Market Leadership

Market Leadership is in a “Churn Cycle” – Like a Washing Machine

by Louis Navellier

April 27, 2015

So far this year, the market is acting like a washing machine, sloshing back and forth.  Last Thursday and Friday, for instance, we saw profit-taking in powerful tech stocks like Avago Technologies* (AVGO), NXP Semiconductors* (NXPI), and Skyworks Solutions* (SWKS). On the other hand, multinationals with declining sales, like Caterpillar (CAT) and GE, bounced back due to aggressive stock buy-back activity.

Amazon.com (AMZN) announced truly horrible earnings last week, but they also had surprisingly strong sales so Amazon led NASDAQ to a new record high above 5000. Meanwhile, some powerful high-dividend stocks like Altria Group* (MO) and Reynolds American* (RAI) experienced profit-taking, so there is a rotational correction going on. When all the dust settles after earnings announcement season, I expect that stocks characterized by strong sales, earnings, and rising dividends will be the big winners.

Earnings announcements remain on center stage this week.  So far, corporate earnings have come in better than expected but sales for many of the biggest (S&P 500) companies have been disappointing. Looking forward, second-quarter corporate guidance has been encouraging; but positive results and rosy guidance tend to come early, while the more disappointing results and guidance tend to happen later in the earnings season, so May’s earnings announcements may cause the market to turn bumpy in the upcoming weeks.

Greek Architecture ImageDespite Wall Street’s laser focus on earnings, there are some external factors that may impact the market, like the ongoing Greek tragedy. Greece is less than two weeks from a new deadline (May 11) to comply with Eurozone demands.  Greece needs to secure billions of euros in bailout aid to avoid defaulting on its debts and exiting the Eurozone.  Any new austerity measures could undermine the new government of Prime Minister Alexis Tsipras, which was elected in January on an anti-austerity pledge.  So overall, the Eurozone has lost patience with Greece and its new Prime Minister. So far, financial markets have done a great job of ignoring the Greek crisis but no one will be surprised if Greece defaults on its massive debts.

In This Issue

In Income Mail this week, Ivan Martchev boldly predicts a crash in China stocks over the next 12 months – likely sooner than later.  In Growth Mail, Gary Alexander agrees that China stocks are risky, but that we should not underestimate China’s economic growth potential. In my Stat of the Week column, I’ll cover the recent statistics that seem to indicate that the “data-dependent” Fed will postpone any rate increases.

Income Mail:
Can Crashes Be Predicted?
by Ivan Martchev
The Conundrum Down Under
First-Quarter Earnings are not as Bad as Feared

Growth Mail:
Don’t Underestimate China (or Overestimate Greece)
by Gary Alexander
China’s Growth “Slows” to 7% in the First Quarter
To Understand China, You Need to SEE China
Europe will get over its Long, Drawn-out Greek Divorce
April 28, 1942 – the Lowest Dow Close of the Last 81 Years!

Stat of the Week:
“Core” Durable Goods Orders Decline in March
by Louis Navllier
Germany Accelerates, China Slows Down
Existing Home Sales Rise 6.1%, but New Home Sales Fall 11.4%

Income Mail:

Can Crashes Be Predicted?

by Ivan Martchev

Can one predict a market crash? I believe the answer is “absolutely yes.”

The topic came up in the office last week, since numerous bears have been predicting big declines for U.S. stocks over the past year. In reality, however we had just one V-shaped classic sharp correction in October of last year and by mid-November the market had fully recovered.

When a bull market correction gets going, it likely won't turn into a full-fledged bear market if the economy is still improving and stocks are not hopelessly overvalued. Last October, we had an improving economy and the S&P 500 decline stopped in the vicinity of a rising 200-day moving average, which traders in general deem as a serious area of support, where the bulls have to make a stand – and they did.

A crash and a big bear market are very different than a bull-market correction. They are much deeper by multiples, more prolonged, and much more serious in nature. They can turn a recession into a depression and devastate wealth on a massive scale. Crashes can be predicted, in my opinion. You cannot predict the day and the level when an index will make an all-time high and unwind the vast majority of its gains in a vicious bear market, but you can spot it early on and capitalize on the decline – there is nothing evil about short selling, if done the right way – or get out of the way so that you don’t get wiped out by the decline.

Could I give an example, the key question was put to me.

