Saturday Football Open Thread, Week 12

Early games: the Yellow Jackets lost to Clemson 31 – 55 Thursday night, and UCLA beat Washington. Today’s games:

A hapless Iowa State is playing Oklahoma in what should be a rout for the Sooners (line: OK, spread 21). UPDATE: Oklahoma wins 48 – 10.

From MiA:  They call themselves Sooners to commemorate the Land Rush in which the most aggressive of them got the best homesteads.  It was an actual covered wagon race for a land grab.  Thus we call this team The Land Thieves.  Later, they adopted their two word fight song, Boomer Sooner, by plagiarizing Yale’s inane Boolah Boolah.  The Land Thieves is both historically accurate and appropriately disrespectful.
 

And an equally hapless Purdue is visiting Happy Valley to take on PSU (line: PSU, spread 20.5). Go, Nittany Lions! UPDATE: PSU 45 – 21.

Indiana is at Wisconsin (line: UW, spread 18.5)(ESPN2, noon EST) while osu is playing the Illini (pleasepleasepleasepleaseplease)(line: osu, spread 32)(ESPN, noon EST).UPDATES: UW 50 – 3 and osu 60 – 35, damn them

NC State is playing Boston College (line: BC, spread 7.5). Go, Eagles! UPDATE: BC wins 38 – 21.

UPDATE: Maryland (of the horrible uniforms) is in OT at Virginia Tech and won 27 – 24.

WSU is at Arizona (line: AZ, spread 13.5) and Syracuse is at unbeaten FSU (line: FSU, spread 38.5)(errrr)(3:30 EST, ABC). Cheering for the Wildcats and Orange. UPDATE: FSU 59 – 3 (yup) and WSU 24 – 17 over Arizona

Michigan is playing the blood-spattered Wildcats (line: UM, spread 2.5), and if anybody deserves to lose for bad uniform choice, it would have to be Northwestern.UPDATE: UM wins 27 – 19 in OT

MSU is at Nebraska (line: Nebraska, spread 4)(3:30 EST/ABC) and Paul and I are duking it out. Go, State!!!UPDATE: MSU wins 41 – 28

OK State (who I believe Mark refers to as The Land Thieves) is playing Texas in Big 12 action (line: Texas, spread 4.5)(3:30 EST/FOX) and I’ll stay out of the middle of that one.  From MiA: we call this team Okie Lite, but no disrespect is intended.UPDATE: OSU wins 38 – 13

Utah visits the Ducks (line: Oregon, spread 25) and USF is hosting Memphis (line: Memphis, spread 2.5)(ouch). UPDATE: Utah and USF both lost

Minnesota and Notre Dame have the weekend off. May all the right teams win!


What else?


Morning Report – Private entities trying to force something with Fan and Fred 11/15/13

Vital Statistics:

Last Change Percent
S&P Futures 1791.2 3.5 0.20%
Eurostoxx Index 3057.4 3.7 0.12%
Oil (WTI) 93.88 0.1 0.13%
LIBOR 0.238 0.000 -0.15%
US Dollar Index (DXY) 80.88 -0.141 -0.17%
10 Year Govt Bond Yield 2.70% 0.01%
Current Coupon Ginnie Mae TBA 105.7 -0.2
Current Coupon Fannie Mae TBA 104.6 -0.1
RPX Composite Real Estate Index 200.7 -0.2
BankRate 30 Year Fixed Rate Mortgage 4.34
Markets are higher on no real news. Bonds and MBS are down small.
The Empire Manufacturing Survey came in lower than expected and import prices fell. Industrial Production and Capacity Utilization fell.
Bill Ackman has taken a 10% stake in Fannie Mae and Freddie Mac and may seek talks. This comes on the back of Fairholme’s bid to buy the insurance units of Fan and Fred. Fairholme’s bid would probably be denied by the government. Many in the financial community view the government’s changing the terms of the bailout just as Fannie and Fred became profitable as dirty pool. The government owns 80% of Fannie Mae and Freddie Mac’s stock and doesn’t have to do anything it doesn’t want to, but it certainly cannot relish the thought of dueling in the press with guys like Ackman, Pauson, and Berkowitz.
Housing affordability fell in the third quarter as prices rose and interest rates increased, according to the NAHB.
Janet Yellen’s testimony was pretty much as predicted. She is a dove. Reading the tea leaves, however it appears she is in no rush to begin tapering. Punch line:  I don’t know how you could have come out of that meeting thinking “I gotta short some bonds, right here.” Here is my longer take on it from yesterday: http://thenadtearsheet.blogspot.com/2013/11/janet-yellen-data-dump_14.html

