Posts filed under “Think Tank”

It all comes down to home prices

When home prices stop going down, the worst of the credit crisis will have ended as banks can confidently quantify their exposure, investors can feel comfortable with taking on certain risk, many homeowners will stop the drowning on their mortgage, home buyers won’t have lower prices to wait for and the important wealth effect can stabilize. Home prices rose m/o/m in May for the first time since July ’06 and is expected to rise again m/o/m in June according to today’s S&P/CaseShiller 20 city home price index. The y/o/y drop is expected to be 16.4%, the slowest pace of decline since July ’08. However, because the prime area of housing is now under growing stress, price declines in this area will in my opinion reverse the temporary stabilization signs we’re seeing now in the aggregate. The FHFA price index is also out and has shown more modest price declines. Consumer confidence is out too. Chinese stocks broke its 3 day winning streak in response to yesterday’s comments from Premier Wen basically saying the recovery won’t all be smooth sailing. The rest of Asia followed.

Category: MacroNotes

Bernanke!

Bernanke! August 24, 2009 Markets will like the removal of uncertainty now that President Obama has committed to Fed Chairman Bernanke’s reappointment. Confirmation by the US Senate is expected without much difficulty. History shows that uncertainty is the enemy of markets. Much speculation about Bernanke and a possible Summers succession has swirled in market analysis…Read More

Category: Think Tank

To be sure, this may be much ado about nothing and Goldman shares rallied sharply early Monday, before fading in the afternoon with the broader market. Still, if nothing else, this “trading huddle” story is another black eye for the white shoe firm, whose summer of discontent has so far featured:

  • Matt Taibbi’s blistering “vampire squid” feature in Rolling Stone.
  • Rumors of Goldman front-running the market via high-frequency trading software after one of its former developers was arrested for allegedly trying to steal is proprietary trading code.
  • A New York Times story detailing former Goldman CEO Hank Paulson’s numerous calls to current CEO Lloyd Blankfein last fall, when Paulson was Treasury Secretary and Goldman was one of many firms in line for government largess.

Category: Think Tank, Video

Zombie Dance Party: Q2 Update and Stress Test Preliminaries

Earlier today we announced the preliminary Q2 stress test results for all US banks.  Gretchen Morgenson gave us great ink yesterday in the NY Times:  “What the Stress Didn’t Predict.”

The preliminaries are of interest because they exclude the large banks and thus give you a regional/community bank view. In Q2 2009 the preliminary bank safety and soundness ratings calculated by the IRA Bank Monitor using the data from the FDIC indicate a dramatic climb in the stress in the US banking industry, up 23% to 6.87 in Q2 2009 (1995=1) vs. the preliminary Stress Index value of 5.57 in Q1 2009.   The rate of change in the preliminary Bank Stress Index was lower than in the previous quarter, but the absolute stress test score is at record levels.  The final industry aggregate average Bank Stress Index calculated by IRA was 1.8 at the end of Q4 2008 and 2.36 as of Q1 2009, illustrating the degree of subsidies flowing into the larger banks, as discussed below.

IRA’s unique automated system enables us to gather and process CALL reports in real time, as they become available on the FDIC CDR web facility.  This facility cuts several weeks off the wait time for the public to access FDIC data, but some of the largest banks are still not released until the FDIC releases its own analysis of the quarterly data, roughly 60 days after the quarter close.  Since the largest banks and/or the FDIC deliberately hold back the release of certain bank CALL reports until just prior to the press conference, the sample of CALL reports available via the FDIC CDR facility just prior to the FDIC press conference allows us to view the rest of the US banking industry “ex-big bank.”

Q2 2009 “Ex-Big Bank”:  Less Worse Than Previous Quarter, But Still Climbing

Prior to the FDIC press conference in Q1 2009, IRA for the first time calculated a preliminary Banking Stress Index rating for the industry using the bank CALL reports that were available on the FDIC web site about 50 days after the quarter close.   This preliminary Bank Stress Index rating included over 7,000 institutions, but excluded the largest banks and therefore provided a perspective on the rest of the industry.
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Category: Markets, Think Tank

more on the differing messages between stocks and US Treasuries

As a follow up to my morning comment, today is another of mixed messages being sent by the stock market and the US Treasury market as stocks continue to power higher while the 10 yr bond yield moves lower. Just since the Friday Aug 7th close, the S&P 500 has rallied 2.1% while the 10…Read More

Category: MacroNotes

Bank of Israel the first to raise interest rates

The Bank of Israel has become the first global central bank to raise interest rates as they moved their benchmark to .75% from .50%. They cite 3 main factors for moving. 1)Over the past few months, inflation data was above the target range of price stability, 2)the most recent economic data has shown a turnaround…Read More

Category: MacroNotes

King Report: Sympathy for Traditional Managers

> Our sympathies go out to traditional managers of public funds because they are being forced to abandon prudence and reason in order to generate short-term performance in a rigged casino. Deceit and duplicity are encouraged if not demanded. Earnings are crafted; balance sheets cannot be trusted; government economic data is illegitimate. Case in point:…Read More

Category: Think Tank

Stock market and US Treasury market sending different signals

RIP the CFC program as of tonight and we’ll now get to see what the natural supply and demand dynamic is in the auto industry. The other major program, the Cash for Shelter plan providing tax credits for home purchases, runs to Nov 31st but there is already talk of enlarging its size and making…Read More

Category: MacroNotes

Andy Xie is a former Morgan Stanley economist now living in China; The following is from the South China Morning Post: > The A-share market is collapsing again, like many times before. It takes numerous government policies and “expert” opinions to entice ignorant retail investors into the market but just a few days to send…Read More

Category: Think Tank

Oil! The price forecasts vary. Why?

David R. Kotok co-founded Cumberland Advisors in 1973 and has been its Chief Investment Officer since inception. He holds a B.S. in Economics from The Wharton School of the University of Pennsylvania, an M.S. in Organizational Dynamics from The School of Arts and Sciences at the University of Pennsylvania, and a Masters in Philosophy from…Read More

Category: Think Tank