It's gorgeous in NY today. I got CNBC's Dylan Ratigan properly irate, him being in a suit and all, and we have had a run of surprisingly good numbers reported today. Durable goods advanced .8% when expectations were for much less. Without the highly volatile transportation figures, the number was even better at a +2% reading. New home sales were better than hoped for at a 530,000 rate and the prior month was revised upwards. The supply of new homes being offered for sale is still historically high at 10 months, but that is down from last months 10.4 months.
John Ryding, formerly of Bear Stearns and now in his own shop, RDQ Economics, mentioned in a note that new home sales have risen at a 13.9% annual rate the last three months (although still down a good bit against the prior quarter), and existing home sales were reported "down only 6.3% at an annual rate over the same three month period." All these numbers are subject to revision, but they read good today.
I don't pay much attention to consumer confidence surveys unless they serve my point, so I'll mention the Univ. of Michigan's consumer confidence survey came in much better at 61.2 from an originally reported 56.6 and well above expectations. I'll guess the softening in the headline price of crude oil helped this number. It is a bit sobering though to reflect that this survey was 88 in the last recession.
Credit markets are calming down after the FNM /FRE crisis. The TED spread - the difference between the 3 month US Treasury bill and the three month London interbank offer rate- is back to 116 from a recent peak of 146 on July 15. The bigger the number the more fear there is in the system. The 10 year average is around 48 basis points so there is a long way to go, but we are off the peak fear levels of just a few weeks ago. Also, the difference between the 10 year Treasury Inflation Protected Security (TIPS) and the conventional 10 year note is 2.32%. That is down 10 basis points since I wrote about it a week ago. It represents the expected rate of inflation for the next 10 years.
Foreclosures of homes spiked 14% in the second quarter and made for a big splashy headline. I'm not indifferent to the pain such a number represents, but for our purposes this is old, old news. A home takes almost 180 days to finally get into foreclosure after being late on payments, so the number that is more relevant is the current rate of new mortgage delinquencies- which will be tomorrows foreclosures. I mentioned Tom Brown of Bankstocks.com a few weeks ago and his work analyzing the pace of delinquencies shows they have been increasing, but at a declining rate. The so called second derivative has turned.
As I write this just before lunch on Friday, oil is down again and the dollar is trading flat to slightly positive. We are in a bear market but not all is doom and gloom. There are a number of lights at the end of the bear tunnel.
I should have shut my mouth. I will be putting on a suit today and doing Larry Kudlow's show at 7 PM NY time tonight. It's always a pleasure but we have some good stuff to talk about tonight.