joi, 21 ianuarie 2016

Mish's Global Economic Trend Analysis

Mish's Global Economic Trend Analysis


Draghi Rally Fizzles In Less Than One Day: Failure In Pictures

Posted: 21 Jan 2016 04:25 PM PST

ECB President Mario Draghi attempted to talk the Euro lower and the market higher today in a lengthy one hour press conference following his decision to not change interest rates.

Markets are now closed, so let's put a spotlight on the results (or lack thereof) of Draghi's verbal intervention.

click on any chart for sharper image

Euro 15-Minute Chart



That is the key chart for someone who desperately desires the euro to sink vs. the US dollar.
In 15 minutes, the Euro sank from 1.09 to 1.078. For the rest of the day, the Euro rallied right back where it started from.

Five Year German Government Bond



Congratulations are in order. Draghi managed to drive the yield on the German bond from -0.20% to -0.24%.

How that's supposed to cause inflation remains a mystery given that it's not done a damn thing yet.

US 10-Year Government Note



Yield on the US 10-year treasury note reversed its freefall to close back above 2%. Will it stay there? Why should it?

The New York Fed is now openly discussing negative interest rates in the US if there is another crisis.

S&P 500 15-Minute Chart



The S&P 500 did a number of gyrations, but the key Draghi-sponsored effect is the largest green candle. A decent rally ensued off the lows, but that rally faded into the close. 

Brent Crude 15-Minute Chart



Brent crude did rally more than $2 off the lows. However, the rally stalled before hitting $30. Neither US West Texas Intermediate (WTI), nor Brent is above $30 as I type.

Jawboning oil is not likely to work, even in the intermediate-term.

As I said earlier today Mario Draghi a Bare-Assed Emperor With No Clothes.

Mike "Mish" Shedlock

Is Mario Draghi a Bare-Assed Emperor With No Clothes?

Posted: 21 Jan 2016 12:41 PM PST

ECB Hints at March Stimulus

ECB president Mario Draghi ignited the markets today with Hints at More Stimulus in March.
Investors reacted positively to Mr. Draghi's comments Thursday, with eurozone equity markets moving higher in anticipation of further stimulus from the central bank. The euro fell against the U.S. dollar while government bond prices rose, another sign that investors expected Mr. Draghi to deliver fresh measures in March.

Speaking in a news conference, Mr. Draghi said the stimulus measures undertaken by the central bank since June 2014—and topped up most recently in December—had "strengthened the euro area's resilience to recent, global economic shocks."

But he added that fresh declines in oil prices suggest that the annual rate of inflation in 2016 is likely to be "significantly" below forecasts released last month.
Five Draghi Takeaways

Heading into the market close, there's not much left of today's rally. Crude has not even held the $30 level, but a half hour remains.

The Wall Street Journal offers 5 Takeaways from Mario Draghi's News Conference. My comments follow these takeaways.
[Draghi warns] inflation is the currency area is likely to be "significantly weaker this year than had been expected, and that consumer prices may even fall again in coming months. That means further action may be required, and as early as the governing council's next gathering. "It will be necessary to review and therefore possibly reconsider our monetary policy stance at our next meeting in March," said Draghi.

[In regards to the failure of the ECB to raise the inflation rate towards the central bank's target of just under 2% from the 0.2% rate recorded in December, Draghi proclaimed] "We are not surrendering in front of these global factors. We will confirm our determination to continue to comply with our mandate even in face of adverse developments."

His final comment of the hour-long conference? "We don't give up." 
ECB Inflation Mandate

Please note whose inflation mandate Draghi is desperate to meet: "our mandate". It's a self-imposed mandate, and a ridiculous one at that.

I repeat my challenge to Keynesians "Prove Rising Prices Provide an Overall Economic Benefit".

Draghi's torturous Press comment lasted over an hour. The final 4 minutes are worth a look. I position the video at that spot. 



Keynesian Inflation Nonsense

The Wall Street Journal points out "The annual inflation rate in the 19-country currency area has been far below the central bank's medium-term target of just below 2% since late 2013. Central banks usually try to avoid deflation, or steadily falling prices, as it can lead to consumers holding off purchases and ultimately lower the standard of living of the entire economy."

Consumer price inflation, called Harmonized Index of Consumer Prices (HICP) in Europe, is indeed lower than what the ECB wants. But the second half of the above paragraph which proclaims "falling prices cause consumers to hold of purchases thereby ultimately lowing standards of living is complete" Keynesian nonsense.

