall Street
The Occupy Wall Street movement appears to be gaining momentum. Thousands have taken to the streets today with hundreds being arrested. The Troll noted that he was concerned that the European riots would make their way to the U.S. (see Washington State. The Big Layoff). While the Troll agrees that Wall Street should be held accountable for their actions leading to current economic conditions, others should be held accountable as well (U.S. Congress). The 2012 elections will go a long way in shaping the path forward. Hopefully, voters will arm themselves with enough information to choose wisely.
The Troll
Little Trolls go Back to School
Well, the Troll has been in a difficult predicament over the past few days. You see, his little Troll’s are still out of school and they are fierce consumers of the Trolls time when they are not at school. Don’t forget the Troll has 2 jobs (mortgage and real estate broker). One could also consider his soon to be award winning blog a part time gig and you get the idea. Think of the Jamaican Family skit on the old SNL.
We left off last week with the stage set for Bernanke. He took the stage and said nothing new would be implemented in the form of economic stimulus (QE). The door is obviously still open in that regard but as of right now nothing is in the works. Rates remain near all time lows and it is the Trolls humble opinion that they will remain low for the foreseeable future. If Bernanke can’t hold off on another round of QE then interest rates will likely move slightly higher as investors seek better returns in the stock market. If you haven’t taken advantage of the current climate (low rates), give the Troll a call. You might be surprised to find out that he can save you some cash.
The Troll
Mortgage Market Update 8-24
Prior to 8:30 the DJIA futures was down over 100 points
after the strong 322 point rally yesterday.
At 8:30 July durable goods orders, expected up 1.9%,
was reported up 4.0%; excluding the volatile transportation orders durables was
expected down 0.4%, as reported up 0.7%. A very good report that turned the
trade in stock indexes around to trade unchanged at 9:00. Bookings for goods
meant to last at least three years rose the most in four months, after falling
a revised 1.3% in June. The bond and mortgage markets were a little stronger
prior to durables, and then fell back some but still not much change from
yesterday’s levels.
All markets continue to increase focus on Bernanke’s opening
speech Friday at Jackson Hole.
Risk trades coming off in equities and the bond market as well as currency trading. Gold fell $62 yesterday this
morning down again another $42 at 9:00. Will we get another money printing QE? Or
has the Fed recognized it has run out of bullets in terms of increasing
economic growth? Keeping interest rates low is already a given from the Fed
after the statement from the FOMC two weeks ago; so far the historic low long
term interest rates, including mortgage rates, has had no real impact on the
economy. With many believing another easing will occur, maybe Bernanke feels
cornered and has to do something. What he should do is chastise politicians and
the Administration for failing to accept that spending cuts are now mandatory
as well as increased revenues. Not going to happen.
Earlier this morning the weekly MBA mortgage applications were
weaker again.
The purchase index fell steeply for a second week, down 5.7% in the August 19
week and now at its lowest level in 15 years. Low interest rates aren’t helping
with applications falling across the board including a 15% fall for jumbo loans
and an eight percent fall for government housing programs. Low rates had
triggered a surge in refinancing applications which however eased back 1.7% in
the latest week. Rates moved slightly higher in the week with the 30-year up
seven basis points to 4.39%.
At 9:30 the DJIA opened -50, the 10 yr note -3/32 at 2.17%
and mortgage prices up 1/32 (.03 bp) form yesterday’s close.
After the lower open, by 9:45 the DJIA began to improve and interest rate markets backed off
to trade lower in price, the 10 yr note yield at 9:45 at 2.19% +3 bp while
mortgages were down 5/32 (.15 bp). Lenders that priced prior to 9:30 are
watching closely, anymore weakness will set up re-pricing.
Like yesterday, we are not looking for much in the way of
movement, but the very near term bias is slightly negative for the
bond and mortgage markets as long as equity markets don’t crack.
Short covering and positioning ahead of Bernanke on Friday is providing a little support in
equities on the idea another easing from the Fed would drive investors back
into stocks. Frankly, I don’t understand that logic; QE 2 didn’t help, another
easing that will push interest rates lower—so low that investors have little
choice but to buy stocks—-seems like a huge stretch. Low interest rates and
some improvement in stock prices have had no positive impact on the economy.
At 1:00 this afternoon Treasury will auction $35B of 5 yr
notes, yesterday’s 2 yr auction met with good demand, most expect the 5 yr
today will also be well bid.
At 10:00, the June FHFA housing price index, not much of a market
mover, fell 4.3% yr/yr; from May to June +0.9%. No reaction to it as it isn’t
new news.
The Troll
Daily Pfenning 8-23
In This Issue
* Gold sees profit taking as it nears $2,000.
* Currencies take their turn with the dollar.
* Eurozone & China PMI’s beat forecasts.
* Canadian Retail Sales to disappoint.
