There is little doubt that the negative seasonal effects are beginning to impact housing. As we said at the beginning of the year, we were likely to see a “false dawn” in home prices due to low interest rates and seasonality. This morning’s New Homes Sales data came in well below estimates at 402K. Analysts had expected 440K. The inventory of new houses on the market remained high at 7.5 months. The extension of the monumentally stupid homebuyers tax credit can defer the eventual resumption of lower home prices, but it cannot end it. This program is an incredible waste of taxpayer dollars and a disgrace to a country that claims to have “free markets”.
Durable goods orders also came in well below expectations at 1.0% – analysts had expected a 1.5% jump. The biggest news of the day, however, is another mysterious last second estimate change out of Goldman Sachs. Jan Hatzius is once again issuing a last second report on GDP that downgrades their current outlook to 2.7% growth versus their previous reading of 3%. For those who can’t remember, Hatzius has a penchant over the last few months for issuing these last minute reports that are remarkably prescient. The analyst consensus is looking for a 3% reading tomorrow morning. The continued wasteful spending on Capitol Hill is becoming painful to watch.
This market is spooked heading into the Halloween weekend. Investors are definitely beginning to question whether the huge move in equities is justified. I have a feeling we’re likely to be confronted with another good buying opportunity over the course of the next few weeks as money managers pile into equities before the end of the year. Until that opportunity becomes visible I’ll remain the lion in the grass rather than the deer in the headlights.