DAILY INTELLIGENCE BRIEFING REPORT
Daily Intelligence Briefing - April 25, 2017
Featured Topic: US HOUSING
MRP's longest-running theme, LONG US HOUSING, has been performing spectacularly, and the latest data on the U.S. housing market indicates why. Previously-owned homes are selling at the fastest pace in a decade; Sales of new homes are also accelerating, and soared to an 8-month high; Home price growth is the fastest in nearly 3 years, with prices reaching all-time highs in some U.S. cities. This is all occuring despite higher mortgage rates and price bidding wars.
So what's causing this boom? We believe part of it is driven by demand from millennials, who are entering the market for the first time. They are now the largest age cohort in the labor force, so their share of housing sales will only increase over time. Another source is baby boomers who are forming new households. Then, there's pent-up demand from population growth and replacements. Increased interest from international buyers is also a factor.
BOTTOM LINE: U.S. Housing remains one of our top themes, and we are re-affirming our recommendation to be long the sector. Here's what Joe Mac wrote in his housing report titled New Pig in the Python:
"Several specific industries will benefit from rising home prices, increased existing home transactions, and new home construction. The major beneficiaries are homebuilders. With the construction of new homes, it logically follows that they will need to be furnished, while existing homes will be modified and improved. The Dow Jones U.S. Select Home Construction Index contains a diverse basket of securities that effectively captures an acceleration in home building. The S&P Homebuilders Select Industry Index contains securities that take advantage of the housing retail sector that includes home improvement products and retailers. There are ETFs for both indices. Furthermore, with increasing new and existing home sales, it would follow that there would be an increase in the volume of title insurance applications and real estate broker commissions – boosting revenues for both."
MEANWHILE, here are some recent headlines on the U.S. housing market: (these articles are summarized in the REAL ESTATE section)
- Homes are flying off fast this spring in the 'strongest seller's market ever'
- Sales of Existing U.S. Homes Rise to Fastest Pace in a Decade
- New-home sales roar to an 8-month high as spring selling season starts with a bang
- US home prices climb at fastest pace in nearly 3 years
- Cheaper Mortgages Could Spur Housing Market
- One reason for Dallas’ soaring home prices and labor shortage: Immigrants aren’t coming to work
- Fannie-Freddie Plan Would Create Utilities, Add Competitors
On November 8, 2016, MRP added LONG COFFEE to our roster of active themes. Our rationale at the time was that global demand for coffee was rising at a time when supply was tightening due to bad weather and production disruptions in the top exporting countries. We believed that would create a supply / demand imbalance leading to a shortage of the commodity. We also considered the fact that the (Bloomberg?) coffee index was almost 90% down from its 1997 high and therefore had plenty of room to rise, if the shortage we expected were to unfold.
As it turns out, the supply disruptions ended and the shortage has not materialized. In fact, an article featured in our Friday’s DIBs reported that, the International Coffee Organisation (ICO) is predicting low prices in the near future for both the global Robusta and Arabica crop. The article further noted that, growers such as Uganda, Indonesia, Honduras, India and Peru, who contribute almost a quarter of global exports, significantly increased their shipments in the first months of coffee year 2016/17 and this pushed prices down.
Given the changed supply outlook, we are closing our recommendation to be LONG COFFEE.
- FX - The U.K.’s largest bank says French vote is a ‘game changer’ for the euro MW
- US Stocks - After 17 years, S&P 500 tech sector finally regains lost ground MW
- China Stocks & Bonds - Banks Are Backing Out of $1.7 Trillion in Chinese Investments B
- Gold Mining Stocks - How a $1.4 Billion ETF Gold Rush Rattled Mining Stocks Around the World WSJ
- Bitcoin - Russia to legalize bitcoins and other cryptocurrencies in 2018 RBTH
- Economics and Trade:
- Politics and Policy:
- Real Estate:
- EVs - The Electric Car Revolution Tesla Began Faces Its Biggest Test B
- Energy & Environment:
- Real Estate Tech Deals Tick Up, But Still Well Below Peak … Funding, however, is on track to reach record levels. CBI
- Long Aerospace and Defense
- Long Homebuilders
- Long Gold
- Long Value over Growth
- Long U.S. Energy
- Long Oil Services and Equipment
- Long CAPEX
- Long Steel
- Long Emerging Markets
- Short Long-Dates Treasuries & Long Treasury Inflation Protected Securities (TIPS)
- Long Financials
- Long Regional Banks
- Long Cybersecurity
- Long Gaming
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|POLITICS & FISCAL POLICY|
|ENERGY & ENVIRONMENT|