Factory Orders Rise 2.1% In Line With Expectations

Factory orders climbed 2.1% month-over-month in May to $485 billion.

This was pretty much in line with expectations for a 2% rise.

April's reading was revisde up to show a 1.3% rise.

The factory order report gives more complete data on manufacturing than the durable goods report.

This comes after Monday's ISM report showed that manufacturing expanded in June, after a contractionary reading in May.

This also follows on the PMI report that showed manufacturing expanding but at a slower pace.

Here's a summary frome the U.S. Census Bureau release:

"New orders for manufactured goods in May, up three of the last four months, increased $9.9 billion or 2.1 percent to $485.0 billion, the U.S. Census Bureau reported today. This followed a 1.3 percent April increase. Excluding transportation, new orders increased 0.6 percent.

"Shipments, up following two consecutive monthly decreases, increased $4.6 billion or 1.0 percent to $483.6 billion. This followed a 0.7 percent April decrease.

"Unfilled orders, up three of the last four months, increased $8.2 billion or 0.8 percent to $1,004.8 billion. This followed a 0.3 percent April increase. The unfilled orders-to-shipments ratio was 6.21, down from 6.28 in April.

"Inventories, up six consecutive months, increased $0.3 billion to $627.8 billion. This was at the highest level since the series was first published on a NAICS basis in 1992, and followed a 0.1 percent April increase. The inventories-to-shipments ratio was 1.30, down from 1.31."

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DEUTSCHE BANK: These Are The 33 Best Stocks You Can Buy Right Now

REUTERS/John Gress

Traders William Noah (L) and Kevin Statham call out trades in the Corn Options Pit at the CME group in Chicago July 11, 2012,

Deutsche Bank's U.S. Equity Strategy team led by David Bianco are concerned about stock market volatility in the near-term as interest rates rise.

"The S&P should stay above 1525 given tentative signs of 10yr yields stabilizing around 2.5% and unshaken oil prices and Euro," wrote Bianco. "A further near-term jump in yields could spark fears of a surge and dislocate credit, FX, and commodity markets, but this is not likely."

However, he continues to be bullish on the long-run. He sees the S&P 500 at 2,000 by the end of 2015.

With this framework in mind, Bianco and his team offer 33 buy-rated stocks on his latest "What To Buy Now" list.

Each have a market capitalization over $10 billion, a price-earning ratio on 2013 EPS below 20, 2013 EPS growth above 5 percent, and a net debt to market cap ratio below 30 percent (excluding Financials).

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The Saddest Gold Fund Investor Letter You Will Ever Read

Gold, gold miners, everything gold is in the dumps, and unfortunately for some money managers, the onus is on them to explain why they went all in on the commodity, and why it's performing so horribly.

Their investors still need to get that periodic letter.

Business Insider obtained a copy of one such letter dated June 30th, 2013. The money manager's fund, a Florida-based "long/short value" fund that is focused on equities and commodities, lost 68.45% in Q2 2013.

The letter notes that the fund's net exposure is "fully invested in gold stocks."

From the letter:

Here is the problem. The oldest daily gold stock index started in December 1983. If you look at the older, weekly gold stock data, which starts in December 1938, there were plenty of instances when the 1-month RSI readings went lower than February 20 and gold stocks continued to go lower.

While one may think that 29 years would produce enough data to make for a robust indicator, the problem is commodities have 30 year cycles. The last major commodity top was in 1980. So the 1983 data does not even cover a full commodity cycle. While this seems obvious in retrospect, it did not become glaring obvious that something was amiss until the precious metals complex crashed in mid-April.

The daily 1983 data was downgraded and the more stress-tested 1938 data was analyzed more thoroughly. At the April 17 low, even the 1938 data was indicating gold stocks were roughly in the 0.9% percentile with respect to being oversold. So it seemed like a good idea to buy even more. Well, by the end of June, gold stocks were in the 0.1% oversold percentile.