“I think the Chinese stock market will crash in the next 12 months,” I said.

This prediction shouldn't come as a surprise. I have followed the unwinding of the Chinese real estate bubble here in MarketMail and in other media outlets. I have picked “three canary indicators,” two of which have shown serious signs of carbon monoxide poisoning – Soufun Holdings (SFUN) and BitAuto* (BITA) – while the third, Noah Holdings (NOAH), has gone parabolic with the Chinese A-share market.

Chinese Financial Markets Chart

Source: businessinsider.com.au

Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.

What has gone even more parabolic in China is the rate of new account openings. They are adding new investors at a rate of more than a million per week (the latest week soared to 3.26 million; the week before was 1.68 million). At the same time, the real estate market is gathering momentum to the downside and the Chinese financial system is operating on record leverage.

Overleveraged financial systems and busted real estate markets usually lead to much sharper economic slowdowns and severe recessions as well as deflationary shocks. Japan in 1990 and the Asian Crisis in 1997 are good examples. The U.S. in 2008 would have been another example, but a deflationary outcome of that event has so far been averted by truly extraordinary quantitative easing measures on a scale the world had never seen before.

Iron Ore Price Chart

Source: Sydney Morning Herald

Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.

You can see the Chinese economy slowing down in the price of key commodities like iron ore, copper, and oil and the decline in commodity-based currencies like the Australian and Canadian dollars as well as the Brazilian real. The day of reckoning of a massive credit cycle that has been accelerating in China in the past five years is upon us.

It is not possible to guess the day when the Chinese stock market will crash as long as the authorities are opening stock trading links between China and Hong Kong and new Chinese stock trading accounts are being opened at a more-than-a-million-per-week rate.  The Chinese authorities are also aggressively loosening monetary policy with reserve requirement rate cuts and other measures but I think the credit cycle unwinding has gathered enough momentum to the downside that it cannot be stopped.

Chinese Lamps ImageI personally think the Chinese stock market will crash in the next 12 months. I think the odds are high that this will happen sooner rather than towards the end of 2015. This is not a market where long-term investors should participate at the moment. I have nothing against trading Chinese stocks for a profit, driven by the “greater fool” mentality of those freshly-minted Chinese “investors” that just entered the stock market; but don’t forget to sell “too soon” rather than “too late.”

An economic downturn in China, driven by a busted real estate market, likely followed by a stock market crash, would be a profoundly deflationary outcome as China is the largest consumer of commodities and its trade relationship with the rest of Asia is more important than its trade relations with the U.S.

Ultimately, this means that U.S. long-term interest rates (like the 10-year note) might fall as low as the 1% mark as the effects of the Chinese unravelling spread globally. Meanwhile, interest rates in the greater Asian region – like those in Australia, a country that has a huge trade relationship with China – might do what the German bunds are doing at the moment, i.e., trading at ultra-low yields.

The Conundrum Down Under

Australia’s massive trade relationship with China puts the Aussies in a precarious situation, since 36.7% of their exports go to China (another 18% go to Japan). The rapid growth of the Chinese economy has put all the major regional economies in the same boat, so to speak, as the mainland economy has become the #1 or #2 export market. About 20% of Australia's imports come from China. The U.S. is a distant second at 11%. It would not be an exaggeration to say that if China sneezes Australia very well may catch a cold.

Australian Imports and Exports Chart

Source: Australian Department of Foreign Affairs and Trade.

Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.

Australian Bridge ImageIron ore is Australia’s top export, followed by coal, natural gas, gold, and crude petroleum. It is this massive exposure to commodity prices and Chinese commodity demand that has put pressure on the Australian dollar to the point that it has gone to parity with the New Zealand dollar, since the neighboring country enjoys a bit more balanced trade mixture. This Chinese overdependence threatens to send the Australian dollar towards the lows of the financial crisis, when it was changing hands at 60 U.S. cents, if not the all-time lows of 50 cents from 15 years ago. The Australian dollar can be traded with the Currencyshares Australian Dollar Trust (FXA) with the caveat that the bulk of professional currency trading on the AUDUSD cross rate is done over the counter at a leverage ratio of 100X or higher.

United States Australian Foreign Exchange Rate Chart

Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.