Falling prices are a good thing. Money goes further. If falling prices caused people to delay purchases not a single computer would have been purchased for decades.

Consider clothes. Someone who needs a coat will buy one even when prices fall. On the other hand, if prices were rising rapidly, consumers might have to choose between a coat or eating.

There is absolutely no economic benefit to rising prices.  

ECB Oil "Rally" In Pictures



ECB Bond Purchases



Draghi Has No Clothes

If padding the central bank balance sheet causes inflation, then why the hell hasn't it?

The answer is: it did, just not in the CPI or the HICP. Instead, central banks sponsored yet another asset bubble. This bubble is even more widespread than the housing bubble that preceded it.

Another round of asset deflation is now baked in the cake.

History proves it is asset deflation, not consumer price deflation that is economically damaging.

The BIS (Bank of International Settlements), agrees with that statement. For further discussion, please see Historical Perspective on CPI Deflations: How Damaging are They?

Meanwhile, please note that Mario Draghi was bare-assed naked at today's conference.

Like the emperor with no clothes, no one seemed to notice.

Mike "Mish" Shedlock

All Bad Things Come to An End

Posted: 21 Jan 2016 10:27 AM PST

Eventually, all bad things come to an end.

Here's a case in point: Christine Lagarde's 5-year term as head of the IMF is nearly over. A replacement search is underway.

 The Wall Street Journal reports the IMF Launches Selection Process for Managing Director.

Upon reading the article, I was both shocked and outraged to discover that neither I nor ZeroHedge are in serious consideration for the job.

Then again, the first thing I would do as head of that parasitic organization would be to fire everyone, then myself, effectively killing the parasite.

Further investigation shows Lagarde is a shoo-in for a second term. So, although bad things will eventually come to an end, we will just have to wait longer.

Mike "Mish" Shedlock

Run on Italy's Third Largest Bank? Capital Controls or Bail-Ins Next? Why Take Chances?

Posted: 20 Jan 2016 11:11 PM PST

Italian Bank Customers Pull Deposits

The CEO of Monte dei Paschi, Italy's third largest bank, and the oldest surviving bank in the world, admits Customers Pulling Deposits as share prices sink.
Some Monte dei Paschi customers have been pulling savings out of the Italian bank, its chief executive said on Wednesday, as it faces a crisis over a mountain of bad loans that has wiped nearly 60 percent off its market value this year.

CEO Fabrizio Viola did not say how much money savers had withdrawn, or when the outflow began, though he said the fall in deposits was "limited" and that the bank could cope with it as he sought to reassure customers and investors.

Italian bank shares have lost 24 percent since the beginning of 2016 as investors, already rattled about global economic growth, have sold out of a sector with low profitability and about 200 billion euros ($218 billion) of loans that are unlikely to be repaid.

Monte Paschi - Italy's third-biggest bank - has lost the most ground as it is perceived to be the most vulnerable; it has the highest level of bad loans as a proportion of assets and was the worst performer in a 2014 health check of euro zone lenders.

"Of course clients turning to our local branches are worried about what they read," Viola said in a statement.

"At present the size of the funding lost due to clients who decided to move part of their savings elsewhere is limited and anyway below levels seen during the previous crisis the bank faced in February 2013 which was overcome brilliantly."
Believability Standards

The problem with statements like "fall in deposits is limited" is that no one can possibly know if they are true. We can't expect Viola to admit the problem is serious.

European Commission President Jean-Claude Juncker set the believability standard in 2011.

Juncker admitted "When it becomes serious, you have to lie". At the time, he was Luxembourg prime minister.

It's Serious! Share prices of Monte dei Paschi are down over 50%, the worst of any major Italian bank. Deposits are leaving, and the only statement we have is that withdrawals are "limited".

Bail-ins have already hit other Italian banks.

In December, bail-ins at smaller Italian banks wiped out subordinate bondholders.

Sergio Picinotti, a 63-year-old unemployed man, lost his entire €40,000 nest egg in Banca Etruria. A friend at the bank said "Trust me, it will take the third world war to shut down Banca Etuuria," said Picinotti.

Did a third world war just start?

Bad Bank Plan Stalls

On January 20, Bloomberg reported Italy's Lending Recovery at Risk as Renzi Bad Bank Plan Stalls
With non-performing loans touching a record high of 201 billion euros ($219 billion) in November and delays in creating a bad bank even as the European Central Bank ups its scrutiny, lenders may be reluctant to make new loans.

