Morning Report – Incomes up, spending down 10/31/14

Stock markets are soaring globally after the Bank of Japan unexpectedly boosted its stimulus. It’s raining yen. Bonds and MBS are down.

Some economic data – Personal Incomes rose .2% in September, while Personal Spending fell .2%. It looks like dropping energy prices explain the drop in spending, which means the number isn’t really bearish. However, the gas savings used to pay down debt as the savings rate ticked up to 5.6% from 5.4%. This increase in the savings rate could be bullish.

The Fed’s preferred inflation measure – the Personal Consumption Expenditure Index came in at 1.4% (1.5% ex food and energy). Inflation continues to come in below the Fed’s target rate of 2%.

University of Michigan Consumer Confidence increased in October. As I have said before, the consumer confidence index is often a stealth gasoline price index.

Could the price increases in the new home market finally be coming to an end? It sounds like it. Meritage Homes reported margin pressure, and Standard Pacific’s margins are flatlining. The story for the builders has been tepid delivery growth with big increases in ASPs. Those days may be over, which means builders will have to increase volume to be able to show growth to the Street. This should be bullish for the economy.

Standard Pacific missed on the top and bottom line last night. The press release was pretty sparse on detail, and the conference call is later on today. The stock is more or less unch’d pre-open.

3 Responses

  1. http://dealbook.nytimes.com/2014/10/30/judge-approves-bankruptcy-exit-for-stockton-calif/?emc=edit_dlbkpm_20141030&nl=business&nlid=55859017&_r=0
    An interesting municipal bankruptcy.

    Addendum:

    We stopped in Stockton on our drive out of Yosemite this summer. We visited The Haggin Art Museum, a little gem, and enjoyed the exhibits thoroughly. http://www.hagginmuseum.org/

    We did not know the city was bankrupt and nothing about the neighborhood of the Haggin indicated less than a thriving and happy small city.

    Like

  2. Election Day quote is up.

    Like

  3. Good piece on the municipal bankruptcy, but the writer’s use of “cramdown” here isn’t exactly correct.

    “It had asked to be reclassified in a separate group from the retirees because that would turn the bankruptcy case into a cramdown — a situation where a judge cannot approve a debt adjustment plan that unfairly discriminates among creditors in similar classes.”

    Like

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