Existing Home Sales Are Not Good Enough

Not all that long ago, I wrote "The next big domestic economic measure due out today is existing home sales for November 2010. If you recall, October's sales were a depressing 4.43 million units (down 2.2% from September's 4.53 million units and missing expectations). Expectations are a little tamer (but still optimistic), with a consensus estimate for 4.75 million sales. The actual numbers aren't due out until 10 AM EST, though, so we have no idea (yet) how realistic that is."

Well, we now have an idea of how realistic that is. Not very. We came in at 4.68 million existing home sales in November. That's good - it's a 5.6% increase from October - but, since it missed expectations it will probably disappoint the Street.

A Day Full Of GDP Is Like A Day Full Of Sunshine

And today? Today has plenty of sunshine.

Great Britain reported it's final Q3 2010 GDP results about 4 hours ago. The first revision had put them at 0.8% growth for the quarter (with 2.8% growth from Q3 2009 to Q3 2010). Going into the day, analysts were expecting no change to the final revision. The final results, while not bad, did not quite live up to that expectation. Growth for the quarter was revised down to 0.7%, while year over year growth was revised downward to 2.7%. Mildly disappointing, but not (on its own, anyway) a source of soul-crushing despair.

US GDP is up next. The first revision put us at 2.5% growth for Q3 2010, with the price index[1] up 2.3%. The Street is feeling quite optimistic this morning, and is looking for the final revision to put us at 3.0% growth for Q3 with no change to the price index. Our results are slightly sunnier than Great Britain's, with the final revision of Q3 GDP revised upwards 2.6% and the price index revised downwards to 2.1%. Most of the GDP increase is credited to a "sharp deceleration in imports and an acceleration in private inventory investment".

The funny thing here? These results seem to have pushed the futures down. Go figure.

The next big domestic economic measure due out today is existing home sales for November 2010. If you recall, October's sales were a depressing 4.43 million units (down 2.2% from September's 4.53 million units and missing expectations). Expectations are a little tamer (but still optimistic), with a consensus estimate for 4.75 million sales. The actual numbers aren't due out until 10 AM EST, though, so we have no idea (yet) how realistic that is.

In the news, South Korea is continuing their largest peacetime military exercise ever. Mostly as a way of making President Lee Myung-bak look tough after what was commonly perceived as a "weak"[2] response to the shelling of Yeonpyeong Island. There has been no specific response to this from North Korea, to the shock of everyone and the disappointment of connoisseurs of fine crazy.

There was a three hour strike in Greece against the 2011 austerity measures about to be implemented by their parliament. So far, the strikers have managed not to murder anyone.

Speaking of the PIIGS, China[3] is coming to their rescue. They have struck a deal with Portugal to buy 4-5 billion euros of Portuguese sovereign debt. At least, that's what has been reported in the Jornal de Negocios. The euro is up in ecstatic jubilation on the news.

Closer to home, the Financial Report of the United States is out (you can choose to read either the 12 page Citizen's Guide or the 268 page full report), and it shows that the budget deficit has increased by 65.9% from FY 2009 to FY 2010 (in 2009 it was "only" a $1,253.7 billion deficit for the year, while in 2010 the deficit has increased to $2,080.3 billion).

And, wrapping up the GDP day, New Zealand's GDP is due out at 4:45 PM EST.

[1] Yet another measure of inflation.

[2] "Weak", because the word "sissy" rarely makes its way into Reuters. Although that's pretty much how the South Korean people looked at his response.

[3] Still not wanting to replace the United States as the sole superpower of the world - just ask them - and still tired of being treated like they're solely responsible for holding North Korea's leash.

Existing Home Sales

North Korea hasn't managed to start shelling any islands off the coast of the United States but, based on how the markets are reacting, they may as well have. Fortunately, North Korea's actions today don't really have any impact on home sales in the US from last month. Unfortunately, even if the numbers are good, nobody will really care.

Existing home sales are exciting for the markets. They mean loans are being taken out. They mean the housing market isn't totally dead yet. They mean big ticked durable goods orders (really, has anyone ever really liked the appliances the house comes with?). They mean sales at hardware stores. They mean a thousand little trickle-down impacts on GDP that join together like the rushing of mighty waters to drive the economic engines of our nation and propel our GDP to undreamed-of heights [1].

Unless the numbers are bad. Then sad broker is sad.

Now, I think I've said it a dozen times already this week {2], but in September there were 4,530,000 existing homes sold (a 10.0% increase from August's sales). The smart guys in the expensive suits who look at this sort of thing are expecting only 4,500,000 sales for October. Are they right?

Well, no. Sad broker is sad.

The official information is on the website of the National Association of Realtors, at http://www.realtor.org/press_room/news_releases/2010/11/october_retreat. In a nutshell, we hit only 4,430,000 existing home sales (a 2.2% decline from September).

So, not as good as expected. Not as bad as 200 artillery shells landing near your home, but still not great.

[1] Which, historically speaking, results in an unsustainable housing bubble that bursts and destroys the world economy. But who wants to learn from history?
[2] Three times actually. Counting this one. But who's counting.

FBI Beavers and Irish Bailouts and Giving Thanks

Those of you who read it may have noticed this headline in the Wall Street Journal: "U.S. in Vast Insider Trading Probe" (http://online.wsj.com/article/SB10001424052748704170404575624831742191288.html?mod=WSJ_hp_MIDDLETopStories). It's big, it's looking at multiple insider-trading rings, and the fallout could conceivably change the way the financial industry is allowed to do business. Some of the things the probes are looking at are:
* Was nonpublic information passed along by "expert network" companies to hedge and mutual funds?
* Did Goldman Sachs Group Inc bankers leak information about transactions that benefited certain investors?
* Have independent analysts and research boutiques been knowingly allowing clients to trade on inside information?
* Did traders at "a number of hedge funds and trading firms" improperly obtain and use nonpublic information about pending merger deals.

Ignites (http://www.ignites.com/c/124284/11924/insider_trading_probe_involves_funds_report, which may require a subscription to access) points out that currently "no mutual fund firms are identified by name as suspects, but Janus, Wellington and MFS are known to be among the clients of one analyst whom the FBI has accused of relaying inside information".

As of right now, no charges have been made, although a Federal grand jury is hearing evidence right now. Look for some indictments to be handed down in the next few weeks.

In world news, Bloomberg reports (http://www.bloomberg.com/news/2010-11-22/ireland-seeks-european-union-rescue-as-outsized-crisis-overwhelms-nation.html) that Ireland has recanted its claims from a week ago that it does not need financial aid. On Sunday, Irish Prime Minister Brian Cowen formally ate crow and requested financial assistance from the EU and the IMF. There are no official numbers - the details are still being worked out - but Goldman Sachs Group estimates that they may be tapping 95 billion euros. To put that in the market-crushing perspective it requires, Greece borrowed about 47% of its GDP. Ireland will most likely be borrowing close to 60%. If you've noticed that the futures are down this morning (and they are), this is why.

With all that in mind, we don't really have any market moving reports due out on this, the first day of the Thanksgiving trading week. Tomorrow we get the release of the Q3 2010 preliminary revision for GDP (analysts are expecting to see real GDP revised upward to 2.4% from the initial 2.0% estimate, with no change in the price index) and existing home sales (the Street is looking for a drop of 30,000 from September's 4,530,000 units). Wednesday brings durable goods orders, personal income and outlays, first time jobless claims, consumer sentiment, and new home sales. All by 10 AM. Then the markets are closed on Thursday (for Thanksgiving generally and, it appears, specifically for giving thanks for not having been indicted yet), and they close early on Friday.