The Big Picture |
- Lone Star Swingin’?
- 10 Tuesday PM Reads
- QOTD: “Thank God for BofA CEO Brian Moynihan”
- Angelo Mozilo: Serious Disregard for Process, Compliance with Guidelines
- 80 Years of Financial (De) Regulation in the U.S.
- Case-Shiller Home Price Rise for 6th Month
- Consumer Confidence best since Feb ’08.
- “Deal” on Greece announced – will it work?
- Durable Goods surprise to upside
- 10 Tuesday AM Reads
- Whalen: Deutsche Bank’s Absurd Claims About Banks
- Greece again buys time/Shanghai index/Fed’s Fisher
| Posted: 27 Nov 2012 06:00 PM PST @TBPInvictus As I was beginning to follow-up my recent post about our changing national demographics, I almost immediately came upon a state-run website that was rich with data about that particular state. As it happens, it was Texas. So, without further ado, a very quick look at the Lone Star state and its population projections. You can read lots of stories on the internet about how Texas may be headed toward “swing state” status. Here’s the Houston Chronicle:
None of the stories I reviewed provided hard data (i.e. what we here at The Big Picture are all about). Having found the Texas State Data Center, it took only a matter of minutes to whip up election year demographics for the state. That table is below: (Click through for larger)
(Note: The “Total Pop” column is the sum of the other columns displayed and represents the age criteria selected (18-85, which includes those over 85); it is not the total population of the state.) Here’s the same data looked at a bit differently:
Of course, it is impossible to know how many voting-age residents of any state will register to vote and, beyond that, actually exercise their right to do so (I’m open to suggestions as to how I should model that as I continue to collect data). That said, the table above is remarkable for the change it portends. Look at the explosion of the Hispanic population, the growth of the Black population, and the virtual stagnancy of the Anglo population. It seems conceivable to me that, under the right set of circumstances, Texas could be “in play” by the year 2020. Unless, of course, it secedes, in which case its 38 electoral votes will be lost to Republicans in 2016. I’ll continue to update periodically as I make my way around the country. Special thanks to Dr. Glenn Lawyer at the Max-Planck-Institut für Informatik for the ongoing discussion about demographics and the offer of assistance and collaboration on some future posts. Most appreciated, and happy to have you aboard. Additional, fascinating reading: Bruce Bartlett, Revenge of the Reality-Based Community Robert Shrum, GOP Faces Years in the Wilderness |
| Posted: 27 Nov 2012 01:30 PM PST My afternoon train reads:
What are you reading?
Hot and bothered |
| QOTD: “Thank God for BofA CEO Brian Moynihan” Posted: 27 Nov 2012 01:00 PM PST Matt Taibbi has a field day with the deposition of Bank of America CEO Brian Moynihan in the litigation MBIA v. Bank of America, Countrywide, and a Buttload of Other Shameless Mortgage Fraudsters. Here’s the money shot:
Taibbi does not hold back, invoking metaphors from Captain Kirk to Peter Sellers.
Here’s some of the questioning from MBIA’s lawyer:
You don’t need to read all 223 pages — Taibbi does an admirable job pulling out the choice bits.
Source:
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| Angelo Mozilo: Serious Disregard for Process, Compliance with Guidelines Posted: 27 Nov 2012 12:00 PM PST Angelo Mozilo: “The loans were originated through our channels with serious disregard for process, compliance with guidelines…we delivered loans with deficient documentation, did not respond timely in correcting those deficiencies” Hat tip Manal Mehta of Sunesis Capital |
| 80 Years of Financial (De) Regulation in the U.S. Posted: 27 Nov 2012 11:30 AM PST |
| Case-Shiller Home Price Rise for 6th Month Posted: 27 Nov 2012 09:00 AM PST Click to enlarge
Home prices, according to the S&P/Case Shiller report, rose 0.4% sequentially (seasonally adjusted) in September and 3% year over year. The index is now up for an 6th straight month, putting it at the highest level since Oct ’10 while still remaining 31% below its ’06 highs. Jonathan Miller notes the declining momentum in Home sales: Falling mortgage rates are not creating housing sales. He blames credit remaining very tight. On a year over year basis, 18 of the 20 cities surveyed saw gains. Only Chicago and New York saw declines. Miller observes that year-over-year comparisons in various national reports are “skewed higher from an anemic 2011.” Housing Pulse confirms this, observing further that 1st-time home buyers are not seeing any gains from the so-called recovery. The bottom line is that housing has stabilized — but done so in a rate driven artificial manner — at least for now.
