Monthly Archives: August 2011
Markets Hopeful of The Clam; Analyst Say the Fed Has Little Wiggle Room
“They’ve got a very cluttered balance sheet. The Fed doesn’t have a lot of room, but I believe in this environment he (Fed chairman Ben Bernanke) has to say something. People don’t feel inspired. There’s a leadership vacuum,” said Art Cashin
Comments »Productivity Drops Adding to Further Economic Slowdown
Ex-Treasury Secretary Henry Paulson on the market
You can find his complete interview here.
Comments »It is beginning to feel a lot like 2008 all over again. But it’s not the same.
As markets tumble – the Dow Jones industrial average fell 5.6 percent on Monday – it is instructive to hear from someone who knows a thing or two about a financial crisis: Henry M. Paulson Jr., the former Treasury secretary.
And he turns out to be more sanguine about the United States, after the Standard & Poor’s downgrade, than some other voices being heard amid the tumult.
“While the players in Washington certainly haven’t performed at AAA level, I would certainly take U.S. Treasuries over other AAA sovereigns any day,” Mr. Paulson told me.
Yes, there has been much hue and cry over S.&P.’s cut in the credit rating of the United States. But the credit rating downgrade almost seems like a bad joke considering what happened in the bond market: Treasuries rallied as yields fell on Monday to their lowest levels since 2009. In other words, investors felt Treasuries were a safer – yes, safer – bet after S.&P. downgraded them than they were before. (What does that say about S.& P.’s credibility in the bond market?)
The downgrade may point up the enormous challenges facing the country – persistent unemployment and the possibility of slower economic growth is a hard truth that may ultimately force the cost of borrowing to rise for the nation over the long term.
But the downgrade is almost a sideshow compared with the real reason that stocks started falling Monday morning, before panic set in and the momentum of the market took over: the intractable problems in the European Union, which look a lot more like the United States banking crisis circa 2008 than what’s happening on this side of the Atlantic now.
Pretend for a moment that countries like Greece, Spain and Italy are our banks in 2008. They are close to insolvent. (And the actual banks in Germany, Britain and France that are supposed to be strong are horribly undercapitalized and are holding too much debt from countries like Greece, Spain and Italy – all countries that truly may not be able to pay it back in full.)
As Mr. Paulson told me, “The most pressing and significant problems in the global economy are unsustainable structural issues with regard to the E.U. – fiscal deficits and the structure of the E.U. itself.”
This story might not grab as much attention, but it is this plight that is manifesting itself in the market.
Mortgage rates continue to decline
Despite the credit downgrade, lower treasury yields pressed mortgage rates lower.
Comments »At least one fear was not realized amid Monday’s meltdown: the concern that mortgage rates would immediately shoot higher in response to Standard & Poor’s downgrade of Fannie Mae and Freddie Mac, the government-sponsored entities that are the 800-pound gorillas of the mortgage market.
In fact, the initial response to Fannie and Freddie getting cut to AA+ from AAA was precisely the opposite. Mortgage rates were poised to continue declining.
HSH Associates, which surveys lenders, quoted the average 30-year fixed rate mortgage at 4.44% Monday. “We expect to see rates go into the 4.30’s by noon tomorrow,” said Keith Gumbinger, of HSH Associates.
Mortgage rates are set off of the interest rates on U.S. Treasury notes and bonds. Even though Standard & Poor’s pulled its AAA rating of the United States Friday night, investors still rushed into U.S. Treasury securities Monday as a safe haven, believing more in the “full faith and credit of the United States” than in the opinion of Standard & Poor’s credit analysts. As investors snapped up Treasury notes and bonds they pushed down interest rates on those securities, which move inversely to prices.
Late Monday afternoon, the 10-year Treasury note traded at a yield of 2.34%, down from 2.56% on Friday and 3% just two weeks ago, a huge move. That 10-year yield is the benchmark used to set 30-year fixed mortgages.
“The flight to quality effect is dominating,” said Walt Schmidt, senior vice president of FTN Financial Capital Markets. “The net effect is lower mortgage rates.”
Home price recovery revised, further away
Comments »Any glimmer of hope that the housing market will stage a recovery in the upcoming months has vanished, thanks to the recent spate of bad economic news that has been making headlines over the past several weeks.
According to the latest analysis of home price trends in 384 markets based on the Fiserv/Case-Shiller Indexes, it will be well into the first quarter of 2013 before median home prices across the nation will even be on par with prices from the first quarter of this year.
And that’s not saying much. During the first quarter of 2011, prices fell in 302 of the 384 housing markets tracked by the Fiserv/Case-Shiller index, dropping by an average of 5.1% year-over-year.