Janet Yellen data dump

Janet Yellen testified in front of the Senate Banking Committee today and overall, there were few surprises. It is becoming clear that she intends to continue most of the Bernanke Fed’s policies, and to be honest I couldn’t find anything she would do differently. Her reception was generally good, and the Senators were respectful. Most of the questioning had to do with banking regulation, income inequality, the existence of asset bubbles and the size of the Fed’s balance sheet.

Here are some of the discussion points:

On current monetary policy: The Fed is seeking a strong and robust recovery, and must not jeopardize it by removing accomodation too early. She does not want to remove support while recovery is fragile. It is costly to withdraw accomodation or fail to provide adequate accomodation, and the Fed has the tools and the will to withdraw accomodation at the right time.

On asset bubbles: The Fed should attempt to detect asset bubbles when they are forming, however the first line of defense should be regulatory. Monetary policy is a blunt instrument and should be used if other measures aren’t working. She won’t rule out using monetary policy to address bubbles, but prefers that we use regulatory measures (such as increased capital requirements, higher risk retention requirements, etc) to prevent bubbles from occurring.  Separately, she sees little evidence that there are bubbles currently forming in the real estate market.

On banking regulation: Too Big To Fail imposes costs on the economy and should be avoided if possible. The government is making progress in handling too big to fail. They will raise capital standards further and the Fed is looking at requiring banks to issue additional unsecured debt at the holding company level to raise capital. She wants to ensure that the system isn’t set up to advantage the larger banks at the expense of the smaller banks.

On communication: In a nod to the volatility of the bond market over the summer, she said that she wants the Fed to communicate as clearly as possible with the markets and will redouble efforts to reduce volatility. This follows Bernanke, and is a departure from the Fed of the past, where they wanted to be as opaque as possible, lest the market anticipate what they were going to do, which would limit the effectiveness.

On QE and the balance sheet: Yellen was asked repeatedly about the effects of QE. She stressed that QE is being done to help the economy, not to help the government finance its deficit. When pressed about the size of the Fed’s balance sheet, she was forced to admit it is unprecedented for the US Central bank, but it was not unprecedented compared to other central banks. She acknowledged there are costs and risks to such a large balance sheet, and opposes any sort of Congressional audit of the Fed lest it reduce the Fed’s independence.

On income inequality: The Democratic Senators pretty much focused on income inequality, and what could be done about it. Yellen acknowledged that asset prices are rising, and that primarily benefits the rich, however the point of QE is to help the economy recover, and the best thing we can do for the middle class is to have a robust economy. She also acknowledged that QE is doing a number on seniors who rely on interest from safe assets to supplement social security. She views income inequality as a serious problem.

On the dual mandate: She stressed that the Fed must prevent inflation that is too low, and that deflation is a terrible thing. She refused to say what she thought “full employment” was, other than to give a range that it is probably in the 5% to 6% range. She also said that fiscal policy was working at cross purposes with what the Fed is trying to do. She also acknowledged that the reported unemployment rate understates the severity of the problem.

Key Takeaways:

While not admitting it, she seems to indicate the Fed goofed when it talked about withdrawing accomodation last June and causing the subsequent bond market sell-off. Expect the Fed under Yellen to be more communicative and she will probably try and clear up the confusion over tapering QE. It certainly seems she intends to err on the side of caution, provided there is no evidence of asset bubbles and inflation is at or below its 2% target rate.

The comment about full employment being in the 5% to 6% range was interesting as well. We spent many years over the past couple of decades with unemployment under 5% (it actually got below 4% in 2000). Does that mean the Fed will begin to start tightening before it ever gets to that level? Perhaps.

