Morning Report

Vital Statistics:

Last Change Percent
S&P Futures 1370.7 -3.8 -0.28%
Eurostoxx Index 2541.5 -7.2 -0.28%
Oil (WTI) 108.05 -0.8 -0.73%
LIBOR 0.4758 -0.004 -0.82%
US Dollar Index (DXY) 79.313 0.526 0.67%
10 Year Govt Bond Yield 2.00% -0.03%

Markets are a touch weaker this morning on some negative reports out of Europe and a drop in Spanish government bonds. There are no major economic reports out this morning in the US. Bonds and mortgages are slightly higher this morning.

Yesterday, CoreLogic released its Q411 report on underwater homeowners. They estimate that 11.1 million (23%) of residential homes with a mortgage are underwater. Nevada is in the worst shape, with 61% of mortgaged houses with LTVs over 1. Of the 11.1 million, 6.7 have a first-lien mortgage only with an average balance of 219k and is underwater by 51k, for a LTV of 130%. The remaining have home equity loans as well, with an outstanding principal balance of 306k and a combined LTV of 138%.  Aggregate negative equity nationwide is $717 billion and is concentrated at the low end of the market.

The NYT has a good article on ISDA’s decision yesterday that the ECB bond exchange on Greek debt did not constitute a credit event. If Greece puts through an involuntary exchange, that would trigger a credit event and the swaps would pay out. The article also points out that the bond used to set the payout will be different than the bond underlying the contract. So even if you were right on the Greek default, you may not be getting paid what you think you were.

The sell-off in bonds over the last two days has driven mortgage rates higher. Conventional mortgages are now 4.0% vs 3.875% a few days ago. If you are thinking about refinancing or buying and have questions about your rate lock, here are some things to consider.

16 Responses

  1. OK, looks like the NCAA bracket pool a go. I posted this on the NCAA thread and am repeating it here so we all see it.

    Anyone mind if I set up the group in Yahoo! ?? I will then post the link in a separate post here at ATiM on March 12, with instructions on how to set up your picks.

    The bracket will cover just the ‘final 64’ men’s teams. None of the pre-qualifying nonsense. You fill in the entire bracket, including your thoughts on the score of the final game, before tip-off on March 15.

    Unless folks reeeeeeeeally want $$$ involved, I’ll just make a nice plaque for the winner.

    Contest open to ATiM’ers and their families. I’ll leave it to you to determine whether non-humans are part of your family.

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  2. Sounds great msjs. I’ll do my best to keep up…..lol

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  3. I cannot get behind paywall on this article but if someone who has read it will summarize here I will reciprocate at the “Economist” some time.

    http://online.wsj.com/article/SB10001424052970204653604577251722168929822.html

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    • MarK;

      As a subscriber, I am supposed to be able to e-mail articles to non-subscribers and make them available for a limited time. I’ve sent you one for this article. Let me know if it works (or doesn’t).

      Like

  4. @ Mark.

    It is an article encouraging this: http://www.scribd.com/doc/56286702/The-Open-Fuel-Standard-Act-of-2011

    The gist of the article is that government has a duty to break cartels and OPEC is a cartel. The best way to break the back of OPEC is to promote flex-fuel autos.

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    • Thanks, Brent – I have now read the bill.

      I like the rationale – break OPEC’s stranglehold – but the bill is on a short leash, while the time to build service stations to meet all these new vehicles might be on a longer one. US has maybe 140k gas stations. Guessing we would need an infrastructure with 20k compressed natural gas stations before compressed NG is popular car fuel. E85/M85 might be easier. E85 seems unrealistic – we already grow oceans of corn in America and there is not enough acreage for that much switchgrass, or cane. But M85 seems realistic – more like NASCAR, too. Mike, bb, and ‘Goose, wouldn’t M85 be a possible quantity product in a relatively short time frame?

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  5. “ScottC, on March 2, 2012 at 8:34 am said:

    MarK;

    As a subscriber, I am supposed to be able to e-mail articles to non-subscribers and make them available for a limited time. I’ve sent you one for this article. Let me know if it works (or doesn’t).”

    I’m thinking that free access to the WSJ and NYT should be the next employer mandate for Obamacare.

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    • jnc:

      I’m thinking that free access to the WSJ and NYT should be the next employer mandate for Obamacare.

      And what’s up with the WSJ not doing a daily sports page? Why should the WSj be able to cater to people only interested in business, and force people looking for sports news to buy a different paper? Surely there should be a standard level of service required of a newspaper.

      There ought to be a law.

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  6. Also posted on the NCAA thread:

    My preferred scoring in Yahoo! is the default scoring with a Seed Difference Bonus multiplier of 2.

