The Deadline Is Near
Financial Review by Sinclair Noe
DOW – 36 = 18,126
SPX – 2 = 2120
NAS – 8 = 5097
10 YR YLD + .01 = 2.14%
OIL + .46 = 57.97
GOLD – .02 = 1188.20
SILV + .01 = 16.76
The National Association of Realtors’ index of pending home sales increased in April for the fourth consecutive month to reach the highest level in nine years, signaling that upcoming deals could pick up. The pending home sales index climbed 3.4 percent to 112.4 last month. The index now is at its highest since May 2006.Lawrence Yun, NAR’s chief economist said: “Realtors are saying foot traffic remains elevated this spring despite limited – and in some cases severe – inventory shortages in many metro areas.”
The number of Americans filing new claims for unemployment benefits rose last week, but remained at levels consistent with a strengthening labor market. Initial claims for state unemployment benefits rose 7,000 to a seasonally adjusted 282,000 for the week ended May 23. Today’s report from the Labor Department shows companies are laying off the fewest number of employees since the government began keeping track several decades ago.
Median household income is showing improvement. According to the latest data from Sentier Research, which derives the results from government figures, the median annual household income rose 0.6% in April to $54,578. That’s 3% higher than the same month of 2014, and 6.2% higher than Aug. 2011. However, median income is still 2.9% worse than before the recession in Dec. 2007.
Federal Reserve Bank of St. Louis President James Bullard has joined the chorus of Fed policymakers calling for a rate hike later this year. Bullard said a prolonged accommodative stance is a “recipe for asset-price bubbles and a lot of mischief to happen. Asset price bubbles have been a devastating feature for the U.S. economy in the last 15 years.” Still Bullard says he is waiting for economic data to show the economy is getting stronger. Tomorrow we’ll get the revision to first quarter GDP, which was initially reported at 0.2% growth; the revision is expected to show contraction.
The Shanghai Composite has ended a seven-day winning streak with a bang, wiping out 6.5% to record its second-worst session of 2015, while the tech-heavy Shenzhen Composite lost 5.5% – its third biggest fall in five years. Until Thursday China’s benchmark index had surged more than 50% this year, despite widespread concerns that the market was in bubble territory. The plunge also highlighted the warnings Credit Suisse gave clients earlier this week: “At some point, there will be a massive correction of these stocks, in our view. Avoid this space!!!”
Japanese shares rose for a 10th session today as the yen traded at its lowest level since 2002. The Nikkei closed up 0.4% at 20,551 – marking its longest winning streak since a 15-day run that ended in March 1988. Meanwhile, Japan’s retail sales rebounded modestly in the year to April following three straight months of falls, bolstering the case that consumer spending is reviving.
The dollar rose to its highest level against the yen in more than 12 years today. The euro weakened slightly against the dollar, as investors waited for more information on the status of a deal between Greece and its creditors, (which is still up in the air.)
The G-7 is meeting in Germany today. The official topics for the summit range from the state of the global economy, to financial regulation, fighting tax evasion and ways stopping funding for terrorist groups like ISIS. The big unofficial conversation was about Greece. The ECB warned that the Greek crisis could pose a risk to financial stability in the euro area in the future. Germany’s finance minister said there were no significant breakthroughs. The Greeks are drafting an accord with creditors, and hope to have something substantive by Sunday. Something is about to happen with Greece, they face a June 5 deadline to make a payment of $235 billion and as we all know, they don’t have the money. US Treasury Secretary Jack Lew is at the G-7 summit and he said: “It’s a mistake to think that a failure is of no consequence outside of Greece. We don’t know the exact scope.”
What we do know, or at least have seen is that the Troika, which is the ECB, the IMF, and the Euro Monetary Union represent the Euro banks and other financial institutions, and their position has been intractable; they demand austerity, even though it has not worked and will not work. The Greeks have already made big cuts in the budget, pensions slashed 40%, health care and public services cut back, payrolls reduced, public works programs shuttered; and the result is unemployment has climbed to more than 25%, runs on the banks, increased infant mortality, increased suicides, and the debt to GDP rate has skyrocketed despite massive cuts in spending. Apparently starvation does not result in prosperity.
