Morning Report 8/30/12

Vital Statistics:

  Last Change Percent
S&P Futures  1402.6 -4.6 -0.33%
Eurostoxx Index 2422.6 -11.7 -0.48%
Oil (WTI) 95.45 0.0 -0.04%
LIBOR 0.421 -0.001 -0.24%
US Dollar Index (DXY) 81.45 -0.104 -0.13%
10 Year Govt Bond Yield 1.63% -0.02%  
RPX Composite Real Estate Index 192.1 -0.8  

Markets are lower after ho-hum economic data in the US and disappointing data overseas. Bonds and MBS are up slightly. Tonight we will get Mitt Romney’s speech at the Republican Convention and then all eyes turn to Bernake’s speech in Jackson Hole.

Personal Income and Spending both rose in July, with income coming in at .3% and spending coming in at .4%. The spending number was the strongest number since last winter, but was little below street expectations. The retailers will report BTS comps a week from today, and that will give us a more granular look at spending patterns. Initial Jobless Claims were 374k last week, more or less in line with the latest readings. 

Tomorrow, Ben Bernake will give a speech in Jackson Hole. The Street will be looking for clues to further stimulus, and they will probably be disappointed as politics are now center stage and the Fed wants to appear independent. Mitt Romney has been skeptical of the Fed’s reflation efforts and has already said he would replace Ben Bernake if he wins. Which means you should watch the polling numbers as a Romney win should be bond bearish at the margin. Especially if the Europeans find a way to muddle through.

The national settlement over foreclosure abuses is 6 months old, and the settlement monitor has released his first report. Total consumer relief has been $10.6 billion, of which the lion’s share has been short sales. At first glance, it appears the banks are over halfway there on delivering the $20 billion in relief, but that $10.6 billion will be haircut as there are different weights for different outcomes. 

30 Responses

  1. brent:

    Ok now I can go back to being a Republican and pointing out that foreclosure would have been the best path for all seriously behind homeowners and the nation as a whole all along.

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  2. brent

    What are you expecting from Jackson Hole tomorrow?

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  3. “France’s Prime Minister has told CNBC that his government will work hard with businesses to avoid major job losses and dismissed claims that his government is anti-business and driving away investment with a 75 percent tax on high earners.

    “This is not what is going to sum up our policies,” Jean-Marc Ayrault said in his first interview with CNBC since taking office earlier this year.”

    Call me crazy, but I believe he is mistaken!

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  4. What are you expecting from Jackson Hole tomorrow?

    Not much, to be honest. The professional Fed-watchers believe Bernake prefers to make big policy announcements in FOMC statements as opposed to forums like Jackson Hole. As I posted a few days ago, one of the dealers thought the Street was leaning very long going into the speech, which leaves a lot of room for disappointment, I guess.

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  5. “The national settlement over foreclosure abuses is 6 months old, and the settlement monitor has released his first report. Total consumer relief has been $10.6 billion, of which the lion’s share has been short sales. At first glance, it appears the banks are over halfway there on delivering the $20 billion in relief, but that $10.6 billion will be haircut as there are different weights for different outcomes. “

    Any idea how many of those sales were to investment funds? Is the federal government still offering incentives for bulk sales of foreclosed properties?

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  6. “bannedagain5446, on August 30, 2012 at 8:17 am said:

    “France’s Prime Minister has told CNBC that his government will work hard with businesses to avoid major job losses and dismissed claims that his government is anti-business and driving away investment with a 75 percent tax on high earners.

    “This is not what is going to sum up our policies,” Jean-Marc Ayrault said in his first interview with CNBC since taking office earlier this year.”

    Call me crazy, but I believe he is mistaken!”

    Remember, Eisenhower tax rates caused the economic growth of the post-WW II era. It should be easy for France to recreate the growth of 1950’s America if they just raise their marginal tax rates high enough.

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  7. Any idea how many of those sales were to investment funds? Is the federal government still offering incentives for bulk sales of foreclosed properties?

    I don’t think you can do short sales en masse to large institutional investors. The government is still selling properties, but they are intended to be used as rental properties, not sales. The strings attached to these sales are meant to hold this property off the market.

    That said, with rental yields in the high single digits, there is no shortage of investors who find that attractive.

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  8. Apparently hypocrisy is the new “lying”

    http://www.washingtonpost.com/blogs/fact-checker/post/fact-checking-the-gop-conventions-second-night/2012/08/30/128cbe9e-f260-11e1-adc6-87dfa8eff430_blog.html#pagebreak

    Most of the debunking begins with phrases like

    “Obama gave his speech in February, 2008, and he did say those words.”

    and

    “Ryan is referring to the Simpson-Bowles Commission, and he is correct that Obama did not act on its report”

    and then the obligatory “but” followed with how Ryan is being hypocritical. Being hypocritical isn’t the same thing as lying about what Obama did or did not do himself.

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  9. “Remember, Eisenhower tax rates caused the economic growth of the post-WW II era. It should be easy for France to recreate the growth of 1950′s America if they just raise their marginal tax rates high enoug”

    yes I know sarcasm when I read it! LOL

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  10. brent

    It would be a boon to the nation if we could get home ownership down to 60% at least.

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  11. Interesting counter-factual:

    “What If Obama Had Turned to the Middle?
    Channeling David Plouffe channeling an alternate reality.
    By Karl Rove
    August 30, 2012”

    http://www.rove.com/articles/413

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  12. I continue to find Ezra Klein to be one of the more credible critics of Paul Ryan, given his history of providing Ryan with a fair opportunity to make his case:

    http://www.washingtonpost.com/blogs/ezra-klein/wp/2012/08/30/a-not-very-truthful-speech-in-a-not-very-truthful-campaign/

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  13. Is the Ryan pick playing out as the Democrats expected? Serious question since I’m sensing the party is floundering a bit in response to him, particularly the Romney Medicare attack on Obama.

