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 | 1397.8 | -11.0 | -0.78% |
| Eurostoxx Index | 2429.9 | -29.0 | -1.18% |
| Oil (WTI) | 102.74 | -1.3 | -1.22% |
| LIBOR | 0.4692 | 0.000 | 0.00% |
| US Dollar Index (DXY) | 79.723 | 0.240 | 0.30% |
| 10 Year Govt Bond Yield | 2.26% | -0.04% | |
| RPX Composite Real Estate Index | 170.61 | 0.0 |
Markets are continuing their sell-off that started after the Fed released the minutes of their last FOMC meeting. The message: The economy has to weaken for the Fed to consider another round of quantitative easing. Ironically, the FOMC statement noted more strength in the economy, but the markets are selling off.
A lousy Spanish bond auction has people wringing their hands over Europe again. Euro sovereign spreads are wider across the board, and Greek spreads continue to widen. Post restructuring, the Greek 10 year yield bottomed at 18% two weeks ago. It is now 22%. The ECB also kept rates unchanged at their meeting today and forecast the eurozone economy will shrink .3% this year. The ECB is in a pickle as inflation is becoming a risk in Germany while deflation is a risk in the South.
ADP released their March National Employment Report, suggesting nonfarm private employment increased by 209,000 in March. After declining for 4 years, we are seeing modest growth in construction and finance.
Steven Davidoff (The Deal Professor) lambastes the JOBS act. The punch line: Decimalization could explain why small IPOs are lagging as much as inability to access VC funds. Essentially, Congress is clueless about the financial markets (true) and legislates to the political winds (true). The reason why this bill got pushed through is so that Washington can have the appearance of “doing something” about jobs in the US. The unintended consequence is that it makes it easier for a dodgy company to raise capital, and if we have a couple of Sino Forests on our hands, multiples could contract across the market.
The WSJ has a story discussing how much credit has tightened. Loans closed in February had an average FICO of 750 and LTC of 76%. The average denied loan had a FICO of 699 and LTV of 83. 699. 83. Denied. They go on to say that even as credit conditions ease in the greater economy, credit conditions in residential mortgages are still getting tighter. Of course, this is one of the side effects of abnormally low interest rates – as a lender, you are almost guaranteed to lose money lending for 30 years at 3.75%. Unintended consequences rear their ugly head again.
Is your local savings bank becoming a credit union? If it is, perhaps it is due to the new regulatory environment. As the OTS gives way to the OCC, many smaller banks are opting to become credit unions or state regulated.
Filed under: Morning Report |
All Things in Moderation 
Sorry to be a drive by visitor but I come in search of expertise. Brent and John I’m curious about the gas prices.
Is trying to predict where they’ll be this fall as foolish as predicting who will win the next Super Bowl?
Do you investment guys have any ideas about where gas prices will be after Labor Day when the summer driving season ends?
I know I can trust you two to not BS me. If you have ideas you’ll share them, along with your rationale.
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Depends on where, I think. A big chunk of East Coast refining capacity is going off line in the spring / summer. I know Sunoco is trying to sell its Philadelphia refinery and is having trouble getting interest. If they can’t sell it, they are going to close it.
Anyway, capacity constraints probably mean higher gasoline costs, at least on the East coast.
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The markets have spoken. More cash by summer, or we kill the hostages.
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ruk:
Without giving a calendar date, you are more likely to see $5 gas before you are to see $3 gas. Additionally if gas goes to 3 then Obama is in trouble because only a failing recovery could cause it.
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Famous last words on all entitlement programs: It “seemed like a great idea back in 1965”.
“Explosion in student loan debt reaching crisis proportions, but largely flying under radar
By Associated Press, Published: April 3
WASHINGTON — The federal student loan program seemed like a great idea back in 1965: Borrow to go to college now, pay it back later when you have a job.
But many borrowers these days are close to flunking out, tripped up by painful real-life lessons in math and economics.
