Friday, October 30, 2020

Weekly Economic Wrap: Oct 30, 2020

This is a summary of economic reports released during the week ending Oct 30, 2020. These are summarized from the Econoday web site and other various reports, such as Ned Davis Research. 

The stock market overall was down. The DJIA began the week at 28,185 and closed at 26,502 on Friday. This is a daily chart of the SP500. Click to enlarge.  

New Home Sales (Oct 26)

Actual number: 969,000 (annual basis)

New home sales have been soaring, easily beating Econoday's consensus the last five reports. After August's 1.011 million annual rate, Econoday's consensus for September is 1.016 million. New home sales measure the number of newly constructed homes with a committed sale during the month. The level of new home sales indicates housing market trends and, in turn, economic momentum and consumer purchases of furniture and appliances.

Durable Goods Orders (Oct 27)

Consensus: .4% increase. Actual: 1.9% increase

Recovery in durable goods orders is expected to hold steady in September, at a 0.4 percent monthly increase following August's 0.5 percent gain (revised from an initial 0.4 percent). Durable goods orders are new orders placed with domestic manufacturers for factory hard goods. The report also contains information on shipments, unfilled orders and inventories. The advance release provides early estimates and is revised about a week later by the factory orders report. 

Housing Prices (Oct 27)

The Case-Shiller House Price index was up 0.5% over the previous month. Year to year it was up 5.2%. The FHFA House Price index was up 1.5% month to month and 8% year over year. The Case-Shiller is based on actual sales in 20 cities, while the FHFA relies on mortgage data from Freddie Mac and Fannie Mae.

Oil and Gas Inventories (Oct 28/29)

Crude oil inventories were up 4.3 million barrels. Natural Gas stocks were 29 billion cubic feet higher, lower than expected. 

GDP (Oct 29)

GDP for the third quarter was up 33.1%. This is after a decline of 31.4% in the second quarter. Personal consumption expenditures increased 40.7% vs a decline of 33.2% in the prior quarter. 

Jobless Claims (Oct 29)

The actual number was 751,000, below expectations. Initial jobless claims ratcheted lower after California, which had suspended reporting, came back on line. Claims in the October 17 week fell sharply to 787,000 with Econoday's consensus for the October 24 week calling for further improvement to 758,000.

Regional manufacturing activity expands (Oct 30)

The Chicago Business Barometer ticked down 1.3 points in October to 61.1, but that was still its second best reading since February 2019, as regional factory activity grew for the fourth straight month. New orders increased at the quickest rate since November 2018, but production growth moderated and employment was cut. Of the six regional factory activity indexes we follow, four improved this month, and all six were in expansion territory. Coupled with the steady level in the Markit flash U.S. Manufacturing PMI, this suggests that the ISM Manufacturing Index would also show continued expansion in October. 

Consumer sentiment up modestly (Oct 30)

The Reuters/University of Michigan Consumer Sentiment Index edged up 0.6 points from its preliminary October reading to 81.8, above the consensus of 81.2. It was also up 1.4 points from the previous month. Consumers’ expectations improved to their best level since March, but their assessment of current conditions weakened slightly. While sentiment has rebounded since April, it is still 19.2 points below what it was in February. The current level is 14.3% lower than a year ago, historically consistent with a weak economy. Additionally, we find that sentiment tends to increase ahead of presidential elections, but gives up some of the gain post-election. This implies that the recent run-up in sentiment may be tenuous in nature, and supports the outlook for a slow economic recovery. 

Personal income and spending stronger than expected (Oct 30)

