Morning Report 5.10.12

Vital 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:

 

 

Life in Desolation Canyon

Haaaaaahaaaaaa, did I catch you with the title?  Since it’s a bit of a slow news day, except for the fact that Obama finally evolved, and I’m not particularly interested in controversy right this second, I’ll just go ahead and put up a boring post.

I’m not sure if any of you will be interested in this or not but I thought I’d mention that our youngest daughter is off to Desolation Canyon again to finish her research in fluvial geology (her mountain pictured above).   She’s working on her Master’s at the Colorado School of Mines and will be finished with her thesis by the end of Sept. or early Oct. and has a job with an oil company in Denver beginning on Nov. 1st.   This will be her last opportunity to get all the information she needs to complete her research.

I thought some of you might be curious about life on the river.

Apparently, her research area is somewhat unique, even for a geologist, in that it is so remote and lacking in amenities, so to speak.  She is one of only two students on campus allowed to requisition the satellite phone and also takes a gps locator device she uses to send a message every day with their location mapped out.  There are three possible messages which are pre-recorded, “all’s well”, “send help soon”, and “send help now”.  She will use the satellite phone to get weather updates every five or six days and also of course, if there is an extreme emergency or if the locator doesn’t work for some reason.

This will be her third trip.  The first was about this time last year and it was a group consisting of her academic adviser, her industry adviser, a PhD student, two river guides and herself.  They spent 10 days on the river in two different locations and she was able to see the lay of the land, and begin measurements and analysis of “her mountain”, which apparently is a fantastic out crop with lots of useful information for the oil industry.  She’s taken a real right turn since being a water consultant.

The weather was dicey this time last year and still very cold at night and they had several thunder storms and plenty of hail.  During the first big down pour most of the tents were flooded at their primary camp and they had to dry everything out, not easy in cool weather and then set up new sleeping quarters on higher ground and dig moats around the tents for drainage.   She and her advisers spent a lot of time on the mountain investigating the most useful areas and setting up a strategy to acquire all the information she was going to need to finish her research in two additional trips.  There is a very narrow window of opportunity to get to the site because of weather and river conditions.

The second trip was at the end of August last year and she and Chelsea, her river guide for all three of her trips, spent 21 days in the baking sun (average temp of 100).   The raft above is packed for two people for 21 days. Her site is only accessible by rafting down the Green River for three days and then another full day rafting out.  They spent some time directly across the river photographing the outcrop with a gigapan system and visiting a natural spring where they were able to acquire fresh water to bring back to camp for purification.   They set up a secondary camp near the old McPherson Ranch and spent a couple of nights there.  The rest of the time they spent hiking up “her mountain” and while Chelsea found a shady spot to read, our daughter “worked the channels”.  Chelsea was there just in case of accident or injury as the site itself is several miles from camp across a large meadow and then up.  Even with really good walkie-talkies it would still take someone a couple hours to get from camp to the research site so Chelsea was her shadow in the field.

After the first couple of days and a little experience with heat exhaustion, they began heading out in the pre-dawn hours of the morning using their head lamps to begin the hike.  This way she was able to begin her work as the sun came up and get off the mountain before the most intense heat of the day did them in.  Back at camp, after cooling down in the river, and with a gas powered generator she would upload her photos from the day and work on her notes for several hours.  Chelsea would cook and maintain the camp.  This was followed by dinner and a quick game or two of rummy and then lights out.

By day 14 or 15 they were out of ice and perishables were either gone or inedible.  They kept water and beer (yep) cool by floating them in the river.  The toilet (above) was full of flying bugs, which was a little nerve wracking, and their clothes, hair and bodies looked and smelled as if they were never going to be clean again.  The Green River is not exactly the clearest water in the world for bathing or doing laundry.  She’s a very accomplished outdoor person and has spent quite a bit of time in the middle of nowhere for days on end but this trip really tested her.  Of course afterward a sense of accomplishment and the benefit of some great stories and useful research information erase most of the worst memories of the trip, and there were more than a few.  She’s actually looking forward to the next trip.

