Morning Report – The margin clerk approacheth… 6/12/13

Vital Statistics:

  Last Change Percent
S&P Futures  1637.7 10.6 0.65%
Eurostoxx Index 2697.5 14.3 0.53%
Oil (WTI) 96.07 0.7 0.72%
LIBOR 0.273 0.001 0.37%
US Dollar Index (DXY) 81.15 0.037 0.05%
10 Year Govt Bond Yield 2.23% 0.04%  
Current Coupon Ginnie Mae TBA 101.6 -0.3  
Current Coupon Fannie Mae TBA 99.92 -0.2  
RPX Composite Real Estate Index 202.8 -0.2  
BankRate 30 Year Fixed Rate Mortgage 4.04    

 

Markets are higher this morning after yesterday’s decline. This week is relatively data-light until Friday. Bonds ad MBS are down small.
 
Mortgage Applications rose 5% last week as the Bankrate 30 year fixed rate average fell from 4.1% to 4.03%. Refis were up 5%.
 
The sell-off in bonds and MBS has not only hit mortgage REITs like Annaly and American Capital, who are down 25% + in the last month, it has also hit some hedge funds as well. $1.5 billion Metacapital is down 6.5% this year. The REITs are levered something like 6:1 and the hedge funds are undoubtedly levered as well. Margin calls could start soon, and when they happen, look out below. MBS are one of those investments that pretty much everyone is long, and there are few buyers when they get hit. The point of this: watch your locks. It is a dangerous environment to float in.
 
Corelogic has put out its latest equity report. Just under 20% of all homes are underwater and negative equity fell by 8.7% in the first quarter.

16 Responses

  1. The second half of this article is interesting. It talks about Covered California and the “sickest of the sick’s” access to very expensive medication.

    http://mobile.spectator.org/theamericanspectator/#!/entry/uncovered-california,51b849aeda27f5d9d0dda5d1

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  2. McWing, I’ll try to get to that piece later, too busy right now for a long piece. In some ways though after reading other articles and seeing the projections here, I think we may not know how this is all going to work and who will sign up and what they’ll get from the ACA until it’s actually implemented and people are using it. That’s definitely a little scary though.

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  3. Brent, this might be interesting to you if you’re not already aware of it.

    Southern California’s housing recovery surged last month as buyers scrambled for a short supply of homes.

    The median price reached $368,000 for all homes sold in the six-county Southland — a 24.7% increase from the same month a year earlier and the highest price in five years. The number of sales, 23,034, hit the highest level for a May in seven years, real estate information provider DataQuick said Tuesday.

    “We’re deep into uncharted territory,” DataQuick President John Walsh said, citing “razor-thin” inventory, pent-up demand, low interest rates and all-cash purchases by investors and wealthy individuals. “How this all plays out is educated guesswork at this point.”

    Home prices in Los Angeles, Orange, Riverside, San Bernardino, San Diego and Ventura counties all posted double-digit increases last month compared with May 2012. In Los Angeles, the median skyrocketed 30.2% to $410,000.

    The price increases have raised concerns of another housing bubble, but prices remain far from the peak and experts say the market is likely to cool off as inventory expands. As prices rise, more homeowners and builders will list homes for sale. May’s median price was 27.1% below a peak of $505,000 reached in spring and summer 2007.

    http://www.latimes.com/business/la-fi-home-prices-20130612,0,7539985.story

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  4. Lulu, CA is in a world of its own at the moment. Here is an article I wrote discussing how different it is: http://marketrealist.com/2013/04/real-estate-price-appreciation-widely-dispersed-by-location/

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  5. Brent

    CA is in a world of its own at the moment

    Yeah we hear that a lot….. 😉 Thanks for the article. Maybe it will help me figure out what’s going.

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  6. McWing, I read the piece finally and just like most of the articles both criticizing and heralding Covered California this is primarily speculation IMO. But the last part dealing with the high cost of cancer and other serious illness drugs is really misleading. Most of these people couldn’t even get insurance to cover their treatment on the individual market before so I suppose paying $2000/mo, if it’s true, is better than not even being able to access the drugs at all.

    A member of extended family on my daughter-in-laws side couldn’t get insurance and when she finally had a diagnosis of colon cancer, after numerous trips to the hospital, and couldn’t get into a drug trial, decided to forgo treatment altogether rather than burden her family with the costs of treatment. She died a few years ago only about six months after her diagnosis and was only 57.

    People who write these articles don’t understand what it was like pre-ACA for the people they seem so concerned about now, and so the comparisons they make don’t actually exist.

    One other thing, I have a few, and know a lot of young people and almost all of them would prefer having insurance than not having it even if they have to pay for it. Those of us who have health benefits through our job have no clue what it’s like and how nerve wracking it is to not have any medical coverage. Not everyone in their 20’s believes they’re indestructible.

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  7. Brent, that visual is amazing………….ha………….”the West and the Rest”. I have noticed, because we live in a highly sought after area, that there are almost no rental properties around.

