Fight over Cato

Someone mentioned this the other day, but the Washingtonian has an article on the fight over control of Cato.

“Politicians surf public opinion,” says Cato scholar Jim Harper. “They are not interested in the right answer; they are interested in the answer that gets them reelected.” Crane told a colleague that the entrance to Cato’s building faced away from the Capitol “so Congress can kiss my ass.”

Whole thing is worth reading.

Morning Report 5/31/12

Vital Statistics:

  Last Change Percent
S&P Futures  1309.6 1.0 0.08%
Eurostoxx Index 2124.7 8.5 0.40%
Oil (WTI) 87.6 -0.2 -0.25%
LIBOR 0.467 0.000 0.00%
US Dollar Index (DXY) 82.81 -0.212 -0.26%
10 Year Govt Bond Yield 1.59% -0.03%  
RPX Composite Real Estate Index 177.5 0.0  

Equity markets are flat after yesterday’s bloodbath, while bonds continue to rally.  The 10 year is trading at 1.59%. MBS are up as well. Lest anyone think this is strictly a US phenomenon, yields in the “safe” European countries like Switzerland, Denmark, Germany are even lower. On the other hand, Greek debt now yields 30.6%, which is pretty much the same level it was before default. 

Today is Jobs Day with a slew of labor-related economic releases at 8:30. Challenger has already said that announced job cuts were up 67% YOY in May.  This is a notoriously volatile index because one large employer (in this case HP) can dominate the month, so you have to focus on the trends and here 10 out of the last months showed increases. On the other hand, announced job cuts don’t always happen so take it with a grain of salt.  That said, there aren’t a lot of forward-looking labor measures out there.

Initial Jobless Claims came in at 383k, higher than the 370k estimate. The ADP Employment change report predicts 133k jobs were added in May.  1Q GDP was revised downward to 1.9%, in line with expectations. Consumption, exports, and residential fixed investment (finally!) drove Q1 GDP growth.

Delays in foreclosures and recent incentives by the Obama administration are making short sales more attractive to lenders than foreclosures.  Short sales were up 25% from a year ago as opposed to bank-owned sales which dropped 15%.  More aggressive pricing on the part of lenders is driving the increase.

Given the outsized rally in Treasuries yesterday, you would have expected a commensurate drop in mortgage rates.  But that didn’t happen. Mortgage rates are moving lower only grudgingly as rates fall, indicating that we may be reaching a floor, or at least further drops will be very hard to come by.

Morning Report 5/30/12

Vital Statistics:

  Last Change Percent
S&P Futures  1323.7 -9.7 -0.73%
Eurostoxx Index 2162.6 2.3 0.10%
Oil (WTI) 89.51 -1.2 -1.38%
LIBOR 0.467 0.000 0.00%
US Dollar Index (DXY) 82.54 0.056 0.07%
10 Year Govt Bond Yield 1.69% -0.05%  
RPX Composite Real Estate Index 177.5 0.1  

A sloppy tape to start the day as Euro fears take center stage. Spanish credit default swaps are at 522 basis points, an all-time high. Troubled Spanish lender Bankia continues to fall. Greek sovereign debt is over 30%. The beneficiary of the risk-off trade is the US 10-year, where yields are down 6 basis points. Meanwhile, oil cannot get out of its own way, with WTI down 15% this month.

The 10-year yield is flirting with the Sep low of 1.673%.  MBS are unchd, and we are witnessing a similar phenomenon as last fall, where the 10 year rallied and MBS underperformed. The spread between the Freddie Mac generic 30 year fixed mortgage and the 10-year bond yield is 2.04%.  Here is a chart of the generic 30 year fixed rate mortgage, the 10-year bond, and the spread between the two. 



While mortgage rates are falling as the yield on the 10 year falls, they are falling much more slowly. So, if you are facing a lock decision, you have are faced with a bit of a conundrum:  If the 10 year yield continues to fall, mortgage rates might not participate. In other words, we may be reaching a floor in mortgage rates.  Which means you might as well lock.  On the other hand, if the 10 year yield starts backing up, mortgage rates should rise much slower since they really didn’t fall that much to begin with.  Which means you have some room to wait and see what happens, and you might want to float. So, lock or float?  IMO, when markets crack, they crack quickly. And the 10 year is at very lofty levels. It could go from 1.7% to 2.4% in a hurry. The risk is more skewed towards mortgage rates increasing quickly than falling quickly. I would lean short in mortgage rates, or in other words, lock.

