Existing home sales rose 7.2% to a 5.24 million annual rate in July, the most since August 2007 and the fourth straight month the figure increased, the National Association of Realtors (NAR) said Friday. Year-over-year sales grew 5%, the increase since September 2007, just before the markets came crashing down the following month.

“The housing market has decisively turned for the better,” said NAR chief economist Lawrence Yun. “A combination of first-time buyers taking advantage of the housing stimulus tax credit and greatly improved affordability conditions are contributing to higher sales.”

Rising sales numbers in the past few months may have triggered previously discouraged sellers to re-list their homes, according to Yun.

Total housing inventory at the end of July grew 7.3% to 4.09 million existing homes available for sale, representing a 9.4-month supply at the current sales pace. However, the raw inventory totals are 10.6% lower than they were last year.

Sellers are responding to rising inventories accordingly: The national median existing home price was $178,400 in July, 15.1% lower than a year ago. But the fact that buyers are dipping their toes back into the murky depths of the housing market doesn’t necessarily mean the sector is trending toward a full-blown recovery.

Turn of the Year Makes for Uncertain Future

One in three homes sales last month came from first-time buyers who benefited from the Obama administration’s $8,000 tax credit, which ends after November. First-timers accounted for almost the same amount in June with 29%. That means there could be a significant drop in purchases when that program expires.

The real estate industry is lobbying Congress to extend the first-time buyer tax credit, and Nevada Democratic Senate Majority Leader Harry Reid told reporters earlier this month an extension is “something we can get done.”

With or without a tax break, consumers in this economy are looking for a bargain much like they are with retail sales and auto sales. The bulk of the first-time tax credit sales have come from lower-priced homes, and NAR data supports that. Sales of homes that cost less than $250,000 were up almost 17.8% year-over-year through June. Meanwhile, sales decreased 13.3% in the $250,000-$500,000 bracket, 18.6% in the $500,000-$1 million range, and 32.7% in the $1 million – $4 million range.

Lost pricing power in the more expensive homes wasn’t lost on Pulte Homes Inc. (NYSE: PHM), which last Tuesday finished its acquisition of value-priced homebuilder Centex Corp.(NYSE: CTX), making Pulte the largest homebuilder in the United States.

“I’m not seeing a tremendous amount of good news on the job or economic front, so I do think it’s important that the [tax] credit get extended,” Pulte Chief Executive Officer Richard Dugas told The Associated Press.

The turn of the year isn’t likely to yield much good news on the job front. Most economists are expecting the unemployment rate to top out around 10%, and although July’s rate dipped one-tenth of a percentage point, the latest weekly initial unemployment insurance claims were discouraging, rising 15,000 to 576,000 for the week ended August 15.

“The improvement in the labor market has stalled,” Scotia Capital Inc. economist Derek Holt told Bloomberg News following the latest jobless claim figures. “Consumer spending will be pushed back on its heels for a longer time than markets are expecting.”

When the bleeding of jobs does peak, an upturn in employment could take some time as the United States experiences a jobless recovery. With an unemployment rate at or around 10%, home inventory levels could creep back in to 2008 territory.

“[The unemployment rate projection] indicates that the level of labor market slack would be higher by the end of 2009 than experienced at any other time in the post-World War II period, implying a longer and slower recovery path for the unemployment rate,” Fed economists wrote.  “This suggests that, more than in previous recessions, when the economy rebounds, employers will tap into their existing work forces rather than hire new workers. This could substantially slow the recovery of the outflow rate and put upward pressure on future unemployment rates.”

Source: Home Sales Will Struggle to Rebound Without Tax Credit Extension

Let’s make some trades this morning. We asked Rick Rule, a living legend here in Vancouver, what’s the next bubble market?
“The Canadian market does not care about small oil and gas companies,” he told us yesterday. “Which means that small Canadian O&G companies are selling for 50-60% of net asset value. They are very, very, very cheap. They are unloved, with no finance options and no trading liquidity… and I love that. This value is free. There will be much money made in small-cap Canadian energy.

“But that will pale in comparison to alternative energy. This is what investors need to pay attention to. There is money to be made in solar, wind, even something as stupid as biofuels. Alt energy is now politically and socially correct. It has the full backing of the U.S. government.

