The National Assoc of Home Builders reported Feb 2015 HMI at 55, 2pts lower than Jan’s 57. Surprise, surprise!! No one complained that this was a disaster. Most are taking about how good they are doing in Apple with AAPL hitting new highs and how they are continuing to avoid oil related issues expecting either a 2nd dip with some still indicating that they expect $20bbl-$30bblpricing.
Apple Discussion: As of 1/31/2015 AAPL represented 3.9% of the S&P 500. APPL’s ~20% price move since 1/1/2015 represented 0.78% to the SP500 which has moved only 1.02%. (75% of SP500 since 1/1/2015 is due to AAPL.) This shows that Apple’s shares have at the moment and had most of last year an unusually large impact to the SP500. This is why using indices, even the highly respected SP500, for benchmarking is often criticized for good reason if used over too short a period. We all want to do well, but when indices are distorted by just a few single issues, we need to take this into consideration. Investing using a diversified portfolio is always part of being prudent.Oakmark’s Nygren faces off with Morgan Stanley’s Lynch on disruption
There has been much talk in recent years about disruption and trying to pick companies that will disrupt their industries. The debate continued at the Morningstar Investment Conference as Bill Nygren of Oakmark Funds faced off with Morgan Stanley's Dennis Lynch. Q2 2021 hedge fund letters, conferences and more Persistence Morningstar's Katie Reichart moderated the Read More
It is indeed a surprise that no one has complained that ‘HMI has slipped’ and that investors ‘should be worried’. One can never call when market psychology turns more positive, but this certainly feels like this is what is happening. We saw this with the last series of employment reports. I saw many positive comments about employment ‘turning the corner’ and I did not see a single negative comment. I am sure there were some, but on CNBC they were not highlighted. It was almost as if some one switched the ‘positive slant signal’ on it felt that different from a couple of weeks prior.
My own observations since early 2009 have reflected the many positive economic trends one could see in the weekly and monthly data. Today’s HMI(Housing Market Index) continues the trend first seen Fall 2011. New Single Family Starts uptrend continues and is accelerating. This is a very good sign with the leverage a single new home has on economic activity.
Such is housing’s impact that I expect a substantial improvement in US GDP the next 5yrs or so. 5yrs represents the expected remaining period of our housing cycle. If this holds, rates should rise, mortgage lending should show considerable expansion and construction employment, general employment, vehicle sales and etc should all reflect considerable improvement.