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Destroying The Yen

The Bank of Japan recently decided it would prefer to follow in the footsteps of the United States and the Federal Reserve. Japan's policy of debauching its currency, the yen, is part of a plan to stop its strength. As you can see in the chart below, the yen has fallen considerably over the last three months and recently hit a 27-month low against the US dollar. Japan thinks that more stimulus spending, currency printing and bailouts are the surefire way to fix the Japanese economy; if the US economy is anything to go by, that type of plan is but nothing but wishful thinking.

 

Destroying The Yen - YEN


Goodbye Gold

The great commodity super-cycle is in the process of turning and driving commodity prices down with it. As the American economy moves from "Growth Slowing" to "Growth Stabilizing," the artificial commodity bubble  brought on by the policies of the Federal Reserve is now popping. Plenty of investors, from hedge funds to individuals, are long gold and it's beginning to really hurt. Gold snapped our long-term TAIL risk line of $1671 last week, which means the price is likely to continue falling until catching some kind of support. Gold is down nearly $100 over the last month alone and CFTC gold net long contracts are down -13% week-over-week as investors flee. This is what happens when you let Ben Bernanke take control of the wheel.

 

Goodbye Gold - annotategold


Moshe Silver: Money, Riches & Wealth

 

This week, Drew and Tim are joined on air by Moshe Silver, author of Fixing a Broken Wall Street. Moshe authors the regular Hedgeye featured column “Slouching Towards Wall Street” and scours the Latin American press daily to add detail – and the occasional scoop – to Hedgeye’s in-depth coverage of Brazil.


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Recovery In The Housing Market

Recovery In The Housing Market - SA YoY

 

 

Five years after the financial crisis, investors are welcoming recovery in the housing market. Several data points that have come out over the last six weeks or so indicate that housing is doing well with inventory falling, home prices rising and mortgage applications increasing. This morning's S&P/Case-Shiller data shows that October home prices increased 4.3% year-over-year, beating expectations of 4.0%. That's the best improvement since May of 2010.

 

We've highlighted some data points over last two weeks from the housing sector:

 

* HOUSEHOLD FORMATION REMAINS STRONG IN NOVEMBER (note 12/20)

* Inventory of existing homes for sale sank 3.8% month-over-month to 2.03 million units, down from 2.14 million units in October. (note 12/20)

* The rate of existing home sales in November was stronger than expected at 5.04 million (SAAR) vs. consensus expectations for 4.9 million and was up 5.9% month-over-month vs. October. (note 12/20)

* Builder confidence rose further in December, as this morning's NAHB HMI reading was 47, up 2 points MoM from a revised composite reading of 45 in November. (note 12/18)

* The MBA Mortgage Purchase Applications Index rose 1.0% last week. This is the fifth consecutive week of positive WoW growth. (note 12/12)

 

Hedgeye Financials Sector Head Josh Steiner breaks down this morning's Case-Shiller data in detail:

 

"Looking at the data on a city-by-city basis, Phoenix and Las Vegas showed the strongest month-over-month improvement, rising 1.4% and 2.8%, respectively. Meanwhile, Boston and Chicago were the laggards. On a year-over-year basis, Phoenix is blowing the rest of the country away, up +21.7% YoY, followed by Detroit +10.0% YoY. Clearly the distressed market has turned from headwind to tailwind. The weakest two markets nationally on a YoY basis are New York and Chicago, both down just over 1%.

It's also worth noting that New York has an enormous weighting in Case-Shiller. New York accounts for 19.4% of the index. Considering NYC is the worst performing market in the country, and accounts for one-fifth of the index, it's a testament to how strong the real estate market throughout the rest of the country is." 

 

 

Recovery In The Housing Market - housing1

 

Recovery In The Housing Market - housing2

 

Recovery In The Housing Market - housing3

 

Recovery In The Housing Market - housing4

 

Recovery In The Housing Market - housing5


HOUSING: ACCELERATING PRICE GAINS AND MORE STIMULUS ON THE HORIZON

Takeaway: More evidence of home prices accelerating, while the government is poised to add further stimulus to an already strengthening recovery.