In summary, there were many indicators based on 1983 data in February, March and early April that were at all-time extremes. This made the risk look negligible. However, the 1938 data does not give up “all-time” extremes so easily. The next time around the oldest available data will be utilized. So this particular problem should be rectified Ianthe future. We are now at the point where every time gold stocks were this oversold (yes since 1938), the downside risk was quite minimal. The upside potential from here will not be mentioned. The numbers are so high that doing so would strain credibility.

Incomplete data set ... whaddayagonnado?

The fund remains committed to maximizing annualized return, so chins up.

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GOOD NEWS, HOUSE SELLERS! Panic About Mortgage Rates Is Driving Prices Higher

Freddie Mac

CHICAGO (Reuters) - If you're weary of watching the stock and bond market get dyspepsia over the Federal Reserve's possible pullback of its easy money policy, turn your gaze to the U.S. home market. Rising interest rates could be a catalyst to boost sales and prices.

In January, the average 30-year mortgage rate, as tracked by Freddie Mac, was 3.34 percent. In the most recent survey, the rate jumped to 4.46 percent, up more than half a percentage point from the week before.

While that is still a bargain by historical standards - the benchmark rate averaged about 8 percent in 2000 - the summer buying season combined with the possible end of the Fed's easing policy will move millions of buyers into the home market.

Those who are still on the fence about buying a home will be worrying that rates will soar higher. Mortgage rates are still relatively low, so "fear of regret" will push them into purchasing.

Overall, the outlook for U.S. housing continues to improve. U.S. home prices posted the biggest gain in seven years in April, according to CoreLogic, up 12 percent from April a year ago.

Prices also climbed 12 percent year-over-year for the 20 major cities tracked by the S&P Case-Shiller Home Price Indices during that month. Pending home sales hit a six-year high in May, according to the National Association of Realtors, the real estate trade association.

Tight supply and pent-up demand have nudged buyers into the market. Higher mortgage rates, which have shot up over the past month, are also motivating buyers to make bids and close sales.

Even more potential buyers may come off the fence: At the current pace of economic and job growth, mortgage rates could hit 6 percent next year, which could spark even more sales, according to Richard Barrington of moneyrates.com.

Not every housing market will experience this upswing, though. Prices may not have bottomed out in some areas.

BEST MARKETS FOR APPRECIATION

Ideally, the sweet spot for home gains is in a market with robust job growth, healthy inventories and low foreclosure rates. Here are some of the leading markets in that category, according to Local Market Monitor, a real estate information service:

San Antonio, Dallas, Houston and Austin, Texas - Population growth in Texas is more than double the national average, thanks to ample job growth, climate and the energy-industry boom. Houston, San Antonio, Austin and Dallas-Fort Worth all ranked among the country's 10 fastest-growing cities, according to the Census Bureau.

Homes in the Austin area, for example, have seen nearly 10 percent appreciation in the last three years and 4 percent in the last year, according to Local Market Monitor. The city has experienced almost 10 percent population growth in the last three years. Like many Texas markets, Austin wasn't impacted by the bubble and has low unemployment, of 5 percent.

Provo, Utah - Provo's healthy economy is fueling job growth, which has risen 5 percent in the past year; the unemployment rate is 4 percent. That's translated into strong home price increases: The median home sales price for the area has climbed from about $167,000 last year to $185,000 during the past year through July 1, according to Movato.com, a property information service.

Fayetteville, Arkansas - Benefiting from the nearby headquarters of Wal-Mart, job and population growth are strong. The short-term outlook is good as metro-area unemployment has trended well below national averages in recent years. The jobless rate was 5.4 percent in April, compared to 7.2 percent for the state, according to the Bureau of Labor Statistics.

TROUBLED MARKETS

Several markets are still struggling with high foreclosure rates, which depress prices. They are generally "older manufacturing towns with stagnant or shrinking population and continuing job losses," according to Ingo Winzer, president of Local Market Monitor. "Not surprisingly, home prices in these markets continue to fall." Some noteworthy laggards include:

Providence, Rhode Island - Providence is suffering from no growth, no new jobs and an unemployment rate of 10 percent. As a result, both sales and average listing prices have dropped over the past year, reports Trulia.com, an online real estate service. The number of sales dropped nearly 20 percent year over year through June 19.