Surging above $1 trillion, U.S. student loan debt has surpassed credit card and auto-loan debt. This debt explosion jeopardizes the fragile recovery, increases the burden on taxpayers and possibly sets the stage for a new economic crisis.
With a still-wobbly jobs market, these loans are increasingly hard to pay off. Unable to find work, many students have returned to school, further driving up their indebtedness.
Average student loan debt recently topped $25,000, up 25 percent in 10 years. And the mushrooming debt has direct implications for taxpayers, since 8 in 10 of these loans are government-issued or guaranteed.”
…
“Mark Zandi, chief economist at Moody’s Analytics, argues that government loans and subsidies are not particularly cost-effective for taxpayers because “universities and colleges just raise their tuition. It doesn’t improve affordability and it doesn’t make it easier to go to college.”
“Of course, it’s very hard on the kids who have gone through this, because they’re on the hook,” Zandi added. “And they’re not going to be able to get off the hook.””
http://www.washingtonpost.com/politics/explosion-in-student-loan-debt-reaching-crisis-proportions-but-largely-flying-under-radar/2012/04/03/gIQADFFQsS_story.html
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jnc (from the article):
“Mark Zandi, chief economist at Moody’s Analytics, argues that government loans and subsidies are not particularly cost-effective for taxpayers because “universities and colleges just raise their tuition. It doesn’t improve affordability and it doesn’t make it easier to go to college.”
Who could possibly have imagined that increasing the demand for a product would drive the price of it higher?
But I’m sure subsidizing health care will have the exact opposite effect that subsidizing education has had, and will drive costs down. 🙂
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Who could possibly have imagined that increasing the demand for a product would drive the price of it higher?
Health care begs for a supply side solution. It is a classic case of exploding demand as the population ages, pitted against a short supply. Think 1946 and pent-up demand for cars and homes and no supply. We turned that around with essentially supply side stimulus. We have discussed the macroeconomics of this before. Best bucks any government at any level could spend would be to encourage more GPs and RNs in clinical practice, and more storefront clinics. There is no incentive for the supplier to increase the supply [think of the AMA as OPEC] so a government role is certainly plausible.
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jnc:
But the college professors are working 70 hours a week for low pay. How can this be?
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ruk:
To give you an idea, and this is a flawed model to be sure, if you check the UGA the ETF that tracks nationa average gasoline prices, there is little interest in seeling calls.
Of the months thru October, only July has any open interest to speak of. So while investors may not be betting on a further rise, they’re not willing to sell covered calls against the possibility.
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banned:
But the college professors are working 70 hours a week for low pay. How can this be?
Not sure what this is in reference to, but I do work 65 – 70 hours a week and I bring in 50% of my salary from grants, which also fund my research and lab salaries. But I get a comfortable salary — not in the top 10%, but certainly within the top quintile.
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NYMEX Sep RBOB is trading at 310.78 vs spot at 330.97. So the market is predicting a 6% decline (ignoring carry and storage costs)
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Interesting article on Planned Parenthood in Virginia. Sometimes opposition is driven as much by existing hospital chains wanting to prevent competition as it is by anti-abortion advocates.
“Va. grants permission for operating room at Planned Parenthood clinic
By: Michael Martz | Times-Dispatch
Published: April 04, 2012
Virginia’s top health official has granted permission to Planned Parenthood to create an operating room at its Virginia Beach health clinic to provide gynecological services to poor women in the Hampton Roads and Peninsula areas.
State Health Commissioner Karen Remley ruled late last week that the barriers to care for poor women in the region justified a certificate of public need for the operating room, despite a general surplus of operating rooms in the region.
In granting the certificate, Remley dismissed concerns expressed by her staff and a major hospital chain in the region that the operating room was not needed, as well as accusations by anti-abortion activists that the surgical center would be used for late-term abortions.”