“I would encourage you to look at small hydro and geothermal. The others have problems. Solar has one big problem — night. Wind doesn’t always blow either, and people don’t like to live places where the wind blows all the time. You might make money in solar and wind, because government likes it, but I don’t have the courage to buy a biz that’s success is determined by the Governator.

“Geothermal is always there. It is spectacular. So is hydro. In the short, medium and long term, you will all turn out to be happy. They are the uranium of this generation. I think we are on the verge of an incredible mania in alt energy.”

Which specific geo and hydro businesses? Rick has named company after company after company to our attendees at this year’s Investment Symposium. We’ve recorded nearly every second of his presentations and recommendations… you can hear them too with the Symposium CD/MP3 set.
“The world’s biggest energy player has thrown $600 million into a research partnership to study algae oil’s potential,” reports Greg Guenthner in a similar vein. Not coincidentally, we’ve heard several Symposium speakers mention this exact transaction. “Exxon Mobil and human genome researcher Craig Venter have teamed up in an attempt to make algae oil a viable fuel source.

“‘There has been so much hype and hope about the potential for algae that this announcement should act as a reality check for everyone,’ Venter told the Financial Times.

“Of course, this new partnership does not mean we will be filling our tanks with pond scum biodiesel just yet. Developers will still need to tackle genetic engineering and oil extraction issues…

”But Exxon Mobil’s leap into the algae oil market effectively legitimizes the industry.”

Want Greg’s microcap algae play? Check it out here, along with the rest of his Bulletin Board Elite portfolio.
Of course, alt energy is dead to Wall Street (all the more reason to buy). For the last two weeks, surprise blue chip earnings anouncements have led the market up, and today is no exception. Better-than-expected earnings from AT&T and 3M are in the spotlight today, and the S&P is up 2% as we write.
Hell, even The New York Times is making money again.The Old Gray Lady earned almost $40 million in the second quarter, the paper reported this morning. The NYT pulled it off by jettisoning staff and cutting opperating costs by 20%… and there was this little “favorable tax adjustment” that boosted earnings by $37 million.
Exisiting home sales rose for the third straight month in June, the National Association of Realtors says today, adding to the buying frenzy. Sales of previously owned homes inched up 3.6%.

“We have finally bottomed out,” PNC’s chief economist told Bloomberg. Heh, we’ve got a fine bridge to sell that fellow…

Best we can tell, the market-clearing process is still chugging along. Of all the sales in June, 31% were distressed. Prices are still plunging — the median price is down 15% from the same time last year, to $181,000. There is a still a historically high 9.4-month supply of exisiting homes on the market. Is that what a bottom looks like to you?
Not to mention, the job market still stinks. This morning, the government said there were 554,000 initial jobless claims last week. That’s off crisis highs of over 600,000, but obviously not by much. Continuing claims rang in around 6.2 million.
“Chicken sales will probably lead unemployment numbers as an economic indicator out of the recession,”writes our resource man Alan Knuckman, just back from annual National Chicken Council conference (sounds like a real hoot!). “Chicken growth has slowed with the toughening economic conditions, but still is three times that of beef. Restaurants and home consumers have seen a shift in protein demand and replacement with chicken or other chicken parts.

“These guys do volume because people love chicken to the tune of over 700 million pounds a week, with per capita consumption now at 86 pounds per year. In fact, consumption has quadrupled in the last 40 years and doubled in the last 20. BSBM — boneless, skinless breast meat — has paved the way for growth, but now dark meat is making a move as consumers cut food costs.

“Now, all this chicken talk is fun and interesting, but how does this make us money? BRIC consumers (Brazil, Russia, India and China) all have expanding middle-class populations that are now in the position to buy better food. Not fancy cars or electronics, but simply better protein to feed themselves and their families.

“Here in the United States, there is a 0.95 correlation between chicken consumption and income and personal consumption expenditures. More money to spend means more chicken bought. As others have their incomes rise worldwide, those citizens can add more meat to their diets.

“This growth will put tremendous upside pressure on the base inputs: commodities, which are used to feed, process and transport the protein of chicken, beef, pork and even farmed fish. Protein is what’s for dinner, and the U.S. is serving the rest of the world.

“The income growth in underdeveloped countries will continue to put our farmers in the leadership position to deliver. Plus, all along the way, we’ll be ready to profit here at Resource Trader Alert.”

