May 23, 2012

AP Reaction to One-Month 3.3% Seasonally Adjusted New Home Sales Increase: Housing ‘Could Be Starting to Recover’

To be fair, the full text of what Martin Crutsinger at the Associated Press wrote in the first sentence of what I believe was the final version of his report today on the Census Bureau’s new-home sales release was that “Americans bought more new homes last month, the latest evidence that the U.S. housing market could be starting to recover.” The other “evidence” he cited related to a small bump reported earlier this week in existing home sales and one homebuilder’s improved financial results.

That’s pretty thin gruel from which to paint a “could be starting to recover” scenario, especially when it’s expressed by someone who isn’t a housing expert, i.e., an AP reporter. The only expert Crutsinger cited told him that “Housing could be a pleasant surprise this year.” Wow. How profound. Let’s take a look at some quotes from experts Thomson Reuters was able to find. Readers will note that the variations on word “bottom” occur quite frequently (quotes are not in the same order as they appeared at the link):


Today’s numbers I think are indicating that housing is definitely in the bottoming phase and benefiting from record low mortgage rates. The other part of the equation, and what we are seeing from our clients, is if you look at the lower end of the market people are taking advantage to utilize it as a source of rental income.”


“The slightly better figure reflected both a sharper rebound during the current month and some slight upward revisions to previous data. However, following a still sharp decline in March, the underlying trend in new home sales since the start of the year remains broadly flat, following the gradual uptrend towards the end of 2011.


“The new homes sales data is much like what we saw from existing home sales yesterday. There is progress but still at a gradual pace. It is still baby steps. This increase of 343,000 still comes in below that February high, which was probably inflated by weather. It does look like we have found a bottom, which is encouraging, but it is still very slow progress at this point.”


“I don’t think this adds anything new for the market at this stage because there was some indication housing was bottoming out from yesterday’s (existing home sales) numbers.


“It is a little better than expected, but housing is still stuck in a rut here. Mortgage applications in the first few weeks of this month indicate we should remain around this level here, if not slightly lower.


“It’s encouraging. These are signs that we might be forming a bottom in housing. I would disregard the price data, though. On yesterday’s existing home sales data, the rise in prices was skewed by some technicalities. But it’s encouraging to see the supply of homes is falling. We’ll need to see housing shore up before we can talk about a meaningful recovery in the U.S.”

Gosh, it has been almost three years after the recession officially ended, and at least according to Mr. Esiner, we still don’t have a “meaningful recovery.” Imagine that.

One of these days, probably not in my lifetime, AP is going to learn that readers don’t want to know what its reporters think; they only want to know what people who know what they’re talking about think, and don’t want to have to wade through reporters’ inexpert assessments to get to them. It’s even worse when, as was the case with Crutsinger’s dispatch today, there ends up being no expert who says anything meaningful.

Perhaps the reason Crutsinger only quoted one expert, and only got one superficial quote, is that he couldn’t find anyone who would support his “could be starting to recover” premise. If so, that’s hardly surprising.

The raw data for April show that only 33,000 homes were sold in the entire USA. That’s about 20% below the 41,000 sold in April 2010 when the homebuyers credit expired (remember how that credit was going to kick-start the industry?), and barely above the 32,000 sold in April 2009. The actual number of homes for sale at the end of April was 144,000. That’s the second lowest number seen in almost fifty years of recordkeeping (March 2012 was the lowest), and less than half the number which were for sale three years ago. Those quoted above who cited various versions of “bottoming out” would appear to have far more support for their assertions than non-expert Crutsinger.

Look at the bright side. Unlike Christopher Rugaber, who last week falsely claimed that “Home construction is near a three-year high,” at least Crutsinger didn’t try to convince us that we were seeing nearly the best new-home market in three years.

Cross-posted at

Facebook Had No Lock-up Period: Why?

Filed under: Business Moves,Economy,Taxes & Government — Tom @ 2:45 pm

Much hay is being made about that fact that Facebook founder Mark Zuckerberg and other insiders were able to sell some of their shares in the company on the open market as soon (if not just before, which I suppose is a point requiring investigation) as the company’s stock began public trading.

As I understand it, the insiders’ plans to do this were clearly disclosed in the S-1 prospectus.

We’re supposed to believe that there’s nothing unusual about what they did.

That is flat-out wrong, as Investopedia explains:

When companies “go public”, the number of shares offered in the initial public offering (IPO) is typically a relatively small portion of the overall ownership. The balance of the shares is held by insiders, which include management, founders and venture capitalists (VC) who funded the company while it was private.