Personal income increased 0.9% in September, above the consensus of 0.5%. Disposable personal income (DPI) rose by the same amount. It was led by a 5.1% gain in proprietors’ income, up for the fifth consecutive month, partly due to the impact of the PPP program earlier this year. Worker compensation and rent income also rose. But transfer payments from the government continued to shrink, as some pandemic unemployment assistance expired or its amount was reduced. Returns on assets also fell, as interest income diminished. Personal consumption expenditures (PCE) increased 1.4%, its fifth consecutive gain, and more than the consensus of 1.0%. Real PCE was up 1.2%. Most of the increase was in goods, led by vehicles and apparel. Within services, there was a notable increase in spending on health care and recreation. With spending rising faster than income, the personal saving rate took another notch down to 14.3%. This is still the highest rate since 1975, but less than half of what it was at its peak in April, when it hit 33.6%. Stimulus checks and unemployment benefits that went mostly unspent during the lockdown period, are now supporting consumer spending. The risk, however, is that personal income will weaken from here, as the labor market continues to struggle and fiscal support wanes, which could slow the recovery in consumer spending and the broader economy. Indeed, real DPI shot up in the early months of the pandemic, but the y/y growth rate has rolled over in the past three months. The risk of slower growth ahead both in income and spending is augmented by the surge in new COVID cases nationwide, which could lead to partial lockdowns or some consumer disengagement from the economy, as implied by the flat-lining of the national Mobility and Engagement Index in recent weeks. The PCE Price index and its core each picked up 0.2% for the month. On a y/y basis, PCE prices were up 1.4%, while core prices rose 1.5%. Both remain below 2.0%, ensuring that the Fed will remain accommodative for the foreseeable future.

Employment cost pressures ease (Oct 30)

The Employment Cost Index (ECI) increased 0.5% in Q3, in line with the consensus. Wages and salaries in the private sector rose 0.5%, but those in the government sector were up only 0.1%, matching the smallest gain on record, as the pandemic has weighed on state and local government budgets. On a y/y basis, the ECI has eased to 2.4%, the least since Q2 2017. The rollover implies downward pressure on core consumer price inflation.

Monday, October 26, 2020

What are good reasons not to buy a home?

Right now, people are feeling like there is a lot of pressure to buy a home. After all, mortgage rates have been insanely low. So, for many who have been saving up to buy their first home, now feels like a good time.

But, while the nationwide real estate market is booming, you probably aren’t looking for an average home just anywhere.

And local markets can see vastly different stories playing out that you don’t hear about when you’re taking a look at the real estate market as a whole.

So, how can you look at specific data that applies to your specific situation and still make an informed decision?

While there are benefits to buying, let's look at some top reasons not to buy a house.

First, the original article where this material came from stated that you shouldn't buy if you're nearing retirement. I couldn't disagree more. If the other criteria, such as income, debt, etc., are in line, buying can be a good choice, as it tends to lock in your housing costs. This has been my experience.

It's important to be honest with yourself about whether you can truly afford a home, says Christopher Flis, president of Tennessee-based Resilient Asset Management. "By afford it, I mean you do not borrow from your retirement accounts for the down payment, the occupancy costs of the home do not exceed 25 percent of your gross income, and you do not plan to do a revolving door of upgrades to the home," he says.

Unless you're buying a house on wheels, you're stuck in one place. "If you're in the military or have a job that transfers you every couple years, buying a home can become more of a burden than a blessing," says Christian Stewart, a financial coach with Do Better Financial. "Trying to sell a home quickly typically means you take a loss or become a long-distance landlord, neither of which is ideal." When you can commit to a location for three to five years, buying a home makes more sense.

The local school system should always be factored into a home purchase, and areas with great public schools are usually more expensive. If you can only afford a home located in a less-than-adequate school system, you may decide to move later if your family expands. Unfortunately, that may not be so easy -- a bad school district can tamp down interest from prospective buyers along with the future sale price of the home.

Buying a house when you've just started a new job can have downsides. If the job doesn't work out, you may suddenly find yourself struggling to make the mortgage payment. If you simply don't like the work, you may be stuck in a job where you're unhappy just to stay afloat.

There are certainly banking institutions that will work with buyers who have less than ideal credit, but they offer so-called subprime mortgages, which come at a cost. "Subprime mortgages tend to have higher or adjustable interest rates, which translates to paying more for your home in the long run," says financial coach Christian Stewart. If you have debts in collections or judgments against you, get those cleaned up before a home purchase, as that will help you qualify for better terms.

Add up all your monthly debt payments (credit cards, loans, etc.), divide that figure by your (gross) monthly income, and multiply the result by 100. The number you come up with is what's known as your debt-to-income ratio, which is a huge factor in any mortgage application. "Even if your credit score is pretty good, over 670, having a high debt-to-income ratio (over 40 percent) will land you right back in the subprime category," Stewart says.

