NEW$ & VIEW$ (26 MARCH 2013)

U.S. retail sales. Chicago Fed Index muddling through. After Cyprus, Italy. Ford enters currency war. Housing watch: Florida developers looking for trouble.

WEEKLY CHAIN STORE SALES DROP

Continuing to monitor high frequency data to stop a possible soft patch, weekly chain store sales dropped 1.7% last week. The 4-week moving average rose some more, however, but the Y/Y gain hit its lowest point since March 2010 at +1.7%. When is Easter this year?

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U.S. Chicago Fed National Activity Index Suggests Moderate Economic Growth

The Chicago Federal Reserve reported that its February National Activity Index (CFNAI) rose to 0.44 from a downwardly revised -0.49 in January. Smoothing out the m/m volatility, the three-month moving average deteriorated to 0.09, its weakest reading since October. During the last ten years, there has been a 79% correlation between the Chicago Fed Index and the q/q change in real GDP. (Chart from Doug Short)

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Cyprus Deal Strains European Ties

The Cyprus bailout came at the price of deepening the political mistrust between the strong economies of Europe’s north and the weaklings of the south

The fresh bitterness over the Cyprus mess—which appears deeper than at similar points during Greece’s extended financial turmoil—could hamper future attempts to fix the bloc’s flaws. Germany, the euro zone’s biggest economy, prevailed as it typically has in the negotiations, but at the price of growing resentment over what some Europeans saw as its bullying of a tiny nation. (…)

Markets greeted the deal with an optimism that quickly faded when Dutch finance minister Jeroen Dijsselbloem suggested in an interview that big bank depositors and senior creditors may be expected to contribute to future euro-zone bailout packages. Later, after bank shares and other euro-based assets fell on the remarks, he appeared to backtrack in a message from his Twitter account: “Cyprus [is a] specific case. Programmes tailor-made to situation, no models or templates used.”

Well, here’s what he told Reuters:

“What we’ve done last night is what I call pushing back the risks,” Dutch Finance Minister Jeroen Dijsselbloem, who heads the Eurogroup of euro zone finance ministers, told Reuters and the Financial Times hours after the Cyprus deal was struck.

“If there is a risk in a bank, our first question should be ‘Okay, what are you in the bank going to do about that? What can you do to recapitalise yourself?’. If the bank can’t do it, then we’ll talk to the shareholders and the bondholders, we’ll ask them to contribute in recapitalising the bank, and if necessary the uninsured deposit holders,” he said.

Looks like a template to me. By the way, small depositors were saved this time, but here’s the lesson for other countries that may face a similar situation (chart from IBD):

Eurozone Signals Bank Deposit Grabs In Play After CyprusThe president signed off on the broad deal—one more costly than the one its parliamentarians rejected last week.

“There is no doubt in the government that the first deal was far better,” said a senior Cypriot official. “We bluffed and we lost. The whole thing was a fiasco.”

Italy Continues to Crumble. Cyprus Down, Italy Next?

(…) With Cyprus resolved attention should turn back to Italy which is in fact a more important and more significant threat to the European Community. (…)

Italian politics spells trouble for EMU - The Italian president, Giorgio Napolitano, has empowered the center-left Bersani faction to pursue the formation of a government in the wake of the still unresolved Italian elections. Silvio Berlusconi is demanding that his faction be included in the making of a government. Meanwhile, the Five Star Movement (FSM) faction under ‘Bebe’ Grillo is gaining more grassroots support and thereby becoming a potentially larger faction should these elections prove unable to produce a workable government and should new elections need to be set.

The Grillo faction has said it would not be part of a government led by any conventional political party. Many of its members are separatists with respect to participation in the European Monetary Union. Grillo’s FSM seeks a referendum on Italy’s continued participation in EMU. The Italian President’s circumstance is increasingly with limited options. The ability to steer this outcome seems to be increasingly tenuous.

The maneuver in the previous election to install a technocrat government worked because the two major contending factions supported a technocrat government that would do the difficult things neither of them wanted to do but that the EU Commission demanded. A technocrat government is no longer supported. The people are up in arms over the changes made by the technocrats, imposed on them by outsiders. (…)

Italian consumer is angry… at risk… and… not at all fooled - The Italian consumer does not seem to be fooled by the prospects that stand in store. With confidence essentially at the weakest levels they have ever seen they are not optimistic about the outcome whatever it would be. The overall situation in March is assessed as the worst ever. With an average reading for this metric at -85, the reading in March is -150. (…)

Households are pulling back - Households assess their financial situation over the last 12 months as having been worse historically only one half of one percentage point of the time.(…) That seems to suggest that households currently are saving and saving as much as they can because they are so very concerned about the future. (…)

Ford CEO Mulally Says He’s Concerned About Japanese Yen

Ford Motor Co. Chief Executive Officer Alan Mulally said he’s concerned about the depreciation of the yen that’s bolstering the competitiveness of Japanese carmakers.

“The most important thing that most countries around the world believe in is letting the markets determine the currency,” Mulally said today from Bangkok in reference to the Japanese currency, during an interview on Bloomberg TV’s First Up with Susan Li. “That’s just so important to all of us in the international trading system.”

HOUSING WATCH

SOUTH FLORIDA CONDO UPDATE CondoVultures.com writes:

Overall in South Florida, developer are proposing nearly 125 condo towers with more than 16,550 units for the tricounty region of coastal Miami-Dade, Broward, and Palm Beach as of March 24, 2013, according to the Cranespotters.com Preconstruction Condo Projects Database™ compiled by the licensed Florida brokerage CVR Realty™.

Fueled by investors primarily from overseas, less than 2,900 new condo units remain unsold from a supply of nearly 49,000 units created since 2003 in South Florida’s seven largest coastal markets of Greater Downtown Miami, South Beach, Sunny Isles Beach, Hollywood / Hallandale Beach, Downtown Fort Lauderdale and the Beach, Boca Raton / Deerfield Beach, and Downtown West Palm Beach and Palm Beach Island as of November 5, 2012, according to a recent CondoVultures.com report.

Pointing up  The total number of unsold new condos does not include any of the more than 8,000 units that were purchased in bulk transactions by investment groups that plan to one day resell the units at a premium, according to the Condo Vultures® Bulk Deals Database™

A number of the newly proposed condo units are not expected to be completed until 2014 when the unsold developer inventory from South Florida’s last real estate boom and bust is projected to be sold. (…)

It is unclear how many of the other proposed towers could get built in the short term as construction financing is challenging – and expensive – to secure, industry watchers said.  

To overcome the obvious financing hurdle, most of the newly proposed projects are requiring prospective buyers to commit to deposits – to be paid in phases – of as much as 80 percent of the preconstruction contract price, industry watchers said.

During the most recent South Florida condo boom, preconstruction buyers were generally asked for deposits of about 20 percent, industry watchers said. 

If all projects get financing (!) and go ahead, there will be 16,550 + 2,900 + 8,000 new condo units for sale in the next 2-3 years. That’s 27,450! They have sold outright an average of 3,800 units per year since 2003.

 
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One thought on “NEW$ & VIEW$ (26 MARCH 2013)

  1. Dear Mr. Ouellet :
    You’re right it does look that Florida developers looking for trouble . With the financing’s requirements it will slow down many possible Buyers and specially with all the cost involved for the new construction the price of those units will be affordable for the so – called BRIC COUNTRIES where the people are becoming very rich at a stunning rate. as per specified in the article of New York time!
    We will email You an interesting article may be you ‘re alreadty got it but it ‘s interesting.
    Have a nice day and thank You for keeping us posted it.

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