The exact number of shares that is offered in each IPO will differ from company to company. For example, in 2004, Google offered 7% of its shares to the public, while Vonage offered 20% of its shares to the public during its 2006 IPO.

… although the number of shares offered will differ from one IPO to another, nearly all IPOs have some sort of lock-up period. A lock-up period is a caveat placed on insiders and pre-IPO holders that prevents them from selling their shares for a set period of time after the company has gone public. A typical lock-up period is four to six months.

My understanding and experience (admittedly a bit dated) is that it’s not at all unusual for lock-up periods to be as long as two years.


There is no federal law or Securities and Exchange Commission requirement that forces insiders or pre-IPO shareholders to be “locked up”, but the investment banks underwriting the IPO almost always request it so that insiders do not flood the market with shares right after the company’s initial public offering. The lock-up in the prospectus (Form 424B4) is a contract between the insiders and the purchasers of the IPO, so it is highly unlikely that it would be violated.

This information is disclosed in the S-1 when the IPO documents are filed with the SEC. The best sources for lock-up information are the SEC website and several paid services including Edgar Online. The lock-up period will be stipulated in the prospectus, called the S-1, but it is very important that investors watch each revision of this document, called S-1As, because there could be a change in the lock-up terms.

… As a company goes public, underwriters want to be able to see what outside investors believe the new entity is worth based on information like that found on the balance sheet, the income statement (profits and losses) and executive overviews of the business (business risks).

If inside investors are allowed to sell immediately at the time of the IPO, it may well obscure the price that the markets put on the company by putting selling pressure on the shares on the first day of trading.

Hmm. Isn’t that what just happened?

All of this in my view raises serious questions about the Facebook IPO:

  • Why did the founders and other key players insist on avoiding the normal lock-up?
  • Why did the underwriters let them? It’s against the underwriters’ interest to allow this, because doing so makes it in the founders’ personal self-interest (even beyond already-existing corporate self-interest) to overvalue the company and to fudge the financial and nonfinancial data to support the overvaluation. In Facebook’s case, the nonfinancial data about hits, subscriber growth, and the like are particularly important. If enough of the ownership stake is involved, it also exposes the public to the founders losing interest in managing the company well.
  • Does the founders’ and other key players’ insistence on no lock-up period betray a fundamental lack of faith in Facebook’s long-term prospects? I don’t see how you can interpret it any other way.
  • Finally, a free-market believer would certainly agree the SEC can’t (and at least in theory shouldn’t) stop such an arrangement — unless there is some kind of conflict of interest with the potential to shortchange the public involved. Was there? A clear possibility exists. Goldman Sachs was a major investor in Facebook, is a major underwriter of IPOs, and a major investor in other businesses. The lack of a lock-up period would seem to have benefit Goldman Sachs bigtime. The rest of the underwriting community may not have had the gumption to challenge what should have been challenged because it needs Goldman’s cooperation to make other IPOs and investments happen.

April New Home Sales: As Usual, Unimpressive

Two years ago in April, the Obama administration-driven special first-time homebuyers’s credit expired. That impending expiration drove new-home sales to a seasonally adjusted annual rate of 420,000 (actual sales that month were 41,000).

The highest such number seen during the next 18 months was 311,000. In recent months, the number got as high as 353,000 in February and dropped back to 328,000 in March (these numbers were updates to 358,000 and 332,000, respectively, in today’s release).

The Census Bureau released April’s new home sales numbers this morning (along with revisions to March).

The raw data shows that 33,000 homes were sold nationwide. While that’s the highest raw number in an individual month since April 2010, it’s still almost 20% below the two-years-ago figure. If that comparison seems unfair because of the homebuyer’s credit, remember that it was sold as a way to create some kind of sustainable momentum in the housing market. It obviously did no such thing.

After seasonal adjustment, annualized sales were up 3.3% over March. March itself was revised slightly upward, but it’s drop from February was still over 7%. If we’re to believe in the accuracy of seasonally adjusted numbers — which I don’t in this case, because the economy hasn’t been normal enough to have any reliable data based on real seasonal fluctuations since what I have been calling the POR (Pelosi-Obama-Reid) Economy began almost four years ago — April got back less than half of March’s decline.

There is no compelling evidence that the housing market and “home construction” as properly defined is doing anything but scraping along at or not far above the all-time bottoms of the past three years. Yet in his dispatch today about the Census Bureau’s report, the Associated Press’s Martin Crutsinger wants readers to believe that it constitutes “the latest evidence that the U.S. housing market could be starting to recover.”

