Headlines in Tokyo last night - “Asia stocks set for biggest advance in two weeks on housing starts.” This is too much.
Knowing investors would retire for the night more secure, the media trumpeted yesterday’s Starts print as the spark for a world recovery, not to mention the spark in equities. Fine. Tucked in for the night, all are content. And, misled. And Tokyo, never given to original thought anyway, takes it from there.
In fact, housing contributes perhaps 17% of GDP, maybe 5% of that the investment itself, and 12% for housing-related services. This is not puny but not major. We have set well-performing anchors for our clients - jobs and consumption - which totally eclipse this contribution. Housing has not been an anchor for us as we expect no change in the dynamics of that sector over the intermediate term. And most of the strength in Starts was in multis, because no one wants to buy a home anyway.
No one knows the answers to a market move; the press, as always, knows least. But, in a world were any news regarding hope for one’s home price, where in some areas of CA for example, most home prices don’t account for the first, then it’s good news, even if it doesn’t mean much. So it was fuzzy warm stuff, nothing substantive.
We don’t know all the real reasons for yesterday’s great cheer (no one ever does) - the ECB 3 yr line was one, Spain’s auction another, Germany’s IFO read another, a no doubt, many others. But Nov Starts & Permits? If so, the great cheer is to be short-lived.
Robert Craven
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