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Monthly Archives: October 2012

Market Update

Equities are in rally mode on the notion Spain is close to a bailout. Good data around the planet has also helped to get the risk on trade going.

Meanwhile the finance minister of Germany had some comments that may get some people excited: ”

 “German Finance Minister Wolfgang Schaeuble has called ahead of an EU summit for a great leap forward in European integration, urging the creation of a new commissioner with power over budgets and reform of European Parliament decision-making.

Such a reform would accelerate the trend towards a two-speedEurope whose inner core would be the euro zone, spurred towardscloser union by its three-year-old sovereign debt crisis.”

All in all we had some decent earnings reports this morning and investors have thrown caution to the wind.


Market update

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The Euro Rises Back Above 1.30


“The euro rose above $1.30 for the first time in a week as German investor sentiment improvedmore than economists predicted and amid speculation that Spain is moving toward asking for financial assistance.

Europe’s 17-nation currency strengthened for a fourth day versus the yen as the Financial Times reported that Spain has found an acceptable formula for seeking aid. The dollar and the yen fell against most of their major counterparts before U.S. reports that economists said will show improvement in industrial production and housing starts, damping demand for the safest assets. The pound fell against the euro as U.K. inflation slowed to the least in almost three years.

“We have a general risk-on mode” helping the euro to appreciate, said Daragh Maher, a currency strategist at HSBC Holdings Plc in London. “There’s also the local news with the suggestion that Spain was pretty much on the brink of asking for help. That has helped. It was a combination of the two that brought us above $1.30.””

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Brent Rises on Mid East Tensions, WTI Remains Unch


Brent crude traded at the highest premium in a year to futures in New York amid concern that supplies from the North Sea and the Middle East will be disrupted and speculation U.S. stockpiles are increasing.

Brent in London climbed to as high as $24.28 a barrel more than West Texas Intermediate as WTI remained little changed near a three-day low. The European Union tightened sanctions onIran’s energy exports, while Nexen Inc. (NXY) declined to give a specific date for resuming its Buzzard field in the North Sea after maintenance. Crude inventories in the U.S., the world’s biggest oil user, rose 1.5 million barrels last week, according to a Bloomberg News survey before a government report tomorrow.

“The Brent market has been inflated by declining North Sea production and hiccups in that production, like the recent problems with Buzzard,” said Christopher Bellew, a senior broker at Jefferies Bache Ltd. in London. “The price of WTI is also being distorted by the huge increase in U.S. domestic oil production.” ”

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Global Markets Gap Up on a FT Article That Spain is Near in Asking for a Bailout

“Markets are on a big tear with Spain leading the way, so it’s easy to surmise that enthusiasm over a possible Spain bailout is what’s got investors excited.

And there’s an article to support exactly that.

Miles Johnson at FT reports that Spain is getting ready to bite the bullet.

A senior official within the Spanish ministry of economy said Spain did not require any money from the European Stability Mechanism, the eurozone’s state rescue fund, but would be comfortable making a request for a credit line only in order to satisfy the conditions of the ECB to begin buying bonds.”

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REINHART & ROGOFF: The US Is Delivering One Of The Best Post-Crisis Recoveries In History

Carmen Reinhart and Kenneth Rogoff, who wrote the book on the most recent financial crisis – “This Time is Different” – released a white paper Sunday reviewing the economy since the financial crisis.

And overall, they had positive things to say about the U.S.

“According to our (2009) metrics, the aftermath of the US financial crisis has been quite typical of post-war systemic financial crises around the globe,” they wrote.  “If one really wants to focus just on United States systemic financial crises, then the recent recovery looks positively brisk.”

Read the rest and see the charts, here.

