Vital Statistics:
Last | Change | Percent | |
S&P Futures | 1467.5 | 0.4 | 0.03% |
Eurostoxx Index | 2713.3 | 5.1 | 0.19% |
Oil (WTI) | 93.31 | -0.5 | -0.54% |
LIBOR | 0.304 | -0.001 | -0.33% |
US Dollar Index (DXY) | 79.6 | -0.140 | -0.18% |
10 Year Govt Bond Yield | 1.89% | 0.00% | |
RPX Composite Real Estate Index | 191.6 | -0.1 |
Markets are flattish after Wells Fargo’s earnings beat expectations and import prices showed that inflation remains contained. Bonds and MBS are up small.
Richard Cordray of the CFPB laid out the outlines of what will be considered a qualified mortgage at a presentation in Baltimore yesterday. Big picture, he believes that lenders were too loose with credit in the past, but now they are too tight. The Rule will be called Reg Z, or the Ability-to Repay and Qualified Mortgage Standards under the Truth in Lending Act. These rules are intended to both protect consumers and increase access to credit. The highlights are
- A cap in points and fees
- No exotic (IO, increasing principal, 30 year + maturity, balloon) loans
- DTI < 43%. Period. (In other words, nothing on FICO or down payments)
- DTI ratios must be calculated on the expected long term payment, not teaser rates on ARMs.
- Provides immunity from homeowner lawsuits under the QM rules for prime loans. Rebuttable presumption for subprime.
- Safe harbor is only for homeowner lawsuits under QM rules, all other rules still apply
- Rules will take effect 1/10/14 and will be phased in over a period of years
- Community banks / credit unions, and low income lenders will have relaxed standards
There were several housing advocates, consumer advocates, etc on the panel. For the most part, they lauded the agency, but thought the QM rules were too skewed in favor of the financial industry. They also feared that it would restrict CRA lending. On the other hand, SIFMA praised the rule. The most eye-opening comment came from Cordray himself, when he said that he believed that we would not have had a financial crisis if these “ability to repay” rules would have been in effect before. Really. Of course the term “housing bubble” was not uttered during the entire discussion.
Will it increase lending? My sense is that unless the GSEs and FHA agree to insulate lenders from buy-back risk if they follow the QM rules, it will not in any meaningful way.
Well Fargo’s earnings release beat expectations on the top line, but net interest margins were disappointing. Particulars regarding mortgage banking:
- Originations fell from $139B in Q3 to $125B in Q4, reflecting the normal seasonal decline. Originations were up 4% YOY.
- Pipeline at quarter end was $81 billion, down 16% QOQ and up 13% YOY.
- Net interest margin declined from 3.89% to 3.56% YOY. Q3 NIM was 3.66%
- Total delinquency and foreclosure rate was 7.04% down from 7.96% in Q3
- They continue to wind down the legacy Wachovia assets. The “Pick a Pay” loan portfolio has a UPB of $63.8 billion and is being marked at $58.3 billion, or at 91%. Note, the UPB is ex-writedowns already taken.
Filed under: Morning Report |
Beware the zombie title!
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Link doesn’t appear to be working for Zombie Title.
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Does it work now?
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Yes, Thanks.
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The real chicken and egg issue for fingerpointing on the housing collapse is whether lax lending standards inflated the bubble of if the loosening of standards was the way the market coped with overly inflated home values. As always, the answer is probably a bit of both.
Just my gut feel based on anecdotal observation and my reading of pop-journalism like Michael Lewis is that the voracious appetite of the CDO market needed lots of raw fuel which encouraged this sort of unsustainable and irresponsible lending.
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yello:
Just my gut feel based on anecdotal observation and my reading of pop-journalism like Michael Lewis is that the voracious appetite of the CDO market needed lots of raw fuel which encouraged this sort of unsustainable and irresponsible lending.
If you really want to understand what happened, from an insider who not only lived through the storm but managed to weather it quite well, I highly recommend John Allison’s book.
Money quote: “It is impossible to have a systemic failure of the financial markets without mistakes by government policy makers being the primary cause.”
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The bubble started inflating in 2000, long before liar loans, CDO squareds, etc. The Fed inflated the bubble.
The lax lending standards and liar loans etc were prevalent just before the bubble burst. It didn’t inflate it.
