Purchase Apps | Equivocal ... Waiting on PHS

Takeaway: Purchase Apps declined WoW, accelerated YoY and remain in-line with the 3Q and YTD averages. We're more interested in tomorrow's PHS data.


Our Hedgeye Housing Compendium table (below) aspires to present the state of the housing market in a visually-friendly format that takes about 30 seconds to consume.


Purchase Apps | Equivocal ... Waiting on PHS - Compendium 102815


Today's Focus: MBA Mortgage Applications


The Data: Purchase Apps declined -3.1% WoW but accelerated back near the fastest pace of growth YTD at +23% YoY.


The Distortion: The TRID related pull-forward in demand and its subsequent reversal convoluted the first two weeks of October data (see 1st chart below).  The last two weeks of semi-clean data have averaged 194.3 – which compares to the 3Q average of 202 and the YTD average of 194.4. 


So the data was marginally softer sequentially, better on a year-over-year basis and largely in-line with the recent quarter and YTD trend.  Discerning a discrete inflection in trend from a single, middling print in a volatile high-frequency data set is challenging, particularly with some measure of residual distortion likely still impacting volumes.   


The Disagreement:  We’re more interested in tomorrow’s PHS data for September which we hope will serve as the arbiter of the underlying demand Trend/TRID implementation impact as the Purchase Application (up significantly) and New Home Sales (down significantly) data for September told antithetical demand stories. 


The preponderance of housing data remains strong (HPI, HMI, EHS, Purchase Apps, Interest Rates, Seasonality, Election Cycle, etc) but given the NHS decline alongside the emergent slide in consumer confidence, the recessionary data in the industrial space and twin softness in the Aug/Sept Employment reports, we’re more acutely focused on marginal shifts in the data than we have been in a while. 


Purchase Apps | Equivocal ... Waiting on PHS - Purchase YoY


Purchase Apps | Equivocal ... Waiting on PHS - Purchase YTD Monthly


Purchase Apps | Equivocal ... Waiting on PHS - Purchase Index   YoY Qtrly


Purchase Apps | Equivocal ... Waiting on PHS - Purchase 2013v14v15


Purchase Apps | Equivocal ... Waiting on PHS - Purchase   Refi YoY


Purchase Apps | Equivocal ... Waiting on PHS - Purchase LT


Purchase Apps | Equivocal ... Waiting on PHS - 30Y FRM


About MBA Mortgage Applications:

The Mortgage Bankers’ Association’s mortgage applications index covers more than 75% of mortgage applications originated through retail and consumer direct channels. It does not include loans delivered through wholesale broker and correspondent channels. The MBA mortgage purchase applications index is considered a leading indicator of single-family home sales and construction. Moreover, it is the only housing index that is released on a weekly basis. 



The MBA Purchase Apps index is released every Wednesday morning at 7 am EST.



Joshua Steiner, CFA


Christian B. Drake




"Fed Day Live" w/Keith McCullough Today at 2:10PM ET

Investors will anxiously watch as the Fed releases its highly-anticipated policy statement today at 2:00PM ET.


Keith McCullough will host a LIVE + INTERACTIVE online event today at 2:10pm ET offering immediate market reaction and commentary on whatever the Fed has decided to do (or not do). He will also answer viewer questions live during the show and offer high-level insight on the market impact, catalysts and how to position your portfolio going forward.


CLICK HERE to watch.



While our team believes the Fed will be more dovish than expected, Keith will distill various scenarios and describe how to be best positioned going foward. If you'd like to ask Keith a question, simply submit it via the dialogue box below the video stream.

Topics will include:

  • Does "Slower-For-Lower" (Growth) and "Lower-For-Longer" (Rates) remain the macro call?
  • Is Deflation still a risk?
  • Where is the Dollar headed into year-end?
  • What is an appropriate gross and/or net exposure to have as we traverse the next 3-6 months?




The Macro Show Replay | October 28, 2015



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CHART OF THE DAY: This Classic Pro-Cyclical #Bubble indicator Is Flashing Red


CHART OF THE DAY: This Classic Pro-Cyclical #Bubble indicator Is Flashing Red  - 10.28.15 EL chart


Editor's note: Below is a chart and brief excerpt from today's Early Look written by Hedgeye CEO Keith McCullough. Click here if you'd like to subscribe and get a step ahead of consensus.


"As you can see in today’s Chart of The Day, M&A is what we call a classic pro-cyclical #Bubble indicator (peaks at the end of an economic cycle). That makes complete sense. When top-down Global and US GDP growth slows, companies try to buy growth and/or “synergies.”

Storytelling Recession

“The more you leave out, the more you highlight what you leave in.”

