Posts Tagged ‘mortgage spreads’

WHAT IF THE MARKET ISN’T A “WIN WIN”?

WHAT IF THE MARKET ISN’T A “WIN WIN”?

Courtesy of The Pragmatic Capitalist 

Two young women jumping on the beach

Apparently I am not the only one who took issue with David Tepper’s comments that the market is now in a “win win” situation. In today’s note, David Rosenberg says Tepper is not necessarily right. Rosenberg believes Tepper is ignoring a potential third scenario (aside from his “win win” scenarios). This of course, is the scenario I have repeatedly discussed – QE won’t work. Rosenberg says:

“Too bad we weren’t invited as a guest on CNBC last Friday to engage in a friendly debate with this portfolio manager because he didn’t outline the third scenario, either because he doesn’t believe it or he just plain didn’t contemplate it or he’s simply not positioned for it.  That third scenario is that the economy weakens to such an extent that the Fed does indeed re-engage in QE, but that it does not work. So the “E” goes down and the P/E multiple does not expand. Maybe it even contracts since it already has spent the past number of years reverting to the mean as are so many other market and macro variables (for example, the dividend yield, savings rate, homeownership rate and debt ratios). In this scenario, the stock market does not go up; it goes down.

Is it possible that QE2 won’t work? The answer is yes. How do we know? Well, because the first round of QE didn’t work.  After all, if it had worked, the Fed obviously would not be openly contemplating the second round of balance sheet expansion. If the objective was narrow in terms of bringing mortgage spreads in from sky-high levels, well, on that basis, it did help.”

I don’t entirely agree here. QE1 worked because we were in a different environment. The problem Bernanke was targeting in 2009 was one of bank balance sheets. Bank balance sheets were loaded with toxic assets so replacing these assets with cash was most certainly beneficial. It eliminated much of the risk associated with the banking system. As Bernanke said at the time, the point of QE was to alleviate pressures in the credit markets.  As we can see from credit spreads he certainly succeeded in this regard. But this is no longer the environment we are in. As I said last week there are no bank balance sheets to fix.  There is no…
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Trade Deficit Widens, Signals Weaker U.S. Economic Growth

Trade Deficit Widens, Signals Weaker U.S. Economic Growth

Courtesy of Rom Badilla at Bondsquawk

Stacked Red Cargo Containers

The trade deficit widened for the fourth consecutive month on a jump in imports of consumer goods from China, signaling weaker economic growth for the U.S.  The Department of Commerce revealed that the U.S. Trade Balance for June totaled a deficit of $49.9 billion from a revised prior period gap of $42.0 billion.  The widening was driven by both a 1.3 percent fall in exports and a 3.0 percent increase in imports.  The June number disappointed the market as economists forecasted a negative trade balance of $42.1 billion.

Since January of 2010, the trade gap has widened 42 percent suggesting that economic activity during that period was weaker than originally thought.  Imported goods from China and Mexico highlight much of the activity as the numbers reveal.  Year to date, the trade balance with China totaled a deficit of $119.5 billion, a year over year increase of nearly 16 percent.  Similarly, trade with Mexico reflects a negative balance of$33.1 billion for an increase of 56 percent from a year ago.

Today’s widening suggests that economic growth in 2010 may be weaker than originally estimated due to a change in assumptions of the calculation of GDP data.  BNP’s chief economists, Julia Coronado stated in an email to clients that the widening deficit “has been a significant weight on GDP in 2010.”  Furthermore she added that the “advance estimate of Q2 GDP had assumed a widening in the trade deficit in June; however the data showed an even greater deficit than assumed. Combined with other incoming source data that has been weaker than assumed, Q2 GDP looks to be tracking 1.5% q/q saar, down from the 2.4% advance estimate.”

In addition, the Mortgage Bankers Association released its weekly applications index.  For the week ending August 6, mortgage applications increased by only 0.6 percent from a prior period increase of 1.3 percent.  This anemic numbers partially coincides with stagnant mortgage rates, which influences demand for home purchases and mortgage refinancings.

According to Bankrate.com, the 30 Year Conventional National Average Rate was unchanged at 4.56 percent from the prior week.  Interestingly and given that interest rates are generally correlated, the 10-Year U.S. Treasury dropped 9 basis points to 2.82 percent during the same time-period.

With yesterday’s FOMC announcement that they will reinvest maturing mortgage and agency…
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Phil's Favorites

Growth in data breaches shows need for government regulations

 

Growth in data breaches shows need for government regulations

Who is responsible for protecting consumer data? Data breaches are now a regular occurrence, and governments are stepping in. (Shutterstock)

Courtesy of Michael Parent, Simon Fraser University

Do you remember when 40 million was a large number? Forty million dollars in sales, 40 million customers, 40 million Twitter followers, 40 million protesters — all once conveyed something substantial.

Were it only so for data breaches.

As an academic who has studied data governance for the past 20 years and worked with hundreds of boar...



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Zero Hedge

Anti-Impeachment Democrat Jeff Van Drew Defects To GOP

Courtesy of ZeroHedge View original post here.

