Key News
*Home Prices in 20 U.S. Cities Declined by 18.6% in February (Bloomberg)
* New Zealand May Cut Interest Rate to Record-Low 2.5% (Bloomberg)
*Citigroup, Bank of America Decline on Capital Report (Bloomberg)
*Oil, Metals, Grains Drop on Outlook for Demand After Swine Flu (Bloomberg)
The Event Agenda
The Morning Run-Down
Though markets this morning are giving back some of the moves made overnight, the general theme is more risk aversion following yesterday’s sell off in stocks, commodities and carry trades… and surge in treasuries and the dollar. Global stocks are down across the board going into the NY session.
USD/JPY is being dragged lower, not by the risk aversion appeal of the yen, but as a product of carry trade selling driven by sentiment of elevated risk. Meanwhile, gold has diverged from the risk aversion instruments the past two trading sessions, declining yesterday…and more so this morning. And the plausible explanations for this divergence are few. Technically, however, gold traded into significant trendline resistance (from the Feb highs) yesterday and has traded 34 bucks lower since.
Tomorrow we get US GDP for the first quarter, core PCE and we hear from the FOMC– Plenty of fuel for volatility.
Charts and Data of Interest
The Case-Shiller index was released today reporting housing prices measured from the month of February. Prices dropped another 2.2% from the prior month and down 18% from the same period a year ago. With the general view that consumers and the economy cannot find the ground floor until housing stabilizes, just where might the bottom be?
Take a look at major asset classes and the magnitude of moves that have taken place over the past two years… all relative to where the reported housing market is positioned.
Asset Class Benchmarks
Commodities (CRB Index) fully retraced July 2002 levels
Stocks (S&P 500 Index) fully retraced October 2002 lows.
Fixed Income (10-years) surpassed 1998 levels.
Currencies (Carry Trades) have fully retraced 2000-2001 levels.
Real Estate (Case-Shiller) has retraced only July 2003 levels.
If housing follows suit, a retracement to 2002 levels would represent a nearly 40% peak to trough decline, another 7% or so to go on the downside. This would take housing prices back to pre-boom levels, equivalent to the value destruction that has taken place in other asset classes.
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Mr. Rich your recent email send out today (saturday) shows complete idiot the lack of being a currency expert? The last chart didnt even include the Yuan/Renminbi. Come on! All this printing/digitzing dollars makes for a bull market? Russian market 11 years remove from default, yes but at least they are removed. How about the unsustanible monetising of debt like 3rd world countries that the US gov’t is doing? $165B in treasuries, a record high? How about the Chinese currency swaps with Argentina, Central American countries, or with Hong Kong, Singapore, Vietnam, Cambodia, and other regional nations. This is all omitted, even the inverse head and shoulders technical on the dollar. Sure buddy, drink your own kool-aid. You are not going to be the next top trends forecaster, because you can’t get your history or even facts in order. Oh yeah markets determine currencies, not politicans? What about Brenton Woods? Oh those were not politicians. What about Nixon closing the gold/silver window when the French demand their dollars to be in silver. I dont think Nixon was a politican, hmmm. What about the British removing the gold/sterling backing of the pounding – market? or gov’t decision? What about FDR when he devalued the dollar against gold, and confiscated Americans gold/money/wealth, he wasn’t a politican was he? You even admitted the Yuan and the Ruble was manipulated by the gov’t. You, sir are a hypocrite. You do not know history and that, as Gerald Celente states: “Current events create trends for the future.” Your pure lack of the macro picture really discounts your creditials. I think Weiss has you just for a cartoon strip. For this dribble I can watch CNBC for propaganda.
Jeremy