Why Some States are “Donors” and others are “Donees”

Fix and PL commenters are quick to allege that R states are “donees” and D states are “donors”.  The reality eludes them.  But what is the reality?

In the map above, the deepest green states are the biggest donors and the deepest red states are the biggest donees.

The average state should be light green, that is, a small donor, to cover spending outside the USA.  We should look at the average states, the light green ones, like Texas, last.

We can quickly deal with some of the red states.  MD and VA house much of the federal bureaucracy.  They are understandably donees.  NM and AK have huge native American and national park and national forest burdens.  They are understandably donees.  Notice, btw, that of those first four, only one is reliably Republican.  That always falls on deaf ears at PL.

NJ, an industrialized state with plenty of manufacturing and commerce and limited support from AG subsidies or military bases or national parks or Indian reservations, is an understandable big donor.

I have more trouble understanding IL’s situation.  Like TX, it is big in industry and agriculture. IL should be light green, as far as I can see.   Why is it such a big donor?

Why is WVa such a big donee?  If I had to guess, I would think it was purely the legacy of Robert Byrd, but that is cynical, no?  Why is FL a net donee?  Indians and parks?  Could be the Everglades and Key West and the military are enough to explain it, coupled with AG subsidies.  Or are they counting where the social security checks are going?

I am curious as to y’all’s deep thoughts, this not being either The Fix or PL.

NCAA Men’s Final Four: A Word from Madame Commish

A number of the pundits I’ve read this week seem to think the championship is Kentucky’s to lose.  Ahhh, but tournaments are won one game at a time and today it’s Louisville vs. Kentucky, followed by Ohio State-Kansas.

The two Bluegrass State teams met earlier this season.  In that matchup, Kentucky committed a lot of turnovers and shot badly from the floor, yet still managed to win.  And the Wildcats have played very well during the tournament, averaging 88 points per game and shooting over 50%.  ‘Course, they haven’t met anything like the Cardinals’ defense in the last two weeks, either.  And it’s the Louisville defense that holds the potential for an upset.

The evening’s second game features two solid defenses with rugged playing styles.  Kansas beat Ohio State back in December, but OSU’s key player, Jared Sullinger, didn’t play that day.  Kansas has to stay out of foul trouble and have better accuracy with three-pointers, while OSU needs a balanced offensive attack.  Most of the pundits I’ve read are giving this one to the Buckeyes of OSU.

5 Reasons You Don’t Really Want to Win all that Lottery Money

For the last couple days, I had been planning retirement and trying to figure out just how I was going to spend my share of the winnings from the MegaMillions lottery (I do it with my company pool and my share would be a paltry 11 mil).  Then I see this article on why I don’t want to win it.  So naturally I read it. Here are the 5 reasons why they say I don’t want to win it (go to the article for more details about each):

1) Your friends will take advantage
2) Your relationship could fail
3) You’ll have an increased risk of bankruptcy
4) You’ll have to fight off a host of long-lost family members
5) You’ll be a target for a litany of lawsuits and scams

My thoughts on this are:

1) People I know will take advantage – my friends won’t. If ‘friends’ do, then really, how good a friend are they?
2) According to the example they gave (emotionally unprepared for the enormous responsibility and pressure of winning the lottery, took to gambling and womanizing to deal with the troubles adjusting to his new lifestyle), I have a hard time thinking that either my wife or I would not be able to handle it. It could happen I guess but given the chronic savers we are and the money sense we have, I’m willing to risk this one.
3) The theory is that winners have more credit available to them, use it, and overextend themselves. We are not credit people. Other than mortgage, we have lived debt free, paying off credit cards each month, not spending money we don’t have. I don’t think this is really in our DNA.
4) And? If they were long lost, it’s not like I am going to miss them when they come, are denied and leave.
5) Target of scams? Having been fortunate enough to have my Barrister and Libyian email friends already contact me to send over the fortunes that they have gotten for safe keeping, I feel safe in saying that while I am sure people will try and try more often, I think I am ok with the scam part. The lawsuit part I could see as problematic. Will need to up my liability insurance and probably install security cameras around my house. I should be able to afford those measures however.

To sum it up, I am still ready to win my 11 million this evening and begin retirement.  One may have problems when you are rich but they are a better set of problems than if one is poor.  I will be sure to let you all know if, er, when I win.  The first (and only) round is on me.  Cheers!

Handicapping 2012

How are the markets currently handicapping the 2012 election?
Intrade currently has obama trading at about 60
Sporting Index (A UK spread betting index) has him at 62.
No, you can’t arbitrage the two.

