Today’s Daily Angle comes from Wikinvest Wire member Tim Iacono of TimIacono.com. You can read the full article on Tim’s blog.

The Commerce Department reported(.pdf) that housing starts and permits for new construction both rose more than expected last month, however, similar to recent data on new home sales that just sunk to new all time lows, it doesn’t take much for the homebuilders’ leading indicators to show improvement from current levels.

Housing starts rose 1.6 percent in March to an annualized rate of 626,000 units and are now more than 20 percent higher than a year ago. Permits for new construction rose to their highest level in 17 months, up 7.5 percent to a rate of 685,000, a full 34 percent higher than a year ago when this data series was making a bottom.

Today’s Daily Angle comes from Wikinvest Wire member Asset Prime. You can read the full article on the AssetPrime blog.

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According to the US Census Bureau, January housing starts were up from December, as well as January 2009. Specifically, according to the Bureau’s report:

Privately-owned housing starts in January were at a seasonally adjusted annual rate of 591,000. This is 2.8 percent (±11.5%) above the revised December estimate of 575,000 and is 21.1 percent (±12.3%) above the January 2009 rate of 488,000.

It appears I was wrong with my initial assessment and the housing market indeed showed signs of picking up in January, potentially contributing to the Lumber run-up of the last month. However, the actual meaning of the housing start increase is slightly more complicated than the above quoted numbers and, I would make the case, much less meaningful than reports are making it out to be. Let me explain.

First, regarding the meaning of the number itself, the 2.8% increase in housing starts is an increase in the seasonally adjusted housing start rate. Because the US Housing market is highly seasonal (i.e. more building projects begin in the spring and summer months) examining trends on a purely month to month basis is not meaningful when analyzing long-term trends. Housing starts will almost always go up in March, and they will almost always go down in October. As such, the US Census Bureau developed a statistical method called X12 (and its predecessor X11) used to remove the expected seasonal effects of this type of data. The best article I could find describing the algorithm is, oddly enough, onan old Federal Reserve Bank of Dallas webpage, but suffice to say the algorithm is designed to remove expected seasonal effects for a given data series, thereby showing the actual overarching trend. Thus, the published number is a point estimate for what the current annual housing start rate is; in this case, 591,000 housing units started per year. As with any statistical analysis, there is a margin of error to that point estimate, and the margin is given right in the reporting sentence. “This is 2.8 percent (±11.5%) above the revised December estimates…” Wait a minute, 2.8% ±11.5%? That should give us a range of –8.7% to +14.3% and, if I’m not mistaken, –8.7 ≤ 0 ≤ 14.3. As any statistician can tell you, a confidence range that includes zero is not statistically significant at all. And the Census Bureau uses a 90% confidence interval in their calculations, so it’s not as though they’re being overly conservative with their estimates and confidence ranges. In other words, this number is fundamentally meaningless. In fact, if you actually bothered to read the report (as apparently no one in the media did) you’d see that the “±11.5%” figure is asterisked with a footnote that reads as follows:

“90% confidence interval includes zero. The Census Bureau does not have sufficient statistical evidence to conclude that the actual change is different from zero.”

So, in other words, there is no evidence that there was a change in the seasonally adjusted rate WHATSOEVER. This number is meaningless. Moving on, despite the lack of evidence for a month over month change, the increase in rate from January last to now does appear to be truly significant, with a confidence interval of 21.1 percent ±12.3% (between 8.8% and 33.4%) for the change from January 2009’s seasonally adjusted rate. (Note that that range does not cross zero.) The report also lists the raw housing start numbers (those that haven’t been seasonally adjusted). Here are the highlights (all numbers pulled from the aforementioned report):

• 2008 Year in full: 905,500
• 2009 Year in full: 554,500
• January 2009: 31,900
• November 2009: 42,300
• December 2009: 37,100
• January 2010: 37,800

The takeaway from all of this is that the housing market has improved significantly since 2009. In fact, using either the December or January estimate for the seasonally adjusted housing start rate yields a significant improvement over the 2009 total figure. However, there is not sufficient evidence to suggest that any further progress has been made over the last two or three months, the numbers (both seasonally adjusted and raw) do not demonstrate sufficient statistical significance to draw that conclusion. Starker still, is that the market today remains at about 65% of where it was in 2008.

How did the Lumber market respond to all this? Somehow, despite the hype, prices moved mostly sideways; either this information was already priced in, or it doesn’t really exist.

