Morning Report 6/25/12

Posted on June 25, 2012 by Brent Nyitray

Vital Statistics:

  Last Change Percent
S&P Futures  1310.5 -16.3 -1.23%
Eurostoxx Index 2135.2 -51.6 -2.36%
Oil (WTI) 78.44 -1.3 -1.65%
LIBOR 0.461 -0.001 -0.22%
US Dollar Index (DXY) 82.51 0.250 0.30%
10 Year Govt Bond Yield 1.62% -0.06%  
RPX Composite Real Estate Index 181.4 0.2  

A soggy tape to match a soggy morning here on Wall Street. There is no real news driving futures down, just a sense of malaise coming out of watching the European slow-motion train wreck. Euro sovereigns are slightly wider, while the US 10-year is up about a point.  MBS are higher as well. 

New Home Sales came in at 369k, well ahead of expectations of 347k. That said, we are still running at levels below the bottoms of recessions going back to the 1960s and well below the average 700k pace from 1963 to the bubble burst. 

 

We have a lot of economic data this week, with April Case-Schiller and Consumer Confidence coming out tomorrow, Durable Goods and pending home sales Wed, Initial jobless claims and final Q1 GDP numbers on Thurs, and Personal Income / Spending numbers on Fri.  We also have a European summit (something like #18) and will potentially hear the fate of Obamacare as well.

We are in earnings pre-announcement season, where companies who are going to miss their quarters disclose it to the market. Earnings season will officially begin in two weeks with Alcoa’s numbers.

Treasury yields will hit 1% by  year end, says CNBC.  Certainly that is a possibility if nothing is done about Taxmageddon or if Europe implodes.  Simon Johnson is worried about how US banks will handle a European implosion, and even introduces a new risk we can wring our hands over:  Dissolution Risk.

The Chicago Fed National Activity Index declined to -.45 in May from +.08 in April, which indicates slowing economic growth. Positive numbers indicate the economy is growing above trend, while negative numbers indicate the economy is growing below trend. The 3 month moving average, decreased to -.34 from -.13 in May.  If the 3 month moving average falls below -.7, it typically means a recession has already begun. 

$9.3 billion.  That is the amount of money people lose per year responding to those ubiquitous Nigerian email scams.  To put that number in perspective, that is roughly what GM made last year and accounts for 11% of Nigeria’s GDP.

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Obamacare down to the wire

Posted on June 24, 2012 by ScottC

As the Supreme Court’s ruling on the constitutionality of Obamacare approaches, the NYT today has an article about how many supporters of ACA were slow to realize the dangers of a constitutional challenge.

It was to be expected that Obama would express public confidence in the constitutionality of the law, and of course we all remember Nancy Pelosi’s now potentially embarrassing dismissal – “Are you serious?” – of a reporter who dared to question her on the constitutional legitimacy of the law she had just passed. At the time I simply assumed that this was natural political bluster. But it seems that a great many Dems did indeed view the idea that forcing people to purchase a private, commercial product simply because they happen to exist might be beyond the legitimate power of the government to be beyond the pale.

“It led to some people taking it too lightly,” said a Congressional lawyer who like others involved in drafting the law declined to be identified before the ruling. “It shouldn’t strike anybody as a close call,” the lawyer added, but “given where we are now, do I wish we had focused even more on this? I guess I would say yes.”

How could they have been so wrong about this? It is one thing to be able to craft, out of Supreme Court precedent and a manipulation of language, a legitimate-sounding argument supporting the constitutionality of a power that had never been exercised before in the history of the US. But it is quite another to imagine that no reasonable counter argument could possibly exist or be forwarded. I don’t know which way the Supremes will ultimately vote on this, but it is clear now that it has been a reasonably close call, whichever way it goes.

How could experienced lawyers and constitutional scholars have thought – actually still think – that the constitutionality of a heretofore unexercised power which relies on the counterintuitive (some might even say perverse) definition of the absence of activity as the presence of activity, was an obvious and certain constitutional lock? Is it an example of widespread wishful thinking? The results of an academic liberal echo chamber? A mass delusion? I really don’t get it.

