Wednesday, February 3, 2010

Housing, Jobs, and the Stock Market Agree to Disagree

It has been a rough week at work folks so just a quick thought or two for the evening.

Reader Help Needed
All I wanted to do was to get the revenue numbers for Whirlpool Corporation (WHR) and check them over time. This proved to be nearly impossible in a reasonable time frame! I do not want earnings per share (useless indicator to me) or anything else, just revenues for the time frame of 2000-2009. Anyone know an easy way to get this info without digging through miles of quarterly reports? Any help is appreciated.

Housing, Jobs, and the Stock Market
The stock markets have been up so long I almost have to double check and make sure on the off day that the indices close in the red. Many have written about how volume on the upside has been lacking, but on down days it has been high. Maybe more folks like to sell once a month than spread it out!

I bring this up because the ability of the markets to ignore structural news that is bad is amazing. A day may come when we find out why, but until then consider the following points that by themselves mean more to the economy than the stock market does, yet the stock market, which is supposed to be a gauge of the economy, continues it's assault back to old highs.

The Positives: Home sales are moving up and prices has stopped a never ending collapse.
Caveats to this: Sales have been at the low end due to tax credits and FHA loan expansion. Government intervention has supported things artificially.

Macro Issues: Too many to cover in detail but shadow inventory is a big one and an increasing foreclosure rate is alarming.
From today:
Sorry Folks, The FHA Is Still Going To Meltdown
FHA loans going south in a hurry

Mortgage Delinquencies Pass 10%: LPS
National rate keeps climbing

Without Precedent in the Modern Era
Walking away gaining momentum

I would also add that when (IF?) the government ends their enormous support measures (MBS buys, ZIRP) there is a built in 10-20% price correction on tap. How will this affect the home sector? Badly I imagine. Nothing like jumping at a 8k tax credit only to be underwater by 50k in two years!

Word is that CNBC has a whole truckload of baseball caps with the slogan:
"Jobs Were Created Today!!!!"
ready to pass out on Friday when the BLS releases the jobs number. Ok, I made that up.

Lost in the ether will be the enormous revisions coming to the 2009 job loss total because as you know, employment is a lagging indicator, until it goes up, then it is a leading indicator worth a 5% move to the upside.

Mish has harped on this all year and when the 820,000 additional job losses are announced for 2009 on Friday you will have been informed:
824,000 Will Disappear on February 5; BLS Admits Flawed Model but Plans No Changes
That is some revision.

Zero Hedge goes further down the rabbit hole:
Explaining The Government's 1.8 Million Job Overestimation In Pictures
Can Bernanke follow along with the pictures? Can anyone?

This year states and municipalities are going to start having serious issues and this is yet another facet ignored by the markets. Sovereign debt risk is as high now as during the crisis apex, and this too seems unimportant. Lots of things have been deemed unimportant. The senate election result in Massachusetts is already unimportant and has lost any steam to influence CONgress as real financial reforms have been torpedoed out of existence before they even got a chance to have a debate.

At some point, something is going to matter!

Have a good night.


Anonymous said...

I can probably get those revenue numbers on WHR tomorrow at work...

getyourselfconnected said...

If you can I would be eternally grateful and would give a shout out!

GawainsGhost said...

Well, as far as the housing market goes, yeah, I think it's going to get ugly. It's not just shadow inventory--which is REOs (bank lingo for Real Estate Owned or repos) that are not yet listed for sale--or increasing foreclosures, or people walking away (which in a recourse state could be disastrous), it's also overbuilding. There's simply too much inventory on the market for prices not to decline.

As I mentioned a couple of days ago, FHA is changing its lending standards to require 5% down and limit seller's contribution to buyer's closing to 3%. Fannie offers special financing (3% down) on some of its homes. Freddie offered a 2-year warranty, but that expired at the end of last month. However, the tax deduction for first-time homebuyers is set to expire in April, right before the seasonal peak in sales (most people like to move in the summer), so I have no doubt that will be extended.

Regardless, lending is tightening at the same time inventory is expanding. For traditional homeowners, this is not the time to try to sell a house.

But for investors and/or speculators, it's a good time to buy a house. If you have the capital, that is. It will be an even better time a few months from now.

The problem is employment. People who do not have jobs cannot make payments, much less buy a house. This is a mess of cataclysmic proportions.

As prices fall, tax revenues fall with them. And with overly generous and underfunded public pensions, numerous cities, counties and states are on the verge of bankruptcy. Hell, the entire federal government is on the verge of bankruptcy. None of this is going to end well.

But it was fun while it lasted, right?

Anonymous said...

Wow--and here I was thinking nothin' happened today. Thanks for the rundown!

getyourselfconnected said...

I think the built in lower price after aid ends is being ignored; not a huge deal if you have capital and buy a cash flow positive property, but not good for owners looking to "move up" fast.

Nice to see you. There is always something going on someplace!

Stagflationary Mark said...

All I wanted to do was to get the revenue numbers for Whirlpool Corporation (WHR) and check them over time. This proved to be nearly impossible in a reasonable time frame! I do not want earnings per share (useless indicator to me) or anything else, just revenues for the time frame of 2000-2009.

For what it is worth, that's sort of the mindset I had when picking individual stocks in the past. It worked well. I love looking at 10 year revenue numbers.

I'd get the Standard & Poors 500 Guide each year and plow through all 500 companies in it looking for revenue and income growth over the previous 10 years.

I'd then pare down the list using a kindergarten mindset filter to the companies to find something of value (i.e., cheap). In other words, I had to both know the company and not cringe. Seriously. (I'd heard that kindergartners actually outperformed the professionals much like a dart board, so heck, why not!)

You could start there perhaps. Any large bookstore probably has them. Just a thought. The books are fairly cheap and provide a wealth of information. If nothing else, going through a page at a time should give you at least one "Aha" moment.

GawainsGhost said...

By the way, GYC, here is an article for by Don Banks, one of my favorite NFL analysts. It's about the Saints defense.

Defense wins championships. Offense wins games. While it is true that the championship is a game, not every game is the championship. Ultimately, it comes down to this. The better prepared, more focussed team will win.

The closer we get to the Super Bowl, the more I like the Saints' chances. They've got attitude. They've got an offense that can score points, and a defense that can take the ball away.

But Manning really is very good. And the Colts are there for a reason. So it's going to be a game.

The obvious way to beat Indianapolis is to take the receivers out. Then New Orleans has more than a fighting chance.

This could be the most watched Super Bowl in history.

watchtower said...

It's none of my business GYSC, but about the Whirlpool info you were wanting, is it to follow the housing boom to bust for the last ten years?

It's 11:04 AM CST as I write this and I noticed the market has dropped about 200 pts and once again PM's have nose dived.

Ag at $15.47

I wasn't for sure if you were going to ask for the reader's prognostications on the big game this weekend or not but here is mine:

Saints 27 Colts 24

sedentary state said...

>At some point, something is going to matter!

We haven't lived in that world for some time. Imagine such a crazy concept. Things mattering.

Dave Narby said...

Hey, looking forward to your take on gold. : D