Naturally, investing in Australian ADRs is not advisable in a situation where the economic leverage toward China is so high. Both Rio Tinto* (RIO) and BHP Billion* (BHP), which have large operations in Australia and are highly leveraged to China, have seen their share prices trying to rebound of late after having a rough second half of 2014. I do not think those are rebounds to buy but rebounds to sell. Both might soon end up looking more like Vale* (VALE) – the largest iron ore producer – where the decline in the Brazilian real compounded with the decline in the price of iron ore has decimated the share price.

If the Chinese economic slowdown has not found a bottom yet, why would the share prices of producers of key commodities, where China is the #1 consumer, find a bottom?

Australian Ten-Year Bond Yields Chart

Source: Tradingeconomics.com

Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.

The Australian government 10-year bond yield hit a record low of 2.27% in February of 2015 and is in danger of taking out that low later in the year if what I think will happen to China’s market comes to fruition.

First-Quarter Earnings are not as Bad as Feared

While there was significant cutting of estimates during the first quarter, to the point where year-over-year declines in EPS began to be projected by some strategists; results so far (with 201 of the S&P 500 companies reporting so far) are not as bad.

Change in Forward Twelve-Month EPS versus Change in Price Chart

Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.

Here’s the basic earnings data so far, according to the April 24 Factset Earnings Insight:

Overall, 201 companies in the S&P 500 have reported earnings and revenues to date for the first quarter. On the earnings side, 73% of the companies have reported actual EPS above the mean EPS estimate and 27% of the companies have reported actual EPS below the mean EPS estimate. The percentage of companies reporting EPS above the mean EPS estimate is equal to the 5-year (73%) average. However, on the revenue side, 47% of the companies have reported actual sales above the mean sales estimate and 53% of companies have reported actual sales below the mean sales estimate. The percentage of companies reporting sales above estimates is below the 5-year average (58%). In fact, if 47% is the final percentage for the quarter, it will mark the lowest percentage of companies reporting sales above estimates since Q1 2013 (also 47%). Since Q3 2008, the percentage of companies reporting sales above estimates has finished below 50% only six times due in part to more companies missing sales estimates than beating sales estimates, the blended sales decline is larger today (-3.5%) compared to the start of the quarter (-2.6%). On the other hand, due in part to more companies beating EPS estimates than missing EPS estimates, the blended earnings decline is smaller today (-2.8%) compared to the start of the quarter (-4.6%).

Change in Q115 Earnings and Revenue Growth Chart

Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.

Weak sales are a result of a strong dollar and falling inflation or outright deflation, if one looks at Japan or Europe. There is very little a company can do about fixing a sales problem in a hostile macro environment, while cutting costs is always an option to improve earnings. Still, there is a limit to improving productivity and operating margins, which are presently near record highs. In that environment, one should expect U.S. Treasuries to remain well-bid as the dollar is strong and Treasuries offer the best yields of any large industrialized governmental bond market.

Growth Mail:

Don’t Underestimate China (or Overestimate Greece)

by Gary Alexander

“In barely three decades, this once-backward, insular country has moved hundreds of millions of people out of poverty while turning itself into the world’s second-biggest economy.”

-- Henry M. Paulson, Jr. in the introduction to his new book “Dealing with China” (published April 14)

Since this column is about Growth, let me begin with the latest International Monetary Fund (IMF) projections for global growth this year and next.  In their latest edition of “World Economic Outlook,” the IMF has projected global growth at a 3.5% rate this year – unchanged since their previous (January) outlook. However, there were some changes in the national and regional outlooks.  The U.S. growth rate was lowered from 3.6% to 3.1%, which is still pretty ambitious, considering recent downbeat statistics.

The world’s #2 economy, China, is expected to slow from 7.4% growth in 2014 to 6.8% this year and then to 6.3% in 2016 – but that’s still double the U.S. growth rate and the envy of the rest of the world.  By contrast to China, India’s growth rate was raised from 6.3% to 7.5%, surpassing China at long last.

Other positive revisions included the Eurozone’s growth rate, which was increased from 1.2% to 1.5% and Japan’s growth rate, raised from 0.6% to 1.0%. In both cases, their currencies provided the key to rising growth: Sharp drops in the euro and yen make exports from Japan and Europe more competitive.

