Posts filed under “Think Tank”

Existing Home Sales

April Existing Home Sales totaled 4.68mm annualized, 20k more than
expected and up from a revised 4.55mm in March which was revised lower
by 20k, so taken together it’s about in line with the consensus. The
negative within the data was the months supply which rose to 10.2 from
9.6 and is now at the highest since Nov as both single family and
condos/co-ops inventory to sales ratio rose. The absolute # of homes for
sale rose 8.8% to 3.97mm and the NAR economist said that’s due to
seasonals, Whateva. The median price y/o/y fell 15.4% but rose a touch
m/o/m to $170,200. The NAR said 45% of sales were considered
‘distressed’ properties. Sales in the West which has seen most of the
distressed sales, rose 3.5% m/o/m and are up 19.4% y/o/y with a median
price down 21.8% y/o/y. The South saw sales up 1.8% m/o/m but down 8.9%
y/o/y. The Northeast rose 11.6% m/o/m but are down 10.5% y/o/y while the
Midwest fell 2% m/o/m and are down almost 10% y/o/y.

Category: MacroNotes

Moody’s says we Aaa-ok

Moody’s said that the US govt’s Aaa rating is stable “even with a significant deterioration in the US govt’s debt position.” They said due to a diverse and resilient economy, strong gov’t institutions, high per capita income, and a central position in the global economy, “Moody’s expects that US economic strength will emerge after the…Read More

Category: MacroNotes


Coincident with the CRB index at its highest level since late Nov, the Baltic Dry Index rising for an 18th straight day to the highest level since early Oct and all in the context of the Fed’s policy of quantitative easing, the implied inflation rate in the 10 yr TIPS this morning is up for…Read More

Category: MacroNotes

Dollar’s slide hurting foreign investors

Dollar’s slide hurting foreign investors With the US dollar trading at a five-month low, spare a thought for non-US investors invested in US stocks and bonds. The graph below compares the performance of the US 10-year Treasury Note in US dollar terms (green line) with the same bonds from the viewpoint of a European investor…Read More

Category: Think Tank

Yesterday’s stock market celebration of the possible return of the US consumer to the world stage again after the better than expected consumer confidence data continued overnight in Asia as any maker of goods headed for US shores rose sharply. The Conference Board # was a written questionnaire that was filled out weeks ago. The…Read More

Category: MacroNotes

Confidence Rises Among Consumers of Equities

Good Evening: After a brief bout of depression last week, the bi-polar patient otherwise known as Mr. Market went a bit manic today. Helping the old gentleman during Tuesday’s session wasn’t a dosage change to his medication, but rather some uplifting news about consumer confidence. A rush into beta-heavy stocks ensued, and even some of…Read More

Category: Markets, Think Tank


An example that the more the US govt gets involved in cleaning up the economic mess, the longer it will last, aka Japan, Fitch is forecasting that between 65-75% of mortgage loans that are modified will redefault after 12 mo’s. An example of the damage that can be done to a family by artificially modifying…Read More

Category: MacroNotes

Only a madman can get the $ to rally?

Who would have thought that the best friend of a US$ bull would be Kim Jong Il but it was North Korea’s missile and nuclear test that bounced the $ after 5 days of selling last week. Commodities are lower as a result and helping to pressure crude is the realization (as expected) that nothing…Read More

Category: MacroNotes

Words from the (investment wise) May 24, 2009

Stock markets kicked off the last week on a high note, but then the US parted ways with other markets as the remaining four days went downhill for American stocks. In contrast, global markets in general had only one down day on Thursday.

In addition to non-US equities, risky assets such as commodities, oil, gold, silver and platinum, and high-yielding currencies performed strongly amid fresh signs of “less bad” economic and financial conditions. However, safe-haven trades such as the US dollar and government bonds got whacked, especially following Standard & Poor’s decision on Thursday to mark down its medium-term outlook for the UK’s AAA credit rating from “stable” to “negative”. This raised concerns that the US may face a similar fate.


Source: New York Post, May 23, 2009.

As the implications of surging government debt levels move to center stage, the US Debt Clock makes for sobering reading. Click here or on the image below for the live version.


Source: US Debt Clock, May 23, 2009.

David Rosenberg, Merrill Lynch’s former chief North American economist, who has just commenced duty with buy-side firm Gluskin Sheff & Associates, commented as follows: “While the UK government debt-to-GDP ratio is around 40%, the rating agencies are looking at 100% in coming years. The US government debt/GDP ratio right now is near 65%, but clearly heading higher. It seems as though 100%+ is the trigger point for downgrades …

“So the view out there that the US is about to receive a credit downgrade despite the dramatic expansion of the government balance sheet is a little premature. For now, it makes for nice cocktail conversation but as super-sized as the deficit is (13% of GDP), there is enough room in the debt ratio that the US would likely have to run three more years of this sort of fiscal policy to be seen as a candidate for a downgrade.”

The performance of the major asset classes is summarized by the chart below.



Following the previous week’s bruising, the MSCI World Index last week gained 2.2% (YTD +2.3%) and the MSCI Emerging Markets Index 5.4% (YTD +31.6%).

Similarly, the major US indices reversed course, but in a much more subdued fashion, as seen from the fairly flat movements of the major indices: S&P 500 Index (+0.5%, YTD -1.8%), Dow Jones Industrial Index (+0.1%, YTD -5.7%), Nasdaq Composite Index (+0.7%, YTD +7.3%) and Russell 2000 Index (+0.4%, YTD -4.4%).

The Nasdaq remains the only major US index still in the black for the year to date, finding itself in the company of the majority of emerging and mature markets.

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Category: Think Tank

Securitization: Advanta and the Fiction of True-Sale

Below is a comment by LSU Professor Joseph Mason and Eric Higgins  on the evolving situation in the securitization market. While the folks at the Fed and Treasury pretend that they can breathe life back into the private label securitization market, the legal underpinnings of this OTC market are disintegrating under the weight of mounting losses and falling cash flow. –  Chris

Advanta and the Fiction of True-Sale

Joseph R. Mason and Eric J. Higgins†

On Monday, May 11, 2009, Advanta Corp. announced that their credit-card securitization trust would go into early amortization and that they will shut down all of the accounts in the trust. What the casual observer (and most regulators) missed is that this announcement is also endemic of the problems at the heart of securitization: the “true-sale” classification from which securitizations obtain their off-balance sheet treatment.

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Category: Think Tank