News that Moves: The U.S. Housing Numbers Revealed, 5-Yr Treasury Auction Disappointment

RCM Comment: The following story is a pristine example of the misinformation and misdirection coming out of the traditional financial news media. It is the stupidity of articles like this that compels us at Rosenthal Capital Management to publish this blog and set the record straight. This article mirrors a plethora of news coverage Monday that extolled the virtues of the housing numbers released by the government. To compound the error, investors were told the equity markets were rallying due to this number. Completely incorrect; equity markets rallied, right or wrong, because of the Geitner plan. This action is not surprising because government engineered rallies typically occur around government announcements of this ilk.

But I digress. Let's set the record straight: 1) The majority of "bargain hunters" are the repossessing banks of foreclosures not new buyers. 2) When banks foreclose, the value of the mortgage is recorded as a sale, hence there is nothing unexpected about "sales" climbing during a period of rising foreclosures. 3) And this one is my favorite, the median value rose, which was tauted as a good thing. However, the median value rose because foreclosures are happening on bigger houses. In other words, the housing crisis is getting worse as foreclosures are occurring not only with subprime borrowers but now prime borrowers as well.

March 23 (Bloomberg) -- U.S sales of previously owned homes unexpectedly climbed in February as record foreclosures brought bargain hunters into the market to take advantage of lower prices. Read more...

RCM Comment: The Fed is buying $300 billion of short term U.S. debt, but today's auction is disappointing? Hmmm...

TALKX Floor Talk: Market pulls sharply off the highs following disappointing 5-Yr Treasury Auction -Update-
The bid/cover was only 2.02 and the high yield slid to 1.849% with only 19% allotted; Indirect Bidders slid to aprox 33%. Note that the disappointing U.S. auction results come on the heels of the UK failing to attract enough bidders in its bond auction today. According to the NY Times, the last time a conventional bond, or one not linked to inflation, failed to cover was in 1995.