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The NSA is helping some banks combat DDoS attacks.
http://www.washingtonpost.com/world/national-security/banks-seek-nsa-help-amid-attacks-on-their-computer-systems/2013/01/10/4aebc1e2-5b31-11e2-beee-6e38f5215402_story.html?hpid=z1
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Back from MedPAC — they were largely focused on technical updates and didn’t get into too many big picture things. but one thing that I’d pass along was this little nugget.
there was a study (i’m looking for it) that found you could improve quality outcomes and lengthen life among Medicare beneficiaries with polypharmacy just by arbitrarily taking them off 5 of them. basically, they cut stopped giving any of 5 Rx drugs to those and they were better off. most of these people were on 10 or so drugs.
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Knock me over with a feather. Next they’ll tell me that health insurance premiums will increase under Obamacare.
http://hotair.com/archives/2013/01/11/electronic-records-turns-out-to-potentially-add-costs-rather-than-reduce-them/
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McWing:
Knock me over with a feather. Next they’ll tell me that health insurance premiums will increase under Obamacare.
But don’t worry…you’ll never see politicians getting between a patient and his doctor.
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But don’t worry…you’ll never see politicians getting between a patient and his doctor.
No, they like to get between a patient and HER doctor. Usually with an ultrasound wand.
Cheap shot but I couldn’t resist taking it.
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yello:
No, they like to get between a patient and HER doctor. Usually with an ultrasound wand.
Another good example, although tempered somewhat by the fact that what is actually being attempted is getting between a human life and its destroyer. 😉
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“No, they like to get between a patient and HER doctor. Usually with an ultrasound wand.
Cheap shot but I couldn’t resist taking it.”
So, you’re saying that government involvement in healthcare inevitably leads to these infringements?
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“and its destroyer. ”
it’s NYC — it’s the destructor.
http://spin.despair.com/products/despairwear-destructor-tshirt/
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If anyone wants to read the RAND paper referenced in Troll’s link, let me know and I’ll send the PDF.
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Reader of RAND links, here, thank you. You could email me.
NoVA, I think reduction of polypharmacy [great new word for me] is the right direction, from what I have seen with my M-i-L, and some others similarly situated. My youngest, the soon to be PharmD, agrees.
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nova:
Did you find that study? A quick PubMed search only turned up a couple of studies done abroad.
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I think this might be it. I didn’t catch what journal it was in, but the transcript will be out monday so I can double check.
http://archinte.jamanetwork.com/article.aspx?articleid=226051
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Jerry Brown interview I came across that’s worth a read:
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JNC –
I really thought Brown had a chance. It is a fine way for a politician to do his last job – fighting virtually everyone to make the machinery just work, and not worrying about his next job.
Maybe we should only elect officials from both parties who are over 70 but sane and in good health. For one term.
Aha you say. A flaw appears. They had to be whippersnapper pols for years feeding at the trough to understand how to make it work without the pig slop.
And so it goes.
Brent – thanx for the reply and explanation on the apparently egomaniacal investment capitalists.
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nova:
Yeah, that’s one of the ones I found — an Israeli study on octogenarians (n=70). I also found this one, which is a meta-analysis of studies on withdrawal of specific drugs from the elderly. I don’t have access to the full text of that one though. Finally, there was this Australian study.
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Mark, we’ll see if Brown has truly addressed the structural drivers or if this is just one of a series of tax increases. He is however one politician who has a reasonable shot of succeeding as governor of California.
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The other crazy thing about progressives citing California’s budget as a success story is that they are basically endorsing austerity: tax increases and spending cuts to balance a budget.
I don’t see how Krugman can say this with a straight face:
Austerity is supposed to cause an endless spiral into Depression, per Keynesian theory.
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I call bullshit on this:
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Equal application of the law would serve the public’s best interests.
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J,
Look, they’re our betters, what’re you, a wingnut?
As for Krugman, he’s talking about spending reductions, not austerity. Again, drop the wingnut shtick.
