Stock Market Crash! Blog

New Home Sales Fall, Inventory a Record

New-home sales in the U.S. fell to the lowest level in a year in January and the number of properties on the market was the most ever, more signs housing is losing its luster after five record years.

Sales declined a greater-than-expected 5 percent to an annual rate of 1.233 million from a revised 1.298 million in December, the Commerce Department said today in Washington. The number of homes for sale rose to an all-time high of 528,000 in January from December's 515,000.

Higher mortgage rates and home prices will push down sales and may contribute to a slowing of the economy in the second half, economists said. Homeowners will borrow half as much cash from the value of their houses this year as last, according to Freddie Mac, the second-largest mortgage lender, and that may curb consumer spending.

``The combination of slower demand and looser supply is likely to put downward pressure on housing-price growth,'' said Jonathan Basile, an economist at Credit Suisse in New York. ``Housing won't be the driver for growth as it has been.''

The slowdown in the housing market may weigh on economic growth in the second half of the year, Federal Reserve policy makers said in the minutes of their Jan. 31 meeting, released earlier this month. The central bank increased its main interest rate for the 14th time at that meeting, to 4.5 percent, and said more increases ``may be needed'' to keep inflation under control.

The economy probably will grow at a 4 percent annual rate this quarter, slowing to 3 percent by the last three months of the year, according to a Bloomberg survey from Jan. 31 to Feb. 8. The cash extracted by homeowners from refinancing conventional mortgages may drop to $117 billion this year from an estimated $243 billion last year, according to a Feb. 7 report from Freddie Mac. That may slow consumer spending, which accounts for 70 percent of the economy.

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U.S. computer buyers, meet Lenovo

The Chinese company that took over IBM Corp.'s PC business is introducing its own brand of computers to the United States for the first time. Lenovo Group Ltd., until last year largely unknown outside China, yesterday introduced new low-priced desktop and notebook computers targeted at small businesses and consumers.

The 3000 series of computers, which start at $349 for the desktop and $599 for the laptop, is aimed at the same markets that IBM once exited to focus on selling its ThinkPads to the higher-margin corporate sector.

Lenovo will continue to sell ThinkPads, starting at $749, and ThinkCentre desktops, starting at $379.

Ownership of the "Think" name was part of the deal when Lenovo agreed to buy Armonk-based IBM's ailing PC operations in a $1.25 billion transaction in December 2004. The sale was completed last May.

Lenovo has the right to the IBM brand for up to five years.

With its IBM acquisition, Lenovo last year ascended to rank behind No. 1 Dell Inc. and No. 2 Hewlett-Packard Co. in worldwide PC market share, according to research firm IDC.

In the fourth quarter of 2005, Lenovo had a 7.2 percent market share, compared with Dell's 17.2 percent and HP's 15.7 percent, according to IDC.

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China, India Might Buy Rockefeller Center Next: William Pesek

The U.S.'s failure to notice Asia's rise was clear enough from last year's Chinese bid for Unocal Corp. Shocked members of Congress torpedoed Cnooc Ltd.'s attempt to buy the No. 8 U.S. oil company, playing the national security card. It was a disingenuous, though successful argument.

Now we have the world's biggest steel company fending off Mittal's $23.7 billion bid for Arcelor. Chief Executive Officer Guy Dolle said Arcelor doesn't share the ``values'' and ``culture'' of Mittal. He also dismissed the Rotterdam-based Mittal as a ``company of Indians.''

Europe and the U.S. haven't seen anything yet from an increasingly acquisitive Asia. Lining up behind Mittal is a potentially huge stable of Indian and Chinese companies with as much ambition as cash to spend.

It's one of the greatest ironies of the Bush administration's campaign for a stronger yuan. Politicians pressuring China to revalue even further forget how Japan unnerved Americans in the 1980s when it bought California's Pebble Beach golf course, New York's Rockefeller Center and Universal Studios in Los Angeles. A stronger yuan won't save many U.S. jobs, but it will make the U.S. more affordable and spark a Chinese buying binge that dwarfs Japan's........

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Japan's Boom May Explode Yen-Carry Trade: William Pesek Jr.

Surprisingly strong growth in Japan is raising many eyebrows, not least those at the central bank anxious to scrap its zero-interest policy.

There can be little doubt 5.5 percent growth between October and December pushed the Bank of Japan further in that direction. Oddly, there are few if any signs global markets are bracing for higher debt yields in Japan.

Why? Japanese rates have been negligible for so long that investors take them for granted. This, after all, is the economy that's cried wolf too many times. The reason investors from New York to Singapore aren't ecstatic about Japan's recovery is the sense we've been here before -- many times.

Even so, it's not clear investors are taking the risk of rising Japanese bond yields seriously enough. Once the process begins, world markets may be surprised by how quickly Japanese rates shoot higher, taking the yen -- and all those who borrowed in it -- along for the ride.

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