While some people inexplicably continue to deny the impact of Housing, the reality-based community is taking the measure of the actual net results of the slowdown.
Slate’s Dan Gross looks at all of the industries now feeling the pain from the housing slump. It is not just companies whose "fortunes are directly tied to housing and to housing credit" like home builders (Toll Brothers, Pulte, Lennar) and rating agencies (Moodys, S&P). Rather, the decrease in economic activity related to the slowing real estate sector cuts across industries and regions, and even nations.
What other sectors are showing quantitative data reflecting the slowdown?
• Railroads: CSX reported volume of shipments down 4%. Union Pacific said Q1 carloads fell 2%. Revenue was down 3%.
• Recreational Boating: West Marine’s
quarter showed sales were down 4%. Marine Max cut forward guidance and earnings estimates for
2007 by over 60%. Marine Max also happens to Brunswick’s largest customer — and they report tomorrow (4/26).• Latin America: As we noted yesterday, monthly remittances from the U.S. to the region (Mexico, Latin America) have dropped by some 30% or so.
• Automobiles: The Fed spurred a huge run-up in car sales when they dropped rates to 46 year lows. Zero % finance became ubiquitous; that was followed by MEW funded car purchases. GM noted the entire market was "a little weakish." Why? Reduced ability to pull out equity and spend it, not just at GM, "but across the industry."
• Luxury Homes: Even within the housing sector, the results have been surprising. Forbes notes that its not just the lower end sub-prime credit/entry homes that are being effected: there is something of a fire sale in the luxury sector as well. "Even wealthier households use ARM products to finance the purchase of luxury homes in expensive areas. The rate resets combined with declining house values are creating a problem even in this sector of the housing market."
Remember, a lot of economics takes place at the margins. Why? (I know this is economics 101 but bear with me).
In most markets, there is a fairly stable equilibrium between supply and demand. That balance — just enough goods to meet the needs of those who want/need to purchase them — maintains price stability. It also allows companies to plan and execute their production and distribution fairly smoothly.
Once either side of the equation moves out of balance, shift happens. If supply builds too high, you end up with too much product. Prices drop until increase in sales (at lower margins) reduces the inventory build. When demand drops due to credit or financing issues, a mere price drop will have little effect. This is why the decrease in Housing activity — Resales, HELOCs, Refis — is potentially so important.
~~~
Let’s do a little crowdsourcing: I am sure that the many readers of this site can come up with a long list of other companies/sectors/regions that are impacted by the ongoing Housing slump.
Hit the comments — that’s what they are there for!
>
UPDATE April 25 2006 9:46am
A few stories have hit the tape after this was posted:
Greenspan Says Consumers Fund More Spending With Home Financing
Bloomberg: Former Federal Reserve Chairman Alan Greenspan said the share of consumer spending that Americans funded from extracting cash from the value of their homes doubled in the five years to 2005.Subprime Bondholders May Lose $75 Billion From Slump
Bond investors who financed the U.S. housing boom are starting to pay the price
for slumping home values and record delinquencies in sub-prime loans. They will lose as much as $75 billion on securities made up of millions of
mortgages to people with poor credit, says Pacific Investment Management Co.,
manager of the world’s biggest bond fund. Some of the $450 billion in sub-prime
mortgage-backed debt sold last year has lost 37 percent, according to Merrill
Lynch & Co.
To repeat the original question, what sectors are slowing in the US relative to Housing
>
>
Source:
The Real-Estate Blame Game: The unlikeliest victims of the housing slump
Daniel Gross
Slate, Tuesday, April 24, 2007, at 3:12 PM ET
http://www.slate.com/id/2164915
Other sectors impacted include:
— personal computers – evidenced by Dell’s weaker results and CompUSA closing 104 stores
— home entertainment systems – Circuit City layoffs and wage reductions
— casual dining – the decline in this sector has been well-documented
We’ll know when consumers are really strapped when Starbucks’ same store sales begin to decline.
Arkansas Best (ABFS) said its first-quarter net income dropped 22% to $4.8 million, or 19 cents a share, as tonnage declines at its ABF Freight Systems unit continued into 2007. The quarter also included a 3 cents a share charge for pension settlement accounting. Revenue fell to $422.6 million from $425 million.
No International sales or earns here.
Construction Equipment:
As the larger developers slow down there is less use for heavy earth movers, bull dozers, etc.
Convention Centers
With the RE industry, the construction suppliers, and boating concerns trending down there will be less need for the largest spaces.
Luxury car leasing. Every realtor I know has a leased Lexus, Jag or Benz. They’ll be driving used Corollas like the rest of us soon.
You’d think the small law firms (real estate is bread and butter) would be feeling the crunch, but at least here in Central Mass, despite the drop in residential real estate transactions, commercial activity seems to have taken up the slack: (anecdotally) little change (so far) by comparison to same period last year.
