Today's Tidbits

MISC
From Dow Jones: “U.S. Treasuries prices saw robust gains Monday morning, fueled by a tame March inflation reading and some weak regional manufacturing data. The data came after Friday’s weaker-than-expected first quarter growth data, which showed the economy expanding at its slowest pace in four years. The combined weaker growth and weaker inflation data convinced investors to increase their bets on Federal Reserve rate cuts. [Treasury yields drop 6-7bp]… The dollar was down in afternoon trading after the Euro made another attempt at a new all-time high, climbing to an intrasession high of $1.3679 but unable to hit a new record of $1.3682. Sterling, meanwhile, was back up above the [$]2.0 mark, while the dollar slipped modestly against the yen as additional disappointing U.S. data helped refuel dollar-bearishness…[U.S. stocks closed lower with the Dow down 58 and the S&P 500 down 12 points]… Crude oil futures turned lower Monday, shedding some of the gains made Friday following Saudi Arabia’s foiling of a major terror plot targeting the kingdom’s oil industry. Saudi Arabia’s arrest of 172 militants stoked fears about the security of Saudi oil supplies and sent oil prices sharply higher.”

From Merrill Lynch: “…as of 2006Q4, outstanding home mortgages stood at $9.7 trillion. At the end of 2000, it was $4.8 trillion. So consider that we tacked on more to our mortgage debt in the past six years than we did in the prior 50 years combined. Half of today's mortgage market – for a country more than two centuries old – was "built" in just the past six years….In ten years, mortgage debt per worker has doubled”

From Bloomberg: “Residential investment, as it's known in the GDP accounts, subtracted from growth for the sixth consecutive quarter, something that hasn't happened since 1980.”

From Goldman Sachs: “Rental vacancy and homeowner vacancy rates for the first quarter both rose from already high levels. The homeowner vacancy rate set a new record of 2.8% (the series goes back more than 50 years), topping the already record 2.7% of last quarter. The rental vacancy rate now ties the second highest level over the last 10 years at 10.1%. Elevated rental and homeowner vacancy rates are associated with lower shelter inflation (rent and OER components of CPI). The continued elevation of both rates indicates oversupply in the housing sector from elevated investment in housing over the last several years. This oversupply should translate into downward pressure on prices - both for rentals and for sales - over the remainder of this year.”

From Dow Jones: “Second-home sales were a mixed bag in 2006, with vacation- home sales hitting a record high, while investment property purchases dropped off sharply, according to the National Association of Realtors. Overall, second-home purchases accounted for 36% of all existing and new residential transactions, down from 40% of
sales in 2005, NAR said. An annual survey from NAR showed vacation-home sales
rose 4.7% to a record 1.07 million in 2006 from 1.02 million in 2005. But investment-home sales plummeted, down 28.9% to 1.65 million in 2006 from a record 2.32 million in 2005.”

From Bloomberg: “One year ago, capital spending was growing at a 9 percent year- over-year rate…``A year ago, people said capital spending was going to rescue us as housing slowed,''…``Capital spending is down to zero (year-on-year). There's been an unambiguous slowdown.'' In only one quarter of this entire expansion did capital spending add 1 percentage point or more to growth compared with an average contribution of 1 percentage point from the end of 1992 through the middle of 2000. The first-quarter contribution was 0.1 percentage point. ``Are businesses going to step up their pace of capital spending with the utilization rate falling and consumer demand slowing?''”

From Bloomberg: “Prices at the gasoline pump for regular-grade gasoline rose in April to $2.88 a gallon, the highest in eight months, according to the Energy Department.”

From Barclays: “…look at the May bi-weekly seasonal tendencies (beginning in 1986) of the US Ten Year Treasury Yield…The first half of the month shows a bias for yields to rise, averaging an increase of 4.6 bp and a median increase of 9.8 bp. Since 1986, yields have risen 62% of the time in the first half of the month. In contrast, the second half of the month averages a yield decline of 6.9 bp, and median fall of 8.3 bp. The second half of the month has seen yields fall 76% of the time since 1986. Yields have fallen for the past 10 years in a row (and in 12 of the past 13 years) in the latter half of May.”

