This day in history – August 13

Posted on August 13, 2013 by ScottC

August 13 is an incredibly boring day in history. Only a couple of things worthy of note.

1982 – Cameron Crowe’s Fast Times at Ridgemont High opens in theaters across the nation. Based on Crowe’s book of the same name chronicling his undercover experiences in a San Diego high school, the film features a slew of soon-to-be household names, including Nicholas Cage, Jennifer Jason Leigh, Forest Whitaker, Phoebe Cates, Anthony Edwards, Judge Rheinhold, and most famously Sean Penn as the stoner Jeff Spicoli.

1925 – Cuban strongman Fidel Castro is born in the eastern Cuban province of Oriente. Castro will successfully lead the overthrow of the Batista government in 1959, and will survive as the dictator of Cuba until he steps down, passing power to his brother, in 2008.

1899 – Legendary film director Alfred Hitchcock is born in London. Hitchcock is best known for his suspense-thrillers as well as for his unique use of camera angles and editing techniques in order to build tension. Hitchcock also makes quick cameo appearances in all of his films, making for an interesting game of trying to find where he appears in each film. See if you can find Alfred in the opening credits of North by Northwest.
https://www.youtube.com/watch?v=xBxjwurp_04

1521 – After a 3 month siege, Hernan Cortes and his Spanish conquistadors finally capture the capitol of the Aztec empire, Tenochtitlan. The fall of the city effectively marks the end of the Aztec Empire, which lasted just under 100 years.

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Morning Report – Mixed bag of economic data 8/13/13

Posted on August 13, 2013 by Brent Nyitray

Vital Statistics:

 

  Last Change Percent
S&P Futures  1688.5 1.4 0.08%
Eurostoxx Index 2837.4 10.2 0.36%
Oil (WTI) 106.3 0.2 0.20%
LIBOR 0.264 -0.001 -0.19%
US Dollar Index (DXY) 81.59 0.253 0.31%
10 Year Govt Bond Yield 2.68% 0.06%  
Current Coupon Ginnie Mae TBA 104.6 -0.2  
Current Coupon Fannie Mae TBA 103.5 -0.4  
RPX Composite Real Estate Index 200.7 -0.2  
BankRate 30 Year Fixed Rate Mortgage 4.29    

 

Markets are slightly better this morning after the NFIB Small Business Survey came in below expectations and a mixed report for retail sales. Bonds and MBS are down.
 
The National Federation of Independent Business Optimism Index rose to 94.1 from 93.5, just missing the Street estimate of 94.5. Generally speaking it was a glum report, although it was the 4th highest reading since 2008. (The index has averaged 100 in the 35 years prior to to 2008 so that gives you a bit of perspective). 9% of firms added workers while 12% shed workers. 20% reported job openings they could not fill, which is a good sign for the labor markets, I suppose. 19% reported increasing worker comp while 4% reduced it. Capital Expenditures fell. Credit appears not to be a problem. The report notes the bifurcation of the business environment, where the big S&P 500 names are doing great (energy, large manufacturers, agribusiness) due to strong exports and the rest, who are seeing prospects of earnings growth fade. 
 
The advance estimate for retail sales increased .2% month-over-month and increased .4% ex-autos and gasoline. Sales increased 5.4% year over year. Discretionary goods (sporting goods, apparel) seemed to lead the charge while autos were a drag. Given that consumption is 70% of the U.S. economy, we need to see more robust growth here if we want to see a recovery.
 
Have a borrower who is ineligible for FHA (or doesn’t want to go down that route) but is coming up shy on the down payment? A new equity sharing product from First Rex provides downpayment assistance. They will put down up to half the borrower’s down payment in return for 40% of the house price appreciation. Since it is an equity investment, there are no payments that the borrower must make. FHFA has recommended that the GSEs allow this product as a form of down payment, and SIFMA is considering a proposal to allow loans with subordinate financing product (which is what this is called) to be eligible for good delivery into TBAs. If you have the view that house prices are going nowhere for a while, this may be an interesting product. 
 
Ever wonder why GDP gets revised so much? Remember Q1, which was revised downward from 1.7% to 1.1%. The advance estimate for Q1 GDP was 2.5% in April. By the July, it was 1.1%. What accounts for the revisions? Zach Pandl at Columbia Management discusses all of the economic “sausage making” that goes into GDP estimates and how noisy they are. Which means that when you look at GDP numbers, they might not be giving you a good picture of how the economy is actually doing. 
 
Harry Reid is not onboard with ending Fannie and Fred. From the government’s perspective, F&F are FWB – they are spewing cash, which goes 100% to the government’s coffers, they control them absolutely, but there is still a 20% sliver of outside equity which allows them not to consolidate F&F’s debt on the government balance sheet. When you consider that the taxpayer bears 50% of the credit risk in the U.S. mortgage market, that is significant.

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