Circuit City layoffs may be more about Walmart’s price cutting on big screen TVs than about the housing slump.
Walmart itself is probably a fairly good indicator of the impact on undocumented jobs.
WaMu: Michael Shedlock (aka Mish) wrote a piece showing how half of their reported earnings came from shifting around their balance sheet. Unless the housing market turns around, it’s only a matter of time…
Circuit City: Best Buy does the same thing and is better. Best Buy has to worry about CostCo. Being #3 to those two, the recent wage cutbacks to sales staff, etc., I don’t see how barring a new high margin technology emerging (CC came back based on plasma tvs) Circuit City can stay in the game.
Kohl’s: $70+ for this stock? Unless Eddie Lampert is running it as a hedge fund, they’re still struggling to sell off winter product (at least the one near me) at 80% off now.
In fact a walk through the mall can yield multiple chains which are going to have a difficult time making their margins in a major spending downturn. This would be a middle class mall; the upper end one still packs them in.
And what’s with Dick’s sporting goods? Seems they’re pricing like the Nordstrom’s of sporting goods. How long will folks continue to pay their prices when you can get the same thing at Target for half the price?
Toyota: Sales up 11.7% in the first quarter.
Amazon: Profit up 119% in the first quarter.
Median house sale prices virtually unchanged over a year (217.0K in 07 vs. 217.6K in 06).
Yep, that subprime contagion is destroying everything in its path.
~~~
BR: Those are global numbers. We are discussing US effects. The question is what is being impacted — not what is NOT being impacted — by the slowdown.
You want more? Mercedes, Audi and BMW sales are doing great. Lexus (a Toyota nameplate) is also doing great. Ferrari and Bentley are sold out for the year in the US already.
Back to the question at hand: Toyota makes high quality cars, and they are not inexpensive. How are the lower Toyota models doing in the US? Other lower brands?
Boeing Co., the world’s second- largest maker of commercial airplanes, said profit rose 27 percent as it delivered on record orders
~~~
BR: Fat Mary:
Are you arguing that Boeing sales have any correlation with Housing Sales, HELOCs or Refis? I am not sure if I get your point.
Those railroads are taking a beating. they are all at 52 week highs.
~~~
BR: To repeat the question: What is the impact of the Housing slow down on their business: CSX reported volume of shipments down 4%. Union Pacific said Q1 carloads fell 2%. Revenue was down 3%.
I had a chance to see some numbers from a large retailer of RV’s. His numbers had not been affected by the last round of gas prices, but they have been severely impacted by the reduction in refis. Turns out that a lot of the people who were buying $100,000 RV’s were taking the money out of their house to do it.
Similarly, as I’ve been working on remodeling a bathroom, every tradesman I talk to has noted a tremendous slowdown in the remodeling projects that have continued to keep tradesmen employed in an area that’s built out with little new home construction.
Finally, I talked to an attorney who works with Homeowners’ associations here in Southern California. As delinquencies and foreclosures increase, millions of homeowners in California will see increases in their assessments to cover bad debt writeoffs and legal costs. There are scads of twenty to thirty year old condo associations with huge deferred maintenance issues. If they haven’t funded their reserves, they are facing $10,000 to 20,000 special assessments – one more reason for owners to walk away from loans they can’t afford, and there are some aging low-end condo associations which will fail.
State tax receipts – and sales tax receipts – are reported down in many states even as government stats say sales are strong.
I’m sure many states are now looking at the decrease in remittances to Mexico and Central America and adding up the taxes they SHOULD have collected from homebuilding labor.
it just doesn’t matter.
http://www.youtube.com/watch?v=tbZFU7X3Qjo
you’ll see why if you watch this.
smile.
~~~
BR: That’s the best thing you’ve posted all day!
Business Week has an article in the April 30, 2007 issue about Sherwin Williams. According to the article the paint seller has no fear of a housing cycle, without a Bloomberg screen I can’t see what their stock did in 1991 and 1981, but I’m guessing it wasn’t gangbusters.
The big one will be employment. With sales and starts down 40%, no change in construction employment is NORMAL. It isn’t until later that you get the drop in employment and that’s when you get the big impacts. Laid off workers don’t consume as much and the ripple effects move thru the system.
As crazy as this sounds, we are still very much in the opening act of this play.
Be patient in waiting for and watching problems in housing spread to other sectors. Bulls have pointed to the employment numbers in the sector (not going down as anticipated) as proof that it’s all a bagatelle. But looking at the dramatic reduction in money being sent south to Mexico, it seems plausible that undocumented workers have been the first to be hit, so their layoffs have not hit the official numbers.
