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 |
1357.0 |
-5.5 |
-0.40% |
|
Eurostoxx Index |
2250.6 |
2.2 |
0.10% |
|
Oil (WTI) |
97.76 |
-0.7 |
-0.74% |
|
LIBOR |
0.466 |
0.000 |
0.00% |
|
US Dollar Index (DXY) |
79.69 |
0.190 |
0.24% |
|
10 Year Govt Bond Yield |
1.87% |
-0.01% |
|
|
RPX Composite Real Estate Index |
175 |
0.4 |
|
Global markets are weaker this morning after the far left won elections in France, and Greece voters rejected austerity measures. Greek bond yields have blown out 240 basis points this morning. French yields have taken the election in stride. The CAC-40 (French stock market) is actually up. The S&P futures were initially down 20 points on the Asian open, but have largely recouped their losses. Bonds and MBS are flat / up.
Pundits will be trying to read the tea leaves in the European election. Needless to say, Paul Krugman is delighted. Mohamed El-Arian is cautious.
Robert Samuelson sums up the debate going on in the academic community over how to address the current recession. Paul Krugman has been urging the Fed to target increased inflation in order to decrease unemployment. Ben Bernake considers Krugman’s prescription to be reckless. FWIW, I side with Bernake here. With so much slack in the labor force, we are seeing zero upward pressure on wages, and the Fed’s profligacy has created a bull market in commodities. Stagnant wages plus higher food and energy costs are a recipe for more consumer misery, not less.
The Obama administration has released its April Housing Scorecard. Punch Line: The housing market remains fragile and the administration remains committed to try and prevent avoidable foreclosures and to stabilize the housing market. It more or less reads like a campaign ad.
This week is Loanapalooza – the Mortgage Bankers Association Secondary Conference, which is being held in NYC. Certainly the top issues will be the CFPB, the return of the private label market, and the new regulatory environment.
Filed under: Morning Report |
All Things in Moderation 
Given the makeup of the Greek Parliament after this round of elections, I sense that a ruling coalition is going to be difficult to arrange and that new elections might have to be set.
Looks like the Greeks also want to renegotiate the bailout deal. We’ll see how that goes over with the Germans.
“Battle of the beards” …. it would be funny if the debate weren’t so serious.
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So, who’s ready for 100 year lows on Treasury rates this week?
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10yr has 20bps to go just to reach the lows of last September. I am skeptical, although admittedly not as much as I was last week.
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Moving this forward from Friday’s Morning Report:
“lmsinca, on May 7, 2012 at 5:37 am said:
jnc
It’s clear now how hollow that promise was.
I’m not sure the promise was hollow or that you were naive jnc. I believe Obama was the naive one and his lack of experience and familiarity with the office he was seeking lead him to make promises he couldn’t possibly keep.”
President Obama lost me when he submitted his first budget to Congress (“A New Era of Responsibility”) that contained spending cuts that only equaled to one half of one percent.
“The news releases began flying as Obama unveiled the long-awaited details of his $3.4 trillion spending plan, including a list of programs he wants to trim or eliminate. Though the proposed reductions represent just one-half of 1 percent of next year’s budget, the swift protest was a precursor of the battle Obama will face within his own party to control spending and rein in a budget deficit projected to exceed $1.2 trillion next year.”
http://www.washingtonpost.com/wp-dyn/content/article/2009/05/07/AR2009050702001.html
You can’t square that with:
“But I will also go through the federal budget line by line, eliminating programs that no longer work and making the ones we do need work better and cost less, because we cannot meet 21st-century challenges with a 20th-century bureaucracy”
The President’s budget submission is his governing document. Even if it doesn’t make it through intact, it’s the first document that shows the priorities of his administration, and as it was the first one his administration was submitting to a Congress controlled by his party, it was more relevant than most other budgets.
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JNC
I see your point. As you know, I think, he’s been a disappointment to me as well, in some ways for the same reasons and in other ways for completely different ones. I can’t pretend to know what’s in his heart or mind but I do think he’s sometimes confused about where he really stands. I think it’s tough to square one’s interest in keeping the safety net alive and helping average Americans out of this recession, and being a conservative on economic strategy. I certainly no longer trust him, although I barely trusted him enough to vote for him in the first place. It was the first time in many many years I voted for one of the two parties in a Presidential election.
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scott:
I’m not taking the bet mind you, just thinking out loud!
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lms:
Afghanistan might prove to be his biggest mistake of all, depedning on how things go with Pakistan. This could easily blow up in his face at any time.
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John
I agree completely and was only trying to address jnc’s economic complaints. I won’t be voting for him, but as I said last week I have that luxury by living in CA. I’ve thrown away more Presidential votes than anyone I know. I thought his speech from Kabul was just sad and almost desperate sounding, although I didn’t hear it, only read the transcript, so perhaps I was reading it wrong.
