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 | 1370.0 | -8.2 | -0.59% |
| Eurostoxx Index | 2460.4 | -13.1 | -0.53% |
| Oil (WTI) | 84.97 | -0.6 | -0.70% |
| LIBOR | 0.31 | 0.000 | 0.00% |
| US Dollar Index (DXY) | 81.2 | 0.166 | 0.20% |
| 10 Year Govt Bond Yield | 1.59% | -0.01% | |
| RPX Composite Real Estate Index | 192.8 | 0.3 |
Markets are weaker this morning on Greek worries and a negative earnings report out of Weatherford. Bonds are up 1/2 a point and MBS are flat.
The NFIB Small Business Optimism index gained .3 points. Uncertainty reached a record high, although this is understandable given it was an October before an election. CAPEX remains in maintenance mode, and hiring is absolutely flat. Generally it was a glum report.
Now that we have the election behind us, we can pretty much safely say that it is safer to be more constructive on Treasuries. The Fed will continue to do what it does, and taxes are going up at the end of the year. Combine that with the fact that Obama’s re-election is a negative for energy and the financials, and we could be facing a weak Q113 as well.
But is there a bright spot? Ah yes, housing. Jamie Dimon has some optimistic comments regarding housing in the WSJ. He basically cites the same things I have been talking about – household formation, affordability and inventory. He makes the statement that housing isn’t going to recover in the absence of a strong economy, which I am not so sure I agree with. I think the low household formation numbers of the last 6 years are artificially depressed due to a lousy economy and have created pent-up demand. Eventually, people get married, move out of Mom and Dad’s place, and boot out the roommates. In other words, housing can improve in spite of the economy.
Not only that, but think about this: As part of obamacare, obama instituted a 3.8% surtax on investment income for people making over $250k. In a tight rental market, landlords will undoubtedly attempt to pass that cost on to renters, making the rent vs buy decision even more of a no-brainer. Credit availability remains a problem, though as Dimon notes.
Wapo notes that the REO discount is starting to disappear.
AIG is looking to expand its balance sheet in the mortgage business.
Filed under: Morning Report |
All Things in Moderation 
Re: Petraeus, et. al.
If the CIA was secretly still in the detention business, this mushrooms from the usual bread and circuses Washington sex scandal into something considerably more significant.
http://www.washingtonpost.com/blogs/worldviews/wp/2012/11/12/why-did-paula-broadwell-think-the-cia-had-taken-prisoners-in-benghazi/
Should it be proven to be true, It’s unlikely that this was a rogue operation of which the White House was unaware, given the tight control that they have run on anti-terrorism policy.
This incident also points to the difficulty of conducting effective oversight of the executive branch in the current partisan environment. Congress is more apt to act based on partisan alignment instead of as an institution counterbalancing the executive.
Thus, when the oversight committees are run by the same party as the executive there is now pretty much non-existent oversight and when they are run by the opposing party, everything is dismissed as politically motivated, ex. Fast and Furious.
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I question whether or not temporary detention of intelligence assets in a CIA annex in Benghazi should be disclosed. Thus I question Major Broadwell’s judgment and her veracity. Notice she and Petraeus denied he was the source, and CIA denied the assertion.
This may be a mole hill.
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Hey, Brent–
Totally OT, but I’d love to see your chili recipe if you want to drop it into Sunday’s post!
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Michigoose, I put it in the post.
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” Combine that with the fact that Obama’s re-election is a negative for energy and the financials, and we could be facing a weak Q113 as well.”
Fact?
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Investors dumping MSFT after Sinofsky announces his departure. Wonder what the floor is on the stock price …
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” Combine that with the fact that Obama’s re-election is a negative for energy and the financials, and we could be facing a weak Q113 as well.”
Fact?
Obama’s re-election is bad for the energy and financial sectors? No doubt.
We could be facing a weak Q113? Starting to feel like it.
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Brent, I know you can speak with some authority about the financial sector and I know the ACA surtax will be felt there. Judging by the response of Wall Street execs telling Rs that they can pay more taxes if it is part of a budget cutting deal, I don’t see how it will have an enormous effect. Or did you think D-F could get repealed under WMR? What am I missing?
On energy, the power utilities will like BHO. BHO is not going to get in the way of offshore drilling or fracking, AFAIK. And O&G is worldwide biz. If you meant that domestic coal will continue to decline, I agree. But I think that is a natural result of natural gas, and wind, taking bigger share. Midland, TX is in a new Permian Basin boom. I cannot see how WMR would have made it bigger.
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Investors dumping MSFT after Sinofsky announces his departure. Wonder what the floor is on the stock price …
Value trap.
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So book value is the floor?
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Mark, IMO, the next front in the battle of the banks vs Washington will be in loan servicing. The CFPB is already auditing servicers and we are all worried about what will come out of it. If they remove the economics out of it (as they seem to want to do) that will be a problem going forward.
Also, I believe that obama’s regulatory agencies will be more likely to sue the banks for sins committed during the bubble than Romney’s would. Which means credit will be tougher to get as banks reserve for these suits. So yes, I believe obama will be a negative for the financials and I am resigned to another 4 years with a target on my back.
As far as the energy sector, the Street has been taking down numbers for CAT already in response to the election. Most of that is coal-related. The street has been taking down numbers for the integrateds since the election (CVX / XOM / HES). The oil services sector seems to be mixed. WIth obama, I believe he talks out of both sides of his mouth re energy, where he claims to be all for exploration while at the same time cancelling leases. I hope obama sees that fracking and nat gas has the potential to greatly improve the US (and the environment) on so many levels, but I fear that the environmental lobby has his ear.
