Morning Report 7/10/12

Posted on July 10, 2012 by Brent Nyitray

Vital Statistics:

  Last Change Percent
S&P Futures  1351.5 2.3 0.17%
Eurostoxx Index 2253.9 26.0 1.17%
Oil (WTI) 85.39 -0.6 -0.70%
LIBOR 0.458 0.000 0.00%
US Dollar Index (DXY) 83.18 0.023 0.03%
10 Year Govt Bond Yield 1.52% 0.01%  
RPX Composite Real Estate Index 183.6 0.3  

Markets are slightly higher this morning on moves by European Finance Minsters to lend to Spanish banks and a positive surprise in UK factory output.  Alcoa reported better than expected sales and profits last night. Bonds are down a couple ticks. 

The National Federation of Independent Businesses reported a 3 point drop in their Small Business Optimism Index in June. The only bright spot in the report is that small businesses expect credit conditions to continue to improve, but all other components were down. On the employment front, 9% of firms added 2.6 workers, while 12% cut employment by 2.8 workers.  The rest were unchd.  Punch line:  The economy slowed, but so far it doesn’t appear that we are headed into a recession.  Political uncertainty remains at historic highs. Note the SC decision on obamacare was not reflected in this report. 

Fannie Mae’s National Housing Survey reports that consumer optimism in the housing sector continues to improve, even in the face of weakness in other areas. But is the optimism being artificially driven by tight inventories which is primarily due to negative equity?

The Consumer Financial Protection Bureau has put out a 2000 page phonebook on how to address high cost mortgages.  It plans to ban balloon payments and prepayment penalties. Of course, prepayment penalties merely make the cost of the embedded prepayment option explicit, as opposed to being hidden in the interest rate. This would be the equivalent of the SEC decreeing that all mutual funds must be no-load. They also cut the size of permissible late payments and an assortment of other things. By ending balloon payments, the CFPB is effectively ending the hard money mortgage market, leaving those that can’t qualify for a normal mortgage unable to borrow. 

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Morning Report 7/9/12

Posted on July 9, 2012 by Brent Nyitray

Vital Statistics:

  Last Change Percent
S&P Futures  1347.7 -4.1 -0.30%
Eurostoxx Index 2232.2 -3.3 -0.15%
Oil (WTI) 84.93 0.5 0.57%
LIBOR 0.458 0.000 0.00%
US Dollar Index (DXY) 83.21 -0.169 -0.20%
10 Year Govt Bond Yield 1.52% -0.03%  
RPX Composite Real Estate Index 183.3 0.5  

Markets are down slightly as we kick off earnings season and Spanish yields top 7%. European finance ministers will meet in Brussels this morning, although no one expects much out of it. Bonds are up about half a point, while MBS are up a quarter. 

Earnings season starts tonight with Alcoa’s report. While the Street is somewhat pessimistic about Q2 numbers, I would point out that we coasted through the pre-announcement season with few misses.  The Street is estimating the S&P 500 will earn $25.23 this quarter, vs $24.06 last quarter and $25.16 a year ago. So for all intents and purposes the Street is looking at flat YOY earnings.

A couple positive data points with the markets:  we have couple big mergers this morning as well as some IPO filings. 

In an attempt to ease the credit crunch, the Federal Government is looking at how to address the problem of overlays – which is the layering of more stringent credit standards than the agencies require on Fannie, Freddie, and FHA loans. The government is keeping quiet about what potential remedies they are examining. Originators would love to see some sort of safe-harbor provision for lending which will lower or eliminate putback risk, which is the risk that the government will force an originator to buy back a loan after the fact if becomes non-performing. 

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Bites and Pieces: Chawanmushi (or what to do when you have a cook book with ridiculously complicated recipes)

Posted on July 7, 2012 by Fairlington Blade

We have a few cookbooks written by chefs. We bought The Figs Table, by Todd English, with some of our wedding money. I haven’t made much from it, though the olive oil & basil emulsion is a lovely addition to many recipes. Pesto without pine nuts. Some years later, a friend of ours gave us a cookbook on ceviche by Guillermo Pernot, the chef of Passión in Philadelphia. Last Christmas, my parents gave us the Bluestem cookbook, by the chef/owners (Colby and Megan Garrelts) of my favorite restaurant in Kansas City. The level of cooking there matches anything I’ve had in NYC/DC/SF.