Anti-impeachment Democratic Rep. Jeff Van Drew of New York has confirmed that he will switch parties and become a Republican, following a lengthy meeting with President Trump, according to Politico.

Van Drew is one of two Democrats who voted 'no' on opening the impeachment inquiry in the first place, and has been a vocal opponent of the effort, according to the repor...



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Chart School

Funds are getting ready to move out of USA

Courtesy of Read the Ticker

Just before the hang over in the US equity markets, money will move and take their well earned gains else where. Here is why.

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Charts in video.

US is in the late cycle boom.

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US stock market with the US dollar, they have risen together from 2012. A change of this will force money to move.


Cli...



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Kimble Charting Solutions

Euro Breakout In Play? Gold Bulls Sure Hope So!

Courtesy of Chris Kimble

The Euro has spent much of the past 2 years trading in a down-trend.

Though precious metals like Gold have fared well, this has been a bit of a headwind because it means that the US Dollar has remained firm.

Big Test In Play for the Euro

The Euro is testing a confluence of important support just as the downtrend is narrowing and ready for a “break”. That support includes lower falling wedge support and the Euro’s long term up-trend support line (see points 1 and 2).

If the Euro can succeed in breaking out at (3), it would be bullis...



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Insider Scoop

8 Healthcare Stocks Moving In Friday's Pre-Market Session

Courtesy of Benzinga

Gainers
  • Sarepta Therapeutics, Inc. (NASDAQ: SRPT) stock surged 36.4% to $137.00 during Friday's pre-market session. The market value of their outstanding shares is at $6.1 billion. The most recent rating by Janney Capital, on December 13, is at Buy, with a price target of $175.00.
  • GlaxoSmithKline, Inc. (NYSE: GSK) shares surged 1.1% to $46.44. The market value of their outstanding shares is at $112.9 billion. According to the most recent rating by UBS, on November 21, the current rating is at Buy.
  • AstraZeneca, Inc. (NYSE: ...


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Digital Currencies

Three Men Arrested In NJ For Running Alleged $722 Million Crypto Ponzi Scheme

Courtesy of ZeroHedge View original post here.

Authored by Kollen Post via CoinTelegraph.com,

United States authorities in New Jersey have announced the arrest of three men who are accused of defrauding investors of over $722 million as part of alleged crypto ponzie scheme BitClub Network, per a Dec. 10 announcement from the Dep...



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Members' Corner

Tobin Smith: Foxocracy, the 2020 Election, and the Stock Market

 

For decades, Fox News has been spreading false information and hooking its audience into an angry, xenophobic and paranoid worldview. It's no mystery that Fox was instrumental in the 2016 election -- but how did it do it? How did it gain so much influence? Tobin Smith, CEO of Transformity Research, Inc. and former Fox News contributor and talk show host, explores this phenomenon and discusses Fox News’ emotionally predatory and partisan propaganda media strategies and tactics in his new book, ...



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Lee's Free Thinking

Chart Shows the Fed Ramping Up Not QE - Funding Almost All Treasury Issuance

 

Chart Shows the Fed Ramping Up Not QE – Funding Almost All Treasury Issuance

Courtesy of Lee Adler, Wall Street Examiner 

The Fed is ramping up “Not QE” .

The Fed bought $2.2 billion in notes today in its POMO, “not QE,” operations. Actually $2.15 billion because they sold back a whole $50 million. Must have been a little glitch in the force.

This brings the Fed’s total outright purchases of Treasuries to $170 billion since it started Not QE, on September 17.

It also did $107 billion in gross new repo loans to Primary Dealers to buy Tre...



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The Technical Traders

VIX Warns Of Imminent Market Correction

Courtesy of Technical Traders

The VIX is warning that a market peak may be setting up in the global markets and that investors should be cautious of the extremely low price in the VIX. These extremely low prices in the VIX are typically followed by some type of increased volatility in the markets.

The US Federal Reserve continues to push an easy money policy and has recently begun acquiring more dept allowing a deeper move towards a Quantitative Easing stance. This move, along with investor confidence in the US markets, has prompted early warning signs that the market has reached near extreme levels/peaks. 

Vix Value Drops Before Monthly Expiration

When the VIX falls to levels below 12~13, this typically v...



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Biotech

Why telling people with diabetes to use Walmart insulin can be dangerous advice

Reminder: We are available to chat with Members, comments are found below each post.

 

Why telling people with diabetes to use Walmart insulin can be dangerous advice

A vial of insulin. Prices for the drug, crucial for those with diabetes, have soared in recent years. Oleksandr Nagaiets/Shutterstock.com

Courtesy of Jeffrey Bennett, Vanderbilt University

About 7.4 million people ...



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Mapping The Market

How IPOs Are Priced

Via Jean Luc 

Funny but probably true:

...

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Promotions

Free eBook - "My Top Strategies for 2017"

 

 

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Phil has a chapter in a newly-released eBook that we think you’ll enjoy.

In My Top Strategies for 2017, Phil's chapter is Secret Santa’s Inflation Hedges for 2017.

This chapter isn’t about risk or leverage. Phil present a few smart, practical ideas you can use as a hedge against inflation as well as hedging strategies designed to assist you in staying ahead of the markets.

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