Full Disclosure: As of writing, author is short May 2010 Lumber (LBK10)

Today’s Daily Angle comes from Wikinvest Wire member Tim Iacono of TheMessThatGreenspanMade.Blogspot.com.Read the full article here.

It appears there was good reason for Monday’s dimming confidence by homebuilders - according to today’s report(.pdf)from the Commerce Department, housing starts and permits for new construction have flattened out at severely depressed levels.

Housing starts increased modestly, from an annual rate of 587,000 in August to 590,000 in September, however, the gain would not have occurred if not for a downward revision to the August data from 598,000.

In a way, this is reminiscent of a few years ago when there were huge downward revisions to prior data and, each month, gains would be reported when comparing new unrevised data to previous data that had been revised, all part of a clear and persistent downward trend.

The good news today is that, as shown clearly in the chart above, there’s not much room to move down from current levels of home building that are still about 75 percent below the 2005-2006 peak, remaining near all-time lows. From year-ago levels, housing starts are down 28.2 percent.

Permits for new construction fell 1.2 percent in September, from an annual rate of 580,000 to 573,000 and as is the case for housing starts, have clearly flatlined over the last five months, a point that should be quite clear to see in the enhanced image to the right from the larger graphic above.

While this is not necessarily bad news for the housing market in general since, if there’s one thing that we don’t need right now it’s more housing inventory coming onto the market, it is certainly not an indication of a resumption to more normal levels of residential construction that would create a few jobs and boost economic growth.

The downward revisions to previous data and the fact that permits - a leading indicator for new home construction - appear to be weaker than housing starts do not bode well for a sustainable rebound in this sector.

It’s no wonder that home builders are clamoring for an extension and expansion of the home buyers‘ tax credit that, according to news yesterday morning, has had more than its share of fraud.

Somehow, just throwing money at the bursting housing bubble doesn’t seem to be fixing it…

Today’s Daily Angle comes from Wikinvest Wire member Contrarian Profits. You can read the full article on theContrarian Profits Blog.

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What can we tell you about the US stock market that you don’t already know deep in your belly? This is a stimulus rally, pure and simple. It’s one big bet that the government’s funny money will lift up stocks out of mire of the recession… and send them to the moon!

You want to know the really funny thing? Traders and investors don’t care! All they care about is that Washington has Wall Street’s back. And that the Fed and the Treasury can keep on producing dollar bills like Willy Wonka produced Everlasting Gobstoppers.

In our eyes it’s no different to Bernie Madoff’s little scam. Big Wall Street players shoved money into Bernie’s ponzi scheme knowing that the profits were ginned up somehow. But they didn’t care. They knew it didn’t really matter how Madoff was producing his profits; it just mattered that he was producing them. They knew that some poor schmuck down the road would get clobbered.

And that’s how it’ll be with this rally. When it seems like stocks are going up and will never come down… and the networks, giddy with excitement, can do nothing but praise God for the coming V-shaped recovery… and when every last mom and pop investor is sucked in… it will all come crashing down.

It may not be quite as spectacular as the end of the 48% 1930 bear market rally… But it will be ugly…

Of course, there are always pundits willing to give sensible reasons why stocks are defying gravity. Right now, there are three eminently sensible reasons being splashed around the mainstream press (hat tip, David Rosenberg):

Eminently sensible reason #1: Bernanke reappointed

We really fail to see how it could possibly be that the same central bank official, who, over a span of a decade, presided over two massive bubbles and their busts, can be viewed as being a positive force for the markets. Perhaps there is some solace in knowing that the same person who created this awesome and complex $2 trillion Fed balance sheet will be around to dismantle the largesse since he’s probably the only one that knows how.

Eminently sensible reason #2: The first monthly increase in the Case-Shiller home price index

As for the second point, despite jubilation about a recent upswing in the Case-Shiller Index, there is a difference between a trendline and the noise around that trendline. Home prices are down a massive 31% from their peak and have been in a vertical-down pattern for nearly three years. Perhaps a respite is in order, but with the true underlying unsold inventory near 12 months’ supply, which is double what would typify a balanced housing market, it would seem like wishful thinking that we have suddenly achieved a fundamental low in residential real estate values (especially at the high end).

Eminently sensible reason #3: The seven-point jump in consumer confidence in August

With regard to point number three, we welcome any rise in consumer confidence but an honest appraisal of the data would show that 54.1 is still a very depressed level. In fact, the average index level during recessions is 73.0 – August’s reading was nearly 20 points below that. So, if the recession is indeed over and done, somebody forgot to tell this 70% chunk of GDP otherwise known as the consumer.