Home Price Data Reinforces Main Street Confidence

This morning's Case-Shiller HPI reading for October showed further acceleration. On a year-over-year basis, home prices rose by 4.3% in October, up from a 3.0% YoY increase in September. This should come as no surprise as Case-Shiller reflects Corelogic data on a lag, as it is a 3-month rolling average. Nevertheless, the market, media and Main Street continue to ascribe greater significance to this series, which makes it important.

 

Once of the central tenets of our bullish housing call is that good news in housing feeds on itself. As Main Street hears more and more good news about housing's recovery, that begets greater demand as demand is positively correlated with price. That rising demand, in turn, fuels ongoing price increases in a virtuous loop.

 

In our recent Black Book "Housing Heading Higher in 2013" we laid out the bull case for housing's recovery being stronger than expected in 2013. This morning's print is another data point in support of our thesis. 

 

Looking at the data on a city-by-city basis, Phoenix and Las Vegas showed the strongest month-over-month improvement, rising 1.4% and 2.8%, respectively. Meanwhile, Boston and Chicago were the laggards. On a year-over-year basis, Phoenix is blowing the rest of the country away, up +21.7% YoY, followed by Detroit +10.0% YoY. Clearly the distressed market has turned from headwind to tailwind. The weakest two markets nationally on a YoY basis are New York and Chicago, both down just over 1%.

 

It's also worth noting that New York has an enormous weighting in Case-Shiller. New York accounts for 19.4% of the index. Considering NYC is the worst performing market in the country, and accounts for one-fifth of the index, it's a testament to how strong the real estate market throughout the rest of the country is.

 

Further Government Involvement Is a Positive for Housing

Normally, weekly mortgage application volume data is released on Wednesday morning, but in light of the holiday it seems to be on a delay. We will provide an update once the data hits. That said, we wanted to flag an article in the Wall Street Journal as an interesting read.

 

The article describes new initiatives by the Obama administration to expand the refinancing programs backed by the government. The idea is to allow non-GSE loans that are underwater to be refinanced, though it's unclear how this would be achieved. One proposal has these loans being transferred to Fannie and Freddie, but there doesn't appear to be any consensus around whether this would also entail putback immunity for the banks underwriting the refi. This would be a major undertaking, however, as it would require a change to Fannie and Freddie's charters, which can only be done by Congress. Another proposal would allow non-GSE borrowers to refinance underwater loans through HAMP. This would be the path of least resistance as it would require no involvement by Congress. Currently, HAMP only allows underwater refis for borrowers at imminent risk of default. The proposal would modify those guidelines to include underwater borrowers not at risk of default.

 

While it remains to be seen what, if anything will come of this, it seems clear that the two scenarios here are either status quo or further stimulus for housing. As such, the expected outcome is another positive for housing. Our Black Book had flagged further government initiatives as an ongoing catalyst to the strengthening recovery in housing and this article appears to support that conclusion. Here is the link to the article WSJ.

 

HOUSING: ACCELERATING PRICE GAINS AND MORE STIMULUS ON THE HORIZON - SA YoY

 

HOUSING: ACCELERATING PRICE GAINS AND MORE STIMULUS ON THE HORIZON - NSA YoY

 

HOUSING: ACCELERATING PRICE GAINS AND MORE STIMULUS ON THE HORIZON - YoY

 

HOUSING: ACCELERATING PRICE GAINS AND MORE STIMULUS ON THE HORIZON - MoM

 

HOUSING: ACCELERATING PRICE GAINS AND MORE STIMULUS ON THE HORIZON - NSA MoM

 

Joshua Steiner, CFA

 

Robert Belsky


ANOTHER GOOD WEEK IN MACAU

Average daily table revenues were HK$775 million over the past 9 days, same as the prior week and up 14% the comparable period last year.  We believe the market is on pace for December YoY growth of 13-17% which would be above our original expectations of 12%.  High hold percentage may be the main driver of the better than expected results.

 

ANOTHER GOOD WEEK IN MACAU - 1

 

Wynn has been unable to recapture much share lost in the first 10 days of December and remains well below trend.  LVS and MGM continue to outperform their recent trend.  We think LVS will continue to gain share over the coming months while MGM appears to be more of an anomaly.  

 

ANOTHER GOOD WEEK IN MACAU - 2


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