If you want to trade this trend, you’ve got to check out Alan’s latest report on his “no-brainier” trading strategy.
The 2011 state budget crisis has already begun. You likely read the headlines last week, that state governments around the country were able to close $142 billion worth of budget gaps for the 2010 fiscal year. Well, according to the latest from the Center for Budget Policy and Priorites, 12 states and D.C. are already facing new budget gaps totalling $23 billion.
That’s not great for the ol’ U.S. dollar, nor is today’s stock rally. The dollar index is down to a fresh six-week low of 78.5.
What would be the best way to get money and yourself out of the country if there is a sudden collapse in the U.S. dollar? That question was posed last night to our Whiskey Bar panel — one of the highlights of the Symposium thus far. We managed to round up our most opinionated, venom-spitting editors for a panel discussion — Doug Casey, Chris Mayer, Eric Fry, Byron King, James Howard Kunstler, Gary Gibson, Patrick Cox and Barry Ritholtz. There’s no way to paraphrase a group like that, so here’s a snippet:

Casey: “It is still possible to send all the money you want out of the country… very possible to buy real estate. I bet in two years, it will be a problem to do both. I think the fuse is getting really short. Once you send it out of the country, buy something like real estate. My two favorites are Argentina and Thailand. I think Argentina is about to change radically, like New Zealand in the ’80s.”

King: “You need to start wrapping your brain around this. When I was in South Africa, I was told by this old Dutchman — and now I really don’t mean to offend anyone, this is just what he said — when the Jews leave, it’s time to leave. When the Portuguese leave, it’s too late.”

Ritholtz: “Keep your boat fully fueled and get ready to sail… pretty safe out there. I don’t think it’ll be an ongoing firestorm. You’ll just need a place to lay out for a week while the worst of it passes.”

Kunstler: “It’s important for those in business leadership to start thinking about defending your country and doing things that make this culture better. We have no time to be crybabies. Just too much to do to get this country back together again.” (Spontaneous applause.)

Gibson: “I’m looking to get work on Bill Bonner’s ranch.”

The event likely peaked when Doug Casey called everyone in the room “whipped dogs that roll over and wet themselves” whenever they’re scolded. Evidently, he was upset there was no gunpowder or tobacco allowed at an event sponsored by Whiskey & Gunpowder. Heh. For more from Doug, be sure to check out his presentation in the Symposium CD/MP3 set.
With that in mind, one last note — a genuine tragedy: The Brits are taxing one of their few national treasures into extinction:

As if the legnedary British watering hole didn’t have enough head winds — smoking ban, the recession, etc. — the Economist reports that recent tax hikes on booze are causing over 50 pubs to close every week. Taxes on a pint were around 8 pence 30 years ago… they are 38 pence today. Maybe it’s just the reminants of last night’s Whiskey Bar still in our bloodstream, but what a shame!
“Your reader who was looking at Florida real estate hit the nail on the head,” writes another reader. “My wife and I also went last year to Florida to look at ‘super’ deals and foreclosures and short sales. We concentrated in the Palm Coast area and learned that most banks had stopped foreclosing and were doing all things possible to help short sellers (except take less than what was owed by any great degree). The banks realized that if they foreclosed, THEY would now have to pay the taxes, upkeep, etc. on the properties, and, even in the case of condos, maintenance fees or dues!

“Most of the properties we looked at were in the $300,000-600,000 price range, and, as a result, had taxes of $6,000-7,000 and maintenance fees of nearly equal cost! Ouch! We too have decided to rent — unless you live there at least six months out of the year, it doesn’t pay to ‘own,’ and even then it may not.”

Source:  The Next Bubble, The Chicken Indicator, Surviving the Worst Case Scenario and More!

Initial construction of new homes in the U.S. fell to the lowest level on record last month, the Commerce Department announced early today. Housing starts in April fell 12.8%, to an annual rate of 458,000, the worst since at least 1959, when the government started keeping track. Applications for building permits fell to a record low as well.

Here’s what we don’t get: The market hates this. Futures were aiming for another day in the black early this morning, and then reversed seconds after the numbers were announced.

But we see the housing starts number as an encouraging development. In the worst housing crisis of our lifetimes – with a 9.8-month supply of existing homes on the market and a record 342,000 homes in foreclosure in April alone – who in their right mind is starting construction on a new house?

If the biggest hurdles in ending the housing crisis are price discovery and clearing supply, and if true recovery is a curtailment of home price expectations and a return to living within our means… why are record low housing starts a bad thing?

