Archive for Investing

Worst May Be Over For Home Sales; TIAA/US Bank Deal; More Refis and More Pull-Through in January

Existing home sales fell again in January although the decline was a minor one compared to the 6.4 percent drop in December. The National Association of Realtors® (NAR) said sales of single-family homes, townhomes, condominiums and co-ops ticked down 1.2 percent from December’s annual rate of 4.99 million to a seasonally adjusted annual rate of 4.94 million. That number, the lowest since November 2015, put sales behind those a year earlier (5.40 million) by 8.5 percent. Single-family home sales declined from 4.45 million in December to 4.37 million, putting them 8.4 percent lower on a year-over-year basis. Existing condominiums and co-ops sold at an annual rate of 570,000 units in January, up 3.6 percent from last month and down 9.5 percent from a year ago. Analysts, pointing to lower mortgage …read more

Read more here: Worst May Be Over For Home Sales; TIAA/US Bank Deal; More Refis and More Pull-Through in January

Category: businessNews

Low Rates and Strong Jobs Numbers Bolster Builder Confidence; The Range is on Borrowed Time

The Housing Market Index (HMI) continues to recover from the plunge it took in November and December when it dropped an aggregate of 12 points. The National Association of Home Builders (NAHB)/Wells Fargo measure of builder confidence in the market for newly-built single-family homes added another 4 points in February to the 2 it gained in January. It now standards at 62 on a 100-point scale. “Ongoing reduction in mortgage rates in recent weeks coupled with continued strength in the job market are helping to fuel builder sentiment,” said NAHB Chairman Randy Noel. “In the aftermath of the fall slowdown, many builders are reporting positive expectations for the spring selling season.” Derived from a monthly survey that NAHB has been conducting for 30 years, the HMI gauges builder perceptions …read more

Read more here: Low Rates and Strong Jobs Numbers Bolster Builder Confidence; The Range is on Borrowed Time

Category: businessNews

Homeowners in Great Shape; Buyers Aren’t Giving Up; GSEs Still Winning; Rates Still Holding

Mortgage loan delinquencies were down from the third quarter of 2018 in the fourth quarter. The Mortgage Bankers Association (MBA) said the improvements held across all loan types and all stages of delinquency although there was a slight uptick in foreclosure starts. The delinquency rate for mortgage loans on one-to-four-unit residential properties decreased to a seasonally adjusted rate of 4.06 percent of all loans outstanding, down 41 basis points (bps) from the third quarter and 111 bps from the fourth quarter of 2017 according to MBA’s National Delinquency Survey. The percentage of loans on which foreclosure actions were started in the fourth quarter rose by 2 bps to 0.25 percent but MBA said that was probably due to the expiration of foreclosure moratoria in states affected by natural …read more

Read more here: Homeowners in Great Shape; Buyers Aren’t Giving Up; GSEs Still Winning; Rates Still Holding

Category: businessNews

Highest Rates in a Week; First-Time vs Trade-Up Buyers; Marketing Products; Does Inflation Matter?

Mortgage rates hadn’t changed much over the past few business days, even though they arguably should have moved a bit higher yesterday. That made today’s adjustment slightly more abrupt. Why was there an adjustment? Mortgage rates are based primarily on the trading levels in the bond market. In turn, the bond market takes cues from a multitude of factors big and small. Among the biggest considerations for bonds are the various regularly scheduled economic reports. Among those reports, inflation data is traditionally very important to bonds. And finally, among inflation data, today’s Consumer Price Index is probably the most widely followed. Inflation didn’t jump in any major way, but the important “core” reading (which factors out food and energy) was slightly higher than expected on an annual …read more

Read more here: Highest Rates in a Week; First-Time vs Trade-Up Buyers; Marketing Products; Does Inflation Matter?

