Monday, September 22, 2014

Markets decline on lower sales of existing homs

Dow sank 40, decliners over advancers better than 4-1 & NAZ was also off 40.  The Alerian MLP index dropped 4 to the 533s & the REIT index was off 1+ to the 296s.  Junk bond funds edged lower & Treasuries climbed as stocks fell.  Oil was a tad lower & gold inched higher.

AMJ (Alerian MLP Index tracking fund)

CLV14.NYM....Crude Oil Oct 14...92.06 Down ...0.35  (0.4%)

GCQ15.CMX...Gold Aug 15.....1,226.50 Up ...6.70 (0.6%)

Russia’s banks are feeling the effects of granting free-spending consumers loans for everything from mobile phones to household appliances & foreign holidays as late repayments surge amid US & European sanctions.  Non-performing retail loans jumped 49% in the 12 months thru Jul to 588B rubles ($15B), taking the ratio versus total consumer credit to an almost 3-year high of 5.4%, according to Russian central bank data.  That compares with 37% increase in Turkey in the period & a bad-debt ratio of 2.4%.  For an economy where growth over the past decade has been fueled partly by consumers’ willingness to borrow, rising delinquencies risk exacerbating the worst slowdown since 2009.  By forcing policy makers raise interest rates to shore up markets, pres Putin's conflict with Ukraine is serving to spur debt-servicing costs & curtail lending.  As non-performing loans rise, growth in lending to individuals in the world’s largest energy exporter slumped to 22% in Jun, the slowest pace since Feb 2011, from 36% a year earlier.  That’s signaling the end of a boom that saw banks triple their retail loan books in 4 years thru 2013.  Russia’s delinquent-loan ratio climbed by 1.1 percentage points in the 12 months to Jul while the equivalent Turkish measure increased 0.4 point.  Russian banks have been virtually blocked from Western financing after the US & EU banned the provision of new liquidity to some of the biggest Russian lenders & energy companies with maturity of more than 30 days.  GDP is expected to expand just 0.25% this year, the slowest since the economy shrank 7.8% in 2009.  Growth may halt next year with falling consumption being one of the culprits.

Ukraine Blowback Adds to Russian Bank Consumer-Loan Woes

Purchases of previously owned US homes unexpectedly declined in Aug for the first time in 5 months as investors retreated from the market.  Existing home sales dropped 1.8% to a 5.05M annual pace, from a revised 5.14M pace in Jul, the National Association of Realtors reported.  The forecast called for 5.2M.  The share of properties sold to investors was the lowest in almost 5 years.  As wage gains are slow to materialize & credit conditions remain tight, it has been difficult for first-time homebuyers to enter the housing market to make up the decrease in investor activity.  Employment growth & easier lending rules could help would-be buyers to feel more secure in taking the plunge into homeownership.  The median price of an existing home rose 4.8% to $219K in Aug from $209K a year earlier, today’s report showed.  The number of existing properties for sale fell to 2.31M from 2.35M.  At the current pace, it would take 5.5 months to sell those houses, the same as in Jul.  Transactions paid for completely in cash fell to about 23% of the market from the usual 33%, NAR Chief Economist Lawrence Yun said.  Investors accounted for 12%, the fewest since late 2009.  The drop in sales last month is “primarily attributable to investors stepping out of the market,” he added.  Existing home sales, which are tabulated when a purchase contract closes, have rebounded from a 13-year low of 4.11M in 2008.  They reached a record 7.08M in 2005.

Sales of Existing U.S. Homes Decrease as Investors Retreat

Apple Sells Record 10 Million of Latest IPhones in Debut Weekend
Photo:   Bloomberg

Apple sold a record of more than 10M iPhones in the weekend debut of 2 new models, as consumers flocked to stores & web shops to buy handsets featuring bigger screens.  Sales surpassed last year’s 9M units when the iPhone 5s & 5c were introduced.  “While our team managed the manufacturing ramp better than ever before, we could have sold many more iPhones with greater supply and we are working hard to fill orders as quickly as possible,” CEO Tim Cook said.  Estimates varied widely, with a high of 15M units while others cautioned that the results could fall short of last year’s shipments of the new iPhones because of production shortages & the fact that the new devices didn’t go on sale in China.  Cook is using the iPhone 6, which has a 4.7" display, & iPhone 6 Plus with a 5.5" screen to push into the turf of the competition with jumbo-sized smartphones.  The rollout of the new iPhones, which account for more than half of Apple’s $171B revenue, will be followed by the anticipated debut of new iPad models next month as the company revamps its product lineup ahead of the holiday shopping season.  Demand is robust.  Pre-orders of the latest models topped 4M in the first 24 hours.  IPhone sales exceeded expectations for the first weekend, “shattering all previous sell-through records by a large margin,” Cook said.  But analysts differ on the outlook for the new iPhone.  The stock went up chump change.  If you would like to learn more about AAPL, click on the attached link:

Apple Sells Record 10 Million IPhones in Debut Weekend

Apple (AAPL)

Nothing seems to be going right for the stock market.  Existing home sales were disappointing & intl news goes from bad to worse.  China is dampening talk about its economic stimulus plans while the MidEast is heating up.  ISIS is adding propaganda videos on its brutality, Yemen has major problems & the Turks are fighting Kurds.  This is UN week in NYC.  Maybe Obama can wave is cloak of magic to make problems disappear.  The goings on at the UN should be center stage & the outlook is they will be negative for world peace.