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@Brent: “Obama’s re-election is bad for the energy and financial sectors? No doubt.”
Would Romney’s election been good for the financial sector? Seems more likely that he’d give them enough rope to hang themselves. Temporarily better, I suppose.
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“Would Romney’s election been good for the financial sector? Seems more likely that he’d give them enough rope to hang themselves. Temporarily better, I suppose.”
No, much better. Romney understands how much uncertainty affects business, especially this one. obama has no clue and regulatory guidance has been coming at a glacial pace.
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what Brent said. ACA included a device tax effective 1/1/13. IRS still hasn’t put the regs out. so we’ll have less than 2 month to comply assuming it comes out this week. and i have no insight into that happening.
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I believe Kevin’s argument is that under a Romney administration regulation would be rolled back to the point that another bubble and subsequent financial crisis would ensue, however this time the likelihood of a TARP bailout would be much less likely.
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If Romney understood how uncertainty affected business, then he should have disclosed whatever plans he had for tax deductions. His election would have generated far more uncertainty than the re-election of Obama.
That, or it’s just the usual shell game.
BB
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I think the tax uncertainty is more at the personal level, not the corporate level. I know Romney proposed going to a territorial system, but aside from eliminating “oil subsidies”, obama was pretty much ok with the corporate tax code as it is. I didn’t think the election would affect corporate taxes that much.
The uncertainty I am talking about is regulatory uncertainty. In the financial sector there are still major issues that have been hanging for years.
The most egregious example is in mortgage REITs – over a year ago, the SEC put out for comment a proposal to regulate them under the Investment Company Act, limit their leverage, and to eliminate their tax-free status. Basically eliminate their business model. After that, radio silence. For over a year.
Hey, we are thinking of putting you out of business. Film at 11.
There are many others. I can only imagine what the EPA is telling utilities and energy companies.
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Energy’s a good example. Coal is dealing with uncertainty, but it’s not from the government. Fracking has changed the economics of power generation entirely. Yet, government regulation is expected to be unchanging.
Let’s go to the financial sector. From what hints Romney threw down during the campaign, he’d plan on enormous changes from the Obama administration. Is that not uncertainty? I suspect any significant changes in financial regulation would receive a three pronged response. Administrative appeal, litigation, and Congressional action. Uncertainty means opportunity.
There’s probably a misperception between us of consumers vs. producers. Anyone who opens a checking account or books a flight is playing a game of cat and mouse with the bank or airline. It used to be that you’d book a flight and that’s what you’d pay. Not so much any more. I expect sometime that an airline will adjust the carry on bag size and grab some revenues from customers who bought what used to be allowed bags. Sure, they could say one carry on or one checked bag, but that’d generate less revenue.
Ah well. Up to bed. I interviewed for a job four weeks ago and am getting radio silence. Talk about uncertainty.
BB
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Ah well. Up to bed. I interviewed for a job four weeks ago and am getting radio silence. Talk about uncertainty.
I hate it when that happens.
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@Fairlington Blade: “If Romney understood how uncertainty affected business, then he should have disclosed whatever plans he had for tax deductions.”
I tend to agree. While I did not pay as close attention as I probably should have during the campaign, from what I saw, Romney seemed very short on specifics as to what sort of approach he would take. Leaving the electorate to take on faith that he had better ideas.
My thought that Romney might have been so friendly to the financial sector that it might have been bad for them, ultimately (like the parent who lets his kids eat nothing but cake and candy) is, of course, purely speculative, and ultimately not why I decided to vote for Gary Johnson. BTW, as many of us here are Johnson voters, we are all part of an elite group of 1-percenters. Alas, not the 1% with all the country’s wealth, but still, 1% is 1%. 😉
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Heh (re Kevin).
Mark – I had to deal with some auto issues today. The car died, so I jumped it. Only figuratively of course. It ran fine, but wouldn’t start once I went to work. [Should have left it running before taking it to the repair shop.] So, got the jumper cables from Keen (naturally, I left them in the working car) and then my friend jumped it. 😉 I took off during lunch and bought a battery. The connection to the negative terminal was so badly corroded that it fell apart as I tried to remove it. I picked up a connector when I returned the old battery and worked something up. I put a new connector on the ground terminal. I used the part where a cable should go in to lock down the remainder of the old connector. Used electrical tape to make sure it wouldn’t go anywhere. I then picked up some honking alligator clips at Radio Shack and used speaker cable to provide a certain contact to ground in case it did slip off. Then, I drove it to the service station in Arlington.
[Aside to NoVa – Japanese Auto Clinic on Lee Highway in Arlington. They’re fantastic. I use Royal Service Center on Quaker Lane for regular servicing. None of the up selling you get at the chains.]
I’ll eventually get back to the National Science Foundation. The service station is about a mile from the Ballston Metro station, which is where the bus that goes to our place stops. So, I walked down there and stood for a bit in front of the building. It would have been great to work there and I think I would have had a lot to contribute. Perhaps that’ll happen at some point in the future, but I think I didn’t get the job this time. Funny how it gave me a bit of closure, though. The experience makes me think the patent office position would have some significant pluses. I think the main question was how I could handle proposals out of my field. Three years at USPTO would answer that question decisively.
Brent – I do want to note that I enjoy your commentary as well as the occasional acerbic observation. Even if I object.
BB
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