Today - Monday, April 20, 2015
- Alleging a "political agenda under which the DOJ is ‘investigating’ and pressuring large, high-profile lenders into paying nine- and 10-figure sums and publicly ‘admitting’ wrongdoing," Quicken Loans files a lawsuit against the DOJ and HUD over their investigation of the company's FHA-backed loans.
- In this, Quicken is daring to go where powerhouses like JPMorgan, U.S. Bancorp, and SunTrust - all of whom took out their checkbooks to make the investigations go away - feared to tread. Not being publicly traded helps, as does not having to rely on D.C. for approval to return profits to shareholders.
- In its complaint, Quicken says Justice based its settlement demands on a sampling of 55 out of 246K loans and found defects too small to even call rounding errors. The government used similar procedures against the publicly traded names, relying on a Civil War-era law allowing for triple damages if there are any errors.
- Source: WSJ
- Nobody really talks about it much, says Jeff Gundlach, but the junk-bond market's entire life has been spent in a time of secularly declining interest rates. Exactly how with these assets react once that move ends?
- There's no need to sell today, says Gundlach, as the crisis he envisions is at least a couple of years away, when increasing interest rates collide with a wave of maturing paper needing to be refinanced. For now, stick with the "carry trade" of owning high-yield bonds.
- ETFs: HYG, JNK, HYLD, HYS, SJNK, SJB, BSJF, ANGL, BSJG, HYHG, BSJI, HYLS, UJB, WYDE, XOVR, BSJH, HYZD, THHY, QLTC, SHYG, BSJJ, HYND, HYGH, BSJK, TYTE, BSJM, BSJL
Friday, April 17, 2015
- March Leading Indicators: Leading Index +0.2% to 121.4 vs. +0.3% expected, +0.1% (revised) in Feb.
- Coincident Index +0.1% to 112 vs. +0.2% prior.
- Lagging Index +0.4% to 116.2 vs. +0.3% prior.
- "Although the leading economic index still points to a moderate expansion in economic activity, its slowing growth rate over recent months suggests weaker growth may be ahead," said Economist Ozyildirim.
- "For Fed officials, the turn of events is somewhat of a recurring nightmare," writes Jon Hilsenrath. "Economic growth has continually fallen short of their expectations in an expansion nearly six years old."
- Putting that in a picture is BAML's U.S. activity surprise index - strongly in positive territory early in 2014, but then steadily dropping throughout the year, and turning sharply negative by Q2 of 2015. BAML says the ratio of disappointing economic reports to positive ones has been greater recently than at any time since the expansion began in June 2009.
- “We just don’t seem to be getting escape velocity,” says Reserve Bank of India Governor Raghuram Rajan, speaking on the sidelines of an IMF conference in D.C. “That virtuous cycle is just not happening. Every time it seems like it is happening, you have one more quarter of terrible growth.” Veterans of the Japanese experience will be familiar with the term "escape velocity." BOJ officials were talking about it in 1995 ... 20 years later, they're still waiting for it.
- ETFs: TBT, TLT, TMV, IEF, TBF, EDV, TMF, PST, TTT, ZROZ, TLH, SBND, VGLT, IEI, TYO, UBT, DLBS, DTYS, UST, TLO, VGIT, TBX, SCHR, TENZ, GSY, TYD, LBND, DTYL, ITE, DLBL, TYBS, DFVL, FIVZ, TBZ, DFVS, TYNS, SYTL
- Westport Innovations (NASDAQ:WPRT) moves higher in early trading to follow up on a strong 5.5% move yesterday.
- The drop in oil prices last fall raised demand concerns for the company's low-emission fuel engine components and designs.
- WPRT +3.95% premarket to $5.00 to push over the threshold for the first time in over a month.
- Following a string of disappointing U.S. economic data, the dollar hovered near a one-week low against a basket of major currencies on Friday and was on track for its biggest weekly drop in a month.
- The dollar index, which last traded at 97.86, set a one-week low of 97.282 on Thursday - down 1.8% so far this week.
- If U.S. consumer inflation data due later today comes in soft, it could reinforce the view the Fed will delay a rate hike in June and add further pressure against the dollar.
- ETFs: UUP, UDN, UUPT, UDNT, FORX, USDU
- In a change of heart, the Federal Reserve will allow big U.S. banks to use some types of municipal bonds to meet new rules that ensure they have enough cash during a market meltdown, WSJ reports.
- At issue is the treatment of municipal debt under new liquidity requirements, which call for large banks to hold enough "high-quality liquid assets" to fund their operations for 30 days.
