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Five Things You Need to Know: CPI, Housing Stops, Japan Releases the Doves, China Pauses to Reflect, College Rankings


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. CPI

The Consumer Price Increase (Oops, paging Dr. Freud) Index showed up in-line with expectations this morning, prompting wave two of buying the news following yesterday's Producer Price Index.

  • CPI core prices, excluding food and energy, rose 0.2 percent, the smallest increase since February, after a 0.3 percent gain a month earlier, the Labor Department reported.
  • Adding food and energy, prices rose 0.4 percent following June's 0.2 percent increase.
  • The main ingredient for the CPI is Owners' Equivalent Rents (OER).
  • As housing continues to slow (see Number 2, below), there continues to be upward pressure on rents.
  • OER increased 0.4%, the same as June.
  • The market takeaway is that the in-line numbers are "OK".
  • Our takeaway is that "risk assets" hold the keys going forward.
  • The Russell 2000 (RUT) was a significant outperformer versus the S&P 500 yesterday... and so far this morning.
  • We'll be watching for signs of slippage in that relationship to tell us that risk aversion continues to bubble underneath the surface.

2. Housing Stops

Housing starts effectively stopped last month, falling to their lowest level in nearly two years, the Commerce Department reported.

  • Housing starts fell 2.5 percent, more than forecast, to an annual rate of 1.795 million, and building permits, declined 6.5 percent, the most since September 1999.
  • This is the fifth decline in the past six months for home construction.
  • The number of new homes on the market at the end of June was a record 566,000.
  • Meanwhile, the National Association of Home Builders' August index for sales of new homes,released yesterday, dropped another seven points to 32.
  • That's the lowest level since February 1991... during a recession.
  • Meanwhile, the mantra "Real estate never goes down" is being challenged left and right.
  • Today's Wall Street Journal notes in "Going, Going, Gone..." that home sellers are turning to auctions in an effort to move properties.
  • Auctions are typically a sign of distress in the real estate market. Moreover, as the graphic below shows, prices are definitely coming down.
  • We may be nearing the point of recognition for housing. As in all markets, the point of recognition is where the largest declines originate.

    [Cutting Prices]
    Graphic from Wall Street Journal

3. Japan Releases the Doves

The Bank of Japan policy minutes revealed a rather surprising dovish tone from the July 13-14 meeting.

  • Some members of the Bank of Japan's policy board called for a cautious policy stance to avoid leading markets to think the central bank's rushing to raise interest rates, according to minutes of the July 13-14 meeting.
  • At that meeting the policy board voted unanimously to end the central bank's quantitative easing program, raising the target for the overnight call rate to around 0.25% from near zero.
  • According to the minutes, "some members said that it was important that the bank did not give the impression that it was rushing to raise the policy interest rate."
  • As if that weren't enough, our own Federal Reserve was identified as a central bank fashion plate NOT worth emulating.
  • The BoJ "should avoid giving the impression that it would carry out successive raises of the policy interest rate like the Federal Reserve," the minutes said.

4. China Pauses to Reflect, Fluctuate

The Chinese yuan gained 0.24% overnight in the largest single session currency move since last year's revaluation.

  • The move for the yuan suggests the PBOC might be intent on making good on its August 8 promise to allow the yuan to fluctuate in a wider band against the dollar.
  • Meanwhile, some this morning are trumpeting the "exciting slowdown" in urban fixed investment as a sign the banks recent "tightening" measures are working.
  • Urban fixed investment, according to Dow Jones Newswires citing a statistics bureau official, grew only 27.4% in July year-on-year, compared to 33.5% in June.
  • China has said it wants to see investment growth soften to avoid overinvestment and excess capacity.
  • Yesterday it was reported that China's industrial output grew 16.7% in July year-on-year compared to 19.5% in June.

5. College Rankings

Tired of the US News & World Report annual guide and ranking system of colleges and universities, the editors at Washington Monthly have devised their own ranking system for colleges and universities.

  • According to Washington Monthly, their guides "asks not what colleges can do for you, but what colleges are doing for the country."
  • Washington Monthly asks, "Are our colleges making good use of our tax dollars?"
  • "Are they producing graduates who can keep our nation competitive in a changing world?"
  • "Are they, in short, doing well by doing good?"
  • Leading the Washington Monthly list of National Universities in "doing well by doing good" was Massachusetts Institute of Technology.
  • Leading the list of liberal arts colleges was "Bryn Mawr College," although the name of the school suggests to me that at least one top college might want to consider brushing up on spelling. Would you like to buy a vowel Bryn Mawr?
  • Anyway, it's all well and good to know which colleges and universities are doing well by doing good, but what about the many "lesser students" who just want to avoid going to the worst colleges and universities?
  • What about the average college Joe or Jane who just wants to get by?
  • Below are the Minyanville rankings of the colleges and universities who are "doing poorly by doing bad."

    Minyanville College Rankings
    The Worst of the Worst

    1. SWUNY (Sidewalk University of New York)
    2. Grifter College at Belmont Park
    3. Abacus Institute of Technology
    4. University of Kegstand
    5. Sloth
    6. Homeschool Junior College at Home
    7. West Virginia School of Whittling
    8. Condominium College
    9. Swindler University
    10. ESPNU
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