Stocks have been a little dicey this week with the tech and energy sectors
falling while the rest tread water. Tech stocks look overvalued and energy
stocks fell with the price of oil. So far, stocks are ignoring oil’s
bear market, declared Bloomberg, June 23, 2017.
yield curve continues to flatten with long-term yields dropping further to new 2017 lows. The Fed’s recent rate hikes haven’t worked out so well, but the financial markets haven’t broken and we’re not in a recession… yet, submits Lance Gaitan, Dent Research, June 23, 2017.
Thanks to Dent Research, provided here is our weekly information roundup ending the week of June 23, 2017. We start each subject with what you hear in the news and finish with what that information means to you. We hope this information will help you separate the noise from the news.
Housing Starts Down 5.5% Last Month… The big drop was in multi-family housing, where starts dropped 9.7%, but single-family units also slid 3.9%.
What it means – Housing starts are the deal, as they indicate the ebb and flow of construction employment. Single-family homes take more labor than multi-family, so when this sector falls, it’s notable. Even worse than the numbers for last month, housing starts in the second quarter are down 9.2% compared to those in the first quarter, and permits are off 4.9%. This won’t add a lot of jobs to the economy in the months to come.
Existing Home Sales Up 1.1% in May… Single-family and multi-family sales both rose, reversing the recent slide in home sales.
What it means – After several dismal data points, real estate finally caught a break. This report showed strength almost across the board, with only the Midwest region posting another decline. But the slight gain over April and the modest 2.7% growth over last year isn’t much to write home about. Sales remain steady, and prices are firm, but there’s no sign of a housing boom on the horizon.
It’s interesting that high prices and low inventory aren’t driving more home building, but that’s been the story of this market for years. It looks like caution is still the word of the day.
New Home Sales Also Show Strength in May, Up 2.9%... The gain reversed part of the 8% drop last month.
What it means – New home sales are 8.9% higher than this time last year, but more importantly, the median sale price is 16.8% higher. It’s hard to reconcile this report with housing starts above. If builders can sell more units at higher prices, then why aren’t they building more homes?
Several years ago, builders claimed they couldn’t get enough workers. That made sense, for a while. But now it’s an old storyline. Pay more and you’ll attract more workers. Or maybe that’s what builders want – a constrained market that keeps prices inflated.
Argentina Sells $2.75 Billion “Century” Bonds… The bonds mature in 100 years, and pay 7.9% interest.
What it means – Well, the country has declared bankruptcy six times in 100 years, and just settled with creditors last year. So why not sell bonds that mature in a century? What could possibly go wrong?
Of course, the reason they got away with it, err, were able to sell them, is because of the yield. There aren’t many, if any, government bonds on the market that pay almost 8%. But there are thousands of investors – think of the state of Illinois pensions, among others – that must earn 8% to remain solvent. For them, such a bond is a lifeline, even if it is an illusion.
Investors that take the bait will wind up like those that bought Puerto Rico bonds in 2014. They’ll be stuck arguing their case in court and settling for pennies on the dollar.
I’d recommend that you stay away, but chances are you’re already involved. Maybe not personally, but through a fund or a pension system. You might not have a pension from Illinois or your home state, but you certainly have to support it. If the pension loses money on an investment like this, you’re on the hook. With 60% of the issue sold to U.S. investors, chances are some of these bonds are lurking in lots of portfolios.
Amazon Announced a Deal to Buy Whole Foods… The e-commerce giant intends to buy the upscale food retailer for just over $42 per share.
What it means – If you sell food, you should be scared. Who knows. It could end up like the Amazon Fire phone (remember that?) and fizzle. Or, it could be that Amazon just figured out how to automate the last mile of food delivery – buy 450 physical locations in upscale neighborhoods around the country. Grocery stores took a hit when the news was announced.
It will be interesting to see how it works. Amazon is known for a cutthroat work environment where automation and efficiency is the key. Whole Foods focuses on customer experience and employee relations. It might not be any fun getting the two companies together… but at least I think I’ll pay less for groceries.
Randolph Bar in Brooklyn Installed Beer ATMs… The pub has a full bar, but also allows customers to use a card to self-serve at a wall of taps.
What it means – Best. Idea. Ever. It used to be that bars had five or six beer choices, and two of them were light beers so they didn’t count. Now bars have beer menus. Who really knows what they all taste like? This approach allows customers to pour between one and 12 ounces, so they can sample as much as they like. But it comes with a fabulous side benefit – it removes the wait staff. Now you don’t have to wait for a bartender or waitress to either take your order or return with your cold brew, and you don’t have to tip them. It’s deflation in the beer market!
Next Week – The last week of June brings reports on durable goods orders and the S&P CoreLogic Case-Shiller Home Price Index.
The proof is in the planning.
200 N. Westlake Blvd., Suite 109
Westlake Village, California 91362-3783
805.495.2077 800.266.2077 888.WHY.BEPOOR
The information presented here has been provided by HS Dent. HS Dent is an economic research company that uses various techniques to study the potential impact of various changes in demographic trends in our economy. No one person or strategy can accurately predict market movements. Certain statements contained within are forward-looking statements including, but not limited to, statements that are predictions of or indicate future events, trends, plans or objectives. Undue reliance should not be place on such statements because, by their nature, they are subject to known and unknown risks and uncertainties.
The opinions in this article are for general information only. They are not intended to provide specific advice or recommendations for any individual and do not constitute an endorsement by NPC. To determine which investments may be appropriate for you, consult with your financial professional. Please remember that investment decisions should be based on an individual’s goals, time horizon, and tolerance for risk.
Indices are unmanaged measures of market condition. It is not possible to invest directly into an index. Past performance is no guarantee of future results. In general the bond market is volatile, and fixed income securities carry interest rate risk. (As interest rates rise, bond prices usually fall, and vice versa. This effect is usually more pronounced for longer-term securities.) Fixed income securities also carry inflation risk and credit and default risks. Any fixed income security sold or redeemed prior to maturity may be subject to a substantial gain or loss.
Securities and advisory services offered through National Planning Corporation (NPC), Member
FINRA/SIPC, a Registered Investment Adviser. Investor