Thursday, August 14, 2014

Higher markets on easing political tensions

Dow climbed 61, advancers over decliners 2-1 & NAZ went up 18.  The MLP index jumped 3 to just over 520 & the REIT index was up pennies iin the 308s.  Junk bond funds were mixed while Treasuries continued to advance (yield on the 10 year Treasury is at 2.4%).  Oil plunged (see below) & gold didn't do much.

AMJ (Alerian MLP Index tracking fund)

CLU14.NYM...Crude Oil Sep 14...95.51 Down ...2.08  (2.1%)

Live 24 hours gold chart [Kitco Inc.]

The challenges facing prospective buyers of the least expensive homes in the US are getting harder to overcome.  Already beset by stagnant wages, growing student debt & competition from investors who are snapping up listings, those looking to purchase moderately priced houses must also provide more cash up front.  The median down payment for the cheapest 25% of properties sold in 2013 was $9.5K compared with $6K in 2007, the last year of the previous economic expansion, according to Redfin.  The higher bar is a symptom of still-tight credit that is crowding out first-time buyers even as interest rates remain near historical lows.  Younger adults, who would normally be making initial forays into real estate, are among those most affected, weakening the foundations of the housing market & limiting its contribution to economic growth.  The median down payment for the cheapest 25% of homes was 7.5% of the sales price last year, up from a low of 3.1% in 2006 & compared with an average 4.2% in 2001-2007.  For properties in the middle 50 %, the share rose to 8.8% in 2013 from an average 8.2% in the 7 years & for the top quarter it climbed to 20.9% from 19%.  One of the main reasons for the jump is that fewer first-time buyers are applying for loans backed by the FHA, which require smaller down payments, after the gov agency boosted mortgage-insurance premiums.  FHA raised the cost of borrowing & tightened underwriting to cope with losses on mortgages it backed as the property bubble burst.  Borrowers must now pay an up-front fee of 1.75% of the loan balance & up to 1.35 percentage points in annual mortgage-insurance premiums.  A new program announced in May will help homebuyers who go thru counseling lower their premiums.

More Money Down Adds to U.S. First-Time Buyer Blues: Economy

Generall Electric, a Dow stock, is in talks with Electrolux on the sale of its home appliance business, the companies said.  Quirky, a consumer-product development startup, is also interested in the unit.  The century-old division is on the block for a 2nd time as CEO Jeff Immelt focuses on industrial operations.  The unit could fetch at least $2B.  “GE is evaluating a wide range of strategic options for our appliances business including discussions with Electrolux and other interested parties,” a GE spokesman said.  Electrolux is #2 in US sales of appliances such as dishwashers, cooktops & refrigerators & GE is ranked 3rd.  Electrolux, the maker of AEG stoves & Frigidaire refrigerators, is looking to boost revenue in Europe & US.  The sale process is GE’s 2nd attempt to offload the division, which introduced an electric toaster in 1905 & a home electric washing machine in 1930.  GE stock was up a nickel.  If you would like to learn more about GE, click on this link:

GE in Talks With Electrolux to Sell Appliances Business

General Electric (GE)

Brent oil slumped to a 13-month low & WTI (US) slipped as the euro bloc’s economic recovery stalled amid signs of ample global supply.  Euro-area GDP in Q2 was unchanged from Q1, according to the EU statistics office.  Libya will reopen its largest oil export port within days, the National Oil said.  US crude supplies rose 1.4M barrels last week, gov data showed.  Brent for Sep fell $2.09 in London while WTI for Sep dropped $2 on the New York Mercantile Exchange.  The 18 countries using the € were projected to have grown 0.1% in Q2.  Having led the bloc out of its longest recession last year, Germany's economy shrank 0.2% in Q2, its first contraction since 2012, while France unexpectedly stagnated.  Italy succumbed to its 3rd recession since 2008, with GDP falling 0.2% in Q2.  In Libya, the Es Sider port is scheduled to start loading crude in days, according to state-run National Oil.  The facility, along with Ras Lanuf, was handed over last month by rebels seeking self-rule in the eastern regions.  All other Libyan terminals were open except for Zueitina, where workers were engaged in a dispute with management.  Futures also slid after Obama said that the situation of the Yezidis in Iraq was greatly improved.  The US doesn’t “expect there to be an additional operation to evacuate” more people, Obama said.  The administration had been considering a range of military rescue operations that could have put US forces at risk in Iraq for the first time since the end of 2011.

The rise in stocks may be getting ahead of itself.  A huge sense of calm has not engulfed the whole world.  There are still plenty of conflicts & they are dragging on.  That can be evidenced by the rise in US Treasuries with yields at lows not seen in over a year.  But bulls are feeling emboldened again & trying to take the markets higher.  More earnings reports are coming from retailers & they may not be encouraging.  Dow is up a little more than 100 YTD.

Dow Jones Industrials

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