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Good to know, especially the last item:
“Whatever the thinking among NBC News execs, the prop worked. Among other things, brandishing the ammo clip:
Helped Gregory press National Rifle Association Executive Vice President Wayne LaPierre on how important it is for the group to oppose further gun regulations;
Ignited a controversy that instructed the public on the availability of magazines and the inconsistent laws regulating them from state to state;
Gave the media-criticism industrial complex something to chew on during the inter-holiday news slump;
Clarified whether there’s a media-elite exemption to gun laws.”
http://www.washingtonpost.com/blogs/erik-wemple/wp/2013/01/11/david-gregorys-stunt-worked/
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Ahhhh, well then, it’s ok.
http://legalinsurrection.com/2013/01/david-gregory-and-wife-knew-d-c-attorney-general/
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This is hilarious.
http://hotair.com/archives/2013/01/11/harry-reid-to-obama-please-ignore-congress-and-raise-the-debt-ceiling-on-your-own/
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McWing:
This is hilarious.
It’s actually kind of irritating. Failure to raise the debt ceiling will not threaten the full faith and credit of the US. It’s a scare-mongering myth.
Over the last 12 months the US has averaged $209 billion in tax revenues each month. The US’s total interest expense for the entire fiscal year of 2012 was $359.8 billion, or on average just under $30 billion per month. The US has plenty of receipts to service its debt without raising the debt ceiling and is in no danger whatsoever of defaulting on debt payments. Zero. None. Nada.
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Shocker, not.
http://hotair.com/archives/2013/01/11/hhs-study-yep-head-start-doesnt-work/
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A Hot Air link to a Heritage Foundation synopsis of a study discrediting a cornerstone of liberal do-goodism. You really need to find some less biased sources for your news, Troll. I hear there’s a blogger at the Washington Post who provides frequent links. Some guy named Greg or something like that.
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” I hear there’s a blogger at the Washington Post who provides frequent links. Some guy named Greg or something like that.”
I know I should be getting this but I don’t, can you clarify?
Also, from earlier, “So, you’re saying that government involvement in healthcare inevitably leads to these infringements?”
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I know I should be getting this but I don’t, can you clarify?
The Heritage Foundation is not perhaps the least biased source of news on the efficacy of liberal programs. The Plum Line Happy Hour Roundups often provide links to dissenting opinions you might find informative.
Also, from earlier, “So, you’re saying that government involvement in healthcare inevitably leads to these infringements?”
No, you are saying that. I’m saying that Bloomberg’s perhaps misguided attempts to keep valuable painkillers out of the hands of thieves are not nearly as egregiously partisan as laws requiring medically unnecessary procedures in order to obtain legal medical procedures.
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yello:
I’m saying that Bloomberg’s perhaps misguided attempts to keep valuable painkillers out of the hands of thieves…
You should have read the article. He’s trying to keep them out of the hands of patients.
…laws requiring medically unnecessary procedures in order to obtain legal medical procedures.
The fact that abortion is a “legal medical procedure” is precisely the problem the law was trying to address.
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“The Heritage Foundation is not perhaps the least biased source of news on the efficacy of liberal programs. The Plum Line Happy Hour Roundups often provide links to dissenting opinions you might find informative.”.
Uh, ok. I’ll try and remove the blinders once and while. I’ll hit Kos only every other day.
I wonder, as Obamacare becomes more and more an (increasingly shitty) part of our lives, if more of these idiotic dictates will occur?
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JNC, thanks to you I am watching the Krugman on Bill Moyers.
He is obsessed with the idea that the economy is as it was in The Great Depression. Obsessed. Blinders.
He wants a WPA. As I have studied it, WPA was successful in maintaining infrastructure and the skill sets of persons [men, mainly] who would have been unemployed, but had little effect on the macroeconomy at that time and was not actually cost effective. WW2 ended the Depression, and the fact that our manpower pool was healthy and had been working skilled labor jobs in carpentry, machine work, iron work, etc. on the government’s teat meant we had the ability to raise an Army and Navy that was actually skilled and healthy.
So when he talks WPA and “suffering” I understand him to be talking about liberal social programs to help the individual, not economic programs to recharge the national economy. He may think “btw, this will help the national economy”, but that is only at the margins, I think.
There is an argument to be made for physical infrastructure [lots of deferred maintenance could be done now, rather than waiting for good economic times when the various gummints and their contractors would have to compete with other private employers for workers]. I am one who has made it before. There is an argument to invoke a German style plan, where some of what we spend would otherwise spend on UC is actually paid to employers to keep a force on 3/4 time rather than terminate 1/4 of a force so that skills are not lost during the years it takes the economy to get better. As JNC suggested, that is way cheaper than shotgun deficit spending.