More Case Shiller Charts after the jump
Source: |
| Consumer Confidence best since Feb ’08. Posted: 27 Nov 2012 08:15 AM PST The Conference Board Consumer Confidence # for Nov was 73.7, about in line with expectations and up modestly from the 73.1 print in Oct. It’s the best since Feb ’08 and the improvement is most seen in the answers to the labor questions where those that said jobs were Plentiful rose to 11.2, the most since Sept ’08. Those that said jobs were Hard To Get were unchanged but held at the lowest since April. Also of encouragement, those that plan to buy a home within 6 mo’s rose 1.5 pts to 6.9. the highest on record. Those that plan to buy a car/truck fell .7 pts. Also of note, those that plan to buy a home appliance such as a fridge, tv, or air conditioner rose to a new high. One year inflation expectations ticked lower to 5.6% from 5.8%, a 4 month low, consistent with the lowest gasoline prices since July. Bottom line, November confidence, depending on where you live and who you voted for, captured a lot of mixed emotions and still held at multi year highs. What this means for actual holiday spending remains to be seen but the mood for now is ok. I say just ‘ok’ because confidence is still below the 10 year average of 77.0 and the 20 year average of 93.1.
Richmond mfr’g bucks trend
Source: Barrons |
| “Deal” on Greece announced – will it work? Posted: 27 Nov 2012 07:30 AM PST The Japanese DPJ announced their economic policies ahead of the forthcoming general elections. Essentially, “trust us, we’ll fix our economic problems” routine. No concrete measures. They plan to weaken the Yen – how, Mr Noda; The Shanghai Composite declined by -1.3%, closing at 1991.17 today, the lowest since January 2009. Market confidence in the governments ability to turn around the country’s economy is waning. The new regime, which takes over towards the end of the 1st Q of next year, will have a major task on its hand. Stimulus measures, likely targeted, are a distinct possibility starting in Q2, but history would suggest that such measures will prove questionable; The Chinese National Bureau of Statistics reports that Chinese October industrial profits rose by +20.5% Y/Y, having risen by +7.8% Y/Y in September (which was the 1st rise in 6 months). The data does not seem to have been appreciated by the markets, however, given its lows today !!!!; The Indian governments plan to allow majority ownership of multi-brand retail operations by foreign companies is being opposed vigorously by the opposition. The policy will remain the focus of Parliament, with questions as to whether other reform proposals can be passed until this proposal is sorted out. Tough going for the current coalition, but one has to presume that they will push it through – if not, well………; The EZ/IMF reached a “deal” on Greece late last night. They have reduced interest rates on bail out funds, suspended interest payments, extended maturities on the loans and the ECB has given up its “profits” on Greek bonds owned by it. The EZ/IMF has also suggested a debt buy back which they emphasized. Stupidly a debt buy back has been leaked for some time, which has resulted in a near doubling in the price of Greek bonds. I must say, I had thought that Greek bonds were a risky investment at current levels. However, by emphasizing the need for a successful buy back, in particular by Mrs Lagarde of the IMF – indeed she has made it a condition for the IMF participating in a future bail out for Greece – the EZ/IMF has strengthened the position of debt holders – a completely stupid plan, as it will now cost more to buy back the bonds. The plan is to buy bonds at around 35 cents on the Euro – the EZ/IMF statement reported that the buy back would be concluded at a price no higher than that on 23rd November. The EZ is to disperse funds on 13th December, once the debt buy back (full details are not available) has been completed. Will the buy back be successful? I suppose that Greek banks will be lent on. However, do other bond holders really want to own an asset which clearly is worth much, much less? Details of the deal are as follows. Greece will get E44bn, with the 1st installment of E34.4bn to be released on 13th December, though the rest of the funds will be disbursed in 3 subsequent stages in Q1 2013, as Greece meets certain conditions. The IMF’s element of the bail out funds will only be paid over once the debt buy back is successfully completed – once again strengthening the position of bond holders. Interest rates on official loans will be reduced to just 50bps over Euribor, from the current 150bps, once Greece achieves a primary surplus of +4.5% (expected in 2016, from 2014 previously), with maturities of