Friday, August 24, 2012

Fun With Numbers Friday

I would just like to add that we see shares of Apple hitting new all-time highs, even though their last quarter wasn’t quite up to snuff.  But the market cap of Apple is now greater than three times that of all of the world’s publicly traded gold and silver equities...This will be seen as preposterous in the fullness of time, and I can assure that this will reverse as the bull market in gold and silver mature.  - John Embry, King World News LINK

I felt compelled to comment on the new home sales number for July number reported yesterday because the headline was egregiously misleading.  The headline triumphantly reported 372,000 annualized homes were sold in July.  Note this is a seasonally "adjusted" number which is then annualized.  A supposed 14% increase over the June number.

However,  if you pull up the actual news release from the Department of Commerce, which of course I did and CNBC or your local newspaper did not, you'll see that there were 34,000 actual homes sold in July, the same number as in June.  Even more ominous, the median price of a new home dropped to $224k in July from $229k in June.  The average price dropped from $266k to $263k.  One would think that, IF the market were as strong as the media and industry cheerleaders would have us believe , the average price of a new home should stay the same or at least stay constant.  I smell the desperation of discounting...Here's the new home sales report if anyone wants to peruse the data:  LINK

One more point on this, essentially the adjusted number assumes the maintainability over time of the July actual number.  But this is the peak selling season.  If I'm right about the economy - and I have zero doubt that I'm not, we'll see the actual number of new homes being sold over the next six months likely drop in half.  That would take you 372k adjusted annualized number down below 200k.  Not good...

What's troubling about the recent housing statistics, especially the long string of weekly declines in mortgage purchase applications, is that with record low mortgage rates and a supposedly recovering economy we should see housing staging a real and meaningful recovery.  But as Mark Hanson details in his most recent blog post, the massive Fed/Govt stimulus into the housing market has done nothing except "pull forward" a substantial number of home purchases, leaving the system with a lot of "shadow inventory" overhang and a depleted pool of potential buyers:  LINK

And even more troubling, a large source of housing market stimulus has come from YOU, the taxpayer.  The FHA share of mortgage financing has gone from just 7% of the market in 2007 to as high as 30% of all mortgages issued.  To make matters worse - aside from the fact that FHA mortgages incorporate taxpayer subsidized expense reduction features - this expansive pool of new FHA mortgages now sports a 16% delinquency rate.  That's 1 in 6.  In other words, FHA taxpayer mortgages are the new subprime financing product - the new Countrywide/Wash Mutual of our housing market.  And we saw how well that's a great article on that subject:  LINK

Today the Govt released its durable goods orders number for July.   The headline that 99% of the people in this country who are paying attention will see is that durable goods jumped a torrid 4.2% and far exceeded the expected number.  However,  if you strip out a large one-time order by Boeing - which is always subject to cancellation or partial cancellation - durables were actually down .4% and missed expectations.  If look at non-defense capital orders ex-aircraft parts, "core" durables plunged over 3%.  Not good.  Ugly, in fact.  Here's the report:  LINK

Finally, for all you Facebook faithful, you should be aware that a Facebook director and the first outside investor dumped almost all of his stake as soon as he was able to as set by the terms of the IPO underwriting agreement.  As Bloomberg reports, it is highly unusual for an IPO insider to get rid of their shares this quickly after an IPO:  “It’s a bit stunning that at the earliest opportunity it was sold and the volume that was sold,” said Hamadeh. “Their job is to liquidate, but typically it’s a little more gradual.”  If you still own Facebook, you should be digging into why this guy felt compelled to unload this quickly and so far below the IPO price.  You are an idiot if you call your broker accept the standard explanation that "he was diversifying his investments."

Oh, one more thing.  Many of you are aware that Meredith Whitney took a lot of heat about 18 months ago for prognosticating widespread municipal bankruptcies.  Her view is quite the same as mine, only she had the benefit - or dis-benefit - of widespread public exposure and ridicule.  It looks like her call will be correct, just early.  Just in the past few months we've seen three of the largest municipal bankruptcies ever.  If you are one who believes that elitists have a better view than the rest at what is going on behind the scenes, and you have a big portfolio of "high yielding" muni bonds, you might want to pay attention to this:  LINK  (copy the headline and paste it into a google search browser and you'll get the whole article).  Warren Buffet, who definitely gets a better look "behind the curtain" than most of us, has terminated over $8 billion municipal default insurance that was underwritten by Berkshire.  Not a good sign...Have a great weekend.


  1. But the stats are all about re-electing Obama. Did you really think they were about reality?

  2. Lawyer James Koutoulas Tells Rick Santelli: ‘We Plan To Pursue Criminal Charges Against Jon Corzine In All 50

    Read more:

    Best quotes from Koutoulas:

    “Crimes were unequivocally committed and I will do whatever I can to continue to do the government’s job for it and help see justice done.”
    “MF Global had a choice. Do we cheat or go out of business. And they cheated. They broke the law. And these took these customer funds to cover margin calls.”
    “Attorney General Eric Holder’s Department of Justice is the biggest enabler of financial crime in U.S. history.”

    And the kill shot:

    “I will take this to all 50 states. And we will win. We will get a conviction of Jon Corzine. And the next time a sociopath CEO says ‘Do I go out of business or do I cheat,’ he’s gonna think about President Obama’s biggest fundraiser in an orange jumpsuit in state prison.“

  3. There has to be a bubble some where, Facebook didn't work, Apple is the best option at the time, along with treasuries, and student loans. Hey, all that fiat has got to go somewhere!

  4. Dave,

    Manning and the defense look really good. We (Packers) will see you in the superbowl!


    1. LOL. Assuming Manning stays healthy, Denver's offense will be tough to stop. The path to the Super Bowl will tougher in the NFC. The Packers are certainly one of the favorites.