Similarly, understand that people do not give up their lifestyles willingly–they go down fighting. Watch credit card borrowings–they will spike as people increase debt where they can to defend their lifestyles. So expect the deteriorating numbers to come out slowly, but come they will. There’s $860 billion in mortgage resets coming between the 1st of May and the end of the year. They will hit hard, but again with lagged effect. Anecdotally, consider the $2.5 million house, in Alpine NJ–a lot more like Greenwich than Newark. Introductory teaser monthly payment, $11,000–no problem. Payment moves to $17,000 on the reset, and the house is gone. This will hit all segments of the market, and consumption will suffer from bottom to top.
Short HOG, KMX, GM, WHR, THOR, PSS, and AMZN, on direct effects on the consumer.
One reason that the downturn in the housing market hasn’t had a huge effect on the larger economy must be because of the high proportion of illegal aliens amongst the construction workforce. Yes, their remittances back to Latin America are down, but these people were not the backbone of the economy in the first place – though it might seem cold, they essentially low-cost, unskilled, expendable labor. When they’re laid off, the suffering doesn’t spill over to the larger society beyond the illegal alien enclaves.
In a perverse way, the market itself may do more to solve the illegal immigration crisis than any Act of Congress ever could.
Thoroughbred horse auctions have seen their gross and median prices decline in California, Maryland, Florida and Kentucky.
Fat Mary, you may want to read a little bit deeper into those durable goods orders. The headline reads +3.4% and +1.5% ex-transportation but these figures are month over month! The Year-on-Year figures are a better indicator and total orders were -3.1% YoY and -1.2% YoY ex-transport.
From Reuters:
Norbord posts Q1 loss on prices, construction drop
http://www.reuters.com/article/marketsNews/idUSN2525063520070425
Norbord Inc. (NBD.TO: Quote, Profile, Research) said it swung to a first-quarter loss on Wednesday, as plunging prices for a key wood panel product in North America overshadowed its profitable push into Europe.
…
Oriented strand board prices, a replacement for higher-cost plywood, dropped to their lowest level since 2001, Norbord said. That coincides with a decline in housing starts over the past year as well as the impact of tighter mortgage lending conditions due to higher default rates in the subprime segment of the U.S. mortgage market.
Difficult market conditions are seen persisting into next year, the company said. Norbord cited industry experts who forecast housing starts in the United States ranging from 1.5 to 1.6 million for the year, well below 1.8 million in 2006.
North American oriented strand board prices will “bounce along at the bottom” throughout 2007, Norbord forecast, while European panelboard prices will continue improving.
Apart from large scale earnings manipulations, which I do not believe is happening, how does one explain the continued growth in earnings/sales? Durable goods recovered some lost ground as well. There are ample signs that the impact is not as widespread as the doomsday forecasters like Roubini believe. I am not saying that the stock market is right. However, I think that that the evidence is mixed at best. Economy is not falling of the cliff yet.
Earnings go from double digits to 9% est, then down to 3% est, and guess what?
Who’dathunk it.
GE had great Q1 earnings also.
U just have to admire these Wallendas who go out there every day, tight rope walking at 3000 ft above the earth. Wondering if “they’re” going to throw out the net again today.
“Hankie, who’s supposed to be watching that fire up thar in Canada? He must be sleeping on the job.”
js, interesting questions. The reason why I’m sitting in cash is because US stocks aren’t cheap and earnings are weakening. Of course there will always be companies that report solid figures such as Amazon since not all are on the road to Shitshowville. The headline index P/Es hide poor fundamentals and earnings growth has been driven by financials. Profit margins are at all time highs and a contiuation of this seems to be baked into analyst forecasts. US growth is slowing dramatically and incidators such as the yld curve, building permits, housing starts, housing completions, construction spending, Real M-prime, and durable goods orders (look at YoY and don’t fall for the sequential noise) point towards a good chance for a recession. With companies taking on too much debt (again, don’t just look at the publically listed companies because TOTAL non-financial sector corporate debt was +8% YoY last year), valuations and the trend in the US economy, I just don’t like the risk/reward in here.
Barry, Toyota’s unit sales IN THE US were up 11.7%. Those are certainly NOT their global numbers.
http://www.washtimes.com/business/20070403-100307-2677r.htm
Please explain why Toyota’s sales in the US are up if the consumer is unable to buy because of the housing “crisis.”
~~~
Unless total sales are inreasing, Market share is a zero sum game.
Consider: FORD’S NET LOSS narrowed in the first quarter, helped by a stronger performance at its international units and higher revenue.
Nissan posted a 54% drop in net profit due to restructuring costs.
With Nissan down, Ford up overseas, picking Toyota as proof of no domestic housing impact on auto sales proves nothing at all —
Once again, Nogo, shows his inability to stay on point and shift the topic to what HE wants to talk about.
Don’t you ever get tired of being wrong?
AS far as the suggestion to short AMZN…..Ha look what that got you in the last three months, today’s squeeze is on nothing more than a tax rate change….actual earnings are not to good but then again nobody reads any longer….just like Nogo…
Ciao
MS
Coming from the fool who yesterday said that GM doesn’t do any international business, Michael, your latest stupidity does not surprise any of us.
