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 |
1307.5 |
6.2 |
0.48% |
|
Eurostoxx Index |
2155.6 |
8.7 |
0.40% |
|
Oil (WTI) |
92.68 |
0.1 |
0.13% |
|
LIBOR |
0.467 |
0.000 |
0.00% |
|
US Dollar Index (DXY) |
81.38 |
-0.004 |
0.00% |
|
10 Year Govt Bond Yield |
1.72% |
0.02% |
|
|
RPX Composite Real Estate Index |
175.6 |
0.1 |
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:
Filed under: Morning Report |
All Things in Moderation 
Brent/Scott:
Looks like the LIBOR has been pretty stable recently. Is this being reflected in the Euribor too? I’m wondering about why the political changes and the Mediterranean nations’ economic conditions don’t seem to have moved the LIBOR much.
I’m probably misunderstanding how LIBOR is calculated and how banks lend.
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Mike:
I’m wondering about why the political changes and the Mediterranean nations’ economic conditions don’t seem to have moved the LIBOR much.
That’s a good question. As Brent points out, Libor and Euribor movements themselves are not indicating any immediate credit crisis. However, if you watch eurodollar futures contracts, which are essentially the market’s prediction of where 3 month libor will be on various dates in the future, there has been a dramatic spike in them in the last couple weeks, indicating that the market is increasingly pricing in a future crisis, presumably emanating from Europe. Since the Tuesday following elections in Greece and France, the September futures contract, which had been fairly stable at about 9949 (equivalent to a libor rate of 51 bps), has sold off by about 15 basis points. Basically, prior to the election, the market was pricing in about a 4 basis point rise between now and September. Now the market is pricing in a 20 basis point rise. That is entirely due to worries about the credit issues in Greece/Europe.
Addendum: When I say there has been a dramatic spike in the Eurodollar contract, I am referring to the first 4-6 contracts, all of which expire within the next 18 months. Further out the curve, there has been an even more dramatic rally. That is to say, massive yield curve flattening, with the short end rates moving up and the long end rates moving down. This, too, is indicative of a brewing credit crisis.
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Euribor has been dropping as rates have fallen. It is not indicating any sort of systemic risk in Europe.
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“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.”
Another arguement for judicial mortgage modification aka bankruptcy cram down.
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I agree with jnc [on using bankruptcy as a mechanism in the mortgage/foreclosure arena].
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mark:
I agree with jnc.
I largely do too. And because I do I also think that taxpayers/government representatives who are all aflutter over JPM’s reported losses ought to re-prioritize their focus if sparing the taxpayer the risk of underwriting bad decisions is their true worry.
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So, the jump in yield for Spain’s bond auction, for example, is an indication only of the Spanish economic problems and whatever downgrading of happens there won’t affect the rest of the Eurozone banking sector?
Wonder when the “Grexit” is going to happen …
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I’m guessing somewhere around a double on Facebook today but anything over 50% will be a success.
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Another big rally day for gold and silver, most likely as a hedge against currency chaos coming out of Europe.
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WTI under $92 headed under 90 as I suggested earlier. we’re not going below 88-89 however unless everything just falls apart in Europe in a sudden plane crash rather than an all day foggy pileup on the interstate
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banned:
in a sudden plane crash rather than an all day foggy pileup on the interstate
Good metaphor.
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very early FB look: 45 on 26MM
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Bloomberg is now explaining the concept of a limit order to their viewers…
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Only 45? Hmmm for the sake of the market as a whole, this one has to trade up into the high 50s
scott :
ty
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looking 42 on 56mm now..
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Scott:
Thanks. That clarifies things a bit for me, that the serious action is in the futures market.
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“Any principal reduction program will encourage people to stop paying their mortgage.”
I’m not late or upside down. But I’d be really tempted stop paying mine. what are they going to do. foreclose?
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we’re only marginally up right now, and I’m worried that FB could drag us down if it doesn’t hit the ground running. If it trades anywhere at or below 38 today, that’s a walking talking disaster.
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banned, if FB were to sink to a more logical traditional value, like say $8/share, I think it would indicate the victory of common sense. You are telling me that the NASDAQ would crater?
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crater would be an excellent description because it would indicate that there is no retail market for stocks whatsoever right now (which is probably true, but not something you want to see thrown in your face in that way)
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42, eh ok I guess lets see where we go from here
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FB acting a little heavy…
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40 and change, bad realy bad market heading south
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Oh FFFFFFFFFF
38
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going to break price…
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they got too greedy….
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38?
I think i was better off betting the pass line this past weekend.
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the problem is that this has an unusually short lockup period of 90 days not 180
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Maybe the Post Office should short some FB shares and claw back some of those losses. Naked shorts, naturally. Get them Goldman’s number.
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underwriters come in at 38 for support
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see this is why you have to stick to your knitting. I don’t buy tech because I’m no good at pricing it. I really thought based on groupon zynga and angie’s list that FB, a company with real earnings should make a 50% pop without dificulty.
