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Wednesday, March 26, 2008

Strong Housing Data Outweighs Durable Goods Weakness

Another day, another economic disappointment. Durable goods orders came in not only short of expectations, but moving in the wrong direction as well. Still, we could not be more enthusiastic about this week's housing data.


Durable Goods Orders (February)

The number came in this morning, down 1.7%. With the economy tanking, you might have thought a decline was expected, but it was not. Considering that January's durables were reported down by a depressing 4.7%, economists expected February's report to make up for the sharp decline with new order growth of 0.7%. You see, in this just-in-time inventory world we live in, orders can fluctuate wildly because of light inventory carries across industries. That makes this report an even harder pill to swallow.

This means the economy is not just easing into recession, but perhaps collapsing into a deeper version of it. Yo Greek! Not so heavy in the morning! "I hear you," he said to himself... (and then laughed, which is even worse). Hey, spread out! It's not alcohol, for the concerned, just good old healthy exhaustion. Okay, back to topic........

This durable goods figure, marking the second contraction in a row might be erased next month by a stronger rise than just 0.7%. But, the market does not want to hear that now. When the metric was expected to show growth, there's just no positive spin that can be tossed on it. Let's try anyway. Excluding transportation, which can often cause big swings in the numbers due to the exorbitant price of aircraft from the likes of Boeing (NYSE: BA), orders decreased 2.6%. That's not working either!

Excluding defense, which can cause wild swings because of government forgery of numbers devised to fool you all into thinking there is no recession despite the potato you had for dinner last night, orders fell 1.6%. Yikes! Of course we jest, government regulator readers. Forgery is much better enjoyed in a progressive capitalistic environment than forgery in the rest of the world. Corruption is universal after all.

Is there no way we can make this report good? Defense orders actually fell 10.1%. When the government can't even buy guns for wars, that's just horrible. Guess Iraq turned out to be an even worse blunder than we thought. Now we don't have funds to spur the economy with defense spending even, or any spending, unless we continue to pile on debt and depress the dollar. Yeah, I'm an Independent now! Even so, Iran needs bombing someday because I would rather be poor and alive than a still poor dead man.

Wait, get up off the floor and cancel those sell orders. We found an increase! Unfilled orders of manufactured goods rose 0.8%, marking the 33rd month of the last 34 that have shown increase. Wait a second, that's not good news either! When people are not filling goods orders, there could be bad reasons for that, like for instance non-payment.

Mortgage Activity

Ha, just when you thought The Greek was going to hit you with a double whammy of bad economic news and stay true to theme, it turns out mortgage activity posted a strong increase in the week ended March 21. Application volume increased 48%, driven largely by an 82.2% rise in refinancings. The purchase index also rose 10.7%. This is good anyway you look at it.

Okay, mortgage rates dropped 0.24% because the market expected the world to end, but also because it expected the Fed to cut rates (and it did). Refinancings can be nothing but good, at least now that mortgage brokers are supposedly not allowed to trick trusting Americans into cunning mortgage traps. Perhaps credit markets are freeing up also, thanks to the government's easing of restrictions on Fannie and Freddie (NYSE: FNM, NYSE: FRE), but that would not be reflected in this data yet. All in all though, this is the second bit of good news for the housing market in three days, if not the last 12 months!

New Homes Sales

New home sales ran at an annual pace of 590,000 in February, exceeding economist expectations for a pace of 578K. Make that three bits of good housing news. Wow, I have to say, this is a good sign. The Fed may have done enough at this point to help housing find footing. The only question left to answer is if the government has done enough to inspire consumer spending. We'll get a premature reading of that on Friday.

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Blogger Uncle said...

enjoyed the humor.

1:14 PM  

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