On asset bubbles, she does not hold the view that the Fed had a role in inflating the real estate bubble or the stock market bubble. Those bubbles were due to regulatory failure. It is ironic that the Fed has a problem with “too much money chasing too few goods” – in other words “inflation”, but is ok with “too much money chasing too few assets” – in other words a bubble. This is unsurprising; and suggests that the punch bowl might hang around a little longer than expected.

Morning Report – Here’s Janet! 11/14/13

Vital Statistics:

Last Change Percent
S&P Futures 1782.4 3.7 0.21%
Eurostoxx Index 3041.1 20.0 0.66%
Oil (WTI) 93.35 -0.5 -0.56%
LIBOR 0.238 -0.002 -0.89%
US Dollar Index (DXY) 81.08 0.156 0.19%
10 Year Govt Bond Yield 2.71% 0.01%
Current Coupon Ginnie Mae TBA 105.4 0.4
Current Coupon Fannie Mae TBA 104.5 0.1
RPX Composite Real Estate Index 200.7 -0.2
BankRate 30 Year Fixed Rate Mortgage 4.38
Markets are higher this morning on no real news. Bonds and MBS are flattish.
Wal-Mart cut its profit forecast due to the weaker economy at the lower end of the income spectrum and increased competition from dollar stores.
Finally, some economic data, although nothing market-moving. Initial Jobless Claims came in at 339k, a touch higher than the 330k forecast. Productivity was 1.9% vs Street expectaions of 2.2% and unit labor costs fell .6%. Later on today, we will get the Bloomberg Consumer Comfort index. Philly Fed President Charles Plosser will be speaking momentarily – he is a hawk so bonds could sell off on his comments.
Janet Yellen is scheduled to appear in front of the Senate Banking Committee today. Here are her prepared remarks. First thing off the bat, no mention of QE or tapering. For the most part nothing in the statement suggests any sort of change in direction from the Bernanke Fed. She intends to continue with the policy of keeping the markets informed of the Fed’s thinking, and believes that the dual mandate requires her to boost inflation if it is too low. She is committed to making sure the too big to fail banks are regulated, while at the same time she wants to lower the regulatory burden on small community banks. These sort of hearings are more or less dog and pony shows for the benefit of politicians, not public consumption. They don’t ask questions, they make statements. I don’t expect anything market-moving to come out of this, but just be aware. While there are a few people who want to use her nomination as leverage to advance other items, she should be confirmed easily.
Abby Joseph Cohen loves stocks right here..
Bidding wars on the West Coast are beginning to wane as inventory builds. Expect to see this reflected in the home price indices going forward. This could be a welcome development for the mortgage industry as professionals exit and real buyers (the ones who will need a mortgage) enter.

Morning Report – Mortgage Credit beginning to ease up 11/13/13

Vital Statistics:

Last Change Percent
S&P Futures 1755.5 -9.6 -0.54%
Eurostoxx Index 3006.0 -28.7 -0.95%
Oil (WTI) 93.31 0.3 0.29%
LIBOR 0.241 0.001 0.56%
US Dollar Index (DXY) 81.15 -0.041 -0.05%
10 Year Govt Bond Yield 2.73% -0.04%
Current Coupon Ginnie Mae TBA 105.2 0.2
Current Coupon Fannie Mae TBA 104.2 0.3
RPX Composite Real Estate Index 200.7 -0.2
BankRate 30 Year Fixed Rate Mortgage 4.51
Markets are lower after Atlanta Fed President Dennis Lockhart said a paring of U.S. bond purchases could very well take place next month. Bonds and MBS are up; however.
Mortgage Applications fell 1.8% last week, with purchases down .5% and refis down 2.3%. We had a huge move in rates last week, but it took place on Friday. This week’s numbers will probably be horrendous.
Mortgage Credit Availability increased slightly in October, according to the Mortgage Bankers Association. On one hand, some lenders increased lowered their FICO floor, but others restricted cash-out refis. The net effect was a slight increase in credit availability. FWIW, given the end of the refi boom, it looks like bankers realize they have to go our further on the credit curve. Redwood Trust announced on its conference call that it is diversifying away from strictly high quality jumbos and will look at the non-QM space.
Tri-Pointe Homes reported better than expected sales and earnings, and took up full year guidance. They are buying Weyerhaeuser’s home building unit as well. We are starting to see more M&A in the homebuilding space.
Transunion reported that the national average for 60 day delinquencies is 4.09%. The worst states are the judicial states, while the best are the northern mountain / midwest states. They have a cool interactive map where you can see DQ rates by state.

