Central Perk: 20 aug. 2015

joi, 20 august 2015

Mish's Global Economic Trend Analysis

Posted: 20 Aug 2015 11:56 AM PDT

Economists are bubbly over home sales, especially existing home sales that came in at the top end of the Bloomberg Consensus range of 5.3 to 5.6 million homes at a seasonally adjusted annualized rate.

There's plenty of life in the housing sector with existing home sales up a stronger-than-expected 2.0 percent in July to a 5.59 million annual rate. And demand is well ahead of supply which is very thin, at 4.8 months at the current sales rate vs 4.9 and 5.1 in the two prior months and 5.6 months in July last year. Sales are up 10.3 percent year-on-year, well ahead of the median price which, at $234,000, is up 5.6 percent. This mismatch, especially with thin supply, hints at pricing power ahead.

Single-family homes lead the report, up 2.7 percent in the month at a 4.960 million annual rate. Condos, where demand on the new home side is soaring, actually fell 3.1 percent in the month to a 630,000 rate. Year-on-year, sales of single-family homes are up 11.0 percent with condos at plus 5.0 percent.

By region, July's strength is centered in the South with a gain of 4.1 percent. The West follows at plus 3.2 percent with the Midwest unchanged and the Northeast down 2.8 percent. Year-on-year, sales are very evenly balanced with all right at the 10 percent mark.

The balance of this report is impressive, pointing to a rising tide of strength across housing which, given spotty performances by the factory and consumer sectors, looks to be the leading driver for the second-half economy.

New vs. Existing Home Sales

New vs. Existing Home Sales Detail

Comparison

Existing home sales are now back to a level first seen in 2001.
New home sales are below a number reached in 1963.
Sales are "strong" only as compared to recent anemic activity.

New Home Sales Detail

New Home Sales Details

New home sales currently sit at 482,000 (seasonally adjusted annualized).
Every month between April 1963 to May 1966, inclusive, exceeded the current total.

Rising Tide of Strength?

New home sales are far more important than existing home sales.

People remodel a bit on existing home sales. Typically they paint, perhaps buy a new appliance, or plant a tree. Some even put in new cabinets. Others may have to repair a roof. But some do nothing at all.

On a new home, everything is new from appliances to shingles. Landscaping follows. So does furniture.

Few new jobs are created on existing home sales. Multiple jobs are involved in new home sales.

Finally, existing home sales are recorded at closing. New home sales are recorded at contract time, with jobs activity guaranteed to follow.

Price Mismatch?

Bloomberg states "Sales are up 10.3 percent year-on-year, well ahead of the median price which, at $234,000, is up 5.6 percent. This mismatch, especially with thin supply, hints at pricing power ahead."

Is that what it means, or does it mean buyers cannot afford much because everyone who could afford more already bought?

Mike "Mish" Shedlock

Tsipras to Resign, Call Snap Elections; Sweeteners Before the Screws; Campaign Promise You Can Believe In

Posted: 20 Aug 2015 09:58 AM PDT

In the wake of the world's largest ever renege on campaign promises in the shortest period of time, Greek prime minister Alexis Tsipras' Syriza party splintered. Tsipras lost his ruling coalition and would likely have not survived a vote of confidence.

Instead, and as widely expected, Alexis Tsipras to 'Step Down and Call Snap Elections'.

The Greek prime minister, Alexis Tsipras, has decided to step down and call snap elections for 20 September, government officials said.

Once he submits his resignation the prime minister would be replaced by the president of Greece's supreme court, Vassiliki Thanou-Christophilou – a vocal bailout opponent – who would oversee the elections as the head of a transitional government.

Tsipras won parliamentary backing for the tough bailout programme last week by a comfortable margin despite a large-scale rebellion among members of his ruling leftwing Syriza party, nearly one-third of whose 149 MPs either voted against the deal or abstained. Syriza governs in a coalition with the rightwing, anti-austerity party Independent Greeks (Anel).

The revolt by hardliners angry at what they view as a betrayal of the party's pledge to fight austerity left Tsipras short of the 120 votes he would need – two-fifths of the 300-seat assembly – to survive a censure motion and he was widely expected to call a confidence vote this week or next.

Tsipras appears to have calculated that it was better to call the elections early, before the effects of the new bailout measures – including further pension cuts, VAT increases and a "solidarity" tax on incomes – started to make themselves felt.

Under Greece's complex constitutional laws, President Prokopis Pavlopoulos cannot immediately call an election if Tsipras resigns, but must first consult the other major parties to see if they could form a government – a near impossibility given the current parliamentary arithmetic.

Recent opinion polls have put support for Syriza at around 33-34%, making it by far the country's most popular party – but not popular enough to govern without a coalition partner. No polls have been published since then, but Syriza insiders remain optimistic.

Sweeteners Before the Screws

Support for Syriza is unlikely to be 33-34% because of party splintering.

Thus, one can fully expect sweeteners and outside interference from creditors praising Tsipras in the next month.

I suspect the ECB will agree to return profits it made on any Greek bonds and add in a few other meaningless (in the grand scheme of things) promises as well.

The goal of the creditors is to provide a few sweeteners (as few as necessary), to increase the odds Tsipras wins the next election and can form a government.

Such manipulation needs to be sooner rather than later, before the screws of the latest "bailout" take their toll on voters.

Campaign Promise You Can Believe In

Here's a lollipop today, for your vote in September. After the election you will feel like we kicked you in the teeth.

Mike "Mish" Shedlock

Seth's Blog : Agreeing on the problem

Agreeing on the problem

Please don't tell us it's complicated.

Organizations, scientists and individuals always do better in solving problems that are clearly stated. The solution might be complicated, the system might be complex, but if we don't agree on the problem, it's hard to find the resources and the will to seek out a solution.

For a business, the problem might be that:

there aren't enough customers
gross margins are too low
word of mouth is poor
hiring sufficiently talented people is too difficult
competition just moved in next door
production quality is off.

Identify and agree on any of these and we can get to work. Denying the problem doesn't increase the chances it will go away.

This is the political/lobbied challenge facing our stalled response to the melting icecaps. There are a variety of possible problem-denials along with one simple statement that actually opens the door to progress:

The world isn't getting hotter, the data is wrong.
The world is getting hotter, and that's okay.
The world is getting hotter, but it's not caused by us, and anyway, we can't do anything at all about it.
The world is getting hotter, it's urgent, we need to hurry, and dealing with it is a difficult technical and political problem.

Which category are you in at work? What about the people you vote for and work for?

Often, the reason people don't want to agree on a problem is that it's frightening to acknowledge a problem if we don't know that there's a solution, as if saying the problem out loud makes it more real, more likely to undermine our lives.

The irony, of course, is that fear of the problem makes it far more likely that the problem itself will hurt us.