…
“Planned Parenthood also overcame opposition by Bon Secours Hampton Roads Health System, which cited a health commissioner ruling last year that approved fewer operating rooms than the nonprofit Catholic hospital had requested.”
http://www2.timesdispatch.com/news/2012/apr/04/tdmain01-va-grants-permission-for-operating-room-a-ar-1816755/
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“Mike, on April 4, 2012 at 9:58 am said:
banned:
But the college professors are working 70 hours a week for low pay. How can this be?
Not sure what this is in reference to, but I do work 65 – 70 hours a week and I bring in 50% of my salary from grants, which also fund my research and lab salaries. But I get a comfortable salary — not in the top 10%, but certainly within the top quintile”
It’s in reference to this op-ed in the Washington Post and the tenor of the associated comments.
“Do college professors work hard enough?
By David C. Levy, Published: March 23
No public expenditure has a more productive impact on a nation’s health than its investment in education. But college costs have risen faster than inflation for three decades and, at roughly 25 percent of the average household’s income, now strain the budgets of most middle-class families. They impose an unprecedented debt burden on graduates and place college out of reach for many. This makes President Obama’s recent statement that college is “an economic imperative that every family in America should be able to afford” an especially urgent message.
As a career-long academic and former university chancellor, I support this position. But I disagree with the next assumption, that the answer to rising college costs is to throw more public money into the system. In fact, increased public support has probably facilitated rising tuitions. Overlooked in the debate are reforms for outmoded employment policies that overcompensate faculty for inefficient teaching schedules.”
http://www.washingtonpost.com/opinions/do-college-professors-work-hard-enough/2012/02/15/gIQAn058VS_story.html
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“ScottC, on April 4, 2012 at 9:39 am said: Edit Comment
jnc (from the article):
“Mark Zandi, chief economist at Moody’s Analytics, argues that government loans and subsidies are not particularly cost-effective for taxpayers because “universities and colleges just raise their tuition. It doesn’t improve affordability and it doesn’t make it easier to go to college.”
Who could possibly have imagined that increasing the demand for a product would drive the price of it higher?
But I’m sure subsidizing health care will have the exact opposite effect that subsidizing education has had, and will drive costs down.”
The next step will be to make federally subsidized health care debt non-dischargable in bankruptcy to complete the parallel.
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Brent and John,
Thanks for your answers. I knew I could count on you guys.
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A followup question Brent and John. I get that it’s a global market and the health or lack thereof in the Chinese, Indian and other economies has as much to do with oil prices as supply and demand in our country.
What as a layman I have difficulty understanding is why refineries are closing..as Brent has pointed out ,when gas prices are soaring. Are they simply that obsolete as to be inefficient and unprofitable? At what price would gasoline need to sell to keep these production facilities profitable?
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@ruk, I don’t think there is a spot answer regarding a gasoline price. Refineries make more than gasoline, and each refinery has a different cost structure and product mix.
Here is everything you ever wanted to know about crack spreads but were afraid to ask: http://www.cmegroup.com/trading/energy/files/EN-211_CrackSpreadHandbook_SR.PDF
FWIW, crack spreads are pretty wide at the moment, even as expressed as a percentage of the oil price. That said, 2007-2010 were abnormally low, except for a spike in early 09.
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Banned-
Since you like to make fun of Detroit, it looks like the dream of a RoboCop statue are close to becoming reality.
Nothing like reminding people that Detroit is the go to city for depictions of crime ridden cities of the future!
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With all the Lions getting busted for wacky tobaccy lately, Detroit should put up a statue of Cheech and Chong or Charles Rogers.
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@ruk –All refineries face investments to update or replace old equipment, meet environmental operating requirements and fuel specification changes. at the same time, the administration is openly hostile to fossil fuels. why sink the money into a refinery?
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markinaustin, on April 4, 2012 at 11:48 am said:
…
“There is no incentive for the supplier to increase the supply [think of the AMA as OPEC] so a government role is certainly plausible.”
Or the Rand Paul solution of starting an alternative credentialing organization.
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” Average student loan debt recently topped $25,000, up 25 percent in 10 years. And the mushrooming debt has direct implications for taxpayers, since 8 in 10 of these loans are government-issued or guaranteed.”
