Today in History – September 19

Posted on September 19, 2013 by lmsinca

1988 – On September 19, 1988, just one day after sustaining a head injury in a frightening accident, American diver Greg Louganis wins gold in the springboard competition at the Summer Olympics, in Seoul, South Korea. It was his second consecutive Olympic gold in the event.

Louganis fought through his nerves to nail all 11 of his dives, proving that he was still the best diver in the world. Louganis also won repeat gold in the men’s platform competition, becoming the first man ever to win consecutive golds in both events.

On October 2, Louganis was awarded the United States Olympic Committee Spirit Award and later announced his retirement from competition to pursue an acting career.

In 1995, Louganis confirmed that he was suffering from the AIDS virus.

1957 – The United States detonates a 1.7 kiloton nuclear weapon in an underground tunnel at the Nevada Test Site (NTS), a 1,375 square mile research center located 65 miles north of Las Vegas.  The test, known as Rainier, was the first fully contained underground detonation and produced no radioactive fallout. A modified W-25 warhead weighing 218 pounds and measuring 25.7 inches in diameter and 17.4 inches in length was used for the test. Rainier was part of a series of 29 nuclear weapons and nuclear weapons safety tests known as Operation Plumbbob that were conducted at the NTS between May 28, 1957, and October 7, 1957.

1957’s Operation Plumbbob took place at a time when the U.S. was engaged in a Cold War and nuclear arms race with the Soviet Union. In 1963, the U.S. signed the Limited Test Ban Treaty, which banned nuclear weapons testing in the atmosphere, underwater and outer space. A total of 928 tests took place at the Nevada Test Site between 1951 and 1992, when the U.S. conducted its last underground nuclear test.

1873 – One of the worst financial depressions in American History. On September 19, 1873 (Black Friday), the New York Stock Exchange announced that important investment banking firm of Jay Cooke & Company had collapsed after investing too heavily in railroad securities. The collapse of such an influential company affected the entire stock market, and soon other large firms failed. By 1875, about 500,000 men were unemployed, and wage cuts for other workers precipitated a wave of strikes and labor violence. And not until the end of 1870’s did the U.S economy improve.  The original Black Friday was on Sept. 24, 1869.

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Morning Report – Party at the Fed 09/19/13

Posted on September 19, 2013 by Brent Nyitray

Vital Statistics:

Last Change Percent
S&P Futures 1721.8 4.0 0.23%
Eurostoxx Index 2940.7 31.7 1.09%
Oil (WTI) 108.2 0.1 0.07%
LIBOR 0.25 -0.002 -0.89%
US Dollar Index (DXY) 80.2 -0.042 -0.05%
10 Year Govt Bond Yield 2.70% 0.01%
Current Coupon Ginnie Mae TBA 105 1.3
Current Coupon Fannie Mae TBA 104.2 0.0
RPX Composite Real Estate Index 200.7 -0.2
BankRate 30 Year Fixed Rate Mortgage 4.42
Markets are higher this morning after yesterday’s furious rally on the Fed’s decision to keep asset purchases in place. The 10 year had a trading range of over 30 basis points in yield yesterday. Initial Jobless Claims increased to 309,000. Bonds and MBS are up small.
The FOMC statement was obviously a surprise, and it is clear from the reaction in the markets that a LOT of people were leaning short heading into the announcement. What does that mean for rates going forward? The markets will now begin to fret about the December meeting, which isn’t going to be bond bullish. I think if you are considering locking right now, you do it. 2.7% seems to be resistance on the 10 year, and we could be looking at a 2.7% – 3.0% trading range. At these levels, take the money and run.
The Fed’s decision certainly provides support for the theory that the Fed was really targeting leverage with its announcement last Spring. The economic data has never supported a reduction of stimulus, and the Fed has been consistently too high with its economic forecasts. The thing is, they can’t un-ring the bell – so people are not going to be piling into levered curve flattening trades. REITs have significantly de-leveraged. Mission Accomplished.
The Fed took down its forecasts again, with the 2013 GDP range now 2.0% – 2.3% from 2.3% – 2.6% in June. Unemployment’s forecast ticked down as well, from a range of 7.2% – 7.3% to 7.1% to 7.3%. Ben Bernanke was asked in the press conference about the labor force participation rate and how it seemed to be driving unemployment. Bernanke acknowledged that there is more to the labor picture than simply the headline unemployment number, and also stressed that these are guideposts, not thresholds. In other words, if unemployment gets to their 7% target, but it is due to the wrong reasons (a drop in the participation rate), then the Fed may decide to remain accomodative.
The beatdown goes on… Wells Fargo is cutting 1,800 jobs in its mortgage unit, in addition to the 3,000 announced earlier this year.

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