At this stage, isn’t the best possible housing start number… 0?

Source: Encouraged by Plummeting Housing Starts

And closer to home, toxic drywall has become the scourge of South Florida.

It’s particularly bad in St. Lucie County. They’re now saying thousands of homes could possibly be contaminated…that the nearly-toxic levels of sulfur might have seeped into the foundation, meaning the homes will need to be demolished.

And the rest of the U.S. housing market is just as shocking. The free-fall in home prices is still accelerating. 20% of American homeowners are underwater on their mortgages…some 11% (and maybe more) of all the homes in America are unoccupied and unsold…

But most Americans still don’t recognize the biggest mistake they made during the boom…

And That’s Confusing Real Estate Speculation With Real Estate Investment

It didn’t even occur to me until just a few weeks ago.

I was watching a presentation from Frank Trotter of EverBank, and it gave me a renewed bearishness for housing. As one of America’s few responsible bankers, Frank has an intimate knowledge of the U.S. housing market…and since his bank isn’t holding a boatload of “toxic assets,” he tells it like it is.

He insisted that houses are not investments; they’re utilities. Buying a house for US$150,000 in 1975….then selling it for ~US$850,000 in 2005…sounds great, but after inflation, you only made about 1.5% a year.

That’s a nice little gain, but not on an investment. The house required upkeep…the lawn had to be mowed…you can look at the 1.5% as a return on your time.

And yet, as Frank answered questions following his presentation, the audience asked questions about when…and where…they should be buying houses. “Is it a good time to buy in Austin?” they asked…

And I realized that we’ve all been fooled. Hoodwinked you might say.

You see, the bubble saw prices rising like a rocket ship; and anyone with a piece of the action stood to make a ton of money. Even I watched the shows on TLC – saw a few nervous, amateurish homeowners flip a house and clear US$100,000 – and I was fascinated. “If they could do it…” we all thought.

But that was during the bubble. And as prices fall across the board, so do the profits to be had from speculation. And just because houses might start to seem cheap doesn’t mean the market’s in for the same kind of rising prices we saw in recent years. In other words; speculation is dying a pretty quick death in U.S. housing markets.

And indeed, most bubble-based “investment” really turned out to be speculation. These deals exposed “investors” to a heap of leverage…and as the old saying goes… “Leverage makes poor men rich, and rich men poor.”

But at the same time, falling prices are making true Real Estate investment more and more attractive, as houses and apartments reach crucial rent ratios and rates hit all-time lows.

So what is true Real Estate investing?

It’s All About Cash Flow!

And in some ways it’s easier…and far safer…than any form of Real Estate speculation.

Our Executive Editor – Justin Ford – has been investing in Real Estate for years. He’s taught courses and seminars on the subject…made a bundle off of cash-flowing properties…organized deals for other investors…and he knows firsthand the profit potential of true real estate investment.

And unlike most people, Justin still sees mortgages as a great way to build your wealth with relative safety. In a recent conversation with some of the younger members of our staff, Justin laid out a scenario where Real Estate investment could make them a fortune by the time they reach their 50’s…

“Go out and buy some houses selling for ultra cheap prices,” Justin says. “Buy at 4 to 5 times annual rent. You’ll be able to pay management, all expenses and debt service, allow for 10% vacancy and put a few dollars in your pocket every month. But make sure you get a fixed rate. Because the mortgage will then “kill off” the balance through amortization.”

“So buy a house today for $50k that was worth $125k at the peak”

“Have it professionally managed. 30 years from now, the mortgage will be zero. If you throw the extra cash flow at the principal, you’ll probably pay it off in 20 years or a little less. You’ll own the $50k house, free and clear.”

“And if it goes up just 1% or 2% a year on average (and it could go up a LOT more than that thanks to inflation) your $80k or $100k is yours free and clear. And you put in just $15k to buy it. (That’s $10k down payment and $5k closing costs and reserves.)”

“So you turn $15k into $50k, plus get net income in a scenario where there is ZERO appreciation for decades. Highly unlikely…given the major correction is probably more than halfway over (some homes, after all are selling for less than replacement cost, even if you got the land for Free!)”

“Add to that all the money pumping out of DC,” Justin concludes, “…and the prospect for inflation, including housing inflation, in the next five years or sooner is strong.”