Sporting Index Markets:
Intrade Obama Chart:

Morning Report

Vital Statistics:

Last Change Percent
S&P Futures 1403.9 5.7 0.41%
Eurostoxx Index 2471.7 19.0 0.77%
Oil (WTI) 103.52 0.7 0.72%
LIBOR 0.4682 0.000 0.00%
US Dollar Index (DXY) 78.81 -0.376 -0.47%
10 Year Govt Bond Yield 2.15% -0.01%
RPX Composite Real Estate Index 170.13 0.4

Markets are higher this morning on no major news except for the increase in the European firewall. There is probably an element of end-of-the-quarter window dressing to it as well.

Personal Income came in +.2%, lower than expectations, while Personal Spending increased .8% higher than expectations. Inflation data came in as expected. Overall, no reaction in the futures. Chicago Purchasing Manager, Michigan confidence, NAPM, and some revisions are coming out later this morning.

The NYT notes that Moody’s may lower the credit ratings for B of A, Citigroup, and Morgan Stanley in mid-May. The side effect of this downgrade would be to kill their derivatives businesses, as the lower rating will force them to put up much more collateral against their derivatives books, and force many large buy-side clients to trade elsewhere. This could be the impetus to turn Citi and B of A back into plain old commercial  banks.

Goldman is raising money for a new fund to buy distressed home loan bonds without government backing. The documents state this is a bet on improving fundamentals in U.S. housing. The story also goes on to say that Goldman bid on mortgage bonds from AIG in a Feb 8 auction, and decided to hold the merchandise instead of selling it. Most of these bonds are trading in the 50s. Non-agency MBS have done well this year as credit conditions have eased – enough that some funds are paring their bets.




Morning Report

Vital Statistics:

Last Change Percent
S&P Futures 1394.3 -5.9 -0.42%
Eurostoxx Index 2468.1 -28.6 -1.15%
Oil (WTI) 105.23 -0.2 -0.17%
LIBOR 0.4682 -0.002 -0.32%
US Dollar Index (DXY) 79.244 0.118 0.15%
10 Year Govt Bond Yield 2.16% -0.04%
RPX Composite Real Estate Index 169.77 0.0

Markets are weaker as S&P warns that Greece may have to restructure its debt again and a disappointing report from H&M. Best Buy reported better-than-expected earnings this morning and will close 50 stores.

The third revision to 4Q GDP was released this morning, unchanged from the 2nd revision at 3%.  Initial Jobless claims were slightly higher than expected at 359,000. Bloomberg Consumer Comfort and Kansas City Fed come out later this morning.

Bill Gross of PIMCO told Bloomberg that the Fed will probably concentrate on supporting MBS once Operation Twist ends in June. He referred to a “sterilized twist” where the Fed would buy current coupon MBS and simultaneously repo out the Treasuries. This would cause MBS spreads to tighten. So even if the sell off in Treasuries continues, mortgage rate may not rise as rapidly.

Bloomberg had a good interview with FHFA Acting Director Ed DeMarco regarding principal forgiveness on underwater homeowners. It certainly does not appear that a mass taxpayer-funded principal forgiveness, (or cramdown for investors) is in the cards. FHFA prefers to mod interest and term first in order to make an affordable payment. If they cut the principal and the house increases in value, the borrower gets all of the benefit. If they don’t cut the principal, then taxpayers share in that upside. Ed has been a pinata to the Left who want mass cramdowns.

American borrowers fear the Repo Man over everyone else, at least according to a TransUnion survey cited in the Washington Post. It used to be that the mortgage payment was the first priority, but with foreclosure pipelines so elongated, the car loan now takes priority.

Dealbook has been the go-to place for all things MF Global. Yesterday, regulators held a hearing with several top executives of MF, who took the Fifth. The CFO has apparently offered a proffer statement, which means he is negotiating to talk.

Morning Report

Vital Statistics:

Last Change Percent
S&P Futures 1407.2 0.8 0.06%
Eurostoxx Index 2522.2 -3.0 -0.12%
Oil (WTI) 106.12 -1.2 -1.13%
LIBOR 0.4697 -0.001 -0.21%
US Dollar Index (DXY) 79.086 0.039 0.05%
10 Year Govt Bond Yield 2.21% 0.02%
RPX Composite 169.78 0.2

Markets are flattish after Durable Goods orders, which came in below expectations. February Durable Goods came in at 2.2% vs 3% expectations. Bonds and mortgages are off slightly. June 10-year bond futures are trading at 138 after bouncing off a low of 135-05 last week. Mortgage applications also fell 2.7% for the week ending Mar 23 as the backup in mortgage rates hurt refinancings.