So far, the ECB's bond purchase program, known as quantitative easing, has shielded government bonds from the country's banking woes, with the yield on 10-year debt stable at 1.56 percent compared with a euro-era high of 7.5 percent in November 2011. Italy pays just 101 basis points more than German bunds to borrow for a decade.

Italian bank stocks and bonds, however, have not been spared.

To further grease the wheels of the economy by speeding up disposals of non-performing loans and free up more resources for credit to companies and households, Italian Prime Minister Matteo Renzi's government has been trying to win approval at the European level for the creation of a bad bank.

The plan has been delayed several times and investors fear recent quarrels between European Commission President Jean-Claude Juncker and Renzi over an alleged lack of budget flexibility won't make things easier.

"If there is a bail-in event this year, Italy is one of the countries where that is most likely to happen," said Alberto Gallo, head of macro-credit research at Royal Bank of Scotland Group Plc.

"Many banks, deprived of a cheap source of funding such as subordinated bonds and having to repay the loans they got from ECB, may find themselves with a reduced liquidity at disposal to boost lending," Gianluca Ziglio, executive director of fixed-income research at Sunrise Brokers LLP in London, said by phone.

"Gone are the days when concerns about NPLs [Non-Performing Loans]could be simply swept under the carpet," said Wolfango Piccoli, managing director of Teneo Intelligence in London.
Europe Fears Bail-Ins

On January 11, I commented Europe Fears Bail-Ins: Capital Flight Intensifies in Italy, France, Spain; Are German Banks Safe?

Here's a table from that post, with Target2 Balances in billions of euros.

Country Symbol Target2 BalanceComment
SpainES-241.8Worst Negative Since 2012
ItalyIT-229.6Worst Negative Ever
GreeceGR-97.3Least Negative Since 2015 Q1
ECBECB-73.8Worst Negative Ever
FranceFR-73.5Worst Negative Since 2011
GermanyDE592.5Highest Since 2012
LuxembourgLU140.4Highest Ever
NetherlandsNL49.4Highest Since September 2015
FinlandFI31.8Highest Since August 2015
Cyprus CY2.4Second Highest Ever


Lack of Trust

Target2 is a measure of capital flight between eurozone countries. For example: A depositor in a Greek, Spanish, or Italian bank does not trust their bank so the depositor opens up a new account and transfers the balance to a bank in Germany, the Netherlands, or Luxembourg instead.

The recipient banks then park the money at the ECB at negative interest rates instead of  buying Greek, Spanish, or Italian bonds. 

Money parked at the ECB at a negative rate of 0.3% hit a new high at the beginning of 2016.



Brilliant Comeback Details

Viola claims there was a crisis in February of 2013 that was "overcome brilliantly".

How many times does one want to bet on that roll of the dice?

Let's explore Viola's brilliant comeback idea from the perspective of Target2 balances for Italy (in billions of euros).


DateItaly Target2 Imbalance
200822.9
200954.8
20103.4
2011-191.4
2012-255.1
2013-229.1
2014 Q2-149.4
2014 Q3-197.4
2014 Q4-208.9
2015 Q1-191.5
2015 June-188.6
2015 July-195.2
2015 Aug-214.6
2015 Sep-235.7
2015 Oct-223.9
2015 Nov-229.6
2015 Dec?

Between 2008 and 2010, Italian banks had capital inflows.

Things went to hell in a hurry starting 2011. By the end of 2012, target2 liabilities of Italian banks hit €255.1 billion. By second quarter of 2014, those imbalances shrank to €149.4 billion.

"Brilliance" Explained

Did Viola do something to spur confidence in Italian banks?

Nope.

What caused the improvement? 

  1. On July 26, 2012, ECB president Mario Draghi made this Famous Statement: "Within our mandate, the ECB is ready to do whatever it takes to preserve the euro. And believe me, it will be enough."
  2.  
  3. On February 14, 2014, Renzi Grabs Power in Italy Without Election.

The ECB and the financial markets liked that power grab by Matteo Renzi who then became Italy's prime minister.

Money that had fled Italian banks, poured back in, for a while. That honeymoon is clearly over. Care to bet on another "brilliant" comeback? 

Not a single fundamental problem with Italy, the ECB, the euro, or Europe in general has been fixed.

Capital Controls or Bail-Ins Next?

In December, only bondholders were at risk. Starting 2016, depositors are at risk, but allegedly only on amounts that exceed €100,000.

