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 | 1359.1 | 8.1 | 0.60% |
| Eurostoxx Index | 2248.8 | 23.2 | 1.04% |
| Oil (WTI) | 96.89 | 0.1 | 0.08% |
| LIBOR | 0.467 | 0.000 | 0.00% |
| US Dollar Index (DXY) | 80.01 | -0.075 | -0.09% |
| 10 Year Govt Bond Yield | 1.89% | 0.07% | |
| RPX Composite Real Estate Index | 175.4 | 0.2 |
Markets are higher this morning on no real news. Yesterday’s technical support at 1345 on the S&P 500 held, and perhaps we are just having an oversold bounce. Bonds and MBS are down as well. The Spanish government seized Bankia, the county’s largest real estate lender
Initial Jobless claims for last week came in at 367k, more or less in line with estimates.
Hey, Fannie Mae made some money! And they don’t need a check this quarter either.
The National Association of Realtors released their latest quarterly report yesterday, noting that improving sales and declining inventory are creating more balanced conditions. The inventory of homes for sale fell to 2.37MM existing homes from 3.03MM in Q111. The median home price fell slighlty to $158,100 from $158,700. This drops the median home price to median income ratio to 3.075, the lowest level since 1976, and below its historical range of 3.15 – 3.55. Prices after a bubble tend to overcorrect, and it certainly is possible that prices could go lower – however we are officially in “overcorrection” mode.
Chart: Median House Price to Median Income:
Filed under: Morning Report |
All Things in Moderation 
Get inflation proofed, even the banks are starting to get it.
“Citi’s Buiter: Time for ‘Helicopter Money Drops'”
http://www.cnbc.com/id/47364152
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“Bundesbank embraces more inflation (in Germany)”
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john, FWIW, I was disgusted (more than usual) by some comments to you by ddawd and cao on yesterday’s PL HH. You have my utmost respect for carrying on in a civilized manner.
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dawd has been really very good lately so that came out of the blue. I took it as a bad day.
cao, well what can you say!
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I’m curious as to why you put up with that.
And your point is spot on. Before he was completely incapacitated Byrd stopped mid-speech once and asked who had the floor. Tim Johnson is seriously ill. Thurmond’s staff was essentially pulling a “weekend at bernie’s” routine.
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From John’s cnbc story:
Huh. Color me surprised.
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Euro Will Have to Be Devalued to Save EU: Siegel”
http://www.cnbc.com/id/47356767
we’re all on board, so let’s get started already!
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start shopping for your beachfront house in Marbella.
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“bannedagain5446, on May 10, 2012 at 9:09 am said: Edit Comment
“Bundesbank embraces more inflation (in Germany)”
http://econoblog101.wordpress.com/2012/05/10/bundesbank-embraces-more-inflation-in-germany/”
Looks like you win the bet. Still no Eurobonds though, correct?
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“okiegirl, on May 10, 2012 at 11:22 am said: Edit Comment
john, FWIW, I was disgusted (more than usual) by some comments to you by ddawd and cao on yesterday’s PL HH. You have my utmost respect for carrying on in a civilized manner.”
Which HH thread? May 9th? I didn’t see anything particularly crazy.
http://www.washingtonpost.com/blogs/plum-line/post/happy-hour-roundup/2012/05/09/gIQArOt1DU_blog.html
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jnc, you don’t think this is particularly crazy? Never mind, I don’t want to pollute this blog by repeating here, But see responses to john’s (hammilcarbarca) 6:19pm CDT comment on the 5/9 HH.
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jnc — see 5/9/2012 7:19 PM EDT
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“okiegirl, on May 10, 2012 at 2:35 pm said: Edit Comment
jnc, you don’t think this is particularly crazy? Never mind, I don’t want to pollute this blog by repeating here, But see responses to john’s (hammilcarbarca) 6:19pm CDT comment on the 5/9 HH.”
No, I just overlooked the post because I didn’t read carefully. Normally the flame wars are characterized by large blocks of text. Like a car wreck that I know I shouldn’t be watching, but end up rubbernecking anyway, a good PL dust up is hard to skip.
I concur with your assessments of the responses.
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Wow, that was particularly nasty wasn’t it? I was resisting the urge to read it but couldn’t after all. I guess being called an asshole or simple-minded pales by comparison. I keep imagining I’m going to comment over there when it’s slow here but then I read some of the comments and just can’t do it. I wish we could get ATiM back where it was when we first started though…………………..something’s gone wrong IMO.
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“Like a car wreck that I know I shouldn’t be watching, but end up rubbernecking anyway, a good PL dust up is hard to skip.”
LMAO.
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“something’s gone wrong IMO.”
not enough posts? arguments being re-hashed?
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nova:
not enough posts? arguments being re-hashed?
The absence of belief in the good faith of others, I suspect.
