Ed’s Daily Notes for July 12th   Leave a comment

Market Watch: Has Fed killed housing, and with it, the economy?

Good questions:

Has the Federal Reserve strangled the recovery by hinting that it would soon ease back on the throttle?

Will higher mortgage rates stop the housing market in its tracks?

Or is the economy now steady enough that the Fed can take off the training wheels by tapering its bond purchases?

How the economy — and particularly the housing market — handles the spike in interest rates will be a key factor in the timing and pace of the reduction in bond buying by the Fed, which could begin as early as September.

Fed Chairman Ben Bernanke said Wednesday that one of the biggest risks facing the economy right now is that higher interest rates could stop the housing recovery in its tracks. Housing is now the brightest sector of the economy, and if it stumbles badly, you can expect the Fed to reverse the taper and buy more bonds.

The rebound in housing certainly looks robust enough to cope with somewhat higher rates, but no one can know in advance how lenders and would-be borrowers will react to the news that the rate on a 30-year fixed mortgage has risen from 3.45% in April to 4.51% today. Rates are up compared with last month and last year, but in historical context, they’ve rarely been lower.

If the Fed is using the housing market as a barometer for economic health, then housing market reports should give us a strong clue to what the Fed’s plans are. Here are some upcoming reports to look for:

July 16th: Housing Market Index
July 17th: Housing Starts
July 22nd: Existing Home Sales
July 23rd: FHFA House Price Index
July 24th: New Home Sales
July 29th: Pending Home Sales Index
July 30th: S&P Case-Shiller Home Price Index

Motor Trend: Lessons Learned from June 2013 Auto Sales — Tesla Takes Longer to Recharge

At the end of the first quarter of the year, Tesla Motors was on a roll. The company announced it was ahead of schedule, selling 4750 vehicles between January and March (in the U.S.) – noting that it outsold the Chevrolet Volt and Nissan Leaf. It also said that it was showing a profit for the quarter – the first quarterly profit, ever.

The second quarter, which ends with June sales, was not as successful. In June, Tesla sold 1,425 vehicles and ended the first half of the year with 8931 units sold, according to Autodata Corp. That’s 4181 units for the second quarter, which is 569 units off the first quarter mark and 319 units off Tesla’s 4500 units a quarter mark.

So what’s happening? Lots of things might be happening. Other electric vehicles have followed similar paths seeing a spike in sales begin the plateau.

Sales for the Model S may have slowed after a strong push in the first quarter may have taken away from some of the later sales. Additionally, the sales number reflects U.S. sales and not other countries.

Still, Tesla remains on a path to average 4500 sales each quarter, putting the annual projection at around 18,000 units, a very respectable – and hopefully, profitable — number. (Though after that first quarter, Tesla upped its projections to 21,000 units by the end of the year, but that’s a worldwide projection, not strictly U.S. sales.)

Also, it’s worth noting that after the poor first quarter, the Volt and the Leaf have regained their volume lead on Tesla. The Volt, though June, has 9855 units sold and the Leaf 9839 units.

I still like Tesla, but their stock is hugely overpriced. The less-than-stellar 2nd quarter could knock their stock down some, providing another good entry point.

Reuters (via Yahoo): Google’s Schmidt says relationship with Apple has improved

Feel the love:

The relationship between Google Inc and Apple Inc has improved over the past year with the rival technology companies and sometimes partners conducting “lots and lots” of meetings, Google Executive Chairman Eric Schmidt said.

Schmidt did not provide details about the nature of the meetings during comments to reporters at the annual Allen and Co media conference in Sun Valley, Idaho on Thursday. He noted that Google Chief Business Officer Nikesh Arora, who joined him at the press briefing, was leading many of the discussions.

The two companies are in “constant business discussions on a long list of issues,” Schmidt said.

This is one of those news pieces I read with a raised eyebrow. What’s Schmidt up to? I don’t have a clue.


Posted July 12, 2013 by edmcgon in Economy, Federal Reserve, Market Analysis, News, Stocks

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