Part of the reason why the recovery has been so halting has been that the job market for those in their prime earnings years has been horrendous. Instead of making the top salaries of their lives (which they need to pay for college for their kids and also retirement savings), many people in their prime earnings years are either unemployed or underemployed.  This is a huge drag on the economy. 

Morning Report 5/29/12

Vital Statistics:

  Last Change Percent
S&P Futures  1322.0 7.0 0.53%
Eurostoxx Index 2147.7 -0.3 -0.01%
Oil (WTI) 91.13 0.3 0.30%
LIBOR 0.467 0.000 0.00%
US Dollar Index (DXY) 82.27 -0.131 -0.16%
10 Year Govt Bond Yield 1.72% -0.02%  
RPX Composite Real Estate Index 177.4 0.3  

Markets are higher this morning on hopes of stimulus in China. Spain is working on a rescue plan for Bankia, its 3rd largest lender. Spanish banking woes have pushed their sovereign debt to around 6.5%, close to the highs of last November. While Greek and Spanish fears are pushing sovereign yields higher, we have not seen a corresponding rise in EURIBOR / OIS, which is a signal that the banking system in Europe is taking a sanguine view, at least for now.  Meanwhile, Treasuries and bonds are higher, with the 10 year bond now at 1.73%


The S&P Case-Schiller index posted a slight sequential gain in March, but was still down 3% YOY, and made a new post-crisis low. Nationwide, house prices on average are back at their mid-2002 levels. That said, the pace of the decline has definitely slowed.


Chart:  Case-Schiller

Bits and Bites: Stir Fry

My wife and I are fans of Cooks Illustrated. We bought a boxed set of the first ten years of bound volumes after getting back from our honeymoon back in 2003. Since then, we’ve added most of the individual volumes. I’ve always found their approach appealing as it strikes me as the way a scientist would go at a problem. Cooking as chemistry rather than art. It’s a good grounding in cooking. I’ve learned to indulge my creative side too.

One criticism of CI is that the recipes can be ridiculously involved. We have some vegetarian friends and so I make a vegetarian friendly stuffing for Thanksgiving. The vegetarian stock in CI is over the top. Two pounds of veggies and an hour of cooking to produce one quart of stock. REALLY??? I’ve simplified it a bit and double the amount of stock that I get out of it.

One of our favorite books is The Simple Recipe, from the same folks. The idea is to take the ridiculously complicated recipes and simplify them for every day cooking. It still takes time, but works for a weeknight meal. When it comes to throwing together a balanced meal, my most serious failing is in not making a side dish to balance out the meal. It’s too easy to just serve the main course with a starch. One pot meals have a nice way of handling this problem. Veggies included!

This brings me to my recipe of the week: stir fry. Everything is in one pan, so there’s no need to do anything on the side. Get some rice going, chop up some meat and veggies (or use a bag of frozen veggies), and you’re good to go. This does not, however, mean throw everything into a pan. Different veggies take different cooking times. Plus, if you crowd the pan, those veggies are going to throw off enough liquid to drown your meal. What I really like about the Quick Recipe approach is that it’s broken up so that everything has a chance to cook, not too much, and you throw it all together in the end. The meat marinates while you get everything else ready.

Here’s the general approach.

Step 1. Cut up ¾ of a pound of meat (or tofu) into bite sized pieces and combine with 2 teaspoons each of soy sauce and sherry. Not being English, I don’t often have sherry on hand, so I use white wine (if I don’t have it on hand, I’ll run over to Unwined).

Step 2. Combine a tablespoon of minced ginger, another of minced garlic, some chopped green onions (white parts), and a couple teaspoons of oil. Peanut oil is really good for stir fries as it has a high smoke point. Safflower and sunflower oils are a good alternative.

Step 3. Chop up 1 ½ pounds of veggies. They’ll need to be separated by how they cook. Spinach is going to get added in at the last moment. Carrots and onions go in early.