The trading was all about Gold (and Silver) yesterday again, but it looks like they are finally seeing some profit taking this morning, while the currencies move higher. Hmmm. I had better see what’s up, doc!
Front and Center this morning, Gold and Silver are seeing some profit taking, after Gold climbed as high as $1,897!!! ($1,910 in futures!) I told the boys and girls on the desk yesterday that I truly believed that once Gold moved past $1,900, that it wouldn’t take long for it to get to $2,000, because of all the momentum behind it, and the idea that so many analysts have called for $2,000 Gold of course, I don’t know anything “inside” that would make me think that. It’s simply my opinion, and I could be wrong!
So with Gold & Silver backing off their lofty levels of yesterday afternoon, the currencies have decided to take over. It’s like a tag-team wrestling match, folks. Gold beat on the dollar, until it was tired, tagged the currencies, and now it’s their turn to beat on the dollar. So, as I look at the currency screens this morning, I see that all the currencies that are supposed to show “green numbers” are green, and all the currencies that are supposed to show “red numbers” are red, which means it’s an all out rout on the dollar. You can see that even the currencies of Japan and Switzerland, which rallied alongside the dollar when it was “risk aversion” and flight to safety time, have turned on the dollar, and are rallying beside the other currencies this morning!
The beaten and beleaguered euro is up $1.25 this morning. So, in my conspiracy world, I would think that it’s about time that the U.S. media begins to dig up more dirt on the Eurozone, so as to take the focus away from the U.S.’s problems, that are probably deeper than most realize, and I do believe that this Friday’s speech by Fed Chairman, Big Ben Bernanke, will highlight the need for more stimulus. And that thought is shared by the bond guys, who are selling Treasuries ahead of the speech, because they don’t want to be caught with Treasuries when everyone is heading for the exit door at the same time!
Now, don’t get me wrong. Things are seriously wrong in the Eurozone, this morning, German Economic Sentiment as measured by the think tank ZEW, showed some real rot on the vine folks. The reading of the index number shows us that Economic Sentiment is at its lowest level in 2 1/2 years! The Composite Manufacturing Index (PMI) remained stable above the line in the sand figure of 50 (at 51.1). But when the Services piece is taken out, the actual Manufacturing Index fell to 49.7. That’s not good folks. However, the number was better than the forecasts, so that takes some of the sting out of report.
Speaking of Manufacturing. China printed their manufacturing index (PMI) last night, and improved from July’s number of 49.3 to 49.8. Yes, it’s below “50” but it’s hanging on folks and that’s a bright spot for global growth. Hey, you didn’t expect for China to continue to have guns a-blazin’ while the U.S. and Europe meltdown did you? Yes, China has done a good job of driving domestic demand to offset the loss of exports while the U.S. and Europe meltdown, but, exports are still “king”.
Since China’s Manufacturing report was somewhat better than forecast, and improved on July’s number, the currencies of Australia and New Zealand are booking gains this morning. The Aussie dollar (A$) is back to $1.05, and kiwi has pushed back above 83-cents!
So. It looks like my thought that this weeks’ Jackson Hole meeting was going to be the Big Kahuna for the markets is really taking shape. There are more stories about what the writer believes will happen at Jackson Hole this week, than any other story on the news wires.
Did you see what the S&P Chairman got for downgrading the U.S. credit rating? He got shown the door! Ok, he will step down next month. But don’t you find that just a little interesting? My conspiracy blood is boiling right now. I’m thinking the U.S. Gov’t decided to show the rest of the rating agencies what would happen to their leaders should they follow S&P’s downgrade with a downgrade of their own!
Then there was this. “Fears of a double-dip recession have been eased in Germany after this year’s estimated budget deficit was slashed from 2.5 to 1.5 percent. The German Finance ministry claimed its public finances will be balanced by 2014. Germany appeared to be back on top as Europe’s powerhouse economy on Monday after it announced that it cut this year’s estimated budget deficit from 2.5 percent to 1.5 percent. Monday’s reduction more than halved the 2010 deficit which stood at 3.3 percent. According to a report published by Germany’s Finance Ministry public finances will now be balanced sooner than expected.”
Way to go Germany! See. It can be done civilly and without all the drama, and political theater.
To recap – its tag team time, and Gold and Silver became tired of beating on the dollar, and tagged the currencies to take over. Gold is seeing some profit taking this morning, after getting very close to $1,900 ($1,910 in futures). The risk appetite for the markets is healthier this morning. Europe and China printed PMI’s (manufacturing), and while both printed below the “50” level, both were stronger than forecast. And so with China, the global growth traders were happy.
That’s it for today. I see my beloved Missouri Tigers football team, is ranked number 21 in the preseason poll. Not too shabby considering they lost two top players “early” to the NFL draft that went in the first 10 picks! And with that, I’ll get this out the door, and hope you have a Terrific Tuesday!
Chuck Butler
President
EverBank World Markets