    We had our ad for the rental in the paper and on Craig’s list last November and not only did we receive hundreds of calls, we’re still getting them and have two friends of family members who want to know asap if it becomes vacant.

    I don’t trust the jump in value though unless we decide to sell something now. I don’t think it will last.

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  8. Those of us who have health benefits through our job have no clue what it’s like and how nerve wracking it is to not have any medical coverage. Not everyone in their 20′s believes they’re indestructible.

    Not to be all one-up you but I have, at times, gone years without health insurance. I never thought I was indestructible but I also knew the odds were with me. I also know young people where I work who decline insurance offered through our mutual employer because they just don’t want to spend the money on it and pay cash for what medical bills they have.

    We’re at opposite ends of the spectrum here, I think a big chunk of the uninsured are there because they do not wish to spend their money on it. I’m guessing you believe that the same chunk do not buy insurance because they cannot afford it.

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  9. McWing

    Either can’t afford or can’t get it………….we know a lot of those as well. I went without insurance for about six years and thought it was pretty rough but I survived.

    I guess we know different people. It’ll be interesting I think when all the numbers and charts start coming in here in CA to see how the ACA is working. I’m hoping it works better than anticipated but at least not awful. A lot of people are counting on it.

    I think these articles telling us all what’s going to happen are primarily just speculation, even the ones who think it’s all going to be fine. I imagine conservatives will highlight the horror stories and people like me will highlight the heart warming stories……………haha

    At least you’ll have one person here in CA, plus her daughter, who will be going through the process of applying. I promise to let y’all know how it goes……………”the good, the bad and the ugly”.

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  10. This is a wake up call for girls who want to join the military.

    Senator Kirsten Gillibrand (D-NY) on Wednesday attempted to make the case for her legislation to crack down on military sexual assaults.

    “The problem is very clear, because the victims have told us what it is,” she said as the Senate Armed Services Committee considered amendments to the annual defense spending bill. “And I am just distressed that the victims’ voices aren’t being heard in this debate.”

    She said the victims number one concern was a climate of retaliation, where those who reported sexual crimes ended up being punished for speaking out. Gillibrand said victims of military sexual assault feared being retaliated against, blamed and marginalized if they reported the crime.

    “The victims tell us they do not report because of the chain of command,” she explained, adding that women were often victimized by senior officers. “They see that the chain of command will not be objective.”

    The Senate Armed Services Committee voted 17-9 to replace the Gillibrand’s Military Justice Improvement Act with a watered-down amendment proposed by Sen. Carl Levin (D-MI).

    Gillibrand’s measure would have removed the authority of commanders to prosecute sexual assault cases and turned such powers over to independent military lawyers. Levin’s amendment, in contrast, keeps the prosecution of sexual assault within the chain of command, but mandates a review whenever a commander decides not to prosecute a case.

    http://www.rawstory.com/rs/2013/06/12/sen-kirsten-gillibrand-on-military-sexual-assault-the-victims-voices-arent-being-heard/

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  11. And I’m just going to mention this because I would be derelict in my duty as a liberal female if I didn’t. Republicans aren’t doing themselves any favors unless there are a lot more ultra-conservative women out there than I believe there are. I don’t even need to link these stories, they’re everywhere because obviously Democrats and left leaning pundits will pounce, and why not?

    Congressman Franks seems to believe that “The incidence of rape resulting in pregnancy are very low” and Gov. Walker apparently has no problem with the ultra sound probe. If Republicans have an economic message I’d like to hear about that but this other stuff is really annoying…………………….to me.

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    • lms:

      From the WaPo on Wisconsin:

      The measure in Wisconsin, notably, doesn’t require transvaginal ultrasounds — the most controversial aspect of the Virginia legislation. Instead, it allows women to choose between transvaginal ultrasounds and less-invasive abdominal ultrasounds.

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  12. And also this morning, the latest Brooks/Collins conversation. I enjoy these but primarily because I love Gail Collins’ sense of humor. I’m not sure they tell us anything useful about the American people but they’re entertaining I think.

    David Brooks: Gail, my general view of politics is that at their core people want government to provide order.

    Gail Collins: Just order?

    David: They don’t expect deliverance from all their troubles, just a basic sense of order. They almost always vote for the presidential candidate who seems to offer the more orderly future.

    Gail: That sounds a bit like the husband who says he loves his wife because she’s so good at keeping the house clean. And the socks matched.

    David: Barack Obama seemed to them safer and more orderly than John McCain in 2008, George W. Bush seemed more orderly than John Kerry in 2004, Obama seemed more predictable and orderly than Romney this last time.

    Gail: I think voters want somebody who understands their problems. You’re right that they don’t expect the president to fix everything. When he’s wrestling with Congress and Wall Street and the rest of the world, they hope he’ll be looking at things from their vantage point.

    But I’m not discounting order. Order would be, as they say on house-hunting shows, a “must have.”

    http://opinionator.blogs.nytimes.com/2013/06/12/data-data-what-do-you-see/?ref=opinion

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  13. Thanks for the clarification Scott.

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