Money supply growth is created by credit. When credit growth slows, all industries will suffer in the oncoming deflationary recession. Banks will suffer severely. The financials will certainly become worth less than 20% of the S&P 500. As the bubble deflates the real economy will become more important. The paper economy will suffer.
Nova — I stand corrected on Toyota’s US sales.
Ironically, GM’s total sales rose 3 percent worldwide — thats their highest level ever. Their slowdown is definitely domestic.
http://money.cnn.com/2007/04/24/news/companies/
gm_toyota/?postversion=2007042506
and yet again You’ve put words into my mouth…and yet again I ask you to prove it
and yet again you won’t
i feel sorry for your wife if that’s how you hold an arguement…by only talking about what YOU want to when you want to.
Too bad for you….
Barry came clean and admitted his mistake…..why can’t you?????
Ciao
MS
play nice, please
First, I cannot resist but to jump on the bankwagon claiming BR’s list is a contrarian indicator. Railroads, Latin America, Mexico are all doing very well in the markets. Even the financials ETF (IYF) is above water for the YTD despite the sub-prime mess. As an investor, if this is the spillover effect, I’ll gladly take it.
But to answer BR’s question, I can only give a big picture answer. All change takes place on the margin, but not the reasoning behind the change. It may have been the 10,000th straw that broke the camel’s back, but removing any of the other 9,999 would have yielded a different result. A housing slump directly impacts the myriad small businesses tied to housing (agents, yard services, remodeling, etc). The folks hurt by that slowdown will adjust in different ways (they will all remove a different one of those 9,999 straws) in order to continue to carry the load. I think those adjustments will be difficult to identify as solely due to housing. Auto sales slowdown is a good example. Some is surely based on housing, but some is based on energy prices.
The only certain impact of the housing slowdown is that the Fed gets their wish for a slower economy. I am not smart enough to identify which company, sector, or region will feel it first.
having a bummer with housing .
Lumber Wood Production
Bldg Materials Whsle
Home Improvement Stores
Select metals (copper , aluminum )
I see…NOGO can attack me..question my patriotism and generally put words in my mouth and that’s ok?? So sorry if I defend myself as he has said far worse to me in the past.
I’m still waiting for him to prove what he has consistently accused me of.
Ciao
MS
ok i get it now.
Specialty gas maker Air Products & Chemicals Inc. said Wednesday second-quarter profit rose 12 percent, as sales rose across most of its business segments. One dollar off 52 week high. they make the argon gas that goes into the insulated glass panels in your doors and windows. They also supply the torch gas for your plumbers and other industial gases that help to manufacture other products like electrical and plumbing fixtures.
Latest new home sales numbers are out. The media is latching onto the ‘increase’ over last month, which was pretty easy, especially since last month’s estimate was lowered. The margin of error is insane. Is there any actual value to any govt housing numbers with these kinds of margins?
“Sales of new one-family houses in March 2007 were at a seasonally adjusted annual rate of 858,000, according
to estimates released jointly today by the U.S. Census Bureau and the Department of Housing and Urban
Development. This is 2.6 percent (±12.9%)* above the revised February rate of 836,000, but is 23.5 percent
(±7.9%) below the March 2006 estimate of 1,121,000.”
As a P.S., I’m surprised to see people here who think stock prices have something to do with economic reality. Psychology, yes, but economics, not really.
My swiss cheese was on fire this morning, but the NYFD got there just in time.
Wait, now sumpin’s burning a hole in my pocket. Must be those damn Euros.
Quick, somebody send the trucks!
“Similarly, understand that people do not give up their lifestyles willingly–they go down fighting. Watch credit card borrowings–they will spike as people increase debt where they can to defend their lifestyles.”
Scott Frew’s comment (above) hits the nail on the head, which speaks to my comment on MEW yesterday. The Housing/Mortgage/MEW issues do not necessarily mark the end of this cycle but it will likely mark the beginning of the end… As consumption goes, the American consumer has arguably dried up the “equity tap.” Now they will turn to the “debt tap” or credit cards, which likely have low or zero balances now because of recent refis. Psychologically, low credit card balances provide opportunity for more spending for the American consumer. Zero percent teasers on credit cards are creeping back to the scene. This is a behavioral issue just as much, if not more, than a capacity issue. I can see a return to reality with regard to consumer spending no later than mid-2008 compounded by uncertainty over the presidential election. As we all know, consumer spending and the presence (or lack thereof) of uncertainty in the minds of investors both play enourmous roles in the economy and financial markets…
Outdoor Power Equipment, and the small-engine manufacturers who sell to OPE manufacturers.
Construction equipment won’t be hit too badly, however, as overseas sales (PRC, India) are offsetting US declines.
All the home-improvement DIY stores, just like Bill said above.
