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Monthly Archives: December 2012

Mortgage Applications Rise 6.2%

“Applications for U.S. home mortgages rose last week as loan requests for new purchases hit its third straight high point on the year and fixed 30-year mortgage rates hit a historical low, an industry group said on Wednesday.

The Mortgage Bankers Association said its seasonally adjusted index of mortgage application activity, which includes both refinancing and home purchase demand, rose 6.2 percent in the week ended Dec. 7.”

Full report

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Breakthrough Possible in EU Banking Talks

“Euro zone finance ministers may achieve a “breakthrough” on Wednesday in their talks in Brussels on reforming supervision of Europe’s banks, a German government official said.

Germany and France have been at loggerheads over how many banks the European Central Bank should directly supervise and some other details.

“We hope for major progress and perhaps a breakthrough (in the talks),” the German official said, speaking on condition of anonymity, adding that Finance Minister Wolfgang Schaeuble had told the German cabinet he was “optimistic” about a deal.

“We are ready to contribute to a solution on banking supervision. We have some questions but if they can be resolved by finance ministers today then Germany will not stand in the way of an agreement,” the source said.

But reaching a deal, which EU leaders want to sign off when they meet at a summit on Thursday and Friday, will require addressing the concerns of Germany, whose support is crucial,while also satisfying France and others with deep vested interests such as Britain, Sweden and the Netherlands.

“It’s not an easy one for Germany,” said one diplomat, close to the talks. “But the markets are watching us.” Another diplomat said it came down to a conflict between quality and speed: For the best banking union possible to be put in place it will take time and it may be necessary to extend agreed deadlines.”

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Gapping Up and Down This Morning



Symb Last Change Chg %
HCI.N 20.24 +1.01 +5.25
CEB.N 47.22 +1.09 +2.36
TRLA.N 18.00 +0.37 +2.10
MANU.N 13.89 +0.26 +1.91
PES.N 7.41 +0.13 +1.79


Symb Last Change Chg %
RKUS.N 18.13 -0.83 -4.38
LOCK.N 7.61 -0.23 -2.93
SSTK.N 25.57 -0.61 -2.33
USPH.N 27.00 -0.39 -1.42
GMED.N 11.57 -0.16 -1.36




Symb Last Change Chg %
APAGF.OQ 13.56 +0.90 +7.11
ARRY.OQ 3.86 +0.24 +6.63
FES.OQ 2.74 +0.06 +2.24
FIVE.OQ 34.95 +0.57 +1.66
CLRX.OQ 4.15 +0.05 +1.22


Symb Last Change Chg %
IDSA.OQ 2.17 -0.06 -2.69
ICCC.OQ 4.20 -0.10 -2.33
SUPN.OQ 7.77 -0.16 -2.02
HGSH.OQ 3.74 -0.07 -1.84
MDRX.OQ 11.19 -0.07 -0.62




Symb Last Change Chg %
PW.A 10.15 +0.95 +10.33
SED.A 2.37 +0.20 +9.22
BTC.A 2.60 +0.20 +8.33
NCQ.A 2.11 +0.15 +7.65
MDM.A 3.73 +0.26 +7.49


Symb Last Change Chg %
FU.A 3.48 -0.16 -4.40
WVT.A 11.25 -0.25 -2.17
BXE.A 3.75 -0.07 -1.83
CTF.A 24.45 -0.40 -1.61
SAND.A 12.09 -0.06 -0.49

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Housing to Boost U.S. Economy Next Year

“We are still waiting for a strong increase in construction employment, but we know it is coming (I expect construction employment will be revised up in the annual revision).

Michelle Meyer at Merrill Lynch wrote about this today (and more on housing): The housing market in 2013

We believe 2012 will go down in history as a year of transition for the housing market. Housing starts are on track to be up 25% and home prices are set to rise 5% over 2012. We believe the recovery will continue into 2013 for several reasons. Most importantly, household formation has started to turn higher, reflecting the shortfall of household creation over the prior five years. In addition, listed inventory is low, owing to extraordinarily slow construction and only a gradual reduction of the distressed pipeline. And specifically for prices, there has been a shift toward short sales as a means of disposing distressed properties. Moreover, investor demand is strong, particularly for distressed inventory.

