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Five Things You Need to Know: Why Do Real Estate, European Economic Growth, Google Insiders and Magazine Sales Hate America?

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

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

1. Why Does Real Estate Hate America?

More sour real estate news trickling in this morning as luxury homebuilder Toll Brothers (TOL) reported results. The question is, Why does real estate hate America?

  • Toll Brothers said its fiscal third quarter profits fell 19%, thanks to higher mortgage rates, among other things.
  • The company also cut its fourth quarter outlook... again... blaming a glut of homes on the market and a decline in buyer confidence.
  • Ironically, the profit picture for Q3 was not quite as bad as many expected.
  • But wait, there's more. Orlando realtors released July numbers showing that inventory ballooned to the equivalent of 9.38 months' worth of homes on the market - a figure not seen in more than nine years, according to the Orlando Sentinel.
  • Even more worrisome is a little nugget Merrill's David Rosenberg passed along yesterday in a note to clients: his group can trace almost two-percentage points of the 3.5% average annual GDP growth over the past five years to the boom in housing construction and home prices.
  • Not only is there the direct impact on homebuilding to consider, which is now apparently being unwound, but also ancillary effects in sectors ranging from real estate services, engineering, mortgage services, architecture, legal services, etc. but also the multiplier "wealth effect" impact on consumer spending, Rosenberg noted.
  • And that's still not all. Barron's over the weekend reported that 32.6% of new mortgages and home equity loans last year were interest-only.
  • That's up from 0.6% in 2000.
  • As well, 43%! of all first-time buyers put no money down on their homes last year.
  • For those keeping score at home, it's America 0, America-hating real estate mortgage resets $2.7 trillion.
  • So why does real estate hate America so much?
  • Because we are successful. That's why.
  • But while real estate is busy chewing on a soggy resentment sandwich, it might just want to consider the fact that we Americans have the freedom, and more importantly the wherewithal, to just up and move out of this place if we want.
  • We don't need real estate. Not in our special astral plane of denial.

Astral Plane of Denial?




2. Will Wednesday's and Thursday's Home Sales Hate America?

Although this week is relatively quiet on the economic calendar, tomorrow will be a key day as July existing home sales are due out at 10 a.m. EST. New home sales are due out Thursday at 10 a.m. Will they hate America too?

  • Existing home sales are due out tomorrow at 10 a.m. with consensus expectations for a 0.8% drop to 6.58 million.
  • New home sales are expected to come in at 1.1 million, a 3% drop, and the lowest sales rate since February, which was the lowest sales rate in two years.
  • The data will be key in assessing whether we are seeing a correction in the housing market, or a collapse.
  • With housing construction and sales making up a large slice of GDP over the past five years, any sign of greater than expected deterioration could lend added significance to the data, especially during a slow economic news week.
  • Do home sales hate America too?
  • We shall see.


3. Why Does Economic Growth Hate Europe and, By Extension, America?

Euro zone industrial orders fell 2.5 pct in June from May. German Investor Confidence plummeted this month. Why does economic growth hate Europe and, by extension, America?

  • Euro zone industrial orders fell 2.5 pct in June from May.
  • The 2.5 pct June decline follows a revised May increase of 2.7 pct.
  • Eurostat previously estimated that orders rose 2.3 pct in May.
  • Meanwhile, German Investor Confidence unexpectedly slumped to a five-year low.
  • The ZEW Institute said August sentiment of the analysts and investors it polled declined to -5.6 from +15.2 in July.
  • Economists had been expecting a decline, but nothing of that magnitude.
  • Most estimates were for a decline to +11 or +12.
  • So why does economic growth hate our friend Europe and, therefore, by extension, America?
  • Simple. Because we are rich. But make no mistake, economic growth: hate and envy us today, crawl back to us on your hands and knees from China, India, Taiwan, South America and other places tomorrow.
  • We never forget.


4. Why Do Google Insiders Hate America?

A Bloomberg article over the weekend by columnist Mark Gilbert took a look at all the insider selling over at Google (GOOG) since Valentine's Day (the expiration date of the final restriction on insider sales following the company's IPO). The numbers raise a disturbing question: Why do Google insiders hate America?

  • According to Gilbert's piece, as of about a week-and-a-half ago, insiders at Google had sold a total of 23 million shares. (23,000,000 shares).
  • "That means Google's top executives have offloaded about $7.4 billion of stock, equal to about a third of the company's starting market value when it sold shares at $85 each in the August 2004 IPO," Gilbert notes.
  • Even more remarkable, Gilbert notes, "not a single Google insider has bought a single share of the company in the 18 months since the IPO lock-ups expired."
  • Barry Ritholtz, Chief Market Strategist for Ritholtz Research & Analytics puts the sales in context: "Insiders sold enough to buy Sun Microsystems (SUNW). Or, they could have bought contract manufacturer Flextronics, or three-quarters of on line broker E*Trade -- together. Or, they could have simply purchased three -quarters of Amazon.com. "
  • Question: Why do Google insiders clearly hate America?
  • Well, in all fairness, they do have detailed knowledge of our search histories.
  • I can't say that I blame them.


Kevin Depew Personal Google Search History:
"Kevin Depew"
"How to short Google stock"
"How to short more Google stock"
"Kevin" + "Depew" + "Sexy"
"Maintaining a short position in Google stock" + "how to"
"Rickets" + "symptoms"
"Borrowing shares of Google to short" + "how to"
"Hypochondriacs" + "anonymous"
"Google stock" + "price target 8"

5. Why Do Magazine Sales Hate America?

American magazine newsstand sales fell more than 4 percent in the first half of this year, according to preliminary figures provided by publishers to the Audit Bureau of Circulations. Why do magazine sales hate America?

  • The New York Times this morning reports that newsstand sales of magazines fell by more than 4% to 48.7 million copies, according to data provided by publishers to the Audit Bureau of Circulations.
  • Time magazine reported the largest drop in newsstand sales, a decline of 24%.
  • Newsweek sales fell by 1.8%.
  • Why do newsstand sales hate America so much?
  • Clearly, they hate us for our freedom to read for free just about any magazine we want over someone's shoulder on the subway.
  • Meanwhile, although the news weeklies suffered (except for U.S. News & World Report because U.S. News & World Report, as the name would suggest, loves America) celebrity weeklies saw a clear boost in sales.
  • US Weekly circulation jumped 7.2%, probably because US (as in you, me and everyone) looks very much like U.S.
  • Also, People magazine saw an increase of 1.2%.
  • People magazine - a magazine by the people, for the people, about famous people, just like the Constitution says.

When Magazines Loved America:

No positions in stocks mentioned.

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