Don't kid yourself into believing smaller deposits are safe. There are other problems, like capital controls. Greece and Cyprus both have them.

Capital Controls in Greece

In 2015, the ECB imposed Capital Controls on Bank Accounts limiting withdrawals to €1,800 a month.

On October 19, 2015, Bloomberg proclaimed A Quick End to Greek Capital Controls? Economists Don't Think So.

Even if your money is not stolen, you may not have access to it for quite some time.

Why Take Chances?

Viola said the fall in deposits was "limited".

I ask "Why Take Chances?"

Renzi wants to create a "bad bank". Under new rules, effective 2016, bondholders and depositors are liable for any losses transferred to the "bad bank".

Why is the ECB reluctant to approve a bad bank for Italy? Could it be the losses will be massive?

Get Out Now!

Don't be seen Standing in Line hoping for your money when withdrawals are 'limited' via capital controls or outright confiscated by bail-ins.

Avoid the rush. Get out now.

Where? Think carefully.

For further discussion, please see Europe Fears Bail-Ins: Capital Flight Intensifies in Italy, France, Spain; Are German Banks Safe?

Mike "Mish" Shedlock

"B" Word Hits Chicago: Illinois Governor Proposes Bankruptcy for Chicago Public School System

Posted: 20 Jan 2016 06:16 PM PST

"B" Word Hits Chicago

At long last, Illinois has a sensible proposal to help Chicago schools: Bankruptcy.

The cause of Chicago's problem is untenable pension promises, ridiculous union contracts, and bloated administration payrolls.

As a direct result of those problems, the Chicago Board of Education, the nation's third-largest district, is under fiscal siege. The CBOE operating deficit is projected to reach $1 billion a year through 2020.

Yet, union arrogance abounds. The Chicago's teachers union is threatening to strike, demanding still more benefits.

Republicans Propose Takeover

The solution, proposed by Governor Bruce Rauner and key Republican leaders on January 20, is a
State Takeover and Bankruptcy for Chicago Schools.
Christine Radogno and Jim Durkin, the state's top Republicans in the legislature, outlined a proposal Wednesday that would allow the state to take control and even push the system, charged with educating almost 400,000 students, into Chapter 9.

"What we're proposing is a lifeline," state Senator Radogno told reporters in Chicago. "We didn't come to this lightly. The track record of Chicago and its public school system is abysmal."

Illinois Governor Bruce Rauner, a Republican who has been at odds for months with the Democrat-controlled legislature over the state budget, has said he won't bail out Chicago's school system unless Mayor Rahm Emanuel supports limits on unions or other proposals he's seeking to enact.

School officials passed a budget for the year that started July 1 with a $480 million hole, asking the state for the money to fill the gap. Without it, the district faces drastic cuts and more borrowing, officials have said.

"The mayor is 100 percent opposed to Gov. Rauner's 'plan' to drive CPS bankrupt," Emanuel's spokeswoman, Kelley Quinn, said in a statement. "If the governor was serious about helping Chicago students, he should start by proposing -- and passing -- a budget that fully funds education and treats CPS students like every other child in the state."

Chicago's school district bonds have been cut to junk by all three major credit-rating companies. On Tuesday, Fitch Ratings lowered its grade on $6.1 billion of general-obligation debt by three steps to B+, four ranks below investment grade. Bonds due in 2039 traded on Jan. 15 for an average of 88 cents on the dollar to yield 6.5 percent.
Tax Hikes and More Tax Hikes

Mayor Rahm Emanuel's solution to this mess was to make the biggest tax hike in history.

On October 28, 2015 I commented Chicago's Sheep Dogs Approve Mayor's Tax on Sheep; Quote of the Day "It's Not a Piece of Art".

The "sheep" in question are Chicago taxpayers who will need to pony up a historic property tax hike of $589 million to fund the city's police and fire department pensions.

Chicago Curbed notes "some aldermen and activists have warned that the historic tax hike will hit renters the hardest."

The report added "There have already been some neighborhood skirmishes in Logan Square, Humboldt Park and notably in Pilsen regarding runaway gentrification, and some activists say that the property tax increase will only exacerbate the effects."

Did Emanuel's Tax Hike Solve Anything?

Of course not. The school system is still broke. And instead of admitting the problem, mayor Emanuel wants the rest of Illinois taxpayers to "save the system".

The system is bankrupt. It cannot be saved. Any rational person would not want to save a corrupt, taxpayer-milking machine that does a horrendous job at its primary goal: teaching. 

