No signs of catastrophe in housing market

Scott Grannis at Calafia Beach Pundit notes that the Case Shiller Home Price Index continues to show strength or at least stability in housing prices:

The Case Shiller Home Price Index for 20 major metropolitan markets hit bottom in the second quarter of last year and has been rising gradually ever since. Given the lags used in constructing the index, this means that prices likely hit bottom around March of last year. Even after adjusting for inflation, as this chart shows, home prices are up at a 3% annualized rate over the past 8 months.

S.F. Bay Area year-over-year median home price rises 25% in February

Yep, you read it right. The S.F. Chronicle:

A total of 3,582 existing single-family homes changed hands in the nine-county region in February, down 8.5 percent from the same time last year, according to the DataQuick report. Their median price was $370,000, a 24.8 percent increase from February 2009.

And then there’s this: “California’s median home sale price jumps 11.2% in February.”

RockTenn continues boosting the prices of its paper-based products

RockTenn (RKT), a manufacturer of paperboard, containerboard and consumer and corrugated packaging, has been busy this year with its price increases. RKT began the year by increasing the price of uncoated recycled paperboard by $50/ton. Since then, RKT has implement FOUR additional price hikes:

Jan 28: corrugated box prices increased by 10% and corrugated sheets by 12%.
Mar 02: prices on all grades of containerboard increased by $60/ton.
Mar 05: price increases for Classic NewsTM, AngelCote(R) and MillMask(R) coated recycled paperboard products equaling $45/ton.
Mar 09: prices on all grades of uncoated recycled paperboard increased by $60/ton.

Certainly, business continues to improve for the suppliers of paper-based products and packaging!

REITs power higher

Traders are betting that the real estate recovery is for real. Higher commercial and residential rents may be coming sooner than most people think.

Vanguard closed-end REIT fund

Breakfast just got a little more expensive thanks to orange juice prices

Florida’s freezing temperatures sent orange juice futures to two-year highs in January. The impact on the price of breakfast is upon us.

Tropicana will be shrinking one carton size and increasing the price on another:

“The 64-ounce container of orange juice drop to 59 ounces. The suggested retail price remains at $3.59.

The price of Tropicana’s gallon container of pure premium orange juice will rise between 5 percent and 8 percent. Right now it costs $6.49.”

Roubini protege expects inflation all around the world

The tagline for Inflation Watch is “Watching for potential inflation here, there and everywhere.” We borrowed this from money manager Bill Fleckenstein.

Apparently, there is at least one other person forecasting a time when inflation is “everywhere.” CNBC interviewed Arun Motianey, director of fixed income strategy at Roubini’s RBG Capital and a protege of economic professor Nouriel Roubini:

“We’re heading into a world of inflation because we are highly indebted and we are indebted here in the US economy in the household sector and in the financial sector…It’s going to be inflation everywhere and it’s going to happen really through the weakness of the US dollar…Then inflation in those other parts of the world that are expecting appreciating currencies, they’re going to inflate as well because that’s the way you ultimately correct this [economic slowdown].”

Motianey asserts that this inflation is required to avoid the apparently worse alternative of deflation.

What is copper telling us?

After a correction earlier this year, copper has rallied and is now approaching its 52-week high. It appears that fears about a slowdown in the global economy have receded.

Copper approaches its 52-week high

Real estate investment trusts hit 52-week high

If residential housing is about to resume its decline and commercial real estate is about to collapse, why are shares of real estate investment trusts hitting fresh 52-week highs?


Sugar prices continue to plunge

At the end of 2009, we noted that sugar prices were soaring to multi-decade highs. Sugar prices proceeded to peak at the end of January and have plunged 33% from there.

Sugar prices continue to plunge from multi-decade highs

Sugar prices continue to plunge from multi-decade highs

Sugar prices are riding a rollercoaster of scarcity and abundance. Monsoons in India forced the world’s largest consumer of sugar to import it. This year, sugar crops are expected to produce a large bounty from India and Brazil. See “Indian sugar stocks turn bitter as output seen rising” for more details.

Sacramento’s Supply of Resale Homes Drops Below Three Months

Keep Sacramento on the list of cities that is still not seeing a wave of foreclosures overwhelm housing inventory. The Sacramento Business Journal reports:

“Far from becoming Foreclosure City littered with vacant homes — which was what some predicted for Sacramento as the housing crisis struck — the capital region has among the lowest supply of available housing in the nation.

Existing homes listed for sale are in shorter supply here on a per-capita basis than in 18 major metro areas, including Chicago, Dallas and Atlanta. And unlike areas where condo towers proliferate, such as Las Vegas, the Southern California coast and south Florida markets, Sacramento has among the fewest finished-but-vacant new homes in the country.”

These numbers mean that the inventory of resale homes has now dropped below a 3-month supply. Demand from entry-level and first-time buyers has pressured supply (and prices), whereas the market for move-up and high-end homes remains lackluster.

Is the TIPS market signaling lower inflationary expectations?

From the Wall Street Journal:

A closely watched gauge of inflation expectations is telling the Federal Reserve that it can leave rates low for a while to help the economy heal.

The five-year, five-year forward breakeven rate–that is, the market’s expectations for inflation between 2015-2020–has come down sharply since February and currently implies an inflation rate of 2.60% for that period. That’s down 0.30 percentage point from the historic high of 2.91 percentage points on Feb. 1, which implied an inflation rate of 2.91%.

After rallying strongly in late 2009, the iShares Barclays TIP Bond Fund is down about 2 percent so far in 2010:

Reduced inflationary expectations?

But inflation-unadjusted Treasury long bonds have fared only slightly better. The iShares Barclays 20+ Year Treasury Bond Fund, for example, is just about flat year-to-date:

Does this look like a rally to you?

Perhaps inflationary expectations have declined slightly during the past two months, but if so not by much.

(Disclosure: The author recently purchased an inflation-adjusted bond fund.)

Morgan Stanley sees iron ore prices rising 60% in 2010

Dow Jones Commodity News reports that “Morgan Stanley has raised its forecast for a 2010 benchmark iron ore price rise to 60% from 20% previously. Morgan Stanley also sees a further 20% increase in ore prices in 2011, a bank analyst report released Friday said.”

According to Wikipedia, “iron ore is the raw material used to make pig iron, which is one of the main raw materials to make steel.”

Foreclosures are slowing

Many analysts have been predicting a tidal wave of foreclosures in 2010, but so far there is no evidence of it. In fact, in many areas, the foreclosure rate has been declining:

In related news, XHB (the homebuilder’s exchange-traded fund) is at a 5-month high and is just shy of its 52-week high:

WSJ: some firms move gingerly to rescind salary cuts

The WSJ’s Paul Glader reports that some firms are cautiously rescinding salaary cuts imposed last year:

Hard-drive maker Seagate Technology Inc. and New York Times Co. are among the concerns restoring full salaries for some but not all employees. Hewlett-Packard Co. granted one-time bonuses after cutting pay, though it may not permanently reverse the cuts.

FedEx Corp. is resuming some raises, but from levels that were reduced by pay cuts. Computer-storage giant EMC Corp. fully restored pay in January only after monitoring financial performance for six months.

The tentative approach is part of the reason that wage growth is muted even as the economy starts to rebound. Revenue growth remains shaky, so CEOs are reluctant to increase costs. With unemployment at 9.7%, executives are also betting they can keep employees motivated and productive without boosting wages. In the past 12 months, average hourly earnings have risen 2%; in January, earnings rose 0.2%.

Inflation Watch has been covering this trend for awhile.