A frequent problem that arises for me with recipes in such books is a combination of difficult to find ingredients and complicated recipes. Something along the lines of making two cups of basil emulsion of which you will use two tablespoons. That’s great for a menu for which you’ll serve 100 plates. Not so good if you’re left with 1 3/4 cups of basil emulsion. I tend to go out to restaurants where they make something I don’t have the time or skill to make and these cookbooks drive that philosophy home. Tom Sietsema’s recent review of high end steak houses drives that point home. It doesn’t take great skill to cook a great steak. Cassoulet is something else entirely.

Fortunately, there are the occasional gems that you can make at home without tying up your kitchen for a day. Tonight’s offering is one such recipe. It’s a light custard based on dashi stock. Dashi is the basis for miso soup. You can find powdered dashi stock at Asian markets, though the real thing is pretty easy to make. What caught my eye was that I had the ingredients on hand and it looked promising.

Chanwanmusi, hon shimeji, scallion dashi

Heat an oven to 275 degrees.

Dashi stock

1 ounce kombu (dried kelp)

4 cups water

~18 grams bonito flaks

Rinse the kombu under water and cut a few slits into it to release the flavor. Add to the water and bring to a boil. Turn off the heat, remove the kombu, and add the bonito folakes. Let steep for a minute or two until the bonito sinks to the bottom. Strain the stock and set aside. [Note: you can find freeze dried dashi stock and skip this.]

Chawanmushi broth

Combine 2 ½ cups of the dashi with 1 tablespoon of soy sauce, 1 tablespoon of mirin, ½ tsp. of rice wine vinegar, and 3 large eggs. Mix at low speed in a food processor or whisk together. Divide evenly among 4 small bowls and cover tightly with plastic wrap. Place the bowls in a casserole dish with one inch of water. [Note: I was a bit nervous about this, but the plastic won’t burn if you’ve plenty of water.] Put the casserole dish with the bowls of chawanmushi in the oven for about 40 minutes. The custard should be just set—a little jiggly in the middle, but firm overall. This is a light custard, so don’t sweat it.

Meanwhile, slice up a few mushrooms and sauté in sesame oil. Well, or butter, because let’s face it. Butter and mushrooms are a transcendent combination. If there’s anything else you want to use as a garnish, go for it. Combine the remaining dashi with soy sauce, rice wine vinegar, and mirin (about 1 tablespoon of each).

Putting it all together

Take the custards out of the oven. Pour a couple of tablespoons of the spiked dashi over the top, top with the mushrooms (and whatever else you want) and serve. This is a five star dish without that much effort. My guess is that you could get away with using chicken stock in place of the dashi and still have a stunner of a dish.

BB

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Morning Report 7/6/12

Posted on July 6, 2012 by Brent Nyitray

Vital Statistics:

  Last Change Percent
S&P Futures  1351.0 -10.4 -0.76%
Eurostoxx Index 2261.3 -23.6 -1.03%
Oil (WTI) 84.46 -2.8 -3.16%
LIBOR 0.458 -0.002 -0.44%
US Dollar Index (DXY) 82.97 0.154 0.19%
10 Year Govt Bond Yield 1.55% -0.04%  
RPX Composite Real Estate Index 182.8 0.3  

 

Jobs Friday. Basically a crummy report – Nonfarm payrolls increased by 80k, less than economists forecast. The unemployment rate remained at 8.2% and the labor force participation rate remained at a depressed 63.8%.  The only bright spot was that weekly hours ticked up, as did hourly earnings. But otherwise, it was a disappointing report.

S&P futures are selling off on the number, and bonds are rallying. MBS are flat. Markets should be dull going into the weekend as a lot of players took the week off. Alcoa kicks off the earnings season on Monday. 