Amortization, or spreading mortgage payments over a number of years, is important to consider before buying. "With amortization, you don't really start tackling the principle within your mortgage until about seven years," says Shawn Breyer of Breyer Home Buyers. At the same time, wage and salary workers typically stay with an employer for a little over four years, according to the Bureau of Labor Statistics. That means those who move for their next job don't build equity; they lose money by owning.

Cutting the grass, keeping the gutters clean, wrapping the pipes when the temperature drops to freezing — all these things are your responsibility as a homeowner. If you're already a busy person, or someone who doesn't enjoy house projects, then home ownership may not be the way to go although there are options with slightly less responsibility, such as a condominium. If you're in a financial position to do so, you can hire people to do this for you.

Divorce or separation may not be a comfortable prospect to consider, but when contemplating a home purchase with a partner, they're important to keep in mind. "If your relationship is already rocky, buying a home will not fix it," says financial coach Christian Stewart. "If you split, the emotional stress will be compounded by the financial and legal complications required to split your assets."

Many home buyers fail to consider the monthly cost of condo or homeowners association fees (and restrictions). Depending on the location and features of the community, the dues can be in the hundreds of dollars. The money is used to maintain things like the landscaping and amenities such as a swimming pool or tennis courts. "If you can't afford to pay the monthly mortgage payment and the condo fees ... it would be better to rent," says real estate agent Allison Bethell.

Personally, I'd never buy into an HOA until I fully vetted the organization, its people and their rules. On my last house, I avoided and HOA. 

If you don't have an emergency fund in place before buying a home, handling surprises becomes much more difficult. "An emergency fund is in place for a rainy day, and when you own a house, it's going to rain — literally and figuratively," says financial coach Kalen Omo. "When the roof leaks or the plumbing breaks, you need a fund that you can go to in order to take care of those things."

For those who are already in a tight spot financially (think: juggling bills or regularly overdrawing a bank account), buying a home will almost certainly make things worse. "If you want your home purchase to be a dream instead of a nightmare, get full control of your spending before you start shopping," says financial coach Christian Stewart. The first step: Create a budget and stick to it.

Don't make a major life decision like buying a home due to societal or family pressure. "While it may be tempting to buy a house just to silence the masses, the financial and time commitments required for home ownership are too high to make this decision lightly," Stewart says. "Unless your family or friends are ready to write checks to help you with the mortgage and maintenance, don't buy a house unless you truly want one."

Friday, October 23, 2020

Biden told 32 lies in 96 minutes

The biggest lie of all -- if there is such a thing -- was on oil and gas, when he stated that he has never wanted to ban fracking or move the U.S. from oil and gas. 

Biden let his mask slip and declared war on oil and gas at the end of Thursday’s debate.

This was perhaps part of the most damaging portion of the night for Biden. During the discussion of climate change and renewable energy Biden made the declaration he wants to transition away from the oil industry. But his accusation towards the president is bogus. Billions of dollars are paid out annually to renewable energy concerns, including solar and wind power. Lost in the discussion, as Joe Biden claimed explosive job growth would be realized in his green power program, is how dozens of renewable energy companies all failed during his 8 years in the White House, with the aid of huge government subsidies.

And when he challenged Trump to show it on tape, Trump did just that. Here's the tape: 

Here's a sample of other lies Biden tried to get away with. Read the full report here, From another source, more lies here

BIDEN: “[President Trump] did virtually nothing” to combat the coronavirus.

FACT: President Trump took action beginning in January to combat the coronavirus and his Administration has led an unprecedented response to protect American lives.

BIDEN: “And there’s no prospect that there’s going to be a vaccine available for the majority of the American people before the middle of next year.”

FACT: Both the CDC and Dr. Fauci have said a vaccine is possible before the end of 2020.

BIDEN: “I don’t understand why this president is unwilling to take on Putin when he’s actually paying bounties to kill American soldiers in Afghanistan.”

FACT: Top military and intelligence officials have strongly emphasized that the reporting of bounties is completely unproven.

