All Things in Moderation

Markets are stronger after yesterday’s bloodbath, although bonds are still having a tough go of it. There is no economic data this morning

This week looks to be pretty dull with respect to market-moving economic data, with the exception of the FOMC report this Wednesday. Market participants will be parsing the minutes closely to answer the “September or December” question. (Will the Fed start reducing QE purchases at the September FOMC meeting or the December FOMC meeting?) 

Interesting factoid: according to a Goldman Sachs survey, more than half of the homes sold in the United States last year, and so far this year, are all-cash transactions. When you consider the fact that existing home sales are running at around a 5 million / year rate and over half these sales are all cash, it shows that the mortgage business still has a lot of room to rebound. Pre-bubble, existing home sales were about 5 – 6 million units / year and peaked over 7 million at the height of the bubble. This says that the mortgage business is still in highly depressed territory. 

The Inspector General of FHFA is saying that the super-profitable Fannie Mae and Freddie Mac are ignoring billions in potential losses on overdue loans and they adopt a new accounting system. Of course, the GSEs are effectively nationalized and we all know government accounting does not comport with GAAP accounting. They are supposed to start writing down loans when they go 180 days delinquent. They aren’t.

President Obama is scheduled to meet with Ben Bernanke and other financial regulators to discuss the progress in implementing Dodd-Frank. So far, pretty much the CFPB is up and running and that is about it. Major issues remain unresolved as Dodd-Frank was drafted without any input from the financial industry.