Tuesday, August 24, 2010

Expect Existing Home Sales Will Be A Nasty Print

Today we have the existing home sales for the month of July at 10am. Stock index futures are already off some 12 handles from last nights close.

Economists have guessed that existing home sales dropped only 12% from June's -5% loss. I am expecting this figure to be a lot worse. The consensus is for 4.730MM million homes sold in July, this is wildly optimistic. I am looking for a print closer to 4MM or even below.

I for the life of me can't figure out how economists got to this figure of 4.7330MM? Where are they looking? What are their metrics? Who are they talking to? From the looks of this estimates they may just be talking to realtor's as nobody expects a strong print. Housing is a grand delusion within an illusory banking environment. Many in the business/economic community are too optimistic on the state of housing. The MSM is too optimistic on the economy and stock market. So what do we have? DELUSION! These guys and gals are not listening to the American consumer. Its the debt stupid! Its the leverage stupid! Its about capital preservation stupid!

I keep hearing many economists and financial journalists keep harping on the state of the bond markets.


The incomprehensible ranting is getting old and tiresome. Many millions of Americans are stuck in houses that they cant sell or REFI. Its like a bad marriage with kids. There is no way out. Their biggest expenditure is a black hole money pit. The stock market is a giant scam controlled by HFT. The economy is double dipping. Inflation is no where in sight even as the monetary base has roughly doubled in 2 years! Deflation of all risk assets is at the top of the menu.  Every day Americans do have a choice with regards to their investment decisions, and they are making it hand over fist. Remember there is a choice to be made when u have two likely outcomes.

Americans have become very smart to the fallacy of the equity markets. They would rather park what ever money they have left in what they consider a safe investment which is US Treasuries. The US will never default! If you buy a 10Y UST today at a yield of 2.52%, you are locking in a 2.625% coupon for the next 10 years. In a deflationary environment you are clearing close to or over 4% in real terms risk free. Who cares if yields go to 3% or 4%? when no one trusts the equity markets? I personally don't trust the Treasury either but at least they won't default on their own citizens. If in the slimmest of cases the US Treasury defaults do you really want to be in equities or any asset class for that matter?

Back to the home sales figures. This figure will be closely watched when it comes out at 10am. The futures need to desperately hold 1050, if not selling will beget further selling.

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