Cleveland, Ohio, and Buffalo, New York - Decreasing populations and job losses in these rust-belt cities have hurt housing. These cities experienced several decades of plant closings, and lingering foreclosures hurt prices across the board. Buffalo's median sales price, for example, has dropped from around $80,000 a year ago, to about $63,000, according to Movato.com.

Augusta, Georgia - Population is growing, but jobs are just barely being added. Georgia was a center of subprime lending, and more foreclosures are in store. Even though the number of sales has climbed almost 30 percent, the median sales price is down more than 6 percent through June 19, according to Trulia.

While you may find some relative bargains in areas hardest hit by the housing crash, don't forget that employment and the general economy still play a major role. The housing rebound won't be sustainable if the U.S. lurches into another downturn, which is possible if the Fed's future moves trigger a slowdown.

(The author is a Reuters columnist and the opinions expressed are his own. For more from John Wasik see http://link.reuters.com/syk97s)

(Editing by Lauren Young and Leslie Adler)

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CHART OF THE DAY: The CME Is Making Tons Of Money On The Bond Market Sell-Off

As U.S. Treasuries sell off and yields rise, bond funds are seeing record outflows.

Last week alone, investors pulled $23.3 billion from fixed income funds.

Unlike the fixed income asset managers, though, the Chicago Mercantile Exchange is loving this sell-off.

Crain's Chicago reporter Lynne Marek highlights the link between the CME and rising interest rates:

On May 29, CME logged the biggest trading day of its 165-year-history, with nearly 27 million contracts changing hands. That day a Fed official signaled the central bank's plan to ease its buying of U.S. bonds, which has kept interest rates low. The new tack kicked up market volatility and gave traders a need to hedge interest rates with futures contracts.

CME "stock is very interest rate-sensitive," former CME board member Robert Corvino says. "Volume has exploded."

It may be the case that many investors aren't looking to load up on bonds, given the potential for further losses as the Federal Reserve normalizes policy in the coming months and years – but someone still has to trade them, even on the way down.

Business Insider/Matthew Boesler, data from Bloomberg

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KYLE BASS: If China Doesn't Change, 'We Will Likely See A Full-Scale Recession' Sometime Next Year

Reuters

In a June letter to investors, Hayman Capital's Kyle Bass turned his attention to a new target in Asia, according to Absolute Return.

China, he says could see a "full-scale recession" as early as next year if they do not curb the current pace of the credit expansion.

According to reports from the Wall Street Journal, Chinese officials have been equally worried about reckless lending, and intervened last month in the form of rising rates (which in turn resulted in the recent spate of Chinese bank liquidity crunches).

Bass seems to fear however, that this intervention is not enough. He also said that the People's Bank of China would not be able to ensure the country's growth with easy money because of the "inescapable law of diminishing marginal returns."

From the letter (via Absolute Return):

"The scale and pace of credit expansion in China over the last 5 years is truly staggering. The compounded annual growth of bank assets as measured by the China Banking Regulatory Commission has been 30.8%," Bass wrote. "To give some perspective, a 30.8% compounded annual growth of credit in the U.S. equivalent over 5 years would be an expansion of $33 trillion. This rate of credit growth is three times the total credit system growth experienced in the U.S. at the peak of the bubble in 2006...

"The debt-to-equity ratios of Chinese companies are exploding as they funnel new capital, not into yield returning investments, but into the black holes on their balance sheets that have been created by a slowing growth environment. In the industrial sector, there is even outright deflation as overcapacity finally takes its toll," the letter reads.

"The speed and depth of the Chinese policy response will help determine the severity and duration of this crisis. If the Chinese address the issue quickly and move decisively to rein in credit expansion and accept a period of much lower growth, they may be able to use the government and People's Bank of China's balance sheet to cushion the adjustment in the economy," Bass wrote. "If, however, they continue on the current path and allow this deterioration to reach its natural and logical limit, we will likely see a full-scale recession as well as a collapse in asset and real estate prices sometime next year."

That's a big get for the team China bear.

For more of the letter, you'll have to go to Absolute Return (and become a member)>

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