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Five Things You Need to Know: Pending Home Sales; At Least Pretend to Care; Fed's 1.5% Club; U.S. Financial Markets' 4,847 Week Winning Streak Snapped By Europe; This Time It's Really Different


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


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

1. Pending Home Sales

Pending home sales rose 0.7% in February, more than expected, despite bad weather, the National Association of Realtors said.

  • Year-over-year pending home sales are down 8.5%.
  • NAR "Chief Economist" David Lereah, author of 2005's "Why the Real Estate Boom Will Not Bust - And How You Can Profit from It: How to Build Wealth in Today's Expanding Real Estate Market", the more recent "All Real Estate Is Local: What You Need to Know to Profit in Real Estate - in a Buyer's and a Seller's Market" and June 2000's "The Rules for Growing Rich: Making Money in the New Information Economy," said, "the data suggests an underlying stabilization is taking place in the housing market, but it will take another month or two to clarify."
  • Also taking another month or two to clarify, what in the hell the phrase "an underlying stabilization" means.
  • What's the stabilization underlying, a continuing collapse?
  • We're not even sure that's a real phrase - underlying stabilization.
  • It sounds made up, yet is so totally lacking in creativity that it winds up being sad and, well, just half-assed.

2. At Least Pretend to Care

You know, if you're going to take the time to make up housing-related spin phrases man, go all the way! Be creative! Make it seem like you are at least pretending to care! What about these?

  • Minyanville's Recommended Housing-Related Spin Phrases

    Imperceptibly Steadfast: "The data suggests an imperceptibly steadfast housing market."

    Normalized Fluctuating Fixed Process of Adjustment: "The data suggests a normalized fluctuating fixed process of adjustment ongoing in the housing market."

    Rapidly Destabilizing Equilibrium Improvement: "The data suggests a rapidly destabilizing equilibrium improvement in the housing market."

    Standardized Renormalization Reduction Opportunity: "The data suggests we're simply seeing a standardized renormalization reduction opportunity for both buyers and sellers in the housing market, which is a good thing."

    Atypical Rebleakening Buildup: "The data suggests housing is seeing atypical rebleakening buildup, which translates into a great time to buy or sell a home."

    Gradually Accelerating Stabilization Plunge Process: "The data suggests all we're seeing is a gradually accelerating stabilization plunge process in the housing market, which should translate into something solid over the remainder of the period."

3. Fed's 1.5% Club

The Fed should target an inflation rate of 1.5%, St. Louis Fed President Bill Poole said yesterday.

  • "Inflation is a major concern and if inflation were to head up in a convincing way from the current level, I could be in favor of a rate increase at some point," he told the New York chapter of the National Association for Business Economics.
  • What's getting play this morning in the Financial Times and other media outlets is the cracks of an apparent disagreement over reasonable objections for inflation beginning to show through.
  • Late last week Fed Governor Frederic Mishkin said he expects inflation as measured by core PCE to slow to about 2% from its current level of 2.25%, but noted that "a substantial further decline in inflation would require a shift in expectations, and such a shift could be difficult and time-consuming to bring about."
  • Mishkin, along with Fed Chairman Ben Bernanke a proponent of explicit inflation-targeting, added that 2% is a reasonable estimate of current long-run expectations for inflation.

4. U.S. Financial Markets' 4,847 Week Winning Streak Snapped By Europe

Europe has eclipsed the U.S. in stock market value for the first time since the first world war, according to the Financial Times.

  • Europe's 24 stock markets, including Russia and emerging Europe, saw their capitalization rise to $15.72 trillion as of the end of last week, according to Thomson Financial data, exceeding the $15.64 trillion market value of the US.
  • The last time Europe's stock markets exceeded U.S. in value was before the first World War.
  • Factors accounting for what at least one analyst termed a "seismic shift" in market value that were cited by the Financial Times include - rise of the euro against the dollar, growth of Russia and east European markets, overall stock market outperformance and the uncanny ability to drive on the left side of the road.
  • The U.S. markets shrugged off their strong second-place showing last week, saying, "Going week-by-week back to 1914, we're 4,847 and 1 against the Europeans. We'll take that record."
  • Privately, however, the U.S. markets sounded a darker note going into this week's rematch: "You know, before you get too excited, keep in mind the axis of evil ain't necessarily limited to Iraq, Iran and N. Korea. There's room for a few more countries in there... punk."

5. This Time It's Really Different

Yesterday we devoted the entire Five Things space to stagflation. To see how starkly different this bout of "stagflation" is compared to the 1970s, take a look at this article from Sunday's NYT magazine: Can Poor People Be Taught to Save?

  • In the 1970s, the task wasn't to get people to save, it was to get people access to credit.
  • That task succeeded. "As the executive director of the Consumer Federation of America for nearly three decades, [Stephen Brobeck] has watched people increase debt and decrease savings."
  • Why don't people save more? It's not strictly an economic issue, and that point is probably the most misunderstood aspect of savings and debt prevalent among economists and Fed watchers today.
  • According to the Times article, John Caskey, a professor of economics at Swarthmore College, arranged for anthropologists to conduct interviews with people in two low-income communities in order to better understand the factors that prevented them from saving money.
  • "In many cases, people didn't save not because they actually couldn't, Caskey discovered, but because they believed they couldn't. Part of that psychological barrier, Caskey found, was social pressure to not save."
  • Becoming a nation of savers seems so... far-fetched now; almost as far-fetched as it was for our parents' parents to envision a world where "savings" would be measured primarily by access to credit rather than a savings account balance.
  • But that will change over time. In fact, it's changing right in front of our eyes and building momentum below the radar: "The key, [Caskey] realized, was to create a network of support for saving. The network he came up with was America Saves. Initially begun as an experiment in Cleveland in 2000, the project has since expanded to more than 40 locations across the country and more than 75,000 enrolled participants."
  • 75,000 enrolled participants is less than a rounding error in the grand scheme of things.
  • But all major shifts begin somewhere, and we are at the very early edge of what in time will become a psychological shift toward valuing "real" savings over access to credit; intangibles over material possessions.
No positions in stocks mentioned.

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