Let me add one in the “potential to be devasted” category: Banks that strongly book CINA as current profit.
Aaron Krowne of Mortgage Lender Implode-O-Meter has an interesting discussion about CINA risks here: http://www.itulip.com/forums/showthread.php?t=1245
It appears many of these institutions are crossing their fingers and holding their breaths hoping the housing bottom is in so these ARM resets don’t cripple their next few quarters EPS figures.
Barry,
RE: decline in immigrant construction workers, I commute in the Bay Area by bus through Hayward. For some time now, I’ve noticed a big increase in the number of latinos hanging out by the street. In the morning I’m in a sleepy stupor, so it took me a while to realize they were waiting for construction work, but I didn’t connect it to the housing problems until the WSJ article and your note on this last week. There are literally hundreds of them now, where there were very few just 6 months ago.
BTW, did you mean “Moody’s” in the second paragraph? Maybe it’s that with the downturn Moody’s, has the Moodies… :)
-Ray
I have a question….since this is the “big picture” blog.
CSX and UNP both reported lower volume, notably in autos and construction material, evidence of the housing slump. However, both stocks jumped because both companies reported that this year would be strong for them. They both increased rates, increasing their per-car revenue. Notably, they both said that the increase in chemicals made up for the loss in auto/construction freight.
So my question is: who is using all these chemicals and what are they using them for?
Pretty dissapointing that no one was able to stay on the question that was posed. Best answer I saw was the drop in state and local revenues.
What about interior decorating related companies. Furniture, carpeting, windows etc.
“Apart from large scale earnings manipulations,”
js are you saying sam P’s borrowing 15 Billion to buy bakc IBM is a trick? cramer is right, this guy needs to go.
Graco (GGG)) missed expectations last night, but, more importantly, the composition of earnings gave a clear indication how weak the housing-led decline is domestically and, by contrast, how strong the international end markets are.
Graco’s manufactures equipment to apply paint and other coatings on automobiles, appliances, furniture, etc. The company recorded its first profit decline in six years. North American volumes dropped by 9%, while international sales grew by 23%. The company’s aggregate organic growth was a negative 2% (Americas -13%, Europe +16% and Asia +35%). Analysts had previously estimated overall organic growth to increase by 5%.
Couple other datapoints:
“Lawn mower maker Toro Co. said Tuesday its first quarter rose 29 percent on strong sales in the company’s division that sells mowers and irrigation products to professional landscapers.” Not sure what that means re: housing. Seems to cut against your theory, BR….unless those chemical guys are so rich that they are hiring more landscapers…LOL.
Briggs & Stratton: “Company officials said the drop in sales was partially the result of softer power products segment sales, mainly due to lower sales volumes of lawn and garden equipment and portable generators, and lower unit shipments of engines.” Contrary to Toro, this one supports BR’s argument. BGG had a bad day last week, for sure.
I did not dive into DE’s numbers re: lawn tractors. I know that DE is rocking and rolling on their larger tractors, as farmers are getting rich on the higher corn prices.
~~~
BR: A latter commenter notes:
“I have talked with 4 people over the weekend all buying lawn mowers. Why? They are getting hit with interest resets and need to drop that lawn service and start doing it them self :) ”
Here is Toyota’s press release. http://www.toyota.com/about/news/corporate/2007/04/03-1-sales.html
As is typical, they tell only the best part of story. Camry sales ex-hybrid Camry are actually down. SUV sales are flat to down except for the redesigned Rav4, and that is due to a redesign. Tundra sales were good. In short, the equivalent of same-store sales for Toyota was flat to down.
Considering how many car loans were refinanced into homes and paucity of customers paying for cars with cash, it is ridiculous to assert that the LTV of individual consumers has no impact on car sales. When I was selling, I saw it all the time. There are only so many times you can rollover an upside down person before it becomes impossible.
All the furniture companies have been hurting. STLY, HOFT, FBN, ETH. They are getting the double whammy…lower sales and they can’t compete with overseas companies. STLY and HOFT used to sell themselves to the “buy American” crowd, but can’t anymore as they basically sell imported junk now.
ETH did just say yesterday that they see signs of the consumer making a comeback.
I’ve been lurking on this site for a year or so. Lately I have noticed and been annoyed by the acidic comments of this “CIAO MS Michael Shumacher” critter. You tend to start the fights with Nova and you get downright personal about it. Why don’t you lighten up? There is more to life than economics. Common civility, for example.
Komatsu and Kubota’s N. American equipment businesses are doing poorly thanks to lower housing construction.
Railroad volume is anemic YoY (see: http://www.aar.org ) for container boxes shipped from Asia (15% of which is furniture) as well as for materials (wood for housing, etc)
Truckers are having a rough YoY time in volume terms: http://www.truckline.com
Of course the pawn shop operator EZCorp (symbol: EZPW) has been on fire!
