Market briefing --- Lori
Chart of the day - Tom (slow)
>> last week brought conflicting signs from the housing market with new home sales falling and existing home sales rising. economists at daiwa securities say the housing market holds clues to the future of federal reserve interest rate policy and that’s the focus of today’s “chart of the day” with bloomberg news editor-at-large tom keene. tom, we just had chris low on talking about housing and its importance to the fed.
>> chris low mentioned recent weakness in housing and we’re hearing this from a lot of economists. you can have a guy like chris low looking for very few rate increases, maybe up to 5% and someone like michael moran at lehman brothers at 5.5%. moran is from daiwa securities and i spoke to him today on the radio program and he’s adamant that what we’re looking at forward after the march 28 meeting is inflation, obviously, that’s what the fed is most concerned about, but also any potential of a slowing housing market . if we go to the chart, you can see what gets economists’ attention, this is the month’s supply of new homes. you can see over 30 years, the structural change is we’ve run leaner and leaner, let’s call it better construction, better technology. but down we go, down to four-months’ supply and we’ve recently spiked up to this 6.3 months of supply, which gets us all the way back to 1996 levels. so the number of homes laying around unsold seems to be growing and that gives economists pause and it’s the kind of thing that would push against further rate increases.
>> how is the fed looking at this particular data?
>> it’s part of the mix. i talk to barry ikenring of berkley today and he said they don’t look at gold. they do look at housing, it’s a big part of the economy, not only because of housing per se or consumption but because of all the employment within the housing business so it is important and i’m sure it’s within the discussion today and tomorrow at the fed and it may even be, as chris low said, in tomorrow’s statement. we don’t have a clue what tomorrow’s statement is going to say.
>> we’re beating this to death about the statement, just asked chris low about this, talking about restrictions, possibly being a focus. what are you hearing?
>> what we’re hearing is that it will be longer, maybe a denser statement but, again, economists are immediately looking beyond the march 28 meeting, looking to may 10 and even out to the end of june. of course, it’s all about the data but, again, the major theme i’m hearing is about inflation data. it is about this housing market . possibly slowing down. it’s interesting because existing home sales last week went up and new home sales went down. i don’t know if it’s a dichotomy or not. they’ll say new home sales lead existing home sales so it’s just a stew, if you will, of housing data.
>> where does daiwa think we’ll go from here?
>> mike moran is optimistic about the u.s. economy. any slowdown in housing, any slowdown in con sumption will be brought up by business investment, likely - -a like lehman brothers, very optimistic. what’s interesting, if you quiz moran, he’s not only saying 5.5% but if anything, the fed may overshoot that, and there may be pausing but any tend tendency there will be to even higher interest rates given his optimism on the american company.
>> that last move is a significant jump.
>> it’s significant but one month does not make a move. an anomaly, some noise in there. you don’t rely on one month’s statistic but look at a three-months moving average. but it still gets your attention.
>> tom keene, editor-at-large, thank you. today’s “world’s biggest mover” is a look at the new zealand stock market , which moved on m&a activity in australia. next on “after the bell.”
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Listen World & National News -- Mark (slow)
>> i’m mark crumpton with a world news update. defense secretary donald rumsfeld says the united states is doing a poor job in its effort to counter ideological support for terrorism. secretary rumsfeld says part of the problem is that the government doesn’t communicate effectively. in response to a question from a member of the audience at the army war college in carlisle, pennsylvania, secretary rumsfeld said, quoting here, iff i were grading i would say we probably deserve a d or a d-plus as a country as to how well we’ll doing in the battle of ideas that’s taking place in the world today.”
>> i’m not going to suggest that it’s easy but we have not found the formula as a country. it’s basically a struggle not between the west and muslims, it’s a struggle within the muslim faith and the