Does that make Emanuel an idiot?

Here's my polite answer: When a politician's job depends on not understanding a problem, there's no way in hell the problem will be understood.

Governor Rauner needs to stand his ground for as long as it takes, no matter what the interim consequences.

Mike "Mish" Shedlock

Shell Fires Another 10,000; Energy Layoffs Top 250,000; Oil Breaks $28 Again; In Search of Jobs

Posted: 20 Jan 2016 11:41 AM PST

Shell Fires Another 10,000

As reflective of trends in the industry Shell Fires 10,000 Workers
As its fortunes collapse due to falling oil prices, Royal Dutch Shell PLC will fire 10,000 people in an effort to bolster margins.

Operating costs have reduced by $4 billion, or around 10% in 2015, and the company expects Shell's costs to fall again in 2016 by a further $3 billion. Synergies from the BG combination will be in addition to that. Together, these actions will include a reduction of some 10,000 staff and direct contractor positions in 2015-16 across both companies, as streamlining and integration of the two companies continue.
Did Shell Overpay for BG?

The "BG combination" mention above but not explained (emphasis mine) refers to the Shell Takeover of BG announced in December.
Royal Dutch Shell is pressing ahead with its $60bn (£40bn) takeover of BG Group despite doubts among some shareholders about the deal's viability given the falling oil price.

Some Shell shareholders believe the company is paying over the odds for BG because the deal was agreed in April on the assumption that oil prices would recover to $90 a barrel by 2020. The price of oil has slumped from $115 a barrel in summer 2014 to less than $40. On Monday it dropped to an 11-year low of $36.17.

David Cumming, head of equities at Standard Life Investments, said last week the deal does not make sense with the oil price so low. He called on Shell's boss, Ben van Beurden, to pay a $750m break fee to scrap the deal or renegotiate the terms. The only other option is for shareholders to vote against the takeover, he said.
Merger Rule Number One

Management is never fired for questionable, even outright bad, corporate decisions. Employees, not management takes the hit. In this case, chalk up another 10,000 employee synergies.

Energy Layoffs Pile Up


In Search of Jobs

On November 23, Houston Public Media reported Oil Workers Brace For Fresh Layoffs, As Industry Wrestles With 'Lower For Longer' Crude Prices
"We're seeing declines in population across these towns in south Texas," says Ed Hirs, an energy economist at the University of Houston.

For nearly eight years, high-paying jobs grew at a blistering pace across the region, long one of the poorest in the state. Now companies are shutting down operations, and those jobs are vanishing. "And until the price returns to a level above $75, $85, $95 a barrel," Hirs says, "we won't see a complete reemployment of everybody who's left."

So people are leaving — not just south Texas, but the industry — in search of work. Some will come back when the price of oil recovers. But this is an industry where roughly 70 percent of the workforce is over age 50. That's the legacy of weak hiring during the oil bust of the 1980s and 1990s.

"I think this is going to be an acute problem in a couple of years' time. I think it's going to come bite us extremely hard," says Tobias Read, CEO of Swift Worldwide Resources, an energy recruiting firm based in Houston.

Two years ago, the energy sector's big concern was a shortage of skilled workers. Companies were scrambling to train up a new generation of engineers and geologists, pipefitters and project managers, to replace those they were about to lose.

"They've spent a lot of time retaining, recruiting, and training talent," says Chad Hesters, who runs the Houston office of recruiting firm Korn Ferry. "They don't want to see that talent leave. It's incredibly expensive to have people you've spent years training walk out the door."
Global Oil Layoffs Top 250,000

On November 20, Bloomberg noted Oil Jobs Cuts Top 250,000.
The number of jobs gutted from oil and gas companies around the world has now passed the 250,000 mark, with still more to come, according to industry consultant Graves & Co.

"I was surprised it's gotten this far," John Graves, whose Houston firm assists in oil and gas deals with audits and due diligence, said Friday in a phone interview.

The industry has idled more than 1,000 rigs and slashed more than $100 billion in spending this year to cope with oil prices that have fallen by more than half since 2014. Oil services, drilling and supply companies are bearing the brunt of the downturn, having accounted for 79 percent of the layoffs, according to Graves.
The winner of the blue ribbon award for accurate prediction in the month of November goes to Graves for his understatement "It's going to get worse before it gets better."