Nova,
Surely, you can answer your own question about Toyota, merely by reading headlines. Toyota’s sales in the US are up because Toyota is taking market share. For all makers together, the Q1 average unit sales pace in North America was among the worst in recent years. Toyota doesn’t change that.
Barry is right, and play nice ought to include leaving efforts at data mining and misdirection at the door. There are plenty of real conflicts in the data without having to make them up.
New Home Sales Rise a Teensy Tiny Little Bit
New home sales were up in March, the newspapers say. Pull out your magnifying glass and marvel at the rebound: So OK, sales went up. This is the same month that sales of existing homes plummeted, as noted yesterday. Maybe
kharris – just how is pointing out that Toyota’s US unit sales are up 11.7% “data mining”? The meme of this thread is that the housing “crisis” means that consumer spending and other parts of the economy are going into the crapper.
Pointing out that the sales of Toyota (and other non-GM, F, and DCX companies) are strongly higher puts the lie to the “sky is falling” for the consumer claims.
Fat Mary and LAWMAN have also posted data which completely contradicts the Armageddon Scenario. Call it “data mining” if you want – I call it looking at the “Big Picture” instead of cherry-picking and emphasizing the day’s negative stories, in order to reinforce a preconcieved bearish bias.
I wonder if fed governors have this much fun discussing the “big picture” at their meetings.
Good arguments are made for a domestic slowdown, but the worldwide backdrop of a booming BRIC obfuscates bears. There remain pockets of growth and recession in the US economy.
Folks may buy Toyotas at the expense of GM or saving for their kids’ college. One company’s numbers are hard to hang your hat on.
The market will remain strong… until it isn’t anymore.
The more I learn on this site, and I have learned a lot, the more I realize the importance of trend following and technical analysis as a strong component to investment selections.
Economists have one too many hands for my decision analysis.
“no dogs in this fight”, I’ve noticed this, too. But, it seems to me that Nova put words in MS’s mouth on one or more occasions.
Nova, MS, please make your points without being personal about it, ok?
Nova, you’re usually in the minority here. But, if it’s at all relevant, let me say I do find merit in some of your statements. (Also, for instance, a while back someone pointed out that your house price hasn’t necessarily gained in real terms. But, I would argue that your debt to the bank went down even faster in real terms. So, you *did* make money on the spread….See? I’m paying attention….) I do appreciate your posts here. Not trying to pick a fight or escalate.
kharris is correct: overall auto sales are down; gain in market share by Toyota does not appear to be a relevant datum WRT our host’s original question.
In similar terms it looks like trains are taking market share from truckers but the overall transport picture is somewhat more difficult to get a handle on; it appears to be down overall but a reliable data or analytic source would be welcome.
I’m not going to make any other comment on this besides this.
I’ve never “put words into” Schumacher’s mouth. He accuses me of it, falsely.
Yesterday, he posted this:
“Toyota is a global company with products that are bought in almost every mechanized and industrial country in the world. Gm is most certainly not. When was the last time you actually saw a GM car, not a truck, on the same scale as toyota cars in a country other than the US? Answer…you have’nt
There’s you’re friggin tooth fairy….
Basic stuff Nogo…….”
http://bigpicture.typepad.com/comments/2007/04/more_on_equity_.html
Which I proved wrong, with the actual sales and production numbers of GM in Europe. He takes offense at being proven wrong, and instead of admitting his ignorance, he goes on the attack like any common fifth-grade bully.
The point is that none of us should take BS from bullies who prove – repeatedly, as one can see from yesterday’s thread – that they have no clue as to what they’re talking about.
And that’s all I’ve got to say about that….
So save your usual insults and curses, Michael.
Earnings are growing in many cases due to share buybacks from previous years quarters.
Flat Revenue – share repurchases = higher earnings per share
IBM has been doing it for over a decade now and many other companies do the exact same thing.
Fat Mary makes a good point with several examples of news that ain’t bad.
Back to the original question asked by BR on the post, it can be inferred that the housing slowdown is/has been having an impact at companies all the way from Walmart to some luxury goods manufacturers (RV manufacturers, boat manufacturers). How much of this is due to a housing slowdown vs. a lack of increase in salaries vs. US Dollar devaluation is highly debatable.
Nova,
What RW said.
In general, data mining would be picking one auto maker out of the entire universe of auto makers and claiming its gain is the relevant issue. The same would be true of picking any one representative of any sector. Picking either Target or Gap to represent chain stores would be data mining. Picking Borders as a book seller and ignoring Amazon would be data mining. Picking Toyota to represent auto demand is data mining. Picking Toyota to represent broader demand, outside the auto sector, is data mining.
The goal of honest analysis is rarely served by picking convenient examples, and almost inevitably, single examples are going to be convenient to somebody. That is why we have aggregate data.
