matisse capital management

Spain's Housing Bust Continues

Spain's housing downturn is rivaling that of the US, per the new quarterly data from the National Statistics Institute, which you can find here.  The country's Housing Price Index (HPI) showed that home prices fell 7.7% in the second quarter 2009 (the middle line in the chart; existing homes below, new homes above).  Contributing to the problem is the fact that mortgage lending is down significantly.  Home prices have now declined each of the last 10 quarters and, since the beginning of 2007, are down 59% for existing homes and 50% for all homes.  This trend may not be over; per the Barcelona Reporter: "Standard & Poor’s forecasts Spanish house prices may fall 20% this year, followed by declines of 10% and 5% in the next two years..."  Not that S&P is always right...

Case Shiller's New U.S. Housing Report

 

 

Some encouraging housing news. Case Shiller's 20-city composite index was up again in July (see chart, left).  Home prices in the index rose 1.6% in July and, as reported previously, 1.4% in the month of June.  You can read the full report here.   This is now the sixth consecutive month of positive data.  For the last 12 months, however, home prices are still down 13.3%.  Out of the 20 cities in the index, only two - Seattle and Las Vegas - had price depreciation in July.

Companies Raising Dividends - 9/26

   CAG, ConAgra Foods, from $0.19 tp $0.20, quarterly; yield = 3.8%

   COV, Covidien Plc, from $0.16 to $0.18, quarterly; yield = 1.7%

   LMT, Lockheed Martin Corporation, from $0.57 to $0.63, quarterly; yield = 3.2%

   MCD, McDonald's Corp., from $0.50 to $0.55, quarterly, yield = 3.9%

   SAFM, Sanderson Farms, Inc., from $0.14 to $0.15, quarterly; yield = 1.5%

BRIC Economies on the Rise

The BRIC Countries (Brazil, Russia, India, China)  suffered less during the current recession and returned to growth more quickly.  This is why I believe it is important to be diversified, not just across asset classes, but also geographically.  From Deutsche Welle comes this news: 

"When future generations look back at the current financial crisis, they'll almost certainly take notice of an important shift in the balance of world power. Because with wealthy Western nations - and particularly the United States - still reeling from the hits they took, the road has suddenly opened for emerging nations to make a grab for a greater share of economic power, and with it, global influence...Combined, the BRIC countries currently have a 15-percent share of the world economy and a 42-percent share of global currency reserves...BRIC is using its new influence to put pressure on the IMF to reshape its voting structure to better reflect the shift in economic power...Brazil, for example, is the world's 10th largest economy, but has just 1.38 percent of the IMF board's votes, compared to 2.09 percent for Belgium, an economy one-third the size."

The 2009 Global Corruption Report Results

Transparency International publishes a report on global corruption each year.  It is really a measure of the laws and conditions that businesses must operate under in different countries, and the challenges they face as a result.  You can read the entire report here.  The most recent report just came out, and it ranks 180 countries by their CPI (here "CPI" stands for Corruption Perceptions Index).  The report uses 13 different surveys to reach its conclusions.  Listed below are the 20 least corrupt countries, followed by the 20 most corrupt places to do business.  The US was ranked 20th.

                1.  Denmark, New Zealand, Sweden

                4.  Singapore

                5.  Finland, Switzerland

                7.  Iceland, Netherlands

                9.  Australia, Canada

Commercial Reat Estate Prices Take a Hit

July was tough for commercial real estate.   According to Moody's, its CPPI (Commercial Property Price Indices), which tracks data through sales transactions, commercial real estate prices were down 5.1 percent in the month of June alone.  This is an acceleration over the previous monthly rate of decline.  According to Moody's here: "The index is now 30.8 percent below its year-ago level and 38.7 percent below its peak in October 2007."  For anyone in the industry, this is not a surprise. I have written about inflated commercial valuations before here.

Economic News Around the World - 9/21

Some analysts are expecting a bear market on the heels of the recent rally.  The Dow is up 46% in the last six months - this has only happened six other times in the last 100 years, per Ned Davis Research.  These rallies were typically followed by  a slump, as indicated in the chart, left.  Per the WSJ on 9/21:  "All previous rallies of this magnitude took place in the 1930s and the 1970s...Those were periods of turbulence for both the economy and the markets, and none of the gains was sustained."  Other economic news around the world follows:

The top 20 Canadian stocks. 

Santander plans Brazil's largest IPO.

Lebanon's version of the Madoff scandal. 

Staggering country-by-country comparison of public debt.

Only China and Switzerland have rising home prices. 

London's bankers are in a buoyant mood.

(WFC) Wells Fargo's significant exposure to commercial real estate. 

Australia's largest banks are still doing well.

The world's 50 safest banks.

Will insurance regulators drop Moody's from 'acceptable ratings agency' list? 

Moody's Predictions on a Housing Recovery

When will home prices return to their 2006 peak?  Moody's thinks it has the answer, left.  For California and Florida, Moody's predicts a 2030 recovery (here), a rather dire estimate. For both Arizona and Nevada, it will be after 2023.  This will be partly due to an "over correction" on the down side.   I have seen this happen before - in Texas in the late 1980s; home prices there took a decade to recover from a local downturn.  There are a lot of variables that could completely change this scenario, like a period of sustained inflation, e.g.

More Companies Raising Dividends - 9/19

   COPT, Corporate Office Properties, from $0.3725 to $0.3925, quarterly, +5.4%

   GS.TO, Gluskin Sheff, from $C0.12 to $C0.125, quarterly,+4.2%

   KR, Kroger Co., from $0.09 to $0.095, quarterly,+5.6%

   NYM, New York Magic, Inc., from $0.04 to $0.06, quarterly, +50.0%

   STEI, Stewart Enterprises Inc., from $0.10 to $0.12, annually, +20.0%

   TXN, Texas Instruments, Inc., from $0.11 to $0.12, quarterly, +9.1%

   WPC, W. P. Carey & Co., from $0.4975 to $0.50, quarterly, +0.5%

The Ever-Shrinking Share Buyback Plan

Stock buybacks plans are a victim of the recession.  Per the New York Times: "...stock buybacks by companies in the S.& P. 500 fell to $24.2 billion in the second quarter of 2009. That was down 28 percent from the first quarter and was 72 percent below the figure for the same quarter of 2008. The amount was also the lowest for any quarter since S.& P. began tallying the figures in 1998." At the peak of the buyback boom, in the third quarter of 2007, companies in the S.& P. 500 spent $171.9 billion repurchasing shares."  One of the biggest spenders on buybacks in 2007?  AIG.  Chart, New York Times.