What to Watch This Week



This morning's announcement of existing home sales will be an interesting way to start the week. I am hoping to see an uptick; however, this will be driven by distressed asset sales rather than a renewed confidence in the market.

I have strong expectations that the current Wall Street rally will continue, but fear that this will not be the start of the next bull market. More honesty from the banks is needed first.

Final GDP numbers are not expected to move too far from the dismal situation that was offered for the last quarter. There are many that think that the first quarter will be worse than the fourth, but I do not see this and (in as much as it will certainly remain negative) we should see it reducing through the first three quarters of this year and beck to a positive figure in the fourth quarter of this year.

Consumer confidence for March will remain close to historic lows as our opinion of the short-term economy remains very negative.

Crude Inventories will probably remain higher than expected (1M barrels) as producers wait for the G20 summit in April and its moves to shore up the world economy before likely cutting production further.

What I Saw Last Week

Of particular interest to our industry was the remarkable uptick in housing starts, which posted an increase of 22.2 percent to a seasonally adjusted rate of 583,000 (consensus expectations were for a contraction to around 450,000 units). As pleasing a number as this is, we should add that the only region that saw contraction was in the West and that the U.S. rate is still down by 47.3 percent from the same period a year ago. It should be noted that this sharp rise was primarily driven by a huge jump in multifamily units (apartments) with single-family starts rising more modestly.

A strong indicator of future activity, housing permits, also saw an increase of three percent to an annualized rate of 547,000, again defying consensus figures, which pegged a decrease to 500,000 units.

AIG's announcement of $1.2B of bonuses sent every politician running to the microphones. It is interesting to see that a Firm, which lost the most of any corporation in history ($61.7B) in the last quarter, spawned 73 new millionaires in 2008.

We continue to see job losses at both the state as well as local level. Over 28,000 payroll jobs were lost in February, pushing the state unemployment rate to 8.4 percent. Locally, the Seattle metro area's jobless rate increased to 7.8 percent, up from 6.7 percent in January and 4.1 percent a year ago. This is certainly a reflection of the layoff announcements that we reported on during January.

The Federal Reserve pumped some fuel into the Wall Street rally on Wednesday after the central bank announced a plan to buy U.S. debt. With the benchmark federal-funds rate at nearly zero, the Fed has decided to shift its focus to pouring money into the credit market. After a two-day meeting, the central bank said it would buy up to $300 billion of longer-term U.S. government debt in the next six months and expand its purchases of mortgage-related debt by up to an additional $750 billion. This is a move that will certainly bring down all consumer rates and encourage credit flows. Specific to our industry is that it will certainly have an effect on mortgage rates that should stimulate the housing market.

Continuing with what felt like the longest run of positive news for some time, Friday's announcement from Reuters and the University of Michigan indicated that consumer confidence increased from 56.3 last month to 56.6 in March. Even more dramatic was their announcement that the increase in "confidence in economic policy" from February to early-March was the largest ever recorded. Apparently the masses have taken note of recent administrative action and appreciate the effort...

Quote/Link of the Week

Iowa Sen. Charles Grassley: "I suggest, you know, obviously, maybe they ought to be removed. But I would suggest the first thing that would make me feel a little bit better toward them if they'd follow the Japanese example and come before the American people and take that deep bow and say, I'm sorry, and then either do one of two things: resign or go commit suicide. And in the case of the Japanese, they usually commit suicide before they make any apology."

Maybe this was a little bit strong!