We’ll be going into more detail on Real Estate investing in future A-Letters. But one thing is certainly clear; with the stock market still up for grabs and many other investments still suffering, true Real Estate investment could be one of the best profit opportunities at these levels…one that pays a steady cash-flow and gives you a real, tangible investment for your money. It’s at least worth considering.

Matthew Collins

Source: The Biggest Mistake We Made During the Housing Boom

Of course, we’ve been here before. Or as Yogi Berra liked to say, “It’s like déjà vu all over again.”

Recall, back in November of 2008 the markets began an impressive run-up, hitting the 20% milestone, too. Then all hell broke loose.

As a result, not every market observer, myself included, is completely convinced by the recent move. But I will say this – seven notable differences exist between then and now, leading me to believe this very well could be the start of a new bull market.

• There’s hope for housing.

On Tuesday CNBC did a feature story on home sales in foreclosure central – California. In one suburb outside Stockton, where one out of every 67 homeowners received a foreclosure notice last month, new home inventories miraculously plummeted from 130 to just 17. One builder went from four sales in five months to nine sales in one month. Tax incentives definitely played a rule. Nevertheless, the trend jives with the latest overall market data.

Recall, new homes sales jumped an unexpected 4.7% in February. It also lends credence to newsletter guru Dennis Gartman’s latest prognostication that “we’re going to have a shortage of housing in the not too distant future.”

Another positive – lumber prices, a leading indicator for the housing market, rebounded roughly 30% in the last three weeks. (The housing market accounts for two thirds of lumber consumption.) Add it all up, and this data is hardly overwhelming. But it’s certainly less bad (see # 3 below to understand why).

• Takeover rumors are moving stocks again.

In a clear sign of optimism and normalcy, takeover rumors are once again returning to the market. And, more importantly, they’re moving stocks and spurning heavy call options buying. For proof, look at the recent moves in Black & Decker (NYSE: BDK), Textron (NYSE: TXT), Allergan (NYSE: AGN) and Illumina (Nasdaq: ILMN), to name a few.

• From bad to less bad.

Home sales. Durable goods orders. The ISM Manufacturing Index. These are just a handful of the economic data points that have gone from bad to less bad in recent weeks. At the same time, financial companies are beginning to wean themselves off of their government handout dependency.

Five banks announced they returned money given to them under the TARP program. And the TED Spread – a key indicator of perceived credit risk in the economy – is back below 100 basis points (bps) after peaking last October at 464 bps. (Keep in mind, the historical average TED spread is 30 basis points, so there’s still a ways to go.)

• No halitosis.

The November rally that faltered was led by defensive stocks and lacked breadth. In other words, a large portion of the market did not come along for the ride. However, this go-round we’re witnessing widespread strength, particularly in financials, commodity related companies and semiconductors, suggesting the move is sustainable.

• Volatility is dropping.

Right about the time we accepted one-hour 400 point swings as normal, their prevalence dropped off considerably. Look no further than the CBOE Volatility Index (VIX). After peaking at 89.53 last October, it’s back down to more reasonable level around 40. More simply put, the expected market vulatility has been cut in half.

• The market’s always out front.

Countless studies prove the market is the best leading indicator, rallying three to seven months before the economy bottoms. That doesn’t mean we’re immune to head fakes. The classic example comes from the last “severe” recession from 1973 to 1975, when stocks rallied in early 1974, only to stumble again.

But talk about history repeating itself. We experienced the same false rally late last year.

Just like in 1975, when the Dow rallied 36.2% in the three months before the recession finally ended, the recent market move could be the real deal, too.

• Bears out proselytizing bullishness.

In a clear sign of a market bottom, the most bearish investors in recent times found, well, bullishness. This includes Jeremy Grantham, who hated stocks for the past decade; Bill Fleckenstein, who shut down his 13-year-uld bearish fund to go long stocks; Steve Leuthuld, whose Grizzly Short Fund rose 74% in 2008; and Whitney Tilson, another one of the most bearish fund managers in recent years.

Don’t be quick to discard their change of heart and bullish comments as mere bloviations. These guys are the real deal, having predicted the downturn well in advance… and profited from it handsomely.

If this bull market is legit, I’ve already tuld you which small cap companies will perform best here and here.

Turns out they’re already leading the charge, outpacing large caps by a full six percentage points since the March 9 lows, based on the Russell indices.

If you haven’t positioned your portfulio accordingly, take heed. This could be your last chance.

