Mortgage Applications Plunge: Composite Down 9.5%, Refinance Index Down 11.4%, Lowest Since July 2009Submitted by Tyler Durden on 02/16/2011 - 08:11
The patently obvious deterioration in housing just took one big step for the worse, after the Mortgage Banker Association reported that the Market Composite Index, a measure of mortgage loan application volume, decreased 9.5 percent on a seasonally
adjusted basis from one week earlier. The Refinance Index decreased
11.4 percent from the previous week and is the lowest Refinance Index
recorded in the survey
since the week ending July 3, 2009. The seasonally adjusted
Purchase Index decreased 5.9 percent from one week earlier. And for the obligatory quote that confirms that Ben Bernanke's plan to fix the economy by raising rates or something, is about to blow up: "Mortgage rates remained
above 5 percent last week, up almost a full percentage point from their
October lows, and refinance
volume continued to drop," said Michael Fratantoni, MBA's
Vice President of Research and Economics. "Applications for home
purchases also declined on a seasonally adjusted basis. Buyers
have not returned to the market as rising rates have reduced
affordability, to some extent." Bottom line: few people care to refinance (which is also making the QE Lite component of QE redundant), and even fewer people want to buy homes. So, again, what recovery?
RANsquawk European Morning Briefing - Stocks, Bonds, FX etc. – 16/02/11
The small country of Bahrain has promptly been displaced in the docket of revolutionary news, by recent developments in Iran. Yet the peace on the Saudi island neighbor is deteriorating as demonstrations escalate. According to ABNA.ir, "Tens of Bahraini Army jeeps surrounded the main square and attacked the protesters. Thousands of Anti-Government protesters filled a main square in the Bahrain capital due to discriminations posed by the government. Security forces at first appeared to hold back as the crowds poured into Pearl Square in Manama. After a while, in an extreme violent action the army released more than 50 war vehicles to the square, which resulted in shameless and violent attacks against the righteous freedom seekers. The dramatic move Tuesday comes just hours after a third protester died in clashes with police in the strategic Island Kingdom, which is home to the U.S. Navy's 5th Fleet." So while we wait for Al Jazeera or anyone else for that matter to start covering the protests in Manama (which could be a while: the world has suddenly developed revolution burn out), below we present a photographic update from the island nation.
In advance of tomorrow's FOMC minutes releasae (2pm Eastern) Goldman shares some interesting thoughts on what may be disclosed. The key variable is whether, just like in the minutes from early 2010, the Fed will once again jump the shark (what is the creature of jump choice when jump is done twice in one year?) and commence discussions of exit strategy. If, as Goldman expects this might be the case, expect the market to plunge as there is nothing organic about this Fed liquidity driven pump of over 600 S&P points. To wit: "Is the FOMC turning its attention back to its ultimate exit strategy? It is premature to assume that the FOMC has any preset schedule for the “exit strategy” that was discussed widely—inside and outside the Fed—in early 2010. After all, the LSAP program is only about half completed, and the default assumption appears to be that it will run its course until mid-2011. That said, it is never premature for the committee to revisit its options, particularly during the longer two-day sessions that allow time for more strategic thinking. Thus, we would not be surprised to see some discussion, if only a brief review of familiar tools and strategies for the exit strategy that will ultimately be needed. The mere existence of such a discussion would not be meaningful in itself, though obviously the language surrounding it would have the potential for market impact, whether justified or not."
Jan Hatzius is the bellwether of the sellside economist crowd. When he was bearish (2009), most were bearish, when he turned bullish (early half of 2010), everyone else followed suit. Then he turned bearish again (early August 2010) and convinced his friend and former co-worker Bill Dudley to launch QE2. Then, in December, he turned very bullish again. And now we are here. We expect Hatzius to be fake bullish for another 3 months max, at which point he will have no choice than to start telegraphing to Jon Hilsenrath that it is time for QE3. In the meantime, for those who are not too familiar with his work, here is an extended interview with Bloomberg TV, in which the GS head economist talks about Goldman's call for 18% gain in stocks this year as well as trends in jobs, inflation and other data indicators.