BIDEN: “They’re interfering with American sovereignty and to the best of my knowledge I don’t think the president has said anything to Putin about it.”

FACT: The Obama-Biden Administration’s Secretary of Defense Robert Gates said no one has been tougher on Russia than the Trump Administration.

BIDEN: “[President Trump] has a secret bank account with China.”

FACT: The bank account is neither secret nor President Trump’s. Long before Donald Trump ran for president, Trump International Hotels Management, L.L.C. opened an account in order to pay local taxes in China and to explore potential hotel deals in Asia.

BIDEN: “When I met with Xi when I was still Vice President he said we are setting up air identification zones in the South China Sea, you can’t fly through them. I said we are going to fly through them. We just flew B-52 – B1 bombers through it.”

FACT: The Trump Administration, not the Obama-Biden Administration, flew B-1 bombers through China’s air defense identification zone.

BIDEN: “Not one single person with private insurance would lose their insurance under my plan.”

FACT: Biden’s government-run health plan would crowd out the private insurance that Americans rely on, and Biden broke the same promise when he was Vice President. The promise of keeping the plans they held that led to millions who lost their healthcare and private doctors was such a harsh reality that even Time Magazine had listed it as its ‘Lie Of The Year.’

Thursday, October 15, 2020

Got $1.7 Million? Here's What You Get in Texas and California

 We all know that home prices are ridiculous in California. After decades of restrictive housing regulations, demand outpaced supply, driving up prices. 

Here's what $1.7 million will buy you in San Francisco. (2,173 square feet)

1812 Webster Street, San Francisco

Here's what $1.7 million will buy you near Austin, TX (6,495 square feet)

412 Indigo Lane, Georgetown

Wednesday, October 14, 2020

Living in an upside down world

It seems things have gotten a bit upside down.

I have been confused about the hostility of family and friends. I look at people I have known all my life... so hate filled that they agree with opinions they would never express as their own. You can't justify this insanity. We have become a nation that has lost it's collective mind! 

Somehow it's un-American for the census to count how many Americans are in America. 

Russians influencing our elections are bad, but illegals voting in our elections are good. 

It was cool for Joe Biden to 'blackmail' the president of Ukraine, but it's an impeachable offense if Donald Trump inquires about it. 

People who never owned slaves should pay slavery reparations to people who have never been slaves.

People who have never been to college should pay the debts of college students who took huge loans for their degrees. 

Immigrants with tuberculosis and polio are welcome, but you'd better be able to prove your dog is vaccinated. 

Irish doctors and German engineers who want to immigrate to the US must go through a rigorous vetting process but any illiterate gangbangers who jump the southern fence are welcome. 

$5Billion for border security is too expensive but $1.5Trillion for 'free' health care is not. 

If you cheat to get into college you go to prison, but if you cheat to get into the country you go to college for free. 

People who say there is no such thing as gender are demanding a female President. 

We see other countries going Socialist collapsing, but it seems like a great plan to us. 

Some people are held responsible for things that happened before they were born, and other people are not held responsible for what they are doing right now. 

Criminals are caught and released to hurt more people, but stopping them is bad because it's a violation of THEIR rights. 

And pointing out all this hypocrisy somehow makes us "racists"?! 

Nothing makes sense anymore, no morals, no civility. We are clearly living in an upside down world where right is wrong and wrong is right, where moral is immoral and immoral is moral, where good is evil and evil is good, where killing murderers is wrong, but killing innocent babies is right. Wake up America, the great unsinkable ship Titanic America has hit an iceberg, is taking on water, and is sinking fast. The choice is yours to make. Time is short, make your choice wisely!

Friday, October 2, 2020

ESG Investments Do Not Protect You in Market Downturns

ESG = environmental, social and governance priorities. 

From the National Legal and Policy Center: 

"...that ESG factors did not inoculate investors against the stock market downturn that was attributed to the COVID crash of the global economy, nor did sustainability priorities aid in the subsequent limited recovery.

And now it turns out that one of BlackRock’s non-profiting investment priorities ballyhooed by Fink – climate change – is not all he cracks it up to be."

My take: Stocks tend to follow the broader market, without many exceptions. 

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