They had an auction at my brokerage for shares but I didn’t bid because again, don’t know how to price.
Thank God the underwriters came in to support even though we lost all upside in the marekt at least we didn’t crater.
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So you can pick the explanation NASDAQ is investigating a problem with unfilled orders that led to the drop to 38 even, OR you can blame it on the addtional 84 million shares that were released two days ago (didn’t know about that)
With underwriter support, Im guessing now somewhere areoudn 10% for the day.
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Wow, all the way back down to 38 even with the backstopping by the underwriters?
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You wanted in on the IPO? You can buy all you want at that price.
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Brent:
You can buy all you want at that price.
Bad day for the underwriters.
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What was up with the delay in executing FB orders?
What a dud of an IPO.
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the underwirters somewhat successfuly defended their FB neighborhood, for the weekend at least.
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With all the FB hoopla today somehow I missed this from yesterday. Apparently a semi-bipartisan amendment to the NDAA went down to defeat.
At least it’s on the record: Most House Republicans support the indefinite detention without trial of American citizens.
During Thursday’s floor debate over the latest national defense authorization act, the House GOP brought out their long knives for Reps. Adam Smith (D-Wash.) and Justin Amash (R-Mich.), who, in their view, had collaborated on a nefarious plot to undermine national security. Rep. Tom Rooney (R-Fla.) accused the lawmakers of wanting to “coddle terrorists,” while Rep. Mac Thornberry (R-Tex.) warned that under an amendment they’d introduced, “as soon as a member of Al Qaeda sets foot on US soil, they hear you have the right to remain silent.” National Review’s Andrew C. McCarthy, a former federal prosecutor who has never heard of a same-sex marriage supporting, pro-financial regulation liberal who wasn’t secretly a member of the Muslim Brotherhood, wrote that their proposal was the result of “libertarian extremists” teaming up with liberals with an “obsession” with giving “more rights” to “mass murderers.” (my emphasis and a point that Okie and I have made many times)
This time around, the line is absolutely clear. Smith and Amash proposed that the government actually has to prove you’re guilty of a crime before depriving you of your liberty, something that the founding fathers found significant enough to write into the Constitution. Their opponents want the government to have the power to lock up American citizens without ever convicting them of anything, just because it says someone is a terrorist. Their proposal went down by a vote of 182-231, with only a handful of Republicans joining Amash in support.
As Smith pointed out during yesterday’s floor debate, the Fifth Amendment says no “person” shall be deprived of liberty without due process of law. It doesn’t say “citizen,” and the text of the Constitution uses both words enough that it’s clear the framers understood the difference. “Your beef is with James Madison,” Smith told Thornberry on Thursday. So keep in mind, when Republicans like Rooney say that Smith and Amash want to “coddle terrorists,” they’re not necessarily talking about some heavily armed Al Qaeda fighter in Kandahar. They’re potentially talking about you.
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Thanks, lms I was just writing something up about that, and you did it better.
I have already written to my Rep about it, for all the good that will do. Is anybody else concerned enough about this to do anything except comment about it? If so, suggestions about other actions beyond writing your rep?
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okie,
Some suggestions … start a petition on change.org, write to the WH, write to Sen. Majority Leader Reid, SASC chair Levin and ranking member McCain, donate to ACLU …
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Thanks, Mike. I’m now doing several of the things you suggest.
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Heh, Thunder are looking good at the moment. Things can change.
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“okiegirl, on May 18, 2012 at 8:20 pm said
Thanks, lms I was just writing something up about that, and you did it better.
I have already written to my Rep about it, for all the good that will do. Is anybody else concerned enough about this to do anything except comment about it? If so, suggestions about other actions beyond writing your rep?”
“Libertarian extremist” reporting for duty. And the answer to the question posed would be yes, vote for Gary Johnson for President as the Obama administration is fully on board with the concept of cart Blanche powers for the executive in the war on terror. It’s bipartisan consensus now, not Bush administration extremism.
There’s also the possibility that the courts may strike it down.
http://www.salon.com/2012/05/16/federal_court_enjoins_ndaa/
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jnc, I realize you’ve been traveling, but we had an abbreviated discussion of the court decision on some other thread recently. Don’t know if that ruling will stand, and the court process will take too long. IMHO, it will be moot by the time it winds its way through the system because new legislation will have been enacted.
Agree that deprivation of civil rights is now bipartisan consensus. But as far as I know, Johnson is not yet on the ballot in OK. LP OK has a ballot access petition drive going, which I have signed and would circulate if I knew anybody I thought would sign it. Of course, to say I strongly disagree with some of Johnson’s positions is an understatement, and I would not be supporting him if I thought he would win. I do think he could do well in OK, and I would love to see that happen. But OK in all likelihood will go strongly for Romney. Thus, I have the luxury of a protest vote.
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P.S. jnc, thanks for the Greenwald link containing the explanation of why the suit was not dismissed for lack of standing. Had not seen it.
Can anybody here explain the legal aspects of state nullification rights as advocated by Tenth Amendment Center?
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