Morning Report – “Viligant” Janet data dump 2/12/14

Vital Statistics:

Last Change Percent
S&P Futures 1818.5 4.9 0.27%
Eurostoxx Index 3098.2 21.1 0.69%
Oil (WTI) 101.1 1.2 1.19%
LIBOR 0.236 -0.001 -0.21%
US Dollar Index (DXY) 80.8 0.166 0.21%
10 Year Govt Bond Yield 2.75% 0.03%
Current Coupon Ginnie Mae TBA 105.9 0.0
Current Coupon Fannie Mae TBA 104.3 -0.1
RPX Composite Real Estate Index 200.7 -0.2
BankRate 30 Year Fixed Rate Mortgage 4.25
Markets are stronger this morning on no real news. Bonds and MBS are down. Stocks loved the Yellen testimony yesterday, bonds not so much..
Janet Yellen’s testimony was pretty much as expected. She is a primary architect of the Fed’s current course of action, so it makes sense she will pretty much continue with doing what they have been doing. Her Congressional testimony had few interesting tidbits, although she is pretty unconcerned about the debt. According to her, it should become an issue in about 30 years. She also sees no bubbles right now (of course when has the Fed ever seen bubbles until after it is too late?). She also made a comment regarding the decline in the labor force participation rate – saying that some of it is structural. So, once unemployment hits their target, the Fed may not wait for the labor force participation rate to return to pre-recession levels because in their minds, it won’t.
Maxine Waters praised Janet for her “viligance.”
Mortgage applications fell 2% last week, which is disappointing given that rates fell a couple basis points. Both purchases and refis fell, but purchases fell the most.
The House passed a clean debt limit bill, so that takes the risk of another debt ceiling hike off the table. Separately, the House is working on a bill to clip CFPB’s wings a little, and subject it to some sort of Congressional oversight.

17 Responses

  1. (Clears throat.)


    Brent, I read yesterday the the Japanese own 96% of their debt, and 20% is held by the bank of Japan. Further, they, the Japanese, hold about 3.9 trillion in foreign debt, I agree that they seem to be stagnant economically but not in a debt crisis. All they have to do is keep their own citizens convinced it’s their patriotic duty to buy their debt, and they’ll never have to raise interest rates.

    Is that comparable to our own monetization of debt and large foreign holding? What I mean is that any, ANY increase in interest rates and their goes all discretionary spending. If I’m looking for low risk holdings, how can this situation be rationally sold to me as stable and safe?


  2. The Fed owns 25% of our debt, and I don’t know how much is in the Social Security “lockbox.”

    Don’t forget if (when) interest rates go up, the Fed will be sitting on some capital losses as bond prices fall. They have $4 trillion in bonds being supported by $55 billion in equity. Theoretically, if bond prices fall by 1.38% their equity is wiped out and they are insolvent.

    Of course they have access to the Treasury,so that won’t happen, but it gives you an idea of how levered they are. If rates go up and the Fed marks their book to market, they will start passing losses to the government. Think people are pissed at the Fed now? Wait till they start losing money.

    Re Japan, they are in a very different situation than us. Because of their cultural aversion to failure, many companies which are truly insolvent and should go out of business continue to carry on as zombie companies. The low interest rates mean their interest cost is de minimus. But once business recovers (and it will eventually), the Japanese won’t be able to find lenders willing to tie up their money for no return.


  3. The comments of leftist a to Clarence Thomas’s upbringing and racism experience is fascinating.

    I love the left and race and the GOP: “You have no minorities!” When the come a R minority, “You’re a puppet Uncle Tom!”


    • George, Texas news from behind the Austin American-Statesman paywall:
      Texas overtakes California, leads nation in tech exports

      Posted: 6:13 p.m. Tuesday, Feb. 11, 2014
      Email 2Facebook 13Twitter 15ShareThis 32

      By Brian Gaar – American-Statesman Staff

      Surpassing California for the first time, Texas is leading the nation in technology-related exports, according to a new report.

      State companies that make computers, semiconductors and communications equipment, among other products, exported more than $45 billion in products in 2012, according to the TechAmerica Foundation, a tech industry lobbying firm.

      That was driven by Texas’ 7 percent growth — about $3 billion — in tech exports from 2011. Tech exports supported nearly 1.5 million jobs nationwide and about 331,000 jobs in Texas, according to the report. California, meanwhile, declined 2.8 percent, to $44.8 billion in technology exports.

      Technology exports accounted for 17 percent of all exports from Texas in 2012, above the national average of 13 percent. Texas also ranked first or second in every technology export sector examined. Texas was first in semiconductor exports at $14 billion, first in communication equipment exports at $8.9 billion and second in computer equipment exports at $12.8 billion.

      The state’s leading tech export destinations were Mexico ($22 billion), Canada ($4 billion) and South Korea ($3 billion).

      Matthew Kazmierczak, TechAmerica Foundation’s vice president for research, said market dynamics and cost of living make Texas a more competitive location for manufacturing, which helped it overtake California.

      “Texas also has some large-scale computer equipment manufacturing centers that have recently increased production and have resulted in significant increases in computer equipment exports, whereas in California the computer equipment manufacturing has decreased, contributing to the decrease in tech exports from California,” he said.