And so our bureau of central planning has once again made distressed investing a relic of the past. Famous distressed PM Bruce Karsh, who runs Oaktree's distressed investment fund, has just decided to return $3 billion of the fund's $10 billion previously raised from investors due to a lack of investing opportunities. Basically, in preventing failure for a select few, Bernanke made failure impossible for everyone (which begs the question: how long before the specialized restructuring boutiques of the world - the Houlihan Lokeys, the Miller Buckfires, and the Alix Partners, continue to exist, let alone sustain on IPO any time now hopes). So after Bernanke destroyed long/short, sometimes incorrectly called "value", investing, he has now eliminated another formerly profitable vertical of the market that rewarded spotting arbitrage opportunities. The only funds that will remain soon as the Long-onlies and the momos of the world - also known the dumbest money imaginable. And when this whole thing crashes, and only shorts would be able to make money, there will be no-one making money, as there will be no capital available to short strategies. Bernanke's plan of killing all the bears has succeeded. Next up: it's the bulls turn.
After close today, Trian Fund Management, Nelson Peltz' asset management company, filed a 13D indicating the fund had amassed a 10 million (7.9%) share stake in FDO, and more importantly, expressed a vague, preliminary, non-binding and highly-contingent interest in acquiring discount retailer Family Dollar (closing regular hours at $44). As the proposed price indicated in the letter is $55-60, the shares are expectedly surging, meaning the letter alone resulted in nearly a 20% ($13) gain for Peltz 10 million share investment: $130 million for a few minutes worth of work: not bad. Yet is this anything more than a red herring? After all these kinds of fully contingent letters were all the rage during the bubble years, when funds would "express a purchase interest" with so many contingencies Arnold could drive his Hummer through all the "outs." As soon as the stock surged, the letter writer (and more often than not, the cabal of silent co-investors) would cash out, and slowly the buying interest would evaporate, with the price slowly dropping back to historical levels. In fact, for Trian this is not the first time - the company did an almost identical thing with Chemtura back in 2008, only to completely leave the company in March of 2009, months ahead of CEM's filing for bankruptcy (resulting in major losses for Trian). Which is why we urge readers to be very careful before chasing into FDO stock here: we are very concerned that this is nothing more than simply another attempt on behalf of Trian to stir up buying interest in which to sell its 10mm holdings with no real acquisition interest, since with all the non-binding clauses it is extremely difficult to take this letter seriously.
Still hungover from Saturday to comprehend what happened with the Great Obama Budget presented yesterday? Then this video is for you. Using shot glasses of Jack Daniels it takes just under two minutes to lay out in layman's terms not only the essence of the proposed budget, as well as the "Draconian" cuts contemplated, but also insinuates heavily about the level of blood in the alcoholstream of those government workers who came up with the "50% rise in government revenues over 2 years" assumption.
In Britain, they call it "DADA." It means Decide. Announce. Defend. Abandon. In America we call it "NIMBY" - "not in my back yard." It applies to all kinds of infrastructure construction, from airports to roads. But it is electric and gas utilities that feel the brunt of local opposition. These localized forces of "no" have caused the buildup of a substantial backlog of infrastructure projects, not only for sexy green-energy technologies but also for the traditional needs of energy production and distribution - pipelines, power lines, replacement of aging equipment and the construction of new facilities to meet new loads and move the energy infrastructure into the 21st century. It also includes old-fashioned technology - meters, switches, transformers - to get new green electricity to the consumer. A new study, from a group advocating upgrading energy facilities, says the pent-up need for utilities to start these projects is so great that if the impediments can be dealt with, 250,000 jobs can be created almost immediately, without action from Congress or a raid on the federal treasury.
