MARKET COMMENT
December 5, 2006
“We may be seeing a
floor,” Toll CEO says. So shouts the
headline from MarketWatch.
Naturally you must comb thru the article to find the good
news. Let’s see:
“Toll’s
outlook below expectations”. No, not there. “Fourth quarter earnings
down 50%...new orders down 57%...renegotiating land
contracts…cancellations up 37%.” Nothing too encouraging there is
there? So, continue, “These cancellations creating unintended specs,
[read, speculative new homes without contracts] we could face
increasing margin pressure as we try to sell these homes.” said CEO
Robert Toll. “We believe many buyers are waiting on the sidelines with
concerns about the direction of home prices as builders compete to move
their specs”, he continued. [Yawn.] And, borrowing more copy from
MarketWatch, “He said, the Washington D.C suburbs of Northern Virginia,
seem to have stabilized [oh oh], although at levels much lower than it
enjoyed a few years back.” Then [big finish] he added, “We may be
seeing a floor in some markets where deposits and traffic, although
erratic from week to week, seem to be dancing on the bottom, or
slightly above.” [Bing! And we’re not talkin’ Crosby!]
Rick Murray at Raymond James & Associates also noted…”We
would suggest that given the recent turnover in government as a result of
mid-term elections, some near-term stabilization [oh oh]
would not be totally unexpected…”
Huh? Well, the democrats are
known as big spenders, so…
So with the markets “awash with cash” which we featured yesterday,
this “floor” comment is the nugget of good news buried in negative facts that
brings out buyers.
Don’t get me wrong, we’re happy with most conditions now,
but much of the rhetoric bouncing about seems silly. Homebuilder’s aren’t growth stocks, they’re
cyclical companies. They carry
tremendous debt loads and yield little in dividends. But with so much cash floating around fighting
the tape is a loser’s game.
What else is going on?
Same ol’ same ol’ as far as I can tell. Unit labor costs within today’s economic
releases came in below expectations while ISM services data were higher than
forecast. This put “some” pressure on
bonds, held the dollar steady and pushed precious metals lower.
Not
too much has changed in major US markets today as the trend in stocks
remains firmly higher. MarketWatch’s headline titled today’s advance as
“rational”. I’ve never heard/seen that term applied to financial
markets “ever”. The big news, notwithstanding some intervening events,
is the employment report Friday and another Fed meeting next week.
Let’s keep this brief today and just look at a few markets
we didn’t feature yesterday.
That’s enough for today.
While SPY and just about every other equity sector are making fresh
highs there’s really not much point to posting repetitive charts.
Have a pleasant evening.
Disclaimer: Among
other securities, The ETF Digest maintains positions in: IEF, GLD, SLV, CEF,
USO, EWC, EWA, EWZ, EWW and EWM.