Morning Report: 5.4% mortgage by the end of 2014? 11/12/13

Vital Statistics:

Last Change Percent
S&P Futures 1763.2 -4.4 -0.25%
Eurostoxx Index 3039.5 -13.3 -0.44%
Oil (WTI) 95.06 -0.1 -0.08%
LIBOR 0.239 0.000 0.00%
US Dollar Index (DXY) 81.12 0.028 0.03%
10 Year Govt Bond Yield 2.77% 0.02%
Current Coupon Ginnie Mae TBA 105.2 -0.8
Current Coupon Fannie Mae TBA 103.9 -0.1
RPX Composite Real Estate Index 200.7 -0.2
BankRate 30 Year Fixed Rate Mortgage 4.39
Markets are lower as bond traders come back from a long weekend. Bonds and MBS continue their post jobs report sell-off.
The Chicago Fed National Activity Index ticked up a bit in September, while the 4 month moving average remained negative.
The NFIB Small Business Optimism Report fell from 93.9 to 91.6. He points out that small business is still struggling. That is an important point to remember – the S&P 500 is not a representative sample of U.S. business. Most of the big S&P names have exposure to fast-growing overseas markets and benefit from all the liquidity being pumped into the system by the world’s central banks. Small business is more affected by weak demand domestically. The government shutdown weighed on sentiment as well.
With not a lot of economic data, Fed-speak becomes more important. Dallas Fed President Richard Fisher told CNBC that the markets should bear in mind that QE cannot last forever. The balance sheet is $4 trillion and there are limits to what the Federal Reserve can do. Minneapolis Fed President Kocherlakota will talk about monetary strategy at 1:00 pm EST and Atlanta Fed President Dennis Lockhart will discuss the economy at 1:50 EST.
Homebuilder D.R. Horton reported earnings in line with estimates. Average selling prices climbed 15% as a combination of tight supply and low inventory allows the builders to hike prices at will. The stock is up in the pre-market.
NAR’s Chief Economist Lawrence Yun is making predictions about 2014. Exiting Home Sales will be flat at about 5.1 million units, prices will rise by 6% and the the 30 year fixed rate mortgage will end the year at 5.4%. New Home construction will increase to meet demand (at some point the builders will stop seeing price increases and will have to pump up volume to achieve growth). Lending standards will continue to ease and an improving job market will increase activity. If cash sales drop as a percentage of total sales, the purchase business should improve, but probably not enough to offset the end of the refi boom.

Veterans’ Day Open Thread

Happy Veterans’ Day to my fellow vets, and happy Monday to all! I think Brent is playing hooky, so thought I’d fill in for him and try to start a new thread. What are you doing this 11/11? I’m driving down to Annapolis this afternoon to see how they do V-Day there; not quite ready to try to battle the influx into D.C. this year.

Semper fi, fair winds and following seas, and Airborne!

Bites & Pieces: Barks and Bostons Edition

We bought Pinta from the Daisy Hill Puppy Farm last December. Just kidding–it was Howling Hill Kennel, a local breeder of small small breed dogs (Bostons and Pugs). I appreciated the advice regarding rescue dogs from NoVA and, I think Goose. Sadly, the local links ranged as far as N. Carolina and so there were very few Bostons available in this area.

Pinta means painted or spotted in Spanish. The name fit for a Boston Terrier. She’s actually named for a rice and beans dish from Central America called Gallo Pinto (spotted rooster). As ours is a female, the appropriate name was Pinta. All we need to do is pick up a boy, who will of course be called Gallo. Well, that or Bilbo. I figure hobbit names work well for small dogs.