Filed under: aca, Supreme Court | 93 Comments »

3 Movies

Posted on June 24, 2012 by markinaustin

Moonrise Kingdom.  Only slightly surreal comic instant mini-classic.  Two 12 year old first time actors are delightful as the central players.  Surrounded by Bill Murray and Frances McDormand, the girl’s parents, lawyers who call each other “counselor”; Ed Norton as the boy’s scoutmaster, Bruce Willis as the town cop, the Englishwoman Tilda Swinton as “social services”, and Harvey Keitel as the scouting commander, the two kids have a misadventure-and-romance-on-the-hike on a New England island in the mid 60s, while the adults search for them.  It is identifiably Wes Anderson, if you know his stuff, especially Rushmore.   A

Bernie.  Not to be confused with Weekend with Bernie.  Linklater presents the true story of a murder in Carthage, TX.  It is the funniest murder pseudo-documentary you will ever see, with Shirley McLaine as the town’s hated banker and eventual victim and Jack Black, in what could be an award winning role, as the town’s beloved assistant funeral director and murderer.  Matthew McConnaghey plays the D.A. and a retired lawyer I have known since law school, Brady Coleman, plays the defense attorney.  But not to be missed are the actual citizens of Carthage, TX, who  provide continuing commentary as the story unfolds.  As one of them explains, Carthage is behind the “Pine Curtain” in east TX – the part of TX  that is in the South.  A-

MIB3  I loved it.  It cannot be critically reviewed.  Tommy Lee Jones.  B  Must see for fans like me.

Filed under: movies | 1 Comment »

Sunday Funnies Open Thread

Posted on June 24, 2012 by lmsinca

 

 

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Faux health care report

Posted on June 21, 2012 by Mike

Just a couple of quick links from the NEJM about electronic medical records and the difficulty doctors are having with implementation. Perhaps NoVA can help out and give a his perspective as well.

Even as consumer IT — word-processing programs, search engines, social networks, e-mail systems, mobile phones and apps, music players, gaming platforms — has become deeply integrated into the fabric of modern life, physicians find themselves locked into pre–Internet-era electronic health records (EHRs) that aspire to provide complete and specialized environments for diverse tasks. The federal push for health IT, spearheaded by the Office of the National Coordinator for Health Information Technology (ONC), establishes an information backbone for accountable care, patient safety, and health care reform. But we now need to take the next step: fitting EHRs into a dynamic, state-of-the-art, rapidly evolving information infrastructure — rather than jamming all health care processes and workflows into constrained EHR operating environments.

Escaping the EHR Trap — The Future of Health IT

Debates about the productivity yield of IT are new to health care but not to other sectors of the economy. During the 1970s and 1980s, the computing capacity of the U.S. economy increased more than a hundredfold while the rate of productivity growth fell dramatically to less than half the rate of the preceding 25 years.1 The relationship between the rapid increase in IT use and the simultaneous slowdown in productivity became widely known as the “IT productivity paradox,” and economists debated whether investing billions of dollars in IT was worthwhile. The Nobel laureate economist Robert Solow observed in 1987 that “you can see the computer age everywhere but in the productivity statistics.”

That earlier IT debate and its resolution carry important messages for today’s health IT debate. Solow’s famous observation launched more than two decades of research on IT’s effect on productivity, and that research revealed numerous explanations for the paradox — as well as evidence that earlier conclusions about the relationship between IT and productivity were incorrect and that under the right conditions, IT could indeed yield significant productivity gains.

Unraveling the IT Productivity Paradox — Lessons for Health Care

Filed under: healthcare | 38 Comments »

Nuns on the Bus

Posted on June 21, 2012 by lmsinca

Yesterday jnc4p mentioned a slight difference between men and women that I found provocative.

It appears that when there is a financial crisis there is a gender divide on what the appropriate resolution is.

The male outlook as represented by Robert Rubin, Hank Paulson, Larry Summers, Alan Greenspan, Tim Geithner and Ben Bernanke seems to favor the make a deal approach as the way to resolve it with the government assisting/backstopping private entities. If a deal goes bad, make a bigger one until confidence is restored. I believe this is part and parcel of having the regulators captured by the mindset of the Wall Street banks they are supervising.

This is contrasted with the female outlook as represented by Sheila Blair and Brooksley Born which is more in line with follow the rules and let the chips fall where they may.

He went on to say how much respect he has for women like Sheila Bair and Brooksley Born.  His comment made me think of another woman who’s doing her part right now, not in the financial world, but in the political arena nonetheless, as a response to the spending cuts in the Ryan Budget, the increase in poverty since the beginning of this recession and in defiance of the Catholic Bishops’ rebuke.  Have you heard of Sister Simone?

