Morning Report: Housing starts disappoint

Vital Statistics:


Last Change
S&P futures 2791.5 -5
Eurostoxx index 371.78 -0.4
Oil (WTI) 55.5 0.03
10 year government bond yield 2.66%
30 year fixed rate mortgage 4.35%


Stocks are lower this morning on overseas tensions between India and Pakistan. Bonds and MBS are flat.


Jerome Powell heads to Capitol Hill today for his first day of Humphrey-Hawkins testimony. While this events are ostensibly to allow Congress to question the Fed about monetary policy, they are really nothing more than a posturing exercise for politicians to hop on their respective ideological hobby-horses. Expect Democrats to focus like a laser on income inequality, too big to fail banks, and fair lending. Expect Republicans to focus on inflation worries, banking regulation, and the return of the bond vigilantes. The markets will be listening for information on balance sheet reduction and further hikes this year. This probably won’t be market-moving.


Housing starts fell to a seasonally-adjusted annual rate of 1.08 million, a double-digit percentage drop on both a month-over-month and annual basis. As a general rule, winter housing starts numbers can be volatile due to the weather, however this is simply an awful number. The street was looking for 1.25 million, which is still a depressed number. Remember, between 1959 and 2002, we averaged 1.5 million housing starts a year. The last time we saw that sort of building was 2006.


housing starts


The Home Despot reported fourth quarter earnings this morning, and forecasted weaker-than-expected comparable sales. Part of this is a technical aspect of their accounting conventions, but it does speak to weakness in home improvement spending.


Economic activity slowed in January, according to the Chicago Fed National Activity Index. Production-related indicators drove the decline. How much of this was temporary due to tariff issues / government shutdown remain to be seen. Employment remained positive.


More sellers are cutting prices this winter in order to move their homes, according to Redfin. 21% of home sellers are reporting a price decrease, which is a post-crisis high. “Many sellers listed their homes late last year just as rising prices and mortgage rates were starting to price out their core pool of potential buyers,” said Las Vegas Redfin agent Jennifer Brockman. “Meanwhile, some buyers are starting to think that waiting to purchase a home could pay off, especially as listing inventory continues to rise. In this new market reality, buyers may have negotiating power now that they won’t have in the spring and summer.”


redfin price drop

19 Responses

  1. This may be of interest here vis-a-vis CDS tactics.

    Meanwhile, I’m having to shop for a new voice service provider.


    • i used to work with the founder of Aurelius.. Smart guy


      • By Soma Biswas
        Updated Feb. 25, 2019 4:55 p.m. ET
        Windstream Holdings Inc. filed for bankruptcy protection after losing a legal battle with hedge fund Aurelius Capital Management.

        The rural broadband provider’s chapter 11 filing Monday is the culmination of a bruising 18-month legal fight between the telecom company and Aurelius, which had argued a two-year-old spinoff of the company’s fiber-optic cable network violated the covenants on one of its bonds.

        Aurelius argued those covenants prohibited the company from engaging in sale-leaseback transactions. After the telecom company’s spinoff of its fiber assets into a new company called Uniti Group Inc., Windstream paid rent to Uniti to use the fiber-optic cable network.

        Two weeks ago, U.S. District Judge Jesse Furman ruled that Windstream violated the covenant on sale-leaseback transactions and awarded the hedge fund a judgment of $310 million plus interest. The battle highlights a growing practice among hedge funds of searching for instances where a company has violated bond covenants even though the issuer is healthy enough to continue to service and refinance its debt.

        Buyer of AcuSport’s Bankrupt Operations Sued Over Sale February 25, 2019
        PG&E Proposed Debt Trading Restrictions Set Off Protests February 25, 2019
        PG&E To Scrap Employee Bonuses After Protest From Fire Victims February 23, 2019
        Puerto Rico’s Debt Saga May Land Back in Washington’s Lap February 22, 2019
        Wildfire Victims Protest PG&E Bid to Pay Employee Bonuses February 22, 2019
        “Aurelius for a long time has been taking on these litigation plays. That’s where they’re buying a specific bond because they believe the company has violated one of the terms on which the debt was issued,” said Lance Vitanza, a high-yield debt analyst at Cowen & Co.

        Windstream claims Aurelius has bought credit insurance on its bondholdings that would put it in line for a big payout if Windstream files for bankruptcy. “Windstream’s accusation of market manipulation is nonsense,” said a spokesman for Aurelius. “They alone caused the company to enter into a terrible sale-leaseback and prejudice its bondholders by breaking its promises to them.”

        Windstream, based in Little Rock, Ark., has blamed Aurelius and Judge Furman’s decision for pushing the company into bankruptcy. Windstream Chief Executive Tony Thomas in a press release said the company isn’t filing for chapter 11 due to operational failures, and it disagrees with Judge Furman’s decision.

        The company “believes Aurelius engaged in predatory market manipulation to advance its own financial position through credit default swaps at the expense of many thousands of shareholders, employees, customers, vendors and business partners,” Mr. Thomas said.

        The bankruptcy filing is “a necessary step to address the financial impact of Judge Furman’s decision,” he said

        Windstream, however, has $5.6 billion of debt, has been losing residential and business customers to cable and wireless companies for years, and has slowly been replacing its copper network with faster fiber-optic cables. Windstream also faces big loan maturities in 2020 that would be difficult to refinance with the overhang of default.

        The company argued all along that the Uniti spinoff didn’t violate its bond covenants because it was Windstream Holdings subsidiary Windstream Services that issued the bonds, while parent Windstream Holdings was party to the Uniti lease and made the rent payments. Judge Furman, however, wasn’t convinced by the distinction between Windstream Holdings and Services. “The fact that they make those payments indirectly through Holdings is of no moment,” he wrote.

        The ruling surprised the bond market, and prices on the company’s debt and shares plunged following the ruling.

        Write to Soma Biswas at

        Liked by 1 person

  2. Wow. The Clinton people may go scorched earth to stop Sanders from being the 2020 nominee or worse, president.

    Liked by 1 person

    • jnc:

      The Clinton people may go scorched earth to stop Sanders from being the 2020 nominee or worse, president.

      It’s like the Iran/Iraq war. Both of them deserve whatever the other throws at them.

      Liked by 1 person

  3. Worth a read.

    ” This Battle of Billionaires Was Inevitable

    A surprise decision over a Pentagon contract seems like the latest volley in a war between President Trump and Jeff Bezos”


  4. And this is the same guy who wants to screw up the NY schools that work:

    “$773 Million Later, de Blasio Ends Signature Initiative to Improve Failing Schools
    By Eliza Shapiro
    Feb. 26, 2019”


    • “Mr. Bloomberg put a heavy emphasis on using data to make decisions about schools, and Mr. de Blasio’s administration now seems to be heading in that direction.”

      If de Blasio wasn’t using data to make decisions, what was he using? A magic 8 ball?

      Liked by 1 person

      • Ideology and bias.

        Or as noted in the piece, just going along with what the unions wanted which was more money without accountability and stopping the Bloomberg practice of closing failing schools.

        Liked by 1 person


          From Bloomberg, suggesting ATT decision was correct and that there are bigger fish to fry.


        • Re antitrust: the difference between enforcement in the 90s and after is night and day. Interestingly, I don’t remember DOJ and FTC losing as much in court then even though they were way more aggressive.

          There is a hip new antitrust theory sprouting amongst liberal economists – that the government should break up companies because they have a monopsony in labor (using the lack of wage growth as a proxy for damaging behaviour, the way price increases are used.

          The idea that there is only one employer in a town is laughable, but maybe they can get some leftist judge to bite on that theory. Would be interesting to say the least.


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