Tuesday, February 1, 2011

Nearly 11 Percent of US Houses Empty

I usually find the quarterly homeowner vacancy and homeownership report from Census pretty lackluster, but the latest one released this morning was anything but.
Strawberry Mill Valley

America's home ownership rate, after holding steady for a while, took a pretty big plunge in Q4, from 66.9 percent to 66.5 percent. That's down from the 2004 peak of 69.2 percent and the lowest level since 1998.

Homeownership is falling at an alarming pace, despite the fact that home prices have fallen, affordability is much improved and inventories of new and existing homes are still running quite high.

Bargains abound, but few are interested or eligible to take advantage.

More concerning than the home ownership rate is the vacancy rate. The Census tables don't tell the entire story, but they tell a lot of it. Of the nearly 131 million housing units in this country, 112.5 million are occupied. 74.8 million are owned, and that's only dropped by about 30 thousand in the past year. 38 million are rented, but that's up by over a million year over year. That means more new households are choosing to rent.

Now to vacancies. There were 18.4 million vacant homes in the U.S. in Q4 '10 (11 percent of all housing units vacant all year round), which is actually an improvement of 427,000 from a year ago, but not for the reasons you'd think. (more)

Worst of euro crisis over?

European leaders have shown they’re capable of taking the steps needed to stabilize the European single currency, allowing the euro-zone to turn the corner in the sovereign-debt crisis, the region’s most powerful finance ministers told the World Economic Forum’s annual meeting on Saturday.

Noting “indications in the market of confidence,” French Finance Minister Christine Lagarde said the “euro-zone has turned the corner.”

German Finance Minister Wolfgang Schaeuble said the euro would be “stable.”

Although the lack of a common budgetary policy had created turmoil, the euro zone is well on the way to creating the tools needed to ensure the stability of the euro after taking lessons from recent bouts of contagion and volatility, he said, in the same wide-ranging panel discussion on the economic outlook, which also included British Chancellor of the Exchequer George Osborne, World Bank President Robert Zoellick, Barclays PLC /quotes/comstock/23s!a:barc (UK:BARC 294.50, -3.70, -1.24%) Chief Executive Robert Diamond.

“We will deliver. You will see,” Schaeuble said.

European officials are debating a range of potential measures for a permanent rescue mechanism and increased coordination and monitoring of fiscal policy.

The remarks came in a week that saw French President Nicolas Sarkozy and German Chancellor Angela Merkel both use Davos to pledge a commitment to defending the euro. (more)


Robert Shiller: ”It seems like everything is overpriced: stocks, bonds, and real estate. And index bonds were given a negative yield recently; maybe they’re coming back. Nothing looked attractive.”

Gold Bottoming?

Gold has risen a fantastic ten years in succession. Gold, of late, has been receiving a lot of interest and publicity and advertising. Gold is probably overdue for a correction in this ongoing bull market. Analysts are talking about “gold correcting down to 1200 or even 1000.” However, I believe that the more important picture is that the gold bull market has much further to go on the upside.

I’ve been reading the McClellan Market report for years. It’s one of the better and more intelligent reports that I read. McClellan does a good deal of research on cycles, and I must say some of their cycle studies work out quite well.

McClellan has discovered that there’s a cycle low that appears for gold roughly every 12.5 months. The cycle lows have run as follows: Jan 6, ’06, Jan 8, ’07, Jan 7, ’08, Jan 5, ’09, Jan. 4, ’10, Jan 8, ’11. McClellan puts the next cycle bottom for gold at February 8, 2011. Which means that the cycle low for gold should arrive at any time between now and February 8, give or take a few weeks before or after that date.

Interestingly, the McClellan cycle bottom for gold is due to arrive amid a good deal of professional bearishness regarding gold (“gold overdue for a major correction”). Thus, many traders have traded out of their gold positions, just as we near the date for the McClellan cycle bottom. Below, the red arrows mark the McClellan cycle lows.


The Russell view — It’s virtually impossible to successfully time in-and-out trades during an ongoing primary bull market. Usually what happens is that the trader has moved out of the market just as the bull trend resumes. Thus, the bull market does what it’s supposed to do — advance while leaving most traders and Johnny-come-latelies behind. (more)

What to do before the bond bubble bursts

The past two years have seen the biggest boom in bond investing on record. Investors, fleeing the ravaged stock market, have poured hundreds of billions of dollars into the presumed safety of bond funds.

From January 2009, we saw 22 consecutive months of inflows into bond funds, according to the Investment Company Institute, an astonishing $643.4 billion in all.

But starting in November, nervous investors began to pull money from bonds — mostly municipals, amid fears about state and local governments’ finances. Outflows from munis have persisted into January, but money has continued to trickle into corporate bonds, the mainstay of the 2009-2010 bond boom.

And now many investors who’ve just made a big bet on fixed income are worried about getting caught on the wrong side of the trade yet again.

The rumblings apparently got loud enough that Gus Sauter, chief investment officer of The Vanguard Group, the largest U.S. bond mutual fund manager with $413.6 billion of fixed income assets as of Dec. 31, posted a cautionary message on the company’s website.

“I’m increasingly worried that people aren’t aware of the risks in the bond market,” he wrote. “The problem is that when you’re at historically low rates, as we are now … yields aren’t likely to go significantly lower, and at some point when the economy does strengthen, they’re likely to push higher.” (more)

Bloomberg Businessweek - 31 January-06 February 2011

read more here

Rice Rebounding From Two-Year Drop as U.S. Crop Falls to Lowest Since 1989

U.S. farmers are planting the fewest acres with rice since 1989 just as global demand surpasses production for the first time in four years, driving prices as much as 12 percent higher by December.

