Brent Nyitray
Fairlington Blade
Let the mutherfuker burn!
jnc4p
Kevin S. Willis
Michigoose
lmsinca
markinaustin
Arcanaut
novahockey
quarterback
ScottC
yellojktVital Statistics:
| Last | Change | Percent | |
| S&P Futures | 1289.5 | 13.9 | 1.09% |
| Eurostoxx Index | 2351.9 | 65.460 | 2.86% |
| Oil (WTI) | 103.13 | 1.820 | 1.80% |
| LIBOR | 0.5795 | -0.001 | -0.17% |
| US Dollar Index (DXY) | 80.776 | -0.212 | -0.26% |
| 10 Year Govt Bond Yield | 2.00% | 0.04% |
Markets are rallying worldwide on no real news. Alcoa kicked off earnings season last night with a loss that was more or less expected. Sales were higher than forecast. Alcoa also forecast global demand will drop to 7% from 11% last year on China weakness. Regardless, the stock is up this morning. Lennar and JP Morgan also report this week. I am interested in what Lennar has to say – construction has been the weak link in this recovery, and some of the other homebuilders had been relatively optimistic about 2012. If housing construction starts picking up, that is a great sign that the recovery is picking up steam.
The markets are rallying partly on hope that China will ease. China’s hard or soft landing may turn out to be the next wall of worry after Europe. By all accounts, their real estate bubble has burst and Chinese savers are heavily exposed to real estate. China’s capital controls mean that Western banks don’t have much exposure to China’s banks, but they do have exposure to the big UK/HK giants HSBC and Standard Chartered. At any rate, the loss of Chinese demand is the last thing the global economy needs at the moment, though it will be music to the Fed’s ears as it should lead to lower commodity prices.
Filed under: Uncategorized |
All Things in Moderation 
Brent, John and anyone else interested, I found this piece which is relevant to commodities, most particularly oil, and thought I'd link it in case it's valuable to you guys in some way. I don't know who this guy is, or if he's correct because I barely understand it, although I waded through the entire piece glutton that I am.Current PositionIf you believe the investment banks – who all have oil funds to sell to the credulous – Far Eastern demand is holding up, supplies are tight, and stocks are low, so prices are set to rise to maybe $120 or above in 2012, even in the absence of fisticuffs involving Iran.I take a different view. I see real demand – as opposed to financial demand and stock-piling, such as in the copper market – declining in 2012 as the financial crisis continues at best, and deepens at worst, particularly in the EU. Stocks are low because bank financing of stock is disappearing as banks retrench, and it makes no sense for traders to hold stocks if forward prices are lower than today’s price.As for supplies, US crude oil production is probably higher, and consumption lower, than widely appreciated. Elsewhere, there is plenty of oil available now that much of the Dark Inventory has been liquidated, and this liquidation was probably why in November 2011 we saw the highest Saudi monthly deliveries in 30 years.Finally, we see North Sea oil being shipped – for the first time since 2008 – half way around the world to find Far East buyers. We also see Petroplus, a major independent Swiss refiner, crippled by inflated crude oil prices, and shutting down three refineries because demand for its products has disappeared, and it can no longer finance crude oil purchases now that banks have pulled its credit lines.In my world, refineries closed due to reduced demand for their products imply a reduction in demand for crude oil: but not, apparently, on the Planet Hype of investment banks with funds to sell.History does not repeat itself, but it does rhyme, and my forecast is that the crude oil price will fall dramatically during the first half of 2012, possibly as low as $45 to $55 per barrel.
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Lennar seems to be doing a lot of building here in Florida, so maybe they will have good news later this week.
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Speaking of housing, I missed that mortgage insurance can no longer be written off. I expect that may have some effect on new home sales this year as well.
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David Brooks' column is worth a read today:Where Are the Liberals?"Why aren’t there more liberals in America?It’s not because liberalism lacks cultural power. Many polls suggest that a majority of college professors and national journalists vote Democratic. The movie, TV, music and publishing industries are dominated by liberals.It’s not because recent events have disproved the liberal worldview. On the contrary, we’re still recovering from a financial crisis caused, in large measure, by Wall Street excess. Corporate profits are zooming while worker salaries are flat.It’s not because liberalism’s opponents are going from strength to strength. The Republican Party is unpopular and sometimes embarrassing.Given the circumstances, this should be a golden age of liberalism. Yet the percentage of Americans who call themselves liberals is either flat or in decline. There are now two conservatives in this country for every liberal. Over the past 40 years, liberalism has been astonishingly incapable at expanding its market share.The most important explanation is what you might call the Instrument Problem. Americans may agree with liberal diagnoses, but they don’t trust the instrument the Democrats use to solve problems. They don’t trust the federal government.A few decades ago they did, but now they don’t. Roughly 10 percent of Americans trust government to do the right thing most of the time, according to an October New York Times, CBS News poll.Why don’t Americans trust their government? It’s not because they dislike individual programs like Medicare. It’s more likely because they think the whole system is rigged. Or to put it in the economists’ language, they believe the government has been captured by rent-seekers. "…"You would think that liberals would have a special incentive to root out rent-seeking. Yet this has not been a major priority. There is no Steve Jobs figure in American liberalism insisting that the designers keep government simple, elegant and user-friendly. Sailors scrub their ships. Farmers clear weeds. Democrats have not spent a lot of time scraping barnacles off the state.Worse, in an attempt to match Republican rhetoric, Democratic politicians are perpetually soiling the name of government for the sake of short-term gain. How many times have you heard Democrats from Carter to Obama running against Washington, accusing it of being insular, shortsighted, corrupt and petty? If the surgeon himself thinks his tools are rancid, why shouldn’t you? "…"If Democrats can’t restore Americans’ trust in government, it really doesn’t matter what problems they identify and what plans they propose. No one will believe in the instrument they rely on for solutions."
