Posts filed under “Think Tank”

$ breaks lower/stock bears lowest since ’04

Notwithstanding $ comments from Bernanke (hollow I know based on the minutes yesterday) last week and policy and potential policy steps in Taiwan, Brazil, South Korea, Indonesia, Vietnam and Russia to reverse the strength in their currencies, the $ index is rolling over again to a fresh 15 1/2 month low and the $ is also lower against Asian currencies. In response, gold is rallying for the 17th day in the last 18 to a fresh record high and continues to extend its outperformance relative to the S&P 500 where bullishness on stocks grew significantly over the past week according to the II data. Bulls rose to 50.6% from 46.1% to the highest since Sept and Bears fell to 17.6% from 21.3% last week and 26.7% the week before. Bears are now at the lowest level since June ’04. ABC confidence fell 2 pts to -47. The MBA said purchases bounced 9.6% off a 12 yr low but refi’s fell 9.5% even as 30 yr rates held steady at 4.82%, a 6 month low.

Category: MacroNotes

30 yr FNMA mortgage rate falls below 4%

Today’s rally in MBS has taken the 30 yr FNMA coupon to below 4% at 3.98%, for the first time since May 20th. Combining the treasury rally with continued purchases by the Federal Reserve (where Bullard wants to extend past the expected expiration in March) and likely end of yr buying by banks has helped…Read More

Category: MacroNotes

Great 5 year note auction, they still love us

The record 5 yr $42b auction was excellent as the yield was 3-4 bps below the when issued and the bid to cover at 2.81 was the best since Sept ’07 and well above the average seen this year of 2.28. Indirect bidders totaled a solid 60.9%, above the average of 51.1% over the past…Read More

Category: MacroNotes

Confidence rises but labor market remains tough

Nov Confidence was 49.5 up from 48.7 in Oct and above estimates of 47.3 but still remains below the high this year of 54.8 in May. The rise was all on the Expectations side which rose 1.5 pts. Present Situation was down .1 to the lowest level since ’83. Those that said jobs were Plentiful…Read More

Category: MacroNotes

Economic data

According to the S&P/CaseShiller HPI of 20 cities, prices fell 9.36% y/o/y in Sept, a touch more than estimates of a decline of 9.1%. On a m/o/m basis, prices rose .3% to the highest price level since Jan ’08 but has it still 29% below the July ’06 record high. 9 cities of the 20…Read More

Category: MacroNotes

After a night of binge drinking, payback time

After a night of binge drinking there is always a price to pay the next day. After extending 8.9T yuan of bank loans ytd thru Oct vs 4.9T all of last year, its time to sober up for Chinese banks. The 5 biggest Chinese banks gave regulators their plans to raise capital to fill holes…Read More

Category: MacroNotes

Volume running below Friday’s anemic level

Following Friday’s expiration volume that was the 3rd lowest of the year (consolidated NYSE), today is on track to be slightly below even Friday. Today will also be the 3rd Monday in a row where the week started out with a bang based on the ‘easy for longer, short $, buy stocks trade.’ Two weeks…Read More

Category: MacroNotes

Bank of Israel unexpectedly raises rates

Unexpectedly, the Bank of Israel raised interest rates by 25 bps to 1%. While their policy has no relevance for the rest of the world in terms of its impact, the reasoning behind the move is worth a read to glean the thoughts of other central bankers. They said “1 yr forward inflation expectations increased…Read More

Category: MacroNotes

If You Take a Walk, I’ll Tax Your Feet

Dan Greenhaus is at the Chief Economic Strategist at Miller Tabak + Co. where he covers markets and portfolio theory. He has contributed several chapters to Investing From the Top Down: A Macro Approach to Capital Markets (by Anthony Crescenzi).

This is his most recent commentary:


Monday November 23, 2009

After two weeks or so in which the equity and bond markets had little in the way of corporate earnings and macroeconomic data to deal with, the economy will again take center stage beginning today with existing home sales. Over the course of the week, numerous data points will be released, each of which have the ability to push the market around especially in the reduced trading environment in which we currently find ourselves. Indeed, two of the five trading days in the most recent week saw volume of less than 4 billion shares, something that hasn’t occurred since the beginning of July when trading is expected to slow down. Additionally, we haven’t seen a 5 billion share day since November 4, thirteen trading days ago.

As for the data, housing will be in the forefront as the market gets new data on existing home sales (the largest part of the housing market), the Case-Shiller HPI (YOY comparisons are starting to get much, much easier) and new home sales (high correlation with the homebuilders which are about 4% below September month end levels). Perhaps most importantly though, oddly enough, is the first revision to third quarter GDP. Usually revisions, even to data as important as GDP, are treated as old news however the importance of growth in GDP these days cannot be overstated. To repeat, with an unemployment rate north of 10% and an underemployment rate north of 17%, it takes a considerable amount of economic growth in coming quarters to put the 15.7 million unemployed persons back to work. This was key to the expansion in 1983-1885 which brought the unemployment rate down from nearly 11% to 7% and one of the reasons that the path of growth coming out of this recession, by any measure, will be muted in relation to what the models would suggest.

Key to our argument is that the pace of economic growth going forward will not be robust enough to soak up the unemployed and underemployed persons which will serve to put a lid on the pace of consumer spending going forward. With respect to this outlook, we will be monitoring not just the headline reading – which we are expecting to show growth of 3% rather than the 3.5% originally reported – but also its composition. We have argued that a large part of the growth experienced int he third quarter can be attributed to government spending and while there is a case to be made (we make it) that the government has a role to play at the depths of a recession this deep, it will be up to the private sector to carry us forward. It just wont happen after three months.

Which brings us to our final point this morning. We have detailed our believe that any given modest adjustment to the tax code, by itself and at current levels, is not enough to destroy incentives to the degree some would assert. While we believe that taxes should always and forever be as low as possible, we do not believe that a few percentage point move in either direction, at current levels, dramatically affects revenue and incentives. However, there is no doubt that going forward, the tax structure is going to be more challenging for many Americans and we are dismayed to see our colleagues on the economic side of things who are calling for robust rates of growth from 4-5% in coming quarters on the back of a rebound in consumer spending levels dismissing this major hurdle for the private sector.

We bring this up because the list of tax increases that we know about apparently just got a big longer this weekend:

  1. We know that the top marginal tax rate is going to increase in 2011 to 39.6% from 35%.
  2. We know that the capital gains tax is set to increase 5 full percentage points while dividends are set to be taxed as ordinary income.
  3. We know that the upper income brackets will lose the ability to deduct mortgage interest from their state and local tax liabilities.
  4. We spoke on Friday of our horror at learning the payroll tax would increase to 1.95% for some individuals and we spoke earlier this fall of the impending tax related to the health care initiative.

We know of all these tax increases and we have no doubt that upper income bracket consumption patterns (the top quintile accounts for anywhere from 40-50% of spending) will be affected. We would doubt the argument that it is enough to derail economic growth but it seems at least fair to say that consumption will be affected.

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Category: Think Tank

If you blinked, you missed the US$ rally

Just like that, the US$ has given back all of last week’s modest gains and then some and gold is rising to another fresh record high in response. Assuming an 1100 open in the SPX and a gold price of 1165, the S&P 500 is down more than 7% this year in gold terms. Any…Read More

Category: MacroNotes