And, of course, the fact that I’m an asshole.
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You know what they say, if you want respect, extend it to others.
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bsimon:
I’m still not clear on what drove you to your regrettable outburst. All I did was point out that it isn’t the fact of someone else’s money that limits you from making your voice heard through expensive TV advertising. There is no reason for me to think that, for example, Paul Krugman is limiting my ability to be heard simply because his fame as an economist has afforded him a greater opportunity to be heard by vastly more people than my humble self. Nor is there any reason for me to think that my ability to be heard has been limited simply because Jeneane Garofalo’s (to pick one particularly asinine celebrity at random) talent as a comedian/actor has afforded her greater opportunity to be heard than my significantly less talented self. Likewise, there is no reason for you to think your ability to be heard is being restricted just because some billionaire is able to use his money to buy himself more opportunity to be heard than you are able to buy with your money.
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nova
not enough posts?
I’d say that’s definitely true. I think of things I’d like to discuss all the time but they seem too controversial so I stay clear. I wonder what everyone elses problem with posting is. I’ve resorted to some pretty boring stuff lately……………….lol
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But Jeebus what do you get out of even reading that site anymore? I have to shower now.
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Well, I have to admit that I was hoping when I got back from my swim you guys would have figured out how to save ATiM. Where else are we gonna go?
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Do you swim with a masters group?
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Scott, I have learned that conversing with you is an exercise in futility & returns nothing for the investments of time and thought. If I reply to your comments, please presume the thoughts are meant for the group and that I am not soliciting a reply from you. Thanks in advance.
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I was out gardening a lot of the day because I had internet problems. I still come here, but there is a time problem in that I seem to post when nobody else is around, whereas I can get instant gratification and abuse on PL. I prefer to put my financial stuff here because I get intelligent conversation found almost nowhere else.
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john, what post topics would interest you (beyond, obviously, the financial topics)?
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bsimon
I do, but gave up competition about 5 years ago. I’ve actually been helping my niece who is going to be 35 in a week compete in “Special Olympics” Last year she won three gold and a bronze in the back stroke (my stroke). We swim at the high school pool during the week and by this weekend I’ll be swimming in our pool, it’s finally warm enough I think.
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okie:
right now, anything but gay marriage! no seriously just because I dont post on a topic doesn’t mean I’m not interested in the conversation, however I try to limit myself to things I know something about.
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My new favorite quote of the year from Jamie Dimon, commenting today about JPM’s trading losses:
“Just because we’re stupid doesn’t mean everybody else was,” Dimon added.
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banned:
“Just because we’re stupid doesn’t mean everybody else was,” Dimon added
Unfortunately the regulators won’t see it that way. Everyone in the business is going to suffer as a result JPM’s stupidity.
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John
Is your garden planted yet? My large one’s been in for about five weeks now and the new, smaller one for about three weeks. But I planted about a month late this year. I generally plant in early March but was sick this year and just couldn’t get to it. One thing I planted that is doing really well that I’ve never tried before is bok choy.
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I am strictly perrenials, but it has been a great spring because of the mild winter, except my roses have black spot which was exacerbated
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I am strictly perrenials
Ahhhhh, I assumed it was vegetables. I don’t have very many flower beds anymore. We used to have flowers and a fruit tree orchard in the back but then we built our warehouse and poured a lot of concrete. I do love flowers though and still have some bulbs in the front, mostly freesia and daffodils, and various pots around the yard and pool. I think we only have about 4 or 5 roses left but they are pretty.
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scott:
we’re going to get back to more talk about the Volcker rule, but luckily for me, I was almost 100% out of the financials
Apparenlty their loss was twice the max they had caluclated as the risk.
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banned:
Apparenlty their loss was twice the max they had caluclated as the risk.
I’ve read that the bp move during the period JPM claims the losses occurred was 12 bps. That means a risk position of $160mm per bp. Yet their original VaR calc was supposedly only $60mm. And this stuff, BTW, was apparently in a risk management portfolio, not some prop trading account.
Obviously this is going to fuel the volcker flames, but it probably shouldn’t. From what I can tell so far (we may find out more/different eventually) this seems more like a risk control/incompetence issue. It wasn’t as if they deliberately threw on a gigantic bet. As Dimon said, they were stupid.
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” I do, but gave up competition about 5 years ago. I’ve actually been helping my niece who is going to be 35 in a week compete in “Special Olympics” Last year she won three gold and a bronze in the back stroke (my stroke). We swim at the high school pool during the week and by this weekend I’ll be swimming in our pool, it’s finally warm enough I think.”
Cool. I’ve never swum competitively, but trained with a masters group for two winters, for triathlons. This year I’m focusing on other stuff for my primary exercise. The outdoor pools won’t open until June; which is when I’ll restart swim training.