She leaves Saturday for her third trip.  This one will be four weeks (28 days) and she’s taking along another geologist as well as her trusted side kick and new best friend Chelsea, the river guide.  Our daughter is 6’ tall and no shrinking violet but she needs help this time because there are a few areas on the mountain she needs to scale down in order to get the last batch of measurements she’d really like to get.  They’re also going to work on a project that will depict scale as it’s critical to her project.  Her search for a research assistant lasted all year and finally she found Neil, who is apparently excited to experience all the mountain has to offer.  He’s also really smart and will be a good brain storming partner to help solve the remaining challenges.   She’s hoping of course that they’ll still be friends once it’s over.   We’ll be looking for the “all’s well” signal everyday and waiting for that phone call once they get off the raft in the little town of Green River on June 9th.

Morning Report 5.9.12

Vital Statistics:

  Last Change Percent
S&P Futures  1345.8 -12.7 -0.93%
Eurostoxx Index 2215.7 -20.4 -0.91%
Oil (WTI) 95.84 -1.2 -1.21%
LIBOR 0.467 0.001 0.21%
US Dollar Index (DXY) 80.02 0.281 0.35%
10 Year Govt Bond Yield 1.80% -0.04%  
RPX Composite Real Estate Index 175.2 -0.1  

Another sloppy morning as people watch the Greeks try and form a governing coalition which may well reject the austerity measures agreed to with the EU. The Greek 10 year is yielding 23.3% and the Athens Stock Exchange Index is now touching 20-year lows. The turmoil in Greece has investors nervously eyeing Spain and Portugal.

This has put pressure on the S&P futures, and a bid under Treasuries. The 10-year traded below 1.8% this morning. I am watching the 1345 level in the S&P 500, which is the 200 day moving average and the low of early March. We came within a couple of points yesterday. Mortgages are rising, but not as much as Treasuries.

Corelogic released its March 2012 Home Price Index yesterday, which showed prices flat YOY. Excluding distressed sales, prices increased overall. The top markets were Wyoming, Virginia, Arizona, North Dakota, and Florida. The worst were Delaware, Illinois, Alabama, Georgia, and Nevada.

FHA foreclosures increased in March, and it released an interesting statistic – that half the mortgages it modified entered into foreclosure a year later. Speaking of mods, Bank of America is offering principal reductions to 200,000 homeowners as part of the State AG settlement.

University of Chicago economist Raghuram Rajan has an interesting paper discussing the best way forward to improve the economy. He points out that for the past 20 years, the US has attempted to address inequality through the credit mechanism. If we can’t do something directly for the middle class, we can allow them to do cash-out refis to spend as if they weren’t middle class. Ideologically, there will be something for everyone to love and something for everyone to hate. It provides an excellent historical background on how we got here in the first place. Good read.

Morning Report 5.8.12

Vital Statistics:

 

  Last Change Percent
S&P Futures  1361.3 -4.5 -0.33%
Eurostoxx Index 2280.4 -2.7 -0.12%
Oil (WTI) 96.95 -1.0 -1.01%
LIBOR 0.466 0.000 0.00%
US Dollar Index (DXY) 79.74 0.132 0.17%
10 Year Govt Bond Yield 1.85% -0.02%  
RPX Composite Real Estate Index 175.4 0.4  

Markets are generally lower this morning on follow-through from the weekend elections in Europe. German industrial output rose more than forecast, suggesting that Germany may avoid a recession. German GDP growth was negative in Q4, however as an exporter, they benefit form Euro weakness. Such is they symbiotic relationship between the North and South – the Southern European countries benefit from their ability to borrow at lower rates than they otherwise would, while the Northern European countries benefit from the currency weakness that results. Bonds and MBS continue to rally, and the 10-year yield has cracked 1.85% 

The National Federation of Independent Businesses released its Small Business Optimism Report this morning. The report contained an interesting statistic – nearly half of the respondents hired or tried to hire in the last three months, and 3/4 of them said they had “few” or “no” qualified applicants. Hard-to-fill job openings rose, and are typically a leading indicator to a drop in unemployment. Capital Expenditures have increased from the record lows of August 10, but are still below “normal” levels, indicating spending is in maintenance mode, not expansion mode.  Contrary to public perception, access to credit remains low on the list of concerns. Earnings are pushing to cyclical highs. Anyway, it is an interesting report. RTWT.

