Morning Report - QE4EVA

Vital Statistics:

	Last	Change	Percent
S&P Futures	1427.7	0.5	0.04%
Eurostoxx Index	2625.6	-4.8	-0.18%
Oil (WTI)	86.29	-0.5	-0.55%
LIBOR	0.308	-0.002	-0.48%
US Dollar Index (DXY)	79.87	0.058	0.07%
10 Year Govt Bond Yield	1.71%	0.01%
RPX Composite Real Estate Index	191.3	0.5

Markets are flat after a mixed bag of economic data.  Retail sales increased .3% in November vs an expectation of .5%.  Initial Jobless claims fell to 343k and were well below the 369k expectation. The Producer Price Index showed inflation running lower than anticipated. The Bloomberg Consumer Comfort Index fell.  Bonds are down a few ticks and MBS are flat.

As expected, the Fed announced a Treasury buying program in its FOMC statement. $45 billion per month, until unemployment drops below 6.5% and inflation stays below 2.5%.  Bernake was careful not to characterize the 6.5% unemployment rate as NAIRU - or the non- accelerating inflation rate of unemployment. They took down their GDP projections from September, with their 2013 GDP forecast falling to a range of 2.3 - 3.0 from a range of 2.5 - 3.0.  They also took down unemployment as well, to a range of 7.3% to 7.7% from a range of 7.6% - 7.9%.  Inflation forecasts were lowered as well. Here is a video of the press conference.  Bonds reacted negatively to the announcement.  Biggest takeaway - the Fed has the pedal to the metal and they are writing the book as they go along.

Looks like no progress so far on the fiscal cliff. A recent poll shows overwhelming support for increasing taxes on the rich.  Business execs have been lobbying for a deal. Liberals are fighting spending cuts. Bernake mentioned in his press conference that the Fed does not have the ability to offset the negative effects to the economy if we go over.

A delay in BofA's jumbo deal shows just how hard it is to bring private capital back into the mortgage market. Private Label Securitizations were $3.5 billion this year, versus $1 trillion in 2006. Blame Dodd-Frank's proposed "skin in the game" rules, which combined with accounting and other requirements would require banks to hold capital against all of the underlying loans.

Transunion is forecasting mortgage delinquency rates to fall to 5.06% at the end of 2013 from 5.32% today. RealtyTrac reported foreclosure starts are at a 71 month low.

From the Department of Irony:  it turns out that the government's exit from GM hinges on the success of its newly-unveiled full size Silverado pickup.  I could have sworn I heard many in Washington claim that the reason GM hit the wall was because they were making these huge vehicles that "nobody wants."