existing loans extended to 30 years rather than 15. The Greeks will be given a 10 year interest rate deferral. Some E11bn of “profits” derived from purchases of bonds by the ECB will be handed back to Greece. The plan is to reduce Greek debt by E40bn and cutting it to 124% of GDP by 2020 and “significantly below” 110% in 2022. Privatisation proceeds (oh yeah) will be paid into a segregated account to cover debt financing, as will 30% of the excess primary surplus. I can go on and on, but THIS PLAN IS NOT CREDIBLE. The forecasts are, I would argue, total fiction. Indeed, the Troika report (also prepared with rose tinted spectacles) suggests that Greek debt to GDP would amount to 126.6% in 2020 and 115% in 2022. The real intent of this “cunning plan” is to kick this particularly smelly can down the road an until Mrs Merkel’s general elections next September. Indeed, the EZ has advised that “other measures” may well have to be taken. Interestingly, Mr Schaeuble stated that Greek debt will have to be written down in 2016 – why not now, as everyone knows its not going to be repaid, Mr Schaeuble – Oops, sorry, nearly forgot about the German general elections in September next year. However, I’m far from convinced as to whether these measures will result in stability until after the German elections. The deal has to be approved by the Parliaments of a number of EZ countries including Germany, Finland and Holland. German authorities report that they expect Parliamentary approval on 29th November and my clued up German friends report that the Greens and the SPD will support the plan, which will counter some opposition from members of the CDU/CSU. The Euro, which rose to just over US$1.30 on the news has declined – currently US$1.2952 as the market digested the grand plan. Tells you that everything is not kosher. Unfortunately, Greece will come back, again and again and…..; There are rumours that Spain will ask for a bail out. Its only a matter of time. With the elections in Catalonia out of the way, Spain would be crazy not to ask for aid as soon as possible – however, with Mr (ditherer) Rajoy in charge……..The bottom line is that the market believes that Rajoy will ask for a bail out – 10 year bond yields are 9 bps lower at 5.55%; French November consumer confidence came in at 84, better than the 83 expected and the same as October; The EU is to follow the US and delay implementing the Basel 111 rules, by about 6 months – I believe it will be longer. The US has postponed implementing the rules indefinitely – cant see EU implementation ahead of the US;
Mr Carney, the head of the Bank of Canada has been appointed as the next Governor of the BoE. A total surprise (the bookies had priced him at 66 to1 ), Mr Carney’s appointment has been welcomed by all parties. Mr Carney is believed to be less keen on QE and has proposed that banks increase their capital in the past – he is concerned that “too big to fail” remains an issue. He worked at GS and, as a result, understands banks and the markets – positive. Well lets see what happens, but initial reactions to his appointment are positive; UK Q3 GDP was confirmed at +1.0% Q/Q, or -0.1% Y/Y. GDP for Q4 will be materially lower. PIMCO states that the UK will lose its AAA rating – likely; US October durable gods orders came in flat, much better than the -0.7% expected. Ex defence and transportation, a much better data point, durable goods orders came in at +1.7% M/M, much better than the -0.5% expected and the revised -0.4% in September; US 20 city September home prices (Case-Schiller) increased by +0.39% M/M, in line with expectations of +0.4% and a revised +0.42% in August. Y/Y, prices increased by +3.0%, in line with expectations. US home builders have had a great run – time to take profits, me thinks. However, I will retain my US/UK focused building material stocks;
The OECD cut its 2012/3 forecasts and sees a material risk of a recession in developed countries. They advise: Global 2013 GDP has been reduced to +3.4%, from +4.2% in May, with the US at 2.0%, EZ at +1.4% (optimistic), China at +8.5% (optimistic) and Japan at +0.7% (optimistic, as well); Japan needs a credible medium term strategy to cut its budget deficit; They warn that excessive fiscal consolidation should be avoided and urge Europe to introduce monetary easing; Interestingly they suggest that the ECB will cut rates by 25bps in December, with the FED and BoJ on hold. I do believe that the ECB will cut rates, though it may be in the New Year. Furthermore, they suggested that the ECB should provide future guidance on interest rates; and EZ banks need E400bn of new capital. Yep, indeed. much. much more. Outlook Asian markets closed mixed, though the Shanghai