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lms:
I won’t be voting for him, but as I said last week I have that luxury by living in CA.
I’m curious what you mean by “that luxury”. Does that mean that you know CA is going to go Obama’s way no matter how you vote, so you feel comfortable voting for someone else, secure in the knowledge that Obama will win anyway?
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That’s right scott, otherwise I would have to decide whether a vote for someone besides Obama would essentially give my vote to Romney. I get off easy for now and pretend I’m voting for my principles. Maybe someday people in CA will change but for now they’ll vote for Obama I think. Even Jerry Brown won.
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I need to get to work, see y’all later.
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lms:
I get off easy for now and pretend I’m voting for my principles.
You said it, not me!
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Scott
You said it, not me!
Yep, figured I’d beat you to it. Weren’t you just saying the other day that a vote for Johnson hurts Romney more than Obama. Who are you voting for?
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lms:
Weren’t you just saying the other day that a vote for Johnson takes hurts Romney more than Obama.
Not exactly. Each vote for Johnson hurts whoever the vote would have otherwise gone to. But I think Johnson’s presence hurts Romney more, because he is more likely to draw votes from Romney than from Obama.
Who are you voting for?
Romney, although my vote will probably be as meaningful as yours. Over the last 4 elections CT has been more solidly Dem (53%, 56%, 54%, 61%) than CA (51%, 53%, 54%, 61%).
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Scott
But I think Johnson’s presence hurts Romney more, because he is more likely to draw votes from Romney than from Obama.
Sorry to be picky but isn’t that what I said, in fewer words.
Weren’t you just saying the other day that a vote for Johnson hurts Romney more than Obama.
I edited out the takes awhile ago because it didn’t make sense……………maybe that’s the problem, although I thought my point was clear.
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lms:
Sorry to be picky but isn’t that what I said, in fewer words.
Not really, although I think I am probably being picky. I assume we are on the same page, I was just distinguishing between “a vote for Johnson” and “Johnson’s presence”. For example, I don’t think your vote for Johnson hurts Romney in the slightest because you wouldn’t vote for Romney anyway. But on the whole, I think Johnson’s presence does hurt Romney.
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Scott
I was just distinguishing between “a vote for Johnson” and “Johnson’s presence”.
Wow, now I see why we have such a failure to communicate.
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lms:
Wow, now I see why we have such a failure to communicate.
Hopefully that will aid in preempting future failure.
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“lmsinca, on May 7, 2012 at 6:42 am said:
If anyone’s interested here’s the interview. As I said I’m still working my way through it. The grey bars are all expandable answers to questions.””
Thanks for the link to the Frontline Interview with Stiglitz.
(http://www.pbs.org/wgbh/pages/frontline/oral-history/financial-crisis/joseph-stiglitz/)
I particularly liked the section on the administration and the failure of “Pretend and Extend”. Pity Romney is not a particularly good messenger for this critique. Perhaps Gary Johnson could do better if he gets to participate in the debates.
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jnc
Thanks for the link to the Frontline Interview with Stiglitz.
You’re welcome. I thought it was a great interview. Agree re “pretend and extend” and also really liked the critique of HAMP and the lack of real interest or investment there. I thought his point about the shareholders and bond holders was spot on as well.
The preservation of the institution is important, but not of those shareholders and bondholders. They didn’t do their job of managing, monitoring, and they have to pay the price. They get the returns when things are well, and they have to pay the price when things go badly.
That’s what we should have done in the case of Lehman Brothers, especially given that we didn’t know what would happen if it fully failed. In that cloud of uncertainty, if the supervisors had done their job and our regulators had done their job and we knew the consequences, then you might say maybe we can have an orderly failure. But they didn’t know, and that was irresponsible. …
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The support level for oil is about $95. If we close below that at any time this week, we’re probably going down to $90
Add a few miles to your summer driving vacation.
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lms:
No, you understood it. He’s another president who is seemingly trapped by worries about appearing weak.
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“lmsinca, on May 7, 2012 at 8:57 am said:
jnc
Thanks for the link to the Frontline Interview with Stiglitz.
You’re welcome. I thought it was a great interview. Agree re “pretend and extend” and also really liked the critique of HAMP and the lack of real interest or investment there. I thought his point about the shareholders and bond holders was spot on as well.”
I still would prefer judicial mortgage modification aka cramdown instead of HAMP or another “bailout” approach. Cramdown would help align the incentives to help deter against overvaluing the real estate as collateral in the first place and also make those who profited from the initial transaction bear more of the costs should it go bad.