In the “you can’t make this up” category, San Bernardino County is considering using eminent domain to seize underwater mortgages from banks. The WSJ explains:  

“For a home with an existing $300,000 mortgage that now has a market value of $150,000, Mortgage Resolution Partners might argue the loan is worth only $120,000. If a judge agreed, the program’s private financiers would fund the city’s seizure of the loan, paying the current loan investors that reduced amount. Then, they could offer to help the homeowner refinance into a new $145,000 30-year mortgage backed by the Federal Housing Administration, which has a program allowing borrowers to have as little as 2.25% in equity”

The program would only be available for current loans. So banks (and pension funds) would take the hit on the mortgage, since current mortgages are probably carried on their books at par. The only way the partner (Mortgage Resolution Partners) can make any money is if they purchase the mortgage at a discount to the value of the underlying real estate.  So the bank would lose the difference between the mortgage amount and the discounted bid to the underlying real estate ($300,000 – $120,000 = a $180,000 loss).  The VC fund and the city would make the difference between the discounted bid on the underlying real estate and the new mortgage amount ($145,000 – $120,000 = a $25,000 gain).  Supposedly the VC fund and the city would split the profits. 

Needless to say, the Left is cheering this on. It is theft, if you ask me.

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Desolation Canyon

Posted on July 5, 2012 by lmsinca

Final pictures of Desolation Canyon, UT and CO River.  It’s pretty quiet tonight so I figured I might as well put up the final group of pictures from Utah.  She only needed 3 weeks to finish up her research and so ended up on another trip down the Colorado River through Cataract Canyon once her three weeks were finished.  She spent a night between trips in Green River and then hopped on a small plane for a quick flight to catch up to a group that was already poised to put in the water.

This is her rowing the raft loaded for three weeks.  They all took turns and got to her research area in 1 1/2 days instead of the 3 it normally takes.

One of her buddies below.

Colorado River…………….view from the air.  Haze is smoke from various fires.

Exploring a canyon close to camp below China Doll Peak.

Hiking down from the peak.

Working their way to Lake Powell.

View from the peak.

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Bits & Pieces (Thursday Afternoon Open Mic)

Posted on July 5, 2012 by Kevin S. Willis

A message from George W. Bush and Bill Clinton:

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Morning Report 7/5/12

Posted on July 5, 2012 by Brent Nyitray

Vital Statistics:

  Last Change Percent
S&P Futures  1369.9 1.9 0.14%
Eurostoxx Index 2316.5 4.0 0.17%
Oil (WTI) 87.89 0.2 0.26%
LIBOR 0.46 0.000 0.00%
US Dollar Index (DXY) 82.66 0.877 1.07%
10 Year Govt Bond Yield 1.62% -0.01%  
RPX Composite Real Estate Index 182.8 0.3  

Markets are up slightly on moves by the ECB and some encouraging economic news on the jobs front. Overnight, the ECB lowered interest rates to 75 basis points and cut the deposit rate to zero. Bonds and MBS are up slighlty.

The ADP employment change report reported 176k new jobs were added in June, which is much higher than the 100k estimate economists were forecasting. The official non-farm payroll data will be released tomorrow. Initial Jobless claims dropped last week, falling from 388k to 374k. 

Today is the first Thursday of the month, and that means retailers are reporting same store sales.  So far, most retailers are missing estimates.

Finally, Heard on the Street discusses how the housing market is finally a bright spot in the economy, though its size relative to GDP has shrunk tremendously. 

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THE PAMPHLETEER

Posted on July 4, 2012 by markinaustin

Washington maintained the spirits of the rag-tag Continental Army through his own qualities of leadership and courage and with the help of the pamphleteer.  Paine’s The Crisis and Common Sense were disseminated among the junior officers and ordered read to the men.  It is said these were the most effective propaganda materials ever seen until then, perhaps because they rang so true.  From The Crisis:

THESE are the times that try men’s souls. The summer soldier and the sunshine patriot will, in this crisis, shrink from the service of their country; but he that stands by it now, deserves the love and thanks of man and woman. Tyranny, like hell, is not easily conquered; yet we have this consolation with us, that the harder the conflict, the more glorious the triumph. What we obtain too cheap, we esteem too lightly: it is dearness only that gives every thing its value. Heaven knows how to put a proper price upon its goods; and it would be strange indeed if so celestial an article as FREEDOM should not be highly rated. Britain, with an army to enforce her tyranny, has declared that she has a right (not only to TAX) but “to BIND us in ALL CASES WHATSOEVER” and if being bound in that manner, is not slavery, then is there not such a thing as slavery upon earth. Even the expression is impious; for so unlimited a power can belong only to God.