As a result of continued weakness on the jobs front and the debt ceiling fiasco, Fiserv pushed back its projections of a housing market turnaround by three months. Now, it doesn’t expect home prices to start gaining any ground until the second quarter of 2012.
Instead, Fiserv expects median home prices to continue to fall by an average of 3.1% between March 31 of this year and March 31, 2012. After that, it expects to see prices increase by 2.7% until the first quarter of 2013.
Upgrades and Downgrades This Morning
Upgrades
AIG – American Intl upgraded to Market Perform from Underperform at Keefe Bruyette
CBS – CBS upgraded to Buy at Argus
MAR – Marriott upgraded to Positive from Neutral at Susquehanna
ARO – Aeropostale upgraded to Buy at Brean Murray
TYC – Tyco upgraded to Buy from Neutral at Goldman
IBKR – Interactive Brokers upgraded to Outperform from Neutral at Macquarie
WYNN – Wynn Resorts upgraded to Hold from Sell at Citigroup
GPN – Global Payment upgraded to Buy from Neutral at Suntrust
HUM – Humana upgraded to Buy from Neutral at Goldman
CBE – Cooper Industries initiated with an Outperform at Macquarie
GLW – Corning upgraded to Neutral at Ticonderoga
RAX – Rackspace upgraded to Outperform from Sector Perform at RBC Capital
MOLX – Molex initiated with an Outperform at Macquarie
INFY – Infosys upgraded to Neutral from Negative at Susquehanna
MRK – Merck upgraded to Buy from Hold at Jefferies
MCD – McDonald’s added to Conviction Buy List at Goldman
AON – Aon added to the Stifel Nicolaus Select List
CHD – Church & Dwight upgraded to Outperform from Market Perform at Wells Fargo
LLNW -Limelight Networks downgraded to Neutral from Buy at Suntrust
GCO – Genesco upgraded to Buy from Neutral at Suntrust
WTR – Aqua America upgraded to Buy from Neutral at Janney Montgomery Scott
EMR – Emerson initiated with an Outperform at Macquarie
UNP – Union Pacific upgraded to Buy from Hold at TD Newcrest
CNW – Con-way upgraded to Neutral from Underweight at Piper Jaffray
S – Sprint Nextel upgraded to Neutral from Sell at BTIG
HCP – HCP upgraded to Neutral from Underperform at Hilliard Lyons
Downgrades
IL – Illinois Tool downgraded to Sell from Neutral at Goldman
UTX – United Tech downgraded to Neutral from Buy at Goldman
BDX – Becton Dickinson downgraded to Neutral from Buy at Goldman
VNR – Vanguard Natural Resources initiated with a Hold at Stifel Nicolaus
HSIC – Henry Schein downgraded to Neutral from Buy at Goldman
PH – Parker-Hannifin downgraded to Neutral from Buy at Goldman
Comments »Gapping Up and Down This Morning
Gapping up
BBL +5.9%, BHP +5.7%, BEXP +5.7%, ALU +8.8%, RIO +8.7%, STD +4.9%, RIG +4.2%, VE +4.1%, MT +3.7%, BCS +2.9%, BAC +1.4%, MAKO +8.6%, GA +8.3%,
Gapping down
ENOC -16.4%, TTWO -5.6%, HBC -3.1%, YOKU -2.7%, ATHX -10.4%, CLNE -9%,
Comments »
In Play and On the Wires
U.S. Futures Remain Higher; Hopes Are High That Ben Bernanke and Wall Street Can Stem Global Losses Despite Global Markets Entering Bear Territory
Yes stimulus and QE helped to stem deflation, but it did nothing for long term confidence.
Sure the people with money kept spending, all be it at a slower rate, but all the fiscal stimulus did nothing for main street America…..the heart of the largest consumer culture.
Perhaps the next stimulus package should give every house hold a $100k to help out the nation who supports the criminal bankers taking advantage of the political process…..
Oh back to the story of markets hoping the bearded clam saves the day.
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The Technical Bear Market Has Come to the Dow Transports & the Russell 2000
Intervention Fails to Keep the Yen and the Swiss France Down
Spanish and Italian Bonds Continue To Climb as ECB Continues Bond Purchasing
Wilbur Ross is Gobbling Up Assets As He Says Markets Have Lost Touch With Reality
German Exports Fall 1.2%
Deutsche Bank Dumped European Debt as They Pushed for Lenders To Give More Support
They cut losses just before the bottom fell out while orchestrating bailout packages….
The move has been viewed as shady business practice.
Comments »China Inflation Rises to 6.5% vs Consensus of 6.4%
FLASH: DICK bove is Still in Cash and Expects a 1000 Point Down Day Before it’s All Over
He mentioned that BoA balance sheet does not look great. European banks are not as strong as American banks because they put the full amount of derivatives on their books; they also have sovereign risk. This high risk will spread to American banks.
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