Category: businessNews

Rates Gearing up For Big Move; How The Shutdown Matters (And How It Doesn’t); Realtors on Price Gains

Mortgage rates were roughly unchanged yet again today, although the average lender was charging microscopically higher fees compared to yesterday. The key ingredient in today’s market movement (which ultimately translates to mortgage rate movement) was the promise of a deal to avert another government shutdown at the end of the week. Late in the day yesterday, congressional leaders on both sides of the aisle signaled a potential deal was in the works. The fact that Trump didn’t immediately dismiss the deal was taken as evidence of its viability. This resulted in bond markets losing ground today, which normally coincides with higher rates. It was also the inspiration for a good amount of today’s improvement in stocks. The reason for that movement is fairly logical . The shutdown (or the threat …read more

Read more here: Rates Gearing up For Big Move; How The Shutdown Matters (And How It Doesn’t); Realtors on Price Gains

Category: businessNews

Low Rates Unfazed by Market Weakness; Potential Warning About The Range; Conforming Updates

Mortgage rates held their ground fairly well today, despite the fact that underlying bond markets were weaker. Bond market weakness is associated with higher interest rates, all other things being equal. To understand this, consider that a bond is essentially a loan. An investor who buys a bond is buying the right to collect interest payments on a loan. That investor is effectively “the lender.” Ideally, those investors would compete with one another for the right to collect interest on loans. If bonds are “weaker,” it means those investors don’t see as much value in buying those loans. The price they pay to obtain the loan goes down (aka “weakness”). In turn, the loan’s rate of return needs to be bumped up in order to attract investors. And “bumping up the rate of return on a loan” is tantamount …read more

Read more here: Low Rates Unfazed by Market Weakness; Potential Warning About The Range; Conforming Updates

Category: businessNews

Airlines in America fail in their campaign against the Gulf carriers

By The Economist online

ON MAY 14th the United States and United Arab Emirates (UAE) announced a deal that should, at least in theory, put an end to their long-simmering dispute over what airlines in America allege are unfair subsidies provided by the Gulf state to its two major airlines. News of the agreement had emerged three days earlier, prompting both sides to claim victory. American representatives claimed that the UAE had admitted that it had unfairly subsidised its flag carriers and had agreed not to add further so-called fifth-freedom flights, which are routes to the United States that do not originate in the UAE. (Breitbart News ran a triumphant story under the headline “Trump’s America First Agenda Wins Trade Dispute With United Arab Emirates.”) Meanwhile, the UAE ambassador to the United States argued essentially the opposite, stating that he was “very pleased” that Emirati airlines could continue to add fifth-freedom flights.

So who is right? Mostly, the UAE side. When you look at the real substance of the agreement, it is clear that the American airlines did not get anything they wanted. The main thing they sought was to put an end to those fifth-freedom flights, which cut into their business when Emirates and Etihad, the flag carriers of the states of Dubai and Abu Dhabi in the UAE, fly from their home bases to the United States via places such as Europe. The American carriers got some language they could point to in order to declare victory: the Emiratis stated in the deal that they have no plans to add new fifth-freedom routes. But the American claim of victory rings hollow, because there is nothing to prevent Emirates and Etihad from making such plans in the future.

The Americans also claimed a win because the UAE airlines promised to publish yearly reports on their finances that are up to international standards. The American airlines hope this will force them to fess up to the unfair government subsidies that the Americans think keep their Emirati rivals afloat.

Read more here: Airlines in America fail in their campaign against the Gulf carriers…read more

Category: Business and finance, Gulliver

Interest Rate and Trade Concerns Cast a Shadow Over Stocks

The S&P 500 index has traded in a narrow range for the past month, fluctuating between resistance at its 100-day moving average and support at its 200-day moving average, unable to establish any clear direction. The failure of stocks to push higher can be traced to a variety of concerns, including rising interest rates, trade tensions and signs of slowing global growth. At the same time, a strong first quarter earnings season has kept stocks from falling below their longer-term trend. The net result has been directionless trading, in search of a catalyst to break the stalemate.

