Six ratios show high risks and an overvalued market
A move to larger cash holdings may not be a bad idea, writes Mark Hulbert.
Starts Plunge 9.8% As Housing Permits Miss By Most In 7 Months
Last month’s record-breaking surge in housing starts has rapidly reversed and fell 9.8% MoM – the biggest drop since April 2013. Despite a plethora of revisions, single unit housing starts tumbled to 610k – the lowest since July. However, permits were dismal (which is what we should be caring about if we are looking ahead at how the ‘recovery’ will play out). Building Permits dropped 3% MoM, far more than expected, missing by the largest gap since June. This was the 3rd biggest monthly drop in total starts since Lehman. However, year-over-year, the data is abysmal – Starts rose at the slowest pace since Aug 2011, and Permits at the slowest pace since April 2011.
Permits missed notably…
With Total Housing Starts dropping by 108K, or the 3rd most since Lehman.
Consumer Confidence Slides, Misses By Most In 8 Years
Following December’s biggest-surge-in-4-years for UMich consumer confidence (though a miss), UMich data has fallen back to 80.4 – missing expectations by the biggest margin in 8 years. This is the 4th miss in the last 5 months as hope for moar multiple expansion begins to fade. Both current conditions and the outlook indices fell (for the first time sicne October). As UPS would says, confidence dropped because there was too much confidence…
Consumer sentiment slips in January, reports say
WASHINGTON (MarketWatch) — Consumer sentiment as measured by the University of Michigan and Thomson Reuters declined in January, falling to a reading of 80.4 from 82.5 in December, according to news reports. That’s also below the 84 expected in a MarketWatch-compiled economist poll.
New home construction drops in December
UPS Misses, Guides Lower, Blames Miss On Surge In Business, “Weather Events”
Three Points That Refute All Talk of Recovery
For well over five years now we’ve been told that the US was in recovery and that as most the biggest risk was a potential double dip or worse a slow down to the recovery.
The reality however was that the US never experienced a real recovery (unless you work at one of the “chosen” firms on Wall Street).
Housing has re-entered a bubble driven by liquidity, not first time homebuyers entering the market.
The key relationship for housing is home prices relative to income, NOT nominal prices. Stocks are valued relative to earnings. Homes have to be priced relative to incomes.
Today, the median US income is $51K. The median home price is $328K. So homes are priced at 6.4X incomes.
To put this into perspective, in 2007, the housing bubble was only marginally higher than this with homes priced at 6.8X incomes. So housing, which is alleged to be in a recovery, is not much more affordable today than it was in 2007… at a time when home prices were more overpriced than at any point in the last 100 YEARs.
Speaking of incomes, they remain WELL below their 2007 peaks… which were in fact below the 2000 peaks. In fact, the median income in the US today is effectively the same as back in 1987.
“You Only Get To Miss Sales Expectations So Many Times”
With the Q4 earnings season beginning, ConvergEx’s Nick Colas reminds that the top of the income statement matters more than the bottom line if we expect further upside to domestic equities in 2014. Revenue growth has been in short supply over the last four quarters, with the companies of the Dow only able to average a 0.6% top line growth rate over the last year. If 2013 was all about multiple expansion in equity markets, then, Colas warns this will be the year when revenue growth must fulfill the promise of a U.S. stock market so near all-time highs. Analysts have been perennial over-optimists on revenues every month since early 2012. Maybe they finally have it right, but that is purely a matter of faith at this point; their track record on this count is not good.
Bernanke Says QE Works While Posing No Immediate Bubble Risk
Hong Kong Stocks Drop On Shadow Banking Worries
Chinese Stocks Tumble On Contagion Concerns From First Shadow-Banking Default