(CBS News) JANESVILLE, Wis. – Fourteen Roman Catholic nuns on a nine-state bus tour are in Chicago Wednesday, after several stops in Wisconsin. Officially, they’re protesting cuts in federal programs for the poor. But the “Nuns on the Bus” tour is also an act of defiance against criticism from the Vatican.

Sister Simone Campbell is a Roman Catholic nun and the executive director of Network — a liberal social justice lobby in Washington.

“Nuns on the Bus” website

She’s been under siege, but she’s not fazed.

“Into every life a little rain must come,” she said.

Sister Simone is also a bit of a provocateur.

“Catholic sisters have always been out on the edge,” she said. “And quite frankly we have a long history of kind of annoying the central authority.”

The central authority they’ve recently annoyed is the Vatican itself. In April, sister Simone’s group and the Leadership Conference of Women Religious — representing 80 percent of the nation’s nuns — were attacked by the church hierarchy for focusing too much of their work on poverty and economic justice, while being silent on abortion and same-sex marriage.

Vatican reprimands U.S. nuns over “radical feminist themes”
U.S. Catholic nuns go about work after rebuke

Simone says she pleads guilty to part of that charge: “That I spend too much time working for people in poverty. I wear that as a badge of honor.”

The Vatican has appointed a bishop to correct what the church calls “serious doctrinal problems” in the way the nuns work.

They’ve been called radical feminists.

Simone’s response: “Oh my heavens. I actually have to laugh. We are strong women. We’re educated women. We ask questions. We engage in dialogue. That’s all we do. We stay faithful to the gospel and trying to live it.

From the AP via the Washington Post:

While the nuns say they aren’t opposing any specific Republican candidate, they plan stops at the offices of several closely tied to the budget process, including House Speaker John Boehner of Ohio, and Wisconsin Rep. Paul Ryan, the architect of the House-passed budget. Their first stop Monday was Rep. Steve King’s office in Ames. The tour will end in Washington on July 2.

Social activism at its finest.

Filed under: 2012, Poverty | Tagged: , , , | 5 Comments »

Tort Reform – for discussion

Posted on June 21, 2012 by markinaustin

see:

http://www.statesman.com/news/local/new-study-tort-reform-has-not-reduced-health-2402096.html

 

Disappointing, because TX took such a hard line in 2003 that if there were good results to show we would have them by now.

Filed under: tort reform | 9 Comments »

Morning Report 6/21/12

Posted on June 21, 2012 by Brent Nyitray

Vital Statistics:

Last Change Percent
S&P Futures 1351.2 0.5 0.04%
Eurostoxx Index 2220.9 13.5 0.61%
Oil (WTI) 80.75 -0.7 -0.86%
LIBOR 0.468 0.000 0.00%
US Dollar Index (DXY) 81.6 0.012 0.01%
10 Year Govt Bond Yield 1.65% -0.01%
RPX Composite Real Estate Index 180.7 0.2

Markets are flattish after a mixed Spanish bond auction and disappointing jobless claims numbers. Spain auctioned off 2.2 billion euros of 5 year debt, with a bid / cover ratio of 3:1, however it paid 6.07%.  Sovereign yields across Europe are lower, as are Treasuries with the 10 year down a basis point. MBS are up slightly.

Yesterday, the Fed maintained low interest rates and committed to extend Operation Twist through the end of the year. Notably, the Fed took down its projections for GDP growth and bumped up its estimates for unemployment. Here is a “marked up” version of the statement, showing the changes from the April release. Note that the Fed took down its numbers in spite of a massive rally in the 10-year and mortgages courtesy of Europe.

Initial Jobless Claims came int at 387k, down from a revised 389k the prior week and more or less in line with expectations. Philly Fed was a disappointment as the Business Outlook Survey indicated weaker business conditions in its area.  Rounding out the day’s economic data, May existing home sales came in at a 4.55 million annual rate, a drop of 1.5% MOM.