Pinta came home from the kennel with a bag of kibble (which we later determined is Costco’s small breed dog food). We had been feeding her that for the first 7 months we had her along with treats. Then we went to Costa Rica for several weeks. A friend of ours cared for her until I returned. As part of caring for Pinta, she fed her a canned dog food to keep her happy. I returned on my own for four weeks. There were a number of containers left, so I took to giving Pinta a bit in the morning when I left and a bit more in the evening when I came back home. Then I ran out…

What to do? I didn’t want to buy a bunch of expensive dog food and it struck me that it’s something one could make. I hit the web and looked through a few recipes. This was going to be a supplement to her main diet, so I wasn’t worried about making a complete food. Just something that would be a bit of a treat when I left in the morning, but one that is nutritionally appropriate.

It takes a couple of hours to make, but there’s not much active work and one batch makes enough to last for a couple of months. The essentials are meat, rice, and veggies. I went with chicken for the meat. Chicken quarters are inexpensive and the bones are useful for making stock. I suppose I could break down whole chickens and save the breast meat for human food.

I got mixed messages regarding rice. Brown rice is good, because it has additional nutrients. No no no. Brown is bad, because it’s harder to digest. I split the difference in the end. I used a sweet brown rice (the bag your own bin at Whole Foods), but I cook it an extra step. I’m a fan of risotto, so I thought that might work. I cook the rice in our rice cooker and then cook it further with chicken stock so that it gets a risotto like texture. For veggies, I use carrots and peas. Onions are verboten as they can be toxic to dogs. I don’t use a commercial stock as onions are certain to be used and I’d rather not deal with doggie indigestion.Although this isn’t our dog’s primary food, I add a vitamin supplement and some Omega 3 oil. Once everything is mixed together, I freeze it in one cup portions. I can transfer one down to the fridge in the evening and it’ll be defrosted by morning. On days when she’s alone, I give Pinta about 1/3 cup when I leave in the morning and a similar amount in the evening.

The basic approach works pretty well with other proteins. I was cooking salmon recently and had some trimmings after I made filets. That made a nice small batch of Pinta food. Likewise, I had a chuck roast that I used for a Trieste goulash. Grind the smaller pieces and use them for a beef based version of this dish.

Ingredients

Five pound bag of chicken leg and thigh quarters

Two cups chopped or shredded carrots

One pound bag of frozen peas, defrosted

Two cups of sweet brown rice

Nutritional supplements

Method

1. Cook rice. I put rice and three cups of water in a rice cooker and let the machine do the work.

2.  Remove skin from chicken quarters and separate meat from bone. Make stock from the bones, ~6 cups of water, several stalks of celery and a couple of carrots. Do not use onions as these are slightly toxic to dogs. Bring up to a boil and simmer, uncovered, for about an hour. You should get about four cups of stock. Strain and return to pot.

3. Use a meat grinder or food processor to make ground chicken. If using a food processor, cut the chicken into large pieces (1” – 2”) and put in freezer for 15 minutes. This is a method I use for ground beef (taken from Cooks Illustrated).

4. Add a bit of oil to a large, heavy bottomed pot and heat slightly. Add the ground chicken and cook, stirring occasionally, for a few minutes. No need to cook it completely, just take an edge off the rawness. Add the carrots and peas, stir and add a couple cups of hot broth. It’s not a bad idea to defrost the peas in the microwave and chop in the food processor.

5. When the rice is done, add to the pot with the remaining two cups of broth. Simmer until the broth is absorbed. You’re going for a risotto like consistency. I read conflicting information about digesting brown rice, so decided to break it down further. Whole Foods has sweet brown rice, which is short grain and hence suitable for this kind of dish.

6. Add the softened rice to the chicken and vegetables and stir. Cook uncovered until the broth is mostly absorbed. Stir in nutritional supplement. These vary quite a bit, so use your judgement as to the right amount. I use a combination of a NutriVet and Omega 3 oils.

This makes about four quarts of dog food. I freeze in one cup quantities. Move to the refrigerator the day before and it defrosts nicely. I reheat to room temperature in the microwave before serving.

