So what is fuelling the equity rally? http://t.co/Gu1LJauXzx
37 minutes ago
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Comments on the DOT/HUD White Paper on Housing Finance Reform
While those of us in the mortgage and banking industries were cautioned not to expect too much from the administration’s report to congress – the document released today was underwhelming in all but one respect: the administration has stated clearly that there is absolutely no rationale for continuing the farce of FannieMae and FreddieMac as private companies benefiting from government support – implicit or explicit. For that, we suppose we should be thankful.
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Beyond the Double Dip in Home Prices – The Future of Housing Demand and Pricing – Excess Inventory, Household Formation and Absorption
Today we release a report on what we believe will be the endgame of the over half-decade-long destabilization of the U.S. housing markets that commenced shortly after home prices peaked in mid-2006. While we expect prices to decline further, with the confluence of a number of negative factors described in the attached – the final leg down in the value attributed to housing will coincide with the continuing absorption of the excess unutilized vacant units that are the legacy of the substantial overbuilding preceding the crash
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Instant Comment on November 2010 Case Shiller Data
As we predicted a year ago, the Case Shiller 20 City Index index is on its way to a new low (currently, at 143.85, it is only 3.3% above its April 2009 low) and we believe that it will be established somewhere between a reading of 125 and 130. At least that is where we call sustainable fair value, barring an overshoot or a stalled recovery. It is appropriate to factor that into both general economic growth projections and the anticipated impact on the banking sector at this point.
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Comments on a Big Data Day
Some musings and helpful hints on the “Real Economy:”
CPI
Nothing surprising in headline or core CPI. Based on yesterday’s PPI data, it is apparent that demand is going to continue to be insufficient to pass through increased costs without an improvement in employment/aggregate incomes and that – in certain categories of goods where costs must be passed through (e.g. gasoline) – demand destruction will likely be the outcome of material price increases.
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Quick Look – Today’s Employment Print (and a Comment on Retail Sales)
Allow us to preface this comment by reminding readers that the path to economic recovery will (eventually) be paved by growth in aggregate (i.e. not just average) personal income – which means a combination of (a) more people employed (both on a nominal basis and as a percentage of population) and (b) an improvement in the earnings of those employed.
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Open Letter to U.S. Regulators Regarding National Loan Servicing Standards
On Monday evening, an open letter addressed to the Chairmen of the FDIC, the Federal Reserve and the SEC, together with the Secretary of the Treasury, the Comptroller of the Currency and the Acting Director of the FHFA, was sent and posted on the web by 50 senior individuals with expertise in the housing sector, [...]
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Watch Out for Retail Sales Activity in Q1
We are updating the chart we released in last month’s report entitled Retail Sales as the Echoes of a Pre-Crisis Habit, to reflect data through November, with respect to retail sales, and through October with respect to consumer credit. See the revised chart at the end of this email and attached.
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A Brief Note on Friday’s Employment Situation Report
As we wrote on November 5th (see October Employment Situation Note), the expectations raised by October’s headline employment numbers were unwarranted when one looked “under the hood,” as it were. Based on Friday’s numbers, it is now clear that the condition of the U.S. job creation machinery is still quite rusty and demands continuing overhaul.
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The Bailout Trade Meets the Bernanke Put
After exhausting nearly every politically viable opportunity for restarting the economy and stabilizing financial and real asset values through recapitalizing financial institutions and auto makers, direct stimulus, cash for clunkers, and home buyer tax credits; and after pushing monetary policy making to the absolute edge of its efficacy, the U.S. government and the Fed (together with central banks in Japan and Europe) are about to christen QE2 (the second round of quantitative easing).
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Credit Markets Don’t Lie, but They Do Confuse
Much has been made lately of a possible bubble in bonds. The rapid decline in yields could certainly be taken for evidence of over-exuberance. The fact that we are seeing bonds rally up and down the credit spectrum adds to concerns about the existence of a fear driven rally in fixed income.
Market analysts are also fretting about (a) the level of investment capital inflows (much of it from domestic sources) to credit markets, relative to net withdrawals from equities and (b) the impact of the Fed’s announcement that it will be re-deploying run off from its existing positions to support the market and ensure low yields.