I’d like to see the cross tabs for that data. How do the debt loads compare for public, vs private vs for profit schools? How do the post-graduation employment rates compare?
I’d also point out the last 10+ years have included poor to dismal job markets. This can contribute to the student debt problem by nudging more students to graduate degrees & thus a higher debt load.
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“novahockey, on April 4, 2012 at 11:51 am said:
@ruk –All refineries face investments to update or replace old equipment, meet environmental operating requirements and fuel specification changes. at the same time, the administration is openly hostile to fossil fuels. why sink the money into a refinery?”
I’m still a big believer in one or two EPA blends of gasoline for the entire country rather than the current hodgepodge. One with ethanol and one without.
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Here’s a map — a bit dated — that illustrates what jnc4p is addressing
http://www.econbrowser.com/archives/2005/06/the_case_for_mo.html
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Just so I’m following this student loan debate correctly…
If you increase demand prices will go up! OK I get that
If you increase demand but place restrictions on the providers and the amount they are allowed to charge, the dreaded price controls…prices do not necessarily go up or perhaps they could be held at least to the level of inflation.
Don’t offer loans and subsidies to Americans thereby decreasing demand for higher education at which point the market will limit what Universities can charge.
And so what are we arguing here…I get the observations but not the conclusions?
Are we suggesting that we’re sending too many kids to institutions of higher education? Or do we believe the same number would still attend absent any loans or grants? Do we think that while our major competitors are subsidizing the educations of their population we should just sit back…laissez faire and let the market work it’s wonders?
Just askin’
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ruk:
Are we suggesting that we’re sending too many kids to institutions of higher education?
At current prices, almost certainly that is the case.
Or do we believe the same number would still attend absent any loans or grants?
I don’t believe that.
Do we think that while our major competitors are subsidizing the educations of their population we should just sit back…laissez faire and let the market work it’s wonders?
Largely yes, although if you want to subsidize someone else’s education, you absolutely should. BTW, it doesn’t make a lot of sense to me to talk about our competitors subsidizing their population. The money has to come from somewhere, namely the population itself. Isn’t that effectively saying that the population is subsidizing itself? The alternative to letting market forces allocate scarce resources is to have government bureaucrats do it. Yes, some of our competitors do that. I don’t think it is a good idea.
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Nova
the administration is openly hostile to fossil fuels.
I must be misinformed Nova. My perception is not that the administration is openly hostile, but well aware of future energy needs which will require wise utilization of every source available.
I think the entire scientific community is “openly hostile” by your definition…unless you believe fossil fuels are infinite and non polluting…at which point I understand your position.
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MIke:
Working 70 hours a week at a good school for good pay, especially doing research makes sense. All the CC professors of English complaining of the same doesn’t.
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In a short statement the refinery problem is this. The refineries closed in the last 20 years were built 70 or more years ago when the market conditions were entirely different. Cleveland literally used to be the refining capital of the world, but things change. If you can’t make a profit where you are, eventually you either move to where you can or go out of business.
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Refineries are very crude specific as well. You cannot send any old crude to any refinery, their designed and tuned to specific types. For example, some Houston refineries are the only places in the world that can crack Venezuela’s sulphur heavy crude.
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As for Robocop, in Philly they have a Rocky statue too. Maybe it’s a sign of the time that all the statues being put up are now of fictional characters.
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” but well aware of future energy needs which will require wise utilization of every source available.”
all the more reason not to invest in maintaining or building new refinery capacity.
(also … Hi!)
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Re: Robocop — they’re remaking it and have announced a 2013 release date.
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Hey Nova
Sorry I like ya guy but I gotta confess…I don’t think your Pens have nearly enough for the Rangers or Tao’s Bruins…but perhaps cross state rival Philly.
Mind you we’re not bragging much here in Tampa either…at least we have three games left to cheer Stammer on to a 60 goal season..it’s all we have left to salvage.
You know the cry though Nova…wait until next year!
