Not enough folk songs are written in praise of the rich since by definition ‘folk’ tends to exclude the Masters of the Universe. Thankfully the singing duo of Garfunkel and Oates (not that Garfunkel nor that Oates) have admirably stepped into the breach.

(Warning: Lyrics may not be work-safe.)

Hopefully they can snag a gig at the Republican National Convention.

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Vital Statistics:

Markets are lower this morning on disappointing economic data. Initial Jobless Claims came in at 365k, which was better than expectations, however last week was revised upward to 392k. Bonds and MBS are up slightly.

Chicago-based job placement firm released its monthly job cuts report this morning, which tracks announced job cuts. US-based employers announced a total of 40,559 job cuts in April, up 11% from last year.

The Institute for Supply Management released its April Non-Manufacturing Report this morning, which showed the pace of expansion has slowed. The index dropped to 53.5 from 56.  A number above 50 indicates expansion.

Today is the first Thursday of the month, which means retailers are reporting same store sales. Generally, they were disappointing, with The Gap, Costco, and Target leading the charge.

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Recently a newspaper comic strip took on a hot button political issue in a provocative stand in a week-long series which ignited controversy and outrage:

I kid. Zack Hill is a minor comic and this series of strips went practically unnoticed. The story line for the comic seems to be based on this real news story about a preschooler who had her lunch confiscated because it was not well-balanced enough for the person checking lunches, whoever that may have been. For a week or so this became a cause celebre with all sorts of people decrying rampant Nanny State-ism. The primary complaint seemed to be over-reach into the personal decisions of a parent to determine what is an adequate meal.

This week the more high-profile comics and/or editorial page stalwart Doonesbury also took on a topical issue with this strip summing up the tone:

(click image for a more legible version)

This topic is very familiar to ATiM readers. It also tackles the issue as one of government over-reach and excessive Nanny State-ism. Feel free to draw your own additional parallels.

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So I came across the article 6 reasons why you should not retire and, as someone that really looks forward to retiring,  it got me thinking.  Here are the 6 reasons:

1. There is no physical reason to retire.

2. Continued work can support healthy aging, including better physical and mental health.

3. Well-being and happiness are boosted when people are engaged in challenging and meaningful activities. Work is a major place to find such activities in our society.

4. Older people have rich experience and mentoring skills to help enrich the workplace experiences of younger colleagues.

5. Declining numbers of younger workers, courtesy of lower fertility rates, will raise the need to retain older employees in the workforce.

6. We need and like the money, and shorter retirements sharply cut the risk we will outlive our assets.

Well I read through these and…I still want to retire.  Quite badly.  Here is my response to these 6.

1)  So what…  Just because I am not forced into retirement by age or some other reason is not a good reason to keep working.  Just because I can?  I don’t think so. 
2)  If their idea of retirement is sitting out on the porch all day (with the exception of hitting the early bird specials), then yeah, I get it.  But I don’t plan to do that.  I plan to devote time to my hobbies, interests, family, friends and self…do the things I WANT to do, not NEED to do.  I think I am creative  enough to do things that will provide the same mental and physical benefits as what I do at work.
3)  Much the same as 2.  Work is A great place to find meaningful and challenging activities…it is by no means the ONLY place.
4)  Mentoring the younger…really?  Does anyone think that a 40 or 50 year old is going to be any less able to mentor a younger worker than a 70 or 80 year old?  There are plenty of people with the experience and maturity and age to be able to provide this great knowledge transfer.  Besides which, they say we are going to have a shortage of younger workers….meaning there should be a plethora of good mentors available.
5)  So this was the first that actually made me think…for a second.  First off, I will be off doing my own thing and, quite frankly, don’t care.  It will mean that salaries should rise for those workers and/or we will need to be that much more productive.  In any case, a higher salary could lure me back perhaps part time but I don’t think this in and of itself is a reason for me not to retire.
6)  With healthcare taken care of by Obama 🙂 what  is there to worry about if I have saved diligently during my working life?  Could I run out of money?  Certainly.  I can do that at any time during my life – there is always that risk.  I work hard to mitigate it and I will during retirement also. Quite frankly, that is a risk I am willing to accept.

So this article did not even begin to persuede me not to retire.  How about you? 

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New from Despair Inc.

Available here.

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Vital Statistics

Markets are rising this morning after Greece successfully completed its sovereign debt restructuring and the BLS released its jobs report. Over 95% of bondholders tendered after Greece said it would trigger a collective action clause compelling participation. This should pave the way for another 130 billion in aid. While the market clearly does not consider the crisis solved – the new bonds are trading at a 22% yield in the when-issued market – this should at least put Greece on the back burner for a while. The 10-year is down 6 ticks, while mortgages are flat.

The BLS released its February Employment Situation report at 8:30 this morning. Feb payrolls came in a bit higher than expected – 227k vs 210k expected. The unemployment rate was flat at 8.3% and in line with expectations. The labor force participation rate edged up slightly from its Jan lows. Earnings and hours were up a hair. Professional and Business services added the most jobs, along with health care. Government and construction were flat.

CoreLogic released its monthly Market Pulse yesterday (you need to register to get it, but it is free). They note the building economic strength and signs of improvement in the real estate market. They note that the recovery was initially driven by productivity-increasing capital investment, which allows companies to increase output without increasing hiring. Productivity growth is tapering off, which suggests that business has pretty much extracted all it can from existing employees and will need to start hiring to increase output.

