Today’s data: January Existing Home Sales slump to 9 month low.
The street was calling for a month of about 4.95 million annualized and instead it was handed a slightly more modest 4.82 million pace. Say what you will about the housing sector, we will say that it continues to bring mild disappointment and also that it refuses continually the request to be the champion of the next phase of growth in the US economy. That is not to cast aspersions upon its character; it is simply to say that it is something far from the juggernaut it was prior to the Great Recession following the crisis of 2008. On Wednesday we will see the scheduled New Home Sales for January and we would not be surprised to see it not achieve its goal of 0.47 million annualized for the very same reasons we missed the number this morning. In between then and now, tomorrow, we will have the CaseShiller Home Index released and among its variants we prefer the 20 city year-over-year reading as it seems to smooth out the noise best; the consensus is that we will see modest growth here too.
The Big Picture: Ms. Yellen goes to Congress; no one gets paid enough to do that.
There is a profound dishonesty to the process of our FOMC Chair giving testimony to both Houses of Congress when there is literally no one in either House that works for fiscal responsibility that is among their highest responsibilities. Posturing, pontificating and pretending to care from the elected officials; interrupted attempts to reply from the Chair and from it all the markets try to glean something to help them understand the current thoughts of the leader of the Fed. Tomorrow and Wednesday this will go on; I particularly like the start of each day as the Chair reads the prepared and already submitted statement to those in the room. We can only surmise that there is a correct assumption in place that the politicians cannot read the big words among the small ones. Yes, it is crazy that from this really badly flawed charade the markets attempt to learn anything this important. Actually there is more than the normal amount of interest at work right now; the markets know the Fed is in this ‘data dependent’ mode rather than following policy with some defined target or economic metric. Now, in this regime, with each change comes the question asking how the Fed sees the new news. How can the markets react but to increase volatility and with it increase risk?
Investment Portfolio: US Treasury will sell two year notes tomorrow, then more on Wednesday.
The auction cycle is the street jargon for these every month sales; this week the sale of 2/5/7 year maturities is one of two regular auction weeks. In the second the Treasury sells 3/10/30 year maturity issues and thereby the Treasury funds the deficit spending that has become the norm (back in the day the politicians understood this was economic suicide foisted upon succeeding generations). If we took in more revenues than we spent, the need to do these sales every month would eventually no longer be needed as our national debts shrank. I will never live to see that day and I hope I will be around for a very long time yet. LOL of course we aren’t the only nation doing this today, we have major partners in crime pursuing the same policy; Japan makes us look like rank amateurs, China too, the UK and of course the ECB is fully engaged too. The paradox of the moment is this — more than enough liquidity is at hand to gobble up all this new paper being sold as better investment opportunities don’t exist.
Weekly Market Data
Current Market Levels from Bloomberg daily
- Monday: 2/23
Jan. Existing Home Sales expected at 4.95mm >> 4.82mm reported
- Tuesday: 2/24
CS 20 city home sales expected at +4.30% >>
- Wednesday: 2/25
Jan. New Home Sales excepted at 0.47mm >>
- Thursday: 2/26
Weekly Claims expected at 290k >> Jan. CPI expected at -0.6% >> Jan. Durable Goods Orders expected at +1.6% >> Durable Goods Orders expected at +1.6% >>
- Friday: 2/27
4Q GDP expected at +2.0% >>
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