The American Bankers Association released its Real Estate Lending Survey yesterday. The survey of 185 respondents, of which the vast majority are small community banks, said that lending conditions at the end of 2011 are about the same as they were at the end of 2010, with regulatory uncertainty as the main concern. The average delinquency rate fell slightly over 2011.

Is Mark Zandi becoming the Abby Joseph Cohen of real estate and the economy? Seems so. The Washington Post locates a pocket of optimism in real estate, citing Zandi and some Northern Virginia Realtor. Washington DC real estate inhabits a world of its own, so I don’t think it necessarily applies nationwide.

Redwood Trust did another jumbo securitization yesterday, more evidence that the private label market is returning.

Any of the health care / legal experts care to weigh in on the day’s activities?

Ashot here…I’m adding a first person account from yesterday’s arguments. And here’s the link to the audio.

Impressions from inside the courtroom

Mark A. Hall

Wake Forest University

The room was packed and buzzing with excitement. Some people clearly had slept outside last night. Even some of the attorneys general from the challenger states had to stand in line to get in. In the way into the building, I spotted none other than Ken Cuccinelli, attorney general of Virginia and lead party in the Fourth Circuit case. Sitting in my same row in the courtroom was a virtual quorum of the Senate Finance Committee, including Senators Leahy, Baucus, Grassley, and Kerry.

Solicitor General Verrilli encountered some forceful challenges early on in his presentation In particular, Chief Justice Roberts and Justices Scalia and Alito raised concerns about the slippery slope problem, citing examples such as burial insurance, gym membership, and mandatory cell phones to help with police emergencies.

Perhaps one of the most memorable exchanges, and certainly one that will resonate in the media, involved a question from Justice Scalia asking Solicitor General Verrilli to define the market.

JUSTICE SCALIA: Could you define the market — everybody has to buy food sooner or later, so you define the market as food, therefore, everybody is in the market; therefore, you can make people buy broccoli.

GENERAL VERRILLI: No, that’s quite different. That’s quite different. The food market, while it shares that trait that everybody’s in it, it is not a market in which your participation is often unpredictable and often involuntary.

Students of the Court, and of effective rhetoric, know that how issues are framed is critical to how analysis and decisions proceed. Thus, much of the questioning throughout the morning addressed the issue of which of several markets the Court should regard as being regulated: the insurance market, all health services, or the portion of health services the uninsured people are likely to use. As another example of framing, Justice Alito countered the government’s position that the uninsured force others to pay for their care by noting that most people subject to the mandate are required to pay more into the insurance pool than they are expected to use. Justice Roberts also pointedly observed that the comprehensive insurance mandated by the law includes several services that many people never use, such as pediatric care and substance abuse treatment. So, it appears that cross subsidies are in the eye of the beholder.

None of the Justices appointed by Democratic presidents expressed any substantial concerns about the government’s commerce clause position—suggesting that their votes are secure, as has been speculated. Instead, they appeared to rise to the government’s defense. Toward the end of the first hour, Justice Sotomayor crisply defined the government’s three main lines of defense somewhat more clearly than even the Solicitor General had. About 15 minutes into the argument, Justice Breyer spoke up to offer the government some support. He observed that Congress created commerce where none previously existed when it started the Bank of the US, for instance, which Justice Marshall’s opinion in McCulloch v. Maryland famously upheld under the Necessary and Proper clause.

That was the first of two novel arguments Justice Breyer made that I don’t recall reading in the principal briefs. He also pressed several times an argument that should appeal to public health lawyers: what if there were a rampant contagious disease that threatened 10 million lives; couldn’t the government mandate vaccinations? If so, what does it matter that people who are forced to be vaccinated weren’t engaged in any commercial activity?

About 30 minutes in, the Lochner v. New York case was unexpectedly introduced into the arguments, in the form of questioning from Justice Scalia about whether the term “proper” in the Necessary and Proper clause has independent force. Chief Justice Roberts joined in, noting that the Court had earlier expressed concerns about unwieldy substantive due process jurisprudence only with regard to constitutional limits on states’ police plenary powers, and not with respect to limiting the federal government’s enumerated powers.

Tax arguments, on the other hand, received fairly short shrift in all of the arguments. There seems to be very little support, on either side of the Court’s ideological divide, for sustaining the individual mandate as an exercise of Congress’ taxing power. The challengers also reminded the Court that, if this were a tax, they still contend that it is unconstitutional as an unapportioned “direct tax.”