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Brooks is right to point out dem's shortcomings at "scraping barnacles " of gov't. But he's overstepping to claim 'liberalism' is losing market share. As a word, he's correct. Nut when you poll policy preferences, liberal policy polls better than 'liberalism'. It's a new verse to the same old tune about this being a center-right country. True when you poll the words, but not when you poll the policy.
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"they believe the government has been captured by rent-seekers."Instead of believe, he should have written "know" or "correctly believe"
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A good remembrance of David Broder. New Hampshire: The Broder primaryWhile he caught a fair amount of flack as the epitome of the mainstream media, I suspect he would have had some worthwhile and unique observations of this year's election and primary season.
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Ezra Klein on the prospect of mass refinancing.Mass refinancing: The ‘biggest thing’ Obama can do without Congress Based on what John has linked to from MSNBC recently, I believe this proposal has been overtaken by the idea of having the government back real estate speculators buying up distressed properties to prop up housing prices subsidized by taxpayer guarantees, however they may not be mutually exclusive.
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The theory I've been told is that in a neighborhood of predominantly single family dwelling units, you don't want too many renters because that depresses prices.Plus, I hear that some (don't have stats on how many, sorry) who abandon their SFDUs gut the place as they leave and/or the dwellings are ransacked for anything of value later on. That means these dwellings must be remodeled/rehabbed prior to being occupied.So it seems to me that if 'mass refinancing' is to take place, it would be cheaper and probably faster to allow the occupants to be the ones who get first crack at it.
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SFDUs? don't know that one.
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single family dwelling unit.A dwelling not attached to other dwelling units intended to be occupied by a single family. Sorry, it's a data-speak term.
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I work with Medicare. don't ever feel like you have to apologize for using for acronyms.
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The proposal, as described by Ezra Klein (actual Obama policies may vary) seems reasonable given it has some qualification requirements:"Here’s one example: If the White House recess-appointed a friendlier director, the agency could write the rules so that anyone with a loan backed by Fannie and Freddie and current on their payments for six months would be automatically approved for refinancing. Then — and this is crucial — the president could make Americans aware of this fact during the State of the Union and in subsequent public addresses. Fannie and Freddie could send a letter to every eligible homeowner. The combination of easier rules and vastly better publicity would lead many millions of Americans to refinance their loans."but as Ezra notes, there will also be losers, specifically Fannie, Freddie, various investors and the American taxpayer.Also, in order to do this they need to have a "friendly" director of the FHFA, which is the regulator of Fannie and Freddie, who is willing to over look things like statutory fiduciary duty to minimize losses to the taxpayer in favor of the "big picture". Whether the "big picture" is the overall economic recovery or President Obama's reelection chances or some combination of the two, I will leave for the reader to determine.More significantly, this conundrum points to the folly of the entire concept of GSE's in general seeking profit maximizing returns with taxpayer guarantees for some purported larger social benefit.Should we wish to subsidize the housing market, it should be done directly through a government agency such as the FHA which does not have theoretical profit maximizing mission and therefore can adjust policy based on a more transparent cost/benefit calculation.
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The problem is the originator. They still have putback risk, so they will refuse to originate "non-conforming" conforming loans.Won't work
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Brent- Is that why we are hearing about this other reform effort where the government backs private investors. MsJs- I have heard the same thing about rental properties bringing down overall values, but I think that's a bit of a dubious claim. How does a potential buyer know that a house is rented out or not? I suppose you could get some information from a apt/house rental website but that would seem a bridge too far for most buyers and far from comprehensive. A realtor isn't likely to reveal that infromation since it would decrease their commission.I think the underlying rationale is that renters and landlords don't take as good of care as homeowners do. But I live next to renters with a good landlord and their lawn is regularly mowed and the house generally looks much nicer than that unmowed, ugly house next door. It's all about appearances. The other thing is that landlords often split SFDUs into duplexes which I assume would actually harm property values.
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The government is already doing this with the FDIC. The FDIC participates as a co-investor and provides leverage to investors who bid on their non-performing pools.
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ashot: In my area, it's pretty easy to spot the rental homes from the owned ones. I'm glad your experience is otherwise.A landlord's ability to create duplexes out of SFDUs may vary depending on local zoning laws. Or the design of the home. My area is full of 3/2 or 3/2.5 1960s-vintage split-level ranch homes that are virtually impossible to convert.
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