| Last | Change | Percent | |
| S&P Futures | 1380.2 | 4.5 | 0.33% |
| Eurostoxx Index | 2477.4 | -2.4 | -0.10% |
| Oil (WTI) | 85.55 | -0.5 | -0.60% |
| LIBOR | 0.31 | 0.000 | 0.00% |
| US Dollar Index (DXY) | 80.97 | -0.055 | -0.07% |
| 10 Year Govt Bond Yield | 1.61% | 0.00% | |
| RPX Composite Real Estate Index | 192.8 | 0.3 |
Stock markets are higher this morning after last week's post-election sell-off. Bonds are closed for Veteran's Day. The government also has the day off, so there are is no major economic news.
Post election, all eyes turn to the fiscal cliff. There appears to be a growing consensus that we can leave rates unchanged for the top and limit deductions. Partisan posturing and political jockeying will make the markets a miserable place for the next couple of months. Capital gains and dividends remain a wild card. The obamacare surtax will happen regardless, so financial income is taking a hit right off the bat.
The Basel III requirements scheduled to take effect on Jan 1 have been pushed back to some time in the future. SIFMA and the MBA agree with the decision.
So how will the election affect the markets and real estate? I suspect FHFA Chairman DeMarco will be out of a job, which will pave the way for principal reductions on F&F/Ginnie loans. If they don't think this through, they could face a deluge of homeowners suddenly finding themselves "unable" to make their mortgage payment.
Geithner is out for obama II, and the favorite for replacement seems to be Jack Lew. Lew is a "middle of the road" candidate that has already been unanimously confirmed by the Senate in 2010 for the OMB job.
If we go over the fiscal cliff, we will undoubtedly have a 1H recession, which could result in a 1.25% 10-year. Which means the refi boom will continue to have legs. If FHFA starts modding underwater loans to LTVs of 1.0, we should see some refi activity, especially in the FHA space. That said, if CFPB doesn't come out with a bright line definition of a QM, refinancing these folks may prove to be difficult.
Regarding a 1H recession, earnings this quarter were not great, and Sandy will probably lop 1% to 1.5% of of 4Q GDP. Taxes are going up, so we should start handicapping a 1H recession. Will it affect housing? My sense is no, the bottom is in, and the recession will be felt more in cap goods / the energy patch than in housing. JP Morgan downgraded CAT this morning based on the expected negative impact the election will have on energy and mining.
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