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Five Things You Need to Know: Canary in the Coal Mine, You're Going Broke, Housing, Love Boat, Up In Your Grill


What you need to know (and what it means)!


Minyanville's Five Things You Need to Know to stay ahead of the pack on Wall Street:

1. Canary in the Coal Mine

Turkey's central bank raised key interest rates by 225 basis points on Sunday and said it would begin lira purchase auctions to try and halt the currency's slide. Why do we care?

  • Turkey's Monetary Policy Council hiked the overnight borrowing rate to 17.25 percent and the lending rate to 20.25 percent overnight on Sunday.
  • "In order to correct medium-term inflation expectations the monetary policy committee decided to evaluate its key interest rates and carry out another strong monetary tightening," the central bank said, according to Reuters.
  • The Turkish lira has fallen 23% against the dollar since the end of April.
  • Bond yields have risen by 300 basis points since the beginning of the year and equities have fallen.
  • Turkey's CPI rose to nearly 10 percent in May.
  • The bank began lira purchase auctions, called "depo" auctions, in order to drain liquidity from the market and reiterated it would engage in direct forex market intervention if deemed necessary.
  • So, why do we care? It's the repricing of risk... worldwide. To give credit where credit is due (hahaha, an inside central banker joke!) it was Minyanville Professor Greg Weldon who alerted us to this last week.
  • "The macro-market trend has now reversed, towards risk being re-priced as opposed to the environment of DE-PRICING risk that has been so dominant in the era of monetary reflation," Professor Weldon noted.
  • With the FOMC set to report their expected 25 basis point rate hike on June 29, most will direct their tunnel vision toward US markets. What we will be closely watching this week however, per Professor Weldon's advice, is the Brazilian Real, the MSCI Emerging Market Index and the CRB Commodity Index; our canary in the coal mine.
  • The effects of global shrinking liquidity and subsequent risk aversion will manifest in the riskiest of markets first.

2. Guess What? You're Slowly Going Broke.

Pay increases for most salaried workers will average only 3.5 percent this year and stay at that level through 2007, The Conference Board reported late last week.

  • For the fourth consecutive year, salary increases are below 4 percent, according to a wage survey by The Conference Board.
  • Estimates for 2007 for all industries and for all employees show salary hikes staying at 3.5 percent with the exception of the executive group, which is projected to move to 3.8 percent, the survey indicated.
  • Too bad the latest headline CPI is running at 4.2% year-on-year.
  • Because that means you're slowly going broke.
  • See, the way it works is that the money you take in from your paycheck each month goes directly toward buying things that are increasing in price faster than your income.
  • "Well, I could just buy less," you say. True, you could "just buy less," but the problem is... you won't. The Personal Savings rate, which was a negative 1.6% in April shows that you are continuing to buy things by spending more money than you are bringing in.
  • "Of course, everyone knows the Personal Savings does not take into account the "wealth effect," and increases in real estate values smart guy," you say. "Also, the Personal Savings measure doesn't include change in the value of existing assets or capital gains."
  • Good point, let's look at the vast amount of existing assets the Baby Boomers have saved up for retirement: The USA Today notes that according to Hewitt Associates, the median 401(k) balances as of 2005 were $27,100.
  • Bottom Line:

    "Welcome to Wal-Mart!"

3. Obligatory Housing Data. With Bullet Points!

Sales of new homes in the U.S. unexpectedly rose 4.6% in May. Expectations were for a 4% decline in May, according to a Bloomberg survey of 47 economists. (Yawn.)

  • The number of new homes on the market fell 0.7% to 556,000 in May from a record 560,000 in April. The inventory fell to a 5.5-month supply from 5.8 months in April.
  • Builders have said they are cutting prices and offering incentives to boost sales. The median price of a new home was $235,300 in May and is up 3.1% in the past year, down from a revised 4.1% gain in the 12 months ending in April.
  • The government cautions that its housing data are subject to "large sampling and other statistical errors," so the 4.6% may not be a 4.6% increase at all.
  • In fact, April sales were revised even lower to 1.18 mln.
  • The Fed has trotted out no shortage of speakers lately predicting a "gradual" slowdown in housing.
  • On June 14, Fed Gov. Susan Bies said the cooling of the housing market has so far been "moderate," according to Reuters.
  • New home sales have fallen 10 percent in the first four months of this year compared to 2005.
  • Tomorrow existing home sales will arrive at 10 a.m.
  • Confession time. We would love to muster up some enthusiasm, but we already know how this movie ends.


4. Love, Exciting and New!

Condo Cruise Lines, the company that pioneered "affordable luxury cruise ship condominiums, is hard at work on its next two condo cruise ships.

  • Erin LeCel Jones, Executive Vice President of the company, says, "We sold almost 80 percent of the available condos on our first ship in about twenty weeks - more than enough to go ahead and start the re-design and renovation process, the PR Newswire release stated.
  • The first ship's condo prices started out at $349,000 and went as high as $529,000 last January.
  • The condos that are left range from $562,000 to $1,280,000.
  • According to PR Newswire release, many real estate investors are opting for this variation to the pre- construction condo purchase because the rental income is about five times higher than a beachfront condo on the Gulf of Mexico.
  • And, we swear we are not making this up, the ships move out of the way of hurricanes, the release notes.
  • C'mon everybody, sing it with us!

Love, exciting and new
Come Aboard. We're expecting you.
Love, life's sweetest reward.
Let it flow, it floats back to you.

Love Boat soon will be making another run
The Love Boat promises something for everyone
Set a course for adventure,
Your mind on a new romance.

Love won't hurt anymore
It's an open smile on a friendly shore.
It's the Love Boat-ah! It's the Love Boat-ah!

Brought to you by the Realty Team of
Stubing, Doc, Gopher, Isaac and Julie.

"We don't just sell the American Dream,
we sail the American Dream!"

5. Worker Productivity Poised to Collapse Next March

The men's NCAA basketball tournament is considering expanding the field of 65 to 128 teams, according to the Associated Press.

  • College coaches will urge the NCAA to expand the field when they meet this week in Florida, AP said, citing Jim Haney, executive director of the National Association of Basketball Coaches.
  • An increase to 128 teams would double the number of first-round sites and likely add a week to the tournament, which is played over three weekends each March.
  • A study by Challenger, Gray & Christmas found that employers lose an estimated $3.8 billion in lost productivity during the men's basketball tournament each March.
  • The cost to employers in lost wages alone exceeds $237 million, the study found.
  • That figure is based on the current average hourly wage for all American workers -- $18.00 per hour, as reported by the Bureau of Labor Statistics.
  • According to 2005 Gallup Poll, 41 percent of Americans are fans of college basketball.
  • The remaining 59 percent of Americans are reportedly not fans of college basketball, especially when my team breaks out the windex, cleans the glass and reverse dunks all up in their grill.

Why 59% of Americans are
not fans of college basketball:

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No positions in stocks mentioned.

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