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Five Things You Need to Know: New Homes Sales; Bank of Japan Plays Hemingway to Fed's Joyce; Rate Hike Coup?; Where Did All the Shares Go?; Avez Vous Des Video Games?


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. New Homes Sales

New Homes Sales fell 3.9% in February, the lowest level since June 2000.

  • The median sales prices of new houses fell to $250,000.
  • The number of unsold new homes rose 1.5%, pushing the supply of homes on the market to 8.1 months at the current pace, up from 7.3 months in January.
  • The numbers were far weaker than expected, especially on the heels of last week's surprising uptick in sales of existing homes.
  • Also note that year-over-year the number of completed - yet unsold - homes is up 43%.
  • As usual, the following disclaimers to the release apply:
    1) The 3.9% headline number has a margin for error of +/-17.4%. Seriously.
    2) Builders are now routinely including incentives - everything from free televisions to upgrades, vacations, even cars; and these incentives are not subtracted from the reported sales price.
    3) New Homes Sales are reported upon signing of a contract, and do not include cancellations, so given the high cancellation rates being reported by builders, the sales declines are probably understated.

2. Bank of Japan Plays Hemingway to Fed's Joyce

The minutes of the Bank of Japan's February policy meeting were released overnight and contained a handful of observations worth highlighting.

  • First, unlike the Federal Reserve, which sees the U.S. economy likely to "continue to expand at a moderate pace over the coming quarters," the Bank of Japan is unambiguous about its view of the U.S. economy:
    - "The U.S. economy continued to expand, but the pace of growth was decelerating moderately with some fluctuations."
  • Not only is the pace of growth decelerating but, more worrisome, so is private consumption:
    - "Private consumption had been relatively firm recently, but continued to be on a decelerating trend."
  • Nevertheless, and also in language far less ambiguous than the Fed (and it's even been translated so it's a second iteration!), the Bank of Japan members indicated they fall squarely into the "soft landing" camp with respect to the U.S. economy:
    - "Members also concurred that the likelihood of the U.S. economy realizing a soft landing was increasing and thus uncertainty about the outlook for overseas economies had abated."
  • The only remaining flies in the ointment? Housing, should it continue to spread, and the relatively high level of core inflation, should it remain high.
    - "At the same time, many members added that both upside and downside risks should continue to be borne in mind, given that the likely extent of future adjustments in the housing market was still uncertain and the core inflation rate (the CPI for all items less food and energy) remained relatively high."
  • Man, compare that to the language the "more transparent" Bernanke-led Fed uses.
  • It's like comparing Joyce and Hemingway.

3. Rate Hike Coup?

As the minutes of the Bank of Japan meeting were being deciphered overnight, there was at least one BoJ policy board member who disagreed with the decision to raise rates in February.

  • Only one of the nine policy board members voted against the February rate hike, but there has been growing speculation by some in the media that the nascent economic recovery in Japan is just that - nascent.
  • The policy board member who voted against the rate hike did so "because there was significant uncertainty regarding the future pace of increase in prices, given that the relative weakness in wages and private consumption had not been dispelled," the BoJ minutes said.
  • According to XFN-Asis, the member was believed to be one of the BoJ's two deputy governors, Kazumasa Iwata.
  • Meanwhile, before everyone gets too comfortable with the slow pace of BoJ interest rate actions, consider the comments overnight from Finance Minister Koji Omi.
  • According to Bloomberg, Omi said "Japan's interest rates are kept low compared with those of other countries, and that holds down interest payments on government debt, but this situation won't last forever, and we have to figure out how to push forward fiscal reform'' taking interest rates into account.
  • Hmm, an interest rate hike coup?

    Carry trade lingers;
    Guess the Bank of Japan
    is betting the farm.

4. Where Did All the Shares Go?

The 2007 market for initial public offerings is off to its strongest start since 2000 in terms of the number of deals, according to data from Thomson Financial.

  • Through Friday 49 initial public offerings have raised $10.54 billion, nearly two billion more than at this time last year.
  • Still, while the start is strong compared to the prior two years, it's nothing compared to 2000.
  • By this time in 2000 107 IPOs had raised more than $16 billion.
  • Meanwhile, thanks to share buybacks and corporate buyouts, the amount of stock available to investors has actually declined in recent years.
  • According to the Financial Times, citing work by researchers at Morgan Stanley, since 1996 the nominal value of the net equity issuance in the world has risen by 52%.
  • However, deflated by the world's M1, the real value of the net new equity issuance has actually declined by 34% over the past 11 years.

5. Aves Vous Des Video Games?

Apparently, video-gamemakers are worthy of state patronage and support, the French government says, according to Wired News.

  • In early March, France signed into law generous tax breaks for video games made in France.
  • "The creation of video games is an excellent and intelligent way of harnessing the potential of technologies that are ahead of their time in order to substantiate the richness of French culture," Patrick Ollier, president of the committee on economic affairs, the environment and territory at the Assemblée Nationale (French National Assembly), told Wired in an email.
  • Not all video-gamemakers will benefit from France's tax-break incentives, however.
  • Only video games with "cultural content" will qualify.
  • So what kind of French video games with "cultural content" can eager gamers expect to see in the future? Below, Minyanville takes a look at two:

    Surdoue' Derrida Freres (Super Derrida Brothers)

    In this action-packed adventure game, players do battle with evil, self-referential authors, hoping to expose the contradictions contained in their texts, and upon which their giant Western canon is based. The game never ends and scoring is relative.

    Vol de Grande Envergure Voiture: Existentialiste (Grand Theft Auto: Existentialist)
    In this razor-sharp, thrilling action game, players attempt to rise through the ranks of an organized crime syndicate as a low level criminal. But is the player really a criminal? Who is more criminal? The player who can justify his actions by virtue of the fact he alone is solely responsible for pursuing the actions he chooses? Or the "enforcer" of arbitrary laws handed down by those who claim - without any evidence whatsoever to justify the claim - to be in possession of some apparently random authority codified by pigeons gathered on the bitter edge of an oasis populated with ruptured souls.

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