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jnc
I never understood why cramdown was such a tough sell legislatively. You’re talking via bankruptcy right? Regarding HAMP, it just seemed they had so much money set aside from TARP for the express purpose of paying the banks to work with homeowners but no one ensured that it really happened. My impression though may be influenced by good people I know who tried so hard to keep their homes and would have done almost anything if the banks would have committed to something.
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“Maybe someday people in CA will change but for now they’ll vote for Obama I think”
They won’t if the principled, outspoken, and dedicated among them don’t lead the way.
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nova
There’s not a single person on the Presidential ticket I would like to vote for. I’m happy for you that you have someone to be excited about, but I haven’t felt that way in a very long time. I vote third party most of the time just to be principled about something. I get excited about some local races but otherwise, I’m completely jaded about DC politics and the influence they peddle.
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“lmsinca, on May 7, 2012 at 9:29 am said:
jnc
I never understood why cramdown was such a tough sell legislatively. You’re talking via bankruptcy right? ”
Correct. The bankruptcy filing requirement helps to separate viable homeowners from those who can’t be saved and also acts as a deterrent to gaming the system (i.e. the “moral hazard” issue).
The other advantage of structuring this through bankruptcy is that it addresses the entire debt situation of the homeowner, rather than just the mortgage and thus helps to avoid prejudicing other creditors. I.e. by forcing unilateral principal write downs by the banks outside of bankruptcy as has been proposed, the net result may be to just benefit credit card and auto financing companies at the expense of mortgage holders. Since credit card debt is considered unsecured and thus riskier with a higher rate of return (interest rate) for the issuing banks, this would be a perverse effect.
Cramdown was a tough sell legislatively due to the fact that it would have ended the ability of the banks regulators to pretend that the banks were still solvent by forcing them to take immediate write downs on the “crammed down” assets on their books. This would have lead to another bailout or FDIC takeovers. Ideally, bankruptcy cramdown should have been passed at the same time that the capital injections were given to the banks in 2008 so that they would have had a cushion against these effects.
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“msinca, on May 7, 2012 at 9:57 am said:
nova
There’s not a single person on the Presidential ticket I would like to vote for. I’m happy for you that you have someone to be excited about, but I haven’t felt that way in a very long time. I vote third party most of the time just to be principled about something. I get excited about some local races but otherwise, I’m completely jaded about DC politics and the influence they peddle.”
Gary Johnson – Still exciting:
“Gary Johnson Just Gave the Best Speech of His Presidential Campaign
Mike Riggs | May 5, 2012
http://reason.com/blog/2012/05/05/gary-johnson-just-gave-the-best-speech-o
“Comparing Gary Johnson to Past Libertarian Party Nominees
By Conor Friedersdorf
May 7 2012, 8:30 AM ET 3
He has the most executive experience and the potential to win votes from conservatives and liberals.
Over the weekend the Libertarian Party decided that Gary Johnson would be its presidential nominee. He’s likely to appear on the ballot in all 50 states. And he’s arguably the strongest candidate they’ve ever run.”
http://www.theatlantic.com/politics/archive/2012/05/comparing-gary-johnson-to-past-libertarian-party-nominees/256782/
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“I’m completely jaded about DC politics and the influence they peddle.”
I saw that you’re off to work — so we can pick this up later.
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Arnold Schwarzenegger’s Op-Ed in the LA Times for those who haven’t seen it yet.
http://www.latimes.com/news/opinion/editorials/la-oe-schwarzenegger-gop-needs-to-be-more-inclusiv-20120506,0,178448.story
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jnc:
So far, after about 12 hours, the markets are seeing things my way with regard to currency. I’m going to declare victory and get the hell out.
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“bannedagain5446, on May 7, 2012 at 10:56 am said: Edit Comment
jnc:
So far, after about 12 hours, the markets are seeing things my way with regard to currency. I’m going to declare victory and get the hell out”
Meaning they are betting on a looser monetary policy from the ECB? Perhaps. I’ll believe in EuroBonds though when I see them.
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“ScottC, on May 7, 2012 at 10:35 am said: Edit Comment
lms:
I get off easy for now and pretend I’m voting for my principles.
You said it, not me!”
Even the idealists here have a certain minimal level of cynicism. I believe it’s a requirement for membership in ATiM.
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jnc:
Gary Johnson – Still exciting:
I think he’d be more exciting if he had resources at his disposal to become better known. Say, if the Koch brothers and/or AfP put some money behind his campaign.
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yes, tha’t my explanation for the relatively benign commodity market and I’m sticking to it!
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“because he is more likely to draw votes from Romney than from Obama.”
yeah, for some reason Obama has the anti-war, drug legalization, pro civil liberties vote locked up.
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nova:
yeah, for some reason Obama has the anti-war, drug legalization, pro civil liberties vote locked up.
