Posts filed under “Think Tank”

FHFA home price index

The May FHFA home price index rose .9% from April and is better than the expected decline of .2%. The y/o/y decline is 5.6%. From its record high in April 2007, prices are down 10.7%. This data measures only those single family homes that have mortgages backed by FNM and FRE and covers every region of the country. The S&P/Case-Shiller in contrast includes condo’s, jumbo loans and focuses on the 20 big cities. If there is a question on which index is more relevant to the markets, the US Treasury answered it when they used the Case-Shiller as a benchmark indicator in their stress tests of 19 large banks. The banking sector and every home owner should be so lucky to have home prices down just 10.7% from its highs.

Category: MacroNotes

Rate hike odds post Bernanke testimony

Following two days of testimony (and the WSJ editorial) from Bernanke where he repeated that interest rates will stay low for an extended period of time, that inflation will remain subdued for a few years more and that unemployment will remain elevated for a period of time, the odds of a year end rate hike…Read More

Category: MacroNotes

King Report: Paradox of Corporate Cost Cutting

> Because Ben is back in funny money mode, stocks & commodities are rallying.  But the dollar and the Chinese are not happy; and they are clearly expressing their anger. The FT: China will use its foreign exchange reserves, the largest in the world, to support and accelerate overseas expansion and acquisitions by Chinese companies,…Read More

Category: Think Tank

Bernanke Campaigns for Reappointment

Good Evening: Stocks were poised to correct their recent gains today, but a late rally extended the winning streak for both the Dow and NASDAQ to seven straight. The earnings news was deemed positive by market participants, though the bottom line “beats” came even as top line revenue estimates fell short. Cost cutting can always…Read More

Category: Markets, Think Tank

Dennis Gartman, Ben Bernanke & Congress

Dennis Gartman’s letter today hit so many key points with an economy of words that I have excerpted it and scratched my own text on Bernanke’s testimony. Dennis doesn’t mention the changes in “velocity” which is too technical a subject for this missive. Maybe later. He does perfectly characterize our Congress. Go, Dennis, go. Give…Read More

Category: Federal Reserve, Think Tank

All’s Not Well in Kindleland

Here’s an excerpt from my latest update on the slow transition from printed books to electronic books. The course of technological innovation never did run smooth: When it comes to ebooks, no one seems to be able to keep a level head. Publishers are in self-induced swivet; Amazon is being a shortsighted bully, and the…Read More

Category: Think Tank

Bernanke’s testimony

Bernanke in his speech is saying most of what we already know about the economy and specifies that its the household/spending outlook that is the “important downside risk” which we know is the disease of the credit crisis. He says the unemployment rate will remain elevated even as the economy recovers (we need to generate…Read More

Category: MacroNotes

Ben comes to the Hill

If the front page article of today’s WSJ is any indication, Bernanke’s testimony on the economy and monetary policy will be anything but boring. Bernanke lays the groundwork for some of what he’ll say in an editorial that lays out “The Fed’s Exit Strategy.” It sounds great but if the Fed gets the timing wrong,…Read More

Category: MacroNotes

Should the Fed be Responsibly Irresponsible?

This week I offer two short essays for your reading pleasure in Outside the Box. The first is from Ambrose Evans-Pritchard writing in the London Telegraph. He gives some more specifics about the situation in Europe I wrote about this weekend.

He ends with the following sober quote: “My awful fear is that we will do exactly the opposite, incubating yet another crisis this autumn, to which we will respond with yet further spending. This is the road to ruin.” This is a must read.

And the second piece? Last week in Outside the Box we looked at an “Austrian” (economic) view of the inflation/deflation debate from my friends at Hoisington. This week we look at the 180 degree opposite with Keynesian aficionado Paul McCulley, who argues that the Fed should be Responsibly Irresponsible and target higher inflation. This essay has brought some rather heated arguments in print and from some of the people who will be with Paul and me at the annual Maine fishing trip. And you can bet I will put them all together with a little wine to see how the argument ensues. I will report back.

And Paul ends with a great and what is a quite controversial line, “Yes, as Bernanke intoned, there are no free lunches. But no lunch doesn’t work for me. Or the American people. While it is true, as Keynes intoned, that we are all dead in the long run, I see no reason to die young from orthodoxy-imposed anorexia.”

And finally, this one last note on European banks: “European banks including Societe Generale SA and BNP Paribas SA hold almost $200 billion in guarantees sold by New York-based AIG allowing the lenders to reduce the capital required for loss reserves.” (Bloomberg). Want to think about the US taxpayer paying to bail out Europeans banks? Think that might be a tad controversial? This could be explosive.

John Mauldin, Editor
Outside the Box

Fiscal ruin of the Western world beckons
By Ambrose Evans-Pritchard

For a glimpse of what awaits Britain, Europe, and America as budget deficits spiral to war-time levels, look at what is happening to the Irish welfare state.

Events have already forced Premier Brian Cowen to carry out the harshest assault yet seen on the public services of a modern Western state. He has passed two emergency budgets to stop the deficit soaring to 15pc of GDP. They have not been enough. The expert An Bord Snip report said last week that Dublin must cut deeper, or risk a disastrous debt compound trap.

A further 17,000 state jobs must go (equal to 1.25m in the US), though unemployment is already 12pc and heading for 16pc next year.

Education must be cut 8pc. Scores of rural schools must close, and 6,900 teachers must go….Nobody is spared. Social welfare payments must be cut 5pc, child benefit by 20pc. The Garda (police), already smarting from a 7pc pay cut, may have to buy their own uniforms. Hospital visits could cost £107 a day, etc, etc….

No doubt Ireland has been the victim of a savagely tight monetary policy – given its specific needs. But the deeper truth is that Britain, Spain, France, Germany, Italy, the US, and Japan are in varying states of fiscal ruin, and those tipping into demographic decline (unlike young Ireland) have an underlying cancer that is even more deadly. The West cannot support its gold-plated state structures from an aging workforce and depleted tax base.

Read More

Category: Federal Reserve, Think Tank

Bulls Win Today; Watson’s Example is Timeless

Good Evening: U.S. stocks stretched their recent winning streak to six straight today, as some good economic news and some potential help for CIT combined to lift share prices. With more investors becoming convinced the worst is over for our economy, the major averages all tacked on gains of 1% or more. The S&P 500…Read More

Category: Markets, Think Tank