Morning Report 10/26/12

Vital Statistics:

  Last Change Percent
S&P Futures  1403.7 -4.5 -0.32%
Eurostoxx Index 2481.1 -2.3 -0.09%
Oil (WTI) 86.11 0.1 0.07%
LIBOR 0.313 0.000 0.00%
US Dollar Index (DXY) 80.18 0.138 0.17%
10 Year Govt Bond Yield 1.78% -0.04%  
RPX Composite Real Estate Index 193.9 -0.1  

Markets are flat after a better than expected GDP report offset the earnings miss from Apple. Surprisingly, bonds and MBS are rallying on the GDP number. Not sure what to make of that.

3Q GDP came in at +2%, higher than the +1.8% expectation.  This is the “advance estimate,” which means the source data are still incomplete, so the number will be subject to two revisions.  Increases in consumption and government spending were offset by a drop in nonresidential fixed investment. 

The NAR is forecasting that home prices will increase by 3.25% in 2013 based on its survey of 50,000 real estate practitioners.  

If Obama wins re-election, Ed DeMarco’s days at FHFA are probably numbered. To overcome Republican opposition, he will probably be fired and replaced while Congress is in recess. He has continued to butt heads with the Administration over principal reductions for GSE loans.

The MR may be a casualty of Sandy next week.  Hopefully not.


7 Responses

  1. Courtesy of Shrink2 on PL:

    “The Randian and the Bailout
    Bob Benmosche was perfectly happy to while away his retirement on his Croatian vineyard. But the image of AIG employees being beaten up for their bonuses was just too much to bear.

    By Jessica Pressler
    Published Oct 21, 2012”


  2. Bob Benmosche bears a strong resemblance to The Most Interesting Man In The World.


  3. I was about to ask if you meant yourself, yello, and then I got it. . .


  4. OT: This went unremarked in the most recent interview that President Obama gave Rolling Stone.

    “I’ve looked at some of Rolling Stone’s articles that say, “This didn’t go far enough, we didn’t institute Glass-Steagall” and so forth, and I pushed my economic team very hard on some of those questions. But there is not evidence that having Glass-Steagall in place would somehow change the dynamic. Lehman Brothers wasn’t a commercial bank, it was an investment bank. AIG wasn’t an FDIC-insured bank, it was an insurance institution. So the problem in today’s financial sector can’t be solved simply by reimposing models that were created­ in the 1930s.”

    In this, he has joined with Bill Clinton in arguing against a re-imposition of Glass-Steagall:


    Mr. President, in 1999 you signed a bill essentially rolling back Glass-Steagall and deregulating banking. In light of what has gone on, do you regret that decision?


    No, because it wasn’t a complete deregulation at all. We still have heavy regulations and insurance on bank deposits, requirements on banks for capital and for disclosure. I thought at the time that it might lead to more stable investments and a reduced pressure on Wall Street to produce quarterly profits that were always bigger than the previous quarter. But I have really thought about this a lot. I don’t see that signing that bill had anything to do with the current crisis. Indeed, one of the things that has helped stabilize the current situation as much as it has is the purchase of Merrill Lynch (MER) by Bank of America (BAC), which was much smoother than it would have been if I hadn’t signed that bill.”


  5. This analogy seems a stretch:

    “Can Austin Keep Itself Weird?
    Published: October 25, 2012
    AUSTIN, Tex.

    ON the sun-dappled October weekend when the cyclist Lance Armstrong’s world fell apart, Austin, the city he calls home and that until recently called him hero, went on with the simple pleasures of Longhorn football, live music, festivals and an amateur cyclist ride through the Hill Country.

    But the midautumn bonhomie couldn’t hide a sudden anxiety around town. Stunned supporters of Mr. Armstrong arrived for his gala benefit defiant in their Livestrong logos, even as The Austin American Statesman sullenly detailed the charges of doping and cover-up, the fleeing of corporate sponsors and the stripping of Mr. Armstrong’s seven Tour de France victories.

    Among other things, the Armstrong debacle is a cautionary tale for Austin, one of America’s most beloved cities, which I call home. His rise has paralleled the city’s ascent from sleepy state capital to international trendsetter. Each year, millions visit for the city’s music festivals. Its economy has thrived during difficult times. With its success, Austin has attracted celebrity culture, built a sleek city and even attracted a new sport, Grand Prix racing, one usually reserved for the global elite.

    Yet Austin’s very success, like that of its hometown hero, threatens to overwhelm the simple pleasures and values that make it unique.

    I had no idea that Lance Armstrong was even from Austin and I don’t associate him with the city at all. I doubt that his problems will have any impact on the city whatsoever.


  6. jnc:

    Thanks for the Glass-Steagall links. I wondered why people thought 1930s-era legislation would be good (or applicable) to present day problems.


  7. Rolling Stone’s response to Obama’s defense of the repeal of Glass-Steagall and his decision not to pursue reenacting it:

    “So the first and most critical goal of any reform-minded administration should have been to alleviate these dangers by making things less concentrated, i.e. by making Too-Big-To-Fail companies small enough to fail. And Obama really didn’t do that, on any front.

    Reinstating Glass-Steagall or imposing a strong Volcker Rule would have been part of that, because it would have removed the threat that the federal government or the FDIC would ever again have to worry about what sorts of loony gambling schemes these new supermarket firms are getting themselves into. Obama also could also have helped reverse the damage of the Commodity Futures Modernization Act by forcing derivatives to be traded on simple, regulated exchanges. FDR did exactly the same thing with stocks and commodities after the Depression, but Obama passed on doing it with derivatives, again allowing his own party’s derivatives reform proposals in Dodd-Frank to be severely gutted from within.

    Finally, Obama had a chance to physically reduce the size of Too-Big-To-Fail companies by supporting the Brown-Kaufman amendment to Dodd-Frank, which would have forced big banks to cap deposits and liabilities to under 10% of GDP. He didn’t support that amendment and it died.

    The sum total of all of this is that Obama didn’t really do anything to alleviate the dangers of Too-Big-To-Fail. If anything, we now live in a world that is more concentrated and dangerous than it was before 2008. TBTF companies like Chase and Wells Fargo and Bank of America are even bigger and less-able-to-fail-ier than they were when he took office. This is why Obama’s answer to our interview question is so disappointing. If I’m understanding the president correctly, he basically says he doesn’t think Glass-Steagall should be re-instated, and beyond that, he just thinks Wall Street needs to self-regulate better.

    That’s a pretty depressing take, at a time when even Sandy Weill – the bellicose Wall Street braggart who willed the now-infamous Citigroup merger into being and was a driving force behind Glass-Steagall – thinks that Too-Big-To-Fail companies should be broken up. The only hope we really have to fix many of these problems is to do just that, and we will need the chief executive’s help there. But President Obama apparently still isn’t willing to take that step, which is really too bad.”


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