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My Top Five Founding Fathers

Posted on July 4, 2012 by ScottC

This was going to be a Top Ten list, but I ran out of time.  Have to get going to the town get-together for food, music, and fireworks.

5. Benjamin Franklin – Delegate to the Second Continental Congress; helped form what was to become the Declaration of Independence; as a diplomat to France during the war he played the crucial role in securing French military support against the British, without which the outcome of the Revolution would have been very different.  As an emissary to Britain, he worked hard to keep the colonies within the Empire, but once the Revolution started he never looked back – “We must all hang together, or we will surely hang separately.”

4. Thomas Jefferson – Incredibly smart; author of one of the finest documents every produced, the Declaration of Independence; as a diplomat to France was crucial in maintaining foreign relations with the new nation’s primary ally; third President.  Jefferson was a jumble of contradictions, both politically and personally, and I have many reservations about him, but he undeniably played a crucial role in the founding of the nation.

3. John Adams – Member of both Continental Congresses; was central to the choice of George Washington as Commander in Chief of the Continental Army;  instrumental in the drafting and adoption of the Declaration of Independence; first Vice-President and second President of the US.  One of my favorites.

2.  Alexander Hamilton – The epitome of the self-made man and a model for achieving what has become the American dream; he actively fought in the war; author of the Federalist Papers; as the nation’s first Treasury Secretary and trusted confidant of Washington, he almost single-handedly laid the groundwork for the US’s rise as an economic power.  Easily the most under-appreciated Founding Father.

1.  George Washington – Architect of the defeat of the greatest military power in the world by a rag-tag group of untrained colonials; resisted the pull of establishing monarchical powers for himself;  precedent-setter for Presidential traditions including term limits.  Quite simply the single most important person in the history of these United States.

Honorable mention:

James Madison – Co-author with Hamilton of the Federalist Papers and the writer of most of the Constitution.

Thomas Paine – Author of Common Sense in 1776, a powerful treatise on the need for independence from Britain.

Samuel Adams – Brewer and patriot.  What more need be said?

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How we got three branches -1775

Posted on July 4, 2012 by markinaustin

This is largely due to little John Adams, according to his brethren including Jefferson.  Adams wrote this as part of his advice in 1775:

 

1. A single assembly is liable to all the vices, follies, and frailties of an individual; subject to fits of humor, starts of passion, flights of enthusiasm, partialities, or prejudice, and consequently productive of hasty results and absurd judgments. And all these errors ought to be corrected and defects supplied by some controlling power.

2. A single assembly is apt to be avaricious, and in time will not scruple to exempt itself from burdens, which it will lay, without compunction, on its constituents.

3. A single assembly is apt to grow ambitious, and after a time will not hesitate to vote itself perpetual. This was one fault of the Long Parliament; but more remarkably of Holland, whose assembly first voted themselves from annual to septennial, then for life, and after a course of years, that all vacancies happening by death or otherwise, should be filled by themselves, without any application to constituents at all.

4. A representative assembly, although extremely well qualified, and absolutely necessary, as a branch of the legislative, is unfit to exercise the executive power, for want of two essential properties, secrecy and despatch.

5. A representative assembly is still less qualified for the judicial power, because it is too numerous, too slow, and too little skilled in the laws.

***************

This reasoning was adopted in VA by Madison, in NY by Jay and Hamilton, in MA (of course) and in NC, before or during the Revolution.  It was rejected, for a time, by the new nation, but this advice ultimately seeded the Constitution that replaced the AoC.

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