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 | 1433.3 | 1.8 | 0.13% |
| Eurostoxx Index | 2629.5 | 5.4 | 0.21% |
| Oil (WTI) | 86.35 | 0.6 | 0.65% |
| LIBOR | 0.31 | 0.000 | 0.00% |
| US Dollar Index (DXY) | 79.95 | -0.116 | -0.14% |
| 10 Year Govt Bond Yield | 1.66% | 0.00% | |
| RPX Composite Real Estate Index | 191.1 | 0.4 |
Markets are up slightly this morning ahead of the FOMC statement this afternoon. Mortgage Applications were up 6.2% last week. Right to Work was passed in Michigan. Bonds and MBS are flat.
The FOMC statement is due out at 12:30, and at 2:15, the Bernank begins his press conference. Things to look for: New Treasury purchase plan to replace Operation Twist, 2013 GDP forecast, any comments on its outlook for housing. The WaPo speculates that the Fed will shift more buying to Treasuries than mortgages, and it looks like Bill Gross concurs, as he is lightening up his MBS position.
Looks like FHFA Acting Director will be out of a job soon. This will undoubtedly pave the way for a mass principal forgiveness / underwater refis on Fannie and Freddie loans. Mortgage-Backed securities will be vulnerable to news of more interventionist policies out of FHFA, so beware as you could have Treasury pricing and MBS pricing diverge.
While individual tax rates are going up as part of the fiscal cliff, corporate tax rates may be going down. Obama earlier this year proposed lowering the corporate tax rate to 28% from its current 35%. The lower rates would be offset by eliminating some deductions and the net revenue would be the same. I would argue that we are at the point on the Laffer Curve where lowering rates would actually raise revenues as it would eliminate some of the transfer-pricing games companies play to declare as much income as possible overseas. The poster child of these transfer pricing games is GE, which paid no US income taxes in 2010. Or Google, which shifted $9.8 billion in revenues to a Bermuda shell company, which allowed it to avoid paying roughly $2 billion in taxes.
Dodd-Frank implementation could stall for a while after Mary Schapiro steps down as Chairman of the SEC, leaving the commission deadlocked with 2 democrats and 2 republicans. Politically divisive issues like prop trading and restrictions on executive pay will have to wait until a fifth commissioner is nominated and confirmed. Fun fact: The SEC has finalized just 32 of the 95 rules that the 2010 law required.
The Fed has been quietly telling the big banks: No more mergers. Banks that hold 10% of US deposits are already capped in size, but now it looks like the biggest banks just below that threshold are now prohibited from growing by acquisition. Fed Governor Dan Tarullo gave a speech which discusses the TBTF problem and examines various alternatives (re-instate Glass Steagall, capping non-deposit liabilities, etc.)
Filed under: Morning Report |
All Things in Moderation 
It’s not so much the Laffer Curve as it is the declining utility of off-shore tax rate arbitrage. And why would a company willing to do that shenanigans to avoid a 35% rate they aren’t paying be more willing to accept a 28% rate they can still avoid?
There are a lot of hidden negotiations and wish lists we never hear about and the perennial cry for an off-shore repatriation tax holiday at some nominal rate like 5% is what they are after. They will continue to hold the overseas profits in their coffers until they can bring it home for free.
LikeLike
I wonder how much BHO is willing to battle over the open SEC commissioner spots. He’s got a bunch of Senate confirmations coming up — it’s about time the Senate got off its ass and confirmed some of the judicial nominations.
LikeLike
Mo’ money, mo’ money, mo’ money
LikeLike
QE4EVA
LikeLike
http://www.federalreserve.gov/newsevents/press/monetary/20121212a.htm?wpisrc=nl_wonk
Fed Res news release linked from Ezra. Apparently monetary poicy will now be linked to benchmarks of 6.5% unemployment and 2.5% growth.
…this exceptionally low range for the federal funds rate will be appropriate at least as long as the unemployment rate remains above 6-1/2 percent, inflation between one and two years ahead is projected to be no more than a half percentage point above the Committee’s 2 percent longer-run goal, and longer-term inflation expectations continue to be well anchored.
Apparently both criteria must be met.
I actually think a benchmark like this makes more sense for a rational fiscal policy. Suppose we could predict what revenues would be at 6.5% – 7.0% unemployment for a full year. Then we could budget to spend only that amount. Higher employment would put us in surplus. Lower employment would put us in deficit. The countercyclical would be built in and over the business cycle we would be in balance. Theoretically.
Nah.
LikeLike
QE∞
LikeLike
Mike,
Bravo. I was looking for the infinity symbol in my character map but gave up.
LikeLike
I wanted to let all of you know that Josh Marshall over at TPM did a nice write up on our very own Emily Meier (All But Certain). I haven’t heard from her in a few weeks myself but am so happy to see her work, especially “Suite Harmonic”, receive the kind of attention it deserves.
http://talkingpointsmemo.com/archives/2012/12/my_friend_emily.php?ref=fpblg
LikeLike
LMS – will read; thanx.
LikeLike