Stocks are higher despite new attacks in the Strait of Hormuz. Bonds and MBS are up.
The week ahead will be dominated by the jobs report on Friday. We will also get ISM data and construction spending. We will also have speeches from Beth Hammack, Neel Kashkari, Michael Barr and Tom Barkin.
The US Navy is quietly guiding ships through the Strait of Hormuz. The Navy is having the ships “go EMCON” or not transmit data during the passage, which is meant to not tip off the Iranians that someone is coming through. This makes it more difficult for shipping trackers to know who is coming through. Regardless, this should help increase petroleum supplies for the rest of the world and put additional pressure on oil prices.
“Though U.S. forces are not escorting, we continue to communicate and coordinate with commercial ships seeking to freely and safely transit the Strait of Hormuz, a critical international corridor for regional and global economies,” Capt. Tim Hawkins, a Central Command spokesman, said in a statement on Saturday.
Berkshire Hathaway is buying homebuilder Taylor Morrison for $6.8 billion in cash. The $72.50 price works out to be a 24% premium to Friday’s closing price. The homebuilders have gone nowhere for the past year as hopes of lower rates have been dashed.
Below is a chart of the S&P SPDR homebuilder ETF. The builders are an early stage cyclical – the type of stock that performs best when the economy is coming out of a recession. Given that the homebuilders are sitting on a glut of inventory, it is an odd time to buy one.
Berkshire is paying 11.3x expected 2027 earnings, which isn’t an unreasonable multiple given that gross margins for the sector are on the low side as builders cut prices to move the merchandise.
Rent prices continue to climb, despite rising interest rates and flatlining real estate prices. The median asking rent rose 4.5% in the fourth quarter compared to a year ago.
