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January 22, 2013

Economic themes: Housing, Consumer Sentiment, CPI/PPI, Manufacturing, Retail Sales, Beige Book.

  • Housing: Existing home sales fell 1% in December to a 4.94 million unit pace, and prices shot up 11.5% on a year-over-year basis, attributed to a lack of supply, which fell to 4.4 months, down from 6.4 months a year ago.  New housing starts shot up 12.1% in December to a 954k pace, led by the Midwest.
  • Consumer Sentiment: The Reuters/University of Michigan consumer sentiment index had a mid-January reading of 71.3, slightly weaker than expected, blamed on rising oil prices and looming debates in Washington D.C.  The figure may be somewhat mitigated by GOP language implying they intend to extend the debt ceiling to May 19th, and removing a specific dollar cap.
  • CPI/PPI: The Consumer Price Index was unchanged in December, with year-over-year prices up 1.7%, well within the Feds comfort zone.  The Producer Price Index declined by -0.2%, with the core rate up 2.0% year-over-year.  Food and energy prices leveled off, though auto and tobacco prices experienced jumps.  Expect January figures to be higher as oil prices have spiked recently.
  • Manufacturing:  Industrial Production increased 0.3% in December, led by manufacturing.
  • Retail Sales:  Consumer spending was strong in December, increasing by 0.5%, with auto sales leading the way.
  • Beige Book: The Fed reported improving economic conditions with “modest” to “moderate” growth across all twelve districts, an improvement from the “measured pace” growth language.  The holiday shopping season and auto sales highlighted the report, though the consumer is concerned with the upcoming debates in Washington D.C..
  • Economic highlights for the week ahead:
    • Thursday, 1/24/2013: Jobless Claims.
    • Friday, 1/25/2013:  New Homes Sales.

Municipal market themes: Assured Guaranty, Sacramento Kings, Bell.

  • Assured Guaranty:  After AGMC was downgraded two notches by Moody’s to A2, CEO Dominic Federico referred to Moody’s analysis as, “seriously flawed … determined by unsupported qualitative factors and assumptions about future demand, future profitability.”  He cited they did not sufficiently focus on the “company’s quality of its insured portfolio” and “financial strength.”  He also threatened to start a new municipal financial guaranty provider that will not be rated by Moody’s.
  • Sacramento Kings: Basketball fans across the State’s capital are devastated as their fabled Kings have been sold by the Maloof family to a group including hedge fund magnate Chris Hansen and Microsoft CEO Steve Ballmer for $525 million plus relocation fees.
  • Bell, CA: The trial has begun for six Bell officials accused of using the City’s coffers as a personal piggy bank.  Robert Rizzo and Angela Spaccia, the former City Manager and Assistant City Manager, who were the alleged leaders of the fraud, will have their day in court separately.

This report is prepared for informational purposes only. It is not intended as an offer or solicitation for the purchase or sale of any financial instrument or service.  Market prices and other data may be obtained from outside sources and is not warranted as to completeness or accuracy. Any comments, statements and/or recommendations made herein are subject to change without notice, and may not necessarily reflect those of Alamo Capital.  Past performance does not guarantee future results.  Alamo Capital has no affiliation with any political party. Investing involves risk. Consult with a Financial Professional for additional information to determine the suitability of this or any other financial product or issue as it relates to your particular situation.