Morning Report: Merger Mania on Wall Street 12/20/12

Vital Statistics:

Last Change Percent
S&P Futures 1430.2 -2.9 -0.20%
Eurostoxx Index 2654.9 0.2 0.01%
Oil (WTI) 89.7 -0.3 -0.31%
LIBOR 0.31 0.000 0.00%
US Dollar Index (DXY) 79.12 -0.145 -0.18%
10 Year Govt Bond Yield 1.78% -0.03%
RPX Composite Real Estate Index 191.8 -0.1

Markets are slighly lower after a slew of economic data this morning.  3Q GDP was revised upward to 3.1%.  Initial Jobless Claims came in at 361k. Consumption rose 1.6%.  The November Index of Leading Economic Indicators fell .2%.  Bonds and MBS are flat.

The FHFA House Price Index rose a half of a percent in October.  Sep was revised downward.  Prices are up 5.6% YOY and the index is 15.7% below its peak in April 2007.  We are more or less back to Summer of 2004 levels.

 The Intercontinental Exchange (ICE) has agreed to buy NYSE Euronext for $8.2 billion.  It shows just how much the importance of trading equities has fallen.  Who would have thought a 12 year old scrappy upstart from Atlanta would end up buying the New York Stock Exchange, Paris Bourse, and the Amsterdam Exchange?  The floor of the New York Stock Exchange is more or less just a museum these days.  Separately, Knight Capital Group, the Nasdaq market-maker which lost $460 million on a computer glitch earlier this year, agreed to deal with Getco, the Chicago-based leader in high frequency trading.

On the fiscal cliff front, the House plans to vote on a measure that increases taxes on millionaires.  Obama has already threatened to veto it. The current bid / ask spread is 400 – 1000, meaning that Obama wants the threshold for higher taxes to start at 400k, while Boehner wants it to start at 1 million. Bloomberg has a good backgrounder on the relationship between Obama and Boehner.

KB Home announced their 4th quarter and full year earnings this morning.  Deliveries were up 6% and average selling prices increased 10% sequentially and 23% year-over-year. Backlog is up 35% and that potential revenue would be the highest since Q407. Larger homes were the driver, which accounts for the jump in ASPs.

18 Responses

  1. FWIW, i’m stilling hearing deal late tomorrow, vote Wednesday or Thursday


  2. We got an email from a DC consulting firm: They predict a deal with a threshold of 500-750k, top rate between 37% and 39.6%, cap on deductions, cap gains taxed at 20%, means-tested chained CPI calculations on SS, one-year increase in the debt limit, AMT patch, sequestration pushed off for a year.


  3. hmm. Obama’s base isn’t going to like that. but it matches with what i’m hearing. of course, it’s a game of telephone down here. repeating the same rumors at $400+ an hour.


  4. I can’t see the base voting against Obama…


  5. There is so much about military spending that makes zero sense. My last ship was sent into the shipyards for an 18 month overhaul – new radar systems, the whole 9 yards. Probably cost $50 million. She came out of the yards, went on one deployment, was decommissioned immediately afterward and shot / used as target practice.


  6. Very true about having a locked in base of support.


  7. What percentage of the population would you say is “locked in base support” for Obama? 47% or so sound right?


  8. repeating the same rumors at $400+ an hour.

    Damn. Where do I sign up for that job?


  9. Brent, I’m not sure what means tested chained CPI means but if it truly means the poorest among us will be protected, I don’t think you’ll see Obama’s base resisting a deal like you outlined. I believe the problem will be whether Boehner can get the votes he needs for it in the House. Otherwise it sounds like a good compromise to me, at least the way you’ve outlined it.


  10. “Obama? 47% or so sound right?”

    Oh, maybe more like 51%


  11. Plan B failed to come up for a vote much as I predicted. Boehner cannot even get his own proposal passed which gives him no leverage in saying he can deliver the votes for a genuine compromise. Cantor is playing good soldier in public but his fingerprints are all over the pulling of the bill. I have no idea whether he is playing bad cop to get the Democrats to capitulate or if he is engineering a palace coup.


  12. Anyone remember what was in the bill passed by the Senate earlier? All I remember its the $250K threshold. Were there any spending cuts or anything else in it? It seems to me it’s either take the President’s offer of today, which may change from the deal outlined earlier this week, take the Senate deal, or go home and hope Americans forgive them by 2014.


  13. LMS — the Finance committee marked this up in August, but I’m fairly positive it was never brought to the floor.


  14. Thanks Nova, but I thought there was a bill already passed by the House, don’t know if this is it or not. I’ll have to go looking for it this morning.

    Also, bannedagain and I, along with a few others, have been discussing the changes proposed to COLA all week over at the PL. I don’t have time to repeat all of it here but found this letter interesting on the subject, and Ezra had a column earlier this week that I very much agreed with.

    Click to access EPI_COLA_Letter.pdf

    From Ezra:

    The question worth asking, then, is if we want to cut Social Security benefits, why are we talking about chained-CPI, rather than some other approach to cutting benefits that’s perhaps more equitable? The answer is that chained-CPI’s role in correcting inflation measurement error is helpful in distracting people from its role in cutting Social Security benefits. Politicians who are unwilling or unable to offer a persuasive political or policy rationale for cutting Social Security benefits are instead hiding behind a technocratic rationale. We’re not “cutting benefits,” we’re “correcting our inflation measure.”

    A similar dynamic is behind the popularity of raising the retirement age, or the Medicare eligibility age: Its advocates can pretend that it’s not a cut, but a technical adjustment made to account for the fact that Americans are living longer. Compared to other approaches to cutting benefits, raising the retirement age is, again, a substantively unwise, regressive approach. But it can be justified as a mere technocratic tweak.

    This is bad policymaking. If we want to cut Social Security and/or Medicare, we should have a conversation about how to cut Social Security and/or Medicare, decide what our priorities are — Progressivity? Making the health-care system more efficient? Total deficit-reduction? — and find the policy that does the best job achieving those goals. The effort to mask cuts in technical adjustments just leads to worse cuts, as the top priority isn’t protecting the poorest or improving the program, but finding a policy sufficiently confusing that you can pass it before most people realize what it is.


  15. “passed by the House”…………….I mean Senate.


  16. AHA comments on essential health benefits reg. the protections aren’t as strong as they appear.


  17. nova:

    That’s Baucus’s tax cut legislation. Reid’s was passed earlier in the year.

    CRS summary for S.3412


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