56,000 Layoffs in Texas Alone

On November 12, FuelFix reported Oil crash job losses in Texas may be steeper than previously thought.
The number of oil and gas job losses in Texas may be far worse than an industry group originally predicted, potentially reaching 56,000, according to the latest analysis by the Texas Alliance of Energy Producers.

When crude prices started collapsing late last year, Karr Ingham, a petroleum economist for the alliance, initially forecast that the state could lose 40,000 to 50,000 upstream oil and gas jobs during the downturn, but the fresh plunge in oil prices over the summer forced additional round of layoffs across Texas.

"We now appear to be well beyond that estimate and the end is not in sight," Ingham said in a statement Thursday.
That 56,000 estimate was from early November. What is it now?

Unambiguously Good

The price of US and Brent crude both broke $28 to the downside today but remain hovering near that level.

Don't fret. I have it on good authority this decline in oil prices is "Unambiguously Good" for the economy.

In a CNBC video in November of 2014, Kudlow stated Drop in Oil Prices is Unambiguously Good.



It was not just Kudlow making such statements. Various Fed officials believed the same thing.

"We Got This Wrong"

Let's now flash forward to a bit of reality. On January 9, 2016, San Francisco Fed president John Williams finally admitted "We Got This Wrong".

Williams still does not realize precisely what is wrong.

Oil prices in and of themselves are inherently neither good nor bad. It all depends on why. In this case, the Fed sent false economic signals with round after round of QE, and by once again keeping interest rates too low, too long.

Effects were not seen in consumer prices as the Fed wanted. Rather, asset price bubbles developed in stocks, bonds, and junk bond borrowings of hundreds of billions of dollars to drill wells smack into a slumping global economy.

The only "tools" the Fed knows are rates cuts and QE. But that's what created this mess. And here we sit with the Fed still insisting four more hikes are coming in 2016.

The market now spits in the Fed's face.

Mike "Mish" Shedlock

Parade of Weakness: Housing Starts and Permits Slump in December

Posted: 20 Jan 2016 09:40 AM PST

Housing starts, one of the presumed strengths in the economy, took a dive in December.

The Econoday Consensus Estimate was for 1.200 million starts vs. the actual report of 1.14 Million.
Housing starts and permits both fell back in December but follow large gains in November. Starts came in at an annualized 1.149 million rate in December for a 2.5 percent monthly dip while permits came in at 1.232 million for a 3.9 percent decline. Yet both of these readings for November surged more than 10 percent. Year-on-year, starts are up a healthy 6.4 percent with permits especially strong at 14.4 percent.

Starts for both single-family homes and multi-family homes fell in the month, down 3.3 percent to a 768,000 rate for the single-family category and down 1.0 percent to 381,000 for multi-family. Year-on-year, both are close at respective gains of 6.1 and 7.0 percent. The breakdown in permits shows a downdraft for multi-family homes, 11.4 percent lower to a 492,000 rate but which follows very strong gains in the prior two months. Permits for single-family homes rose 1.8 percent in the month to 740,000.

Housing completions jumped 5.6 percent in the month to edge over 1 million at 1.013 million, reflecting in part favorable weather. Homes under construction, also benefiting from the winter's mild weather, rose 1.7 percent with the year-on-year rate at plus 18.5 percent.

This report is below expectations and soft on a historical basis, but readings still point to respectable strength underway for new housing.
Respectable Strength Questioned



The above chart calls into question alleged strength from a historical basis. However, when calculating GDP, what matters is near-term comparisons (month-over-month and year-over-year).

Both of those can fluctuate strongly because of weather-related issues. Bloomberg smooths that out via a 5-month moving average.



Parade of Weakness

Have housing starts now stalled?

November might have one thinking "no", December might have one thinking "yes", and perhaps the 5-month average has one thinking "maybe".

Year-over-year comparisons in February and March will be very easy to beat. Starting in April, year-over-year comparisons will be difficult to beat for a long stretch. That's when apparent strength likely starts to look like apparent weakness.

Wasn't December supposed to be the warmest ever? Northern Illinois certainly was unusually mild. That should have added to December starts, but it didn't.

One typically only hears about the weather when it makes matters worse. In this case, warm weather should have added to starts, but didn't.

Regardless of weather-related effects, home prices are no longer affordable. Millennials are priced out.

Manufacturing is in recession. Retail sales have stalled despite low gasoline prices. Autos sales were a disappointment. Inventory-to-sales numbers signal trouble, everywhere.

My bet is housing joins the parade of weakness.

Mike "Mish" Shedlock

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