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Daily Market Commentary

The NAHB housing index hit an ALL TIME LOW yesterday (chart in Daily FI Snapshot).  This index surveys home builders in the US regarding present sales, 6 month sales expectations and traffic of prospective buyers.  It is a 1-100 index (north of 50 meaning good times) that currently stands at a lowly 18.  From a contrary perspective, this is actually good in the very long term.  It will take home builders capitulating and cancelling plans for further developments to actually get the US homes inventories back to a level where house prices can stabilize and increase again.  Currently, inventories are running in the 8-9 month range.  With that kind of overhang, there is no chance of price appreciation in the near term.  Once again... this housing pain in the US is not over, but for the first time in a long time, we can see a pinprick of light at the end of the tunnel.  Unfortunately, the turnover of homes runs very slowly and we still see foreclosure rates rising no matter where interest rates go from here.  Easy credit has disappeared quickly, and those who used to be able to get financing now will not be able to for any amount of money.  With lenders feeling the pinch, you can bet the NINJA (No Income, No Job, No Assets) mortgage is long gone.


  Further to that, US housing starts and building permits were weaker than expected.  Much weaker.  The near term pain continues and will continue to add to dis-inflation for the foreseeable future. 


  Speaking of Inflation, CPI out in the US this morning, came in line with expectations.  Year on year headline @ 2.8% and core @ 2.1% - most of the core number coming from the services sector.  The market reaction has been some mild buying of Treasuries and Canada bonds, I'd suspect mostly from the continually weak housing numbers rather than the inflation numbers, which were right in line with expectations.


  Stay tuned tomorrow for US Leading indicators, and of course with lots of Dow component earnings out today, the equity markets will be important to watch


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