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NEW HOME SALES: THE PACE OF SALES ACCELERATES, MONTHS SUPPLY FALLS

Takeaway: New Home sales rose 4.4% in November. Limited supply and rising demand are working together to push home prices higher.

New Home Sales: Another Strong Print in November

New home sales rose 4.4% MoM in November to 377k (SAAR). October data was revised down from 368k to 361k making the comp easier. On a year-over-year basis, new home sales in November are up 19.7%.

 

The inventory of new homes for sale rose to 149k in November, up from 147k in October. This continues an emerging trend of rising inventory, marking the third consecutive month in which inventory has grown, albeit off an all-time low base of 141k in August. When looking at inventory on a months supply basis, November stood at 4.7 months, which was down MoM from 4.9 months. For perspective, months supply floated between 4-5 months from 1, and has been in the mid-4 to low-5 months range YTD.

 

We would expect to see inventory levels rise, as this reflects a strengthening market. This is counterintuitive, we realize, but in looking at the long history of price in relationship to inventory levels, they have a strong positive correlation.  

 

The median price of new homes sold in November rose 15% vs the prior year, a continuation of the trend we've seen year-to-date.

 

We continue to believe that home prices are heading meaningfully higher in 2013. This morning's New Home Sales data, showing a rising sales rate and falling months supply of inventory, supports our thesis.

 

NEW HOME SALES: THE PACE OF SALES ACCELERATES, MONTHS SUPPLY FALLS - NHS   Sales   YoY

 

NEW HOME SALES: THE PACE OF SALES ACCELERATES, MONTHS SUPPLY FALLS - NHS   LT

 

NEW HOME SALES: THE PACE OF SALES ACCELERATES, MONTHS SUPPLY FALLS - NHS   Inventory

 

NEW HOME SALES: THE PACE OF SALES ACCELERATES, MONTHS SUPPLY FALLS - NHS   Inventory LT

 

NEW HOME SALES: THE PACE OF SALES ACCELERATES, MONTHS SUPPLY FALLS - Median

 

Joshua Steiner, CFA

 

Robert Belsky


Jobless Claims: Missing Pieces

This week’s jobless claims numbers had 19 states omitted from the data, including California and Texas. While the data is positive with initial jobless claims falling 11k to 350k from 361k, we wouldn’t put too much faith in this data and would wait and see what next week’s numbers hold. Hurricane Sandy is no longer affecting the numbers and claims are generally trending lower, the latter of which is a tailwind we should expect to continue through February.

 

Jobless Claims: Missing Pieces  - Katrina normal

 

Jobless Claims: Missing Pieces  - Seasonality normal


JOSHUA STEINER: JOBLESS CLAIMS: TOO MUCH DATA MISSING TO DRAW ANY CONCLUSIONS

Takeaway: The labor department's estimates show claims posting another solid week of improvement. We'll see how good they are at estimating next week.

Nineteen states were omitted from the jobless claims data this morning, including California and Texas. As such, the labor department had to estimate claim rates for those states. Needless to say, we wouldn't put too much stock in these numbers.

 

That said, initial jobless claims fell 11k to 350k from 361k. The prior week's number was revised up by 1k to 362k. Incorporating this upward revision, claims were lower by 12k. Rolling claims, meanwhile, fell 11.25k WoW to 357k and non-seasonally adjusted claims rose 39k to 441k. Additionally, the NSA rolling year-over-year change, which we monitor because it excludes the effects of seasonality, was -5.9%.

 

Claims have resumed their "normal" behavior in two respects. First, the effects of Hurricane Sandy are now fully out of the numbers, as we show in the first chart. Second, claims are generally trending lower as we would expect them to through the end of February. This will keep the wind at Financials' back, generally speaking, for the next two months. 

 

JOSHUA STEINER: JOBLESS CLAIMS: TOO MUCH DATA MISSING TO DRAW ANY CONCLUSIONS - 1

 

JOSHUA STEINER: JOBLESS CLAIMS: TOO MUCH DATA MISSING TO DRAW ANY CONCLUSIONS - 2

 

JOSHUA STEINER: JOBLESS CLAIMS: TOO MUCH DATA MISSING TO DRAW ANY CONCLUSIONS - 3

 

JOSHUA STEINER: JOBLESS CLAIMS: TOO MUCH DATA MISSING TO DRAW ANY CONCLUSIONS - 4

 

JOSHUA STEINER: JOBLESS CLAIMS: TOO MUCH DATA MISSING TO DRAW ANY CONCLUSIONS - 5

 

JOSHUA STEINER: JOBLESS CLAIMS: TOO MUCH DATA MISSING TO DRAW ANY CONCLUSIONS - 6

 

JOSHUA STEINER: JOBLESS CLAIMS: TOO MUCH DATA MISSING TO DRAW ANY CONCLUSIONS - 7

 

JOSHUA STEINER: JOBLESS CLAIMS: TOO MUCH DATA MISSING TO DRAW ANY CONCLUSIONS - 8
 

JOSHUA STEINER: JOBLESS CLAIMS: TOO MUCH DATA MISSING TO DRAW ANY CONCLUSIONS - 9

 

JOSHUA STEINER: JOBLESS CLAIMS: TOO MUCH DATA MISSING TO DRAW ANY CONCLUSIONS - 10

 

JOSHUA STEINER: JOBLESS CLAIMS: TOO MUCH DATA MISSING TO DRAW ANY CONCLUSIONS - 11 

 

Joshua Steiner, CFA

 

Robert Belsky

Rb


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Becoming American

Client Talking Points

How Low Can You Go?