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Scott
Thanks for your clarification. As you might imagine we differ a bit on populations “subsidizing” things for the betterment of society or making a society more competitive. But I do not believe there are any simple answers and so I appreciate your thoughts on the subject.
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The future?
http://www.washingtonpost.com/blogs/innovations/post/google-glasses-get-a-preview-video/2012/04/04/gIQAQ0iUvS_blog.html?hpid=z1
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Scott
An additional thought….scarce resources I’m probably with you in principle there but I’m sure we differ on what defines a “scarce” resource. Some will believe that there is plenty of cash in the system to pay for higher education..but I get that you believe that is confiscating other peoples money while I believe it to be “rent”..paying for the benefits society bestows on all of us. We’ll just have to agree to disagree on that important point.
BTW Just curious…I know where JNC stands but I’m curious about you..and chime as well NOVA…do you think Paul was the best libertarian candidate or would you have felt more comfortable with Johnson?
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ruk:
but I’m sure we differ on what defines a “scarce” resource.
All resources are scarce.
.paying for the benefits society bestows on all of us.
When X receives an education paid for by someone else, that is a benefit bestowed directly upon him, not “society”. Others may or may not reap indirect benefits, but that is a function of what X decides to do with himself.
do you think Paul was the best libertarian candidate or would you have felt more comfortable with Johnson?
I have to confess that I didn’t pay much attention to Johnson. There are things I like about Paul, but I have problems with him on some things, like FP.
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RUK, you did not ask me, but I am much more comfortable with Gary Johnson, who was a good governor of NM and doesn’t want to close the Federal Reserve. In fact, right now I intend to vote L in November.
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Nobody can match the Pens down the middle. Crosby, Malkin, and Staal. Over a 7 game series they will grind down the opposition’s top D-pairings.
If they get their powerplay going again. forget it. Crosby and Letang will set them up, Kunitz will stick his ass in the goalie’s face, and Neal and Malkin will finish.
http://thehockeywriters.com/crosby-malkin-penguins-powerplay/
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“novahockey, on April 4, 2012 at 12:10 pm said: Edit Comment
Here’s a map — a bit dated — that illustrates what jnc4p is addressing
http://www.econbrowser.com/archives/2005/06/the_case_for_mo.html”
Yes, but that chart is from 2005. I’m pretty sure there was a significant increase in ethanol mandates since then. I believe Exxon has a more current one.
Click to access US_Gasoline_Map.pdf
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I prefer Johnson to Paul — but Johnson is still in the race for the LP nomination. He’s hoping to poll at 15% nationally to get an invite to the Romney v. Obama debates.
Paul had the existing support base and $$. But the systematic exclusion of a 2 term governor from those early debates was just wrong. Cain gets a slot but Johnson doesn’t?
He was on Colbert the other night
http://www.colbertnation.com/the-colbert-report-videos/411472/april-02-2012/gary-johnson
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You’d think that the excess supply of college graduates would merely drive the price down. Yet I’m told many can’t find jobs at any price or even unpaid internships.
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Jnc and I have had this conversation Mark. I shared that if it wasn’t for fear of putting Romney in office I would vote for Buddy Roemer. JNC was upset that both Roemer and Johnson were kept off the stage in favor of folks like Bachmann and Cain who were not nearly as qualified. I agree entirely with JNC
Roemer and Johnson deserved a spot on the stage to have a “real” discussion of the issues…but…not used crying over spilt milk eh.
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Nova
Glad to see you so fired up over your Pens…Good luck…since my guys can’t win it I’ll root for yours. Sorry Tao but your Bruins knocked us out of the Stanley Cup last year and you already have a cup.
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“ruk, on April 4, 2012 at 1:04 pm said:
Scott
An additional thought….scarce resources I’m probably with you in principle there but I’m sure we differ on what defines a “scarce” resource. Some will believe that there is plenty of cash in the system to pay for higher education..but I get that you believe that is confiscating other peoples money while I believe it to be “rent”..paying for the benefits society bestows on all of us. We’ll just have to agree to disagree on that important point.”
