Morning Report - Boring Boxing Day

Vital Statistics:

	Last	Change	Percent
S&P Futures	1832.1	3.0	0.16%
Eurostoxx Index	3072.9	2.0	0.06%
Oil (WTI)	99.19	0.0	-0.03%
LIBOR	0.247	0.001	0.41%
US Dollar Index (DXY)	80.48	-0.076	-0.09%
10 Year Govt Bond Yield	2.98%	0.01%
Current Coupon Ginnie Mae TBA	103.7	-0.4
Current Coupon Fannie Mae TBA	102.8	0.0
RPX Composite Real Estate Index	200.7	-0.2
BankRate 30 Year Fixed Rate Mortgage	4.51

Stocks are higher this morning on no real news. Today is Boxing Day, which means a holiday for a lot of countries. Bonds are down again, with the 10 year bond yield flirting with a 3 handle.

Initial Jobless Claims fell to 338k last week. The holidays invariably cause distortions in the data so it is tough to read too much into it. 

New Home Sales came in at 464k, a little better than expected. Sales in the Northeast and the West rose the most, while the South and Midwest lagged. At the end of October, there were an estimated 167,000 homes for sale, representing a 4.3 month supply. The median price jumped to 270,900 from 245,200 a year ago.

Tony Crescenzi of PIMCO believes the worst of the selling is over. Notes that speculators have gone from huge net long positions in Eurodollar and Treasury futures to huge net short positions. The headline is misleading - he isn't bullish on bonds in that he thinks yields are going higher, but he thinks the big dislocation happened last summer. In other words, mortgage rates aren't expected to make another big sudden move higher.

That said, pretty much everyone is in agreement that the economy is improving and 2014 could be the year that we finally break out of the post-crash malaise. You might want to note the date, because I am going to agree with a Brookings Institute economist for probably the first time in my life. Of course conventional wisdom is not always right - here were the big surprises of 2013.

The Republican establishment is working to take back control of the party from the tea party activists that have controlled it since obama took over. What does that mean? No more dingbat candidates for the Senate. Or as the Chamber of Commerce strategist Scott Reed says: "No more fools on our ticket." Actually I am surprised it took this long. Boehner doesn't like them and he has all sorts of tools to bring them to heel. Maybe he should take away someone's parking spot and put it in Anacostia as a way to send a message. 

Speaking of Congress, if it doesn't act, mortgage relief will get a lot more costly. Beginning next year, anyone who has principal forgiveness on a short sale will get a tax bill. If Mel Watt decides to go the principal forgiveness route for conforming mortgages held by the government, he may find people less willing to play along. Also, extended unemployment benefits are scheduled to end starting next year, but there is a possibility that Congress will do something next year. If the benefits do lapse, we should see a drop in the unemployment rate as previously unemployed people take part-time jobs.