Wells Fargo made nearly 34% of the $385 billion of mortgages originated in the first quarter. Their next closest competitor was JP Morgan at 10.6%.  Should the Federal Trade Commission start preparing an antitrust lawsuit?  Probably not, as the reason for their increased market share was due to their competitors scaling back the business.

It is looking more like Ally will put its Residential Capital unit into bankruptcy and Treasury will support the decision if it happens. Treasury wants to put Ally on the block and recoup their money, but the liability stream from ResCap is making that impossible. The end result could be an acceleration of putback claims.

Morning Report 5.7.12

Vital 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.

Bites and Pieces. Cinco De Mayo edition

I don’t know if I shared my carne asada recipe, but I just did it for everyone tonight, and it is a perfect summer grilling dish.  I always kick off the camping season by doing this over a campfire.

1.5 lb skirt steak

Marinade:

1 white onion diced

3 fresh jalapenos

1 bunch cilantro

1 jar minced garlic

1 plastic lime of lime juice

1 tb salt

2 tb oilive oil.

Salsa:

2 tomatoes, diced

1/2 white onion, diced

1 tsp minced garlic

1 fresh jalapeno, with seeds and membrane removed

fresh cilantro.

Put marinade ingredients in a food processor and mince.  Marinade skirt steak for 3 hours.

Assemble salsa. Cut and mix

Grill skirt steak.  Cut to 2-inch strips against the grain.

Grill flour tortillas briefly to warm up.

Serve with beer, grated cheese, salsa, guacamole, and cholula sauce.

Bites and Pieces, Irish Style

In honor of the Irish backdrop to Suite Harmonic (thanks, Emily!), here is a colcannon recipe that came to me as an authentic County Mayo recipe.  This has long been one of my favorite comfort foods.

Ingredients

1 pound cabbage [can substitute kale in whole or part]

1 pound potatoes

2 leeks

1 cup milk

salt and pepper to taste

1 pinch ground mace or 1/8 tsp ground nutmeg

1/2 cup butter, melted

 Directions

In a large saucepan, boil cabbage or kale until tender; remove and chop or blend well. Set aside and keep warm. Boil potatoes until tender. Remove from heat and drain.

Chop leeks, green parts as well as white, and simmer them in just enough milk to cover, until they are soft.

Season and mash potatoes well. Stir in cooked leeks and milk. Blend in the kale or cabbage and heat until the whole is a pale green fluff. Make a well in the center and pour in the melted butter. Mix well.  OR spoon colcannon into bowls and make a well in the center of each and pour in the melted butter.

Anybody else have a good Irish recipe?  Or maybe a recipe in honor of Cinco de Mayo?

GO THUNDER!

okie

**************************************************************************************************************

Cinco de Mayo fresh tomatillo salsa [Mark]

1 lb. tomatillos, husked
1 tablespoon olive oil
1/4 C red onion, finely chopped
1/2 C fresh cilantro leaves, chopped
2 dried chipotle chiles
1 tablespoon lemon juice
1 teaspoon dried Mexican oregano
1/2 teaspoon salt

With foil covered baking sheet 6 inches from flame, broil the tomatillos for 15 min.
turning at 5 min and 10 min. Tomatillos will darken in spots.
Remove from the broiler, cool [I stick in freezer for 5 min when I am in a hurry]. Then chop.

Warm the olive oil in a skillet. Add the onion and sauté until softened.
In a bowl, combine the onion and tomatillos. Stir in all remaining ingredients.
Refrigerate and serve cold.    2 C

Problem

There seems to be a problem with the site. All posts are showing up in italics. I am investigating, but if anyone has any ideas, let me know.

Update 9:52 est: Still no solution. I’ve looked through and tried to adjust the CSS, but nothing works. Seems like a higher level problem. I’ve contacted WordPress and await their answer.

Update 12:10 est: All fixed. My error. When I updated the quotation of the day, I had a bad html tag, which (surprisingly, to me) fed through to the entire site. All better. Back to your regularly scheduled program.