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lms:
I have only two tomato plants. I have about 25 or so roses, 30 azaleas, maybe 8 rhodos, 7 camelias, 10 or 12 clematis, two new wysterias, a ton of lillies and irises, hollyhocks, but not this year, and two lilacs that are refusing to bloom for some unknown reason!
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john, that sounds beautiful. You have fabulous perennials, lms has a bountiful vegetable garden . . . . . . and okie is focused on her herb garden.
I’ve had some serious gardening setbacks. There was a fire in my back yard in 2005; it burned everything in my yard up to the house, which miraculously was spared. I lost everything, but replanted. In 2010, my back yard was hit hard by a freak hailstorm. I lost everything I had replanted/replaced, plus some (roof and car). For the last two years I have been trying to replant, but other events have interrupted (sister’s illness and death, etc.). This year I’ve gotten in a couple more herbs and planted some annuals, but that’s it so far. Sigh.
Anyway, back from the market and off to the kitchen to make dinner.
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oh, and a lot of peonies that are currently enhancing my room with their fragrance coming from a vase.
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John – Charles Krauthammer shares your assessment of Netanyahu’s recent political moves:
“Echoes of ‘67: Israel unites
By Charles Krauthammer, Thursday, May 10, 7:04 PM”
http://www.washingtonpost.com/opinions/echoes-of-67-israel-unites/2012/05/10/gIQA9tUaGU_story.html
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jnc:
that’s twice you’ve suggested I might be right today. I’m cashing in my chips
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scott:
It was a CDS involving European corporate bonds I believe. they went short and the underlying bonds didn’t.
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okie:
I’ve killed quite a bit to get here though. I have two gardenias that might flower for the first time this year, but this is a tricky climate for them and overall their losses look like the Donner party!
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john, I’d love to chat about your garden further, maybe after the financial discussion or another time. (I’m getting to my old lady bedtime.)
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“ScottC, on May 10, 2012 at 8:04 pm said:
..
Obviously this is going to fuel the Volcker flames”
Would it have been theoretically possible if the positions and losses were large enough for this to have triggered an FDIC/Federal Reserve/taxpayer backstop?
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jnc:
Would it have been theoretically possible if the positions and losses were large enough for this to have triggered an FDIC/Federal Reserve/taxpayer backstop?
Of course. The only possible way to remove those possibilities, regardless of what a bank does, is to not offer them in the first place.
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jnc:
BTW, the losses really ought to be put into context. JPM reported 1st quarter profits of $5 billion. Last year it reported net income of $19 billion. It’s got $140 billion in tangible equity. The unit in which the loss was realized actually showed a loss of only $800 million this quarter despite the $2bn loss, because it was profitable elsewhere. This loss is far, far from life-threatening.
The numbers are large and headline grabbing, and proponents of more regulation will use it as a cudgel. But the fact is that banks are in the business of managing financial risk, and in that business losses will occur. You don’t try to prevent banks from engaging in mortgage lending simply because one of them wrote some particularly bad loans. To me the real issue isn’t the types of risk they had, or the products they used to manage that risk, but rather the metrics and reporting they had in place to measure and know the risks they actually had.
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To me another very interesting aspect of this whole episode with JPM is the effect that disclosure will have on the size of the loss ultimately realized. If JPM was able to quietly to work out of the position over some time, it could limit its losses to something less than what it will probably ultimately realize given that the entire market now knows the size of its position and the urgency of reducing it. The other side of the market will now back up not for any fundamental reason but rather because it knows JPM has little choice but to hit them.
It is a bit of a conundrum. Obviously JPM has a legal responsibility of full disclosure, but it also has a fiduciary responsibility to protect shareholder value. In situations like this, the two responsibilities are in conflict.
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John, it sounds like you probably have a beautiful yard. The best I can really say about ours anymore is that it’s very clean looking……….lol. Oh and vegetable gardens aren’t necessarily the most gorgeous additions to any back yard, especially after about three months growth. I do love going out and picking our dinner though. I’d like to say you’ve inspired me to plant flowers but I know my husband will just say……”like you need something else to do right now”.
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Can one of you guys tell me whose money JP Morgan lost, what kind of investor would it be?
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lms:
Can one of you guys tell me whose money JP Morgan lost, what kind of investor would it be?
Stockholders.
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Stockholders.
So they would have been too risky for say……pension funds, correct?
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lms:
So they would have been too risky for say……pension funds, correct?
I don’t know exactly what the position was. John said it was a short CDS on corporate bonds (ie sold protection). I don’t think pension funds involve themselves in actually selling protection on bonds, although they do take on the same risks involved, ie they buy bonds that have some risk of defaulting.
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Thanks scott, I guess we’ll just have to wait and see. I read somewhere that another cool billion in losses is still in the pipeline. It’ll be interesting, I guess, to see what the market does today.
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