Pinta at 3 Weeks

Image

Pinta at 6 Months

Image

Pinta at 1 Year

Image

Saturday Football Open Thread, Week 11

Busy morning here, so I’m going to miss the first kickoffs, but here’s what’s up:

Early games: On Thursday Oklahoma lost to Baylor 12 – 41 (ouch, okie!) and Stanford managed to crush the Ducks 26 – 20 (the closeness of the score reflects a fabulous fourth quarter by Oregon, rather than a close game), while LA-Lafayette beat Troy 41 – 36.

Today’s games:

Penn State is at UMinn in Big Ten action (line: UM, spread 1.5)(Noon EST/ESPN2) UPDATE: UMinn wins 24 – 10.

Syracuse is playing at UMaryland, so we’re going to get to see the worst uniforms on the east coast again (seriously, who designed UMd’s uniforms?) (line: UMd, spread 3.5). UPDATE: Syracuse wins 20 – 3.

Nebraska is in the Big House (line: UM, spread 6.5)(3:30 pm EST/ABC) so Paul and I can duke it out. Go, Blue! I can feel magnanimous after last week. UPDATE: Nebraska beats the odds and the Wolverines 17 – 13.

Boston College is playing at New Mexico State (line: BC, spread 24 [!!]). Go, Eagles! UPDATE: BC wins 48 – 34.

BYU is traveling to Wisconsin (line: UW, spread 7)(3:30 pm EST/ESPN) Trounce ’em, Badgers! UPDATE: Wisconsin wins handily 27 – 17.

ASU is playing Utah (line: ASU, spread 7), where hopefully the Utes will freeze their tuchesses off. UPDATE: Utah blows a 12-point lead in the fourth quarter and loses 20 – 19.

Texas is playing a late game at West Virginia (line: UT, spread 8)(7:00 pm EST/FOX). Hook ’em, ‘Horns! UPDATE: Texas wins in overtime, 47 – 40.

Notre Dame is at Pitt (line: ND, spread 3.5)(8:00 pm EST/ABC). Go, Mrs NoVA’s alma mater! UPDATE: Pitt avenges last year’s triple OT loss by beating The Irish 28 – 21.

UCLA travels to visit Arizona (line: UCLA, spread 2.5)(8:00 pm EST/ESPN). Go, Wildcats! This could be a really good game. UPDATE: Arizona looked like they were going to come back, but UCLA wins 31 – 26.

Georgia Tech, USF and MSU have the weekend off.


What else?


Morning Report – Jobs day 11/08/13

Vital Statistics:

Last Change Percent
S&P Futures 1741.8 -3.4 -0.19%
Eurostoxx Index 3009.5 -33.4 -1.10%
Oil (WTI) 94.24 0.0 0.04%
LIBOR 0.239 0.001 0.21%
US Dollar Index (DXY) 81.22 0.373 0.46%
10 Year Govt Bond Yield 2.72% 0.12%
Current Coupon Ginnie Mae TBA 105.3 -0.7
Current Coupon Fannie Mae TBA 104.5 -0.7
RPX Composite Real Estate Index 200.7 -0.2
BankRate 30 Year Fixed Rate Mortgage 4.27
Stocks are down in spite of a jobs report that showed a better-than-expected increase in payrolls. Bonds are getting slammed on the number, with the 10-year down 12 basis points.
The economy added 204,000 jobs in the month of October, well in excess of the 120k street expectation. September was revised upward. The government shutdown was expected to depress job growth and it looks like that didn’t happen. The unemployment rate ticked up to 7.3% and the labor force participation rate nosedived to 62.8%, the lowest since January of 1978. Average hourly earnings ticked up a tenth of a percent and average weekly hours fell. Overall, the report was a mixed bag, but it does bring back the possibility of a December tapering. Separately, personal Income rose .5% and personal spending rose .2%.
The chart below shows the labor force participation rate since the days of Ward and June Cleaver. The big increase was due to women entering the workforce, which shows how dramatic the decline has been. Roughly half the gains have been taken away.

Twitter’s IPO went swimmingly. It priced at $26 and traded as high as $50. It now sports a 25 billion market cap which works out to 48 times trailing 12 month sales.
Freddie Mac is doing another risk sharing deal as the GSEs try to lower their footprint in the mortgage market.