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Vote Yes on Prop 37

[youtube:http://www.youtube.com/watch?v=Lni6OAJz3sk 450 300]

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Obama Administration Accused of Lying About Mortgage Fraud Crackdown Data

“When U.S. Attorney General Eric Holder announced at an October 9 press conference that a year-long crackdown on mortgage fraud had resulted in “285 federal criminal indictments and informations against 530 defendants for allegedly victimizing more than 73,000 American homeowners—and inflicting losses in excess of $1 billion” he padded the numbers by including cases initiated before the initiative began. At least one case dated back to the George W. Bush administration. His quote has since been removed from the Justice Department web site.


The Obama administration’s “Distressed Homeowner Initiative” ran from October 1, 2011, to September 30, 2012, and was led by the FBI after agents took notice of a spike in fraud directed against homeowners who were at risk of foreclosure. The unavailability of a complete list of the cases makes it impossible to determine how many of them predated the initiative.”

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Uncle Sam Allows Banks to Regulate Themselves in Foreclosure Market

“Federal regulators have been accused of letting Bank of America (BofA) be heavily involved in a so-called independent review of foreclosure cases that’s supposed to correct the bank’s mistakes.


The Office of the Comptroller of the Currency (OCC), which regulates financial institutions like BofA, began last year to evaluate millions of foreclosures by multiple banks from 2009 and 2010. The Independent Foreclosure Review was intended to keep the banks out of the decision-making process over whether homeowners should be compensated for institutional errors or illegal practices by only allowing them to provide information to an independent regulator. But the banks were allowed to choose their own regulator. Bank of America hired Promontory Financial Group, a company with which it had previously done business. No doubt Promontory would like to continue its business relationship with BofA…thus a potential conflict of interest.”

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ACLU Accusing Morgan Stanley Of Predatory Lending

“NEW YORK, Oct 15 (Reuters) – The American Civil Liberties Union is filing what it says is the first lawsuit against an investment bank, Morgan Stanley, alleging discrimination for packaging subprime mortgage loans into securities.

The ACLU and other plaintiffs will file the case on behalf of five Detroit residents and its Michigan affiliate, claiming the investment bank encouraged a mortgage lender to make loans with justifiably high costs and a strong possibility of foreclosure to enrich its business of selling securities to institutional investors.

“With this lawsuit, real victims of the subprime lending scandal are stepping forward to hold investment banks like Morgan Stanley accountable for the devastation the banks wrought in their lives and in our economy,” ACLU Executive Director Anthony Romero said in a prepared statement.”

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Fitch Sees Less Robust Housing Growth in 2013

“Fitch Ratings has a call on an improving outlook of the U.S. housing market. The report, titled “U.S. Homebuilding/Construction: The Chalk Line Fall 2012,” talks about the gains being sustained with positive reports on single-family starts, new homes and existing home sales. The report shows that 2012 has so far been well above 2011 levels, but still assume a moderate rise off a very low bottom. Here are some 2012 projections:”

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Core PPI Spells Trouble for Gold and Silver

“This up-leg in gold and silver was first initiated by speculation about QE3, and then gathered steam after QE3 was announced. The announcement of the bond buying program from the European Central Bank (ECB) helped stoke the fires of the precious metal bulls.

Gold and silver investors should take notice of how the metals reacted to the announcement of Producer Price Index (PPI) data by the U.S. Bureau of Labor Statistics (BLS).

The BLS releases PPI separately for finished goods, intermediate goods and crude goods. For each processing stage, the BLS releases data for total PPI, foods PPI, energy PPI, and PPI except foods and energy.

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Barry Ritholtz: Technicals Show Global stock Rally ‘Hanging by a Thread’

“Even for the layman, current market technicals paint a clear picture why this week is key for global stocks’ rally. Thanks to Barry Ritholtz over at the Big Picture blog for succinctly wrapping up just where the major indexes sit as we head into the trading day, and why this is a critical week for major world stock indexes.

In the post Ritholtz lays out the technical levels for the S&P 500 SPY +0.44%, the Dow Jones Industrial Average DJIA +0.43%, the Nasdaq Composite COMP +0.26% and the small-cap Russell 2000 Index RUT +0.40%.