Step 4. Heat 2 teaspoons of oil in a 12” nonstick skillet (another thing I love about this method—no wok) until smoking. Add the marinated protein and cook, stirring occasionally, until browned. It’ll probably take 2 – 3 minutes. Less for shrimp (unless you’re a fan of chewing polyurethane). Transfer to a clean bowl.

Step 5. Cook the veggies. Add a bit more oil to the pan and heat until shimmering (not smoking!). Add the slower cooking veggies to the pan and cook until nearly done (tender, but a bit crisp). Move the veggies to the side, add a bit more oil, and add the quick cooking veggies.

Step 6. Clear out the center of the pan and toss in the garlic/ginger mixture. Cook for about a minute, mashing a bit, and then stir all the veggies together. Add the protein back in and stir to combine. Toss in ½ cup of sauce and serve over rice.

It’s time for me to add a note regarding sauces. This should be step 2.5. But hey, there’s some decent sauces that you can buy in the supermarket. This is, after all, supposed to be a weeknight meal. Their sauces are pretty easy to put together. One common theme is cornstarch as a thickener. In case you’re obsessive like me, here’s a few of my favorites.

Garlic Sauce

3 T. dry sherry

3 T. chicken broth

2 T. soy sauce

½ t. sesame oil

1.5 t. minced garlic

1 t. cornstarch

½ t. sugar

Hot and Sour Sauce

3 T. rice wine vinegar*

2 T. chicken broth

2 T. dry sherry

1 T. soy sauce

1 T. chili paste

1 t. sesame oil

1 t. sugar

1 t. cornstarch

*You can sub other vinegars, but cut it back as the rice wine vinegar is pretty low in acidity

Lemon Sauce

Zest and juice from one large lemon

2 T. chicken broth

2 T. dry sherry

1 T. soy sauce

2 t. sugar

1 t. cornstarch

½ t. black pepper

I’ll throw in a couple of my favorites. The basic template is adaptable to whatever you’ve got in the crisper. Okie and I chatted recently. She had a few ingredients available, but was lacking in inspiration. That had me going stir fry!

One of my favorites is beef and broccoli. I didn’t realize until well into my 40s that broccoli stalks were something you should enjoy. I figured you cut off the florets and discarded the rest. Here’s a recipe that I hope might convince you likewise.

Beef & Broccoli in Garlic Sauce

¾ pound thinly sliced flank steak

1 ½ pounds broccoli—florets broken into bite sized pieces; stalks peeled and cut into ¼” thick pieces

¼ cup of coarsely chopped walnuts

Garlic sauce (see above)

All the other stuff I mentioned above

1. Combine the beef with soy and sherry

2. Combine garlic, ginger, scallinos and oil (see above)

3. Toast the walnuts in that same 12” skillet you’ll be using. Set aside.

4. Add 2 t. oil to the skillet, heat until smoking, and toss in the beef. Cook, stirring occasionally, until well browned and transfer to a clean bowl.

5. Add another 2 t. of oil to the skillet and heat until shimmering. Add the broccoli, ½ cup of water, and cover. Cook until the broccoli turns bright green , 1 – 2 minutes. Uncover and cook, stirring, until the water evaporates and the broccoli is ready, About another 2 – 4  minutes.

6. Clear the center of the pan, add the garlic/ginger mixture and cook for about a minute. Stir it all together, add the beef and combine with the sauce. Toss the walnuts on top and dig in!

Shrimp and Peppers in Garlic Sauce

You may notice a theme, as I love the Garlic Sauce

1 pound of large shrimp

2 med. red bell peppers, diced

1 cup of scallion whites, coarsely diced

1 ½ cups of scallion greens, chopped

Garlic sauce

Other stuff as noted above

Note: If you don’t feel like spending awhile chopping scallions, use a medium white or yellow onion for the whites and some spinach for the greens.

Pretty much, you follow the same protocol. Marinate the shrimp and prep the other stuff. Cook the shrimp in smoking oil until browned. I’d say shrimp require a bit more attention Don’t worry if they’re undercooked, because they’ll continue to cook while set aside and go back on heat later. Cook the onions/white parts, toss in the bell peppers, and then add the green parts (or greens). Make some space, cook the ginger/garlic mix, throw everything together and eat!

