But if I knew how to manage my portfolio safer and smarter than most hedge fund managers, I could realistically grow my wealth.
The FOMC Leaves The Big Question About Jobs Unanswered
There was no discussion of the “speed limit” issue in the July FOMC minutes. This is generally a “cyclical versus structural unemployment” issue.
According to the Bloomberg Consumer Comfort Index, perceptions of the economy are highly negative, at 29% positive versus 71% negative.
Increases in industrial production generally signal increases in employment. Things are finally starting to improve as construction jobs rebound and more companies start to move toward onshore production.
While the Great Recession was caused by excess debt, it’s still important to watch business inventories. It’s essential to focus on the inventory-to-sales ratio because spikes in this ratio forecast slowdowns.
We’re seeing energy-intensive industries relocate back to the US. This will do wonders for the employment picture. It will provide good-paying middle-class jobs—which this country desperately needs.
The “Empire State Manufacturing Survey” is put out by the New York Fed. The report shows that the economy is kicking into second gear. Firms are generally optimistic about the future.
Four years into the economic recovery, housing starts are still about where they bottomed in prior recessions. To get the economy out of first gear, we need to start building more houses, as homebuilding employs a lot of people.
In the latest survey, consumers expect home prices to increase by 2.2% over the next 12 months. Homebuilders need people to believe real estate is a sensible investment and that home price appreciation will continue.
Consumers are still relatively bullish on housing but are beginning to expect the torrid home price appreciation of the last year to end soon.
Over the past several months, mortgage rates and the ten-year bond yield stopped correlating. Last week, this trend broke as the two variables lined up once again. We’ll have to wait to see if this trend continues.
We’re coming up on earnings season for the builders. So far, most have reported good earnings. While housing is rebounding, it’s important to remember that these numbers are coming from an extremely depressed base.
There’s been a lot of underbuilding in six years. This means there’s tremendous pent-up demand that will unleash once the economic recovery filters down to the young.
The smaller builders are finding themselves almost shut out of the capital markets. This gives the bigger builders a tremendous advantage.
The dearth of inventory is helping all builders. Low inventory on existing homes is due to high professional investor demand and foreclosure laws in some states that require judges to sign off on foreclosures
Backlog increased 21% in unit terms, from 8,205 to 9,888, and 29% in dollar terms, from $2.2 billion to $2.9 billion. Backlog is an indicator of future revenues, which makes it an important statistic that investors should track.
One of the company’s big promotions is the Main Street Stars program. Through this program, D.R. Horton offers special incentives or options on new homes to people who operate in some sort of public service capacity.
The large foreclosure pipeline in the judicial states is one reason why prices are still weak in the northeast. Homebuyers don’t focus solely on existing supply.
The average 30-year fixed-rate mortgage increased two basis points to close at 3.99%. The ten-year bond rallied and yields decreased four basis points.
Manufacturing activity is a good sign for job growth, which has been the Achilles’ heel of this recovery. Although manufacturing isn’t the economic driver it used to be, it still matters.
Any economically sensitive business—especially a cyclical business—wants to pay attention to the ISM data. Homebuilders are especially cyclical and so will line up with manufacturing activity.