Morning Report 5/18/12

Vital Statistics:






S&P Futures 




Eurostoxx Index




Oil (WTI)








US Dollar Index (DXY)




10 Year Govt Bond Yield




RPX Composite Real Estate Index




Markets are firmer this morning after enduring a bloody week which sent the S&P down 3.6% and the 10 year government bond yield down to 1.69%. Today is also the expiration of May options, so there is always the potential for funny closing prints. There is no economic data being released this morning.  Bonds and MBS are down slightly.

It’s Facebook Day! Facebook priced at the top end of the revised range last night and should begin trading around 11:00. There are a stocks that capture the attention of the populace and Facebook is one of them. Growth fund managers who have been starving for a good growth story besides Chipotle Mexican Grill and Lululemon just got a new one. With an IPO price at 28x revenue, the stock will have to almost collapse to get value and GARP guys interested. I’m sure if you are a good technical trader, you should be able to have a field day with this one. Treat it as a slip of paper with an alphanumeric code, not an investment, cause it isn’t.

Bloomberg has a column on why principal reductions won’t solve the housing crisis. The big problem is that something like 80% of all underwater homeowners with Fan and Fred mortgages are current on their mortgages. Any principal reduction program will encourage people to stop paying their mortgage. Second, of those seriously delinquent, most of them won’t be able to afford the lower payment anyway.

The National Association of Home Builders and Wells Fargo have constructed a housing affordability index, which is a measure of the percent of homes affordable by someone at the median income. The latest index is 77.5, which means 77.5 percent of all new and existing homes sold in Q1 were affordable for families earning the national median income. In a lot of ways, this chart is the inverse of my median house price to median income chart.

Chart: NAHB / Wells Fargo Housing Affordability Index:


The Wrong Focus?

According to US Postal Service financials, in 2007 the USPS posted a net loss of $5.1 billion. In 2008 it posted a loss of $2.8 billion. In 2009 the loss was $3.8 billion. In 2010 it posted a loss of $8.5 billion. In 2011 it posted a loss of $5 billion. In the most recent quarter this year, it reported a loss of $3.2 billion, bringing this year’s total loss to $6.2 billion.

So let’s add that all up. Since 2007 the USPS has lost a total of $31.4 billion.

Now, a question for the folks of ATiM: Who should the US taxpayer be more concerned about having to support with a taxpayer funded bailout, the US Postal Service or JPM Chase?

Next up…how much have taxpayers piled into Amtrak over the last 5 years?

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