As I said about Chris Rugaber’s report last week which claimed that “Home construction is near a three-year high”: “I would call that assertion ‘horse manure,’ but that would be unfair to equine excrement.” One of these days, probably not in my lifetime, AP reporters will concentrate on reporting the facts, get opinions from qualified analysts, and otherwise just … shut … up. We shouldn’t have to filter through what you think at the expense of omitted facts, Chris and Marty, and you have no right to impose your opinions — positive or negative — on us.

Meanwhile, the number of homes actually for sale in the whole country is … (can you believe it?) 144,000. That’s the second-lowest reading on record. The lowest-ever figure of 143,000 came in March.

The good news is that the number of months of sales in inventory is an historically acceptable 5.1 months, down from about 12 months during the worst of the housing mess. The bad news is that, thanks primarily to the Obama administration’s ceaseless meddling in the housing, home-lending, and banking industries, the industry had to shrink by at least 60& from non-bubbly normal levels to stabilize. As long as the government’s interventionist mindset continues to rule the roost, the prospects of a meaningful comeback are slim.


UPDATE: The 13 lowest monthly readings ever in number of homes for sales occurred … in the last 13 months.

Democrat Opposition to Obama Runs Deep — And Could Doom His Reelection Prospects

Filed under: Taxes & Government — Tom @ 9:14 am

In three supposedly dull Democratic primaries, Barack Obama has lost 40% or more of the vote to nobodies — and in one case, literally nobody.

Last night in Kentucky, “Forty-two percent of those going to the polls rejected the president in favor of ‘uncommitted.’” The Bluegrass State Board of Elections result is here.

The Louisville Courier Journal has a list of counties in Kentucky where “uncommitted” outpolled Obama. There’s 67 of them out of a total of 120.

Meanwhile, in Arkansas:

… John Wolfe — a perennial, long-shot candidate — took 41 percent of the vote in the Democratic primary, with 71 percent of precincts reporting. Obama came in just under 60 percent. The Associated Press did not call the race for Obama until close to midnight.

A few weeks ago, in West Virginia:

Keith Judd, a federal inmate convicted of extortion, captured 42 percent of the vote in Tuesday’s primary. According to Democratic National Committee rules, the prisoner could qualify to assign at least one delegate to the national convention in Charlotte, N.C., this September.

Jim Geraghty has a clue for those who want to pretend that these results have no relevance to the general election:

… these states are considered deep red for 2012, but the demographics of Jacksonian white working-class voters in these states aren’t culturally all that different from voters in large swaths of swing states like Ohio, Pennsylvania, North Carolina and even northern Florida.

I would add at least Virginia and Indiana to that list.

Based on the political landscape as of today, if these six states which Obama won in 2008 all turn on Obama in November, he will lose the Electoral College (take away OH’s and PA’s blue-leaning 38 electoral votes at the link, and he only gets 252 of the needed 270 electoral votes needed to win).

Wednesday Off-Topic (Moderated) Open Thread (052312)

Filed under: Lucid Links — Tom @ 7:51 am

Rules are here. Possible comment fodder may follow later. Other topics are also fair game.


Positivity: Group launches tour to end abortion in Canada

Filed under: Life-Based News,Positivity — Tom @ 7:45 am

Reported from Denver (video at link):

May 22, 2012 / 12:59 pm

A Canadian pro-life group is retracing the steps that abortion activists took in the country during the 1970s, but with the goal of repealing local abortion laws.

“We want to take the language for choice and then expose it,” Stephanie Gray, executive director of the Canadian Center for Bio-ethical Reform, told CNA May 16.

The group, which is dedicated to “making abortion unthinkable” by engaging the public in discussions about the reality of abortion, will undertake its most ambitious campaign yet on May 29 with a cross-country educational tour.

The New Abortion Caravan will follow in the footsteps of abortion activists who engaged the public with a nearly identical campaign, called the Abortion Caravan, in the summer of 1970 to gain free abortions on demand and repeal pro-life laws.

By using disturbing imagery, having women to share emotional accounts of their experience with illegal abortion and presenting the act as a fundamental women’s right, the abortion advocates were able to achieve their goal.

The original Abortion Caravan, which visited provinces from Ottawa to Vancouver, significantly contributed to the repeal of anti-abortion laws 18 years later, resulting in free abortions on demand, paid for with Canadian taxes, through all nine months of pregnancy.

Gray is confident that the new tour – which follows the same route and is part of the organization’s larger campaign called End the Killing – will contribute to Canadians overturning abortion laws in the year 2030, precisely 18 years from now.

“We can end the killing and we can end it in our lifetime,” Gray said.

She noted that using similar rhetoric as abortion advocates is key, adding that the New Abortion Caravan hopes to “shift the debate from an abstract notion of choice” to the reality of abortion as “an act of violence which kills a baby.” …

Go here for the rest of the story.