-Henry Green


In the spirit of The Great #Deflation Risk, I’m finding some eerily relevant quotes from the 1930s these days. Green was an English author best known for his 1939 novel titled Party Going. What a capital markets bender this #SuperLateCycle US economic story has been!


As you can see in today’s Chart of The Day, M&A is what we call a classic pro-cyclical #Bubble indicator (peaks at the end of an economic cycle). That makes complete sense. When top-down Global and US GDP growth slows, companies try to buy growth and/or “synergies.”


In case you didn’t know, “synergies” means firing people. This is why Jobless Claims rising above 300,000 is one of the Top 3 US Recession Indicators – the other 2 (already happening) are Consumer Confidence rolling off its cycle peak, and Corporate Profit #GrowthSlowing.


Storytelling Recession - Fed cartoon 10.27.2015

Hedgeye CEO Keith McCullough will host a LIVE + INTERACTIVE online event today at 2:10pm ET offering immediate market reaction and commentary on the Fed statement. Click here to watch. 


Back to the Global Macro Grind


Not surprisingly, this week’s US economic data has been more of the same (i.e. the #GrowthSlowing bottom is not in):


  1. US New Home Sales for SEP missed (slowed)
  2. US Durable Goods (-3% y/y) remain in a recession, missing/slowing again
  3. US Consumer Confidence slowed to 97.6, right on time, from its #LateCycle peak in Q2 of 106


Since US Employment growth (Non-Farm Payrolls) peaked in Q1 of 2015 and US Consumption growth peaked in Q1, should it surprise anyone that Q3 and Q4 are going to be #GrowthSlowing quarters for both US employment/consumption and US corporate profits?


Even the most over-owned stock in human history (AAPL) is slowing. I’m sure that has nothing to do with why it looks “cheap.”


While there’s obviously a recession in Durable Goods, Inflation Expectations, Emerging Markets, etc., there’s a less subtle recession developing in US stock market storytelling.


While I was driving to hockey practice (after the market close) last night, I heard back to back Fast Monkeys on CNBC say this about Twitter’s (TWTR) quarter: “I’m long the stock and the guidance isn’t what I wanted to see, but you definitely have to buy it down here.”


At that point the stock was down 8-10%. They kept reading the corporate headline of “ad engagements” being up. Meanwhile their pricing was down -39% year-over-year. #lol. Thanks for coming out guys.


Imagine that. The ad-cycle has pricing pressure, as the US economic cycle slows from a 77 month peak…


In other #Deflation Risk news:


  1. Oil & Gas Stocks (XOP) led losers in the US stock market yesterday closing -2.9% vs. the Russell 2000 (IWM) -1.1% on the day
  2. US Transportation Stocks (IYT) were a close 2nd to last in terms of US Sector Style Factor exposure, closing -2.7% on the day
  3. Biotech (IBB) led gainers +3.1% on the day ahead of Gilead (GILD) reporting at the closing (and falling -2% on the news)


Yeah, #NoWorries. Everything you had to be long for the 1st two weeks of October has gone straight down in the last 3 trading days post the Draghi Devaluation => USD Up Deflation. And Healthcare Stocks just “outperformed”, for a day.


But but, the SP500 is “flat” for the YTD…


True. It was in 1987 too. And the only problem with “flat” is that everyone and their brother was looking for it (and interest rates) to be up this year. Oh, and many many funds aren’t “flat” (they’re down YTD) because most of the internals are down.


Another way to look at “internals” is this thing called market breadth. If you look at the stocks that were “up” on the day yesterday on the NYSE (New York Stock Exchange), the number was 25% (versus 72% of stocks being down on the day).


With the Russell 2000 and SP500 down -11.6% and -3.1%, respectively, from their all-time #Bubble peaks, you can tell me a story about unicorns, but I don’t buy it. There’s a recession in the credit quality of that narrative too.


Our immediate-term Global Macro Risk Ranges (with intermediate-term TREND research views in brackets) are now:


UST 10yr Yield 1.98-2.09% (bearish)

SPX 1 (bearish)
RUT 1135--1176 (bearish)
DAX 96 (bearish)

VIX 13.41-19.96 (bullish)
USD 95.82-97.44 (bullish)
EUR/USD 1.10-1.13 (bearish)
YEN 119.08-121.39 (neutral)
Oil (WTI) 44.24-46.31 (neutral)

Nat Gas 2.19-2.41 (bearish)

Gold 1150-1175 (bullish)
Copper 2.30-2.41 (bearish)


Best of luck out there today,



Keith R. McCullough
Chief Executive Officer


Storytelling Recession - 10.28.15 EL chart

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