Discussion of Suite Harmonic by Emily Meier

There’s something about the words below that resonate with me and remind me, again, how truly awful war is.  This is toward the end of John Given’s enlistment in the Union Army and he’s quite close to returning home to Harmony, a greatly changed man, in a greatly changed nation.

……it struck him even more how blasted Decatur was.  It was very easy to get tired of looking at nothing except a soldier’s face and, without women, there was singular lack of beauty.  And color was missing.  Clothes were the sea of uniforms, faded to a vague blue, which the men, in the heat, shed as often as they could.  In a place where a normal year would have meant a host of summer flowers everywhere, the ground was unplanted-chewed up and battered by the boots of so many men.  There were no blossoms of any color.  There was no foliage.  There was only the wasted, treeless town and the mud and wood of the fort.

Emily will be checking in periodically so if you want to leave a question for her I’m sure she’ll be more than happy to respond.  It’s impossible to pin everyone down to a specific discussion time so just come in and out as time allows over the weekend.

***

Mark adds:

Suite Harmonic is a lovingly crafted narrative of war and family woven from personal written histories, especially from the letters of John Given and his sister Kate.  It is essentially a novel of manners interspersed with battle scenes.  For those of us who love Civil War stories, as I do, it is satisfying.  The main characters, John and Kate, become known to us as they become assimilated, as their Irish Catholicism fades, as they mature, and as they internalize the issues of their time.

That John survives Shiloh is amazing, that he learns that he will keep his head in combat is what gives him resiliency throughout the War.  Kate, back home in Indiana, is an interesting study in both duty and stepping out of her “place” as an Irish maid to wealthy Protestants.  Both siblings are smart and literate, which is how so much of their material survived.

The eventual love stories, after the War, especially Kate and Harry’s, are truly sweet.

The tragedies of 19th C. health care follow the characters into peace time.

A picky critic might find two anachronisms of speech, but I was not picky and did not catalog them.  My own disappointment with the novel was limited to my high expectations for it – I love historical novels.  I have been through all of Patrick O’Brian’s Aubrey-Maturin novels twice.  Suite Harmonic has no plot.  Think of a lifetime series of interconnected events as told through the eyes of two siblings, in which there is no struggle between good and evil, no climax, no anti-climax, and no denouement.  John and Kate were surely so likable and admirable as presented by ABC, and the incidents themselves so fascinating in detail and social (or combat) observation, as to allow Suite Harmonic to stand without a plot.  I think it does actually present a harmonic suite of the interplay of lives shaped by the Civil War, and by the integration of immigrants into society, and by the daily struggles of people we can still recognize, although their hardships were of a different time.  I am sure it does what Emily intended it to do, and that my expectations were irrelevant.

Morning Report

Vital Statistics:

  Last Change Percent
S&P Futures  1387.5 1.6 0.12%
Eurostoxx Index 2288.4 1.3 0.06%
Oil (WTI) 101 -1.5 -1.47%
LIBOR 0.466 0.000 0.00%
US Dollar Index (DXY) 79.3 0.079 0.10%
10 Year Govt Bond Yield 1.95% 0.02%  
RPX Composite Real Estate Index 174.6 0.4  

Markets are flat this morning after disappointing economic data out of Europe. Eurozone PMI data was solidly below 50, indicating business conditions are getting worse, not better. Equity markets recovered after initially selling off on the payroll data. Bonds and MBS are down slightly. 

Payroll data is out – 115k jobs were added in April, well below the 160k estimate. The unemployment rate fell to 8.1%, and the labor force participation rate fell to 63.6%. Average hourly earnings were flat. By all accounts, this was a disappointing report, and the markets sold off on the number, but then recovered. I suspect that predicting market reactions to economic data are going to become more difficult as disappointing numbers raise the possibility of QEIII.  

Lender Processing Services has put out its full report on March foreclosures. Delinquencies are continuing to decline (lowest level since Aug 08), while the foreclosure inventory is still at all-time highs, especially in judicial states. 

More data on the Facebook IPO.  The pricing range is $28 – $35 for a company that earned 43 cents a share last year. 81x trailing earnings. Click to Like.