Morning Report

Vital Statistics:

	Last	Change	Percent
S&P Futures	1419.6	4.9	0.35%
Eurostoxx Index	2477.1	10.8	0.44%
Oil (WTI)	97.13	1.2	1.21%
LIBOR	0.434	0.000	0.00%
US Dollar Index (DXY)	82.03	-0.422	-0.51%
10 Year Govt Bond Yield	1.84%	0.03%
RPX Composite Real Estate Index	191.8	0.4

Markets are stronger this morning on no real news. There are very no meaningful economic releases this week, except for perhaps the FOMC minutes which come out tomorrow.  The lack of news out of Europe has led to a benign environment for equities, which means that the 10-year continues its sell-off.  MBS are down 6 ticks as well.

HUD is doing another auction of distressed single family loans - $1.7 billion. These are loans primarily in Phoenix, Chicago, Tampa, and Newark. Given the amount of money that's being raised for distressed real estate, HUD should be shoveling this stuff out the door.  When the ducks are quacking, you gotta feed 'em.

Dick Bove of Rochdale Securities points out that the government's regulation of the banks is creating an opportunity for the shadow banking system - the firms who operate outside of the banking system (that would be us, for example). While he does worry about this laying the groundwork for the next crisis, in the meantime winners will emerge in the disarray. Take a look at the charts of Nationstar Mortgage (NSM), Impac (IMH), and Redwood Trust (RWT).  These stocks have been screaming. This is actually a very bullish sign for real estate - since the crisis began, the market has been dominated by Ginnie / Fannie loans. A bottom in real estate is the single most important factor to turn things around. The private label securitization market is the second.

The era of frothiness is over (at least according to the Economist).  What is interesting is that real estate is the cheapest relative to incomes in Japan, followed by Germany and the US.  The Canadian real estate bubble still has yet to burst. It will be interesting to see how their banking system handles it.