Morning Report

Vital Statistics:

	Last	Change	Percent
S&P Futures	1398.0	8.1	0.58%
Eurostoxx Index	2435.4	36.1	1.50%
Oil (WTI)	92.66	0.5	0.50%
LIBOR	0.438	-0.001	-0.23%
US Dollar Index (DXY)	82.13	-0.140	-0.17%
10 Year Govt Bond Yield	1.62%	0.06%
RPX Composite Real Estate Index	188.8	0.3

Stocks are higher this morning on hopes for further stimulus measures out of the ECB after a disappointing factory orders report in Germany. Spanish bond yields continue their descent from their late July highs. The 10-year is down a point and MBS are down about 1/4 of a point.

FHFA Acting Chairman Ed DeMarco has responded to Congress regarding principal reductions on Fannie and Freddie loans. His reasons for resisting principal reductions are largely due to strategic defaults. In other words, he is afraid that people who are current on their mortgage and can afford the payment will stop paying in order to get a principal reduction.  According to the FHFA study under the most favorable model-based assumptions, it would take anywhere from 3,000 to 19,000 strategic defaults to turn the program into a net loss for taxpayers. Will this satisfy DeMarco's #1 critic? Alas, probably not.

The National Association of Home Builders has released their improving market index, which showed 80 MSAs were characterized as improving (about 25%).  "With nearly one quarter of all U.S. metros currently designated as improving housing markets, there is growing recognition among consumers that now is an opportune time to consider a home purchase"  Of course they are talking their own book, but still it is another positive data point. They do note that the tight lending environment is acting as a drag on activity.

I generally don't get too political, but the weakest Romney attack award goes to .... Bloomberg with this lame story about the Seat Pagine LBO. For starters, tax evasion is a national sport in the Mediterranean countries, and to think the Italians would be miffed that Bain used an Luxembourg-based entity to minimize taxes is ridiculous.  Second, the consortium was correct to recognize that the internet was about to destroy the value of the yellow pages and a sale, especially when media valuations were sky-high in the late 90s, was the right thing to do.  The fact that (a) the Italian government sold before the bubble was inflated and (b) Telecom Italia was in empire-building mode in the dying days of the internet bubble is neither Bain nor Romney's fault. My favorite line was "Bain got wind of the public action through the Italian unit of Bain & Co..."  How sinister sounding - like Romney got a clandestine call saying "Blue Horseshoe loves Annacott Steel." It was a public auction, part of a long-term announced plan by the Italian government to sell state assets in order to get their debt levels down for EU integration. I guess I "got wind" of tomorrow's 10-year Treasury note auction from today's Journal too.