Market Tidbits
After something like four straight days of mega market analysis today is just going to be some interesting market tidbits....
Noriel Roubini's blog (which I was pointed to by reader Ramesh Shankar) had an interesting take on todays extreme weakness in new housing purchase rates, which fell so far they are back to the levels of August 2000! Noriel makes an excellent point that new home purchases are more important to the GDP than existing home purchases since they indicate new value being created rather than existing money changing hands.
Additionally we should be watching prices at least as much as volume, since many markets will hold up volume by changing prices. Homes are a classic inelastic asset: you typically sell for reasons that leave you little choice but to take the price you can get. Home prices (also in decline) are a better general indicator of consumer wealth. But the data has to be investigated closely! For example today's depressing report mentioned that average home prices for February were up 7.5%, which sounds great until you read that the median is only up 0.3%. How can that be possible? It points out that tightening lending standards have hit the lower end homes harder than the upper end... which means that if you care about what's in Joe Sixpack's wallet the numbers are actually bad.
On wsj.com David Geffen posts that "Bianco Research models suggest financial stocks lead bonds by about two months, and they were rallying about two months ago, putting the 10-year note at risk of rising higher. It suggests to them that the market sees the Federal Reserve willing to tolerate higher inflation than in the past. That may help the market rally for a time, but it’s not a good thing if it results in a broader inflation problem."
That's interesting. I'll keep an eye on it, but this week most market interest rates went UP, which is the opposite of what would be projected. We shall see.
Richard Kang is starting to wonder about all the ETFs rolling around out there. “Only now am I beginning to question the value of new ETFs coming on line. In the past, there were a few ETFs that occasionally would give me reason to question their purpose,” he writes in his blog, Beta Brief. “However, most have done well in terms of asset growth and trading volumes. I have greater reservations now about certain ETFs coming out now.”
Are the days of easy credit for buyouts coming to an end just as Blackstone Group prepares to sell shares to the public? Could be, writse Henny Sender and Serena Ng in today’s Wall Street Journal. “Sme early signs are emerging that credit markets are becoming less forgiving. That could mean the fortunes of Blackstone and other private-equity firms, which buy businesses on behalf of their investors and hold them privately before selling them once again — may be reaching a plateau,” they write.
Chad Brand, the Peridot Capitalist, argues that if Blackstone Group is offering shares to the public, it’s time to run. “Companies sell stock when demand for shares is high, and they buy stock when interest is lacking. If things are going great, demand will be high and an IPO is the preferred way to cash in. The ’smart money’ as it’s called, sells to the dumb money,” he writes. “Well, guess what? Steve Schwarzman and the rest of the Blackstone Group gang is very ’smart’ money. If they want to sell a piece of their management company to you, it’s probably for a good reason. If they thought the bull market in private equity had a few more years left in the tank, they certainly wouldn’t choose to sell now.”
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Noriel Roubini's blog (which I was pointed to by reader Ramesh Shankar) had an interesting take on todays extreme weakness in new housing purchase rates, which fell so far they are back to the levels of August 2000! Noriel makes an excellent point that new home purchases are more important to the GDP than existing home purchases since they indicate new value being created rather than existing money changing hands.
Additionally we should be watching prices at least as much as volume, since many markets will hold up volume by changing prices. Homes are a classic inelastic asset: you typically sell for reasons that leave you little choice but to take the price you can get. Home prices (also in decline) are a better general indicator of consumer wealth. But the data has to be investigated closely! For example today's depressing report mentioned that average home prices for February were up 7.5%, which sounds great until you read that the median is only up 0.3%. How can that be possible? It points out that tightening lending standards have hit the lower end homes harder than the upper end... which means that if you care about what's in Joe Sixpack's wallet the numbers are actually bad.
====
On wsj.com David Geffen posts that "Bianco Research models suggest financial stocks lead bonds by about two months, and they were rallying about two months ago, putting the 10-year note at risk of rising higher. It suggests to them that the market sees the Federal Reserve willing to tolerate higher inflation than in the past. That may help the market rally for a time, but it’s not a good thing if it results in a broader inflation problem."
That's interesting. I'll keep an eye on it, but this week most market interest rates went UP, which is the opposite of what would be projected. We shall see.
====
Richard Kang is starting to wonder about all the ETFs rolling around out there. “Only now am I beginning to question the value of new ETFs coming on line. In the past, there were a few ETFs that occasionally would give me reason to question their purpose,” he writes in his blog, Beta Brief. “However, most have done well in terms of asset growth and trading volumes. I have greater reservations now about certain ETFs coming out now.”
====
Are the days of easy credit for buyouts coming to an end just as Blackstone Group prepares to sell shares to the public? Could be, writse Henny Sender and Serena Ng in today’s Wall Street Journal. “Sme early signs are emerging that credit markets are becoming less forgiving. That could mean the fortunes of Blackstone and other private-equity firms, which buy businesses on behalf of their investors and hold them privately before selling them once again — may be reaching a plateau,” they write.
====
Chad Brand, the Peridot Capitalist, argues that if Blackstone Group is offering shares to the public, it’s time to run. “Companies sell stock when demand for shares is high, and they buy stock when interest is lacking. If things are going great, demand will be high and an IPO is the preferred way to cash in. The ’smart money’ as it’s called, sells to the dumb money,” he writes. “Well, guess what? Steve Schwarzman and the rest of the Blackstone Group gang is very ’smart’ money. If they want to sell a piece of their management company to you, it’s probably for a good reason. If they thought the bull market in private equity had a few more years left in the tank, they certainly wouldn’t choose to sell now.”
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posted by FinanceWonk at 11:10 PM
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