I Am Confused….(Soon To Be Restated To Bemused)

Somehow the revisions to home sales don’t affect how many months of supply there is?  I guess so, but that does seem like a stretch.

What I’m more curious about is the starts and permits numbers.  Yesterday the market celebrated 685k starts and 681k permits.  We thought we were running at existing home sales of 5 million per annum.  That number was too high by 603,000 on an annual rate.  Are builders basing starts and permits on real demand or were they looking at the NAR numbers?  Were building scratching their hand wondering why they weren’t seeing demand but NAR kept coming up with big numbers?

Yes, I understand that the new construction market is different from existing home sales, but nothing about these revisions gives me a warm fuzzy feeling.  Maybe with Santa here, the ECB acting as the primary source of lending to banks, or some progress on Capital Hill, the strength in the market makes sense?  I just can’t believe that being so far off on existing home sales can be so immaterial.

In the meantime the rally in credit seems to be running out of steam.  SOVX and MAIN are both well off their tightest levels of the day and are almost unchanged (though with bid/offer spreads you could drive a truck through).  IG17 and HY17 are both a touch weaker and even HYG and JNK are managing to show slight declines.

With a far better chance of getting bad news out of Europe rather than good news (though no news is the most likely), I think the market is too high, and will drift toward 1225 again.  It does feel that once again, longs went all in yesterday and don’t have the conviction to load up, merely based on the calendar.