S&P 500
The S&P 500 has pierced its uptrend of the summer rally and sits right at the 50-day moving average.  After making a new high a few days after the Fed’s announcement of” QE3,” the index has made a higher low and lower low.   The S&P 500 opens the week at a critical level and really needs to prove itself.

Dow industrials
Ditto for the Dow. “

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Deutche Bank: Housing Recovery is Real and the U.S. Economy is Not Far Behind

“Despite some nagging doubts that have remained over the U.S. housing market, consensus is that housing has turned the corner and is recovering.

In his latest note titled The Housing Recovery Is For Real, Deutsche Bank’s Joseph LaVorgna writes that the “residential housing market is in the very early stages of a durable recovery.”

LaVorgna says this recovery in housing is important because housing is what led the U.S. economy into a recession, and is part of the reason the recovery has been so slow. Moreover,  as “a leading indicator of underlying domestic demand,” any improvement in housing suggests that underlying domestic demand should improve as well. From LaVorgna:

“In the second chart below, we show the year-over-year growth rate in residential investment compared to the year-over-year growth rate in non-residential aggregated demand, which is defined as real GDP less inventories less residential investment. There is a four-quarter lead on the former relative to the latter.”

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Fast and Furious Hits Syria

“Most of the weapons being sent from Saudi Arabia and Qatar to Syrian rebel groups are going to hard-line Islamic jihadists as opposed to the secular opposition groups that the West wants to strengthen, American officials and Middle Eastern diplomats told David Sanger of the New York Times.

In 2011 the U.S. sold $33.4 billion worth of weapons to Saudi Arabia and $1.7 billion to Qatar as sales tripled to a record high and accounted for nearly 78 percent of all global arms sales.”

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Study: Ryan Plan to Raise Medicare Premiums by 59%

“Elderly people in Florida would have paid more than $200 extra for traditional Medicare if a system similar to Paul Ryan’s proposed overhaul of the program had been in place in 2010, according to researchers at the nonprofit Kaiser Family Foundation.

Ryan, the Republican vice presidential nominee, has proposed transforming Medicare into a “premium support” system in which beneficiaries get a fixed payment from the government for their health insurance, instead of guaranteed benefits. Such a plan would lead to wide variations in the cost of Medicare across the country, according to the Kaiser study reported today.”

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U.S. Equities Rise on Retail Sales and Earnings, Commodities Get the Homo Hammer

“U.S. stocks rose, after paring an early rally in the Standard & Poor’s 500 Index (SPX), as better-than- estimated retail sales and earnings from Citigroup (C) Inc. overshadowed a slump in commodity prices and Apple Inc. (AAPL)

Citigroup soared 3.9 percent as results benefited from a tax benefit and a surge in bond-trading revenue. Texas Instruments Inc. (TXN) rose 2.4 percent on a report Amazon.com Inc. (AMZN) may buy its mobile chip unit. Valero Energy Corp. (VLO) and Occidental Petroleum Corp. (OXY) dropped as much as 1.1 percent as oil tumbled. Apple lost 0.1 percent after rising as much as 0.8 percent earlier.

The S&P 500 added 0.2 percent to 1,431.11 at 11:18 a.m. in New York. The Dow Jones Industrial Average (INDU) rose 23.20 points, or 0.2 percent, to 13,352.05. Trading in S&P 500 companies was 11 percent above the 30-day average at this time of day.

“The direction of the economic data is positive, but we’re moving at a very slow pace and the market is very fragile to external shock,” Dan Veru, who oversees $3.5 billion as chief investment officer at Palisade Capital Management LLC in Fort Lee, New Jersey, said in a phone interview. “The big question regarding earnings is whether expectations have come down enough so that companies can beat guidance.”

Stocks rose as the Commerce Department said retail sales rose 1.1 in September following a revised 1.2 percent increase in August that was the biggest since October 2010 and larger than previously reported. The median forecast of 77 economists surveyed by Bloomberg called for a 0.8 percent rise.”

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