In what can only be described as some surreal witches coven, earlier we had Napoleon Dynamite, Dr. Hashimi, ProAm Golf wannabe Champion Kernen, and of course Russian recovery expert Liesman and Koolaid allergic Santelli all together, going at each other. And while the sideshow was the completely discredited former Fed governor Mishkin accusing Roubini about 10 times of being depressing, with Roubini taking an old adage and applying it to our times, saying that "the weather is the last refuge of scoundrels", the real soundbite was Rick Santelli telling Liesman (about 10 minutes into the video), that "Steve you fight like a girl." Soap opera time.
Now that we know that JPM had a statistically impossible 97% win track record in 2010, we can't help but drool in jealousy. However, we wouldn't be doing our journalistic duty if we didn't inquire just how much did JPM brush under the rug on their underwater gold and silver short exposure, and whether or not Blythe Masters' bank is even accounting under GAAP for the now documented price suppression scheme? After all, Blythe is the master brain behind such no margin "bearish exposure" products as CDS - it would be only logical that she discovered some way to make her massive paper silver short carried on the books at a minute fraction of gross notional exposure. Furthermore, it is no wonder that today Gary Gensler demanded a pound of flesh for his kickbacks to the banker lobby which allowed JPM to be grandfathered in with their huge short positions (claiming the CFTC would need to fire hundreds of worthless staffers if the corrupt agency's 2011 budget wasn't lifted, despite O'Malia's protest). We ask all this because despite all the unprecedented manipulation: the close banging, the paper shorts, the AM-PM session divergence, silver is now at $30.80, and is just 12 cents away from its post-Hunt Brothers record close, which was printed on New Year's Day at $30.92.
Bernanke is kidding himself, the House Budget Committee and the entire 60 Minutes audience when he says that he can raise interest rates in 15 minutes. He can raise rates but it would be the INSTANT end of the economy. I’ve read the book: “Temple of Secrets: How the Federal Reserve Runs the Country”, and a large portion of the book was dedicated to Paul Volcker’s 21.5% rate hike. The adverse effects on the economy were disastrous. Businesses stopped borrowing, or went broke borrowing, unemployment went through the roof, housing was crushed, large purchases of automobiles crumbled.
JP Morgan Says It Had A Perfect Trading Second Half In 2010, Lost Money On Just 8 Days In 2010, Made Money On 96.9% Of Trading DaysSubmitted by Tyler Durden on 02/15/2011 - 14:49
For those wondering why nobody wants to trade ever again on what are now purely legalized fraud markets (and thank god Ze Germans are dumb enough to buy them at any price), here is the reason:
- JPMORGAN RACKS UP THREE PERFECT TRADING QUARTERS IN 2010
- JPMORGAN TRADERS HAD PERFECT SECOND HALF, BANK SAYS
- JPMORGAN TRADERS LOST MONEY 8 DAYS IN 2010, DOWN FROM 42 IN '09
In other words, of 260 trading days in 2010, the firm lost money on 8, or 3.1%. In yet other words, the firm made money 96.9% of the time. We'll repeat that: JPM made money 96.9% of the time.
World Bank President Zoellick Says Surging Food Prices Have Pushed 44 Million People Into Extreme PovertySubmitted by Tyler Durden on 02/15/2011 - 14:21
We give Robert Zoellick 4 to 6 weeks before he follows Axel Weber, Kevin Warsh and the COO of one of the bankrupt GSEs (we forget his name) into the sunset. The reason? After breaking ranks with the Criminal Bank Cartel last year and calling for a return to the gold standard, the president of the World Bank has dared to be the first among the institutional elite to point out that the cotton in the emperor's clothes, were he to be clothed in the first place, would have surged by 100% in less than a year. According to AP: "World Bank President Robert Zoellick says global food prices have hit "dangerous levels" that could contribute to political instability, push millions of people into poverty and raise the cost of groceries." Not to worry. According to Fed VP Christine Cumming who spoke earlier somewhere, rising commodity costs merely indicate "stronger global demand." Oddly enough, it is this supposed demand for products that has forced 44 million people to enter "extreme poverty"... out of their own volition. We are not sure, but something tells us the Fed's Cumming has a Ph.D.