And yet the Troika remains inflexible, and the likely reason is that if Greece gets a break and some of its debt is forgiven, the problems will spread to Spain, Portugal, and Italy. IMF Director Christine LaGarde says a comprehensive solution is very unlikely in the next few days. There is a very good chance that the Greek situation could end in default, which could end in exit from the Euro Union, which could end the Euro Union. So, this is serious stuff. I know we’ve been talking about this for quite some time, but the deadline is now just a few days away.
Chip maker Avago Technologies agreed to buy rival Broadcom for $37 billion in cash and stock. Avago makes chips for wireless-communications and corporate-data-storage markets. Broadcom supplies the vast majority of chips used in the latest networking switches found in corporate data centers, a fast-growing business that could enhance Avago’s communications-focused revenue stream.
Amazon wants to make your impulse buys even more impulsive. The e-commerce powerhouse is offering free same-day delivery service in some cities to its Prime loyalty club members. Amazon says starting Thursday more than 1 million items including books, electronics and vacation gear will be eligible for same-day delivery in 14 metro areas including New York, Los Angeles, the San Francisco Bay Area, Philadelphia, Atlanta, and Phoenix. Orders over $35 are eligible for the service. They need to be placed by noon and will be delivered by 9 p.m. Orders under $35 can still have one day delivery, it just costs $5.99.
You probably use Google for searches on your computer. But you don’t take your computer with you the same way you take your phone with you. You spend lots of time on your phone jumping from one app to another trying to find whatever it is you’re trying to find. Users are engaging more and more with programs that have no attachment or they need to search on the broad web, and as a result Google’s position as the owner of our habits, interests, and needs on the internet has looked increasingly at risk. So, Google came up with a new idea to help you find what you want, no matter where you are on the phone. They call it Now on Tap, and it hovers above any app on your phone or tablet. An example: You’re writing an email to a friend about catching a movie. Tap and hold the phone or use a voice command, and a card with information on the movie pops up inside the email app.
Now this is important for Google because it reasserts their dominance over your digital life away from your computer; it also gives Google access to user behavior and needs. And to go a step further, it allows Google to act as the glue, or the connector between apps. And that means that Google Now could tap into the core functions of your apps and then predict what you want and execute on what you most likely need, in a seamless sort of fashion. At least that’s the idea.
Meanwhile, Apple is readying a major new iOS initiative codenamed ‘Proactive,’ which will leverage Siri, Contacts, Calendar, Passbook, and third-party apps to create a viable competitor to Google “Now”. Like Google Now, Proactive will automatically provide timely information based on the user’s data and device usage patterns. During a Code Conference yesterday, Apple’s operations boss Jeff Williams dropped a hint that the company is working on an electric vehicle, declaring the car to be “the ultimate mobile device.”
Also at the Code Conference: GoPro CEO Nicholas Woodman said his company is working on a quad-copter drone and will introduce a sixteen-camera device to capture 360-degree spherical video, which will allow recording for video and pictures for virtual reality. It could be available in the second half of this year. Google built the rendering technology for the camera array, which means the 3-D videos will live on YouTube. Some of YouTube’s top video makers will be the first to get access to the camera, starting in July. And Google will have a virtual reality headset starting at about $20, to bring 3-D to the masses. And if you would like to order a VR headset, you can use Android Pay, which is the updated version of Google Wallet, and meant to compete with Apple Pay.
And one more thing, Google is coming out with its own platform for the internet of things, a very small operating system called “Brillo” that requires very little power. For example, it might be connected to the front door of your home. When the door is locked, it would also lock your home computer or TV or phone or make sure the lights are turned off. It would also position Google as the ‘invisible backbone of tomorrow’s smart home’.