| Last | Change | Percent | |
| S&P Futures | 1431.2 | 4.2 | 0.29% |
| Eurostoxx Index | 2637.4 | 9.4 | 0.36% |
| Oil (WTI) | 87.76 | 0.6 | 0.64% |
| LIBOR | 0.309 | 0.000 | 0.00% |
| US Dollar Index (DXY) | 79.49 | -0.077 | -0.10% |
| 10 Year Govt Bond Yield | 1.78% | 0.01% | |
| RPX Composite Real Estate Index | 191.7 | 0.1 |
Markets are higher this morning on optimism for a deal on the fiscal cliff. The President made some tax concessions to move closer to Speaker Boehner's position. The current account deficit increased more than expected to 107.5B. Bonds continue to sell off, although it looks like the 10-year yield is bumping up against resistance. Certainly the announcement of QE4EVA was a case of "buy the rumor, sell the fact." FWIW, that is my gut feeling about stocks and the fiscal cliff as well.
Both sides are coming closer on a deal to avoid the fiscal cliff. Obama has lowered his revenue target to $1.2 trillion from $1.4 trillion and moved up the threshold for higher taxes to $400k from $250k. $1.22 trillion will be cut in spending, from a variety of areas. The second biggest component of "savings" would be interest saved on debt that isn't going to be issued. Only in DC, would that count. It would also raise the debt ceiling enough to cover two years and the 2014 midterms. On capital gains, the top tax rate would be 20%. Raising the medicare eligibility age from 65 to 67 seems to be off the table. The sequester will be replaced by another sequester. Extended unemployment benefits would continue. One other surprising tidbit - the President wants to replace the expiring payroll tax cut with other stimulus measures such as infrastructure spending. Which means everyone's taxes are going up, not just the rich.
The FHA plans to sell 40,000 non-performing loans over the next year to help improve its finances, which would make them the biggest seller of distressed paper, according to Louis Amaya of National Asset Direct. One interesting wrinkle is that it is a back-door way to achieve principal mods. Acting FHFA Chairman Ed DeMarco has steadfastly refused to allow FHA to reduce principal when modifying delinquent loans. However, if they sell the loans, the investor is free to make whatever modification makes sense. Under a U.S. Treasury program, investors can be reimbursed as much as 63 cents on the dollar for principal forgiveness. Steve Schwartzman of Blackstone said they are "loading the boat." with delinquent loans, both for rentals and a macro bet on a housing recovery.
At 10:00 am, we will get the National Association of Homebulder's Housing Market Index. This is a sentiment indicator of the homebuilders, which has been skyrocketing since housing bottomed earlier this year. According to Trulia, the Millenials are planning to ditch the rentals to buy a house in the next two years. As I have stated in other posts, household formation numbers have been highly depressed during the last 5 years, not because of demographics, but because of the economy. That represents a lot of pent-up demand that will be unleashed as the economy recovers.
Chris Whalen of Carrington discusses how the lending environment has changed and how the "regulatory arbitrage" favors the smaller independent lenders. The downside is that mortgages will remain tough to get courtesy of the CFPB, especially in judicial states with high value properties.
Fun useless link of the day - put your own house in a snow globe. h/t Rob Chrisman.
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