Market Morning: London Legalizes Moving, Congress and Fed Want More Spending, European Banks Fall

Market Morning: London Legalizes Moving, Congress and Fed Want More Spending, European Banks Fall

Moving Is now Legal in England

Real estate bounce in London? Maybe, maybe not. At least now it’s legal to buy, sell, and move houses again in at least some parts of the United Kingdom. That at least is a prerequisite for a market to function on a basic level. However, all this must take place under strict social distancing and safety rules, meaning it’s still going to be a lot harder to buy, sell, and move, and many may push any planned moves out into the future when social distancing inconveniences are let go. If that ever happens, that is.  According to estimates, about 450,000 buyers and renters have plans on hold in the United Kingdom. Not all areas are being freed up for market activity though. Wales, Scotland and Northern Ireland real estate markets remain shut.

Meanwhile, back in the United States, homebuilding stocks really aren’t doing too bad. A long term chart of one of the largest homebuilders, Lennar (NYSE:LEN), isn’t doing nearly as bad as it was doing in 2008, even though given the circumstances, housing prices are about to fall hard. As a sector, homebuilding stocks (NYSEARCA:XHB) in general are not doing nearly as bad as they were 10-15 years ago. Waiting for better housing prices however, may not be the best move because of the possibility of interest rate rises alongside declines in property values. A mentality of get me my mortgage now before rates rise off historic lows, could keep any decline from being too disorderly.

Congress Suggests Another $3 Trillion in Spending

The national debt is going parabolic as is the federal deficit, so why not add another $3 trillion to it while we’re at it? This is what Democrats in congress are suggesting. Funding will be directed to state governments, businesses, food support and individual families, according to press releases about the plan at least. Republicans have rejected the proposals however, for now, possibly as political posturing because so much money has been spent already anyway. $75 billion is earmarked for coronavirus testing, $6,000 in direct payments to US households, and another bailout of the US postal services, which is perpetually bankrupt. Republicans have called the bill “dead on arrival”.

Nancy Pelosi was having none of it though. “There are those who’ve said let’s just pause. But the families who are suffering know that hunger doesn’t take a pause, the rent doesn’t take a pause, the bills don’t take a pause, the hardship of losing a job or tragically losing a loved one doesn’t take a pause,” she said, implying that more redistribution of existing resources should help, somehow.

Fed Asks For More Debt, Too

The Federal Reserve appears to be cheering on Congress’s efforts to spend whatever possible so the Fed can print the money to enable it. Dallas Fed President Robert Kaplan warned that US unemployment would peak at 20% and fall to 10% by the end of the year, of course having previously said that there was no US recession in sight, and despite the Fed never once actually predicting any kind of recession. The Fed’s predictions of still have an air of authority to them.  “There may well need to be more fiscal stimulus in order to boost economic growth so that we can grind down that unemployment and get closer to full employment,” Kaplan said.

Minneapolis Fed President Neil Kashkari agreed. “In this crisis, the U.S. government has the ability to raise the funds to support the American people,” Kashkari said yesterday. He also said that he would personally not go see a movie until a vaccine is available. That could be awhile. Meanwhile, Netflix (NASDAQ:NFLX) continues to trade near all time highs as it becomes the main source of movies for people who are afraid of getting sick in a theater.

Weak European Financials Get Weaker

Commerzbank (OTCMKTS:CRZBY), a systemically important German bank that is one of those too big to fail entities, is failing. The lender suffered a net loss in the first quarter of 2020 that will likely get worse into the second, because only one month of the first quarter was seriously affected by coronavirus lockdowns. The bank lost €295 million on bad debt and risk profit. This loss came in the face of rising net interest income, which rose from €1.23 billion to €1.32 billion. Commission income also rose over €100 million, but overall income fell about €300 million. Commerzbank declined to provide an outlook, having no idea how long the coronavirus era will last.