- Other regulators, including the OCC and FDIC, do not plan to follow the Fed's new criteria.
- ETFs: MUB, HYD, BAB, PZA, MUNI, HYMB, TFI, XMPT, ITM, MLN, BABS, SHM, CMF, SHYD, PRB, NYF, PZT, SUB, SMB, PWZ, CXA, IBMF, PVI, RVNU, INY, SMMU, IBMG, IBME, IBMD, GMMB, FMB, IBMI, IBMH, MEAR
Thursday, April 16, 2015
- "I do not think that either condition has been met," says Boston Fed President Eric Rosengren, referring to mixed labor data and "stubbornly" low inflation as arguing for no rate hike yet.
- "Incoming data would need to improve to fully satisfy the Committee’s two conditions for starting to raise rates," says Rosengren, a member of the dovish camp at the Fed.
- Previously: Lockhart: Fed should delay rate hike (April 16)
- Previously: Bond yields tick higher on Fischer comments (April 16)
- The bar for a rate hike is "a little higher," says Atlanta Fed President Dennis Lockhart , citing weak Q1 data - GDP growth is looking to come in around 1% - for pointing towards delaying any moves to tighten policy.
- "I think it is highly desirable that the public sees an economic picture at the time of the liftoff decision that is consistent with the decision criteria the FOMC has set out," says Lockhart, considered a voice in the moderate middle of the FOMC.
- The Cleveland Fed's more hawkish Loretta Meister surprises no one in continuing to support a rate hike "relatively soon."
- Previously: Bond yields tick higher on Fischer comments (April 16)
- Housing starts bounced just 2% to 926K in March following February's supposedly weather-related plunge. Expectations had been for a 1.05M starts in March. Gains in the northeast and midwest in March were offset by declines in the south and west.
- Toll Brothers (TOL -2.4%), Lennar (LEN -2.1%), Hovnanian (HOV -2.8%), PulteGroup (PHM -2%), Ryland (RYL -2.7%), D.R. Horton (DHI -2%), KB Home (KBH -1.9%), Standard Pacific (SPF -2.7%), NVR (NVR -1.3%).
- Previously: Lame rebound for housing starts (April 16)
- Previously: Declines in the south and west hold back housing starts (April 16)
- Markets can't depend on the Fed staying on hold forever, says Fed Vice-Chair Stanley Fischer, speaking at an economic forum. Yes, the first quarter was a weak one for the U.S. economy, he says, but a rebound in Q2 is already underway.
- Wages: There are more signs on a daily basis of upward pressure rising.
- The ECB: European-style QE has proven far more successful than most thought.
- Lower earlier, the 10-year Treasury yield is now higher by two basis points to 1.91%. TLT -0.5%, TBT +1%
- ETFs: TBT, TLT, TMV, TBF, EDV, TMF, TTT, ZROZ, TLH, SBND, VGLT, UBT, DLBS, TLO, TENZ, LBND, DLBL, TYBS
- Mortgage rates inched higher in the past week, with the benchmark 30-year fixed-rate mortgage climbing to 3.67% from 3.66% in the latest weekly survey from Freddie Mac.
- The 15-year fixed averaged 2.94%, up from 2.93% a week ago.
- A year ago at this time, the 30-year and 15-year rates averaged a respective 4.27% and 3.33%.
- The Big Short was Michael Lewis' classic about how some made billions shorting subprime mortgage-backed securities ahead of the financial collapse. Now hedge funder Paul Singer says he's found a bigger short in plain old bonds.
- Speaking at the Grant's Spring Conference, Singer wonders "why bondholders persist in trusting that the central banks will be capable of creating just enough inflation and not a farthing more."
- Further, why do bondholders believe - as the former Fed chair, now citizen blogger (and now with Ken Griffin's Citadel) has said - that central bankers can cure an inflation overshoot in "ten minutes."
- Inflation, says Singer, is already perky if you hang around the same circles he does. "The roaring markets for financial assets, high-end real estate and art, and other things that investors and the rich own or use, should be seen for what it is: a modern and peculiar form of inflation which is sectorial and emerges from a modern and peculiar policy mix. And this is the coming attraction for a more generalized inflation of the future.."
- ETFs: AGG, BND, BOND, BNDX, BWX, SCHZ, PLW, LAG, IGOV, GOVT, DI, FBND, RIGS, SAGG, GBF, IUSB, LDUR, TAPR, FWDB, VBND
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