No, that isn’t implied at all in what I said. I just think that, on balance, there are more libertarian leaning Republican voters than libertarian leaning Democratic voters, and hence a strong Libertarian candidate will end up pulling more votes from the R column than the D column.
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What I’m really wondering about (speaking of Libertarians) is what’s going to happen in Tampa if Romney doesn’t win the nomination on the first ballot with all of the Paul supporters as delegates.
And here in UT both Johnson’s presence and any votes he gets will probably harm Obama more than Romney. . . not that it will matter since the state has gone reliably R for decades (54%, 67%, 73%, 63%). With Romney at the top of the ticket I’m betting it’ll top that 73% that GWB got for re-election in 2004.
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Michi:
We’ll see what happens with TX and CA. CA might be enough to put WMR over the top, so that the Paulistas are limited to making noise at the RNC. Otherwise, you can bet that the Romney campaign will be looking to to make a deal to get Gingrich’s delegates. I don’t think WMR will be more than 100 short of 1144 after all the primaries/caucuses are done, although quite a few of the primaries/caucuses have been non-binding.
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I’m betting it’ll top that 73% that GWB got for re-election in 2004
Perhaps in Utah. I’m dubious if that would translate elsewhere. I’m not sure there is the same excitement for Romney as there was for Bush, but my own personal experience may color my view. I was excited about voting for Bush in 2004. I was less enthused about voting for McCain (though Palin helped perk me up at the time), and I’m not at all excited about voting for Romney, and don’t think that I will. I’m thinking Johnson, as a lark. Tennessee will go for Romney.
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“Facebook kicked off its IPO roadshow in New York City. The social network giant indicated an IPO range of $28 to $35 a share, which would value the company at $77 billion to $96 billion.”
It will be interesting to see how many suckers there will be for what is essentially a tracking stock. Of course you can make a LOT of money from suckers!
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I was just distinguishing between “a vote for Johnson” and “Johnson’s presence”.
I first read that, for some reason, as being a choice between “a vote for Johnson” and “a vote for a Johnson”. Which was totally the wrong way to read it.
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It will be interesting to see how many suckers there will be for what is essentially a tracking stock. Of course you can make a LOT of money from suckers!
I would continue to invest in my mattress, had I the extra income for said investment. 🙂
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Perhaps in Utah.
That’s all I meant. He got 89% of the primary votes in 2008, which is fairly Soviet. 🙂
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“It will be interesting to see how many suckers there will be for what is essentially a tracking stock.”
I thought the same thing about Google. If the crowd is clicking “Like” on the stock, you may have to just close your eyes and buy it.
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“Brent Nyitray, on May 7, 2012 at 1:34 pm said: Edit Comment
“It will be interesting to see how many suckers there will be for what is essentially a tracking stock.”
I thought the same thing about Google. If the crowd is clicking “Like” on the stock, you may have to just close your eyes and buy it.”
The only reason gold has any value, is because people believe it will.
I’d argue that any stock that doesn’t pay dividends can also be classified as a “tracking stock” under this view. Certainly most investors could care less about corporate governance issues. The stock price for today, yesterday and tomorrow is all that matters.
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Here we go Banned:
“France’s Hollande aims anti-austerity message directly at Germany
By Edward Cody, Updated: Monday, May 7, 12:13 PM
PARIS — Francois Hollande said he wanted to make Berlin his first stop as president of France, but he warned that the Franco-German partnership was going to have to change and that Europe’s key word from now on was “growth.”
But while Chancellor Angela Merkel said she would welcome Hollande “with open arms” in the German capital, she made clear that she would not accept his plan to renegotiate the European Union’s controversial “austerity treaty” or pump E.U. funds into the continent’s stagnant economies.”
http://www.washingtonpost.com/world/europe/hollande-says-french-german-relationship-must-change/2012/05/07/gIQAZ5HC8T_story.html?hpid=z1
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All the Ron Paul shenanigans is predicated on Romney NOT getting the first ballot. That seems like quite a long shot.
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jnc:
We should get a pool together like they do for golf tournaments on who leaves the euro first. You can take Germany or the field.
Options say that i’ts going to be a currency deval. No real downwrad pressure on commodities today and even oil came back
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Okie
If you’re around I just wanted you to know I made your colcannon recipe tonight. I made it a little early because my husband was hungry and I’m off to swim, finally, but he said it was really good and the taste I had confirmed it. Thanks for the new recipe.
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Thanks, lms, glad hubby (and hopefully you too) enjoyed the colcannon.
And thank you for the Stiglitz interview link. I thought it was a good read, and I really like that format.
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o/t
Just watching CNBC, they have on Arthur C. Brooks talking about income inequality and lack of opportunity in the US. Very interesting. I’m going to have to get his new book, The Road to Freedom.
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