composite was down -1.3%, the worst performer in the region. European markets are mainly lower (ex Germany and the UK). The market is uncertain as to the outcome of the Greek deal. US markets have just opened slightly lower, though I don’t see much action today. Gold is trading at US$1745, with January Brent at US$110.43. The Euro having reached US$1.30, is back down to US$1.2935, given the uncertainty. I’m itching to short the Euro, but will wait – Mr Rajoy may finally get real and request a bail out – and the Euro looks as if it still has some upside. The Yen has strengthened marginally as has the A$, which is near US$1.0470. The A$ is getting to levels which look interesting – to short that is. Still see very little to attract me to buy or sell markets – will hold off for a while longer. Kiron Sarkar 27 the November 2012
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| Durable Goods surprise to upside Posted: 27 Nov 2012 07:00 AM PST Durable Goods Orders in Oct were better than expected as the headline figure was unchanged with Sept, up 1.5% ex transports and higher by 1.7% in the non defense capital goods ex aircraft component vs expectations of down .7%, .5% and .5% respectively. Sept was revised down however but only by .3-.4%. Helping to keep orders positive were gains in electrical equipment, computers/electronics, machinery and metals. Vehicles/parts orders though fell 1.6% and are lower for a 3rd straight month. From a strict GDP perspective, overall Shipments fell .6% but the core level of shipments didn’t fall as much as expected. As inventories rose by .4%, the I/S ratio rose to 1.69 from 1.67, the highest since Oct ’09. Bottom line, after very sluggish growth in the previous 4 months, it’s good to see a rebound in durable goods orders in Oct in the search for stability but in the core cap ex component, orders are still down 7% y/o/y and lower by .1% y/o/y ex transportation orders, reflecting the recession in Europe, slowdown in Asia, and the lack of policy visibility in the US. From a market perspective, all eyes remain on DC.
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| Posted: 27 Nov 2012 06:45 AM PST My morning reads:
What are you reading? > |
| Whalen: Deutsche Bank’s Absurd Claims About Banks Posted: 27 Nov 2012 06:36 AM PST Chris Whalen has today’s must read piece — a pushback against a slice of Deutsche Bank Absurdity claiming the benefits to humanity (really) of Money Center banks. You know. Like Deutsche Bank. You can read it here:
Few people are more knowledgeable about bank absurdities better informed than Chris, who survived both the NY Fed and Bear Stearns intact.
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| Greece again buys time/Shanghai index/Fed’s Fisher Posted: 27 Nov 2012 06:26 AM PST European officials in conjunction with the IMF finally came to an agreement to try to lower Greece’s debt to GDP ratio to 124% by 2020 from about 190% expected next year. The details on how to achieve it, that being a debt buyback, lowered interest rates and delayed payments of them and give back of ECB ‘profits’ on the debt it holds, were all pretty much as expected. What’s missing unfortunately is the only thing that we know works and that’s actual debt write-down’s (private sector has already had theirs and it will be the public sector’s turn at some point) but we’ll deal with that another day. After rallying 7% last week on expectations of a deal, the Athens stock market is down about .50% but the Greek 10 yr bond is rallying to a fresh high on the buyback initiative. Spanish bonds are a beneficiary of the Greek fire temporarily being put out as the 2 yr yield is back below 3% with the ECB still having not spent a euro on the OMT program. After seeing weak confidence figures in Germany and Italy yesterday, French consumer confidence held at a 10 month low at 84. Elsewhere of note and discouragingly, China’s Shanghai index fell 1.3%, breaking below 2000 and closing at the lowest level since Mar ’09. After the Hang Seng index close, Hong Kong exports unexpectedly fell 2.8% y/o/y vs the est of up 6.2%. Imports were also less than expected. On the flip side, the Nikkei closed higher for the 8th trading day in the past 9 as the possibility of more yen printing continues to buoy stocks. In the US, the Fed’s Fisher is holding to his hawkish stance by calling for the Fed to put limits on the amount of MBS and Treasuries they buy and he said there is “no such thing as QE infinity. QE infinity gets you into trouble.” On the possibility of QE4, Fisher said the Fed ‘doesn’t need to do any more.’ With a room full of doves, he’s one of the lone voices on central bank restraint. |
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