PK still thinks all fiscal spending here revolves again and again through the American economy, when we know it very quickly leaks out into the rest of the world.
OK – I watched. Thanks a lot, JNC.
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“ScottC, on January 11, 2013 at 9:50 pm said:
…
The US has plenty of receipts to service its debt without raising the debt ceiling and is in no danger whatsoever of defaulting on debt payments. Zero. None. Nada.”
I often cite this piece from the Economist to make the same point:
One quibble: While I agree that the predicate is true:
“The US has plenty of receipts to service its debt without raising the debt ceiling”
it does not automatically follow that there is
“no danger whatsoever of defaulting on debt payments. Zero. None. Nada.”
There’s always the chance that the administration is so invested in the “hitting the debt ceiling = default” political narrative that they chose to prioritize all payments equally and thus intentionally fail to make timely interest and principle payments on the existing Treasury debt.
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jnc:
One quibble
Fair enough. There is of course the possibility that we have a president so morally corrupt or stupid that he would actually choose to default on the debt.
But in law don’t the bond holders have first claim anyway? Buyers of government debt have a legal right to the interest and principle owed them. I don’t believe, for example, social security recipients have any such right. So presumably the courts could force the treasury to pay bond holders before making other payments.
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Scott, what is funny is how willing Reid is to give up Congressional powers.
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McWing:
Agreed.
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Scott, George, and JNC – I completely agree that talking about “default” is garbage.
What I want to know is whether you think it is responsible to first pass spending and revenue bills that create a deficit and then decide not to issue debt instruments to cover the deficit Congress already created.
In my view, the debt instrument issuing ceiling should rise automatically with the deficit producing laws. Nothing else makes any sense at all, IMHO.
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mark:
What I want to know is whether you think it is responsible to first pass spending and revenue bills that create a deficit and then decide not to issue debt instruments to cover the deficit Congress already created.
I think it is irresponsible to pass spending and revenue bills that, as a matter of course, create or increase a deficit. And it is even more irresponsible to pass spending bills that can only be paid for by violating previously set debt limits.
What doesn’t make sense to me is to vote for governments that promise ever more goodies without any plan to pay for them, outside of the vague implication that it will be someone else and not the voter who pays. As part of the responsible minority, I view the existence of a debt ceiling as a reasonable attempt at imposing at least some small measure of discipline and sanity on the otherwise foolish and irresponsible majority. We all know the debt ceiling is going to be raised, one way or another. If it can be used as leverage to rein in the irresponsible spending habits of the majority (that’s a big if, of course) I view it as good thing, not a bad thing.
BTW, a debt ceiling that automatically rises with a “need” to cover spending has no business being called a debt “ceiling”. Under such a system the only limit on debt issuance would be the desire/ability to spend. And that, of course, is pretty much unlimited.
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BTW, apropos of nothing whatsoever, I watched a movie called Perfume this morning. Extremely bizarre. Set in 18th century France, it is about a boy born with an extraordinary sense of smell who, once grown, becomes a serial killer in his efforts to create the perfect perfume. It features Dustin Hoffman and Alan Rickman as the big name stars, and includes the strangest orgy scenes you will ever see, at least outside of a porn movie. And the orgy is not just gratuitous, but is essential to the (forgive me) climax of the movie.
If you are in the mood for a strange one, it’s on Amazon Prime.
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Well, he was the one who caused the whole problem in the first place:
“How Harry Reid caused the debt-ceiling debacle
By Felix Salmon
July 26, 2011”
http://blogs.reuters.com/felix-salmon/2011/07/26/how-harry-reid-caused-the-debt-ceiling-debacle/
He’s discovered the price for getting Republican “buy-in” on the debt.
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Mark, the biggest disconnect between Krugman’s current prescriptions and the past is that “classical Keynesianism” (disregard the inherent oxymoron) assumed a baseline of a balanced budget and offsetting surpluses in the good years. That’s quite different than a starting point of structural deficits that are already projected to get worse and a debt to GDP ratio that was already around 63% or so in 2007.
