Cashin's Corner - 12/22/2016

December

22

2016

‘Tis three days before Christmas and at each brokerage house

The only thing stirring was the click of a mouse

Down on the Exchange the tape inches along

Brokers bargained and traded as they hummed an old song

The Fed turned data dependent or so they would claim

Yet they hiked in December though the data looked tame

The Cubs took the series the Broncos the Bowl

And Villanova are champs with a last second goal

Cleveland won a title after Fifty-two years

As LeBron held the trophy it moved him to tears

Donald Trump got elected to the pollster's surprise

Since that day in November we see stocks on the rise

Bob Dylan got a Nobel it doesn't get any better

He didn't go pick it up he just them a letter

Samsung phones had some problems with combustion a woe

While millions wandered widely playing Pokémon Go

Yet there's still Cosby and Kim K

they sure don't bring us cheer

But it's Christmastime, Alice

And Santa is near

So stop looking backwards have a cup of good cheer

And kiss you a loved one

raise your hopes for next year

And amidst all the trading

Christmas themes we will heed

And share our good fortune with families in need

And tomorrow they’ll pause as we wait on the bell

To sing a tradition

a song for old “Nell”

Don’t let this year’s problems impede Christmas Cheer

Resolve to be happy

throughout the New Year

And resist ye Grinch feelings let joy never stop

Put the bad at the bottom

keep the good on the top

So count up your blessings along with your worth

You’re still living here

in the best place on earth

And think ye of wonders

that light children's eyes

And hope Santa will bring you that Christmas surprise

So play ye a carol

by Mario Lanza

Unless you are waiting

to celebrate Kwanzaa

Hanukkah’s coming

But Ramadan’s gone

Different folks, different holidays yet each spirit lives on

Whatever your feast is

we hope you all still

Find yourself just surrounded by folks of goodwill

Friday, as the bell rings

hark to your heart’s call

And as Santa would shout

Merry Christmas to All!

h/t to Ed Conarchy creator of Cashin's Corner for keeping in step with this Christmas tradition 

Hedge Cost Serenity Prayer

h/t to Adam at Thomson Reuters
Lord, grant me the serenity to accept the things I cannot hedge, courage to hedge the things I can, and wisdom to know the difference. If else fails, give me gold to buy water, canned goods, and ammo! The situation probably isn’t that dire but why risk it?  You never know.  If Hillary wins, half the populace will be angrier than ever. If Donald wins, half the populace will be more anxious than ever.  Which outcome is worse?  No idea but either way half the country will be operating with a chip on its shoulder. That sentiment is driving the market. Rates definitely have room to run higher but they could just as easily revisit record lows. We’re sitting on a steep duration ledge and a bounce in realized vol is long overdue   Dynamic decision-making might get costly but risk managers don’t have much of a choice. Gotta keep hedge coverage within model variance. Add margin to pricing and hope week-over-week volatility is contained…

AQ

Housing Update

Pending Home Sales

David M. Blitzer, managing director and chairman of the index committee at S&P Dow Jones Indices, stated "The home price increases reflect the low unemployment rate, low mortgage interest rates, and consumers' generally positive outlook.  However, the outlook is not without a lot of uncertainty and some risk.  Last week's vote by Great Britain to leave the European Union is the most recent political concern while the U.S. elections in the fall raise uncertainty and will distract home buyers and investors in the coming months.”

The National Association of Realtors (NAR) reported fewer Americans signed contracts to buy homes in May resulting in home sales sliding lower year-over-year for the first time in nearly two years.  The NAR’s seasonally adjusted Pending Home Sales Index fell 3.7% in May to 110.8, just below its May 2015 reading of 111.

Although overall home sales have steadily improved over the past year, buyers are running into shrinking inventories that are causing homes to sell after fewer days on the market while pushing up prices and this may have reduced pending sales during May.  May's decline implies completed home sales could slow in July or August as the number of listings fell 5.7% from a year ago suggesting prospective homebuyers have limited choices.  Meanwhile, the median sales price has risen 4.7% over the past 12 months to $239,700.

March Existing Home Sales >than expected

Existing home sales for March came in higher than expected up 5.1%.  This increase was led by SFRs  up 5.5% for the month to 4.76m.  The median price for existing homes is currently $222,700 falling short compared to 1 year ago when the median price topped out (for the period of this recovery) just above $230,000.

This means that interest rates neither encourage nor discourage borrowing. As human beings our propensity to take on long-term debt has nothing to do with what the interest rate is but rather it has everything to do with our employment outlook. So, until that changes the real estate market will continue at the same sluggish pace.

#gotrump