Dow Jones Industrials

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Friday, September 19, 2014

Dow sets new record while stocks drift lower

Dow rose 14, decliners over advancers 3-2 & NAZ fell 13.  The Alerian MLP index rose 3+ to the 537s & the REIT index was up pennies in the 297s.  Junk bond funds rebounded after recent selling & Treasuries saw buying.  Oil fell for a 3rd day on rising US supplies & as a stronger dollar weighed on commodity prices.  Gold fell to an 8-month low, near a multi year lows, as equities surged to a record, crimping demand for the precious metal as an alternative asset.

AMJ (Alerian MLP Index tracking fund)

CLV14.NYM....Crude Oil Oct 14....92.15 Down ...0.92  (1.0%)

Live 24 hours gold chart [Kitco Inc.]

Syria Rebel
Photo:    Bloomberg

Congress’s bipartisan passage of Obama's plan to arm & train Syrian rebels sets up a broader debate over the use of US military force when lawmakers return after the Nov election.  Yesterday’s 78-22 Senate vote came a day after the House passed the measure, which now goes to Obama for his signature.  When lawmakers return in mid-Nov for a post-election session, they plan a broader & likely far messier debate over the use of military force to combat Islamic State extremists.  Senators in both parties said before yesterday’s vote that the promise to hold that debate persuaded them to support the more narrow authority now.  The Syrian authorization is part of a package that funds the gov thru Dec, extends the Export-Import Bank’s charter through Jun 30 & provides $88M to help fight the spread of the Ebola virus in West Africa.  Obama requested the Syria aid on Sep 10.  He contends the US needs to help Syrian rebels combating the Sunni extremist group Islamic State, which has swept from Syria deep into Iraq with a campaign of terror that included the beheading of US journalists & a British aid worker.  “The strong bipartisan support in Congress for this new training effort shows the world that Americans are united in confronting the threat” from Islamic State, Obama said.  “As Americans, we do not give in to fear.”  National Security Adviser Susan Rice said that it will take months to begin training Syrian rebels who the US will count on to open a 2nd front against Islamic State.  The House added the Syria authorization measure to legislation funding the gov starting Oct 1, which avoids a repeat of last year’s 16-day partial gov shutdown.  House lawmakers adopted the Syria measure & then passed the spending package on a bipartisan vote.

Congress Syria-Rebel Aid Vote Sets Up Fight Over Force

Exxon Mobil, a Dow stock & Dividend Aristocrat, said the US gov is giving it more time to shut its Russian Arctic well beyond the deadline for sanctions aimed at halting the $700M project.  The company asked for an extension to allow it to continue performing shut-down work on the Universitetskaya-1 well in Russia's Kara Sea to make sure the well was safe before it’s temporarily abandoned.  The company already had ceased drilling the offshore well after US sanctions set a Sep deadline for ending the work.  “The U.S. Treasury Department, recognizing the complexity of the University-1 well and the sensitive Kara Sea arctic environment, has granted a license to Exxon Mobil and other U.S. contractors and persons involved to enable the safe and responsible winding down of operations related to this exploration well,” Exxon explained.  Sanctions had prompted XOM & its partner OAO Rosneft to temporarily halt drilling at the well, which lies about 260 feet beneath the sea surface off Siberia’s northern coast.  The well is aiming to tap a resource estimated to hold as much as 9B barrels of crude, worth $880B at current prices.  The halt is a blow to Russian pres Putin’s quest to find a new generation of oil fields to replace declining output from some of the country’s Soviet-era reserves.  The Russian oil industry is dependent on expertise & equipment from the US & Europe to penetrate crude reservoirs that are deeper, denser & more remote than anything they’ve attempted before.  The disruption also is a setback for XOM as it seeks to lift production that touched a 4-year low in 2013 as the rate it’s replacing output with new discoveries tumbled to the lowest in half a decade.  The stock went up 51¢.  If you would like to learn more about XOM, click on this link:

Exxon Gets U.S. Sanctions Extension to Shut Russian Arctic Well

Exxon Mobil (XOM)

General Motors will begin building a new “top-end, high-technology” sedan next year, as the largest US automaker’s luxury brand contends with declining sales.  Production of the rear-wheel-drive model will start in Q4-2015 at the Detroit-Hamtramck plant.  The sedan, which hasn’t been named yet, “adds to rather than replaces any model” in Cadillac’s lineup, the company said, without giving details of its features.  US Cadillac sales slid 18% last month, including a 35% drop for the CTS sedan.  The deliveries fell 4.7% this year thru Aug, amid gains of 2.8% for GM & 5.1% for the industry.  Cadillac is “not capitalizing” enough on the “tremendous growth” in luxury-auto sales, marketing chief Uwe Ellinghaus said last month.  GM said that the new Cadillac model is part of its previously announced $384M investment at the Detroit-Hamtramck factory. The automaker also said in Aug that it will move production of the Cadillac SRX sport utility vehicle to Spring Hill, Tennessee, from Mexico.  The stock lost 11¢.  If you would like to learn more about GM, click on this link:

GM to Add New ‘Top-End’ Cadillac Sedan as U.S. Sales Slump

General Motors (GM)

This was a confusing day.  Dow hit a new record high without strength in the rest of the market.  Alibaba (BABA) had its whopper IPO & shot up 25 above the IPO price of 68.  NAZ declined, probably because investors were selling other tech stocks to buy BABA.  The market breadth was negative, always a bad sign.  DC is confused about this war (whatever they call it) with ISIS.  The pres has announced a lot of things we will not do, like sending troops there, but they are already there.  Nothing like giving the bad guys time to build defenses.  Now those guys in DC have to figure out how to pay for the fighting.  There's only 1 way, increase the fiscal deficit.  All the confusion coming from DC about what the US is going to do sends the wrong message to countries in the MidEast.  The stock market doesn't like that & uncertainty is on the rise.

Dow Jones Industrials

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