Capitulation

By Jeremy GauntReutersSunday, July 6, 2008LONDON: Profit warnings, breaches of key index levels, record oil prices, stressed consumers and investors seeking safety provide the background for markets this week, and many people are wondering how long this will all last.There has been no classic "capitulation" - a market concept stating that heavy, sometimes panic, selling of stocks heralds the botto

I came to support Barack Obama for President only after Dennis Kucinich and John Edwards were ignored by the mainstream media to the point where their campaigns could not continue. He was my third choice after these two because he stuck me as being the least progressive of the three. Now, with his apparent decision to support the Bush/Hoyer FISA capitulation (H.R. 6304), I am seeing that my concer

I must reluctantly report to my fellow comrades . . . that I surrendered and signed up for Weight Watchers yet again this weekend, despite all my intentions to the contrary a mere three days ago. I didn’t want to tell you, because it makes me sound so fickle! Please be kind. Saturday started out filled [...]

I’ve decided to convert the “Constructing Capitulation” monthly wrapup post of all the economic bits and pieces I track into a recurring document with embedded images, data and narration.I’ll continue to develop this document in coming months adding additional narration and data as well as perfecting the format and content.OverviewLooking back at January’s results (released throughout February and into March) it now seems very possible that the nation’s housing markets, having just entered its third year of unprecedented nationwide contraction, are now poised to take another even more severe leg down with precipitously falling home prices, palpable recession, and significant inflation of food and fuel all working to depress sentiment and, in turn, stifle both general consumptio

I refer to the high volume done today and the strong finishing actions in the futures market. We stands a good chance for a rebound in coming days. With the heavy volume marked, we saw how market recovered. I took small cosco call warrants with 2 minutes to closing when i saw FTSE coming back strongly and simsci gives a late late show. I was deciding between getting a HSI CW or an index stock. To take advantage of a rebound, I must go for index stock or index as second liners may not move. The logic is clear, when index rebounds, those stocks in the basket will move. Period.Ah Ben cuts rate tonight. Was it a coincidence that FTSE & Simsci rebounds late in our trading time? Alas, market has never changed, the clues are there, I just need to be observant. As this is the second d

Looking back at October’s results (released throughout November) it’s now unequivocally obvious that the nation’s housing markets, having fully transcended the mania that existed primarily in the first half of the decade and now, in its aftermath, after being dramatically and irreparably impaired by the unwinding of the resultant mortgage-credit debacle, are now hurtling headlong into a dramatic new leg down.While housing demand continues to slow and inventories swell far beyond historic levels, the credit markets that had provided such a plentiful supply of cheap Jumbo mortgages remains non-existent.Homebuilders have now clearly accepted the severity of the recession and are re-pricing accordingly but, as is typical, the existing home sellers remain behind the curve.Additionally, there are tentative signs that the commercial real estate market (CRE) is now beginning to feel the effects of the ongoing credit debacle and consumption pullback resulting in a sharp pullback in prices

Looking back at September’s results (released throughout October) it’s now unequivocally obvious that the nation’s housing markets, having fully transcended the mania that existed primarily in the first half of the decade and now, in its aftermath, after being dramatically and irreparably impaired by the unwinding of the resultant mortgage-credit debacle, are now hurtling headlong into a dramatic new leg down.While housing demand continues to slow and inventories swell far beyond historic levels, the credit markets that had provided such a plentiful supply of cheap Jumbo mortgages remains non-existent.Homebuilders have now clearly accepted the severity of the recession and are re-pricing accordingly but as is typical, the existing home sellers remain behind the curve.Pending home sales, the most leading existing home sales indicator, again showed a truly dramatic continuation of the decline to residential housing sales both nationally and in every region.The Northeast, Midwest, W

Anything BushtardWants Bushtard Gets, There Is NoReal OppositionWhether It's JudgesSpying On AmericansOr Illegal WarsThe Democrats AreEager To Please Their BushtardIt's Their PresidentThey're Greasing The SkidsFor The Neocon's BombingCampaign Of IranDo These DemocratsReally Understand What IsGoing On, Are They BlindOr Stupid, Or JustComplicit, Gaming It ForTheir Own ElectionsSomething Reeks, MeanwhileThe Bushtard Runs Rampant InIraq Killing SpreeContractors MakingBillions From America'sDisaster IndustryWhether It's War OrNatural Disaster, TheBush Admin PrevailsAnd Empties Out TheTreasury A Little MoreNo One Seems To CareAtleast Not In OurCapital, Government That'sSupposed To Be Ours Capitulation, Again:Senate preparing to fold on telecom immunity: reports Will they actually enforce this:House Passes Bill Outlining Prison Time, Fines for ‘War Profiteering’ VIDEO: You better do more than pray, Nancy:Speaker Pelosi: I pray for President Bush 'all the time' More Capitula

