| Last | Change | Percent | |
| S&P Futures | 1414.5 | -1.5 | -0.11% |
| Eurostoxx Index | 2578.6 | -22.8 | -0.88% |
| Oil (WTI) | 86.63 | 0.7 | 0.81% |
| LIBOR | 0.311 | 0.001 | 0.32% |
| US Dollar Index (DXY) | 80.35 | -0.062 | -0.08% |
| 10 Year Govt Bond Yield | 1.61% | -0.01% | |
| RPX Composite Real Estate Index | 190.5 | -0.4 |
Louis and I did a podcast on the fiscal cliff and the economy. You can listen to it here.
Markets are mixed this morning as optimism on the fiscal cliff is overshadowed by European events. Mario Monti is resigning, creating an opening for Silvio Berlusconi to return. Italian bond yields are up 31 basis points to 4.83%. Japan is officially in a recession again (its third in the last four years) as 3Q GDP shrank at a 3.5% annualized rate. Bonds and MBS are up small.
Generally, we have a data-light week coming up, with inflation numbers dominating. The FOMC rate decision is Dec 12.
The details of a deal on the cliff are taking shape. On the revenue side, either a "split the difference" between the current top rate and 39.6%, or a redefinition of what is considered "rich," to 375k - 500k. Entitlement cuts will be part of the package. Ezra Klein reported Friday that the deal will probably be an increase in the top rate to 37% and an increase of the Medicare eligibility age to 67. Both sides seem to be inching closer together, and we'll see if Boehner can pull his caucus together when they meet on Wed.
Ever since the financial crisis began, "uncertainty" has become the buzzword thrown out to explain why the economy continues to limp along. Two professors from Chicago and Stanford tested the hypothesis that uncertainty is driving the economy by regressing economic variables against the number of times the word "uncertainty" was mentioned in the press. They found a statistical relationship between the two, and estimate that the upturn in uncertainty caused a 16% drop in private investment and 2.3 million jobs. Of course there is a big risk of confusing correlation and causation. Does uncertainty cause a bad economy, or does a bad economy increase the risk that government will do something (either good or bad) in an attempt to fix the economy?
New lawsuits continue to be filed against the banks for the sins of the subprime crisis. Some in the banking industry fear the cost could reach $300 billion. Investors are now suing the trust banks for failing to police issuers. This is a new front, as the trust banks merely hold the securities and collect / disburse payments for a nominal fee. Servicers, are you next?
No comments:
Post a Comment