Source: Wall Street’s New Bull Market: 7 Signs the Bear is Dead…

Geithner painted the picture of the latest U.S. recovery attempt in broad strokes, outlining the “key elements” of his proposal:

• Promoting greater transparency and stricter oversight of both established and new financial stability programs.
• Providing capital to institutions in desperate need of a cash infusion.
• Committing up to $1 trillion to support consumer and business lending.
• Addressing the housing crisis and reducing foreclosures.

Geithner was critical of the previous administration’s handling of the crisis, saying previous attempts to support the economy were “not comprehensive or quick enough,” and that “the spectacle of huge amounts of taxpayer assistance provided to the same institutions that helped caused the crisis added to public distrust.”

Hoping to rectify this, the first step of Geithner’s plan calls for stricter oversight of taxpayer funds.

“The American people will be able to see where their tax dollars are going and the return on their government’s investment,” the Treasury Secretary said. “They will be able to see whether the conditions placed on banks are being met and enforced. They will be able to see whether boards of directors are being responsible with the taxpayer dollars and how they are compensating their executives. And they will be able to see how these actions are affecting the overall flow of lending and the cost of borrowing.”

This information will be made available on a new Web site: FinancialStability.gov.

As far as addressing the crux of the current financial crisis, Geithner described three new programs aimed at strengthening the nation’s banks and jumpstart lending.

First, banks that seek financial assistance will undergo a “carefully designed comprehensive stress test” that will determine which institutions are most in need of capital. Those institutions will then be given access to funds from the Treasury, but only if they agree to specific terms named by the government.

In crafting his plan, Geithner reportedly rebuffed calls from some of President Obama’s top advisors to implement more austere restrictions of executive compensation and dictate to banks how to spend the rescue money.

Geithner instead opted for economic incentives to encourage lending, arguing that stark, interventionist measures would be more expensive in the long-run and ultimately undermine the government’s credibility, The New York Times reported.

Geithner also announced the creation of a Public-Private Investment Fund, which will buy up many of the toxic assets that have bogged down banks’ balance sheets. This fund, which has also been referred to as a “bad bank,” will be jointly managed by the Treasury and the U.S. Federal Reserve and bolstered by financing from private investors.

“By providing the financing the private markets cannot now provide, this will help start a market for the real estate related assets that are at the center of this crisis,” Geithner said. “Our objective is to use private capital and private asset managers to help provide a market mechanism for valuing the assets.”

The fund is expected to spend about $500 billion initially, and could easily expand beyond that.

The third and final measure intended to revitalize credit markets involves a vast expansion of the Federal Reserve program for consumer and business loans.

“Working jointly with the Federal Reserve, we are prepared to commit up to $1 trillion to support a Consumer and Business Lending Initiative,” Geithner said. “This initiative will kickstart the secondary lending markets, to bring down borrowing costs, and to help get credit flowing again.”

In the U.S. financial system, 40% of consumer lending has historically been available because people buy loans, according to Geithner.

In addition to these measures, the Fed and the Treasury will commit $50 billion to reduce mortgage payments for homeowners facing foreclosure. A legislative proposal giving bankruptcy judges more authority to modify mortgages on terms more favorable to borrowers will also be renewed.

“As house prices fall, demand for housing will increase, and conditions will ultimately find a new balance,” Geithner said. “But now, we risk an intensifying spiral in which lenders foreclose, pushing house prices lower and reducing the value of household savings, and making it harder for all families to refinance.”

“The President has asked his economic team to come together with a comprehensive plan to address the housing crisis,” the Treasury Secretary added. “We will announce the details of this plan in the next few weeks.”

Source:  Geithner Unveils TARP Overhaul

• Best Buy Co. (BBY) crowned chief operating officer Brian Dunn as the electronics retailer’s new chief executive. Dunn, 48, started his career at Best Buy as a store associate in 1985 and will succeed retiring Bradbury Anderson, MarketWatch reported.

• IBM Corp. (IBM) will beat analysts’ estimates for its 2008 earnings. The company said yesterday (Wednesday) that its income will rise to at least $9.20 a share in 2009, ahead of the $8.75 average estimated by Bloomberg. “They’re using the current climate as an opportunity to cut costs. This is a pre-emptive strategy for improving profitability,” Gartner Inc. analyst Carl Claunch told Bloomberg.