May you all have a Memorable weekend. I’m taking my sons to visit their great aunt’s grave in Arlington National Cemetery and then we’re going to watch Rolling Thunder going over the Memorial Bridge.


NBA Playoffs

The Western Conference Championship is of interest to me and Okiegirl.

I have some additional observations about the Spurs.

1]  They are very deep.  They have twelve reliable players, even if they can only play 9 in a given game.

2]  They are flashy when Ginobili and Parker are on the floor at the same time because of the passing game. If you like no-look find the open man, or pick and roll, or give and go, or fast pass-touch pass basketball, this is where to see it.

3]  Ginobili and Duncan will not be on the floor more than 32 of 48 minutes.  Depth allows this.  The two can play as if “young” for 30 minutes, but not for 37.

4]  They do not defend as tenaciously as the Robinson-Duncan era team, or in the same way.  The team defense is good and smart, but neither great nor spectacular.

5]  Parker absolutely abused Westbrook last time these teams played, but I would not expect that to repeat.

6]  This may be the best shooting team in history, and the fast passing provides comfortable looks.

7]  This team is relaxed even when down 24 points, as they were to the Clips in game 3 of that series.  They won by double digits.  No nerves.

8]  No one on this team can stop Durant, or really slow him down, one-on-one.

Okie, what about the Thunder?


Mark and all, I’m a big basketball fan but not much of an analyst.  I write this without having read any “expert” analyses, but here goes.  [Michi, cover your eyes.]

1]  Thunder are deep too!  After all, we have Harden, the 2012 NBA 6th Man of the Year.  “Fear the Beard” t-shirts are selling well locally.  That should be a great match-up with Ginobli.  But Collison and Mohammed also get the job done.  I think Collison in particular is underrated.

2]  Thunder aren’t particularly flashy, and I think the pick and roll might be a problem for them defensively.

3]  Hahahahahaha.  There is not a team in the NBA that can hang with the Thunder’s “young” legs.  Rest all ya want; it just means the starters are not on the floor and, subtle as the difference may be, there’s a reason the starters are starters.  Thunder starters can stay on the floor longer.

4]  Kevin Durant will be a problem for the Spurs.  I look for him to have some big games.

5]  This could be a key to the series.  But Westbrook has been on a roll.  We’ll see.

6]  As a Thunder fan, this concerns me.  Offensively, Spurs may pick them apart.  But don’t forget the defensive value of Durant’s speed and 7’5” (or whatever) wingspan.

7]  Ditto for the Thunder.  This actually has been a surprise to me, given their youth.

8]  Bingo.  See number 4.

I have to note how much I love the fact that it is two small market teams in the west finals.  The teams seem to have similar philosophies and values that I find wholesome.  I know someone who came here with the team from Seattle and still works in the Thunder organization, and reportedly the players love being in OKC and the way they are treated both by the organization and by the community.  I have seen nothing locally to indicate otherwise.  Win or lose, you never hear Thunder players blaming teammates a la Kobe.  As far as I know, it’s the same for the Spurs.  Mark, any thoughts on that?

Now for a little local color.  Since it was national news, I suspect all have heard about the shootings that marred the final win over the Lakers (although reportedly having no connection at all to the game).  There is a small plaza in front of the arena where the Thunder play.  There are concessions, bleachers, a jumbotron, etc., and hundreds all this season and in prior years have gathered for pregame festivities (been there myself when I had tickets).  For the first time, for this year’s playoffs they have showed the game in entirety on the jumbotron instead of shutting down at tipoff.  This drew thousands instead of hundreds.  If you watched the Thunder-Laker series you probably saw some cool shots of it on TV.  If not, not as cool but see this or [aarrgghh, cannot get link to work].  Hmmm, 5,000-10,000 people packed into a very small area with no controlled access and where alcohol is sold, what could possibly go wrong?  Due to the recent shootings, the City and the team immediately discontinued Thunder Alley for “public safety reasons” due to the actions of two punks.  Locals are furious.  Hopefully they will find an alternative venue.


Edit by Okie:   My prediction:  Spurs in 7 cause they are playing absurdly well right now.  Reserve the right to change the prediction if Thunder manage to steal one of the first two in SA.

A Proper Tribute to our Fallen

The Gettysburg Address

Four score and seven years ago our fathers brought forth on this continent, a new nation, conceived in Liberty, and dedicated to the proposition that all men are created equal.