I continue to find Steven Pearlstein and Ken Rogoff to be more reliable guides to policy:
http://www.washingtonpost.com/steven-pearlstein-signs-the-economy-has-shifted-in-the-right-direction/2012/02/27/gIQAl8abpR_story.html
http://www.project-syndicate.org/commentary/austerity-and-debt-realism
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Agree in spades, JNC, and have written that here many times. Have also pushed the “Balance over the business cycle” theme – manage for the medium term, don’t fret the deficit/surplus cycle. But we don’t have a cycle, as you said. We have had continuing deficits, and they are not small, and continuing monetary stimulus, and it is not small. No deficit/surplus cycle.
Do think the German plan and some focused highway/port/bridge maintenance are decent and not ridiculously costly ideas, but when they don’t change the business cycle, which they wouldn’t, the Krugman would say “more $$$ would have done it.” But he would be wrong. What those two programs would do is keep skills and physical infrastructure from eroding until the economy turns up again, and to a lesser extent, minimize unemployment [and its UC/food stamp/sec.8 cost] and dampen the down side. That’s all.
But at the relatively small $$$ it takes to do that, the benefit seems worth it.
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I think that not paying the bonds (on time) will result in…? One might argue that interest rates for debt would go up, forcing much needed austerity. I don’t believe that, we already heavily monetize the debt and would just do more of it. What we are is condemned to long term (decades) economic stagnation and eventual economic collapse.
So, what will fundamentally change with a temporary technical default? Virtually nothing.
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“In my view, the debt instrument issuing ceiling should rise automatically with the deficit producing laws. Nothing else makes any sense at all, IMHO.
Since when has Congrss ever been honest about how much a law will cost? How would your concept change the current situation? And why frankly, shouldn’t it be harder and more difficult of an out of control borrower to, er, borrow more?
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That’s the problem with politician’s, (like Harry Reid?) they don’t stay bought.
http://www.sltrib.com/sltrib/home3/55598812-200/johnson-swallow-rawle-attorney.html.csp
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Scott:
I watched a movie called Perfume this morning
I read the book, probably 20 years ago now. It still is fairly vivid in my memory, kind of disturbing actually. The oddest part of the journey is when he sequesters himself from humanity for years in the mountains and lives in the rocks to get away from the smells. I vaguely remembered that they had made a movie out of it, but I can’t imagine it did that well at the box office because it is pretty dark.
BTW,
a debt ceiling that automatically rises with a “need” to cover spending has no business being called a debt “ceiling”
Agreed.
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How is this not win-win? Even Chevron gets the pleasure of a schadenboner.
http://finance.fortune.cnn.com/2013/01/10/burford-capital-chevron-ecuador/
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McWing:
How is this not win-win?
Great story.
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From the, “that was different” file.
http://m.washingtonexaminer.com/top-dems-urging-obama-to-raise-debt-ceiling-all-voted-against-increase-in-06/article/2518344#.UPG6_7-9Kc0
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“ScottC, on January 12, 2013 at 8:43 am said:
…
But in law don’t the bond holders have first claim anyway? Buyers of government debt have a legal right to the interest and principle owed them. I don’t believe, for example, social security recipients have any such right. So presumably the courts could force the treasury to pay bond holders before making other payments.””
I thought so too, but the Economist article I linked to indicates that it’s not so clear cut:
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“markinaustin, on January 12, 2013 at 9:05 am said:
Scott, George, and JNC – I completely agree that talking about “default” is garbage.
What I want to know is whether you think it is responsible to first pass spending and revenue bills that create a deficit and then decide not to issue debt instruments to cover the deficit Congress already created.
In my view, the debt instrument issuing ceiling should rise automatically with the deficit producing laws. Nothing else makes any sense at all, IMHO.””
The problem with this argument is the amount of spending that rises automatically, e.g. entitlements either due to an increase in the number of people legally eligible for it or automatic COLA’s.
The argument for the Gephardt rule, which I generally favor, would have more justification if all spending was subject to an appropriation vote. I.e. Congress should have to vote to appropriate the Medicare, Medicaid & Social Security funds each session just like all other spending. If the appropriation is off, then it has to be addressed through another affirmative vote to make up the difference.
