Posts filed under “Think Tank”

RSI in the NDX, highest since Jan 2000

With another run today higher, the 14 day RSI (relative strength index) in the NDX is now at the highest level since Jan 2000. Momentum such as this that brings us overbought can keep us overbought for a continued period of time so it’s never a one stop timing measurement but it at least brings us some perspective on the strength of the rally. The RSI in the SPX is at the highest level since May ’07.

Category: MacroNotes

Has the housing market hit bottom?

Tim Iacono is a retired software engineer and writes the financial blog “The Mess That Greenspan Made” which chronicles the many and varied after-effects of the Greenspan term at the Federal Reserve. Tim is also the founder of the investment website “Iacono Research” that provides weekly updates to subscribers on the economy, natural resources, and financial markets.

Today, he looks at the question of whether the Housing market has bottomed or not  yet . . .


Now that a number of recent housing reports are generating some incredibly positive headlines and the global economy appears to be slowly digging its way out of an enormous hole that was created last fall when the world nearly came to an end, the burning question on the minds of millions of people is … Has the housing market hit bottom?

There is no shortage of answers.

Unfortunately, most of them are far too simple and, in most cases, the individual or organization providing the answer has a bias of some sort.

I’m no exception.

We sold our house about five years ago and have been renting ever since.

We plan to buy again, but not until at least next year and we hope to get a lot more house for our money than we could today.

That’s the soonest that I think the bottom in home prices is likely to occur around here in the price range we’re looking, though a bottom in home sales may already be behind us, and this is what makes the recent discussion of a housing bottom so complicated – “hitting bottom” means different things to different people living in different parts of the country.

The discourse on this subject is full of misinformation and deception from parties with vested interests that will inevitably lead people to make horrendously bad decisions that they’ll regret in another year or two while others may postpone decisions that would be best made today.

With my biases out of the way, a few thoughts on a housing market bottom are offered here. In this article, regional differences will largely be set aside and the focus will be on three sets of national housing data – new home sales, existing home sales, and existing home prices.

New Home Sales Have Bottomed

First, let’s look at the home building industry, which, up until a couple years ago had accounted for about 10 to 15 percent of all home sales. Then, the homebuilders’ share gradually sank to about half that amount as waves of foreclosures started hitting the market at much lower prices, cutting into their business dramatically.

Ironically, many of these foreclosure sales were homes that the builders had built and sold a couple years prior. Disgruntled home buyers who, in 2006 and 2007, complained about how builders were slashing prices on Phase III after they bought in Phase II ultimately had the last laugh in 2008 and 2009 when they walked away from their almost-brand-new home and the bank sold it at a 40 percent discount to the going prices for Phase III.

Don’t feel too sorry for the homebuilders – they had a few very good years.

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Category: Real Estate, Think Tank

claims data

Initial Jobless Claims totaled 584k, 9k higher than expected and the prior week was revised up by 5k to 559k. This should be the first clean number in weeks where it’s not influenced by the seasonal distortions that was brought by the differing time schedules of auto plant shutdowns. The insured unemployment rate was unchanged…Read More

Category: MacroNotes

That was a short correction

After a 5% drubbing, the Shanghai index bounced back 1.7% as the PBOC quelled concerns that monetary policy would change much. Good earnings reports in Japan also helped to lift spirits. European stocks rallied after the July Euro Zone economic confidence # rose almost 3 points from June and was 1 point more than estimated….Read More

Category: MacroNotes

Settling For Less in the New Normal

Good Evening: Just as they have during 9 of the past 10 sessions, U.S. stocks suffered a setback in the morning, only to rally late in the day. Unlike so many recent sessions, however, all the major averages remained in the red as the closing bell rang on Wednesday. A sell off in China, some…Read More

Category: Markets, Think Tank

Being in the Sweet Spot (twice)

David R. Kotok co-founded Cumberland Advisors in 1973 and has been its Chief Investment Officer since inception. He holds a B.S. in Economics from The Wharton School of the University of Pennsylvania, an M.S. in Organizational Dynamics from The School of Arts and Sciences at the University of Pennsylvania, and a Masters in Philosophy from the University of Pennsylvania. Mr. Kotok’s articles and financial market commentary have appeared in The New York Times, The Wall Street Journal, Barron’s, and other publications. He is a frequent contributor to CNBC programs. Mr. Kotok is also a member of the National Business Economics Issues Council (NBEIC), the National Association for Business Economics (NABE), the Philadelphia Council for Business Economics (PCBE), and the Philadelphia Financial Economists Group (PFEG).


Being in the Sweet Spot (twice)
July 29, 2009

At the moment we are in the “sweet spot” in markets and soon, in Maine. We must enjoy it while it lasts. Some bullets follow.

1. Fed policy is on hold at Quantitative Easing (QE), which means short-term interest rates near zero and plenty of liquidity in the financial system. The Fed has said it will continue this posture for a period of time. Markets do not expect any change until well in to 2010 at the earliest.

2. The much-feared Obama healthcare initiative seems to be stalled. Markets are relieved, because this initiative, as it was presented, amounted to a huge transfer payment that would be funded by future tax increases. The tax hikes would come on top of those already discounted by markets. Lifting the double tax whammy has given stocks a boost.

3. Foreigners are buying US Treasury securities again, and that has quieted the fearmongers who have been crying that the US will be abandoned and the dollar will face a crisis. That may still occur, but the day of reckoning for our fiscal profligacy seems to be postponed. Markets like dodging this bullet.

4. Markets have not priced in any risk premium on the Bernanke-stays or Bernanke-goes debate. Markets are also not pricing any risk premium on how and when the Fed will exit the QE strategy. Right or wrong, markets are now powered higher by bullish momentum coupled with positive economic signs. The Fed and other central banks in the world are on hold. Markets like stasis and have it for the time being.

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Category: Think Tank

China hiccups

After an amazing 100% run from the early Nov ’08 lows, the Shanghai index took its biggest one day hit since the rally began, by 5%. There is talk that the Chinese may raise bank reserve requirements and the stamp duty tax on stock executions to prevent overheating in the economy. To quantify, new Yuan…Read More

Category: MacroNotes

Wall Street’s Script: Should We Follow It?

Good Evening: Yet another afternoon rally after morning weakness allowed the major U.S. stock market averages to finish mixed today. Some earnings misses, along with some so-so economic data set the tone in the early going, but enough buyers showed up by day’s end to turn 1% losses into gains for both the NASDAQ and…Read More

Category: Markets, Think Tank

The Simple Math of Chinese Staggering growth

Chinese non-export economy grew 23% in June! Before you start googling for that number, let me warn you. You won’t find it. I’ve computed it using fifth grade math. Here is what we know: exports constitute about 35% of the Chinese economy and they dropped over 20% in June, while the Chinese economy (GDP) grew 8%. So…Read More

Category: Markets, Think Tank

Fed member Yellen

Fed member Yellen in a speech on the US economy is covering all her bases. In the first part of the speech she is optimistic that growth will resume sometime this year due to an improvement in the capital markets, signs of stabilization in housing and consumer spending, a slowing rate of contraction in job…Read More

Category: MacroNotes