Morning Report

Vital Statistics:

	Last	Change	Percent
S&P Futures	1271.0	-2.0	-0.16%
Eurostoxx Index	2076.6	-2.4	-0.11%
Oil (WTI)	83.63	-0.4	-0.42%
LIBOR	0.468	0.001	0.21%
US Dollar Index (DXY)	82.89	0.328	0.40%
10 Year Govt Bond Yield	1.54%	0.02%
RPX Composite Real Estate Index	177.6	-0.1

Markets are flat after some disappointing economic data out of Europe. The Eurozone ISM survey came in at 46 and has been below 50 for the past 4 months, indicating a contraction in the manufacturing sector. The  US Non-Manufacturing ISM will be released at 10:00 am, with economists predicting a reading of 53.5. Equity markets seem to be stabilizing, so we are seeing Treasury investors back away from the ledge. MBS are lower as well.

Germany is becoming more amenable to some sort of pan-European banking coordination. Angela Merkel said: "So we will also talk about to what degree one has to bring the systemic banks under specific European supervision to keep national interests from playing too large a role." This will be easier said than done, as countries tend to get very nationalistic when talking about banks. Good luck getting the French on board.

CSFB is predicting the Fed will continue monetary stimulus, with a continuation of Operation Twist and buying mortgages. I am not sure why Operation Twist needs to be continued - Europe has done more to lower long-term interest rates than the Fed could engineer. There has been speculation that the Fed could do a hybrid of sorts, where it sells short term paper and buys mortgage backed securities directly.

NPR has an article on the future of the American Dream - homeownership. While most of the article discusses the psychological differences between homebuyers during the bubble and homebuyers before the bubble, they have an interesting chart from showing how much cheaper it is to buy than rent. The chart shows ratio of the cost of homeownership vs the cost of renting since 1986.  The costs are now equal, even if you ignore the interest deduction.

Chart:  Rent vs Buy