Daily Commentary by Larry Baer: December New Home Sales surprised to the
downside, posting a decline of 7.3%. Most economists had anticipated New
Home Sales for December would post a gain of at least 2.1%. Even so, the
trend for all of 2012 was up. For the fourth quarter of 2012, sales were
up an annualized 7.0% and up 20% for all of 2012 compared to 2011, the biggest
annual jump in this housing sector component since 1983.
Mortgage investors
gave this data little more than a disinterested shrug and focused on taking
profits as the defused threat of a federal debt limit showdown reduced, at
least temporarily, the flow of capital into "flight-to-quality"
investment vehicles like Treasury debt obligations and agency eligible
mortgage-backed securities.
I think it would be
a serious oversight to forget the financial peril of a major federal budget showdown
has not been eliminated - it has only been postponed by a month or two.
I'm certainly not
trying to be a doomsayer -- but the recent exuberance surrounding the temporary
reprieve from political uncertainty and the recent surge in the stock markets
appears suspect to me.
My models are
suggesting a disconnect exists between the reality of sputtering economic data
and "kick-the-can-down-the-road" politics and current stock market
levels. There seems to be broad based complacency related to this apparent
mismatch. Even at the risk of being found guilty of howling at the moon -
I have to say the probabilities appear to be very high the stock markets are
vulnerable to significant sell-off sooner rather than later. If
this assessment proves accurate, the flow of capital fleeing the crumbling
stock markets will soon resume and provide solid support for the prospects of
steady to perhaps fractionally lower mortgage interest rates. I
don't think there is much more than three or four weeks left before my
projections here are either proven largely, if not totally inaccurate - or
dead-on the money. Heads up.
THE
MARKET IS ALWAYS RIGHT! . YOU AND I ARE SOME OF THE TIME
