Uh oh! Is housing in trouble?


Author Cam Hui

Posted: 26 July 2013

I was reviewing some charts after the close and I came upon this chart. Notwithstanding Thursday’s action, which was the result of earnings misses by two homebuilders, what does this chart of the homebuilders ETF (XHB) against the market telling us about market expectations about the housing rebound? On a a relative basis, XHB staged a relative rally from the Eurogeddon lows of 2011, started rolling over in early 2013 and now has violated a relative support level.

Now consider this recent post from Barry Ritholz about private equity seems to have gone overboard on the “rent to flip” in US housing. Mr. Market starting to get nervous about housing, especially if mortgage rates rise any further.

Cam Hui is a portfolio manager at Qwest Investment Fund Management Ltd. (“Qwest”). This article is prepared by Mr. Hui as an outside business activity. As such, Qwest does not review or approve materials presented herein. The opinions and any recommendations expressed in this blog are those of the author and do not reflect the opinions or recommendations of Qwest. 

None of the information or opinions expressed in this blog constitutes a solicitation for the purchase or sale of any security or other instrument. Nothing in this article constitutes investment advice and any recommendations that may be contained herein have not been based upon a consideration of the investment objectives, financial situation or particular needs of any specific recipient. Any purchase or sale activity in any securities or other instrument should be based upon your own analysis and conclusions. Past performance is not indicative of future results. Either Qwest or Mr. Hui may hold or control long or short positions in the securities or instruments mentioned.

Take some chips off the table


Author Cam Hui

Posted: 22 Feb 2012

I wrote that I had been watching the behavior of cyclical stocks for a signal that a correction may be starting (see Correction? Watch the cyclicals!) and we may have seen that signal yesterday.

Is the consumer getting into trouble?
Consider, for example, the relative performance of Consumer Discretionary stocks against the market as a measure of risk appetite. This sector began a relative uptrend against the market last August but declined through a relative uptrend yesterday. This move, in conjunction with the behavior of other key sectors, may signal the end of the risk-on trade for the time being.

I would also point out that we have seen two consecutive housing related releases come in below expectations (homebuilder sentiment and housing starts). The housing sector, which recently turned from a train wreck into a recovery, has been a mild economic tailwind for the economy and consumer. Cullen Roche at Pragmatic Capitalism is not as sanguine about the housing recovery as many other analysts:

I still don’t see the recovery in the various housing indices that many are raving about. To me, this looks almost exactly like what I’ve been predicting all along. A sideways market that is consistent with past bubble experiences. Think Nasdaq, Shanghai, Gold in the 80s, etc. In essence, it looks like a big L.

CNBC reported that Americans are tapping home equity again as home prices have bottomed and started to appreciate again. I believe that HELOCs have been one reason why consumer spending has held up well despite the increase in payroll taxes this year.

So what happens to the consumer if the housing price recovery were to pause here?

Cyclical stocks rolling over
Another measure of the risk trade is the behavior of cyclical stocks. Business Insider highlighted the fact that CAT, which is highly cyclically sensitive on a global basis, just posted some disappointing sales statistics:

Caterpillar, the industrial behemoth that makes earthmovers, regularly publishes its rolling 3-month dealer sales statistics.

This gives us a sense of capital equipment sales in various global regions, which in turn serves as a proxy for economic activity.

And the latest numbers aren’t good. Worldwide dealer sales accelerated in the three months ending in January. The North America and Asia/Pacific regions posted double-digit declines.

The chart below of the Morgan Stanley Cyclical Index against the market shows a pattern that is very similar to the Consumer Discretionary sector. Cyclical stocks have also violated a relative uptrend yesterday, which is another bad sign for the bulls:

I also don’t like how Dr. Copper is behaving:

Note that this is not a “dive in the bunker” bearish call, but a warning that it may be time to take some chips off the table and to re-balance portfolios toward a greater emphasis on risk control.