Dow Crosses 13,000 for First Time Ever
When you bears are busy finding problems with the macroeconomy, people here are making money:)
ManhattanGuy, the point is to see the signs and get ready for shorting, while avoiding the increasingly higher risk in this psuedo-bull.
Like the Barron’s commercial says, the market goes up, you make money. The market goes down, you make money.
I’m fine with missing the last thrusts of a move in either direction. Money management rules.
Happy days…
Dark1p – I completely agree about going short when you see the right signs, but until then ride the rally instead of going against it and getting killed. Bears are calling for these “toppy” signs over a year while Dow made an impressive run during the same period. I would look for a sentiment change in May/June.
Causality Crisis
Bank of America’s Correlation Crisis captivated my attention,
perhaps it’s the crisis in the title. Whatever the reason, the question
“We see increasing risk signals that remind us of the run- up to the 2005 correlation meltdown,” the analysts w…
to add to the ripple effects of housing. Over the past week, Southwest Air, JetBlue, Continental and UAL all said domestic bookings were weak.
The USA Today this morning has an interesting article on yet another – look, we’re just going to drop the running “housing is well contained” gag and come right out and say it like it is – poorly contained aspect of the housing slump:
Property taxes keep rising nearly everywhere, even as house prices are falling
How can property taxes continue rising even as property prices fall?
Simple. Despite the housing downturn, the market value of millions of homes still exceeds their assessed value. According to the USA Today, all but five states limit how quickly property taxes can rise.
So after a decade of soaring housing prices, it can take years for a home’s tax value to catch up to its market value. As well, property taxes are frequently based on market values that are several years old.
New Hampshire, for example, revalues property once every five years, most recently in 2006 when prices peaked, the newspaper said.
http://www.usatoday.com/money/economy/
housing/2007-04-24-property-tax_N.htm
The housing slowdown/breakdown (debt/MEW/jobs et al…)
will impact and possibly bankrupt MANY INDIVIDUALS through their own fault but also through the faults of others…
that is how the “new” US economy operates
since the .com bubble.
As for Assets…
(THINK SHELL GAME)
Financial engineering
has plenty of money and a TON OF SHELLS to play with and continue to play with in this game.
Most people – self included, do not :(
Futhermore-This chart says it all!!!!
^NYA -5 YR
http://finance.yahoo.com/charts#chart10:symbol=^nya;range=5y;indicator=split+dividend+volume;charttype=ohlc;crosshair=on;logscale=off;source=undefined
Given all events of the last 5 years…
All problems solved and all news had to be good!!!
(FOR SOME PEOPLE)
And just remember….
the stock market NYA/DOW are at all time highs and yet, for everyone who bought all those winners, somebody SOLD an equal amount…
Have a nice day!
…What I did discover through undocumented chart patterns is an average of 50% probability of ascension for homebuilder stocks (PHM,TOL,CTX,LEN) within 1 year by finding similar charts for this year through image recognition, which is very weak…
LOOK at that “hard” buying in the last hour.
next index for all time high is the SPX.
which day THIS WEEK does it it happen…if not today?
“Lawn mower maker Toro Co. said Tuesday its first quarter rose 29 percent on strong sales in the company’s division that sells mowers and irrigation products”
Interesting you mention this I have talked with 4 people over the weekend all buying lawn mowers. Why? They are getting hit with interest resets and need to drop that lawn service and start doing it them self :)
Barry, any opinion on the horrid April econ data? While the official versions won’t be released to May, there was a clear downtrend in new orders and consumption that would scream a recession in a matter of weeks.
Maybe the “evening” out of the overinflated March data due to the hour increase I have talked about at will?
Hat’s off to the “Greatest Story Never Told.” You’ve been right, and I hope you enjoy it.
Local government employment–permit review jobs decline, but community rehab spots open, so (maybe) a wash…
MarkTX – thats a cool chart
http://finance.yahoo.com/charts#chart10:symbol=^nya;range=5y;indicator=split+dividend
There was a whole lotta volume going on the week of 6/5/06 to 6/12/06 and not alotta downside, reorganizing I guess.
Other 2 big volumes July 2002 and week ending Feb 26th 2007. Both downward.
Going back further the Vietnam War shutdown (Oct/72 to Jul/74) was a big drop 680>350.
I wonder if the Iraq (Terror) war is gonna shutdown anytime soon?
BR – Is that were you got your 6800 prediction?
Greg0658
YOU WIN A CIGAR!!!!!
if you missed it….
yahoo chart – ^NYA 5-Yr a yahoo chart
then go ahead and hit the “max” button
try 1 yr 2 yr etc…. chart
is money worth anything?????
What happened in or around 1974?
Do ya get it NOW????
All of the above will probably be impacted, but I would bet that the hardest hit will be travel and leisure (recreational vehicles especially):
Cruise liners, rental cars, regional and domestic focused airlines, hotels, motorcycles, RV’s (sorry Jim Cramer), and boats.
