New home sales came in this week at an adjusted annual run rate of 621,000 homes. This is up from the February annual run rate of 587,000 new home sales. The logical next question you might ask about is pricing. While it appears the pace of higher prices has subsided, the median sales price of a new home did increase by 1.2%.
As you can see by the graph below, crude oil inventories witnessed an unexpected fall of 3.6 million barrels this week to 528.7 million barrels. Full disclosure, I'm not an energy guy, nor am I a fan of companies in this space. Frankly, the pricing in most crude products has seemed a bit wonky to me. Inventory builds and draw downs seem more random than in the past. I still do not see a huge global demand for this product. I have yet to see the real fall-out from the oil fracking bubble. So until I see credit contract and the inevitable bankruptcies, it is hard for me to be long-term constructive here. Sure, I've traded in here, but until there is a real cleansing of the debt, I find it unwise to build long-term positions.
In baseball, you get three swings at the ball to get a hit. Well, when reporting the US GDP, the BEA gets three cracks as well. This week we saw the first release of Q1 GDP. Q1 GDP came in at a +0.7% vs. an anticipated +1.1%. While one quarter isn't anything to get too worked up about, there is a narrative building in these numbers. And that narrative is perhaps the consumer is getting tapped out. Perhaps the massive contraction in retail isn't solely due to the,"hey we suck and can't deliver a decent customer experience over buying stuff on Amazon." It is possible the state of retail is a bit more ominous. From what I could tell, much of the weakness was attributed to auto sales - or should I say the lack of auto sales. One thing is for certain, expect the auto industry to do what brain-dead central bankers due...let them eat cheap credit. I'm sure the next wave of easy money for new cars is right around the corner.
That's it from me. Have a wonderful weekend and happy returns!
P. Franklin, Jr.
April 28th, 2017
All opinions and estimates included in this communication constitute the author’s judgment as of the date of this report and are subject to change without notice. This communication is for informational purposes only. It is not intended as an offer or solicitation with respect to the purchase or sale of any security. This information is subject to change at any time, based on market and other conditions. Any forward looking statements are just opinions – not a statement of fact.
Investing may involve risk including loss of principal. Investment returns, particularly over shorter time periods are highly dependent on trends in the various investment markets. Past performance does not guarantee future results.