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HomeHow Do We Track Housing?
Posted by Larry Doyle on March 12th, 2009 7:07 AM |
At the core of most, if not all, of our economic problems lies housing. I do not need to replay the tape of low rates, shoddy underwriting, and Wall Street securitizations that all played a dramatic role in creating a bubble the likes of which we have never seen and hopefully never will again. All that said, housing is an enormous market with a wide array of factors impacting it. How does one track it? Are we supposed to rely on our local brokers telling us things feel better? Should we ask contractors if they are bidding on jobs? Dare we rely on our local or national media outlets to provide their expertise and pandering? If we did, housing may have bottomed 14 different times in the last 10 months. In all seriousness, how can we track housing? Welcome to Sense on Cents.
There are two indexes that have developed over the last few years and are enormously respected by market participants. One index, the S&P/Case-Shiller Home Price Indexes, is released on a monthly basis. This index tracks a variety of regions in the country but not every region. Still, all things considered, this index is widely watched as a reliable indicator of health in housing. The index is typically released toward the end of each month. The most recently released report was on February 24th, A Look at Case-Shiller Numbers, by Metro Area. In this report, all indications are that housing has yet to see any support. (more…)
See Me in My Office
Posted by Larry Doyle on March 11th, 2009 7:29 PM |
What student in high school, college, or graduate school does not dread hearing his teacher or professor remark, “young man, see me in my office!” Good news is typically shared in an open forum even if in private discussion. Breaking out the ruler is often reserved for “the office.”
Picture this, as young Barack Obama and Timmy Geithner go in to meet their professor, Mr. Wall Street Economist.
“You wanted to see us, sir?”
“Yes. Even though it’s early in the marking period, I need to speak with both of you about your performance. I detect some issues.”
“Well, just what do you mean, sir? We’re trying hard. We’re working at grasping the material.”
“It strikes me, gentlemen, that you are not fully focused, you are stuck more on appearance than substance, you are quite glib at times, and have an interest more in being liked than in being comprehensive. Those are not the building blocks for long term success!!”
Taken fully aback, the gentlemen lean forward and apprise the professor, “Change is coming. Don’t worry, you will see a rededication and resulting redistribution in our performance. We have become friendly with some previous students who have offered to help us: Nancy, Harry, Hillary, Steny, Chris, and a few other all have reached out. We’ll speak with them. Maybe we can borrow their notes! We’re not going back, we’re moving forward. Change!!”
The professor responds, “I hope so, but I have always thought blind hope is a lousy hedge. We’ll see!!”
If only Barack and Tim were merely going through school and had the luxury of learning on the job; however, in real life Obama, Geithner Get Low Grades From Economists.
LD
Where Can I Put My Money?
Posted by Larry Doyle on March 11th, 2009 5:06 PM |
With stock markets down 15-20% on the year and 50% over the last 14 months, everybody in the market is asking the same question, “where can I put my money?” While many asset managers are touting the equity markets as a great buy at these levels, cooler and calmer heads are stating that the economy and markets are likely to have a slow recovery. The question screams where to put one’s money to earn more than the pittance offered in bank checking and savings accounts.
I read a very informative piece in today’s WSJ, Locking In Returns You Like. First off, this piece is very user friendly. It provides a wealth of information and links to websites which will provide good market insight.
Over and above referencing some quality products (GNMAs, TIPS, municipals), it also broaches the topic of laddering which I believe is a very valuable technique in building a bond portfolio.
Additionally, the article highlights FPA New Income Fund which is managed by one of our Economic All-Stars Bob Rodriguez. (I have no professional relationship with anybody on this site!!)
I think you will find this article a very valuable resource and I would recommend putting it in the “save” column for future reference. As you review the products highlighted and topics broached, please do not hesitate to ask anything you may not fully understand.
LD
Libor Creeping Higher
Posted by Larry Doyle on March 11th, 2009 5:45 AM |
For those involved in the markets, very often the first rate one checks in the morning is Libor (London Interbank Offered Rate). For those not directly involved in the markets, perhaps tomorrow morning or Thursday you may start your day by asking your partner, “where’s Libor?” In all seriousness, the 1 month and 3 month Libor rates may very well be the most closely watched indicators of market health in the world.
As Libor is the rate at which banks can borrow from each other in the London market, the rate is an indication as to the availability of dollars and the confidence banks have in each other’s credit. Traditionally, Libor tracked the Federal Funds rate (the rate at which banks borrow from the Federal Reserve) very closely. However, on the heels of the failure of Lehman Bros. last September, the confidence banks and investors had in each other plummeted. The relationship between the Fed Funds rate and 3 month Libor blew out. The 3 month Libor rate went as high as 4.7% from just outside 1%. Recall that at that period there was concern about money market funds “breaking the buck” amongst a whole set of other issues. (more…)
Turn That Screw a Little Tighter
Posted by Larry Doyle on March 10th, 2009 6:30 PM |
The screwing that Americans have taken on the development and marketing of the scam known as Auction Rate Preferred Securities (ARPS) continues. I have written at length on how the regulatory body, FINRA, actually owned $650 million in these 
securities at calendar year end 2006. I have persistently questioned how a regulatory body could possibly own a security which was knowingly mismarketed. Was FINRA negligent, complicit, or both? Did FINRA liquidate its position prior to the market imploding on all other owners? While many institutional owners of ARPS have been made whole, many retail clients are still left holding the bag.
Well, the screw that is ARPS just got turned another notch tighter. It turns out that the issuers of ARPS (municipalities, hospitals, colleges and universities, et al) are contractually obligated to pay an ongoing underwriting fee to the Wall Street banks despite the fact that these regularly scheduled auctions no longer occur. (more…)
Keystone Kops
Posted by Larry Doyle on March 9th, 2009 5:40 PM |
On the heels of the Bernie Madoff fiasco, there was massive pressure on the gross incompetence displayed by the SEC. Not unlike a police department that is under fire, the SEC needed a high profile case to gain a measure of vindication. Enter Allen Stanford and Stanford Financial.
I am not here to defend Allen Stanford nor any of the activities that transpired in his offshore bank located in Antigua. However, the SEC also froze the assets of all clients housed in Stanford Financial’s brokerage operation based in Houston. Unlike Bernie Madoff, who did not employ a custodian, the bulk of Stanford Financial’s assets were housed at Pershing Financial, one of the largest custodians in the business. While the concerns revolving around Stanford are in the Caribbean, the SEC’s act of freezing ALL customer accounts has been the death of this brokerage entity. Hundreds of legitimate jobs have been eliminated. Thousands of customers have faced unnecessary and undue financial hardships since February 17th as a result. (more…)
