| Last | Change | Percent | |
| S&P Futures | 1455.0 | -2.1 | -0.14% |
| Eurostoxx Index | 2690.8 | -20.4 | -0.75% |
| Oil (WTI) | 92.82 | -0.3 | -0.32% |
| LIBOR | 0.305 | 0.000 | 0.00% |
| US Dollar Index (DXY) | 80.16 | 0.317 | 0.40% |
| 10 Year Govt Bond Yield | 1.84% | 0.01% | |
| RPX Composite Real Estate Index | 192 | 0.2 |
Stock markets are giving back a little after yesterday's relief rally on the fiscal cliff deal. Mortgage Applications fell 10.4% last week. 2013 forecasts are starting to trickle in from strategists - suffice it to say 1H13 looks rough, with the economy basically at stall speed.
There is quite a bit of economic data this morning. ADP forecast that 215k private sector jobs were created in December. Challenger and Gray reported that announced job cuts fell in December to 32,556. Initial Jobless Claims came in at 215k. The NY ISM came in at 54.3, indicating the outlook is barely positive. Later this afternoon, we will get the minutes from the Dec FOMC meeting.
Corelogic reported that shadow inventory - properties that are seriously delinquent, in foreclosure, or are REO that are not listed for sale - fell 12% in October to 2.3 million units, representing 7 month's supply. Almost half of the properties are delinquent and not foreclosed. The real question is how much this inventory will depress prices. Given that many of these units are in judicial states, the supply will be dripped out slowly. Also, if a home has been vacant for several years, it develops problems that make the repairs more than the property is worth. So, while it is in inventory, it is probably worth very little and isn't competing with the homes that most normal homebuyers are focused on.
So now that we have the fiscal cliff uncertainty out of the way, the markets should continue to rally, right? We, according to business leaders, no. And since the deal does not reduce debt, we are in danger of a downgrade, according to Moody's. The debt ceiling also was a taste of what is to come, with 3 gating items in the near future - the debt ceiling, the continuing resolution, and the sequestration. Obama has already laid a marker down saying that it can't be "all spending cuts." Given that Republicans have already made the tax hike concession, they are likely to take a tough negotiating stance on these items. So it could get ugly.
How did Obama get Boehner on board for tax increases? A simple warning. Stop opposing higher taxes for top earners or I will dedicate my second term to blaming Republicans for the global recession. And, blame is one of Obama's many talents.
Latest investment outlook from Bill Gross - Money for Nothin' Writing Checks for Free. The basic idea is that right now, the government is financing its deficit more or less for free. Why? Because the Fed is buying the treasuries (or at least 80%) through QE, and by statute, it gives its profit or losses back to the government. So the government is basically (in a roundabout way) paying interest to itself. Bill goes on to point out that this has been done before, and it has always ended badly. In the long run, inflation will rear its ugly head. Of course Paul Krugman would echo Keynes and say "in the long run, we are all dead." Bill also makes the good Austrian point - that Krugman has no answer for - that the unintended consequences of QE include mal-investments that will sow the seeds for the next bust. You can view this debate here.
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