I of course also disagree with the premise that higher level education is a public good that benefits society as a whole, as opposed to a private good that benefits the individual receiving it.
However, accepting your premise for the sake of argument, the idea that public financing of a college education (and presumably graduate and doctorate as well) provides a public benefit would also imply that society should have some say in how the money will be spent.
I.e. perhaps in exchange for public funding of a college education, the government will have a say on what the individual can major in. No more Art History on the taxpayers dime.
“Not all college majors are created equal
By Michelle Singletary, Published: January 14”
http://www.washingtonpost.com/business/not-all-college-majors-are-created-equal/2012/01/12/gIQAfz4XzP_story.html?tid=pm_pop
These sorts of attitudes on the part of students may have to change:
“”I might have to take jobs that pay more instead of a job that I want to do,” he said. “I want to be an organizer, but I might have to do something more lucrative. This situation makes me unsure of my future.””
http://www.huffingtonpost.com/2012/03/21/student-loan-interest-rate_n_1371236.html
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I agree with JNC that subsidizing students [beyond the CC or trade school level – I am for that by state government] should have strings. I also assume the subsidizing is local or state level or from private enterprise for four year undergraduates. I assume that federal funding would be limited to lab sci-tech grad fellowships, unless the Fedgov has a specialized need, like ROTC.
If a state chooses to do more than I would do, I probably would not complain. States might think they need to train more grade school teachers, or more RNs, or more metal workers, and each state might have different needs.
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“ruk, on April 4, 2012 at 2:46 pm said:
Jnc and I have had this conversation Mark. I shared that if it wasn’t for fear of putting Romney in office I would vote for Buddy Roemer. JNC was upset that both Roemer and Johnson were kept off the stage in favor of folks like Bachmann and Cain who were not nearly as qualified. I agree entirely with JNC
Roemer and Johnson deserved a spot on the stage to have a “real” discussion of the issues…but…not used crying over spilt milk eh.”
To be precise, I was annoyed that Roemer and Johnson were excluded, not that Cain and Bachman were included, in the early debates.
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jnc:
It’s in reference to this op-ed in the Washington Post and the tenor of the associated comments.
Thanks for the link. I see that the author has exempted research faculty from his analysis of whether college professors work hard enough.
I don’t know when the last time he taught a class was, but his statement “in the unlikely event that they devote an equal amount of time to grading and class preparation” doesn’t necessarily reflect reality. Or at least not my reality. I certainly spend more time prepping for class than I do actually teaching — somewhere on the order of 2:1, even now after I’ve figured out how to teach (and prep) more effectively.
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Jnc
However, accepting your premise for the sake of argument, the idea that public financing of a college education (and presumably graduate and doctorate as well) provides a public benefit would also imply that society should have some say in how the money will be spent.
While I believe that all education is good for society i certainly accept your point…it is a more than reasonable compromise. I’m a little nervous about the Gov’t picking majors…but it is a reasonable request. I’m especially on board with anything that provides added value for the Gov’t…e.g..Teaching degrees in areas where needed are more valuable than Art History degrees in Manhattan and so yep. Again jnc it’s too bad we do not represent the R’s and the D’s..you are always thoughtful and willing to consider any issue from both sides. I believe we could negotiate a solution to our problems.
BTW I’m glad you got to clarity our conversation about Roemer and Johnson..two men I respect as qualified. It was a sloppy post on my part and I intimated that you agreed with me that Bachmann and Cain were not qualified. Sorry for the sloppy posting.
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mike:
You are far, far too efficient for your profession. The going rate was 4-5 hours of prep time for every hour spent teaching, with the winners claiming 7 hours!
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banned:
To be fair, it used to take me 4 – 5 hours of prep time per hour of teaching. I’ve just gotten faster at it over the years since I generally teach the same topics and only need to update my lectures now each year.
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mike:
Exactly! Please explain that process to your colleagues.
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