Morning Report – Toll Brothers reports the luxury end of the market is doing well 12/10/13

Vital Statistics:

Last Change Percent
S&P Futures 1803.5 -5.5 -0.30%
Eurostoxx Index 2964.6 -24.1 -0.81%
Oil (WTI) 98.47 1.1 1.16%
LIBOR 0.242 -0.001 -0.31%
US Dollar Index (DXY) 79.98 -0.154 -0.19%
10 Year Govt Bond Yield 2.80% -0.04%
Current Coupon Ginnie Mae TBA 104.9 0.3
Current Coupon Fannie Mae TBA 103.9 0.1
RPX Composite Real Estate Index 200.7 -0.2
BankRate 30 Year Fixed Rate Mortgage 4.44
Markets are lower this morning on no real news. Bonds and MBS are higher
Toll Brothers announced better-than expected earnings of 54 cents a share. The luxury end of the market continues to do well. Average Selling Prices increased to $703,000. Contracts were flat in the first 5 weeks of this quarter, as higher prices and interest rates tamp down demand. That said, they believe “this leveling of demand will prove temporary based on still-significant pent-up demand, the gradual strengthening of the economy and the improving prospects of our affluent customers.”
The National Federation of Independent Business Optimism Index rose to 92.5 from 91.6. This is still a relatively depressed level historically, and speaks to the great divide in American business. The S&P 500 is at record highs, while small business is still stuck in the post-bubble morass. The difference: QE is driving money into stocks, and the big US companies that make up the index have a lot of international exposure. That is why the economy feels “meh” even though the stock market is at record highs.
The Obama Administration’s latest housing scorecard is out. As of October, 1.2 million homeowners have had their principal cut through HAMP. Housing remains affordable as the NAR Housing Affordability index stands at 164.3, (lower than its peak of 213.6 in January, but well above its historical average of 135).

11 Responses

  1. Worth a read.

    “State of Deception
    Why won’t the President rein in the intelligence community?
    by Ryan Lizza December 16, 2013”

    http://www.newyorker.com/reporting/2013/12/16/131216fa_fact_lizza?currentPage=all

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    • Volcker rule getting voted into existence today by several agencies. Yet another example of illegitimate rule by unconstitutional law-making via un-elected bureaucrats.

      And stupid, dishonest law at that. Ostensibly the “rule” (I hate calling it that…it is a new law) prevents banks from “gambling” government guaranteed deposits on speculation and proprietary trading. But, of course, it actually does nothing of the sort. It prevents “gambling” on politically disfavored products, while allowing “gambling” on politically favored products. I’ve made the point before that banks are still allowed to “speculate” on the value of the housing market and the credit quality of various borrowers. But the point is even more obvious than that. Explicitly exempted from the Volcker rule’s prohibition on position taking is both domestic and foreign sovereign debt. So, for example, while a trader is not allowed to deliberately “bet” that interest rates will fall over the next three months by receiving on a $100mm 10yr interest rate swap, that same trader is allowed to buy $100mm 10yr US treasury notes, effectively making the exact same “bet”. Or, while a credit trader is not allowed to take on an uncovered risk that Greece may default on its debt by selling CDS protection to a third party, that same trader can take on the same risk by simply buying outright Greek debt. Or, while a currency trader is not allowed to “bet” that the USD will appreciate against the Euro over the coming months by outright selling Euros short in the fx market, that same trader can make the same bet by selling short German national debt and using the proceeds to buy the equivalent amount of US national debt. BTW, each of the above “permissible” transactions would actually introduce more financial risks of various kinds than the original, no-longer permitted transactions.

      The Volcker rule, like so much of D/F, is a politically motivated absurdity that, like most regulation, will ultimately do far more damage than it prevents (which will be, frankly, zero….it is a “solution” in search of a problem.)

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  2. Hilarious story about traffic, politics and retribution. Only thing it’s missing is sex.

    Scott, this’ll interest you as it involves New York bridge traffic.

    http://www.wnyc.org/story/cuomo-and-christie-bridge-too-far/

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  3. Scott – I presume you wouldn’t consider universal basic income as a “libertarian” concept?

    http://economix.blogs.nytimes.com/2013/12/10/rethinking-the-idea-of-a-basic-income-for-all/?smid=tw-share

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    • jnc:

      Scott – I presume you wouldn’t consider universal basic income as a “libertarian” concept?

      In and of itself it’s hard for me to reconcile it with any libertarian principles. But as an alternative to existing, distinctly non-libertarian, arrangements, which is how libertarian support mentioned in the article seems to be presented, it may have some attraction. Ultimately, however, I imagine it would be both unworkable and not used as simply an alternative to, but rather in addition to, current arrangements.

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  4. This should prove interesting. Is a rent controlled apartment lease an asset that can be seized in bankruptcy to pay off creditors?

    http://www.nytimes.com/2013/10/21/nyregion/widows-bankruptcy-case-poses-risk-to-millions-with-rent-stabilized-leases.html

    http://reason.com/blog/2013/10/21/ny-times-horrified-that-rent-control-lea

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    • jnc:

      Two great links, not only because of the very interesting underlying issue, but also because they demonstrate the complete and utter dishonesty of the New York Times in its reporting. The NYT leads the reader to believe that the woman faces eviction if the court ultimately rules that the lease is an asset than can be seized, pointing out how the first thing the crying woman does every day is check her front door for an eviction notice. But in fact the deal the woman was offered would allow her to stay in the apartment until she dies, and would only prevent her from passing the rent-controlled lease on to her son as part of her estate.

      The journalistic depths which NYT reporters plumb never ceases to amaze me.

      Like

  5. There’s one other caveat which is that normally if you own your home you can file a homestead deed in a bankruptcy proceeding which is meant to address precisely the public policy issue being debated, i.e. throwing people out into the street.

    http://en.wikipedia.org/wiki/Homestead_exemption

    Regular renters wouldn’t need it as they would presumably continue to pay rent.

    However, you then get into the legal paradox which Reason identified so well, namely that the rent control laws, especially the ability to transfer a rent controlled lease to an heir, has in fact created a property interest which has been taken from the original owner without compensation in violation of the Fifth Amendment.

    The Supreme Court should have taken this case, which I believe was discussed here at the time.

    http://www.volokh.com/2012/03/14/when-rent-control-becomes-a-taking/

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