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 | 1587.3 | -0.9 | -0.06% |
| Eurostoxx Index | 2720.1 | 2.7 | 0.10% |
| Oil (WTI) | 93.73 | -0.8 | -0.81% |
| LIBOR | 0.273 | -0.001 | -0.36% |
| US Dollar Index (DXY) | 82.16 | 0.015 | 0.02% |
| 10 Year Govt Bond Yield | 1.65% | -0.02% | |
| Current Coupon Ginnie Mae TBA | 106.4 | 0.0 | |
| Current Coupon Fannie Mae TBA | 104.7 | 0.1 | |
| RPX Composite Real Estate Index | 192.1 | 1.1 | |
| BankRate 30 Year Fixed Rate Mortgage | 3.43 |
Markets are lower this morning on no real news. The Employment Cost Index increased .3% in the first quarter and Q412 was revised down. Wages and salaries increased .5% while benefit costs dropped .1%. No inflationary pressures in the labor market. Today starts the two day FOMC meeting. Bonds and MBS are up slightly.
The S&P / Corelogic / Case-Schiller index of home values came in at + 9.32% year over year and + 1.24% month-over-month. This was the biggest increase since May 2006. Of course the real estate market is pretty bifurcated, with annual growth in the high teens out West and mid-to-high single digit growth elsewhere. They note that housing is now becoming a driver of GDP growth, although the mix still is skewed towards apartments and not single family residences.
Chart: Case-Schiller indices
Apple is doing a massive bond issue – 6 different issues, including a 30 year bond. The proceeds will be used to fund dividends and buybacks and will help Apple avoid repatriation taxes on the over $100 billion in funds it holds overseas. The 30 year bond is supposedly going to be priced at a 115 basis point spread to Treasuries. That would be around 4%. The 5 year paper will be issued at 1.2%. Those are positively Japanese yields. Grandpa, tell me again about the days when companies would issue debt with yields lower than their dividend yield.
PIMCO’s Mohammed El-Arian thinks that the tone of the FOMC meeting will shift from “when do we end QE?” to maintaining it and possibly increasing stimulus. That would certainly be MBS bullish, which could start another refi wave, although prepay burnout has got to be pretty big at this point. He does note the risks of the record amount of stimulus: “The benefits of the Fed come with costs and risks. What I worry about is when you run a system at artificial price levels, you start creating damage, resources are misallocated, too much risk is taken.” Exhibit (A): Apple is borrowing money for 30 years at 4% to fund a stock buyback.
Filed under: Morning Report |
All Things in Moderation 
Does issuing bonds at rates lower than their dividends say something about what they feel their stock value should be? I’m not sure how to read these tea leaves.
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It says more about creditors willing to lend money at such ridiculously low rates.
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So borrowing money to finance dividend payouts and the tax arbitrage is what makes this work? Are they able to repay the bonds from the overseas earnings without triggering the tax?
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No, but the reason why they can borrow at such a low rate is because the cash is there.
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Apple will probably end up paying around 2% on this $100 billion issue, give or take. That is $2 billion in interest. Apple generated 45 billion in free cash flow last year.
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I must be too old fashioned or simplistic for finance. Something about borrowing money to pay out a dividend just strikes me as wrong.
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Dana Priest is always worth a read:
“U.S. role at a crossroads in Mexico’s intelligence war on the cartels
By Dana Priest, Published: April 27”
http://www.washingtonpost.com/investigations/us-role-at-a-crossroads-in-mexicos-intelligence-war-on-the-cartels/2013/04/27/b578b3ba-a3b3-11e2-be47-b44febada3a8_story.html
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She [Dana Priest] is the best.
JNC, thanks for your response at PL. FWIW, I am sure you [and banned, too] are right. I used to think NoVA was spot on with his reply, but I think yours is more accurate. It did not matter what he did, it was how he did [not do] it.
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Anyone know why banned stopped posting here?
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From The Daily Mail in the UK:
The Kingdom of Saudi Arabia sent a written warning about accused Boston Marathon bomber Tamerlan Tsarnaev to the U.S. Department of Homeland Security in 2012, long before pressure-cooker blasts killed three and injured hundreds, according to a senior Saudi government official with direct knowledge of the document.
The Saudi warning, the official told MailOnline, was separate from the multiple red flags raised by Russian intelligence in 2011, and was based on human intelligence developed independently in Yemen.
Citing security concerns, the Saudi government also denied an entry visa to the elder Tsarnaev brother in December 2011, when he hoped to make a pilgrimage to Mecca, the source said. Tsarnaev’s plans to visit Saudi Arabia have not been previously disclosed.
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Mark — JNC said in one word the point I was trying to make. triangulation is right. but that takes a skilled political operative to pull off.
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Bill Gross on Twitter: Bond Investor shortcut: sell bonds priced substantially below par. If they don’t trade over 100 now, they never will.
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Really interesting post by Megan McArdle on research fraud.
“The system was rewarding a very, very specific thing: novel but intuitively plausible results that told neat stories about human behavior. Stars in that field are people who consistently identify, and then prove, interesting but believable results.”
http://www.thedailybeast.com/articles/2013/04/30/the-seductiveness-of-a-good-story.html
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Jeebus, is there any country that didn’t earn us about this guy?
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“when he hoped to make a pilgrimage to Mecca, the source said”
isn’t that a big deal? and they denied him?
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nova:
isn’t that a big deal?
Seems like it ought to be. Don’t forget, though, that the admin is apparently denying the report.
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