The FHFA House Price index was up .8% in April, while March was revised downward from + 1.8% to +1.6%. The FHFA House Price Index only considers Fannie and Freddie loans, so it acts as somewhat of a “center tendency” of the market, ignoring the high price and low price extremes. It certainly appears like the trend has shifted.  See chart below:

Software Provider Ellie Mae released its May Origination Insight Report which provides data on mortgages originated though its Encompass system. The typical closed loan had a FICO of 744, a LTV of 81, and a DTI score of 24/35.  A typical denied application had a FICO of 702, a LTV of 88, and a DTI of 28/43. The mix of refis vs purchase dropped to 54/46 from 56/44 in April and 61/39 in March, which is surprising given the drop in mortgage rates over the past 3 months. Closing times continue to increase, with the time to close up to 46 days from 42 in March. Overall, it shows a tight mortgage market with great rates for those who qualify.

On opposite ends of the economic spectrum, Octomom is getting foreclosed upon, while Larry Ellison is buying a Hawaiian Island.

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Bits & Pieces (Wednesday Night Open Mic)

Posted on June 20, 2012 by Kevin S. Willis

Yeah, I know I’m barely around. Sorry! Work, and general efforts at self-improvement, have necessitated some tough decisions about how I use my free time.

Not that I’ve ever watched pornography, but if I ever had, I certainly wouldn’t now. Turns out it can be really, really bad for you. And easy access to infinite varieties of hardcore adult materials via high speed internet is giving young men erectile dysfunction. When they’re in their late teens and early 20s! Eeek.

Technology. It always has a dark side.

Free Cookies are Never Free

Free Cookies are Never Truly Free!


In a similar vein, I found myself engaged enough by his writing to read most of Athol Kay’s Married Man Sex Life blog (can’t imagine what interested me). There are 3 years of blog posts, so it represented a lot of reading.

He recommends the Captain and First Officer model for marriage (from Star Trek), with the husband being the Captain and the wife being the First Officer. Sounds good to me, but I can’t convince my wife.

He also recommends that couples have sex every night. I can’t convince the wife on that point, either.

There Is Nothing Safe in This Room . . .

The video for Billy Idol’s White Wedding, only with much more literal lyrics. It made me laugh.

The video for Tears for Fears “Head Over Heels” is really awesome, too.

Apparently, doing literal videos is a thing. Lots of different people, at varying qualities, have posted their own literal videos on YouTube. Hmmm.

…

Filed under: Bits and Pieces | Tagged: , , | 11 Comments »

Morning Report 6/20/12

Posted on June 20, 2012 by Brent Nyitray

Vital Statistics:

  Last Change Percent
S&P Futures  1352.0 1.4 0.10%
Eurostoxx Index 2198.5 0.5 0.02%
Oil (WTI) 84.09 0.1 0.07%
LIBOR 0.468 0.000 -0.05%
US Dollar Index (DXY) 81.24 -0.142 -0.17%
10 Year Govt Bond Yield 1.64% 0.02%  
RPX Composite Real Estate Index 180.5 0.2  

Markets are slightly firmer as Antonis Samaras looks to be sworn in as premier of the new coalition government in Greece. This is taking pressure off of Italian and Spanish borrowing rates as well. As we approach the end of the quarter, we begin preannouncement season, where companies that are going to miss their quarterly estimates fess up. Today’s victim:  Proctor and Gamble which is lowering its revenue and profit outlook on European weakness.  The earnings season officially kicks off in a couple of weeks with Alcoa announcing on July 9.

Other than Greece, markets will focus on the FOMC announcement later today, particularly with respect to Operation Twist, which is scheduled to end soon. There has been speculation that the Fed would continue Operation Twist, perhaps by buying mortgage backed securities directly instead of the 10-year. Don’t forget we have gotten 73 basis points worth of stimulation in the last 3 months courtesy of Europe, while mortgage rates have not participated fully.  That said, since the 10-year bottomed at 1.45% in early June, the underperformance has been correcting. See chart below:

 

 

The Fed is conducting Operation Twist because it wants mortgage rates down, not because it thinks the 10-year bond is too expensive. So the Fed will undoubtedly be focusing on the spread between mortgage rates and Treasuries as well as the overall level of interest rates. 

In its June Economic Outlook, Freddie Mac notes the strength in the rental market as vacancy rates fall. This is driving construction activity and Freddie estimates that multi-fam construction will add 200,000 units this year, the most since 2008. A drop in the homeownership rate is driving this demand as well as the high downpayments required for new homebuyers. Between the historically low housing starts of the last ten years (never mind population growth), the low household formation (as new grads move back in with Mom and Dad), and historic affordability we are creating pent up demand for housing that will be released into the market once the economy picks up some steam. 

 

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