Looking back at Augusts’ results (released throughout September) it now appears that the nation’s housing markets, having been dramatically and irreparably damaged by the mortgage-credit debacle, are now hurling headlong into a dramatic new leg down.Housing demand’s slowing is accelerating, inventories continue to climb far beyond historic levels, homebuilders have entered “fire sale” mode, Jumbo and No-Doc loans for any borrower have effectively disappeared, and the federal government has just begun to recognize the severity of the issue.Pending home sales showed a truly stark and horrendous continuation of the historic decline to residential housing on a month-to-month and year-over-year basis, both nationally and in every region.The Northeast, Midwest, West and the National regions have now fallen WELL BELOW 100 indicating that, seasonally adjusted, home sales activity was below the average activity recorded in 2001, the first year Pending Home Sales were tracked.The Natio

Looking back at July’s results (released throughout August) it’s obvious that the nation’s housing markets are continuing to show significant weakness, even during what, for most measures, is generally the seasonal peak in activity for the year.Slowing demand and the now undeniable mortgage-credit-financial crisis are continuing to weigh heavily on housing, setting up for what seems fairly certain to be a new leg down and ultimately a severe housing recession.The preliminary GDP report for Q2 2007 continued to show a significant drag coming from the decline in residential fixed investment as well as significant revisions to past GDP results better demonstrating the pronounced effects this drag has had for the last four quarters.The following chart shows real residential and non-residential fixed investment versus overall GDP since Q1 2003 (click for larger version).The housing weakness also continues to clearly show up in retail sales as consumer’s pullback on spending for some

Looking back at June’s results (released in July) it safe to say that the weakening demand and an ongoing mortgage credit crisis are continuing to weigh heavily on the nation’s housing markets, sending them spiraling down yet another leg in this unprecedented housing decline.The advance GDP Report for Q2 2007 continued to show a significant drag coming from the decline in residential fixed investment as well as significant revisions to past GDP results better demonstrating the pronounced effects this drag has had for the last four quarters.The following chart shows real residential and non-residential fixed investment versus overall GDP since Q1 2003 (click for larger version).The housing weakness also appears to clearly show up in retail sales as consumers pullback on spending for some of the most discretionary of goods.The National Association of Realtors (NAR) released their fifth consecutive downward revision to their annual home sales forecast for 2007 putting the current outl

Democratically controlled Congress approved Bush’s FISA act, allowing the government to continue spying on Americans in the name of terrorism. I know that people just wanted to get home for the August break, and I know this is only a six month extension, but this was a bad bill and I don’t feel too confident about Democratic leadership right now. Barry Bonds has tied Hank Aaron’s home run record with 755. The man has talent, but I’m afraid his steroidal history kind of tarnishes this milestone. Oh, and guess who else decided to spy on their citizens? Makes the U.S. look great in comparison, doesn’t it? And a bit about the Yearly Kos debate yesterday. I was very impressed by the second tier candidates (Richardson and Dodd), but I was most impressed by the format. The candidates were arguing, talking naturally, and on the whole a lot less scripted than in other debates. I thought it helped me get to know them a lot better. Forget ethanol, oil, or nuclear. Ge

May’s results capped another month of indisputable evidence that the housing decline did not bottom in the fall of 2006, as many optimists had hoped but, in fact, continues to collapse under the weight of slumping sales, surging foreclosures and inventories, the mortgage meltdown and increasing interest rates.The final Q1 2007 GDP Report confirms that the historic decline to residential fixed investment continues weigh heavily the US economy with GDP registering a mere 0.7%, the weakest results since the end of 2002.The following chart shows real residential and non-residential fixed investment versus overall GDP since Q1 2003 (click for larger version).The housing weakness also appears to clearly show up in retail sales as consumers pullback on spending for some of the most discretionary of goods.The Census Department’s New Residential Construction Report which continues to indicate significant weakness in the nation’s housing markets and for residential construction showing lar

Not only did April’s results show further weakening of the nations housing markets, it also provided definitive proof that the housing decline is having a significant and undeniable negative impact on the overall economy.The latest preliminary GDP report confirms that the historic decline to residential fixed investment continues weigh heavily the US economy with GDP registering a mere 0.6% for Q1 2007 a fact now not so underestimated by the Federal Reserve Chairman Bernanke.“Of course, the adjustment in the housing sector is still ongoing, and the slowdown in residential construction now appears likely to remain a drag on economic growth for somewhat longer than previously expected.”“The incoming data on new home sales and inventories suggested that the ongoing adjustment in the housing market would probably persist for longer than previously anticipated. In particular, the demand for new homes appeared to have weakened further in recent months, and the stock of unsold homes r