• As global demand for commodities continues to fall, BHP Billiton Ltd. (ADR: BHP) is slashing 6,000 jobs and could face a $1.7 billion charge for closing a nickel mine in Australia. “It’s a sign that we are in for a pretty sustained downturn,” Ken West, a partner at Perennial Investment Partners Ltd., told Bloomberg. “They are trying to realign their cost base.”

• After a 77-year run, General Motors Inc. (GM) officially lost the crown as world’s largest automaker to Toyota Motor Corp. (ADR:TM), Reuters reported. Global vehicle sales for GM dropped 11% in 2008 to 8.35 million. Toyota’s global sales slipped 4% and to 8.87 million units.

• Investors pulled a record $155 billion out of hedge funds last year, according to Chicago-based tracking firm Hedge Fund Research. Hedge funds around the world now manage an estimated $1.4 trillion, the same sum they managed in 2006 and significantly less than the $1.93 trillion they controlled in the middle of 2008, The Associated Press reported.

• The National Association of Home Builders/Wells Fargo housing market index dropped one point to a record-low of 8 this month after stagnating at a reading of 9 for the previous two months. The index has been below 50 since May 2006 and below 20 since April. A reading higher than 50 indicates positive sentiment about the market.

• Satyam Computer Services (ADR: SAY) is seeking emergency funding and will hire an investment bank today (Thursday) to help the company explore its options. Goldman Sachs Group Inc. (GS) and JP Morgan Chase & Co. (JPM) are reportedly on the company’s shortlist.

• Oil prices edged up yesterday (Wednesday) as the market rebounded from Tuesday’s decline. Light, sweet crude for March delivery rose $2.23, or 6.11% to settle at $38.74 a barrel on the New York Stock Exchange.

Source:  Global Investment News Briefs Thursday, January 22nd, 2009

According to the S&P/Case-Shiller index, home prices in Phoenix, Las Vegas and San Francisco sunk the most – giving back 32.7%, 31.7% and 31.0% of their value in a year’s span, respectively.

The ocean-side metros of Miami, Los Angeles and San Diego followed, with respective declines of 29.0%, 27.9% and 26.7%.

Atlanta, Seattle and Portland entered what Case-Shiller called “the double-digit club,” with annual rates of decline of 10.5%, 10.2% and 10.1%, respectively.

The three best performing housing markets – meaning the ones that lost the least value – are Dallas (-3.0%), Charlotte (-4.4%) and Denver (-5.2%).

On a monthly basis, Detroit was hit the hardest, with home prices falling 4.5% from September to October of this year. That’s a dramatic leap from the 2.5% decline from August to September.

“The bear market continues; home prices are back to their March, 2004 levels.” David M. Blitzer, Chairman of the Index Committee at Standard & Poor’s, said in a news release.

Recent statistics from the National Association of Realtors suggest similar pain. Single-family home sales fell 8.0%, the slowest sales growth since July 1997, NAR reported last week.

And the national medium home price fell 13.2% from last year to $181,300, the largest drop since the NAR started tracking statistics, and likely the largest decline since the Great Depression, said Lawrence Yun, the trade group’s chief economist.

“Falling home prices would lead to faster contraction in consumer spending and further deterioration in bank balance sheets,” Yun said in a news release. “More importantly, falling home values would lead to higher loan defaults, including those recently modified distressed mortgages.”

Source: U.S. Home Prices Post Record 18% Annual Drop in October

OK, front and center this morning… The Housing data from yesterday. Since the media decided to sweep this under the rug, I thought I would make certain that at least Pfennig Readers were aware of the rot on the Housing vine. The index of Pending Home resales fell -4.7% in April, a much larger decline than the “experts” forecast. I think what you’re seeing here is simply that would be buyers are holding off as they expect further declines in prices…

There’s something that’s been on my mind for a month now, and I just remembered what it was! Recall when the Existing Home Sales data was strong a month ago, and I said that it must have been the fall in home prices to spur that kind of result? Well… As I thought more about it, I decided to look into a thought I had… The thought was a question… Are foreclosures included in Existing Home Sales data? And, lo and behold, the answer is yes! As long as someone was living in the house when it was foreclosed, which would put the percentage very high, wouldn’t you think? Anyway… There you have it! A price drop, and foreclosures spurred that strong Existing Home Sales report… I knew there was something rotten in Denmark when that data printed!

Source:  Fighting Deflation Instead of Inflation?