The report notes that 25% of MSAs are now experiencing price increases. The ones that are lagging the most are the ones with clogged foreclosure pipelines – for the most part judicial foreclosure areas. Just more proof that politicians who want to slow foreclosures in the hopes that keeping supply off the market will stabilize prices are shooting themselves in the foot. Of course some politicians are incorrigible. To be fair, most of these measures are small-ball things that won’t change the dynamics of the housing market, but will allow the administration to say they are “doing something” about the housing crisis. For some reason, letting the market clear does not constitute “doing something.”

Do you look at Zillow to get an idea of what your house is worth? The Washington Post dissects the Z-estimate and its accuracy. Punch line: Neighborhoods with high turnover tend to have Z-estimates closer to actual sales prices than neighborhoods with lower turnover. While it can be a useful (and fun) number, take it with a grain of salt.

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Vital Statistics:

Markets are stronger this morning a strong economic report out of Germany and optimism that Greece’s debt swap will go through without major problems. Markets are continuing yesterday’s rally that was sparked by QEIII hopes. Initial Jobless Claims were 362k.

I was at the JP Morgan Securitized Products conference all day yesterday. Congressman David Schweikert (R-AZ) spoke regarding the regulatory environment. It is an election year, so expect more initiatives out of the administration to provide relief. A couple takeaways from his talk:

• LIberals agitating for wholesale principal reductions are just conducting election – year posturing. Everyone in Congress is getting phone calls from their state pension funds (who are large holders or MBS) begging them not to do it. Liberals acknowledge in private they would annihilate pension funds and would do great damage to the future housing finance system if they allowed large-scale principal forgiveness in GSE paper. Which makes FHFA Director Ed DeMarco a very convenient figure at this point and means he probably isn’t going anywhere.
• The MERS headache is generating preliminary discussion of a global settlement fund (a la asbestos or tobacco) to settle all of the claims coming from the financial crisis. Probably a low-probability event, but it is out there.

• Origination margins have spiked – originators are probably making 3-4 points on new loans (pre-expenses)
• QEIII will not do much for housing. The Fed is pushing on a string at this point. Fund managers are at record overweight levels on MBS, which means the Fed could spend a lot of money and not move mortgage rates (or affect house prices) all that much.
• The Fed thought it would be cute to institute new fail charges right ahead of QE, thus adding a short squeeze to the mix. Dealers are having a tough time getting paper to satisfy the appetite of the Fed and won’t short due to the fail charges. This is part of what is driving MBS spreads so tight.
• Ally is scaling back the correspondent business, while Wells and Citi are getting more aggressive. Chase overshot in downsizing correspondent lending and plans to increase it this year.
• House prices will fall another 3% this year and that should mark the bottom
• The government is probably going to experiment with a “first loss” tranche in conforming paper. Expect this in the next 3 – 6 months. This would accomplish two things – first it would start the process of handing off mortgage financing to private capital and it would give a market-based indication of what it should charge for its guarantee (its G-fee). The G-fee is set on the basis of politics and funding needs (for example, it was just raised 50 bp for 10 years to pay for the 2 month payroll tax extension). It would be subordinated paper that absorbs the first 5%, making FHA more of a re-insurer. Concern is demand for the first loss tranche.  Banks would have to reserve 100% for it, so hedge funds would have to buy it. The concern is that they don’t have the capacity.
• JPM estimates the shadow inventory to be about 5.5 million homes and net demand for housing is 1.25 million per year. Household formation has fallen off a cliff.
• Basel III requirements for MSRs are extremely harsh (MSR value over 10% Tier 1 becomes a capital deduction) Expect MSRs to remain very cheap. Banks are contemplating cutting servicing fees to 12 basis points.
• Fan and Fred will remain wards of the state. It would take $250 – 300 billion to capitalize them and they already owe Treasury $160 billion. That is basically the enterprise value of Exxon Mobil. You can’t raise that kind of capital in the private sector.
• Once the economy picks up steam, the fiscal problems will become front and center. We are looking at about half a trillion of contraction in early 2013, with the expiration of the Bush tax cuts ($250B), the sequestration due to the failure of the debt supercommittee ($100B) and the expiration of the payroll tax cut ($120B). Don’t be surprised if we fall into a recession early next year.
• Household balance sheets are improving, (DTI ratios are falling) but this has been 100% due to defaults. Debt service ratios are at multi-decade lows due to low interest rates.

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Mich pointed something out to me a couple days ago of which everyone should be aware.  It seems that, for reasons unknown (perhaps user error), occasionally a comment will end up in the trash rather than on the site as intended.  I noticed this morning, for example, that a novahockey comment from yesterday is in the trash.  There doesn’t seem to be any reason for it to have been trashed (in fact, I agree with it wholeheartedly!) so I am guessing it got put there inadvertently.  If so, nova, you may want to go into the trashcan and reinstate it.  Similarly, Mich discovered several posts in there earlier in the week, including one of her own, that didn’t belong there.

Anyway, I just wanted to make everyone aware, and  perhaps it is sensible for everyone to occasionally check the trashcan from the dashboard to make sure nothing is getting mistakenly trashed.

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Good evening.  A quick word from your NCAA group commissioner.

Twelve teams have thus far earned automatic bids by virtue of either winning their conference tournament or finishing first in conferences without tournaments.  Of those twelve, only three –St. Mary’s, Creighton and Murray State– have a decent shot at making it to the round of 16.   But a first-round upset or two may be lurking.

I’ll publish the Yahoo! tournament ATiM group link Sunday afternoon before the brackets are announced so you can check out the site as soon as we learn who’s playing who.  On Monday I’ll provide links to some of the bracketologists’ prognostications, in case you want to absorb their words of wisdom.

Bracket tinkering will cease around 10:30am EDT next Thursday at the start of the first  ’round of 64′ game.

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