Well it’s safe to say that in March I almost capitulated as my server took a “hard landing” of its own putting a jeopardy all the Inventory, OFHEO, Case-Shiller and BNN data collected for an entire year.Well luckily, I was able to recover everything and the server is now healthy and back up and running.The same can’t be said for the nations housing markets though as they continued to flounder in March resulting in fairly uniform acceptance that the bottom was not seen last fall, as had been widely speculated, and that we are now on the verge of a new leg down.The recent National Association of Realtors pending home sales data, a forward-looking indicator, seems to confirm continued weakness as shown by the following chart.Note that, except for the West region, every 2007 year-over-year decline was larger than the declines seen in 2006.Keep in mind that the 2007 declines are coming on “the back” of the declines seen in 2006 indicating accelerating weakness when compared to t

If ever there was a clear indication that the nation’s housing market and economy are headed for a hard landing, it had to be Wall Street’s bull rally on the back of yesterday’s “strong” NAR Pending Home Sales Index Report (PSI).To shed some additional light on the reports findings I’ve created the following chart that shows the year-over-year percent change to the PSI since January 2006 (click for larger version).Note that this chart is using the “not seasonally adjusted” PSI values as NAR doesn’t provide any more that the last 12 months of seasonally adjusted data.I have been keeping my own spreadsheet up-to-date on a monthly basis but recently NAR changed their method of seasonally adjusting the PSI and that resulted in all prior months being revised.Unless you want to pony up a few grand to the NAR Research for the data, we’ll have to stick with the unadjusted data.Keep in mind that we are comparing year-over-year so the seasonal adjustment is not as necessary.S

Despite unseasonably mild weather, the start of a $40 million National Association of Realtors PR campaign, a roaring stock market and a constant flow of bullish “housing has hit bottom” sentiment, January continued to show significant weakening to the nations housing market.January gave us the following:NAR's Pending Home Sales report showed increasing declines to existing home sales both nationally and regionally, but most notably in the Midwest and South regions where home sale activity dropped more than 10% on a year-over-year basis.The Census Department’s New Residential Home Sales report showing the third worst monthly drop-off in new home sales since the housing recession began including an over 50% decline in sales in the West region.NAR’s Existing Home Sales report showing that for single family homes, prices have declined year-over-year in every region especially the West where the median price declined 4.4%.The Census Department’s New Residential Construction repo

December showed further evidence that the nations housing market is experiencing continued weakness. Construction spending was again down significantly declining 12.52% as compared to December 2005. Single family construction spending was down a more dramatic 22.0% reflecting the significant drop off in demand for new construction homes as well as home rehabilitation. The following charts show changes to construction spending (click for larger version): Additionally, the first preliminary Q4 2006 GDP report showed a continued and substantial decline to residential fixed investment. It's important to note that although the overall 3.5% increase in GDP was a fairly strong showing, the substantial decline to residential fixed investment still managed to shave 1.16% from its bottom line. Furthermore, non-residential investment is now declining showing a comparatively small decline of 0.4%, the first decline since Q1 2003. Also, it seems that the preliminary GDP repo

As we now know all too well, 2006 was the first complete year of a national housing downturn that is generally known to have begun its descent back in June of 2005. Although having showed a significant pullback in sales in many markets during the fall selling season, 2005 was such a strong year for housing overall that it seemed to leave many observers with a false sense of security as to the outlook for 2006. Many industry experts sensed a slowdown was immanent, but the existence of a bubble condition and the extent to which a resultant decline would materialize was still hotly contested even by veteran economists. Some even suggested that with some "new math", the housing bubble scenario could be completely reasoned away in favor of an alternative view that would assert that many of the county's hottest housing markets were at fair value or even cheap. But as the year wore on, many found it harder and harder to maintain any confident position that would suggest that housing w

I noticed more than a few die hard bears throwing in the towel on Friday as I perused the message boards. Is this the capitulation phase that will usher in an intermediate-term top? It is starting to look that way. But, sentiment can always get more extreme. So, if the market was acting healthy I would be less inclined to look for a top here. Unfortunately, the market is not acting very healthy

More signs of capitulation in this week's Blogger Poll, where a big shift in the poll took the Bear-Bear spread from it's widest in history last week to dead even this week. This would make only the 3rd week that Bears didn't outnumber Bulls in this poll since the July lows. So, it appears that the Bloggers are finally caving. The amazing thing is that the Perma-Bears over at TT still haven't