China’s Growth “Slows” to 7% in the First Quarter

China’s growth rate for the first quarter of 2015 was just announced last week at +7.0%.  While still a large number, 7% is China’s slowest annualized growth rate since 1990, after the Tiananmen Square riots.

China Gross Domestic Product Annual Growth Rate Chart

Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.

China’s rate of growth will inevitably slow down, due to the law of big numbers.  From 1991 to 2010, China averaged just over 10% per year in real GDP growth.  Double-digit GDP increases are possible in a poor nation embarking on rapid industrialization, but a $10 trillion economy cannot continue to grow by double digits, or even by 7% a year.  A drop to 5% or slower growth is to be expected, and that is healthy.

Chinese Lake ImageJonathan Garner, chief Asia and Emerging Market Strategist for Morgan Stanley, says: “China has begun a new phase of its development. With slower GDP growth and a rising share of consumption/services activity, China’s economy is starting to look like that of Japan 40 years ago and that of Korea 20 years ago.” If you remember that story, Garner is implying that China can grow into the kind of per capita wealth now enjoyed by Japan, Korea, Hong Kong, Singapore, and other advanced Asian economies.  Currently, China is low in per capita GDP, since its $10 trillion GDP is spread among 1.37 billion people.

I think of Asia as a family of nations seeking levels of competitive advantage on an economic ladder.  Japan was the first low-cost producer of manufactured goods after World War II.  They rapidly grew rich and passed the manufacturing baton on to the Four Tigers (Hong Kong, Singapore, South Korea, and Taiwan).  Per capita income in those Tigers is now high, with their manufacturing base mostly high tech.

In the last 30 years, China has been a manufacturing superpower, but their labor costs have risen to the point where Made in Vietnam might replace Made in China.  Meanwhile, Chinese education (mostly in our universities) has turned them from a Sweat Shop to a Think Tank.  As Hank Paulson puts it in his new book, China’s “high-speed rail lines and space-age airports stand in sharp contrast to our own increasingly creaky infrastructure.”  Yes, we’re seeing a decline in China’s Purchasing Managers’ Index (PMI), but if China transforms itself from a primarily manufacturing economy to an innovative knowledge-based goods and services provider, maybe the PMI surveys won’t seem as all-important as they once were.

Are China’s GDP figures reliable?  Morgan Stanley’s Garner says that “our bottom-up analysis indicates progress is more advanced than official GDP statistics suggest.” Specifically, Garner looks at “New China” versus “Old China” growth rates. “Old China” implies mass production of consumer goods. “New China” includes health care, information technologies, and a burgeoning consumer sector. Earnings from “New China” activities are growing at an 8.2% compound annual rate since 2008, while earnings from “Old China” activities (materials, energy, and industrials) declined at a 2.3% annual rate since 2008. You can look at China’s commodity imports and say the old China is slowing, but the new China is rising up.

To Understand China, You Need to SEE China

On this date 19 years ago, I landed in Shanghai, China, with a group of 32 subscribers to John Dessauer’s Investor’s World, a financial newsletter I helped edit and publish from 1993 to 2009.  Our guide and translator was Keren Su of China Span.  My first memory from that visit was sitting in a Shanghai traffic jam for an hour while Russia’s Boris Yeltsin and China’s Jiang Zemin drove to the airport.  (The New York Times article that Sunday, April 28, 1996, was headlined, “On Shanghai Visit, Yeltsin Finds it is Russia’s Turn to be Envious,” calling Shanghai “a showcase for China’s remarkable economic growth.”)

Chinese River ImageOur three-week tour was carefully designed to see the “Real China,” in a series of historical time capsules encompassing China’s growth from poverty to major league economic status.  For that reason, we did not go to Beijing, the Great Wall, or visit the terra cotta soldiers at Xi’an.  We spent the first week in Guizhou Province, the poorest province of China, including trips to rural towns never before seen by Westerners.  (My take-home memory from that week was the eagerness of so many school children to learn English!)

Our second week was spent in Sichuan Province, the most heavily populated province, including a few days in two megalopolises of 10 million each – Chengdu and Chongqing.  The takeaway there was how much these Sichuanese revered Americans for saving them from the ravages of the Japanese invasion in World War II.  Our Flying Tigers (even before Pearl Harbor) defended their inland capital from invasion. (We toured the Joseph Stilwell museum, where the U.S. flag is raised to the same height as China’s flag.)