Plantings in the U.S., the third-biggest shipper, may drop 25 percent this year because growers can earn more from corn and soybeans, according to the median in a Bloomberg survey of nine analysts and farmers. Rice, the staple food for half the world, declined 4 percent last year, extending a 2.9 percent drop in 2009. The other crops jumped 34 percent or more.

“Why would you want to take that risk to plant rice, knowing that your income is going to be way down?” said Terry Hatley, a farmer in Marked Tree, Arkansas, who may not plant any rice this year after growing the crop for more than three decades. “Farming is a business, and you’ve got to look at the economics of it. Now, the economics on rice are very dim.”

Bangladesh, South Asia’s biggest buyer, doubled a target for imports in 2011 to curb prices, the Directorate General of Food said last week. The Philippines, the world’s largest importer, will probably start buying next month, according to the National Food Authority. While global stockpiles are predicted to be 26 percent higher this year than in 2007, consumption will gain 3.4 percent and harvests 2.6 percent, the U.S. Department of Agriculture estimates. (more)

Stocks End Up; Dow's Best January in 14 Years

Stocks rebounded on Monday as investors returned to stocks after a sharp sell-off on Friday, but yet kept a cautious eye on events unfolding in Egypt.

The Dow Jones Industrial Average rose 68.23 points, or 0.6 percent, to close at about 11891.93, after falling 1.4 percent on Friday. For the month, the Dow gained 314.42 points or 2.72 percent, its best January performance since 1997 and its first January gain in four years.

IBM [IBM 162.00 2.79 (+1.75%) ]was the best performer on the Dow in January, rising 10.38 percent, while Merck [MRK 33.17 0.10 (+0.3%) ]was the worst, falling 7.96 percent.

The S&P 500 gained 9.78 points, or 0.77 percent, to close at 1,286.12. For the month, the broad market index rose 28.48 points, its best January performance since 2006.

Nvidia [NVDA 23.92 0.16 (+0.67%) ] was the best performer on the S&P 500 in January, rising 55.32 percent, while Monster Worldwide [MWW 16.65 0.70 (+4.39%) ] was the worst, falling 29.54 percent.

The Nasdaq rose 13.19 points, or 0.5 percent, to close at 2,700.08. For the month, the Nasdaq rose 47.21 points, or 1.78 percent. (more)

Oil prices rise on Egypt unrest; Brent tops $100

An important oil price benchmark topped $100 per barrel on Monday for the first time since 2008, as investors kept an anxious eye on Egypt and worried about unrest there disrupting the flow of oil from the Middle East.

The price of Brent crude rose $1.59 to settle at $101.01 a barrel on the ICE Futures exchange in London. Brent is used to price oil in Asia, where demand is growing fast, and in Europe, where a cold winter is leading to high demand for heating oil. Also, European supplies of oil from the North Sea have been falling steadily.

Brent crude has been trading far above U.S. benchmark West Texas Intermediate, or WTI, for months. Oil supplies at Cushing, Okla., where the U.S. benchmark is priced, have been rising, keeping its price below Brent.

The price of WTI rose $2.85, or 3.2 percent, to settle at $92.19 a barrel on the New York Mercantile Exchange. That marks a two-session gain of about 8 percent. (more)

The 13 Countries That Control the World’s Gold Read more: The 13 Countries That Control the World’s Gold

Even if 2011 has gotten off to a rough start for gold, everyone knows that the value of gold is at historic highs. What is interesting is that there is rarely a discussion about which countries actually have a lock on the world’s gold. 24/7 Wall St has compiled a list of the top 13 nations which hold the bulk of the world’s gold reserves and added in an outlook for 2011.

After having peaked above $1,420 per ounce at the end of 2010, gold has recently traded under $1,330 per ounce and has basically put in 3-month lows. As part of its analysis 24/7 Wall St. looked at the trends of the world’s top holders that may drive demand up or down ahead in 2011 after taking a look at the new data from the World Gold Council.

Many issues should be considered in gold investing including demand from the private sector for bars, coins and jewelry along with industrial use.

1) United States holds 8,133.5 tonnes.

What the U.S. holdings will be when the next report comes out in another 7 weeks or so is uncertain. There will have been more than $600 billion in new commitments for Quantitative Easing by the Federal Reserve in the last few months. The US debt ceiling has been an ongoing issue. The U.S. could always try unloading some gold to depress rising commodity prices rather than to increase the deficit, but unfortunately that would only last a few months. If it did sell some of the shiny gold metal, Uncle Sam would have to find huge amounts of gold later. Besides, it is arguable whether countries are any good at price intervention. The lackluster economic recovery may result in little change in the gold holdings of Uncle Sam in 2011. (more)

Wall St gains on earnings, economy; Egypt fears ease

U.S. stocks rose on Monday on strong earnings and signs of a strengthening economy, even as a surge in the price of oil highlighted the potential for increased political risk in the Middle East to upset markets.

Egyptian Vice President Omar Suleiman said on Monday that President Hosni Mubarak has asked him to start a dialogue with all political forces, while Egypt's armed forces pledged not to fire on peaceful demonstrators.

The latest news calmed markets after stocks suffered their biggest fall in nearly six months on Friday. The improved sentiment helped the Market Vectors Egypt Index ETF rise 7.9 percent, indicating investors' appetite for risk in the region had recovered somewhat.

"It's creating a great opportunity to step up and increase exposure to emerging markets and other areas of the international markets," said Robert Lutts, president and chief investment officer at Cabot Money Management in Salem, Massachusetts. "I'm optimistic that this will be resolved and blow over."

Relief that the turmoil appeared not to be escalating allowed investors to focus on data showing stronger U.S. personal spending and regional manufacturing, while better-than-expected earnings from Exxon Mobil Corp sent the company's shares up more than 2 percent. (more)