From Wachovia: “Implied volatility has declined substantially in recent weeks following the spike in late February and early March. At the moment, implied volatility associated with 5-year and 10-year tenors across the expiry curve have largely returned to its pre-spike levels. Implied vol in 10-year tenors is also approaching its lows in 2007. While low realized vol has supported the drop in implied vol in recent weeks, the amount of cushion left in implied vol to weather a spike in actual volatility similar to what the market has experienced 2 months ago seems to be getting somewhat thin.”

From Merrill Lynch: “On a trade-weighted basis, the Euro has only risen 2.7% since early February (so the 5% gain against the dollar is a bit misleading) – and Germany's exports are increasingly oriented to parts of the world that are posting solid gains in domestic demand. Russia and other eastern European countries now account for about one-fifth of German's exports – up from 13% in 1999 – and outbound shipments to these regions are currently rising at a 20% annual rate.”

From Bloomberg: “Japan, China and South Korea will produce so many vessels
that shipping costs, now at an all-time high, will fall 40 percent by 2010, according to futures contracts…Commodity-shipping rates have soared 41 percent this year…”

From Merrill Lynch: “The PBOC's primary concern is excess liquidity; a secondary concern is inflation. Raising the required reserve ratio (the percentage of deposits that commercial banks need to place with the PBOC) reduces the system's liquidity, lowers the amount of funds banks have available to make new loans, and tends to boost money market interest rates.”

From Dow Jones: “Texas-area manufacturing activity grew at a modestly slower pace in April. The Federal Reserve Bank of Dallas said Monday that its April production index moved to 24.3 from 27.2 the prior month. The bank’s general activity index stood at 15.9 from 12.7 in March. Readings above zero indicate positive activity, and the higher the number, the more broad-based the gains.”

From The Houston Chronicle: “In retirement, income falls steadily. The government study figures show that income falls dramatically as people age. The median income for married couples declines from $68,612 at ages 55 to 61 to $28,490 for couples 80 and older. The decline is less severe for singles, going from $24,000 to $13,321…Social Security is very important for all but the rich. Even for those in the second-highest income quintile, Social Security was usually the largest single source of income. In 48 percent of those households, it accounted for 50 percent or more of all income.[Based on a study by the Social Security Administration, "Income of the Population 55 or Older, 2004".]
From Reuters: “Morgan Stanley former star economist Andy Xie warned of an imminent stock market crash in China…also warned that the global boom in equities would be over by 2008 and that this would coincide with a worldwide recession. The recession would start from the United States and spiral down into Asia where exporters would be hit…a combination of excess liquidity, rising inflation and rich valuations would result in a global crash soon. "People will be surprised. When the end comes, it's going to be pretty bad," Xie added.”
From The Financial Times: “Fidelity International has become the first foreign fund management group to launch a back-office operation in China, reflecting the country’s rise in pulling power as a financial outsourcing centre….could rival the group’s outsourcing operations in India, where it employs about 9,000 staff… is hoping to use the Dalian facility to service its mutual funds and pension business in Japan, where it ranks among the biggest foreign money managers. “I don’t know that this venture will be able to provide all of Fidelity’s back-office support for this region, but I do feel that it may be able to provide a high level of support due to the strong systems, operational and linguistic skills that are not all available in India or elsewhere,” …”

From MarketWatch: “Turkey's stocks and currency fell sharply Monday, as the country's political crisis deepened after the military threatened to intervene in the presidential elections to protect secular values, and the Islamist government came under pressure to call early general elections.

From CNN: “…according to the old Wall Street adage "Sell in May and go away," one who invests in stocks during the colder months and sits it out during the beach months can do quite nicely, more or less. That's because stocks gains in November through April have typically been stronger than May through October for a wide variety of reasons… With just one trading day left in April, the Dow is up 8.6 percent in the most recent "best" period, just above the historic average of 7.9 percent…Why does "sell in May" tend to work so well? May itself is not really that bad… and sometimes the traditional end of year rally can start in mid-October. It's the Memorial Day to Labor Day period that's the worst, and that tends to give the whole six months a bad name. By late May, tax refunds are over, so the flow of fresh funds into stocks ebbs…By the time fall kicks in, the psychology has switched to a back-to-school, back-to-work mentality and from a stock standpoint, to house cleaning. In addition, big mutual funds tend to dump losers in anticipation of the end of their fiscal year in October. September is the worst month of the year for the Dow, Nasdaq and S&P 500.”
From Morgan Stanley: “A much stronger-than-expected Canadian February GDP print gave CAD legs of strength…”