Morning Report

Posted on November 12, 2012 by Brent Nyitray

Vital Statistics 

  Last Change Percent
S&P Futures  1380.2 4.5 0.33%
Eurostoxx Index 2477.4 -2.4 -0.10%
Oil (WTI) 85.55 -0.5 -0.60%
LIBOR 0.31 0.000 0.00%
US Dollar Index (DXY) 80.97 -0.055 -0.07%
10 Year Govt Bond Yield 1.61% 0.00%  
RPX Composite Real Estate Index 192.8 0.3  

Stock markets are higher this morning after last week’s post-election sell-off.  Bonds are closed for Veteran’s Day. The government also has the day off, so there are is no major economic news.

Post election, all eyes turn to the fiscal cliff.  There appears to be a growing consensus that we can leave rates unchanged for the top and limit deductions. Partisan posturing and political jockeying will make the markets a miserable place for the next couple of months.  Capital gains and dividends remain a wild card. The obamacare surtax will happen regardless, so financial income is taking a hit right off the bat.

The Basel III requirements scheduled to take effect on Jan 1 have been pushed back to some time in the future.  SIFMA and the MBA agree with the decision.

So how will the election affect the markets and real estate?  I suspect FHFA Chairman DeMarco will be out of a job, which will pave the way for principal reductions on F&F/Ginnie loans. If they don’t think this through, they could face a deluge of homeowners suddenly finding themselves “unable” to make their mortgage payment.

Geithner is out for obama II, and the favorite for replacement seems to be Jack Lew. Lew is a “middle of the road” candidate that has already been unanimously confirmed by the Senate in 2010 for the OMB job. 

If we go over the fiscal cliff, we will undoubtedly have a 1H recession, which could result in a 1.25% 10-year.  Which means the refi boom will continue to have legs.  If FHFA starts modding underwater loans to LTVs of 1.0, we should see some refi activity, especially in the FHA space.  That said, if CFPB doesn’t come out with a bright line definition of a QM, refinancing these folks may prove to be difficult.

Regarding a 1H recession, earnings this quarter were not great, and Sandy will probably lop 1% to 1.5% of of 4Q GDP.  Taxes are going up, so we should start handicapping a 1H recession. Will it affect housing?  My sense is no, the bottom is in, and the recession will be felt more in cap goods / the energy patch than in housing. JP Morgan downgraded CAT this morning based on the expected negative impact the election will have on energy and mining. 

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A Couple of Articles That May Be of Interest

Posted on November 12, 2012 by ashot

I’m wading a bit into rocky waters with these two articles, but perhaps we can have a good discussion on this topic. I’m particularly interested in Michi and Okie’s thoughts on an article in The Atlantic discussing rape exceptions for abortions. Given our past difficulties in discussing abortion maybe Michi and Okie can send me their thoughts via email, but even if there is no discussion, I thought it was an interesting take on the subject.

For those who are not inclined to read the article, the author argues that were abortion to be made illegal, a rape exception would not really provide women with control over their bodies. She argues that any reproductive freedom from a rape exception would only by illusory because eventually some bureaucrat (possibly, if not probably, male) would likely have ultimate say over whether a particular woman qualified for the exception.

I must admit that I found the argument compelling with respect to its take on the fact that a rape exception would probably only make it seem like women still had some control. However, the article does ignore the more practical aspect of the rape exception, namely that a woman may not have to carry a rapist’s baby to term. Even if the decision is not entirely her own, there is obviously a benefit to the woman. The other thing the article ignores is what were to happen if there were no exception. What if the woman went on a hunger strike? What if she tried to hurt herself and/or the baby? Would the government intervene and force her to eat and deliver the baby? Would a jury convict a woman of murder if she killed the baby? Would physicians be required to report a miscarriage that they thought was a self-induced abortion? So many troubling questions.

This article, also from The Atlantic, talks about where racists tweets came from following Obama’s re-election. The results are both not at all surprising and surprising.

Filed under: racism | Tagged: | 24 Comments »