    Default scoring:
    1st round: 1 pt. for each correct pick.
    2nd round: 2 pts.
    Regional Semis: 4 pts.
    Regional Finals: 8 pts.
    Semis: 16 pts.
    Final: 32 pts.
    In addition to this, the Seed Difference Bonus awards more points for upsets. If the winner is lower-ranked than the loser, the formula is:
    (seed of winner – seed of loser) x multiplier
    So if a number 11 seed beats a number 6 seed, you get (11-6)x2=10 extra points.

    This system rewards riskier players.

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  7. In another piece of anecdotal evidence that the credit markets are turning around, I just got my first piece of “refinance spam” in a long time..

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  8. The Post has a good fact checker article on the various overheated rhetoric on the Blunt ammendment

    “Blunt Amendment: Schumer’s over-the-top rhetoric
    Posted by Josh Hicks at 10:00 AM ET, 03/02/2012”

    “Fallon argues that the Blunt Amendment effectively would have allowed employers to ban contraception coverage, since they could choose whether or not to provide it.

    “Ban” is a strong word in this regard. Again, the Blunt Amendment said nothing about prohibiting birth control, so women could purchase it in the future on their own or with the help of supplemental insurance, as they often do to this day. Schumer’s argument thus is a bit too legalistic.

    In terms of turning back the clock, we’re actually talking about present times, since the contraceptive-related mandate doesn’t take effect until Aug. 1. Schumer is technically arguing that the national policy on contraception coverage is anachronistic to this day. This makes his 19th century reference seem hyperbolic, since women had almost no rights during that time.

    Schumer isn’t alone in his sentiments. Sen. Frank Lautenberg (D-N.J.) issued similar remarks while speaking on the Senate floor before the Blunt Amendment vote Thursday. “The Republicans want to take us forward to the Dark Ages again. . .when women were property that you could easily control, even trade if you wanted to,” he said. “It’s appalling we are even having this debate in the 21st century.”

    Lautenberg’s comments are particularly exaggerative in this regard. He makes a massive stretch by comparing the implications of the Blunt Amendment with the trading of women as property.

    Fallon suggested we’re taking Schumer’s comments too literally. He said the senator “is saying anti-women attitudes — including the notion that a boss should have a say over a woman’s health decisions — belong to an earlier era.”

    But if that’s the case, then this particular anti-women attitude persisted right up until today, since rule in question has not taken effect. ”

    http://www.washingtonpost.com/blogs/fact-checker/post/sen-chuck-schumers-remarks-about-the-blunt-amendment/2012/03/01/gIQAwt6bmR_blog.html?hpid=z2

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  9. Fallon suggested we’re taking Schumer’s comments too literally.

    Well…don’t engage in hyperbole then.

    At the same time, it’s beginning to get hard to deny that there is a massive effort on the Right targeting a woman’s right to an abortion. I just saw an article about several efforts in Alabama to limit access to abortion. The issue of mandated birth control is not an example of that in my opinion since, as the fact checker article points out, the Blunt Amendment is an effort to keep the status quo so isn’t really an attack. However, the Alabama bill that would prevent employers from firing someone who refused to perform abortions, sterilization and a few other procedures seems like another example of conservative supported government intrusion. This time it’s an intrusion on a health care entity’s policy making ability. Now, I know our conservatives here have essentially retorted with “turnabout is fair play,” but I think that’s a bit of a cop out and actions like this put democrats and republicans on the same footing when it comes to governmental intrusion. Namely we like it when we like it and we don’t when we don’t.

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    • ashot:

      Namely we like it when we like it and we don’t when we don’t.

      I don’t think that is necessarily fair at all. I’m all for a principled laissez-faire approach to employers and their ability to set requirements for their employees, under which an employer would be perfectly free to fire someone for refusing to perform an abortion. But since we don’t retain such an approach, and since we already place all kinds of burdens on employers that I not only disagree with in principle but also on substance, I don’t see why I should be expected to object to another burden that is more acceptable to me in substance simply because it is objectionable based on a principle that, in all other instances, has been rejected.

      So yes, I say turnabout is fair play. If liberals are going to be able to set restrictions they prefer on when and why an employer can fire an employee, I think conservatives ought to be able to do the same. Again, I’d prefer a system in which neither could/would do it. I’ll be happy to trade you this unprincipled intrusion for all the one’s that already exist.

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  10. “Now, I know our conservatives here have essentially retorted with “turnabout is fair play,” but I think that’s a bit of a cop out and actions like this put democrats and republicans on the same footing when it comes to governmental intrusion. Namely we like it when we like it and we don’t when we don’t.”

    Hence my referring to myself as a libertarian. I have no use for big government liberals or big government conservatives.

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  11. Boy. Maybe the solution is to sever the tie between employers & health insurance. Wouldn’t that be a more productive use of time than these piddly little tweaks around the edges?

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  12. “but I think that’s a bit of a cop out and actions like this put democrats and republicans on the same footing when it comes to governmental intrusion”

    corked by jnc4p. a pox on both their houses.

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