I would contend that most cash-strapped folks, like most Americans, are not good at budgeting, and will do everything possible to maintain their current shopping and eating habits. It’s the mind of the modern American consumer: “I would rather FEEL financially secure, than BE financially secure. Especially when the bank is telling me that I am the LAST THING from financially secure”. For many, achieving this is as simple as shopping and eating out. So while retail and restaurants will feel some pain, I’m not comfortable shorting any of them.
Vacations, unlike eating out a few times a week and buying stuff every weekend, are easy to cut: they aren’t borne out of habit.
As for recreational vehicles….
It would come as no surprise if the same folks who bought too much house on an ARM, are also proud owners of one or more recreational vehicles (“Ain’t she ‘ah beaut?”). Unless you have zero debt, and a healthy retirement nest egg stashed away, these are probably the most financially irresponsible products one can acquire. They are at least as expensive to maintain as a car, and depreciate in value faster – which is fine for something you use to get to and from work – for a toy?…not so much.
The same kind of ‘shoot from the hip’ spending that results in an interest only ARM on a house you can’t afford, can also be attributed to the motor boat impulse buy.
This would explain Harley’s poor earnings. Brunswick reports today….interesting to see how they fair.
The housing bottom is here!
Pulte posts losses amid housing slowdown
Homebuilder’s revenue falls 38%, as land, homes lose value; gives no full year estimate.
Pulte Homes Inc., the No. 2 U.S. home builder, posted a quarterly net loss Wednesday, chiefly because of charges related to the lower value of land and homes it owns.
Pulte reported a first-quarter loss of $85.7 million, or 33 cents per share, narrower than the loss of 34 cents to 38 cents per share the company predicted in an announcement last week.
However, the average of analysts’ forecasts was a loss of 10 cents per share, according to Reuters Estimates.
http://money.cnn.com/2007/04/25/news/companies/bc.pulte.results.reut/
index.htm?postversion=2007042519
FORD’S NET LOSS narrowed in the first quarter, helped by a stronger performance at its international units and higher revenue.
Nissan posted a 54% drop in net profit due to restructuring costs.
Merely picking Toyota as proof of no housing impact is pointless
AutoNation’s CEO Sees Soft Car Market Ahead
DETROIT – AutoNation Inc. Chairman and Chief Executive Michael J. Jackson said Thursday that U.S. auto sales are likely to remain sluggish through most of 2007 as a result of the housing slump.
“It’s going to take some time to work through this,” Mr. Jackson said in an interview. “I don’t see signs of change…It’s not getting worse but it’s not getting better.”
Earlier Thursday, AutoNation, the nation’s largest chain of auto dealerships, reported that first-quarter earnings from continuing operations declined 11%, to $83 million from $98 million a year ago. The decline stemmed from a substantial increase in interest costs related to a stock repurchase program, and weakness in auto sales in California and Florida markets.
Revenue fell 4%, to $4.4 billion from $4.6 billion.
AutoNation, Ft. Lauderdale, Fla., doesn’t give forecasts of future earnings and Mr. Jackson declined to say how he expects the company to perform in the second quarter or in 2007 as a whole.
Mr. Jackson said AutoNation expects 2007 U.S. auto sales “in the low 16-million range” and down from their 2006 level. He said the slump in home values has kept many consumers from buying new cars, especially in California and Florida, which account for 20% of new-vehicle sales in the U.S.
Florida, where real estate speculation pushed up home prices in the past several years, now has one of the highest rates of foreclosures in the nation, Mr. Jackson said. In California, many home owners have adjustable rate mortgages that have risen recently, eating up disposable income they might have used to buy new vehicles, he said.
AutoNation’s dealerships in California and Florida account for about half of the company’s new-vehicle sales.
Despite the decline in AutoNation’s earnings, its earnings per share increased, to 39 cents a share from 37 cents, as a result of a share-buyback program the company started in 2006. On Thursday, AutoNation authorized an additional $500 million for repurchasing its common shares.
Mr. Jackson said the buybacks are “a very efficient way of returning capital to the shareholders without additional investment on their part.”
http://online.wsj.com/article/SB117759598063783428.html
“UPS plans to shrink payroll”
“He cited unusual moderation in retail online sales as well as indications that finished goods are staying on shelves longer”
This is generally covered in a recent Shilling column, but I think that “big luxury” is going to take this MEW dry-up pretty badly. Examples would be jewelers, boat dealers, and other such big “toy” providers. Even if the toys are financed by their own debt, getting rid of a boat is a major way to “offset the reset”. I have a funny feeling that a lot of very expensive personal luxury goods were bought with home equity. Well, that RV seems to have left the park!
But on the positive, I agree that small luxury will be ok. Starbuck coffee, some gourmet food products, and little things like that will likely actually do much better. Salve on the wound of having to sell one’s boat, etc.