Fundmastery Blog

Kurt Brouwer June 24th, 2008

The downturn in residential real estate is nationwide although the variation among cities is significant. The chart above illustrates what has happened in two groupings of cities. However, the Case Schiller Index covers annual rates of growth or decline in home prices. It does not demonstrate the actual value of these homes over time. With the fall in home prices, it is generally accepted that home prices in much of the country are back to the levels of 2004.

However, the table below illustrates the wide range of falling prices across the country. Clearly, homeowners in Charlotte are happier than their counterparts in Phoenix, Las Vegas or Miami.

For the complete report, go here.

• Uncategorized
• Comments(0)

Kurt Brouwer June 12th, 2008

James Pethokoukis at the Capital Commerce blog coined this tongue-in-cheek phrase — Dude, Where’s My Recession? — and it has been picked up elsewhere in the blogosphere. He posts under this title when surprisingly positive economic news comes out.

This phrase pokes fun of all the politicians, pundits and press people who have been bemoaning the ‘recession’ for many months now. That’s not to suggest that the economy is booming, but that reports of its demise are premature. His latest post on this topic points to the surprising surge in retail sales [emphasis added]:

Dude, Where’s My Recession?: The Series (U.S. News/Capital Commerce Blog, June 12, 2008, James Pethokoukis)

As the saying goes, “Facts are stubborn things.”

1. Retail sales increased 1 percent in May. The consensus forecast was plus 0.5 percent.
2. Retail sales excluding autos increased 1.2 percent. The consensus was 0.7 percent.
3. Sales were also revised, up substantially for March and April.

So tell me, Brian Wesbury and Bob Stein over at First Trust Advisors, what’s it all mean?

Today’s report is the final nail in the coffin for the theory that the U.S. is in a consumer-led recession. Total retail sales are up at an 8% annual rate in the past three months while “core” retail sales are up at a 10.2% rate. It is impossible to be in a consumer-led recession when retail sales are growing so rapidly. Some analysts will attribute the strength in sales to the tax rebate checks that started being sent at the very end of April. However, sales were revised, up substantially for March and April, and core sales (excluding autos, building materials, and gas) in March and April were about as strong as in May, suggesting the rise in consumption is based on fundamentals, not government checks. Today’s report creates considerable upside risk to our forecast of a 1.5% real GDP growth rate for the second quarter of 2008…

For more on this topic, see The Strangest Recession in Economic History and U.S. Economy — Still Growing After All These Fears.

• Uncategorized
• Comments(0)

Kurt Brouwer June 2nd, 2008

Source: Calculated Risk

• Uncategorized
• Comments(0)

Kurt Brouwer May 10th, 2008

U.S. Trade Deficit Narrows Unexpectedly (International Herald Tribune, May 9, 2008)

The U.S. trade deficit narrowed more than expected in March on a record plunge in the value of imports, even as average oil prices surged to a new record, the Commerce Department reported Friday.

The trade gap shrank to $58.2 billion in March, down 5.7 percent from a revised estimate of $61.7 billion in February. Wall Street analysts had expected the March gap to narrow to $61.3 billion.

A $6.1 billion drop in the value of imports to $206.7 billion was the biggest on record. It was also the biggest percentage drop since December 2001, only months after the attacks on the United States and when the U.S. economy was in a downturn.

In a sign that the current U.S. economic slowdown is taking a toll on consumer and business demand, major import categories like autos and auto parts, industrial supplies and materials, consumer goods and capital goods all showed declines in March…

I snorted a bit when I read the title where it says the ‘trade deficit narrows unexpectedly.’ Given how weak the dollar is (see Defending The Dollar), the only thing that could reasonably be viewed as unexpected would be for the trade deficit to widen.

• Business , Economy , Geopolitics , Money , Personal Finance , Uncategorized
• Comments(3)

Kurt Brouwer April 16th, 2008

Normally, it’s considered bad form to report a 50% drop in profits, but this is a wild and wacky time on Wall Street.

Because the panic-prone ‘Street’ expected much worse, the news today that JP Morgan Chase only suffered a 50% cut in profitability soothed investors. Wells Fargo had an even lower drop in profit, but it’s stock went up less than JP Morgan [emphasis added below].

Bank Results Soothe Investors (Reuters, April 16, 2008, Jonathan Stempel & Joseph A. Giannone)

JPMorgan Chase & Co and Wells Fargo & Co posted first-quarter results that soothed investors who had counted on the giant banks to handle the U.S. housing and credit crises better than many rivals.

Profit slumped 50 percent at JPMorgan, the third-largest U.S. bank and fell 11 percent at Wells Fargo, the fifth- largest. Bad loans soared and executives at both banks said market woes will likely deepen….In afternoon trading, JPMorgan shares were up 5.1 percent, and Wells Fargo shares were up 4.1 percent.

… JPMorgan said quarterly profit fell to $2.37 billion, or 68 cents per share, from $4.79 billion, or $1.34, a year earlier.

…Wells Fargo said quarterly profit fell to $2 billion, or 60 cents per share, from $2.24 billion, or 66 cents, a year earlier. Revenue increased 12 percent to $10.56 billion.

…Despite the housing slump, mortgage applications totaled $132 billion, soaring 45 percent from the fourth quarter. Wells Fargo has a reputation as a conservative mortgage lender.

“That’s exactly an area that plays to our strengths and we know we’re picking up market share,” Chief Financial Officer Howard Atkins said in an interview.

Atkins expects more housing market struggles, however. “We’re closer to the bottom than we were six months ago, but we’re not at the bottom yet.”

This last point bears watching. Wells Fargo actually had much higher mortgage loan activity. Apparently, the weaker players in the mortgage industry cut back so much that a strong lender such as Wells can come in and take market share.

That’s the way it works. Recessions make things difficult, but they also present opportunities for those companies with vision and foresight and the financial strength to expand when times are tough.

• Uncategorized
• Comments(0)