Chris Lau - Seeking Alpha

Wednesday, March 18, 2009

A Positive Entry for Once

1) U.S. Housing Starts

New U.S. housing starts and permits rebounded in February 2009

  • Housing starts jumped 22.2 percent to a seasonally adjusted annual rate of 583,000 units from 477,000 units in January
  • New building permits, which give a sense of future home construction, rose 3.0 percent to 547,000 units, from 531,000 units in January. That also marked the first advance in permits since April last year
  • Year-over-Year, housing starts were down 47.3 percent in February and permits declined 44.2 percent
  • Single-family housing completions in February were at a rate of 505,000; this is 8.2 percent (±11.8%) below the January figure of 550,000.

On Calculated Risk blog, the author notes that single-family completions are still significantly higher than single-family starts. Since residential construction employment tends to follow completions, and completions will probably decline further, unemployment in this sector will likely persist.

To smoothe out one-off events like this, a prudent investor would want to see 3 consecutive months of continuous improvements in these figures. Otherwise, stock market rallies, which are inherently forward-looking for the health of the economy, will give out head-fake signals.

2) Corporate Financing

The banking system may be crippled, thereby unable to fund large funding requirements for M&A (mergers and acquisitions). But look! Look at the investor demand for Pfizer's bond offering.

$13.5B had 1,700 orders placed.

Investors are clearly hungry for any investment instrument that will return more than 0%.