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  14. “Troll McWingnut or George, whichever, on August 30, 2012 at 10:55 am said:

    Is the Ryan pick playing out as the Democrats expected? Serious question since I’m sensing the party is floundering a bit in response to him, particularly the Romney Medicare attack on Obama.”

    My impression is that they view the fact checker results as determinative, as if they were constructing a legal case or mathematical proof about why Romney and Ryan can’t be elected. I’m not sure they will matter.

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  15. Rob Portman, who should know better, decides to drink the Kool-aid at Jonestown FL:

    “China manipulates its currency giving it an unfair trade advantage. So why doesn’t the president do something about it?” Portman asked. “I’ll tell you one reason – President Obama could not run up his record trillion dollar deficits if the Chinese did not buy our bonds to finance them…This will end under Mitt Romney.”

    http://www.washingtonpost.com/blogs/ezra-klein/wp/2012/08/30/no-we-dont-need-chinas-money-to-keep-deficit-spending/

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  16. Banned, these seem to be some very optimistic assumptions in the subsequent paragraph:

    “What’s more, Gagnon explains, even if the Chinese government stepped up purchases of dollars again in an attempt to reduce the value of the yuan relative to the dollar, the Fed could easily respond by buying up Treasuries in return. Interest rates would stay constant and deficit-financed spending would be no more difficult than it was before.”

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  17. More job-killing government regulations ….

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  18. oh agreed that Gagnon is not my favorite, However the amount of Chinese treasury buying has little to do with the deficit and our ability to finance it.

    Furthermore if we went to the gold standard suggested by the GOP platform, that would give China as a massive holder of dollars much more power over us than as a holder of Treausries currently, which surely Portman knows.

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  19. ““What’s more, Gagnon explains, even if the Chinese government stepped up purchases of dollars again in an attempt to reduce the value of the yuan relative to the dollar”

    China has capital controls, so they don’t need to buy up Treasuries to manipulate their currency. Foreigners are not permitted to own speculative positions in the Yuan. So there is no market mechanism to drive up the yuan vs the dollar.

    And the final part: “China’s manipulation really took off and peaked under George Bush,” he explained. “Under Obama it has gradually disappeared.”

    Well, yes. Under Bush, the economy was growing and US consumers were buying a ton of Chinese imports. Since then the economy has stunk and we are not buying as much from China, which means they are not buying as many Treasuries from us. Which problem would you rather have?

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  20. mike:

    “Marijuana advocates say the attack collides with California’s law and goes against a campaign promise by President Obama to not circumvent the state’s relaxed rules. But California’s four U.S. attorneys, who banded together last year, cite a need to combat spillover to states where the substance isn’t legal.”

    If only Bush had offered “no legalization Obama” a spot as AG after Ashcroft left, think how different the world would look!

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  21. More proof we don’t need the Chinese. Not single bid to cover ratio under 2.5 since the first half of 2009 in the 10 year with most over 3 in the last year.

    http://www.bloomberg.com/quote/USN10YBC:IND/chart

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  22. If this is true, I wonder if there is any possible bylaw that would allow the Republicans to nominate him instead of Romney:

    http://www.washingtonpost.com/blogs/election-2012/wp/2012/08/30/clint-eastwood-is-your-surprise-rnc-speaker/?hpid=z3

    Like

  23. Then in a master stroke, they could run the do you feel lucky clip in ads all across the country.

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  24. And the Republicans would embrace the “Imported from Detroit” ad campaign.

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  25. banned:

    If only Bush had offered “no legalization Obama” a spot as AG after Ashcroft left, think how different the world would look!

    Are you saying Fredo was a toker?

    I doubt Raich would have come out differently had BHO been GWB’s AG. Maybe Carhart wouldn’t have been pursued as vigorously though (bringing us back to the abortion debate).

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  26. I have never kept my feelings hidden about how badly the auto bailout was done as you know but all the various columns today about the Janesville plant closing are crazy.

    Only in the Republican Party would it make sense to vote for Romney who didn’t want to save ANY GM jobs, because Obama didn’t save EVERY GM job!

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  27. “bannedagain5446, on August 30, 2012 at 1:47 pm said:

    Only in the Republican Party would it make sense to vote for Romney who didn’t want to save ANY GM jobs, because Obama didn’t save EVERY GM job!”

    The policy that Romney advocated for – a bankruptcy restructuring with federal financial backing is ultimately what the Obama administration did after exhausting all other alternatives. The only likely differences between the two would have been in which creditors got priority.

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  28. What If Obama Had Turned to the Middle?

    I have always found Karl Rove’s brier patch advice to Obama hilarious. Nearly as funny as David Brook’s, another frequent unsolicited advice offerer.

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  29. jnc

    I disagree. I think that certainly the unions would have been gone and there would have been much more firings. The bankruptcy would have abrogated the contracts, because no one would have taken the facilities subject to the exisiting ones.

    Certainly also Chrysler would have been completely done for good, which as you know I think would have been a good thing because the industry suffers from tremendous over capacity

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  30. Yes, but it still would have been a restructuring, not liquidation. And if you take Romney at his word from his original editorial on the subject (disregarding subsequent changes of position for the Republican primaries) it would have involved a federal financial backstop, which I believe would most likely have been a loan guarantee for a private company to provide the financing.

    Also, Obama’s bankruptcy restructuring abrogated plenty of contracts with the dealers and with the facilities left with “old GM”.

    Like

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