We forecast housing starts to increase another 25% to an average of 975,000 and home prices to increase 3% in 2013.”

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How Long Can Markets Surf the Momo Wave ?

“ONE of the most mysterious market phenomena is momentum – the tendency for fast-rising stocks to keep going up. How come such an obvious market anomaly is not arbitraged away?

I have referred in previous columns to the work of Paul Woolley and Dimitri Vayanos of the London School of Economics on this issue, and they have a new piece in the latest issue of Central Banking Journal. Their idea is that the anomaly is the result of investors using agents (professional fund managers) to manage their money. They choose those managers on the basis of past performance. That past performance will inevitably result from good/lucky stock selection. So when they fire one poorly-performing fund manager and select an outperforming one, the inevitable result will be that cash will flow into the stocks owned by the outperforming managers (the previous winners) and out of the ones selected by the poor performers (the previous losers). The classic example was in the late 1990s when money was taken away from value managers and given to growth managers who were buying technology stocks.

This process helps to explain asset bubbles. Eventually, prices depart so far from fair value that a shock occurs and the process reverses – often quite quickly, as fund managers stampede out of once favoured stocks. The evidence suggests that momentum works over periods of up to two years but reversal effects predominate after that.

For me, the theory, while telling part of the story, misses the key factor of credit expansion which Charles Kindleberger outlines in his classic Manias, Panics and Crashes. There were no asset bubbles during the Bretton Woods era but there have been many in the period of rapid credit growth since.

In the second part of their essay, Woolley and Vayanos deal with another interesting theme – the expanded role of finance in the modern economy. They argue that…”

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Fed Expected to Revamp Bond Buying Program Today

“WASHINGTON (AP) — The Federal Reserve is wrapping up 2012 the way it began the year, searching for ways to help a U.S. economy that is still struggling with high unemployment and sub-par growth.

The expectation is that the Fed will announce a revamped bond-buying plan at the conclusion of their second day of discussions on Wednesday. The Fed’s policy statement will be followed by the release of a revised economic outlook and a news conference with Federal Reserve Chairman Ben Bernanke.

If the central bank does revamp its bond purchases, the goal would be to keep downward pressure on long-term interest rates and encouraged individuals and businesses to borrow and spend more.

The Fed’s final meeting of the year is being held against the backdrop of the looming “fiscal cliff,” the sharp tax increases and spending cuts that will hit the economy in January if Congress and President Barack Obama are unable to reach an agreement this month to avert them.

Bernanke has said that the Fed’s efforts will not be able to rescue the economy if the budget negotiations fail and the country does go over the fiscal cliff.”

Full article

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Black Gold Jumps Overnight as IEA Increases Demand Forecast

Brent crude rose to a four-day high after the International Energy Agency increased its oil demand forecast for 2013 and as OPEC ministers met in Vienna to discuss the group’s production limits.

Futures climbed as much as 0.9 percent in London, a third straight advance. Global oil consumption will expand to 90.5 million barrels a day next year, more than previously forecast amid signs of a rebound in Chinese demand, the IEA said in a report today. There is consensus among OPEC members to keep output limits unchanged, Ecuador’s Minister of Non-Renewable Natural ResourcesWilson Pastor told reporters at the group’s headquarters in Vienna today, before closed-door talks began.

“Some economic data has improved,” Andrey Kryuchenkov, an analyst at VTB Capital in London, said by phone. “I expect the OPEC meeting will result in them trying to bring production closer in line with the ceiling.”

Brent for January settlement added as much as 99 cents to $109 a barrel on the London-based ICE Futures Europe exchange, the highest since Dec. 6. Futures were at $108.92 as of 12:42 p.m. local time.

West Texas Intermediate for January delivery was at $86.52 a barrel, up 73 cents, in electronic trading on the New York Mercantile Exchange. Brent was at a premium of $22.41 to WTI.