Now we are engaged in a great civil war, testing whether that nation, or any nation so conceived and so dedicated, can long endure. We are met on a great battle-field of that war. We have come to dedicate a portion of that field, as a final resting place for those who here gave their lives that that nation might live. It is altogether fitting and proper that we should do this.

But, in a larger sense, we can not dedicate — we can not consecrate — we can not hallow — this ground. The brave men, living and dead, who struggled here, have consecrated it, far above our poor power to add or detract. The world will little note, nor long remember what we say here, but it can never forget what they did here. It is for us the living, rather, to be dedicated here to the unfinished work which they who fought here have thus far so nobly advanced. It is rather for us to be here dedicated to the great task remaining before us — that from these honored dead we take increased devotion to that cause for which they gave the last full measure of devotion — that we here highly resolve that these dead shall not have died in vain — that this nation, under God, shall have a new birth of freedom — and that government of the people, by the people, for the people, shall not perish from the earth.

No Due Process or Medals

U.S citizen is killed for inspiring a terror plot, but the troops killed in that terror plot aren’t eligible for medals because it wasn’t a terror plot

The White House  posted this about 2 weeks ago, but looks like media is picking up on in right before the Memorial Day weekend.

Trivia — What flower is associated with memorial day?  This came up at a bar trivia contest Wednesday night.  The event was advertised as exclusively Simpsons trivia.  The first question was about Catharine of Aragon.   D’oh!  One round was exclusively on Memorial Day.   We did surprisingly well.

My team came in 4th after missing the final jeopardy style last question.  Category:  Mr. Burns.  Excellent!  We bet the max — 20 points.  Name one of the two middle names, other than Montgomery, that Mr. Burns has.   Hint:  It’s referenced once in the Flaming Moe’s episode.  Four Simpsons dorks had no idea.  Not even a clue.

Get Ready for 10,000,000,000

Love Hans Rosling:

Morning Report 5/25/12

Vital Statistics:

  Last Change Percent
S&P Futures  1322.1 -0.5 -0.04%
Eurostoxx Index 2148.8 -7.7 -0.36%
Oil (WTI) 90.91 0.3 0.28%
LIBOR 0.467 0.000 0.00%
US Dollar Index (DXY) 82.16 -0.186 -0.23%
10 Year Govt Bond Yield 1.76% -0.02%  
RPX Composite Real Estate Index 177.1 0.4  

Markets are flat overall this morning, which makes sense.  Given the fact we have a 3 day weekend and we may have a resolution on the Greek situation, you would have to be certifiably insane to carry positions over the weekend.  Bonds close early today, and I suspect most of the Street will be on the L.I.E. by noon. 

No economic data with the exception of University of Michigan confidence at 9:55 this morning. University of Michigan consumer confidence really just tells you where gas prices were last month (h/t Ron at MCM). Consumer sentiment and the Triple A Gas Price index have a -.52 correlation with a 1 month lag.  

Are people who bought Facebook stock in the initial frenzy getting a do-over?  Sounds like it. The underwriters are claiming they made $100 million supporting the stock. I can see how they made money supporting the stock on the open.  I can’t see how they made money supporting it at the close since it opened down a couple of bucks the next day. Unless they were shorting it in the 40s.

I came across this testimony from a community banker regarding the unintended consequences of Dodd-Frank and the Volcker rule. The biggest one is that the regulators swung at Goldman and Morgan, they ducked, and the regulator ended up slugging all the small fry right in the jaw. When you have 15% of your staff handling regulatory matters and 12% of your operating budget is compliance there is a problem. He notes that regulatory costs as a percent of operating costs is 2.5x the costs for big banks. The Volcker rule alone will require the drafting of policies and procedures to ensure the East Podunk Savings and Loan doesn’t inadvertently set up a trading desk and start slinging around credit default swaps 

He also notes some major problems with the “ability to repay” test on mortgage origination and on the CFPB’s characterization of pricing risk as “predatory lending.”  The net result may be to drive community banks out of entire lines of business because of regulatory risk.  Will the powers that be listen?  I doubt they will do anything more than make perfunctory statements that these regulations were not meant to impact small banks. They will listen to this guy instead. 

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