      However, states also are competing with international markets, and “increasingly companies are finding that they can bring manufacturing production back to the United States and remain competitive,” Kazmierczak said. “As such, they seem to be expanding at their Texas facilities.”

      Tech exports account for a significant portion of the Austin economy.

      In 2012, the Austin metro area was the 35th largest export market in the United States, with merchandise shipments totaling $9 billion, up 4 percent from 2011, according to the International Trade Administration, an agency of the U.S. Department of Commerce that promotes U.S. exports.

      Austin ranks among the top major metro area exporters to South Korea ($3.4 billion), Taiwan ($1 billion), Mexico ($612 million), Malaysia ($497 million) and China ($397 million), according to the International Trade Administration. The city also ranks among major metro exporters of computer and electronic products ($5.9 billion); machinery, except electrical, ($2.2 billion); and electrical equipment, appliances and components ($188 million).

      Brian Kelsey, principal of Civic Analytics, an Austin-based economic development firm, said he wasn’t surprised Texas has overtaken California in tech exports.

      “Austin is widely recognized globally as a center of innovation and technology-based economic development,” Kelsey said. “But this report makes clear, perhaps for the first time for some people outside Texas, that technology is a key driver of growth in Dallas, Houston, San Antonio and other parts of the state. Each region has its own niche within the technology sector, and that diversity provides a strong foundation for the state economy.”

      Major tech employers like Round Rock-based Dell Inc. are a major reason for the Austin area’s – and by extension Texas’ – flush export numbers.

      “As Dell approaches its 30th anniversary this spring, our team members are proud to have been a part of the Texas tech growth story and are focused on continuing to make technology more affordable and accessible for people and organizations worldwide,” company spokesman David Frink said.

      The news of Texas’ jump ahead of California was warmly received by Austin-area lawmakers.

      “It’s no surprise that Texas is now leading the nation in technology exports,” said U.S. Rep. Michael McCaul, R-Austin. “The success of our technology innovators drives job growth and the success of our economy.”

      U.S. Rep. Lloyd Doggett, D-Austin, said the state’s technology sector “means more high-paying jobs that strengthen our community, while delivering more high-quality goods and services worldwide. Maintaining a highly educated workforce and a quality of life that attracts the best and brightest from around the world is essential to growing our economy.”

      Top States by Tech Exports

      Texas $45.1 billion

      California $44.8 billion

      Florida $14.5 billion

      Massachusetts $7.3 billion

      New York $6.6 billion

      Source: TechAmerica Foundation


  4. That’s what I love about Texas, you focus on commerce and the jobs follow. Jobs = quality of life.


    • @Troll: I went to Galveston this summer (which was awesome) and we decided to mix it up, going a different way back than they way we drove there (down through Mississippi and then across Louisiana to Texas, to get there). So, we went back through Houston heading towards Texarkana.

      It was like being in a different world. There were billboards all over the place advertising for employees. In what has become a perpetually down economy, companies in Houston spend cash on billboards trying to attract tech talent with talk of perks and good money.

      If I were going to move anywhere at this point, it would be Texas.


      • Kev – one of my wife’s accounting clients is a two-owner tech business with multistate operations and an outpost in England. It is Austin based. The minority owner runs the biz and lives in Austin. The majority owner lives in soCal. He repeatedly asks my wife how he can save on taxes. She explained to him that simply moving from CA to TX would save him $250K per year in personal income taxes. Really.


        • California is a lovely state. I haven’t been there often, but every time I’ve been there, I almost see why people put up with the oppressive taxes and regulation. Almost, but not quite. But it is, no doubt, worth a premium to live in San Diego. But $250k? Much prefer to live in Texas. Big state. Lots of coast. Lots of tech jobs. So much to love.


  5. @Troll: “All they have to do is keep their own citizens convinced it’s their patriotic duty to buy their debt, and they’ll never have to raise interest rates.”

    Man. I want to move to Japan. What I wouldn’t do to live in a country where people still did things because they considered it their patriotic duty. And would do such things without irony.


  6. @Brent: “The Fed owns 25% of our debt, and I don’t know how much is in the Social Security “lockbox.””

    I just looked in the Social Security lock box. There’s some paper clips and a rubber band and a sticky note that says: “I.O.U. One Bajillion Dollars”. Also, there’s a bright pink battery powered vibrator that was once sold under the brand name Mr. Pleasure. It no longer seems to work.


  7. The business of Houston is business!


  8. Look, I’m the first to admit most of Houston is not scenic and sticky is a charitable way to describe the weather. OTOH, there are jobs and opportunity that exist elsewhere only inside the beltway.

    You don’t need a college degree here, just a desire to work.

    And if you like billboards, we got ’em.


  9. “only inside the beltway.”

    this seat is taken.


  10. Another reason why Lincoln may be our best President.


  11. More Republican War on Women!!!111!1!1

    Wendy Davis now all for a ban on abortions after 20 weeks.

    Not a hit with the Kossacks.

    I expect her to endorse Ted Cruz for President by March.


  12. Ummm…


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