Oil in New York has technical support along an upward- sloping trend line on the daily chart, around $85.73 a barrel today, according to data compiled by Bloomberg. A sustained drop below this line, which connects the intraday lows of June and November, will signal a so-called downside breakout, when losses tend to accelerate.”

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Industrial Production Rises in India, Case for Rate Cuts Decrease


“India’s industrial production grew at the fastest pace in more than a year in October and consumer- price inflation accelerated last month, reinforcing the case for the central bank to hold off on an interest-rate cut next week.

Output at factories, utilities and mines climbed 8.2 percent from a year earlier after a revised 0.7 percent decline in September, the Central Statistical Office said in a statement in New Delhitoday. The median of 34 estimates in a Bloomberg News survey was for a 5.1 percent gain. Consumer prices gained 9.9 percent in November from a year earlier, a report showed.

Prime Minister Manmohan Singh has opened the nation to more foreign investment in the past three months and stepped up efforts to pare a budget deficit to reinvigorate an economy beset by faltering domestic spending and exports. The government plans to announce measures to boost overseas sales this week after shipments fell for a seventh month in November, while theReserve Bank of India has signaled it may reduce interest rates next quarter if inflation eases.”

Full article

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IMF: Hong Kong Faces Severe Property Price Correction

“Hong Kong is at risk of an abrupt decline in house prices after they doubled to a record in the past four years, climbing 20 percent in 2012 even as the economy cooled, the International Monetary Fund said.

“The property sector is the main source of domestic economic risk,” the IMF said in a report on the city released today. At the same time, the odds of a slump that has major economic and financial consequences is “fairly low in the near term,” the fund said.

Hong Kong’s apartment prices have surged to become the world’s most expensive after low interest rates and limited supply fueled demand, prompting the government to tighten mortgage lending and add taxes. Since taking office in July, Chief Executive Leung Chun-ying imposed three rounds of curbs, including an extra 15 percent tax on buyers from overseas, and officials have signaled more measures are possible.”

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Aussie Dollar Rises to a Two month High on Prospects of Dovish Action in U.S.

“Australia’s dollar rose to a more than two-month high on prospects that further monetary easing by the U.S. central bank will debase the greenback.

Australia’s government bonds slumped and the nation’s currency touched the strongest level in eight months versus the yen as gains in global equities boosted demand for riskier assets. New Zealand’s dollar traded at a three-year high against the Japanese currency. The advance in the so-called Aussie was limited after a private report showed consumer confidence slumped the most in nine months.

“Market sentiment is pretty buoyant,” said Andrew Salter, a currency strategist in Sydney atAustralia & New Zealand Banking Group Ltd. (ANZ) “Provisions of liquidity from foreign central banks have been a key determinant of the Australian dollar’s performance.”

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Machinery Orders Rise in Japan, Stimulus Still Expected to Push Economy Towards Growth

“Japan’s machinery orders rose for the first time in three months, a sign that companies may expect the world’s third largest economy to return to growth in 2013.

Orders, an indicator of capital spending, climbed 2.6 percent in October from the previous month, the Cabinet Office said today in Tokyo. The median estimate of 25 economists surveyed by Bloomberg News was for a 3 percent increase. Large orders can cause volatile results.”

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$BAC Sells Stake of Mitsubishi UFJ Merrill Lynch Unit

Mitsubishi UFJ Financial Group Inc. (8306) is poised to announce the 39 billion yen ($471 million) purchase of Bank of America Corp. (BAC)’s stake in their Japanese private banking venture, said two people with knowledge of the matter.

The purchase of the 49 percent holding in Mitsubishi UFJ Merrill Lynch PB Securities Co. will be announced as soon as tomorrow, pending final approval from the boards of both companies, said the people, who asked not to be identified as the talks are private. Japan’s biggest lender will own the whole private bank through two subsidiaries, they said…”

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Ride With Me

[youtube://https://www.youtube.com/watch?v=BWAK0J8Uhzk 450 300]

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