Misinformation Follows Us like A Plague

A small bit of U.S. greenback strength nicked a dollar off gold today. It was regular trading that stuck a dagger into the precious metals, however.

There was an odd confluence of contrary interpretations loose in the markets today. Gold buyers seemed to have been laboring under the misapprehension that the Fed statement issued yesterday was hawkish. It may have been a notch less dovish than the last FOMC session but it could not in any way be counted as “hawkish.” It’s almost ludicrous to think so.

Apparently equities felt that dovish monetary policy will continue for some time. The three U.S. exchanges bounced back between 1.00% and 1.25%. The equities are shrugging off a handful of poor earnings reports as described yesterday here and focusing on the movers to the positive side, Apple foremost among those.

Of great interest in the broader American economy is a statistic released today. New unemployment claims free fell by 14% last week to a nearly 15-year low. That was back in 2000 when job growth was that strong. Bill Clinton was president. The 9/11 attacks, the subsequent wars, the Great Recession and a sense of doom and gloom had not overtaken the country and world. Another little statistic that has popped up – more of an opinion than hard data, maybe: there is a housing shortage in the U.S.

It’s not the typical kind of shortage, though. America lacks the right kind of housing, apparently. Baby Boomers want their sunset quarters in twilight-year kinds of places. Millennials, who are putting off marriage and child bearing just like the Boomers, want compact housing in happening places. And the notion of where “it” is happening is expanding beyond the big, cool cities like New York, Boston, DC, Los Angeles, Chicago, and so forth.

Places we all thought ready for the morgue are coming back onto radar, even if they have a long way to go. Detroit? Buffalo? Worcester, Massachusetts? (Now a place with one of the highest hire rate for young people, and a rapidly rising income average.) Who woulda thought? Big small towns with dynamic universities are also feeling a housing squeeze.

Regardless of the where, certain kinds of houses are in demand and they need to be built, or renovated. Those giant MacMansions wedged into older suburban neighborhoods and 14-room bungalows on the Florida coast all of a sudden are not in huge demand. Insofar as luxury housing ever goes out of style.)

This bodes well for a new round of home construction.

We don’t like to second-guess the Fed because generally they are not a jack-in-the-box kind of organization. They pretty much do what they say.

If the unemployment rate falls below 5%, and if inflation accelerates, we will surely see some action out of them that could surprise markets. There is a big “but” that goes with that: BUT – the rise will be small. Very small. Janet Yellen and her dovish cohorts don’t believe that the world economy is very solid. They said as much yesterday.

Keep an eye on housing and the January unemployment rate. Wishing you as always, good trading,