We continue to believe that stocks can move higher, as economic growth accelerates from the modest first quarter and earnings growth remains strong, even though the rerating of earnings expectations following the passage of tax reform had been mostly discounted by the January rally. As it turns out, however, actual earnings this quarter are exceeding even those lofty expectations. According to Factset, by the end of March earnings expectations for the first quarter had risen to 17 percent. And as recently as last week, those expectations had edged higher to 18 percent. But now, after some better than expected results mostly from technology stocks, earnings are expected to grow by an astounding 23 percent. It seems unlikely that results that strong had been fully discounted by the January move, but that still has not been enough to pull stocks higher, suggesting that worries over trade and interest rates must recede to lift the cloud over stocks.

GDP and Inflation Ratchet Higher 

Last week we learned that GDP growth in the first quarter grew by an estimated 2.3 percent. And although that result continued the pattern of relatively weak performance to start the year, it was better than the 2.0 percent Bloomberg consensus. Improvements in both trade and inventories from the previous quarter were not enough to offset weakness in personal consumption, particularly in automobile sales. But compared to the 1.2 percent pace of growth in the first quarter of 2017, and 0.6 percent in 2016, this year’s performance looks rather healthy overall.

…read more

Read more here: Interest Rate and Trade Concerns Cast a Shadow Over Stocks

A Victorian survivor in fund management

By The Economist online….

WHEN the Foreign & Colonial Government Trust was launched in 1868, The Economist had its doubts. “The shape is very peculiar,” we worried, adding that “the exact idea upon which it starts has never been used before.” Some of the trust’s promises were “far too sanguine to ever be performed”. Nevertheless, we concluded that: “In our judgment, the idea is very good.”

That turned out to be one of this newspaper’s more successful forecasts. One hundred and fifty years later, the trust is still going strong, having delivered a compound annual return of 8.1%. It now looks after a portfolio of £3.5bn ($5bn), rather than the £588,000 it raised at launch.

In its own way, the trust is an example of how much the financial sector has changed—and how much it has stayed the same. The idea of a pooled portfolio seems commonplace now, but at the time it was revolutionary.

This was the 19th century, when Britain was confident of its worldwide role. The first portfolio comprised 18 overseas bonds, some in markets, such as Argentina and Peru, not ruled by Britain (the foreign element) and some that were, such as New South Wales and Nova Scotia (the colonial). This diversity allowed the trust to offer an initial dividend yield of 6%; not bad given that the prevailing yield on British government bonds was 3.3%.

The 20th century saw not just the decline of empires but the rise of inflation, which made a bond portfolio hazardous to investors’ health. The fund moved into equities in the 1920s; its first holding was in Shell, the oil giant, and the shares are still in the portfolio today. A century after its formation, the fund was almost entirely invested in equities.

Read more here: A Victorian survivor in fund management…read more

Category: Business and finance, Approved, Business and finance, Finance and economics

The real problem with pensions

By The Economist online…

PAYING for pensions is like one of those never-ending historical wars; a confusing series of small battles and skirmishes that can obscure the long-term trend. The latest conflict is in Britain where university lecturers are indulging in strike action over changes to their future benefits.

Let us start by making the long-term trends clear.

1. People are living longer and retirement ages have not kept pace. This increases the cost of paying pensions

2 Interest rates and bond yields have fallen. This increases the cost of generating an income from a given pension pot

3. Private sector employers have reacted to this cost by closing their defined benefit (DB) schemes (which link pensions to salaries) and switching to defined contribution (DC) schemes (which simply generate a savings pot)

British universities have reacted in a similar way; they are proposing switching future benefits to a DC basis. To avoid confusion, this means that past benefits will be unaltered; if you are 50, and have worked for 25 years, you will still have 25 years of DB benefits. But since pensions are deferred pay, it does mean that the total benefits of academics are being cut so one can see why they are upset.

But there is still plenty of confusion, as this piece in the Independentillustrates all too well (to cite just one example, in a piece about workplace benefits, it quotes OECD numbers on state-pension replacement rates). There are three big areas where the debate gets muddled.

Read more here: The real problem with pensions…read more

Category: Business and finance, Buttonwood’s notebook

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