Cam Hui is a portfolio manager at Qwest Investment Fund Management Ltd. (“Qwest”). This article is prepared by Mr. Hui as an outside business activity. As such, Qwest does not review or approve materials presented herein. The opinions and any recommendations expressed in this blog are those of the author and do not reflect the opinions or recommendations of Qwest.

None of the information or opinions expressed in this blog constitutes a solicitation for the purchase or sale of any security or other instrument. Nothing in this article constitutes investment advice and any recommendations that may be contained herein have not been based upon a consideration of the investment objectives, financial situation or particular needs of any specific recipient. Any purchase or sale activity in any securities or other instrument should be based upon your own analysis and conclusions. Past performance is not indicative of future results. Either Qwest or Mr. Hui may hold or control long or short positions in the securities or instruments mentioned.

America has come to this?


Author Cam Hui

Posted: 03 Apr 2012

Despite my recent bullishness, I recognize that the United States has experienced a very anemic economic recovery. Here are a couple of anecdotal data points that show how difficult the recovery has been.

First, the Washington Post reported that senior citizens continue to bear the burden of student loans.

New research from the Federal Reserve Bank of New York shows that Americans 60 and older still owe about $36 billion in student loans, providing a rare window into the dynamics of student debt. More than 10 percent of those loans are delinquent. As a result, consumer advocates say, it is not uncommon for Social Security checks to be garnished or for debt collectors to harass borrowers in their 80s over student loans that are decades old.

Ouch! Imagine retiring with student loans!

The trailer park housing recovery
Next, FT Alphaville reported that the US housing recovery has been led by…mobile homes:

Whether and how that sanguine trend seeps into the single family home housing market remains to be seen, with ‘Shadow” inventory levels and an opaque foreclosure pipeline make this a tougher call. Not to mention the difference in demographics between the two buyer bases. And while mobile home sales volumes are up, prices for manufactured houses are still negative year on year. If nothing else, the contours of the current recovery in this narrow part of the housing market likely inform the likely path of eventual recovery for the industry as a whole.

Call this a recovery, but seniors are now retiring still owing money on their student loans and Americans are downsizing from houses to trailer parks…

America has come to this.

Cam Hui is a portfolio manager at Qwest Investment Fund Management Ltd. (“Qwest”). This article is prepared by Mr. Hui as an outside business activity. As such, Qwest does not review or approve materials presented herein. The opinions and any recommendations expressed in this blog are those of the author and do not reflect the opinions or recommendations of Qwest.

None of the information or opinions expressed in this blog constitutes a solicitation for the purchase or sale of any security or other instrument. Nothing in this article constitutes investment advice and any recommendations that may be contained herein have not been based upon a consideration of the investment objectives, financial situation or particular needs of any specific recipient. Any purchase or sale activity in any securities or other instrument should be based upon your own analysis and conclusions. Past performance is not indicative of future results. Either Qwest or Mr. Hui may hold or control long or short positions in the securities or instruments mentioned.

Canadian Banks and Stress of the Housing Sector


Author Larry Berman

Posted: 28 Feb 2012 reposted from etfcm

Bank earnings start off with a slightly better than expected result, but there does seem to be at least some concern about the forward outlook. There appear to be notable stresses developing in Canada’s housing sector that are bound to have an impact on the banks in the coming years. The CMHC is about full on their loan books, and housing is simply becoming unaffordable for a conventional type mortgage. How many young couples have $100K or more needed for a down payment?

More important today and tomorrow is what the S&P 500 does at its 2011 high of 1371. There is obviously some hope that the ECB delivers another monster tranche of LTRO (QE), so there is room for some disappointing ‘sell the news’ type event as well.

Gold and silver look poised for a breakout type trade and all will know how badly gold and silver stocks have lagged their bullions. There are lots of potentially offsetting factors for the TSX, which should limit the upside in the coming weeks and months. We still see 13,000 as a reasonable target to take money off the table.

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