"Economists are pessimists: they've predicted 8 of the last 3 depressions."
--Barry Asmus

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Monday, January 3, 2011

ISM! Construction Spending! Dead Birds!

We have metrics on a Monday morning! Inconceivable![1] This is not a normal thing.
And what is it we're going to have? The Institute for Supply Management's manufacturing survey for December 2010 (expected to climb 60 bps to a level of 52.2) and Construction Spending (expected to be increasing, but with the rate of increase slipping to be up only 0.1%). The ISM survey is a huge market mover, because its seen as indicating the health of the manufacturing sector. Construction spending isn't as huge, although it is still examined. Rising construction spending is seen as an indicator of economic health and stability, but it doesn't point to the same sort of economic trickle-down that you would expect from - say - new home sales. Still, the Street will be disappointed if construction spending is unexpectedly bad. Particularly if the manufacturing survey misses expectations.
How did we actually do? The ISM Manufacturing Index came in at 57.0, missing expectations (but not badly). Construction spending handily beat expectations, coming in at 0.4% increase.
Looking to the news, China[2] has committed to continue to prop up Spanish soverign debt. "China is a responsible, long-term investor in the European financial market and particularly in Spain, and we have confidence in the Spanish financial market, which has meant the acquisition of its public debt, something which we will continue to do in the future," was the statement from Chinese Vice Premier Li kequiang.
Barron's has decided to join the "well, duh" club early with a news item predicting that, when the government begins selling off the $70 billion worth of AIG stock it owns, the price per share of AIG could drop. I'm sure everyone appreciates their insightful commentary.
Bank of America is back in the news, this time paying $1.28 billion to Freddie Mac as part of an agreement to end all claims related to mortgages sold by Countrywide[3], and also plans to record a Q4 "goodwill impairment charge" of $2 billion to its home loans unit. On the plus side for BofA, these particular bad loans weren't their fault. On the minus side, I'm not sure how much good will they have left to impair.
Look for the commercial real estate market to boom, based on the fact that the Association of Foreign Investors in Real Estate found that the United States is overwhelmingly the number 1 investment choice for overseas investors. That (probably) means climbing construction spending in 2011.
Oil is up above $92 a barrel, with some investors anticipating it will get as high as $100 per barrel. Coincidentally,[4] Russian Energy Ministry data showed that Russian oil output rose 2.2% in 2010 to a record 10.145 million barrels per day.
And finally, the city of Beebe, Arkansas rang in the New Year by watching about a thousand dead red-winged blackbirds drop out of the sky. Stone dead. For no reason anyone has been able to figure out, yet. Charles Fort would be proud.
[1] "You keep using that word. I do not think it means what you think it means."
[2] Still not wanting to replace the US as the sole economic and military superpower in the world.
{3] Specifically described as mortgages sold with faulty paperwork and other problems.
[4] I think not.

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