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Five Things You Need to Know: Existing Home Sales Bullish!, The Usual Suspects, Silence Golden, Madison Insult Avenue, Hog Heaven?


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. Existing Home Sales Bullish!

Existing home sales fell 0.5% in August, according to the National Association of Realtors.

  • Although the rate came in slightly above consensus expectations of 6.25 million, the national median sales prices fell 1.7% year-on-year.
  • Meanwhile, inventories continue to rise and now present a 7.5-month supply at the August sales pace. (That's the most since 1993, by the way).
  • Sales have now declined for five months in a row and 9 of the past 12 months.
  • The fall in prices is the first year-on-year decline since 1995.
  • It's also the second-largest decline in the 30-year history of the survey.
  • But you know what? That's all bullish.
  • Just ask the chief economist for the realtors group: "The price correction is a welcome development," he said, because it stops the bleeding.
  • "Sales have hit bottom," he said. "Sellers are finally getting it."

2. The Usual Suspects

Two-year Treasuries may provide the best returns in 2007 as the Federal Reserve cuts interest rates, according to Goldman Sachs and Merrill Lynch, Bloomberg reported.

  • Two bullish reports on the two-year Treasury on Bloomberg this morning from Goldman senior U.S. economist Edward McKelvey and Merrill's David Rosenberg.
  • McKelvey says two-year note yields may fall from the current 4.67 percent to 4.20 percent, according to Bloomberg.
  • Rosenberg says they may drop to 3.60 percent.
  • Reasons for the bullish outlook for the two-year are the usual suspects:
    - Slowing (and we mean really slowing) housing market
    - Real estate takes a bite out of consumer confidence
    - Consumer spending due to slow as personal savings increases
    - Economic growth takes a hit
    - Fed forced to cut target rate for overnight loans
  • Their view is far from unanimous on the Street.
  • Bloomberg notes that the difference between the high and low forecasts made by economists at the five largest Wall Street firms hasn't been this wide since 2004 when the Fed's interest rate boosting cycle began.
  • Meanwhile, Bill Gross, manager of the world's largest bond fund at PIMCO, boosted his holdings of Treasuries to the highest in six months in August.
  • And Stone & McCarthy's weekly survey indicates investors are more bullish on bonds now than they have been in three years.
  • Nevertheless, bonds continue to rally. It's the Keyser Soze bond market.
  • You think you can catch Keyser Soze? You think a guy like that comes this close to getting caught, and sticks his head out?

3. Silence Golden

Many raised in an era of email and text messaging are increasingly shunning "real" physical conversations in favor of electronic ones, according to an article in the San Francisco Chronicle.

  • "I feel more comfortable texting friends, because face-to-face you run out of things to talk about," a17-year-old high school senior from San Mateo said.
  • He's part of a growing number of high school and college students who say they prefer electronic methods of communication for their speed and brevity as well as for the sense of control and security they can provide, the article says.
  • Psychologists also say they are part of a new generation of patients who do better with e-therapy -- counseling via e-mail -- than personal encounters in an office setting, according to the article.
  • Experts who are tracking this trend say that young people feel they're presenting a more authentic self when they hide behind an electronic device.
  • "Teenagers and early 20-somethings would tell me that things like face-to-face and telephone and even e-mail are a cold medium and you can't trust them, but the way you can really be authentic is through texting and instant messaging," said San Jose State University Anthropology Professor Jan English-Lueck, who with her colleague, Professor Chuck Darrah, is conducting the Silicon Valley Cultures Project, the article says.
  • The study, which began in 1992, examines how the work of Silicon Valley affects people's lives and includes an intensive study of 14 families, among other projects.

You can call me Hal, friend.

4. Madison Insult Avenue?

Nearly a quarter of US baby-boomers are insulted by the advertising messages that companies are sending them, the Financial Times reported citing a recent study.

  • According to a study of 30,000 people aged 42 and over, nearly half said there was little truth in advertising, and most said they were less likely to buy certain products with insulting advertising campaigns.
  • The survey suggests many companies are taking a misguided approach in trying to target baby booomers, the largest and wealthiest group of US consumers.
  • There are more than 77 million US baby-boomers, according to the AARP, and by 2010, nearly one in three Americans is expected to be older than 50, the FT said.
  • As well, baby-boomers control roughly 75% of this country's financial assets.
  • "There's a perception among advertisers that if you're over 50, your biggest concern is incontinence – that's not true," Mike Irwin, president of Focalyst, which conducted the survey in a joint venture with WPP and the AARP, told the FT.
  • Below are some of the advertising campaigns Minyanville has learned may be considered insulting by baby-boomers.

5. HOG Heaven?

Speaking of baby-boomers, we ran across an interesting piece this morning questioning the "gentrified biker" positioning of Harley Davidson.

  • Between 1990 and 2003, motorcycle ownership rates among baby boomers increased 44% verses a 6% increase in the general population, according to the Investopedia article.
  • Harley was able to capitalize on the affluent mass baby-boomer market by recasting itself as a "gentrified" biker company.
  • However, seems times they are a changin', and not in the way Dylan meant in 1964.
  • "Most boomers are now over the age of 50, and while their desire to stay active and vital remains undiminished, a more pragmatic outlook on life appears to be steering them toward activities that take them a bit less close to the edge than what would be involved in negotiating a powerful Harley "hog" down the local stretch of open road," Investopedia Advisor contributor Eugene Bukoveczky writes.
  • Based on HOG's second quarter results, motorcycle unit sales are only up 3.5% on a year-over-year basis.
  • So, what's the company doing to reposition itself? They recently partnered with Lehman Trikes USA to build a Harley-Davidson branded three-wheeled motorcycle.
  • "It seems the thinking is that if aging boomers can't keep two wheels on the road perhaps three might be a bit easier," Bukoveczky says.
  • Another possibility? The Harley-Davidson Senior Scooter.

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