Our final week in China coincided with the 30th anniversary of the launch of the decade-long nightmare called the Cultural Revolution (on May 17, 1966).  Westerners will never understand what hundreds of millions of Chinese suffered in that decade, and how determined they are never to repeat that sad history.

My problem with most of the China pessimists is that they have not seen the energy of the place.  China is driven by 1.37 billion people – human capital. At first, that meant sheer brawn, masses of muscles.  Now, it means highly-educated scientists and engineers.  Deng Xiaoping started small in late 1978 with freedom for farmers to grow and keep some crops, then capitalism crept in, stage-by-stage into other aspects of the economy.  The Chinese have long been noted for their capitalist instincts, despite the Communist veneer of the government. The overseas Chinese tend to run the economies of the most prosperous Asian nations.

In our final days on the Bund in Shanghai, we toured the new (then-empty) skyscrapers of Pudong, across the Huangpu River from Shanghai.  Pudong is a former rice paddy field that Beijing wanted to turn into a major international business center, but on that day it looked like a ghost town.  For most of the 1990s, Pudong looked like a case study in the failure of central planning. Office space was offered free, but there were few takers.  If you just agreed to keep the lights on, you got a free office.  Due to the glut of empty office space, real estate values in Shanghai collapsed.  However, Pudong is now a thriving industrial area with a deep-water, tax-free port; a high speed train; and a new airport (and Shanghai is prospering, too).

Europe will get over its Long, Drawn-out Greek Divorce

Compared to the drama in China, Greece seems like comic relief. Greece is small potatoes in Europe.  The Greek GDP represents just 1.3% of the Eurozone GDP.  If Greece exits the Eurozone, its bond holders will no doubt be hurt, but they already know that.  As Ivan Martchev has been reporting in Income Mail, Greek interest rates are in nosebleed territory, reflecting high risk, so… let them default.

Last weekend in Riga, Latvia, the Eurozone finance ministers met to consider what to do if no Greek deal can be reached by June 30.  The Greek exit (Grexit) is becoming more of a likelihood, and it’s about time.  There are requirements for membership in any club, and as long as some scofflaw nation flouts all the normal conventions of financial accountability, the time for a political divorce must finally arrive.

Just to refresh your memory, this crisis began five years ago and has been revived almost every spring since then. The first Greek protests began on May 5, 2010, resulting in three deaths and a 110 billion euro bailout.  The 2011 Greek crisis began on May 25, resulting in 270 injuries and another bailout, while the 2012 Greek riots began April 4, leap-frogging to Italy, Spain, and Portugal, causing a Eurozone recession.

Today, Europe is healthier. The weak euro is boosting European exports, while the strong dollar will no doubt encourage a lot of Americans (and others) to visit Europe this summer, further boosting Eurozone balance sheets.  Friends touring Europe report on huge crowds of tourists throughout Europe – in April!

European Central Bank ImageECB President Mario Draghi said on April 15 that “we expect the economic recovery to broaden and strengthen gradually. Domestic demand should be further supported by ongoing improvements in financial conditions, as well as by the progress made with fiscal consolidation and structural reforms. Moreover, the lower level of the price of oil should continue to support households’ real disposable income and corporate profitability and, therefore, private consumption and investment. Furthermore, demand for euro area exports should benefit from improvements in price competitiveness.”

The latest economic data backs him up. In February (the latest month reported), industrial production rose 1.6% year-over-year, the fastest growth rate since July. Eurozone exports rose 4.2% (year over year) in February. Automobile registrations in the EU rose to 11.9 million in the 12 months through March 2015, up 9% from the mid-2013 lows.  These and other indicators tell us that Europe is coming back to life.

April 28, 1942 – the Lowest Dow Close of the Last 81 Years!

It was on this date in 1942 that the world seemed about to end. On April 28, 1942, the Dow bottomed out at 92.92, its lowest close since 1934. (It’s now the lowest Dow close of the last 81 years.)  As I mentioned here last week, the Dow opened 1940 at 152.83, but when Hitler invaded Western Europe on May 10, the Dow had already dropped to 117.  After Pearl Harbor, the Dow dropped under 100 on March 11, 1942, and stayed under 100 every day from April 9 to May 26, 1942, when news on the war front was bleakest.