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To give the administration credit where credit is due, they have clearly and directly ruled out both the platinum coin option and invoking the 14th amendment. They definitely seem more realistic and mature than the current Congressional Democratic leadership on these options.
http://www.washingtonpost.com/blogs/wonkblog/wp/2013/01/12/treasury-we-wont-mint-a-platinum-coin-to-sidestep-the-debt-ceiling/?hpid=z1
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BTW,
a debt ceiling that automatically rises with a “need” to cover spending has no business being called a debt “ceiling”
Agreed. (Scott and Mike)
Exactly. The debt ceiling is a meaningless anachronism and not a constitutional requirement.
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mark:
Exactly. The debt ceiling is a meaningless anachronism and not a constitutional requirement
It clearly isn’t meaningless, otherwise there wouldn’t be so much fuss over it. And while while I agree that it is not a constitutional requirement (who said it was?), I don’t think it is an anachronism at all. As I said I think it is a reasonable, if not always effective, attempt to impose discipline on the foolish and irresponsible spending habits/desires of voters and the politicians they elect who are so very eager to please.
Which is more irresponsible, failing to increase the debt limit to accommodate the passage of ever increasing spending bills, or passing ever increasing spending bills that require a violation of established debt limits? I say the latter is very clearly more irresponsible.
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See: http://www.economist.com/news/leaders/21569423-debt-ceiling-america-serves-no-useful-purpose-and-should-be-abolished-cliff
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Mark:
I don’t buy the Economist’s overwrought characterization of the debt ceiling as “an instrument of mass financial destruction”. Nor do I find the threat of a recession to be a compelling argument. As I said earlier, we all know that the debt ceiling is going to get raised one way or another. The only question is whether the spendthrifts in Congress and the White House make some spending concessions in order to get it done in a timely manner or not. From where I sit objections to the existence of a debt ceiling just make it easier for the spendthrifts to keep spending. If the debt ceiling makes it at all more difficult, I am all for it.
BTW, I also think there is value in focusing the nation’s attention on the insane amount of spending the government engages in, and the irresponsible way in which it pays for it. To the extent that the attention surrounding the debt ceiling fight does so, that, too, is a good thing.
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I just received this email from Emily’s husband.
Linda,
Emily died last night at a little after 9. She was peaceful and without pain. She stopped breathing for 15 seconds or so, and then took a big breath. Then stopped again for longer, and then took another breath, not as strong as the first. Then a third, and a fourth. And then no more.
She was a wonderful person and a wonderful wife.
Bob
I’m really going to miss my correspondence with her. She was a terrific friend, a wonderful writer, a devoted wife, mother and grandmother, and a political junkie extraordinaire. She’s at peace now dammit.
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For Emily we can say “our loss”, and mean it from the depths.
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lms:
I’m really going to miss my correspondence with her.
My condolences to you and everyone who was touched by her.
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Lulu–
Can I top post this so that everyone sees it?
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PLEASE DO, MAJOR MURPHY.
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mark, there is talk posted on PL re Geo P Bush running for land commissioner in TX. Can you enlighten me on (1) that office in TX — what real power does it have; and (2) any feel for appetite for another Bush family candidacy? (Without reading original source it seemed to me he was leaving open a run for gov. Would that not be unusual for a first candidacy?)
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Okie –
Our current Land Commish, Jerry Patterson, is one R I always vote for. He is a real character – but he brought wind pwr to TX. We have more wind generating capacity than all the other states combined, last time I looked, and plenty of new generators coming on line. Jerry could be LC for life. Last election, he invited his D opponent to travel with him on LC biz, and learn the job just in case Jerry lost. His opponent did so, and it became the most civil race I can recall. Jerry has made it a powerful office.
Jerry has decided to run for LtGov, and this may open the Land Commish position. The R nomination still guarantees election in TX, so it only matters what the TX GOP thinks and whether a TEA runs against him. No matter what, the next LC won’t be an upgrade.
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Of course, Michi
I have company arriving in about 20 minutes so don’t have time for anything else right now but will have more later possibly.
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I second Scott. My condolences to those whose lives she touched.
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The debt ceiling debate as a potential buying opportunity:
http://www.foxbusiness.com/investing/2013/01/09/deutsche-bank-dont-sweat-debt-ceiling/
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