(Headlines - scroll down for full stories)
1. Despite Strong Sales, Housing Bust Isn't Over
2. Calpers Turns to China
3. Demand for Big-Ticket Items Falls
4. Newmont's Gold Sales to Fall
1. Despite Strong Sales, Housing Bust Isn't Over
Is the housing bust over? Home sales jumped 4.1 percent in August, the biggest
increase in sales since March, reports the Commerce Department.
But don't jump for joy too fast. Home prices fell to $237,000, a 1.3 percent
drop from a year earlier, the biggest year-over-year decline in over three
years. Compared to a year ago, new home sales are down 17.4 percent. Plus, July
sales were revised lower to a 7.5 percent plunge.
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"The key thing is don't make too much out of the 4.1 percent increase in home
sales in August," Patrick Fearon, senior economist at A.G. Edwards & Sons Inc.
in St. Louis, tells Reuters.
"If you take into account the downward revisions in each of the previous three
months, the story is that the housing market is still on a downward trend. The
mortgage applications data that came out today also confirm that," Fearon said.
The Mortgage Bankers Association reported today that applications for mortgages
fell in spite of a drop in interest rates to their lowest point since February.
Applications for both new mortgages and refinancings fell, 5.5 percent and 4.1
percent respectively.
Homebuilders have had to slash prices on homes and boost incentives to lure in
buyers. And that's not good news for their profit margins. Just yesterday, the
nation's third largest home seller, Lennar, lowered earnings expectations for
the upcoming quarter. Earlier in the month, KB Homes and Beazer Homes lowered
guidance on earnings.
The inventory of new homes dipped 0.4 percent from a record-high in July. That
translates into a 6.6-month supply of new homes for sale. The number of
completed new homes on the market rose to a record 148,000 in August. In
addition, inventories are still up 19 percent compared to a year ago.
The Commerce Department reports double-digit sales in all regions expect the
West. Sales rose 21.7 percent in the Northeast, 12.2 percent in the Midwest, and
11.1 percent in the South. However, sales plunged 17.7 percent in the West.
Editor's Note:
- Housing expert and Yale professor, Robert Shiller, tells Financial Intelligence
Report that housing prices nationwide could fall by as much as 40% over the next
few years. Find out how the five ways to protect yourself and profit from the
coming real estate crisis. Go here now.
2. Calpers Turns to China
The California Public Employees Retirement System (Calpers), the nation's
largest public pension fund, may begin investing in Chinese companies, reports
the Financial Times.
In an interview with the Financial Times, Calpers CIO Russell Read says that the
staff of the pension fund may recommend the China strategy to the board in the
coming months.
The reasoning behind the new recommendation is to capitalize on China's booming
economy and to raise the fund's exposure to emerging markets, Read tells the
Times. "Investing properly in the emerging markets … is fundamental to our
investment success," says Read.
Calpers would begin investing a portion of its $210 billion portfolio in China
through American Depository Receipts (ADRs) and Global Depository Receipts (GDRs),
notes Read. Companies such as state oil companies Petrochina and CNOOC and
telecommunications companies China Telecom and China Mobile are among the
Chinese companies traded on ADRs in the U.S.
Currently, China is not on Calpers' list of investable markets, which is up for
review in February. However, Read tells the Financial Times that the go ahead to
invest in ADRs and GDRs could come sooner. The next board meeting is October
16-18, according to Calpers' website.
Calpers already has real estate investments in China, but this would be the
first time it ventures into equities in the developing country.
MoneyNews readers will recall from our May 31 issue in which Read said Calpers
would focus on commodities-related companies, including alternative energy
companies.
Editor's Note:
- Protect your wealth from the baby boom crisis wave before it's tool late.
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here now.
3. Demand for Big-Ticket Items Falls
Orders for durable goods, items that are expected to last more than a year, fell
0.5 percent in August, reports the Commerce Department.
The August drop was less than the downwardly revised 2.7 percent decline in
July, but still much less than economists had expected. Economists were looking
for a gain of around 0.5 percent, according to a MarketWatch survey. It's also
the first back-to-back decline since 2003.
The decline in durable goods orders was also surprising because it was felt in
almost every category, indicating that there is a widespread drop in interest
from distributors. Economy.com says that new orders were down in every category
except fabricated metals and transportation.
Orders for transportation goods increased 3.7 percent, with motor vehicle orders
rising 4.4 percent and despite a 21.9 percent drop in civilian aircraft orders.
Orders for fabricated metals were up 2.6 percent.
Orders for core capital-goods orders fell 0.3 percent in August, the first time
in three months. According to Marketwatch, this signals a possible slowdown for
business investment in the third quarter.
"In the wake of the big drop in the Philly Fed, these data make it easy to make
the case that industry is faltering," Ian Shepherdson, chief U.S. economist for
High Frequency Economics, tells Marketwatch.
One positive aspect of the durable goods data is that shipments of goods rose
1.9 percent. That caused inventories to rise just 0.2 percent, indicating that
manufacturers are getting a better handle on their inventory levels.
Editor's Note:
- Sidestep a slumping economy. Discover how to invest in sectors the smart way.
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here now.
4. Newmont's Gold Sales to Fall
Gold miner Newmont Mining Corp. on Wednesday cut back sales expectations for
2006 and said it anticipates further declines until new projects come on line in
2008 and 2009.
The company trimmed its 2006 gold sales expectations to a range of 5.6 million
ounces to 5.8 million ounces from a previously estimated range of 5.9 million
ounces to 6.2 million ounces.
The company blamed the shortfall on the dispute over its interest in a joint
venture in Uzbekistan, lower production in Ghana due to nationwide power
shortages, and the expected sale of its Holloway mine in Canada.
Last month, An Uzbek court declared bankrupt Newmont's local joint venture,
likely ending the U.S. company's gold operations in Uzbekistan. Newmont has
accused Uzbek authorities of trying to seize its part of the venture and said it
plans to challenge the Uzbek government's action through international
arbitration.
For 2007, the company expects gold sales of between 5.2 million ounces and 5.6
million ounces, again as the result of the joint venture issue and lower
production from its Yanacocha operations in Peru. Costs related to sales next
year are also expected to increase 20 percent to 25 percent, the company said,
mostly from higher costs at Yanacocha.
Newmont Mining said it doesn't expect an increase in gold sales until its
operations in Nevada, Ghana and Australia reach full production in 2008 and
2009.
The company also said that an anticipated gain of $295 million in the third
quarter related to the sale of an oil property in Canada and the divestiture of
a project in Indonesia would be partially offset by the $94 million in costs
related to the Uzbekistan venture.
Shares of Newmont Mining fell 25 cents to $43.76 in pre-market trading on INet,
having closed Tuesday at $44.01 on the New York Stock Exchange.
Editor's Note:
- Hedge Fund Investing's gold recommendations have pocketed gains of up to 78%.
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Editor's Notes:
- Housing expert and Yale professor, Robert Shiller, tells Financial
Intelligence Report that housing prices nationwide could fall by as much as 40%
over the next few years. Find out how the five ways to protect yourself and
profit from the coming real estate crisis.
Go here now.
- Protect your wealth from the baby boom crisis wave before it's tool late.
Go
here now.
- Sidestep a slumping economy. Discover how to invest in sectors the smart way.
Go here now.
- Hedge Fund Investing's gold recommendations have pocketed gains of up to 78%.
Go here now.
- The nation's drinking water contains more than 2,100 toxic chemicals that can
cause cancer, yet the EPA has established enforceable safety standards for only
87. Protect your health now.