Santa Barbara Beach ImagePearl Harbor struck after 12 years of a Great Depression and a murderous Dust Bowl, with the jobless rate above 10% for all of the 1930s, peaking at 25%.  After Pearl Harbor, we justifiably feared a Japanese invasion of our West Coast.  Santa Barbara was hit by a Japanese submarine attack on February 23, 1942.  By early April, American forces surrendered at Bataan in the Philippines. On May 6, U.S. forces gave up Corregidor, followed by the ghastly Bataan Death March.  No wonder the Dow was mired under 100.

But there were some seeds of hope.  On April 18, General Jimmy Doolittle’s B-25 bombers attacked Tokyo, and on June 6, U.S. forces scored a surprise victory at Midway.  There was light at the end of the tunnel.  (The Dow stayed above 100 every day after Midway and peaked at 212.50 on May 29, 1946.)

If you want to see a time when Europe and Asia were in deep trouble, look to history – not current events.

Stat of the Week:

“Core” Durable Goods Orders Decline in March

by Louis Navellier

On Friday, the Commerce Department announced that durable goods orders surged 4% in March, which was a pleasant surprise; but it turns out that virtually all of the durable goods’ surge was due to higher orders for commercial airplanes (up 30.6%); military hardware (up 17%); and vehicles (up 5.4%).  “Core” durable goods orders, excluding commercial planes and military hardware, declined 0.5% in March.  Core capital goods declined 0.4%, while the shipments of core capital goods also declined 0.4% in March.

Furthermore, business investment declined 0.5% in March for the seventh straight month.  Due to these details in the durable goods report, economists continue to revise their first-quarter GDP forecast lower.

Germany Accelerates, China Slows Down

Some of the problems with U.S. durable goods orders are related to a strong U.S. dollar hindering manufacturing output, as well as the West Coast Port labor dispute.  On the other hand, in Germany, manufacturing activity is booming, aided by a weak euro.  On Friday, Germany’s Ifo business climate index rose to 108.6 in April, up from 107.9 in March, which is the highest level 11 months.  This level of business optimism in Germany is expected to lead to a steady economic rebound in the Eurozone in 2015.

On Wednesday, HSBC released its preliminary China Purchasing Managers Index (PMI), which measures manufacturing activity.  The preliminary HSBC China PMI slipped to 49.2 in April, down from 49.6 in March, reaching its lowest level in a year.  HSBC noted that overall production actually rose in April as new export orders rose.  Although any reading below 50 signals a contraction, the Chinese New Year is notorious for distorting China’s economic statistics early in the year. Normally, by April, these seasonal distortions diminish a bit, but China’s manufacturing sector appears to be struggling.  The official China PMI is typically higher than the HSBC China PMI, so that report will provide further insight into China’s manufacturing activity. In the meantime, China’s export orders are rising, which is a positive trend.

Existing Home Sales Rise 6.1%, but New Home Sales Fall 11.4%

BrownStone Apartments ImageThe most positive economic news last week was that the National Association of Realtors announced that existing home sales rose 6.1% in March to an annual rate of 5.19 million, the fastest growth rate in 18 months.  This was much faster than economists’ consensus estimate of a 5.08 million annual sales pace and February’s revised annual pace of 4.89 million.  Median home prices have risen a very healthy 7.8% in the past year to $212,100 through March.  Although income growth remains lower than annual home appreciation, low mortgage rates help affordability.  Additionally, aggressive buying by foreigners in key markets, like Los Angeles, Miami, New York City, San Francisco, and Seattle, are also boosting median home values.  Much of the foreign capital pouring into the housing market is apparently due to capital flight from weak currencies and negative interest rates, as well as China’s ongoing corruption crackdown.

In contrast, the Commerce Department reported that new homes sales declined 11.4% in March to an annual pace of 481,000, which is the slowest pace since last November.  However, new home sales in February were revised higher to an annual pace of 543,000, up from an initial estimate of 539,000.  In the past year, new home sales have risen approximately 19%, so the monthly variations are not a big deal. 

The March new home sales rate for single-family homes fell 33% in the Northeast, 16% in the South, and 3% in the West, but rose 6% in the Midwest.  It is very obvious that severe winter weather delayed the construction of new homes in the Northeast, so I expect that new home sales will surge in April as builders catch up with strong overall demand for new homes.  The upshot of these and other downbeat economic statistics released so far this year is that the Fed will likely NOT raise interest rates.


