weak housing data should keep the fed on “extended period”

8/14/2019 Weak Housing Data should keep The Fed on extended period

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Richard Suttmeier is the Chief Market Strategist at www.ValuEngine.com.ValuEngine is a fundamentally-based quant research firm in Princeton, NJ. ValuEngine

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March 16, 2010 Weak Housing Data should keep T he Fed on ext ended per iod

Homebuilder sentiment slumps again in March, as Housing Starts decline again in February.How will banks handle tougher mark-to-market rules? The Scorecard for ForeclosurePrevention! Retailers are undeserving leaders, while semiconductors should not be laggards.

Home Builder Confidence Hurt by Foreclosure Dilemma

The National Association of Home Builders Housing Market Index fell to 15 in March from 17 inFebruary because of bad weather, foreclosure sales, and difficulty in obtaining construction anddevelopment loans. The Prospective Buyers component slipped to 10 from 12, and the Home Sales forthe next six months fell to 24 from 27. This data is significantly weak considering that 50 is a neutralreading. The chart shows a potential re-test of the lows for this index. Housing Starts in Februarydeclined 5.9% to an annual rate of 575,000 units.


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FASB Mark-To-Market Rules may get Tougher

The Financial Accounting Standards Board (FASB) will likely expand the mark-to-market rules toinclude assets such as loans. At present, banks hold loans on their books at original cost and basereserves on their own guidelines for potential losses. This rule change would affect both communityand regional banks. The Big Four; JP Morgan, Bank of America, Citigroup and Wells Fargo have anestimated $2.8 trillion loans on their balance sheets, which is 40% of total assets for these giants.Looking at all 8,012 FDIC-Insured Financial Institutions we find 1,514 overexposed to C&D loans, andanother 1,312 overexposed to CRE loans only. Thats 2,896 banks or 36.1% of the 8,012 that will havedifficulty with this FASB rule change.

The Government Foreclosure Prevention Program is a Drag

According to ProPublica.org new data shows 150,000 homeowners are stuck in trial modification limbo

for more than six months. The program was intended to make mortgage modifications permanent afterthree months given financial documentation that shows the ability to make the lower monthly payments.It seems that three months was just not long enough to complete the process. Some who were deniedafter the trial period are not being officially dropped subject to a review.

As of the end of February 168,708 homeowners were in permanent modifications. While this is up from116,297 from the end of January, keep in mind that the program was supposed to help three to fourmillion homeowners.

Retailers are surprise leaders with the Retail HOLDER Trust (RTH) is at a 52-week high, whichmakes no sense given the extremely weak readings of consumer confidence. The daily chart shows anextreme overbought condition with RTH up 6.2% year-to-date and only 8.3% from its June 2007 high.

Chart Courtesy of Thomson / Reuters


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There are five Retail Industries that are more than 20% Overvalued according to ValuEngine:

Leisure Products by 32.6%

Tools and Hardware by 26.5% Home Furnishings by 26.4% Clothing by 25.2% Recreational Vehicles by 20.0%

Semiconductors have been a laggard with the SOX down 2.6% year to date, and 36.2% below itsJuly 2007 high. The daily chart is overbought with my weekly value level at 331.57 and my semiannualpivot at 358.89 and monthly resistance at 379.97.

Chart Courtesy of Thomson / Reuters

Thats todays Four in Four. Have a great day.

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Richard SuttmeierChief Market Strategistwww.ValuEngine.com(800) 381-5576


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As Chief Market Strategist at ValuEngine Inc, my research is published regularly on the website www.ValuEngine.com. Ihave daily, weekly, monthly, and quarterly newsletters available that track a variety of equity and other data parameters aswell as my most up-to-date analysis of world markets. My newest products include a weekly ETF newsletter as well as the

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weak housing data should keep the fed on “extended period”

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