The Japanese yen recently hit a 27-month low against the US dollar. The Bank of Japan has accepted the task of devaluing the yen in a style not unlike the Federal Reserve. Their theory is that the yen is too strong and thus, they must burn the yen until it glows bright. This, combined with bailouts and other maneuvers is their plan to save the Japanese economy.

 

And much like our stock market, it has inflated the Nikkei and Japanese equities quite a bit, with the Nikkei 225 up 22% for 2012, up 9% in December alone. We mentioned what would happen with Japan if they went this route back in November on our Best Ideas call and here we are. If following in the footsteps of the United States is what Japan is aiming for, they’re doing quite well thus far.

Asset Allocation

CASH 55% US EQUITIES 21%
INTL EQUITIES 12% COMMODITIES 0%
FIXED INCOME 0% INTL CURRENCIES 12%

Top Long Ideas

Company Ticker Sector Duration
NKE

Our competitors are neutral to bearish on the name ahead of earnings, but we think they’re missing the bigger picture. We think concerns over the shoe cycle rolling over are overdone. With R&D in the mid-teens, NKE has the ability to drive the ‘sneaker cycle’ in a case of “the tail wagging the dog”. We also think $NKE is a candidate for releasing a special dividend when they report EPS next week.

SBUX

Uncertainty in US from a macro perspective (jobless claims uptick) gives us pause from TRADE perspective although coffee prices will serve as a tailwind going forward. Company is becoming more complex, taking on risk as it acquires new brands. Longer-term, we view Starbucks, along with YUM, as one of the most attractive global growth stories in our space.

FDX

Margins are in a cycle trough as the USPS is on the brink. FDX is taking more share in the U.S. and following the recent $TNT news flow we think $UPS is in a tough spot.

Three for the Road

TWEET OF THE DAY

“Chinese iron ore prices have seen a 54% rally in the last month. Who saw that coming?” -@HedgeyeDJ

QUOTE OF THE DAY

"Sure there are dishonest men in local government. But there are dishonest men in national government too.” -Richard Nixon

STAT OF THE DAY

November Chicago Fed Midwest Manufacturing Index: 93.7 v 92.2 prior


JOBLESS CLAIMS: TOO MUCH DATA MISSING TO DRAW ANY CONCLUSIONS

Takeaway: The labor department's estimates show claims posting another solid week of improvement. We'll see how good they are at estimating next week.

Nineteen states were omitted from the jobless claims data this morning, including California and Texas. As such, the labor department had to estimate claim rates for those states. Needless to say, we wouldn't put too much stock in these numbers.

 

That said, initial jobless claims fell 11k to 350k from 361k. The prior week's number was revised up by 1k to 362k. Incorporating this upward revision, claims were lower by 12k. Rolling claims, meanwhile, fell 11.25k WoW to 357k and non-seasonally adjusted claims rose 39k to 441k. Additionally, the NSA rolling year-over-year change, which we monitor because it excludes the effects of seasonality, was -5.9%.

 

Claims have resumed their "normal" behavior in two respects. First, the effects of Hurricane Sandy are now fully out of the numbers, as we show in the first chart. Second, claims are generally trending lower as we would expect them to through the end of February. This will keep the wind at Financials' back, generally speaking, for the next two months. 

 

JOBLESS CLAIMS: TOO MUCH DATA MISSING TO DRAW ANY CONCLUSIONS - Katrina

 

JOBLESS CLAIMS: TOO MUCH DATA MISSING TO DRAW ANY CONCLUSIONS - Seasonality

 

JOBLESS CLAIMS: TOO MUCH DATA MISSING TO DRAW ANY CONCLUSIONS - Raw

 

JOBLESS CLAIMS: TOO MUCH DATA MISSING TO DRAW ANY CONCLUSIONS - Rolling

 

JOBLESS CLAIMS: TOO MUCH DATA MISSING TO DRAW ANY CONCLUSIONS - NSA 2

 

JOBLESS CLAIMS: TOO MUCH DATA MISSING TO DRAW ANY CONCLUSIONS - Rolling NSA

 

JOBLESS CLAIMS: TOO MUCH DATA MISSING TO DRAW ANY CONCLUSIONS - s p

 

JOBLESS CLAIMS: TOO MUCH DATA MISSING TO DRAW ANY CONCLUSIONS - Fed   Claims

 

JOBLESS CLAIMS: TOO MUCH DATA MISSING TO DRAW ANY CONCLUSIONS - Recessions

 

JOBLESS CLAIMS: TOO MUCH DATA MISSING TO DRAW ANY CONCLUSIONS - Claims Linear

 

JOBLESS CLAIMS: TOO MUCH DATA MISSING TO DRAW ANY CONCLUSIONS - YoY

 

Yield Spreads

The 2-10 spread fell 6.1 basis points WoW to 148 bps. 4QTD, the 2-10 spread is averaging 142 bps, which is higher by 6 bps relative to 3Q12.

 

JOBLESS CLAIMS: TOO MUCH DATA MISSING TO DRAW ANY CONCLUSIONS - 2 10

 

JOBLESS CLAIMS: TOO MUCH DATA MISSING TO DRAW ANY CONCLUSIONS - 2 10 QoQ

 

Financial Subsector Performance

The table below shows the stock performance of each Financial subsector over multiple durations.

 

JOBLESS CLAIMS: TOO MUCH DATA MISSING TO DRAW ANY CONCLUSIONS - Subsector Performance

 

JOBLESS CLAIMS: TOO MUCH DATA MISSING TO DRAW ANY CONCLUSIONS - Companies

 

Joshua Steiner, CFA

 

Robert Belsky

Rbe

 



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