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It should not be assumed that recommendations made in the future will be profitable or will equal the performance of the securities in this list. Click here to see the preceding 12 month trade report.

Although information in these reports has been obtained from and is based upon sources that Navellier believes to be reliable, Navellier does not guarantee its accuracy and it may be incomplete or condensed. All opinions and estimates constitute Navellier's judgment as of the date the report was created and are subject to change without notice. These reports are for informational purposes only and are not intended as an offer or solicitation for the purchase or sale of a security. Any decision to purchase securities mentioned in these reports must take into account existing public information on such securities or any registered prospectus.

Past performance is no indication of future results. Investment in securities involves significant risk and has the potential for partial or complete loss of funds invested. It should not be assumed that any securities recommendations made by Navellier. in the future will be profitable or equal the performance of securities made in this report.

Dividend payments are not guaranteed. The amount of a dividend payment, if any, can vary over time and issuers may reduce dividends paid on securities in the event of a recession or adverse event affecting a specific industry or issuer.

None of the stock information, data, and company information presented herein constitutes a recommendation by Navellier or a solicitation of any offer to buy or sell any securities. Any specific securities identified and described do not represent all of the securities purchased, sold, or recommended for advisory clients. The reader should not assume that investments in the securities identified and discussed were or will be profitable.

Information presented is general information that does not take into account your individual circumstances, financial situation, or needs, nor does it present a personalized recommendation to you. Individual stocks presented may not be suitable for you. Investment in securities involves significant risk and has the potential for partial or complete loss of funds invested. Investment in fixed income securities has the potential for the investment return and principal value of an investment to fluctuate so that an investor's holdings, when redeemed, may be worth less than their original cost.

One cannot invest directly in an index. Results presented include the reinvestment of all dividends and other earnings.

Past performance is no indication of future results.

FEDERAL TAX ADVICE DISCLAIMER: As required by U.S. Treasury Regulations, you are informed that, to the extent this presentation includes any federal tax advice, the presentation is not intended or written by Navellier to be used, and cannot be used, for the purpose of avoiding federal tax penalties. Navellier does not advise on any income tax requirements or issues. Use of any information presented by Navellier is for general information only and does not represent tax advice either express or implied. You are encouraged to seek professional tax advice for income tax questions and assistance.

IMPORTANT NEWSLETTER DISCLOSURE: The performance results for investment newsletters that are authored or edited by Louis Navellier, including Louis Navellier's Growth Investor, Louis Navellier's Breakthrough Stocks, Louis Navellier's Accelerated Profits, and Louis Navellier's Platinum Club, are not based on any actual securities trading, portfolio, or accounts, and the newsletters' reported performances should be considered mere "paper" or proforma performance results. Navellier & Associates, Inc. does not have any relation to or affiliation with the owner of these newsletters. There are material differences between Navellier & Associates' Investment Products and the InvestorPlace Media, LLC newsletter portfolios authored by Louis Navellier. The InvestorPlace Media, LLC newsletters and advertising materials authored by Louis Navellier typically contain performance claims that do not include transaction costs, advisory fees, or other fees a client may incur. As a result, newsletter performance should not be used to evaluate Navellier Investment Products. The owner of the newsletters is InvestorPlace Media, LLC and any questions concerning the newsletters, including any newsletter advertising or performance claims, should be referred to InvestorPlace Media, LLC at (800) 718-8289.

Please note that Navellier & Associates and the Navellier Private Client Group are managed completely independent of the newsletters owned and published by InvestorPlace Media, LLC and written and edited by Louis Navellier, and investment performance of the newsletters should in no way be considered indicative of potential future investment performance for any Navellier & Associates separately managed account portfolio. Potential investors should consult with their financial advisor before investing in any Navellier Investment Product.

Navellier claims compliance with Global Investment Performance Standards (GIPS). To receive a complete list and descriptions of Navellier's composites and/or a presentation that adheres to the GIPS standards, please contact Navellier or click here. It should not be assumed that any securities recommendations made by Navellier & Associates, Inc. in the future will be profitable or equal the performance of securities made in this report. Request here a list of recommendations made by Navellier & Associates, Inc. for the preceding twelve months, please contact Tim Hope at (775) 785-9416.

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