Both Paul Clement for the states and Michael Carvin for the private parties spoke smoothly and quickly. Justices Sotomayor and Breyer were especially active in challenging their positions, with Justices Kagan and Ginsburg also chiming in regularly. Especially notable, I think, were Justice Breyer’s several references to his concern that barring the federal government from mandating individual health insurance in this case might prevent it from responding effectively to a virulent epidemic.

One of my favorite moments, which drew hearty laughs, was this exchange with Justice Kagan: “Well, doesn’t that seem a little bit, Mr. Clement, [like] cutting the bologna thin? I mean health insurance exists only for the purpose of financing health care. The two are inextricably interlinked. We don’t get insurance so that we can stare at our insurance certificate. We get it so that we can go and access health care.”

I listened most attentively to questions for the challengers from the Court’s conservative wing. All eyes and ears were on Justice Kennedy, as a potential swing vote, and he spoke up early on (about 3 minutes in), raising a key point: is it “true that the noninsured young adult is, in fact, an actuarial reality insofar . . . health insurance companies figure risks? That person who is sitting at home in his or her living room doing nothing is an actuarial reality that can and must be measured for health service purposes; is that their argument?” Justice Kennedy repeated this sophisticated point later: “they are in the market in the sense that they are creating a risk that the market must account for.” And, near the end of the morning’s argument, he interjected (in response to the slippery slope concern that regulating here would allow the government to regulate anything): “I think it is true that if most questions in life are matters of degree, in the insurance and health care world, both markets — stipulate two markets — the young person who is uninsured is uniquely proximately very close to affecting the rates of insurance and the costs of providing medical care in a way that is not true in other industries. That’s my concern in the case.”

Later, Chief Justice Roberts challenged the analogy to requiring people to buy cars, noting that not everyone is in the car market, but they are all in the health care market. He made the same points several times in different ways. For instance, to Mr. Carvin: “I don’t think you’re addressing their main point, which is that they are not creating commerce in health care. It’s already there, and we are all going to need some kind of health care; most of us will at some point.” And, in response to Carvin’s analogy to mandatory mortgage insurance: “I don’t think that’s fair, because not everybody is going to enter the mortgage market. The government’s position is that almost everybody is going to enter the health care market.”

Tacos from Above

Start-up wants to deliver tacos via drone helicopter – FAA regs don’t allow for that.

“Current U.S. FAA regulations prevent … using UAVs [Unmanned Aerial Vehicles, like drones] for commercial purposes at the moment,” Simpson said over Gchat. “Honestly I think it’s not totally unreasonable to regulate something as potentially dangerous as having flying robots slinging tacos over people’s heads … [O]n the other hand, it’s a little bit ironic that that’s the case in a country where you can be killed by drone with no judicial review.”

From HuffPost

Morning Report

Vital Statistics:

Last Change Percent
S&P Futures 1413.8 -1.3 -0.09%
Eurostoxx Index 2543.8 3.9 0.15%
Oil (WTI) 107.1 0.1 0.07%
LIBOR 0.4707 -0.002 -0.42%
US Dollar Index (DXY) 79.023 0.041 0.05%
10 Year Govt Bond Yield 2.23% -0.02%
RPX Composite 169.62 -0.2

Markets are largely maintaining their gains after yesterday’s huge rally. Bonds and MBS are up slightly.

The S&P / Case-Schiller index showed a 3.8% decline year over year. Only Miami, Phoenix, and Washington DC reported increases. Atlanta was the outlier on the downside, with a nearly 15% decline YOY. Note that these are January numbers – Case-Schiller has a couple month lag.

Bloomberg has a story about bidding wars for homes in some parts of the US. While I had heard about bidding wars in the usual places – NYC and DC, this is the first I have heard about bidding wars in places like Seattle. The big question will be whether this is a permanent or temporary phenomenon. Supposedly the settlement with the State AGs ended foreclosure moratoriums, which means more supply is going to be dumped on the market. That said, I am hearing anecdotes of bidding wars in hard hit areas like Phoenix, at least in the $80k – $120k range.

On the other side of the coin, the Campbell / Inside Mortgage Finance survey notes that investors purchases are becoming a larger proportion of home sales, particularly short sales. This is being driven by the long financing timeline. Their Distressed Property Index shows that nearly half of home sales are distressed.

Chart:  S&P / Case-Schiller Composite Index

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